Opinion ID: 746420
Heading Depth: 2
Heading Rank: 2

Heading: The Relief Available

Text: 39 Logically, the next question is, what is the legal consequence when parties attempt to create a contract in the face of a prohibition such as that contained in § 8118. AT & T argues that the statute prohibits the contract as a fixed price-type contract, and as a consequence the contract is illegal and thus void. Since the Navy only had one legally-supportable basis for awarding the RDA contract--to award it as a cost-based type contract--it follows, argues AT & T, that the requirements of § 8118 were, by operation of law, incorporated into the RDA contract; for purposes of granting AT & T a remedy the contract should be understood as a cost-based type contract. 40 The Government responds that, even assuming that § 8118 applies and was violated, that violation cannot render the completed RDA contract void. This is for three reasons: (1) no authority holds or suggests that circumstances such as these can result in a contract being declared void from its inception at the insistence of the performing contractor; (2) the authorities that do address contract invalidity and allocation of risk preclude such a holding; and (3) the circumstances of this case present no reason to create a sweeping new basis upon which to challenge the enforceability of a contract with the United States. 41 In analyzing the problem, it is important to keep clearly in mind what is meant when a contract is termed illegal, a term used with abandon in the parties' briefs. That term encompasses a broad range of possible defects in contractual arrangements, from contracts that are inherently unenforceable (a contract to murder someone), to contracts in which one party is incompetent to contract (due to age or mental infirmity), to contracts in which a necessary term is omitted (such as price or date of performance), to contracts which are in some respect in violation of a positive rule of law (such as the case here). 42 The Government argues that the cases that have held contracts to be void or invalid upon the basis of a statutory or regulatory violation have involved provisions that explicitly limited the very authority of the parties to enter into the contract, or expressly prohibited the contract altogether. See, e.g., Clark v. United States, 95 U.S. 539, 542, 24 L.Ed. 518 (1877); Urban Data Sys., Inc. v. United States, 699 F.2d 1147, 1150 (Fed.Cir.1983); Alabama Rural Fire Ins. Co. v. United States, 215 Ct.Cl. 442, 572 F.2d 727, 729 (1978). The Government notes that none of the illegality cases cited by AT & T deal with funding deficiencies. In the Government's view, a restriction on the availability of funding is not tantamount to a lack of authority to contract. Therefore, concludes the Government, § 8118 does not render the RDA contract void from its inception. 43 AT & T responds that the question is not whether § 8118 restricted the Navy's ability to fund fixed price-type development contracts, but whether the restrictions on the use of funds contained in § 8118 were mandatory. If so, argues AT & T, citing New England Tank Indus., Inc. v. United States, 861 F.2d 685 (Fed.Cir.1988), a contract entered into in violation of § 8118 is illegal and void. 44 The Court of Federal Claims concluded that § 8118's requirement for a written determination upholding the pricing integrity of a fixed-price development contract operates as a constraint on the contracting process intended for the protection of both Government and contractor. We agree with the Court of Federal Claims on this point, and affirm its conclusion. The congressional purpose is abundantly clear: None of the funds provided ... may be obligated or expended for [certain] fixed price-type contracts. Department of Defense Appropriations Act, Pub.L. No. 100-202, § 8118, 101 Stat. 1329, 1329-84 (1987). The attempt by the Navy to obligate or expend funds for a contract not properly authorized by Congress is ineffective to either commit or make use of federal dollars. See, Office of Personnel Management v. Richmond, 496 U.S. 414, 424, 427-28, 110 S.Ct. 2465, 2471, 2472-74, 110 L.Ed.2d 387 (1990). The Government's attempt to contract fails. No valid contract was or could be entered into in face of the express congressional prohibition. See, e.g., 31 U.S.C. § 1341 (1994) (Limitations on expending and obligating amounts (the Anti-deficiency Act).). 45 The remaining question is what follows from the conclusion that the contract between the parties was an invalid attempt to enter into a contract. AT & T agrees that the contract was void ab initio, but seeks reformation of the contract into a cost-based type contract. The trial court correctly differentiated between an otherwise valid contract that contains a prohibited term or clause and one that is void from the inception. The court noted that the former may be amenable to reformation, but that a court has no power to remake that which was never established in the first instance. 32 Fed.Cl. at 682 (citing Hedges v. Dixon County, 150 U.S. 182, 192, 14 S.Ct. 71, 74-75, 37 L.Ed. 1044 (1893)). 46 The position on this issue taken by AT & T is internally inconsistent. Even if we grant that the effect of § 8118 is to cause the DOD to prefer cost-based type contracts for R & D efforts over the fixed price-type, that implicit preference resulting from the statute does not rise to the level of an expressly mandated contract provision making an attempt to contract one way become something else. Congress knows how to impose mandatory provisions in contracts. It did not do that in § 8118. The determination of the trial court that the contract is void and not subject to reformation is affirmed. 47 The trial court, however, did not end the case there. The court concluded that the consequence of its determinations was to leave the parties with an implied-in-fact contract, with compensation to be awarded on a quantum meruit basis. We cannot agree. The concept of implied-in-fact contract is not for the purpose of salvaging an otherwise invalid contract. An implied-in-fact contract arises when, in the absence of an express contract, the parties' behavior leaves no doubt that what was intended was a contractual relationship permitted by law. Trauma Serv. Group v. United States, 104 F.3d 1321, 1326 (Fed.Cir.1997). In the case here, the contractual relationship was not permitted by law, and the rubric of implied-in-fact contract is not appropriate. 48 On the basis of the implied-in-fact contract, the trial court announced its intention to grant quantum meruit relief. It is well established that the Court of Federal Claims does not have the power to grant remedies generally characterized as those implied-in-law, that is, equity-based remedies, as distinct from those based on actual contractual relationships. Hercules, Inc. v. Unites States, 516 U.S. 417, ----, 116 S.Ct. 981, 985, 134 L.Ed.2d 47 (1996); Trauma Serv. Group, 104 F.3d at 1324-25. Quantum meruit is the name given to an implied-in-law remedy for unjust enrichment. As a general rule, it falls outside the scope of relief available through the Court of Federal Claims. Id. 49 The trial court cited the 1986 Federal Circuit case of United States v. Amdahl Corp., 786 F.2d 387 (Fed.Cir.1986), as a basis for quantum meruit relief. In that case, the Federal Circuit stated that although the contract at issue in the case was invalid, the contractor was not entirely without remedy because: 50 Where a benefit has been conferred by the contractor on the government in the form of goods or service, which it accepted, a contractor may recover at least on a quantum valebant or quantum meruit basis for the value of the conforming goods received by the government prior to the rescission of the contract for invalidity. 51 Id. at 393. However, Amdahl is distinguishable from plaintiff's situation because contracting authority was not at issue in the case. The contract in Amdahl was eventually rescinded not because the government representative lacked authority, but because its continued performance violated statutory and regulatory requirements. If the Government attempts to contract without authority, as in this case, there can be no contract on which to award relief for partial performance. While it is true that the Amdahl court discussed the matter under the heading of quantum meruit, the circumstances of the case suggest it was more properly labeled equitable relief allowed under the Contract Disputes Act, 41 U.S.C. §§ 601-613, when a contract, express or implied-in-fact, is present. 52 Since AT & T never had a contract with the Government, and it is not entitled in an action in the Court of Federal Claims to relief based on a theory of unjust enrichment, AT & T has not stated a claim upon which relief can be granted. The Government is entitled to judgment in its favor. The decision of the trial court to the contrary, in which it would consider the award of relief to AT & T in this case, is reversed. 53 This is not to say that AT & T is without any remedy. It would appear that the Government is in possession of goods, the RDA equipment, originally manufactured and owned by AT & T. There is nothing to suggest that AT & T intended to make a gift of that equipment to the Government, and much to suggest the contrary. Whether AT & T may replevy the goods, or bring an appropriate action for the value of its wrongful retention and use by the Government, is not before us.