# I n the United States Court of Federal Claims

No. 18-548C

(E-Filed: October 17, 2018)

ALUMINUM SHAPES, LLC,

Plaintiff,

v.

THE UNITED STATES,

Defendant. ) ) ) ) ) ) ) ) ) ) ) Contract; Settlement Agreement in Civil Enforcement Context; Lack of

Contract-Based Jurisdiction.

Thomas S. Biemer, Philadelphia, PA, for plaintiff. Christie Callahan Comerford, Erik L. Coccia, Margret Spitzer Persico, Philadelphia, PA, and Matthew W. Horn, Chicago, IL,

of counsel.

Robert C. Bigler, Trial Attorney, with wh om were Chad A. Readler, Acting Assistant Attorney General, Robert E. Kirschman, Jr., Director, Tara K. Hogan, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, for defendant.

OPINION

CAMPBELL-SMITH, Judge.

The court has before it defendant’s mo tion to dismiss, ECF No. 7, which is brought pursuant to Rule 12(b)(1) of the Rule s of the United States Court of Federal Claims (RCFC). Plaintiff filed an opposition brief, ECF No. 10, to which the government replied, ECF No. 11. Oral argument was ne ither requested by the parties nor deemed necessary by the court.

The only issue before the co urt is whether a settlement agreement, which arose in

the context of a civil enforcement action brou ght by the Occupational Safety and Health Administration (OSHA) of the United States De partment of Labor (DOL), gives rise to contract-based jurisdiction over plaintiff’s clai ms in this court. For the reasons stated below, the settlement agreem ent between DOL and plain tiff Aluminum Shapes, LLC2 (Aluminum Shapes) does not provide this c ourt with jurisdiction over contract-based claims. Accordingly, defendant’s motion to dismiss pursuant to RCFC 12(b)(1) is

GRANTED

.

I. Background

Aluminum Shapes operates an aluminum extrusion facility in New Jersey. Compl., ECF No. 1 at 2. In 2015, an OS HA inspection of the f acility resulted in $308,000 in fines assessed agai nst plaintiff. Id. Plaintiff contested the fines, and the parties negotiated a settlement which wa s accepted by the Chief Judge of the Occupational Safety and Health Review Commiss ion (Commission). Id. at 3. As part of the settlement agreement, Aluminum Shapes paid $170,000 in fines. Id.

Plaintiff contends that OSHA thereafter violated certain elements of the settlement agreement. Id. at 4. The co ntract breaches alleged in th e complaint include an improper inspection of Aluminum Shapes’ facility by OSHA in January 2017, and an improper

assessment of fines in the abse nce of good faith negotiations. Id. at 4-5. New fines were assessed against Aluminum Shapes in th e amount of $1,922,895. Id. at 5.

In this suit, Aluminum Shapes alleges one count of breach of contract, and another count of breach of the implied covenant of good faith and fa ir dealing. Id. at 5-7. Aluminum Shapes seeks damages sustained as a result of the breach of contract, including, apparently, a ny fines that plaintiff may ultimat ely pay for the OSHA violations discovered during the January 2017 inspection. 1 See id. at 6 (describing the damages flowing from the breach as in cluding OSHA fines that may be paid by plaintiff, and the costs of defending against the assessment of t hose fines). The court reserves any further

discussion of relevant facts for the analysis section of this opinion.

II. Tucker Act Jurisdiction

The Tucker Act delineates this court’s jurisdiction. 28 U.S.C. § 1491 (2012). That statute “confers jurisdiction upon the Court of Federal Claims over the specified categories of actions brought against the Unit ed States.” Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (en banc) (citations om itted). These include money damages claims against the federal government founded upon the C onstitution, an act of Congress, a regulation promulgated by an ex ecutive department, any express or implied contract with the United States, or any clai m for liquidated or un liquidated damages in cases not sounding in tort. Id

. (citing 28 U.S.C. § 1491(a)(1)).

1 Thus, one goal of plaintiff’s suit may be to secure payment from the United States to offset any fines arising from OSHA vi olations discovered at Aluminum Shapes’ facility in January 2017.3 Not all contracts, however, give rise to juri sdiction in this court. See, e.g., Rick’s Mushroom Serv., Inc. v. United States, 521 F.3d 1338, 1343 (Fed . Cir. 2008) (“The government’s consent to suit under the Tuck er Act does not extend to every contract. (citing Sanders v. United States, 252 F.3d 13 29, 1335 (Fed. Cir. 2001); Kania v. United States, 650 F.2d 264, 268 (Ct. Cl. 1981))). Most relevant here, Kania and Sanders exclude certain types of contracting by the United States in its sovereign capacity from the jurisdictional ambit of the Tucker Act. See, e.g., Stovall v. United States, 71 Fed. Cl. 696, 698 & n.2 (2006) (discussing contractin g in the government’s sovereign capacity, and citing to Kania and Sa nders, in particular).

The Kania and Sanders line of cases excl udes from this court’s jurisdiction most

claims founded on contracts aris ing in the “criminal or quasi-criminal” context. Id. at 701 (citing cases). For an example of a cont ract arising from a quasi-criminal matter, this

court in Stovall cited Trudeau v. United Stat es, 68 Fed. Cl. 121, 1 29 (2005), aff’d, 186 F. App’x 998 (Fed. Cir. 2006) (table). 71 Fed. Cl . at 701. Trudeau is a key decision for the jurisdictional analys is required here. 2

III. Standard of Review for Motions Brought under RCFC 12(b)(1)

When reviewing a complaint to determine its jurisdictio n over a plaintiff’s claims, this court must presume all undisputed factua l allegations to be true and construe all reasonable inferences in favor of the plain tiff. Scheuer v. Rhode s, 416 U.S. 232, 236 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982); Reynolds v. Army & Air Force Exch. Serv., 84 6 F.2d 746, 747 (Fed. Cir. 1988) (citations omitted). Plaintiff bears the burden of esta blishing subject matter jurisdiction by a preponderance of the evidence. Reynolds , 846 F.2d at 748 (citations omitted). If jurisdiction is found to be lacking, this c ourt must dismiss the ac tion. RCFC 12(h)(3).

IV. Analysis

As a preliminary matter, there is no real dispute that OSHA citations and fines must be contested before the Commission, not in this forum. ECF No . 10 at 12; ECF No. 11 at 16. Thus, to the extent that plaintiff’s suit could be c onstrued to directly challenge the fines assessed against it by OSHA after the January 2017 inspection, this court has no jurisdiction over such a claim. See, e.g., Sturm, Ruger & Co. v. Chao, 300 F.3d 867,

2 As defendant notes in its reply brief, pl aintiff studiously avoi ds any discussion of Trudeau, even though defendant, in its openi ng brief, contended that Trudeau resolved the jurisdictional question at issue here. Se e ECF No. 7 at 14-17; ECF No. 11 at 7-10, 12, 15. Plaintiff’s failure to discuss Trudeau is mystifying, es pecially in light of the fact that plaintiff extensively relies on Stovall, ECF No. 10 at 14, 16, 18-19, 21, 24, an opinion which presents Trudeau as an example of a contract claim which arose in a quasicriminal context and thus did not fall within this court’s contract-based jurisdiction.4 873-74 (D.C. Cir. 2002). Indeed, plaintiff ack nowledges that its direct challenge to the new citations and fines is currently before the Commission. ECF No. 10 at 8, 12.

Plaintiff insists, however, that it may pu rsue that challenge before the Commission and simultaneously seek damages for breach of contract in this forum. Id. at 12-13, 23-25. The government suggests that there would be substantial overlap between the two proceedings and that allowing this su it to move forward would “undermine the exclusivity of the Commission’ s jurisdiction.” ECF No. 11 at 18. The court need not resolve this dispute because Kania and its progeny compel a jurisdictional ruling in

defendant’s favor.

A. Kania

The claim in Kania was for money damage s flowing from the alleged breach of an agreement between Mr. Kania and a prosecuto r, an agreement which was alleged to have traded truthful testimony for freedom from pros ecution. 650 F.2d at 266-67. Jurisdiction was lacking, however, for a claim based on Mr. Kania’s type of contract. Id. at 267. The jurisdictional analysis in Kania has several elements.

First, the Court of Claims stat ed this general principle:

The contract liability whic h is enforceable under the Tucker Act consent to suit does not extend to every agreem ent, understanding, or compact which can semantically be stated in terms of offer and acceptance or meeting of

minds.

Id. at 268. Most contracts giving rise to Tucker Act jurisdiction were distinguishable from Mr. Kania’s agreement with the prosec utor, because in those contracts, the “sovereign steps off the throne and engages in purchase and sale of goods, lands, and services, transactions such as private parties, individuals or corporations also engage in among themselves.” Id. Thus, a distincti on was made in Kania between “proprietary” and “sovereign” contracts, although that distin ction may be subject to some dispute. See Stovall, 71 Fed. Cl. at 698 (noting that “Kan ia distinguishes between contracts relating to proprietary versus sovereign ac tions,” but observing that the distinction was “only loosely mapped”).

As for plea agreements, and criminal enforcement proceedings generally, Kania requires a contract claimant to meet a heightened burden:

[T]he court would look for specific authority in the [Assistant United States Attorney] to make an agreement obligating the Un ited States to pay money, and spelling out how in such a case the liability of th e United States is to be

determined.5 650 F.2d at 268. Further, criminal courts were seen as the proper forum to police agreements in the context of criminal en forcement proceedings, not our predecessor court, the Court of Claims:

It would be reasonable to expect that the court which is to police and, in appropriate cases enforce, agreemen ts for plea bargains, or witness protection, or for immunity, will be the courts in which are or will be pending the criminal prosecutions to which the ag reements relate. If this means that money damages for breach are nowhere available, this is the case in any claim area where the Congress has not seen fit to grant its consent to be sued. It is particularly unreasonable to suppose that Congre ss in enacting the

Tucker Act intended for this court to intervene in the delicate and sensitive business of conducting criminal trials.

Id. at 268-69 (citing United States v. Jones, 131 U.S. 1 (1889)). In sum, Kania first discussed the difference between proprietary and sovereign actions, and then noted that there are special requirements, and specia l concerns, that may limit this court’s jurisdiction over contracts in the criminal enforcement setting.

B. Sanders

The analytical framework in Sanders is somewhat tr uncated compared to the analysis in Kania. In Sanders, the United St ates Court of Appeals for the Federal Circuit acknowledged that for government contracts in the criminal context, “a damages remedy is not ordinarily available.” 252 F.3d at 1334 (citing Kania, 650 F.2d at 268).

The Federal Circuit then proceeded to examine Mr. Sanders’ agreement with a prosecutor to determine whether that agreement fit within th e circumstances identified in Kania that permit a suit for money damages to pr oceed in this court. Sanders, 252 F.3d at 1335 (citing Kania, 650 F.2d at 268). Par ticular emphasis was put on the agreement’s terms that might explicitly addre ss monetary damages for breach:

In other words, a claim for money damage s for the alleged breach of such an agreement may not be maintained unless that agreem ent clearly and unmistakably subjects the government to monetary liability for any breach.

Id. The Federal Circuit panel concluded w ith a statement that it was following Kania, and that agreements in the cr iminal context must contain “an unmistakable promise to subject the United States to monetary liability ” to come within the ambit of Tucker Act jurisdiction. Sanders, 252 F.3d at 1336. Thus Sanders, like Kania, holds contract

claimants in the criminal en forcement context to a height ened standard. Unless the agreement underlying the clai m explicitly addresses governm ent liability for monetary6 damages in the event of breach, no jurisdiction for that cont ract claim will lie in this

court.

C. Criminal and Quasi-Criminal Contex ts Distinguished from Other Contexts

Although the distinction betw een proprietary versus so vereign actions in Kania may not always guide this court’s analysis, se e, e.g., Carter v. United States, 102 Fed. Cl. 61, 65-66 (2011) (distinguishing Kania), Kania is binding precedent for this court. Kania continues to be cited by the Federal Circu it for the proposition that not all contracts support jurisdiction in this court. See Ri ck’s Mushroom, 521 F.3d at 1343 (citing Kania, 650 F.2d at 268). In the court’s view, Kania and Sanders provide the tools for the jurisdictional analys is required here.

As noted in Stovall, contracts that arise in criminal and quasi-criminal settings are precisely the type of sovereign actions that were addressed in Kania and Sanders. 71 Fed. Cl. at 698-702 & nn.2, 6. In the court’s view, it is help ful to distinguish between the jurisdictional analysis in thes e criminal or civil enforcemen t cases, and the jurisdictional analysis that is required by cases involving ot her scenarios. For example, jurisdiction in

this court exists for some claims fo unded on settlement ag reements resolving discrimination claims. E.g., Holmes v. Un ited States, 657 F.3d 1303, 1312 (Fed. Cir. 2011); Stovall, 71 Fed. Cl. at 701-02. Tucker Act jurisdiction also is available for claims

founded on contracts for certain types of government assistance . See, e.g., San Juan City Coll. v. United States, 391 F.3d 1357, 1360-61 (Fed. Cir. 2004) (citing Sanders, among other authorities, to find jurisdiction over a claim founded on an agreement to receive student financial aid from a federal progra m); Carter, 102 Fed. Cl. at 65-66 (finding jurisdiction over a claim based on a contract to receive dry milk from a federally-funded assistance program). Wh en this court considers contracts that arise in criminal or civil enforcement proceedings, howe ver, Kania and Sanders compel a jurisdictional analysis that is quite exacting. 3 See, e.g., Phang v. United Stat es, 87 Fed. Cl. 32 1, 328-30 (2009) (applying Kania and Sanders and finding no ju risdiction over contract claims based on a plea agreement), aff’d, 388 F. App’x 961 (F ed. Cir. 2010); Trudeau, 68 Fed. Cl. at 129- 31 (applying Kania and Sanders to a contract claim ar ising from a settlement agreement

in a “civil enforcement action” and finding no jurisdiction).

D. Trudeau

3 The contract in question must arise betw een the criminal suspect/defendant (or the target of the civil enforcem ent proceeding) and the govern ment. The court does not

address here contracts between confidential in formants and federal investigators. See SGS-92-X003 v. United States, 85 Fed. Cl. 678, 707-08 (2009) (distinguishing Kania and Sanders, in part because prosecutorial disc retion played no part in the confidential

informant’s contract with federal investigators).7 As defendant argues, this court in Tr udeau confronted a similar, perfectly analogous situation which reso lved the jurisdictional questi on posed by this suit. ECF No. 7 at 14-17; see also EC F No. 11 at 7-10, 12, 15. Instead of challenging OSHA citations and fines, Mr. Trudeau faced civil enforcement actions br ought by the Federal Trade Commission (FTC) to address Mr. Tr udeau’s allegedly false and misleading infomercials, some of which su ggested that Mr. Trudeau’s h ealth supplements could cure cancer and other diseases. Trudeau, 68 Fed. Cl. at 124. The parties entered into a settlement agreement which was ad opted by the district court in a “Stipulated Order.” Id.

at 124-25. That order stated that the distri ct court retained jurisdiction over disputes regarding the enforcement of th e Stipulated Order; most impor tantly, the Stipulated Order permanently enjoined Mr. Trudeau from the creation or dissemination of infomercials and obliged him to pay $2 milli on in “‘equitable monetary re lief.’” Id. (citation omitted).

The FTC issued a press release summarizing the effects of the Stipulated Order.

Id. at 125. Mr. Trudeau unsu ccessfully tried to convince the FTC to retract the press release, and sought relief in both a district cour t (but not in the district court that retained jurisdiction over the Stipulated Order) and in this court. Id. at 125-26. His district court suit sought a rewording of the FTC press rele ase, but was dismissed. Id. at 126.

In this court, Mr. Trudeau sought breach of contract damages. Id. He alleged that the parties’ agreement, embodied in the Stipulated Order, was a contract giving rise to Tucker Act jurisdiction. Id. That contr act was allegedly breached by the FTC’s press release, and Mr. Trudeau’s damages included “inj uries to his business . . . created [by the] public perception that he is a ‘habitual fals e advertiser.’” Id. at 126 (citation omitted).

The court’s jurisdictional analysis excl uded any consideration of the district court’s retention of jurisdiction over the enforcem ent of the Stipulated Order. Id. at 131. Instead, the court focused its analysis on the t ype of contract allege d by Mr. Trudeau, and whether that type of contract gives rise to Tu cker Act jurisdiction. Id. at 127-31. In a thorough and painstaking anal ysis, the court found that Ka nia and Sanders left no doubt that the agreement ending the civil enforcem ent actions against Mr. Trudeau was not a contract that supported jurisdictio n in this court. Id. at 131.

The court will not reproduce he re the exhaustive jurisdicti onal analysis set forth in Trudeau. The distinction between sovereign a nd proprietary actions of the United States was discussed at some length, as was the en during vitality of the holdings in Kania and

Sanders. 4 Id. at 127-30. The court observed that criminal enforcement and civil

4 This court in Trudeau, 68 Fe d. Cl. at 127, did not follow United States v. Zajanckauska s, 346 F. Supp. 2d 251 (D. Ma ss. 2003), in its application of the precedent of Kania and Sanders. Th e court finds the jurisdictional analysis in Trudeau to be more persuasive than the one presented in Za janckauskas, which relied, in8 enforcement actions were actions that could only be undertaken by the sovereign. Id. at

129. For the civil enforcemen t actions against Mr. Trudeau, the court held that the FTC was acting in the government’s sovereign cap acity. Id. at 129-30. Accordingly, the agreement which settled those consolidated actions was a c ontract undertaken in the government’s “sovereign, not propri etary, capacity.” Id. at 130.

The court noted, however, that the preced ent in Kania and Sanders contemplates the possibility that even a contract undertak en in the government’s sovereign capacity could give rise to Tucker Act jurisdiction. Such a contract, however, must contain an “unmistakable promise to subject the United Stat es to monetary liability in the event of a ‘breach’ of that [contract].” Id. at 131 (citing Sanders, 252 F.3d at 1336). The Stipulated

Order contained no such term.

The court’s jurisdictional ruling was summarized as follows:

Because the Government, through th e FTC, was acting in a sovereign capacity when it agreed to entry of the Sti pulated Order and because plaintiff has failed to establish that the Stipul ated Order contained an unmistakable promise to subject the Unite d States to monetary lia bility in the event of a “breach” of that Order, see Sanders, 252 F.3d at 1336, this Court lacks subject matter jurisdicti on over plaintiff’s breach of contract claim.

Trudeau, 68 Fed. Cl. at 131. The court now applies the hold ings in Kania, Sanders and

Trudeau to the instant case.

E. No Jurisdiction for Contract Cl aims Founded on Settlement Agreement Achieved by Parties to Civil Enforcement Action

The contract between Aluminum Shapes and DOL, in the form of a Stipulated Settlement Agreement that was approved by the Commission, arose from a civil enforcement action against Aluminum Shapes. See ECF No. 1 at 1; ECF No. 1-2 at 2-10; ECF No. 1-3 at 2-4; ECF No. 10 at 8; ECF No . 10-1 at 37-46. Pursuant to the precedent of Kania, Sanders and Trudeau, the United St ates entered into this contract in its sovereign capacity. Thus, jurisdiction will lie for plaintiff’s suit only if the Stipulated

part, on contract law principles stated in the precedent of another circuit. See Zajanckauskas, 346 F. Supp. 2d at 253, 259 (citing United States v. McLaughlin, 957 F.2d 12, 16 (1st Cir. 1992)). The court notes, t oo, that the contract in Trudeau arose in a

civil enforcement setti ng, whereas the contract in Zaja nckauskas arose, according to the district court, in the immigration context, where citizenship and de naturalization were at issue. 346 F. Supp. 2d at 258-59. In the co urt’s view, Trudeau is the more analogous case and provides more persuasive guidance.9 Settlement Agreement “clearly and unmistakab ly subjects the government to monetary liability for any breach.” Sanders, 252 F. 3d at 1335.

Defendant argues that the Stipulated Settlement Agreement contains no such language. ECF No. 7 at 15-17; ECF No. 11 at 14-15. The court agrees. Plaintiff misreads relevant precedent and argues that no “unmistakable promise to subject the United States to monetary liab ility,” Sanders, 252 F.3d at 1336 , is required. See ECF No. 10 at 18 (“[I]t is irrelevant that the Settle ment Agreement does not expressly authorize monetary damages in the event of breach because the agreement resolved a civil enforcement proceeding and, thus, money damages are presumptively available for breach.”). Plaintiff’s position ignores the ju risdictional analysis in Trudeau and is unavailing.

Plaintiff’s only analysis of the text of the Stipulated Settlement Agreement, regarding the presence or absence of any unmistakable promise for money damages from the government in the event of breach, is contained in a footnot e. ECF No. 10 at 18 n.5. Relying on Holmes, plaintiff a sserts that the requirement stated in Sanders is met because the Stipulated Settlement Agre ement “does not specifically state that money damages are

not available for breach.” ECF No. 10 at 18 n.5 (citing Holmes, 65 7 F.3d at 1315-16). This argument fails to persuade.

First, Holmes did not address a contra ct arising in the criminal or civil enforcement context, and is thus distinguish able from this case. See 657 F.3d at 1311 (noting that the agreements at issue in that case resolved discrimination claims brought by the plaintiff, not enforcement actions brought against the pl aintiff). As the court noted earlier in this opinion, that di stinction is fundamental to th e correct application of the precedent in Kania and Sanders. See supra. Nor does the Holmes opinion focus on the heightened standard particular to criminal or civil enforcement cases; thus, Holmes provides no guidance as to how to identify an “unmistakable promise to subject the United States to monetary liability .” Sanders, 252 F.3d at 1336.

Second, plaintiff’s proposed application of Sanders, where an agreement that “does not specifically state that money dama ges are not available for breach,” ECF No. 10 at 18 n.5, “clearly and unmi stakably subjects the government to monetary liability for any breach,” Sanders, 252 F.3d at 1335, is not credible. Plai ntiff offers no authority for its interpretation of the requirement in Sande rs for an unmistakable promise of money damages in the event of breach, and plaintiff’s interpretation of Sanders is nonsensical. See Sanders, 252 F.3d at 1336 (holding that the government’s liability for monetary damages in the event of breach “should not be implied”).

Because plaintiff’s interpretation of th e Stipulated Settlement Agreement cannot be reconciled with Kania, Sanders and Trude au, it must be reject ed. The Stipulated Settlement Agreement does not clearly subject the government to liability for monetary10 damages in the event of breach. Lacking su ch an unmistakable promise, the Stipulated Settlement Agreement cannot sup port jurisdiction in this court for plaintiff’s contract

claims.

V. Conclusion

For the reasons explained in this opinion, plaintiff’s contract claims must be dismissed for lack of subject matter ju risdiction pursuant to RCFC 12(b)(1). Accordingly, defendant’s motion to dismiss, ECF No. 7, is GRANTED . The clerk’s

office is directed to ENTER final judgment for defendant DISMISSING plaintiff’s complaint, without prejudice.

IT IS SO ORDERED.

s/Patricia E. Campbell-Smith

PATRICIA E. CAMPBELL-SMITH Judge