Court Opinion

ID: 9490648
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:50:12.944803+00
Date Added: 2024-06-11T17:54:13.847290
License: Public Domain

PAULINE NEWMAN, Circuit Judge,
dissenting.
AT & T and the Navy entered into a fixed price research and development contract relating to new and strategically essential technology for submarine detection. AT & T fully performed its contract obligations, at a cost that AT & T says was significantly higher than the contract fixed price. AT & T says that the Navy urged this performance, although research costs soared. AT & T raises the issue of appropriate compensation, for which it brought suit in accordance with the Contract Disputes Act.
The panel majority holds that AT & T never had any right to any payment for its work done under the contract, and that the Navy is off the hook for the massive benefits demanded and received, even had it never paid a cent. The majority holds that because of the Navy’s transgression in complying with congressional oversight requirements, “AT & T never had a contract with the Government.” My colleagues hold that AT & T might now try to retrieve the electronic equipment from the Navy, but it can not be paid for it, even had there been no payment whatsoever.
It is undisputed that both AT & T and the Navy performed this contract over a period of nearly five years. It can not be correct for this court to charge AT & T with oversight responsibility for whether the Navy also carried out the internal assessment and approval that Congress asked it to do, or whether the Navy filed the reports with Congress that Congress requested. AT & T bore no responsibility for the Navy’s compliance with these requirements, and indeed could not know if the Navy had complied. See E. Walters & Co. v. United States, 217 Ct.Cl. 254, 576 F.2d 362, 367 (1978) (“The discipline to be administered in such cases is a responsibility of the cognizant procurement officials within the agency____”) It is inappropriate to assess AT & T with the consequences of the Navy’s internal lapses, if indeed there were such. If the Navy did not fulfill its obligations to the Congress, it does not follow that “AT & T never had a contract with the Government,” as my colleagues now rule.
Not every violation of a statute or regulation, nor the failure to comply with a congressional request for reports and internal approvals, renders a contract void or invalid — particularly after it has been fully performed. The oversight requirements of § 8118 of the Appropriations Act do not go to the core of federal procurement. Indeed, contracts between the government and a private party have been sustained even when statutes and regulations relating to the procurement or award process have been violated. E. Walters, 576 F.2d at 367 (“the fact that a procurement practice is prohibited does not necessarily mean that it is therefore actionable”); see Walsh v. Schlecht, 429 U.S. 401, 408, 97 S.Ct. 679, 685, 50 L.Ed.2d 641 (1977) (requiring preservation of the validity of contracts' that are not plainly illegal); United States v. New York & Porto Rico S.S. Co., 239 U.S. 88, 92, 36 S.Ct. 41, 42, 60 L.Ed. 161 (1915) (when government did not comply with formal requirements, contract not illegal and recovery permitted upon quantum vale-*1481bat when performed) (citing United States v. R.P. Andrews & Co., 207 U.S. 229, 243, 28 S.Ct. 100, 105, 52 L.Ed. 185 (1907)); Triton Educational Corp. v. United States, 217 Ct. Cl. 266, 578 F.2d 1356, 1361 (1978) (the fact that the contracting officer may have disregarded a directive of the ASPR does not ordinarily render the contract a nullity); Ocean Tech., Inc. v. United States, 19 Cl.Ct. 288, 294 (1990) (“Performance having been fully completed, holding the obligation to pay unenforceable is not a position favored in this circuit.”).
In contrast, those contracts that have been held void or invalid on the ground of a statutory or regulatory violation have been clearly illegal in a material aspect, in that they violated provisions explicitly limiting the authority of a party to enter into the contract, or expressly prohibiting the contract altogether. E.g., Clark v. United States, 95 U.S. 539, 542, 24 L.Ed. 518 (1877) (unlawful for contracting officers to make contracts that violate the statute of frauds); Urban Data Systems, Inc. v. United States, 699 F.2d 1147, 1150 (Fed. Cir.1983) (recovery based on implied-in-fact contract after contracts declared invalid because they contained pricing clauses in plain violation of statute); Alabama Rural Fire Ins. Co. v. United States, 215 Ct.Cl. 442, 572 F.2d 727, 729, 736 (1978) (the statute creating the plaintiff corporation expressly forbade plaintiff from entering contract).
However, § 8118’s assessment and reporting requirements neither limited the authority of the Navy to enter the Reduced Diameter Array contract with AT & T nor prohibited the use of a fixed price contract; the contract was not illegal and is not invalid. Indeed, the Navy agrees that invalidation of the contract is not available on the ground that the Navy failed to comply with internal approvals and reporting at the political level. In enacting § 8118 Congress did not require, or even suggest, that a completed contract would be invalidated if the legislative goal of overseeing Defense Department research and development contracts were thwarted by inadequate defense agency compliance. Congress plainly stated the contrary intent:
It is the intent of the committee that this section be applied in a manner that best serves the government’s interests in the long term health of the defense industry, and that this section not be used as the basis for litigating the propriety of an otherwise valid contract.
S. Rep. No. 100-326, at 105 (1988) (referring to the 1989 reenactment of § 8118).
In addition to stating that it did not intend litigation of an otherwise valid contract to result from § 8118 restrictions, the legislative history demonstrates that Congress intended to monitor Defense Department usage of fixed price development contracts, not to prohibit their use entirely. By various amendments Congress adjusted the enforcement provisions of § 8118 and successor enactments by simply changing the nature arid timing of the Department’s reports to Congress. In enacting § 8118 the congressional conferees explained that the remedy set by this legislation was the requirement for quarterly reports after contracts were let “instead of the more rigorous requirement of prior certification to Congress proposed by the House ... [i]n order to reduce the appearance of congressional micromanagement of acquisition policy.” H.R.Rep. No. 100-498, at 623 (1987). The Report stated that if Defense Department policy did not become more uniform, “more severe restrictions” would be imposed. Id. This carries no hint of, and indeed belies, the dramatic penalty of voiding a fully performed contract, as the panel majority now imposes.
The legislative history shows congressional concerns about the military’s research and development acquisition policy, in the form of continuing review of Defense agency actions in this area and the imposition of specific and carefully considered reporting provisions. Congress did not, however, prohibit the making of fixed price R & D contracts. Compare 41 U.S.C. § 254(b). Instead, if Congress remained unsatisfied with agency procurement practices, Congress expressed its willingness to hold hearings and (as it did when it enacted the 1989, 1990, 1991, 1992, and 1993 Defense Appropriations Acts) to alter the reporting and internal approval obligations.
It is not the judicial role to monitor executive agency reports to Congress, or to discipline the Navy’s internal compliance with the oversight actions requested by Congress. *1482Cf. Longshore v. United States, 77 F.3d 440, 443 (Fed.Cir.1996) (“Congress has undoubted capacity to oversee the performance of Executive Branch agencies, consistent with its constitutional authority. It is not for this court to instruct Congress on how to oversee and manage its creations.”); National Treasury Employees Union v. Campbell, 654 F.2d 784, 794 (D.C.Cir.1981) (when Congress required investigation and reporting to Congress by the [Comptroller General], the court stated: “By means of this and other safeguards, Congress itself is in a position to monitor and enforce its spending limitations. It is not for us to question the effectiveness of the existing remedies and infer additional remedies ....”) (footnote omitted).
Congress plainly did not intend that any lapse by the Navy in its compliance with § 8118, a lapse that by its nature could not have been apparent to AT & T, could be invoked, after full contract performance, to strip the Navy of authority to have entered into the contract, and to strip AT & T of the right to present any claims arising from its performance of the contract. See John Reiner & Co. v. United States, 163 Ct.Cl. 381, 325 F.2d 438, 440 (1963) (after award of the contract the “binding stamp of nullity” should only be imposed “when the illegality is plain”).
In ruling that the Reduced Diameter Array contract is void, the Court of Federal Claims relied on an 1866 opinion of the Court of Claims. However, Curtis v. United States, 2 Ct.Cl. 144, 151-52 (1866), does not support the court’s theory. Curtis involved a contract for the construction of a branch of the United States mint in San Francisco. Congress had enacted a statute limiting to $300,000 the cost to the government, and providing that “the government shall not be liable for [any] excess.” When the contractor sought recovery of cost in excess of $300,-000, the court stated:
The statute became to the claimant notice in law and in fact that the expenditures could not be carried beyond certain bounds; and it was, moreover, by direct reference, stamped upon and made a part of the contract which is the foundation of the claimant’s rights.
2 Ct. Cl. at 152. The court in Curtis did not void the contract ab initio because its cost was exceeded; it simply enforced the statute which limited the amount to be paid. That express provision, not lack of contracting authority, limited the contractor’s recovery.
The eventual discovery by AT & T that the Navy may not have complied with the procedures of § 8118 does not invalidate the contract. Neither AT & T nor the Navy has this option. The panel majority’s retroactive invalidation of the Reduced Diameter Array contract is contrary to the rules of contract, contrary to precedent, and contrary to the statute on which the majority relies. The contract was not illegal, and it was fully performed. Thus I must, respectfully, dissent from the panel majority’s ruling.