Case Name: BALTIMORE CONTRACTORS, INC. v. The UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1981-02-25
Citations: 643 F.2d 729
Docket Number: No. 272-70
Parties: BALTIMORE CONTRACTORS, INC. v. The UNITED STATES.
Judges: Before FRIEDMAN, Chief Judge, and KUNZIG and BENNETT, Judges.
Reporter: Federal Reporter 2d Series
Volume: 643
Pages: 729–747

Head Matter:
BALTIMORE CONTRACTORS, INC. v. The UNITED STATES.
No. 272-70.
United States Court of Claims.
Feb. 25, 1981.
Robert D. Wallick, Washington, D. C., attorney of record, for plaintiff. Henry C. Ikenberry, Roger E. Warin, Stephen A. Fennell, and Steptoe & Johnson, Washington, D. C., of counsel.
Thomas W. Petersen, Washington, D. C., with whom was Asst. Atty. Gen. Alice Daniel, Washington, D. C., for defendant.
Before FRIEDMAN, Chief Judge, and KUNZIG and BENNETT, Judges.

Opinion:
OPINION
FRIEDMAN, Chief Judge:
This government contract case is before the court on defendant's exceptions to the recommended decision of Trial Judge Spec-tor. The trial judge held that, because of various defects in the operating methods and procedures of the Board of Contract Appeals that decided the case, the plaintiff is entitled to a trial de novo on the issues the Board adjudicated. We hold that the Board proceedings in this case were so defective that the Board's findings and decision are not entitled to the usual finality accorded Board decisions under the Wunderlich Act, 41 U.S.C. § 321-22. We conclude, however, that the plaintiff is not entitled to a trial de novo, but only to a de novo decision, based on the record before the Board, to be made by a different trial judge.
I.
A. In 1964, the plaintiff entered into a contract with the Architect of the Capitol (Architect) to construct for $11,777,000 two underground garages and related structures as part of the Rayburn House Office Building project. A number of disputes arose during the performance of the contract, and in 1970 the plaintiff filed suit in this court seeking damages for the claims involved in those disputes. The government moved to dismiss because of the plaintiff's failure to exhaust its administrative remedies before the Contract Appeals Board. The court denied the motion but suspended the case pending completion of the Board proceedings. Those proceedings were concluded in 1975, when the Board denied the last of the plaintiff's claims.
The plaintiff here challenges the decision of the Contract Appeals Board respecting the plaintiff's claims under the "disputes" clause of the contract. It also seeks damages for breach of contract claims that the Board did not decide for lack of jurisdiction. The plaintiff further alleges that the proceedings before the Board were defective in various respects, and it seeks a trial de novo on the issues the Board adjudicated.
In 1976, Trial Judge Spector granted the plaintiff's motion for a trial de novo to the extent it related to (1) the claimed defects in the Board proceedings and (2) the breach of contract claims not decided by the Board. In an en banc order this court upheld those rulings. Baltimore Contractors v. United States, 210 Ct.Cl. 678 (1976).
Following the trial on the issue of the propriety of the Board's procedures and practices, the trial judge rendered the decision under review. On the basis of detailed findings and a lengthy opinion, he concluded that the Board proceedings were "defective, inadequate, and (in the case of the breach claims) unavailable," that the Board's decision therefore was not entitled to finality under the Wunderlich Act, and, "as a corollary to that conclusion, that plaintiff is entitled to a trial [de novoj of its claims in this court."
B. The trial judge made a number of detailed findings, many of which we adopt, relating to the deficiencies in the House Board's operations and procedures. To the extent necessary to our decision, we now summarize them.
h The Organization and Staffing of the House Board. The Act authorizing construction of a new House Office Building directed the Architect to manage the project under the supervision of the House Office Building Commission (House Commission) composed of the Speaker and two other House Members. Pub.L. 84-24, 69 Stat. 41, § 1201, 40 U.S.C. § 175 note. The Architect supervised the preparation, negotiation, and execution of the construction contract. He also acted as the contracting officer in administering the contract and entertaining claims under the disputes clause of the contract by the contractor for additional compensation. The contract contained the standard disputes clause under which the contractor could appeal a decision of the contracting officer to the head of the department, which in this case was the House Office Building Commission. The Commission created a Contract Appeals Board (House Board) to act as its "duly authorized representative" under the contract for deciding those appeals.
The House Commission appointed as members of the House Board employees of the General Accounting Office (GAO), to serve part time in that capacity in addition to performing their usual duties at their agency. The original House Board consisted of three GAO employees, two of whom were lawyers in the General Counsel's office. The House Board subsequently was increased to six members, all GAO employees.
In connection with an earlier contract to construct the new Senate Office Building, which contract the Architect also had administered, the Senate Office Building Commission had designated members of the U.S. Army Corps of Engineers Contract Appeals Board to serve as an advisory board to the Senate Commission in deciding appeals from the Architect's decisions under that contract. Another contractor on the House Office Building had protested the use of the GAO lawyers as part-time members of the House Board. According to the testimony of counsel for that contractor, which was disputed but which the trial judge apparently credited, Mr. Winkelmann, the Architect's general counsel, informed counsel for the contractor, Mr. Cuneo, that
the HOBC would not authorize as its representative under the "Disputes" clause either the U.S. Army Corps of Engineers Board of Contract Appeals, or the Armed Services Board of Contract Appeals (ASBCA), because the HOBC wanted the board to be staffed by employees of the legislative branch. Mr. Winkelmann stated to Mr. Cuneo, and the latter so testified, that the Corps of Engineers Board had previously returned advisory decisions unfavorable to the Architect in matters involving the construction of the Senate Office Building, and that "[tjhis time, we're going to use our own Board, our own lawyers, the General Accounting Office lawyers." [Fdg. 26.]
Following the filing of the present case, the plaintiff in 1972 asked the House Commission to relinquish jurisdiction over the claims then before the House Board, so that this court could decide all the claims in this case. In response to this request, Mr. Pettibone, a lawyer on the staff of the Architect's General Counsel who was representing the Architect in the plaintiff's appeal to the House Board from the Architect's decisions, submitted a memorandum to the Architect opposing the plaintiff's request.
He stated that to allow such an action would "leave the Government exposed, unprotected and at the mercy of a predatory contractor with trumped-up claims of $5 million." In his response to the HOBC on July 24, 1972 the Architect of the Capitol in turn adopted the foregoing language of his trial attorney and otherwise based his reply on the Pettibone memorandum. [Fdg. 60.]
When plaintiff subsequently renewed with the House Commission its request to consolidate all of its claims into a single trial before this court, the Architect's staff prepared the agenda for the House Commission meeting that considered the request. The agenda described the plaintiff's request "as one to 'circumvent normal procedure' with respect to plaintiff's claims. The Architect admitted at trial that the words chosen did not represent an impartial characterization of plaintiff's petition as carried on the HOBC agenda." (Fdg. 63.) The House Commission denied the request in a letter the Architect and his counsel drafted.
2. The Relationship Among the GAO, the Architect, and the House Board, (a) The Architect and his staff had a significant role in selecting the people to serve on the House Board. It was the Architect who initially recommended to the Chairman of the House Commission that the House Board should consist of employees of the GAO. (Fdg. 21.) When the membership of the House Board was changed and its size increased in 1972, the Deputy Comptroller General consulted with the Architect and his General Counsel "concerning the new appointment" of GAO employees to the Board. (Fdg. 29.)
A GAO attorney, Mr. Lynn, served as chairman of the House Board from its ere ation in 1963. In 1970, Mr. Lynn announced that he would retire from the GAO that summer. "A witness for plaintiff testified that when Mr. Lynn announced his retirement, the Architect's trial attorney, Mr. Pettibone, publicly indicated he was 'working hard on (Mr. Lynn's) appointment to be Chairman of the Board.' " (Fdg. 31.) Mr. Lynn continued to work at GAO as a reemployed annuitant and remained as chairman of the House Board.
(b) The Architect and his staff sought and received advice from the GAO staff in connection with various problems that arose under the contract. "On occasion, the participating GAO attorney in these claims conferences would be the supervisor of a part-time board member charged with hearing and determining plaintiff's claims." (Fdg. 24.) One of the House Board members was Mr. Ruppert; one of his superiors at GAO was Mr. Goldstein, who "participated in conferences with the Architect's staff" on some of the disputes under the contract. (Fdg. 32.) Another House Board member, Mr. Cosden, was supervised at GAO by Mr. Shnitzer, a former member of the House Board. During his service on the House Board, Mr. Shnitzer "recognized the possibility that his position as a member of the board could conflict with his regular full-time duties as a member of one of the contract groups at GAO. He expressed his concern in a letter to his section chief, Mr. Haycock. He suggested therein that a matter then pending before the GAO be assigned to someone else. This concern was later the subject of memoranda between Mr. Haycock and Mr. Welch in the General Counsel's office, in which the possibility of excluding Mr. Shnitzer from Mr. Haycock's contract group was discussed with reference to a particular controversy." (Fdg. 24.)
3. The Sharing of Office Space by the Architect's Counsel and the House Board. The trial counsel for the Architect, Mr. Pettibone, and the House Board shared office space in the Rayburn House Office Building. The space consisted of three private offices and a reception area which the House Board also used as the hearing room. The House Board used one of the private offices, and Mr. Pettibone used the other two. The secretaries for the House Board and for the Architect's trial attorney occupied adjacent desks in the reception area. When one secretary was absent, the other would fill in for her. According to the chairman of the House Board,
when the board's secretary was absent, Mr. Pettibone's secretary would docket appeals for the board, prepare the appropriate files, act as the board's receptionist, and type letters for the board. The secretary of the board assisted Mr. Haas, an assistant trial attorney, in the preparation of a brief to be submitted to the board. [Fdg. 72.]
4. Ex Parte Contacts Between the Architect's Staff and the House Board. Both the files of the House Board and the personal files of the Board's Chairman contained a number of internal documents from the Architect's officé. These are described in findings 88 and 89. They include a memorandum from the Architect's assistant trial attorney concerning one of the plaintiff's claims (House Board files), a memorandum from the Architect's trial counsel to the Architect's General Counsel concerning a discussion between the former and the Justice Department about plaintiff's appeal from an order of the trial judge (House Board files), and memoranda from the Architect to the Speaker and from the trial counsel to the Architect's General Counsel. concerning the petition the plaintiff filed with the House Commission requesting consolidation of all the claims in this court (chairman's files). (See supra pp. 4-5.) The chairman of the House Board testified that he had received certain of the documents generated in the Architect's office that were found in his personal file from the Architect's trial attorney, Mr. Pettibone.
II.
A. Here, as in Moore-McCormack Lines, Inc. v. United States, 188 Ct.Cl. 644, 675, 413 F.2d 568, 587 (1969), we conclude that "the Board's procedures have been so defective as to constitute a gross abuse of discretion and thus to invalidate its determinations." The trial judge's findings summarized above show that the operating methods and procedures of the House Board were so defective that its decisions cannot stand.
The Board's operations and procedures departed from accepted standards of fair procedure in numerous respects. These included the significant role the Architect and his staff had in selecting the members of the House Board that would decide appeals from the Architect's decisions; the conflicts of interest inherent in the dual role the Board members had as employees of the GAO (the agency that advised the Architect on many issues that arose under the contract) and as the tribunal that reviewed the Architect's decisions; the sharing of office space and personnel by the Architect's trial counsel and the House Board, and the interchange of secretarial personnel between them; and the ex parte contacts between the Architect's staff and the House Board reflected in the presence in the files of the Board and its chairman of internal documents of the Architect and his staff. Perhaps none of these facts alone would invalidate the House Board's proceedings. In their totality, however, they constitute a denial of the "procedural fairness [that] is the right of every government contractor," which is "the clear assumption of the Wunderlich Act." Moore-McCormack Lines, supra, 188 Ct.Cl. at 671, 413 F.2d at 584.
Indeed, members of the House Commission themselves expressed concern about the fairness of the House Board. At a 1969 meeting of the House Commission
its chairman, Speaker McCormack, stated that he was never satisfied with the composition of the board because it consisted of Government employees who, no matter how impartial they attempted to be, nevertheless could not avoid some conflict of interest. Congressman Celler agreed with Speaker McCormack that the board might have "mental reservations which would prejudice a case in favor of the Government." [Fdg. 56.]
Congressman Celler had expressed similar reservations at a meeting of the Commission 5 months earlier. (Fdg. 54.)
The concept that government contractors are entitled to procedural fairness before a Contract Appeals Board is inherent and implicit in the statutory scheme under the Wunderlich Act for judicial review of Board decisions. The Wunderlich Act makes the decision of a Board of Contract Appeals "final and conclusive unless," among other things, it "is not supported by substantial evidence." 41 U.S.C. § 321. A necessary corollary of that conclusion is that the decision of the Board that is given such finality must have been reached through procedures that are fair to the parties. Cf. MooreMcCormack Lines, supra, where we stated that "[especially if the merits of the determination may be largely shielded from judicial review" — as is the situation under the Wunderlich Act — "is it essential that proper procedures precede the administrative decision. In those situations the right to fair process may be the most meaningful right possessed by the affected parties, and at the same time the sharpest goad pressing the decision-maker toward a fair and correct result." 188 Ct.Cl. at 665, 413 F.2d at 581.
Of course, there is no way of knowing whether the relationship among the Architect and his staff, the GAO, and the House Board influenced the Board in its decision. It is possible that if the House Commission had utilized an independent full-time board, such as the Corps of Engineers Board the Senate Office Building Commission had used (see supra p. 4), the result of the House Board proceedings in the present case would have been the same. On the other hand, it is equally possible that the relationship among the government interests involved in this case subtly or even unconsciously may have influenced to some degree the outcome of the case. Since it is impermissible for the court to probe the decisional and thought processes of the Board and its members, see United States v. Morgan, 313 U.S. 409, 422, 61 S.Ct. 999, 1004, 85 L.Ed. 1429 (1941), Montrose Chemi cal Corp. v. Train, 491 F.2d 63, 67-71 (D.C.Cir.1974), care must be taken to avoid any situations that possess a significant danger of improper influence. Indeed, even where there is no claim of actual bias, a tribunal may be disqualified merely because of the appearance of bias. Cf. Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 150, 89 S.Ct. 337, 340, 21 L.Ed.2d 301 (1968); Jonal Corp. v. District of Columbia, 533 F.2d 1192, 1201-04 (D.C.Cir.), cert. denied, 429 U.S. 825, 97 S.Ct. 80, 50 L.Ed.2d 88 (1976) (Leventhal, J., dissenting in part).
In the present case, the relationship among the Architect and his staff and the House Board and its members created not only an appearance of unfairness but also the serious possibility that improper influence actually may have been at work and affected the outcome. In these circumstances the decisions of the Board cannot stand.
B.l. The next question is whether in such circumstances the limitations that the Wunderlich Act imposes upon the scope of our review of Board of Contract Appeals decisions are inoperative, so that we may decide the substantive questions de novo instead of reviewing the Board's decision under the substantial evidence test. The pertinent provision of the Wunderlich Act provides that the decision of a Board of Contract Appeals "shall be final and conclusive unless the same is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence." 41 U.S.C. § 321. A broad decision that is reached through unfair procedures is "capricious or arbitrary" within the meaning of this provision. Although the capriciousness-or-arbitrariness standard may relate primarily to the substance of the Board's decision, it is broad enough also to cover the serious procedural defects that characterized the administrative proceedings in this case. Cf. Moore-McCormack Lines, supra, 188 Ct.Cl. at 667, 413 F.2d at 582, where we pointed out that "by long tradition" "abuse of discretion" or "gross abuse of discretion" "include review for failure to maintain minimal procedural requirements."
In United States v. Anthony Grace & Sons, Inc., 384 U.S. 424, 86 S.Ct. 1539, 16 L.Ed.2d 662 (1966), the Supreme Court held that when this court reversed a Board of Contract Appeals dismissal of an appeal as untimely, the proper procedure for this court was to remand the case to the Board rather than to develop the record and to determine the merits itself. In so ruling, however, the Court recognized that "the parties will not be required to exhaust the administrative proceedings if it is shown by clear evidence that such procedure is 'inadequate or unavailable.' " 384 U.S. at 429-30, 86 S.Ct. at 1542-43. The Court then gave two examples of situtions where the administrative procedure would be deemed unavailable but no instances where it would be inadequate.
In the present case the defect we have found in the House Board proceedings made that administrative procedure "inadequate." The same reasoning that led the Supreme Court to except from the requirement of exhausting administrative remedies cases where the administrative proceeding is inadequate also justifies an exception for such cases from the Wunderlich Act's rule of finality. In either situation, the deficiencies in the Board's practice make it inappropriate to apply the usual rules governing judicial review of Board decisions.
2. In most cases where we determine that in the Board proceedings the contractor was denied the "procedural fairness" that the Wunderlich Act requires (Moore-McCormack Lines, supra, 188 Ct.Cl. at 671, 413 F.2d at 584), the flaw can be corrected by a remand to the Board to reconsider the case under proper procedures. That was the course we followed in Moore-McCormack Lines itself, where the procedural error was the failure of the Maritime Subsidy Board to give the plaintiffs information they needed to present their cases. We concluded that there was no reason to believe that the Board would "fail to give the owners a full, good faith redetermination of the proper subsidy for these ships upon new and fair proceedings, or that it is now so prejudiced that the protections of a trial-type hearing are required." 188 Ct.Cl. at 680, 413 F.2d at 590.
In Moore-McCormack Lines the procedural unfairness was something the agency easily could correct upon remand by giving the contractors the information it had denied them in the initial proceedings. In the present case, in contrast, the procedural flaw stemmed from the basic way in which the Board was established and operated. There is no way in which upon a remand the House Board as it presently exists could cure the deficiencies that we have determined require that its decisions be set aside. Only a de novo review in this court adequately can protect and preserve the plaintiff's right to have its claims adjudicated by a fair and impartial tribunal. Indeed, the clear implication of our explanation in Moore-McCormack Lines of why we were remanding that case to the Board rather than deciding it ourselves de novo is that we could and would hear it de novo if remand to the agency appeared inadequate to correct the procedural errors found. See 188 Ct.Cl. at 676-80, 413 F.2d at 587-90.
C. We disagree with the trial judge's conclusion that the plaintiff is entitled to a trial de novo of the issues under the disputes clause that the House Board determined. The plaintiff concedes that the House Board made a full record on these issues and did not exclude any pertinent evidence the plaintiff offered. Accordingly, there is no reason for the case to be retried. On remand the trial judge should determine these issues under the disputes clause de novo on the basis of the administrative record before the Board.
With respect to the issues the Board did not determine — the breach of contract claims — the trial judge should.hold whatever trial may be necessary. To the extent that evidence was properly admitted before the Board that bears on the breach claim, the trial judge need not duplicate the Board proceedings, but should incorporate that evidence as part of the record before him.
D. At oral argument the defendant suggested that, if we were to rule that a de novo trial or review is required, it should be before a different trial judge who would not have the strong views concerning the unfairness of the House Board's proceedings that Trial Judge Spector's opinion re-fleets. The government apparently is concerned that Trial Judge Spector's views on that issue might color his thinking on the merits and that the further proceedings in this case should be conducted in an atmosphere that would be totally free of any possible claim of bias or unfairness. Presumably one aspect of the government's concern is the appearance of unfairness. Although the plaintiff indicated that it would be satisfied if Trial Judge Spector continued with the case, it further indicated that it would not object if the case were referred to another trial judge.
We have no doubt that Trial Judge Spec-tor would be impartial and fair in deciding the merits. We conclude, however, that considering all the circumstances of this case, the proceedings on remand should be conducted by another trial judge.
CONCLUSION
The decisions of the House Contract Appeals Board are set aside. The case is remanded to the Trial Division for further proceedings in accordance with this opinion, to be conducted by another trial judge.
. The government argues that the determination of the fairness of the House Board proceedings must be based on the record before the Board and that it was improper for the trial judge to decide that issue based upon a de novo record. This court's en banc order in 1976 affirming the trial judge's decision to conduct de novo proceedings on that issue, however, is the law of the case. The defendant has not established that that ruling was so erroneous or manifestly unjust as to warrant reconsidering it. See Northern Helex Co. v. United States, 225 Ct.Cl. —, 634 F.2d 557 (Oct. 22, 1980); United States v. Turtle Mountain Band of Chippewa Indians, 222 Ct.Cl. -, 612 F.2d 517 (1979). In any event, a single panel of this court could not overrule that decision. Finally, the Board took no evidence oh the fairness issue, although it was given the opportunity to do so. In 1973, during the Board proceedings and prior to the introduction of evidence on the largest claims, plaintiff moved to recuse the Board and its chairman. The Board summarily denied this motion.
. We adopt the following findings of the trial judge but do not print them because, to the extent necessary to our decision, they are contained in our opinion: 1, 2, 3, 4, 5, 9, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 35, 37, 38, 39, 40, 42, 52, 53, 54, 55 (last sentence only), 56, 57, 58, 59, 60, 61, 62, 63, 64, 65 (except for last sentence), 66, 67, 68, 69, 70, 71, 72, 73, 79, 81, 83 (last two sentences only, and deleting words "earlier-mentioned" from last sentence), 84 (except for last sentence), 86, 87, 88, 89, 90, and 91 (except for last sentence). We do not adopt any of the other findings of the trial judge because we consider them unnecessary to our decision.