Court Opinion

ID: 9490269
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:38:07.225371+00
Date Added: 2024-06-11T17:53:59.524322
License: Public Domain

MAYER, Circuit Judge,
dissenting.
More than a century ago, the Supreme Court held that the government cannot deprive a party with which it contracts “of the fruits actually reduced to possession of contracts lawfully made.” Sinking Fund Cases, 99 U.S. 700, 720, 25 L.Ed. 496 (1879); see also Bowen v. Public Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 55, 106 S.Ct. 2390, 2398, 91 L.Ed.2d 35 (1986). In levying the special assessments required by 42 U.S.C. § 2297g-l against Yankee Atomic Electric Company (Yankee), the government improperly diminished the value of Yankee’s contractual “fruits.” The Court of Federal Claims held that this was an “unlawful exaction,” and I agree. I would affirm.
The parties do not dispute that the contracts at issue were fixed-price contracts. “Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered.” United States v. Spearin, 248 U.S. 132, 136, 39 S.Ct. 59, 61, 63 L.Ed. 166 (1918); Dalton v. Cessna Aircraft Co., 98 F.3d 1298, 1305 (Fed.Cir.1996) (“Because fixed-price contracts do not contain a method for varying the price of the contract in the event of unforeseen circumstances, they assign the risk to the [seller] that the actual cost of performance will be higher than the price of the contract.”). As the seller of uranium enrichment services, the government bore the risk of any unforeseen difficulties or increased costs that might arise out of its performance of the contracts.
The parties also agree that the contracts were fully and satisfactorily performed. Once a contract is completed, the contractual relationship ends and there is no privity between the parties. M. Bianchi of Cal. v. Perry, 31 F.3d 1163, 1167-68 (Fed.Cir.1994); John J. Kirlin, Inc. v. United States, 827 F.2d 1538, 1541 (Fed.Cir.1987). Consequently, Yankee cannot prevail on its claim that the government breached the contracts at issue years after they were finished. See Mulholland v. United States, 175 Ct.Cl. 832, 361 F.2d 237, 239-40 (1966) (at the latest, a breach of contract claim accrues when the contract is completed); cf. Henke v. United States, 60 F.3d 795, 799-800 (Fed.Cir.1995).
Contracts, however, are property, “whether the obligor be a private individual, a municipality, a State, or the United States. Rights against the United States arising out of a contract with it are protected by the Fifth Amendment” of the United States Constitution. Lynch v. United States, 292 U.S. 571, 579, 54 S.Ct. 840, 843, 78 L.Ed. 1434 (1934); see also Bowen, 477 U.S. at 52, 106 S.Ct. at 2396-97 (the government “has the power to enter contracts that confer vested rights, and the concomitant duty to honor those rights”); Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003, 104 S.Ct. 2862, 2873, 81 L.Ed.2d 815 (1984) (“[V]alid contracts are property within meaning of the Taking Clause.”); Thorpe v. Housing Auth. of Durham, 393 U.S. 268, 278 n. 31, 89 S.Ct. 518, 524 n. 31, 21 L.Ed.2d 474 (1969). The Fifth Amendment prohibits the federal government from depriving a person of property “without due process of law” and from taking private property “without just compensation.” U.S. Const, amend. V; Lynch, 292 U.S. at 579, 54 S.Ct. at 843; cf. Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 163-64, 101 S.Ct. 446, 452, 66 L.Ed.2d 358 (1980) (where state collected a service charge, subsequently-imposed fee for the same service was an unconstitutional taking).
The government does not contend that its contracts with Yankee were invalid. So, there can be no doubt that once Yankee’s contracts had been satisfactorily performed, its rights under those contracts were fully-vested property rights. Consequently, the government cannot deprive Yankee of the benefits of those contracts. See Sinking Fund Cases, 99 U.S. at 720.
To ascertain Yankee’s vested property rights, we must look to the contracts themselves. The bargain struck between the government and Yankee was simple. The government, through the Atomic Energy *1583Commission and its successor agencies, was to provide uranium enrichment or separation services for Yankee. In return, Yankee was to pay a fixed price per separative work unit, the common measure by which uranium enrichment services are sold. Between 1963 and 1983, Yankee purchased approximately 804,000 separative work units at prices ranging from less than $26 to more than $149 per unit. Because of the fixed-price nature of these contracts, Yankee was entitled to pay no more than the agreed-upon price. The government, on the other hand, was assigned the risk for any unforeseen difficulties that might arise or the risk that actual performance costs would be higher than the contract price.
The sole basis upon which Congress imposed the special assessments which Yankee seeks to recover is that Yankee had purchased uranium enrichment services from the government. These assessments were calculated based on the percentage of the total separative work units produced by the government which Yankee had purchased directly. This is tantamount to a retroactive price increase. It levies a charge on Yankee solely because it had previously purchased enrichment services from the government. But those purchases were made via fixed-price contracts. The assessment effectively requires Yankee to pay for the additional costs the government incurred as a result of performing uranium enrichment services; the very same costs for which the government assumed the risk. Thus, the government retroactively abrogated the essence of the contracts at issue. “But Congress [is] without power to reduce expenditures by abrogating contractual obligations of the United States. To abrogate contracts, in the attempt to lessen government expenditure would be not the practice of economy, but an act of repudiation.” Perry, 294 U.S. at 352-53, 55 S.Ct. at 436.
It is of no moment that the reason for the assessment is to relieve the government from shouldering entirely the unforeseen costs incurred in providing those services, from which Yankee had benefited. Yankee fully paid the government for those benefits, and as the seller of the enrichment services, the government bore the burden for any unforeseen costs. The Fifth Amendment “was designed to bar Government from forcing some people alone to bear public burdens which ... should be borne by the public as a whole.” Armstrong v. United States, 364 U.S. 40, 49, 80 S.Ct. 1563, 1569, 4 L.Ed.2d 1554 (1960); cf. United States v. Winstar Corp., — U.S. -, -, 116 S.Ct. 2432, 2459, 135 L.Ed.2d 964 (1996) (the government may not “simply shift costs of legislation onto its contractual partners who are adversely affected by the change in the law, when the Government has assumed the risk of such change’’).
Nor is it of any great import that the assessment is levied on some utilities that did not contract directly with the government. First, that is not the case before us. Yankee seeks to recover only assessments based oii its direct purchases from the government. It does not challenge charges based on secondary market purchases, which, according to the government at argument, constitute just 15% of the total assessments. Moreover, the same argument, that legislation was not targeted solely at those with whom the government had contracted, was made by the government and rejected by the Court in Winstar. “Legislation can almost always be written in a formally general way, and the want of an identified target is not much security when a measure’s impact nonetheless falls substantially upon the Government’s contracting partners.” — U.S. at -, 116 S.Ct. at 2468. The government concedes that 85% of the special assessment falls on utilities that had procured enrichment services directly from the government. Clearly then, the assessment’s impact falls substantially on the government’s contracting partners. That a small fraction of others who indirectly purchased enrichment services from the government also must pay the assessment does not mask its true identity as a retroactive price increase.
The government invokes the familiar sovereign acts and unmistakability doctrines in support of its position that the special assessment did not abrogate Yankee’s vested contract rights. Neither shields the government.
*1584The sovereign acts doctrine provides that “the United States when sued as a contractor cannot be held liable for an obstruction to the performance of the particular contract resulting from its public and general acts as a sovereign.” Horowitz v. United States, 267 U.S. 458, 461, 45 S.Ct. 344, 344, 69 L.Ed. 736 (1925). “[T]he essential point [of the doctrine is] to put the Government in the same position that it would have enjoyed as a private contractor.” Winstar, — U.S. at -, 116 S.Ct. at 2463. This doctrine. is wholly inapplicable. Properly understood, it is a government defense to breach of contract and other contractor claims that a governmental act adversely affected contract performance. But this is not a breach of contract case. Nor did Congress’ enactment of the special assessment obstruct performance of the contracts, as contemplated by Horowitz. The contracts were fully and successfully performed by both parties. But even assuming the doctrine applied, it would not insulate the government from liability because the impact of the special assessment falls so substantially and directly on Yankee and the government’s other contractors. See Winstar, — U.S. at-, 116 S.Ct. at 2469 (“[T]he extent to which [the legislation there at issue] relieved the Government of its own contractual obligations precludes a finding that the statute is a ‘public and general’ act for purposes of the sovereign acts defense.”).
The unmistakability doctrine, on the other hand, is simply a “canon of contract construction,” Winstar, — U.S. at-, 116 S.Ct. at 2448, which says that “a contract with a sovereign government will not be read to include an unstated term exempting the other contracting party from the application of a subsequent sovereign act (including an act of Congress),” id. at -, 116 S.Ct. at 2456. Its application “turns on whether enforcement of the contractual obligation alleged would block the exercise of a sovereign power,” such as the power to tax. Id. at-, 116 S.Ct. at 2457. But this doctrine too is inapplicable. It is not enforcement of a “contractual obligation,” per se, that is at issue. Rather, Yankee seeks reimbursement for the improper abrogation of its vested property rights, which happened to arise out of the completed contracts. That is, it seeks money damages for the government’s deprivation “of the fruits actually reduced to possession” of the contracts at issue. See Sinking Fund Cases, 99 U.S. at 720.
Even assuming, for the sake of argument, the unmistakability doctrine applied, it adds little. The parties agree that the contracts, out of which Yankee’s property rights arose, had fixed prices and that the government bore the risk of unforeseen costs that might arise. They merely disagree about the legal consequences that flow from this interpretation. But Yankee needed no more than the fixed-price contract terms to insulate itself from a post-performance price hike. It did not need an additional, second promise not to have the contract price increased after completion. See Winstar, — U.S. at-, 116 S.Ct. at 2461 (there is “no need for an unmistakably clear ‘second promise’ ”); id. at-, 116 S.Ct. at 2477 (Scalia, Kennedy, Thomas, JJ., concurring) (there need be no “further promise not to go back on the promise” made).
That is not to say that Yankee would be immune from every assessment or tax relating to decontaminating and decommissioning the government enrichment facilities, no matter how general or broad its application, solely because it had a fixed-price contract. But where, as here, the impact of the tax falls so substantially and directly on Yankee and the government’s other contracting partners, it amounts to a retroactive price increase, which cannot stand.
When the government improperly exacts or takes one’s money “‘in contravention of the Constitution, a statute, or a regulation,’ ” an illegal exaction has occurred, and the pay- or is entitled to recoupment. Aerolineas Argentinas v. United States, 77 F.3d 1564, 1572-73 (Fed.Cir.1996); Eastport S.S. Corp. v. United States, 178 Ct.Cl. 599, 372 F.2d 1002, 1007 (1967). In other words, “an illegal exaction has occurred when ‘the Government has the citizen’s money in its pocket.’ ” Aer*(1)olineas Argentinas, 71 F.3d at 1573 (quoting Clapp v. United States, 127 Ct.Cl. 505, 512, 117 F.Supp. 576, 580 (1954)). The government has Yankee’s money in its pocket. It illegally exacted that money in contravention of Yankee’s rights under the Fifth Amendment. Yankee is entitled to recover it.