Opinion ID: 628626
Heading Depth: 2
Heading Rank: 1

Heading: The Government's Counterclaim for Progress Payments

Text: 18 On appeal, the government argues, as it did in its motion to dismiss, that because the Government's claim for the return of unliquidated progress payments was not the subject of a final contracting officer's decision prior to the commencement of this suit, the Claims Court lacked jurisdiction to entertain the suit. The government is correct. 19 Under the CDA, a final decision by the contracting officer on a claim, whether asserted by the contractor or the government, is a jurisdictional prerequisite 5 to further legal action thereon. 6 41 U.S.C. Sec. 605(a) (All claims by a contractor against the government relating to a contract shall be in writing and shall be submitted to the contracting officer for a decision. All claims by the government against a contractor relating to a contract shall be the subject of a decision by the contracting officer.); 41 U.S.C. Sec. 605(b) (The contracting officer's decision on the claim shall be final and conclusive and not subject to review by any forum, tribunal, or Government agency, unless an appeal or suit is timely commenced as authorized by this chapter.); Joseph Morton Co. v. United States, 757 F.2d 1273, 1279-80 (Fed.Cir.1985) (holding both contractor claims and government counterclaims require contracting officer's final decision); Paragon Energy Corp. v. United States, 645 F.2d 966, 971, 227 Ct.Cl. 176 (1981), aff'd, 230 Ct.Cl. 884, 1982 WL 25259 (1982); Burgett Inv., Inc., AGBCA No. 81-108-1, 81-1 BCA p 14,913 (1981) (dismissing newly asserted government counterclaim because under the CDA issuance and receipt of contracting officer's final decision on the claim is a jurisdictional prerequisite). In this context, claim refers to each claim under the CDA for money that is one part of a divisible case. Joseph Morton Co., 757 F.2d at 1281. Moreover, although the recent amendments to the CDA allow post-filing curing of technical defects in certification, they do not dispense with the jurisdictional prerequisite of a pre-filing final decision by the contracting officer. See 138 Cong.Rec. S17799 (daily ed. October 8, 1992) (statement of Sen. Heflin) (stating that [a] contracting officer's final decision under the Contract Disputes Act will remain a jurisdictional prerequisite to review by the Court of Federal Claims even after the amendments made by Public Law No. 102-572) (emphasis added). 20 As the Claims Court itself noted, jurisdiction must be determined under the actual circumstances existing at the time a complaint is filed, 24 Cl.Ct. at 769; accord Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830, 109 S.Ct. 2218, 2221-22, 104 L.Ed.2d 893, reh'g denied, 492 U.S. 932, 110 S.Ct. 12, 106 L.Ed.2d 627 (1989) (stating that [t]he existence of federal jurisdiction ordinarily depends on the facts as they exist when the complaint is filed.). Here, the jurisdictional prerequisite as to both the contractor's claim and the government's counterclaim for progress payments was not met because there was no final decision of the contracting officer at the time that Sharman filed its initial complaint, alleging, in part, entitlement to the government's progress payments. Neither the August 7, 1989 default termination decision, the September 12, 1989 demand letter, nor the October 18, 1990 final decision letter, alone or in combination, qualifies as a valid and timely final decision of the contracting officer on the government's counterclaim or the contractor's mirror image claim. 21 Furthermore, although Sharman amended its complaint on January 6, 1992 to include an explicit challenge to the government's right to return of the unliquidated progress payments, this amendment merely restated, inter alia, Sharman's earlier assertion of entitlement to those same payments for the same partial performance in the quantum meruit count of its original complaint. Therefore, it is actually the same claim. Similarly, the added government counterclaim involves the same unliquidated progress payments and the same partial performance, and is therefore effectively the same claim, but made by the other party. Therefore, because the progress payment claim was part of the litigation from the outset, Sharman's later amendment to its complaint, and the corresponding government counterclaim which followed, do not affect our determination. Whether the jurisdictional prerequisite was met must be judged from the time that the progress payment claim became part of the lawsuit--i.e., when the lawsuit was first filed. Here there was no final decision on any such claim at that time. 22
23 Although the contracting officer had issued a final decision on the default termination, he had not issued as a final decision the government's demand for the return of unliquidated progress payments when the original suit was filed. The contracting officer's default termination letter of August 7, 1989 could not provide a jurisdictional basis for the government's counterclaim for progress payments because these two claims are not the same. Crippen & Graen Corp. v. United States, 18 Cl.Ct. 237, 241 (1989) ([T]he default claim and the demand for return of the unliquidated progress payments are separate and distinct ... for jurisdictional purposes.). Therefore, the contracting officer's final decision solely on the default termination does not satisfy the jurisdictional prerequisite of a contracting officer's final decision as to the unliquidated progress payments claim. Id. at 240-41 (distinguishing Nuclear Research Corp. v. United States, 814 F.2d 647 (Fed.Cir.1987) on the ground that the contracting officer in that case made a final decision on both the default termination and the progress payment claim). 24 Furthermore, the government's claim for return of progress payments is a claim for money damages. Such a claim requires a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain. FAR Sec. 33.201 (1992). At the time of the August letter, no such written demand or assertion of present entitlement to a sum certain had been submitted to or issued by the contracting officer. Additionally, the August letter contains no reference to any money entitlement being asserted by the government, let alone to the progress payments. Therefore, the August letter could not possibly constitute a final decision for purposes of the government's money damages claim or the contractor's mirror image claim.
25 The September 12, 1989 letter seeking repayment of the progress payments is also not a final decision for jurisdictional purposes on the government's counterclaim. On its face, this letter simply states that it is a notice and demand for payment; it does not contain the customary designation final decision. The text of the September letter also makes clear that it is not a final decision because it specifically invites Sharman to submit a proposal for deferment of collection if immediate payment is not practicable or if the amount is disputed. 24 Cl.Ct. at 765. As the Claims Court itself acknowledged, such notices are tentative determinations issued to invite contractor comment rather than as final decisions. Id. at 768 (citing Crippen & Graen, 18 Cl.Ct. at 240). The September letter, therefore, is not a final decision, either viewed alone, or, as urged by the Claims Court, in the context of the earlier August letter. 26 The Claims Court's theory that the September letter quantified a government claim, implicit in the August default termination letter and therefore the two letters taken together constitute a valid final decision on a claim for jurisdictional purposes is incorrect. 7 There is no authority that supports the combining of two separate letters from the contracting officer, one constituting a final decision on a default termination--the August letter--and the other demanding a specific amount--the September letter--to create a final decision on a monetary claim. They are two entirely separate communications related to two separate and distinct matters. 8 Even assuming that combining such letters were ever permissible, the facts in this case do not support such a combination. The August letter made no reference to any money entitlement; therefore there was no claim in the August letter for the September letter to quantify, as theorized by the Claims Court. Moreover, the amount specified in the September letter was not yet in dispute at the time of the August or September letters; it had been proposed by the contracting officer and not rejected by the contractor. Therefore, these letters do not assert a claim. Dawco Constr., Inc. v. United States, 930 F.2d 872, 878 (Fed.Cir.1991) ([A] claim must seek payment of a sum certain as to which a dispute exists at the time of submission.). Indeed, the amount was later cut nearly in half by the government, unilaterally. 9 Consequently, the September letter, taken alone or in combination with the August letter, provides no final decision for jurisdictional purposes on the government's monetary claim.
27 On October 18, 1990, the contracting officer issued a letter, calling itself a final decision, on the government claim for unliquidated progress payments. As noted by the Claims Court, however, this letter did not issue until more than six months after this suit was filed. 24 Cl.Ct. at 766. Sharman's original complaint was filed on February 2, 1990, alleging entitlement to the government's progress payments under a quantum meruit theory as part of its reimburse[ment] ... for the value of the work performed. As noted earlier, this asserted entitlement to the progress payments in Sharman's original complaint is the same claim as stated by Sharman's amended complaint and the government's counterclaim, because in each case the claim alleges entitlement to the same money based on the same partial performance, only under a different legal label. Therefore, the progress payment claim was in litigation between the parties as of the date that Sharman's original complaint was filed. 10 28 Once a claim is in litigation, the Department of Justice gains exclusive authority to act in the pending litigation. 28 U.S.C. Secs. 516-20 (1988); Hughes Aircraft Co. v. United States, 534 F.2d 889, 901, 209 Ct.Cl. 446 (1976). That exclusive authority divests the contracting officer of his authority to issue a final decision on the claim. Durable Metal Prods., Inc. v. United States, 21 Cl.Ct. 41, 46 (1990) (filing suit in Claims Court divests contracting officer of authority over plaintiff's claim). Because the progress payment claim was the subject of litigation at the outset, the contracting officer had no authority to issue a final decision on the claim after the complaint was filed. Therefore, the October 1990 final decision letter was issued without authority and consequently is a nullity. It also came too late to affect jurisdiction which must be assessed as of February 1990. As a result, it provides no jurisdictional basis for the government's counterclaim for the progress payments.