Court Opinion

ID: 8596295
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:03:32.185922+00
Date Added: 2024-06-11T16:54:57.503250
License: Public Domain

Nichols, Judge,
with whom Kunzig, Judge, joins, concurring and dissenting:
I agree with and join in Parts I and III of the court’s opinion. As to Part II, respectfully, I dissent. I would not allow defendant’s motion for summary judgment in any part, nor would I dismiss any part of the petition. I would remand all parts of the claim to the NASA Board for determination of quantum.
Turning first to the parts I agree with, as to Part III, I would add the caveat that the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as amended, appears to me to have been intended, among other things, to permit discovery by persons carrying on controversies with the government, that have not yet ripened into litigation. If such a person should be prosecuting a claim properly defined, at the time he made his FOIA demand, and if the demand was demonstrably ancillary to such prosecution, I would be inclined to exclude the case from our Part III analysis. *306That is not this case, however, since all now agree that plaintiff was not prosecuting a claim against the government when it made its FOIA demand originally, and by my analysis was not at any subsequent date. On transfer of its Petition for Redetermination here in 1971, plaintiff could have used the discovery procedures of this court, but I suppose by that time the FOIA litigation was too far along the track to be stopped.
I would apply the court’s Part III analysis and interpretation of the Armed Services Procurement Regulation (ASPR) at issue, § 15.205.31(d) also to Part II. I would add that in situations where the demand for money was originally by the government, and was collected and converted somewhere along the line to a petition against the government, I would designate the claim according to its original character. Thus for example, if Mr. A is notified that the Commissioner of Internal Revenue has determined a deficiency in his income tax payments for a prior year, I would for purposes of § 15.205.31(d), and only for those purposes, treat any subsequent litigation as not prosecution of a claim against the government, no matter who initiated it, at least so long as the only procedure available required Mr. A to assume the role of petitioner, which the government maneuvered him into by statutes and regulations adopted to better its own position and worsen that of Mr. A.
My analysis starts with the proposition that § 15-205.31(d) is hopelessly and utterly ambiguous, that is, impossible to construe by mere scrutiny of its terms. As to this, the divergent interpretations given in this case in the executive branch, and the conflicting views among our own judges, are res ipsa loquitur. Should the Supreme Court take this case — as I believe there is need for it to do — it well may come up with a sixth interpretation all its own, as it has recently done in a tax case involving similar ambiguities, Commissioner v. Standard Life & Accident Ins. Co., 433 U.S. 148 (1977).
The usual recourse in such cases to legislative history, is here unavailing. Those who put forward T.D. 5000 in 1940 have gone from the scene and not left any explanation of their reasoning behind. The court opines in Part III that their purpose was to free the government from having to *307subsidize a portion of the contractor-claimant’s efforts.to obtain money from the United States. To be sure. But the language is overbroad in some respects and overnarrow in others, for any single rational purpose we can impute to these long-departed worthies. They dealt with, and here we have, a type of contract where the government pays a fixed fee for doing the job, plus allowable costs. These latter include as indirect costs, expenses necessary for running the company but not imputable directly to the performance being reimbursed. Thus, up to a point, we all agree to allow in the overhead, allocable pro rata to these contracts, the cost of renegotiating other contracts, made and performed in other years. It is only a certain portion of such costs that we exclude. What is the rational reason for cutting this reimbursement off when we do? Of necessity, the introduction into the ASPR of exceptions to the general rule constitute a penalty for incurring an expense of the disfavored type. The ASPR Committee may not think of it in terms of a penalty, but that is the inevitable effect of what they do. The contractor would, if he could, divert his expenses to nonexcepted items, but the "claim” language often puts this out of his power, as here construed. The government could cease to make any cost reimbursement contracts, or it could reimburse direct costs only, leaving the fee to cover all the rest. When it singles out a few perfectly legitimate indirect expenses out of many, the question of invidiousness at once arises. While such issues are not urged in this case, it would seem they would not have been frivolous, if urged, and avoidance of an invidious result should be a factor in interpretation. In the very recent case, Ami-Chanco, Inc. v. United States, ante at 76, the same itch was at work, to find something to exclude in the reimbursement of the portion of costs known as indirect costs. Plaintiff, a corporation, was a Medicare "provider,” entitled to reimbursement of costs, including indirect costs. Defendant by its regulation, the Medicare Provider Reimbursement Manual, excluded, in the case of corporations "stock maintenance” costs, reports to stockholders, shareholder’s meetings, proxy costs, and accounting and legal fees connected with requirements of the Securities and Exchange Commission. We held that the regulation was invalid as arbitrary and capricious, in the *308absence of any evidence that such costs were not ordinary and necessary for a corporation to incur.
The penalty here is assessed for exercise of a constitutional right, insofar as the statutory provisions for a due process hearing, once in the Tax Court, now in this, were essential to save the constitutionality of the renegotiation scheme. See Lichter v. United States, 334 U.S. 742, 791 (1948).
The interpretation given by the court leads to a plainly overbroad result in the case of tax litigation. When the government goes into the market place to purchase goods and services, it takes on a different legal identity from the one it ordinarily occupies as a sovereign.
Thus the procurement officer is not responsible for "sovereign acts” by other branches of the government, that interfere with performance of the contract, though the same acts done by him would constitute breaches. Cf. J. A. Jones Construction Co. v. United States, 182 Ct. Cl. 615, 390 F.2d 886 (1968). By the same token, if not required by statute it must be an abuse for the procurement officer to frame his contracts to attempt to deter the contractor from carrying on tax litigation against another and different branch of the government.
The ambiguity of the phrase "claim against the Government” was first appreciated by the bar, I think, as a result of United States v. Bergson, 119 F.Supp 459 (1954). The United States Attorney obtained an indictment of Mr. Bergson for violating a statute prohibiting him, as an ex-government lawyer, from "prosecuting any claims against the United States involving any subject matter directly connected with which such person was so employed * * *,” 18 U.S.C. § 284, as then codified. Having been Assistant Attorney General in charge of the Antitrust Division, he was retained to obtain a "clearance letter” from his former division. The decision, which is still often cited, though it was by a single District Judge, construed the statutory language substantially as the court construes the instant ASPR provision in Part III, i.e., as applying solely to "claims against the United States Government for money or for property,” p. 464. Accordingly, Mr. Bergson enjoyed many fruitful years as an honored member of the D. C. Bar, passing away only recently. This may have been what *309triggered addition of the language respecting antitrust proceedings to § 15.205.31(d). If so, it was a somewhat wooden reaction. Present conflict of interest limitations on former government attorneys are more extensively revised. The significance of the case herein is, I think, its illustration of the general failure to notice before 1954 the ambiguity of the language and its lack of conformity to any measurable notion of public policy. Few would assert that it made any real difference from that point of view whether the matter Mr. Bergson was retained on was a "claim” or something else.
The present False Claims Act, 31 U.S.C. §§ 231, 235, though now divorced from any criminal provision, and prescribing civil penalties only, likewise limits the notion of a claim against the government to one involving "a demand for money or some transfer of public property.” United States v. McNinch, 356 U.S. 595, 599 (1958), recently reaffirmed in United States v. Bornstein, 423 U.S. 303, n. 8 at 313 (1976); see more extended discussion in Hageny v. United States, 215 Ct. Cl. 412, 437, 570 F. 2d 924, 938 (1978) (Nichols, J. concurring).
Defendant herein took the somewhat unusual step of citing a Trial Division opinion which is due to come before the court for review next October, O’Brien Gear & Machine Co. v. United States, No. 105-72 (Trial judge’s opinion filed August 16, 1977.) I should not and do not rely on its conclusions in the circumstances. It holds that plaintiff, a petitioner for renegotiation redetermination just as Grumman was, forfeited its claim for falsity in the proof under 28 U.S.C. § 2514, which so forfeits only "a claim against the United States * * *.” The able trial judge holds, for reasons which he gives, that the breadth of meaning of a "claim” under that statute is broader than in the criminal statutes and really covers all cases prosecuted in the U. S. Court of Claims, whether or not they are claims for money. I think even now I can rely on that exhaustive and brilliant analysis as supporting my proposition that the words "claim against the Government,” or "against the United States” are utterly and hopelessly ambiguous, and must vary in meaning with every context in which they are used. This is what Trial Judge Schwartz says.
The court relies on Board authority, largely on Reed & Prince Mfg. Co., ASBCA No. 3172, 59-1 BCA ¶ 2172, to the *310effect that the rule long has been that a proceeding before the ASBCA is a claim against the government, regardless of the origin of the dispute. Thus, in the case cited, the contractor was before the ASBCA to resist a demand by the contracting officer for liquidated damages and reprocurement costs. By analogy Grumman should have known that in disputing a claim by the Renegotiation Board for refund of alleged excessive profits, it was prosecuting a claim against the government. The semantic absurdity of the Reed & Prince decision leaps to the eye, as does its obvious unfairness. The rule there asserted has never come before this court for review, and citing Reed & Prince seems to me unpersuasive. It seems obvious the Board’s construction of ASPR § 15.205.31(d) is not the same as the court’s from the variance between the two respecting the FOIA expenses. The Board’s definition of "claim against the Government” in the instant case is broader than the court’s at least verbally, quoting favorably the words: "a demand of some matter as of right made by one person upon another, to do or to forbear to do some act or thing as a matter of duty.” In view of this difference, I do not see how Board decisions can be of persuasive authority here.
The court makes no attempt in its Part II to show that the result reached is fair and reasonable; nor does it justify the difference in results in Parts II and III on fairness grounds. That kind of analysis would be gratutitous if the ASPR provision was clear, but here it is murky. When the legislators have failed to make their meaning clear, legislative history is unavailable, and valid precedent decisions cannot be found, it seems to me the time has come for the court to call into play its own notions of fairness. This is not to make ourselves moral adjudicators (cf. United States v. Oneida Nation of New York, ante, at 45, but because the authors of T.D. 5000 and the ASPR probably intended to be fair, if we call upon our own sense of fairness we may stumble upon what they intended.
The authors must have realized that mandatory disal-lowances of otherwise valid items of indirect cost would have an influence upon behavior, more or less according to the percentage of government cost type contracting on the contractor’s order board. If this item was a large one, and the business all of that type, the impact of disallowance *311would be very severe. If the profits of the business consisted entirely of fees, big disallowances might consume the fees and produce losses for the year. I think the authors would have asked themselves if the item was necessary for survival of the business and would hesitate to disallow such necessary items unless the justification for doing so was clear. I think they would probably have distinguished between "claims” (whatever the claims were) that related to procurement and those that related to matters wholly outside procurement cognizance, and I think they would have hesitated to interfere by disallowances with the policy of contractor’s management in the latter regard. The procurement officers might find it repugnant to finance disputes with themselves, but they would not feel the same way about tax disputes. If they were reluctant to finance tax disputes, they would not, I think, distinguish between tax disputes with the Federal Government, and tax disputes with state or local authorities, or foreign governments. Yet the involved ASPR provision, as construed by the court, treats tax disputes with the Federal Government the same as procurement disputes, while doing nothing to deter contractors from litigating tax disputes with states, or counties, or cities, or foreign governments, and charging the cost as overhead to the United States. I do not think this would have impressed the authors as sensible or fair. Renegotiation is not as removed from procurement as taxation, but it is not a direct part of procurement either. Great stress is laid in the 1951 Act on the independence of the Renegotiation Board. 50 U.S.C. app. § 1217(a) is in this respect a change over the prior law under the 1948 Act, now codified as 50 U.S.C. app. § 1193, which made the Secretary of Defense responsible for renegotiation. I doubt if the authors would have been impressed that the treatment of expenses contesting ASBCA cases constituted a fair analogy to govern the treatment under § 15.205.31(d) of renegotiation expenses.
I think, too, that the authors would have thought it unfair to penalize a contractor for incurring overhead expenses it could not avoid. I think, if they had thought •about it, they would have excluded from the category of claims against the government, claims originating with the government. They would not have seen anything in the *312switch that takes place midway where the previous target of the claim becomes a petitioner, that would justify in fairness a change in the allowability of the legal expenses at that point. The reasoning of both the board and the court as to this, appear to me to be reasoning of persons who have excluded considerations of fairness from their minds. Yet, as I have shown, the phrase "claims against the Government” has no such clear meaning as to necessitate ignoring what the authors would have intended if they had desired to be fair. I would hold, therefore, that the cost of a dispute properly allocable under the cost principles to a government contract, because of being a claim by the government, does not suddenly lose that character because the procedures the government has prescribed by statute maneuver the prior claimee (if I can coin a word) into becoming at that point a petitioner in a judicial or quasi-judicial tribunal. A true claim against the government is one which was that from the day it was born, of which we have many examples in our jurisprudence. Most claims before the ASBCA, claims for equitable adjustment for change orders, etc., are in that category, so I do not leave § 15.205.31(d) with nothing to apply to.
I confess that my analysis has not been much aided by the efforts of both parties to put across their own theories of the nature of renegotiation, and a lot of briefing effort has been wasted so far as my feeble intellect is concerned.
It does stick in my mind as an incontrovertible fact that a unilateral order of the Renegotiation Board was and is a demand for money by the government. It may and may not be successful. There is nothing in the Renegotiation Act to require a contractor to set aside funds to pay future such demands. Solitron Devices, Inc. v. United States, 210 Ct. Cl. 352, 537 F.2d 417 (1976), cert. denied, 430 U.S. 930 (1977), and cases cited therein, illustrate a wide variety of instances where the contractor has not set money aside and as a result, is unable to pay the refund the board proposes. Contractors who cannot pay usually cannot obtain a bond to stay execution of the board’s order under 50 U.S.C. app. § 1218. Accordingly, the government is entitled to obtain before trial and normally does obtain in such cases a judgment in aid of execution, for which it asks in a pleading called a counterclaim. It is my impression that *313such judgments are often uncollectible for the reason that the alleged excessive profits, if ever really realized, have long since been distributed to stockholders, or otherwise dissipated, which the statute in no way frowns on the contractor doing. Thus the pursuit of the money to be refunded is a matter of considerable difficulty and may often fail, or succeed only in part. Whether the contractor can prosecute its petition here in no way turns on whether it has paid, or filed a bond, and I suppose we have adjudicated many cases where neither occurred. The court’s assertion in Part II that the petition by the contractor always seeks to obtain repayment of money already paid to the government, or else the freeing of money not yet fully available, because secured by a bond, may be accurate in the case of established government prime contractors such as Grumman, but in the sweeping form uttered in the opinion, disregards facts that are manifest in our published decisions. The court I imagine does not intend to limit its holding to cases as to which its generalization is true: it does not intend to hold that a renegotiation petition by Solitron in this court reflects a claim by the government, but one by Grumman a claim against the government. Thus the fact, if it is a fact, that Grumman is suing here in hopes of recovering a cash payment or clearing a bond, does not explain or justify the rule the court announces. In my view, the case starts with a unilateral order, a claim by the government, and nothing happens thereafter with enough regularity or consistency to justify saying that the mere filing of a petition has changed the character of the proceeding. I have no knowledge, and I doubt the court has either, whether the net aggregate effect of all our judgments, "in aid of execution” and "final,” is ebb or flow, money going into the treasury, or out of it. There is therefore nothing in the nature of the cases in this court, as they really are, to justify asserting that the petitioner is always the claimant. It would be absurd to make the classification turn, in each particular case, on who expects or hopes to collect money from the other, and the analogy suggested between a renegotiation petition here under § 1218, amended, and one for a declaratory judgment, appears to me to be not unhelpful. It is certainly not true that Congress now does *314or ever did limit the jurisdiction of this court to claims against the government; the history of this court, now in preparation, will state examples to the contrary. They may not be too numerous, but enough to refute that the mere name of this court determines the nature of every lawsuit in it.
Accordingly, I concur and dissent to the extent I have indicated.