Court Opinion

ID: 6103733
Source: CourtListenerOpinion
Date Created: 2022-01-14 20:11:29.94822+00
Date Added: 2024-06-11T08:53:39.845566
License: Public Domain

(Slip Opinion)

          Applicability of the Miscellaneous Receipts Act
               to an Arbitral Award of Legal Costs
An arbitral award of legal costs does not qualify as a refund for purposes of the “refunds
  to appropriations” exception to the Miscellaneous Receipts Act. The Millennium Chal-
  lenge Corporation therefore must deposit the award in the general fund of the Treas-
  ury.

                                                                          March 6, 2018

          MEMORANDUM OPINION FOR THE GENERAL COUNSEL
              MILLENNIUM CHALLENGE CORPORATION

   You have asked whether the Millennium Challenge Corporation
(“MCC”) may retain an arbitral award of legal costs under the refund
exception to the Miscellaneous Receipts Act, 31 U.S.C. § 3302(b). 1 The
Act requires a federal official or agent “receiving money for the Govern-
ment from any source” to deposit it in the Treasury “as soon as practica-
ble without deduction for any charge or claim,” id., but the Act has long
been understood to allow the retention of certain refunds to appropriations
for amounts erroneously disbursed. Because the arbitral award cannot be
viewed as such a refund, we conclude that the exception does not apply
and that MCC must deposit the award in the general fund of the Treasury.

                                            I.

  MCC is a government corporation within the Executive Branch that
provides assistance to developing countries to promote economic growth
and reduce poverty. See Millennium Challenge Act of 2003, Pub. L. No.

   1 See Memorandum for Curtis E. Gannon, Acting Assistant Attorney General, Office of

Legal Counsel, from David P. Kassebaum & Richard J. McCarthy, Assistant General
Counsels, Millennium Challenge Corporation (Mar. 23, 2017). In considering this ques-
tion, we requested and received the views of the Department of State and the Office of
Management and Budget. See E-mail for Sarah M. Harris, Deputy Assistant Attorney
General, Office of Legal Counsel, from Richard C. Visek, Acting Legal Adviser, Depart-
ment of State, Re: Request for Views on a Miscellaneous Receipts Act Issue, att. (Dec. 15,
2017 5:30 P.M.); E-mail for Sarah M. Harris, Deputy Assistant Attorney General, Office
of Legal Counsel, from Heather V. Walsh, Deputy General Counsel, Office of Manage-
ment and Budget, Re: Request for Views on a Miscellaneous Receipts Act Issue (Dec. 15,
2017 5:55 P.M.).

                                            1
              Opinions of the Office of Legal Counsel in Volume 42

108-199, div. D, tit. VI, §§ 602, 604(a), 605(a), 118 Stat. 211, 211–12,
214 (2004) (codified at 22 U.S.C. §§ 7701, 7703(a), 7704(a)). MCC
provides such assistance “in the form of grants, cooperative agreements,
or contracts,” id. § 605(b), and receives congressional appropriations to
fund its programs and operations, including its administrative costs. In
2015, for example, Congress made “up to $105,000,000” available for
MCC’s “administrative expenses” out of a total appropriation of $901
million. Department of State, Foreign Operations, and Related Programs
Appropriations Act, 2016, Pub. L. No. 114-113, div. K, tit. III, 129 Stat.
2705, 2722 (2015). The vast majority of MCC’s appropriations are “no-
year” funds, see, e.g., id., meaning that they “are not limited to use in any
specific fiscal year” and “remain available . . . until expended,” Immigra-
tion Emergency Fund, 20 Op. O.L.C. 23, 23 (1996).
   In 2012, a contractor working on a Mali development program named
MCC as a defendant in an international arbitration. Represented by the
Department of State’s Office of the Legal Adviser, MCC successfully
argued for dismissal, and the arbitrator ordered the contractor to pay
$715,104 in costs, comprising the arbitrator’s costs and the legal costs
incurred by the Department of State and MCC. MCC received $97,575 of
that award, which reflected the amounts it expended for outside counsel,
labor, and travel.
   MCC has asked whether it may retain its portion of the award. It admits
that the Miscellaneous Receipts Act generally requires federal officials to
deposit in the Treasury the funds they receive for the government, and
that no other statute expressly allows MCC to retain the funds. MCC
contends, however, that the award “logically can be construed as a re-
fund” related to the arbitration, since allowing MCC to retain that money
would “make [the] agency whole” for expenditures that it unnecessarily
incurred. Memorandum for Curtis E. Gannon, Acting Assistant Attorney
General, Office of Legal Counsel, from David P. Kassebaum & Richard J.
McCarthy, Assistant General Counsels, Millennium Challenge Corpora-
tion at 3, 5 (Mar. 23, 2017).
   The Department of State disagrees, noting that it “has not viewed arbi-
tral awards in general as falling” within the refund exception to the Act.
E-mail for Sarah M. Harris, Deputy Assistant Attorney General, Office of
Legal Counsel, from Richard C. Visek, Acting Legal Adviser, Department
of State, Re: Request for Views on a Miscellaneous Receipts Act Issue, att.

                                       2
 Applicability of the Miscellaneous Receipts Act to an Arbitral Award of Legal Costs

at 1 (Dec. 15, 2017 5:30 P.M.). The Department of State may retain, and
deposit into its International Litigation Fund, portions of some arbitral
awards under 22 U.S.C. § 2710(e), but that statute does not apply here,
and the Department of State accordingly deposited its share of the award
in the Treasury. See id. at 1–2. The Office of Management and Budget
concurs with that view. See E-mail for Sarah M. Harris, Deputy Assistant
Attorney General, Office of Legal Counsel, from Heather V. Walsh,
Deputy General Counsel, Office of Management and Budget, Re: Request
for Views on a Miscellaneous Receipts Act Issue (Dec. 15, 2017 5:55
P.M.).

                                          II.

   Enacted in 1849, the Miscellaneous Receipts Act provides that “an of-
ficial or agent of the Government receiving money for the Government
from any source shall deposit the money in the Treasury as soon as practi-
cable without deduction for any charge or claim.” 31 U.S.C. § 3302(b);
see Act of Mar. 3, 1849, ch. 110, 9 Stat. 398. The Act codifies the “anti-
augmentation principle,” under which “an agency may not augment its
appropriations from outside sources without statutory authority.” Applica-
tion of the Miscellaneous Receipts Act to the Settlement of False Claims
Act Suits Concerning Contracts with the General Services Administration,
30 Op. O.L.C. 53, 56 (2006) (“FCA Suits”). As the United States Court of
Appeals for the District of Columbia Circuit has recognized, “[b]y requir-
ing government officials to deposit government monies in the Treasury,
Congress has precluded the executive branch from using such monies for
unappropriated purposes.” Scheduled Airlines Traffic Offices, Inc. v.
Dep’t of Def., 87 F.3d 1356, 1361–62 (D.C. Cir. 1996). The statute thus
preserves Congress’s constitutional control over the expenditure of public
funds. See U.S. Const. art. I, § 9, cl. 7 (“No Money shall be drawn from
the Treasury, but in Consequence of Appropriations made by Law[.]”).
   While the Act applies to money received “from any source,” the Execu-
tive Branch and the Comptroller General have recognized two exceptions
to this general rule. 2 The first exception applies “when Congress has

   2 As we have repeatedly stated, the opinions of the Comptroller General do not bind

the Executive Branch, but they may provide helpful guidance on appropriations matters
and related questions. See, e.g., FCA Suits, 30 Op. O.L.C. at 56 n.2. Our prior opinions

                                           3
                 Opinions of the Office of Legal Counsel in Volume 42

specifically authorized the agency to retain” recovered funds. FCA Suits,
30 Op. O.L.C. at 57. (Strictly speaking, that circumstance is not an excep-
tion, but rather an example of a specific statute modifying a general one.)
The second exception addresses “refunds to appropriations” and permits
an agency to retain a recovery of “an amount it erroneously paid from an
appropriation or fund account.” Id. This exception “is grounded in, guided
by, and furthers the anti-augmentation principle,” because retaining those
funds “essentially returns” the agency “to the position it had occupied
based on the authorization of Congress.” Id. at 57–58. By keeping that
refund, the agency does not improperly augment its appropriations from
outside sources. Rather, the agency cancels out an erroneous payment and
returns its appropriations to the level that Congress intended. See id. at 62.
   The Executive Branch and the Comptroller General have repeatedly
explained that the refund exception applies where the agency erroneously
paid too much. In 1926, for instance, the Comptroller General described
the “accepted and uniform rule of the accounting officers in the past”: “if
the collection involves a refund or repayment of moneys paid from an
appropriation in excess of what was actually due,” then the agency may
treat the money as “credit to the appropriation originally charged.” Postal
Service—Recovery of Indemnities Paid for Lost Mail, 5 Comp. Gen. 734,
736 (1926) (“Postal Service”). In 1950, the Treasury Department and the
Comptroller General jointly defined the refund exception as applying to
“amounts collected from outside sources for payments made in error,
overpayments, or adjustments for previous amounts disbursed, including
returns of authorized advances.” Treasury Department–General Account-
ing Office Joint Regulation No. 1, § 2(b) (Sept. 22, 1950), reprinted in
30 Comp. Gen. 595 (1950). And in a 1950 memorandum “amplif [ying]”
that joint regulation, the Comptroller General emphasized that the types of
refunds covered by the exception must “represent adjustments for excess

have specifically endorsed certain Comptroller General opinions concerning the scope of
the refund exception. E.g., id. at 59–60; Apportionment of False Claims Act Recoveries to
Agencies, 28 Op. O.L.C. 25, 27–28 (2004); see also Federal Claims Collection Standards,
49 Fed. Reg. 8889, 8892 (Mar. 9, 1984) (preamble to a final rule issued jointly by the
Department of Justice and the General Accounting Office noting that “[t]he law with
respect to refunds has evolved largely through decisions of the Comptroller General” and
expressing no intention “to change any existing administrative law with respect to re-
funds”).

                                           4
 Applicability of the Miscellaneous Receipts Act to an Arbitral Award of Legal Costs

payments,” and listed “items rejected and returned,” “allowances” on
unsatisfactory government purchases, and recoveries on partially or fully
canceled contracts as further examples. Accounting Systems Memoran-
dum No. 10, § 2(b) (Comp. Gen. Oct. 5, 1950), reprinted in 30 Comp.
Gen. 614 (1950).
   More recent statements have confirmed that the refund exception is
limited to recoveries of money “‘paid from an appropriation in excess of
what was actually due.’” 2 Government Accountability Office, Principles
of Federal Appropriations Law 6-172 (3d ed. 2006) (“Federal Appropria-
tions Law”) (quoting Postal Service, 5 Comp. Gen. at 736); see also FCA
Suits, 30 Op. O.L.C. at 57–58 (“An agency that recovers an amount it
erroneously paid from an appropriation or fund account essentially returns
to the position it had occupied based upon the authorization of Con-
gress.”); Federal Motor Carrier Safety Administration—Retention of
Court-Ordered Restitution, B-308476, 2006 WL 3956702, at *3 (Comp.
Gen. Dec. 20, 2006) (“FMCSA”) (the refund exception applies only when
the agency recovers “an improper payment”). In 2004, for instance, the
Comptroller General stated that the exception “operates simply and solely
to restore to an appropriation amounts that should not have been paid
from the appropriation.” Department of Energy—Disposition of Interest
Earned on State Tax Refund Obtained by Contractor, B-302366, 2004
WL 1812721, at *4 (Comp. Gen. July 12, 2004). 3
   When it comes to litigation, the Comptroller General has long held
that funds recovered by the Department of Justice are not refunds unless
“they represent recoveries of moneys theretofore illegally or erroneously
paid from appropriated funds.” Accounting—Repayments to Appropria-
tions, 6 Comp. Gen. 337, 339–40 (1926). Thus, the Comptroller General
deemed the refund exception inapplicable to a court-ordered restitution
award compensating an agency for the costs of a criminal investigation.
FMCSA, 2006 WL 3956702, at *3. “The restitution award at issue is not

   3 For example, the Comptroller General has opined that the refund exception applies

to “[r]ecoveries of payments made under a fraudulent contract” as a result of an embez-
zlement scheme. Appropriation Accounting—Refunds and Uncollectibles, B-257905,
1995 WL 761474, at *3 (Comp. Gen. Dec. 26, 1995). Furthermore, an agency may retain
refunds of payments “in excess of the value of the goods or services that the agency
actually received from [a] contractor.” Bureau of Prisons—Disposition of Funds Paid in
Settlement of Breach of Contract Action, 62 Comp. Gen. 678, 680 (1983).

                                          5
              Opinions of the Office of Legal Counsel in Volume 42

properly classified as a refund,” that decision explained, because “cred-
iting the agency’s appropriation with the restitution award would not
restore[] to the appropriation amounts that should not have been paid.”
Id. In other instances, the Comptroller General has concluded that agen-
cies may not retain awards of legal costs unless a statute expressly au-
thorizes the retention. Court Costs for Defending Employment Discrimi-
nation Suits, B-139703, at 2 (Comp. Gen. Mar. 2, 1978) (Department of
Justice must deposit in the Treasury “award[s] of court costs to the Gov-
ernment” in cases arising under Title VII of the Civil Rights Act of 1964);
47 Comp. Gen. 70, 71–72 (1967) (National Labor Relations Board must
deposit in the Treasury “moneys derived from a judgment for costs
awarded . . . by a court” to the Board as a prevailing party). Although
these determinations did not expressly address the refund exception, they
are consistent with the conclusion that agencies may not retain funds in
compensation for litigation expenses.
   While most litigation awards must therefore be deposited into the
Treasury, the refund exception does permit an agency to retain the portion
of a judgment corresponding to an erroneous payment. Thus, in a False
Claims Act suit, an agency may retain compensatory damages awards that
reflect the payments the agency was fraudulently induced to make. See
FCA Suits, 30 Op. O.L.C. at 59; Apportionment of False Claims Act
Recoveries to Agencies, 28 Op. O.L.C. 25, 27 (2004) (“FCA Recoveries”);
Federal Emergency Management Agency—Disposition of Monetary Award
Under False Claims Act, 69 Comp. Gen. 260, 262 (1990) (“FEMA”);
Tennessee Valley Authority—False Claims Act Recoveries, B-281064,
2000 WL 230221, at *2 (Comp. Gen. Feb. 14, 2000) (“TVA”). By con-
trast, if the agency recovers treble damages in a False Claims Act suit, the
agency must deposit in the Treasury the portion of the award that goes
beyond the actual losses incurred. TVA, 2000 WL 230221, at *3.

                                     III.

   Applying these well-established principles, we conclude that MCC’s
arbitral award does not qualify as a refund for purposes of the exception
to the Miscellaneous Receipts Act. The arbitrator awarded MCC the costs
it incurred in connection with the arbitration. However, MCC did not
initially pay those legal costs erroneously or “‘in excess of what was
actually due.’” 2 Federal Appropriations Law at 6-172. To the contrary,

                                       6
 Applicability of the Miscellaneous Receipts Act to an Arbitral Award of Legal Costs

MCC paid those costs in return for the actual services it received. Even if
the contractor may be viewed as having wrongfully imposed such costs on
MCC—because the contractor lacked a valid arbitration claim in the first
place—MCC did not make, and the contractor did not receive, any “im-
proper payment.” FMCSA, 2006 WL 3956702, at *3. An agency’s ex-
penditure of funds for legal costs is a necessary incident of its operations,
and those expenditures do not become erroneous or improper simply
because the agency later prevails in the litigation.
   In appropriating funds, Congress provided for MCC to incur “adminis-
trative expenses” like the legal costs at issue here. See supra Part I. Be-
cause Congress anticipated that MCC would incur administrative costs,
these expenditures do not fall within the refund exception. See 2 Federal
Appropriations Law at 6-162; FMCSA, 2006 WL 3956702, at *3 (con-
cluding that, where congressional appropriations covered an agency’s in-
vestigative costs, allowing the agency to retain an award reimbursing its
investigative costs “would improperly contribute financial resources that
supplement those already provided for the agency by Congress”). In other
circumstances, Congress has expressly authorized agencies to retain
recoveries similar to this arbitral award. See, e.g., 22 U.S.C. § 2710(e)(1)
(authorizing the Secretary of State to retain funds recovered from foreign
entities “[t]o reimburse the expenses of the United States Government in
preparing or prosecuting a proceeding before an international tribunal, or
a claim against a foreign government or other foreign entity”). Yet Con-
gress has made no such provision for MCC.
   MCC emphasizes that retaining the arbitral award is necessary to make
MCC whole and return it to the position it was in before it had to incur
legal costs. But this argument proves too much, because the same could
be said of any receipts recouping previous agency expenditures, not just
those satisfying the “limited exception” for refunds. FMCSA, 2006 WL
3956702, at *4; see supra Part II. MCC’s reasoning would expand the
scope of the exception beyond its traditional boundaries, covering not
merely cost awards in litigation, but also any compensatory damages
awards that would make an agency whole following a loss attributable to
an agency expenditure. MCC identifies no precedent for allowing agen-
cies to retain awards of legal costs absent express statutory authority, even
though the United States routinely receives such costs as the prevailing

                                         7
                 Opinions of the Office of Legal Counsel in Volume 42

party in litigation. See, e.g., Baez v. U.S. Dep’t of Justice, 684 F.2d 999,
1005–06 (D.C. Cir. 1982) (en banc) (per curiam).
   MCC also contends that retaining the arbitral award would vindicate
the purpose of the refund exception, since MCC receives “no-year” ap-
propriations and thus could still spend the funds in support of its poverty-
reduction mission. But the anti-augmentation principle applies “even
though the appropriation is a no-year appropriation.” 2 Federal Appropri-
ations Law at 6-169. Congress chose to fund MCC’s administrative ex-
penses in general, and MCC spent the appropriated funds on legal costs.
The fact that MCC might now spend the arbitral award on expenses more
closely related to its core mission does not give the agency the authority
to retain the arbitral award under the Miscellaneous Receipts Act. The Act
requires that the money be deposited into the Treasury to preserve Con-
gress’s prerogative to determine how such additional receipts are to be
spent.
   Finally, MCC cites two Comptroller General opinions and one opinion
of this Office holding that agencies could retain not only compensatory
damages for false claims, but also recoveries for the costs of investigating
false claims. TVA, 2000 WL 230221, at *2; FEMA, 69 Comp. Gen. at 263;
FCA Recoveries, 28 Op. O.L.C. at 28 (citing FEMA, 69 Comp. Gen. at
263). Those decisions are distinguishable, however, because each in-
volves a revolving fund, a funding mechanism by which Congress, rather
than setting a particular funding level, “authorizes an agency to retain
receipts and deposit them into the fund to finance the fund’s operations.”
3 Federal Appropriations Law at 12-85 (3d ed. 2008). 4 In the context of
revolving funds, this Office and the Comptroller General have applied the
refund exception not only to refunds of erroneous payments, but also to
refunds of ancillary expenses that are inextricably linked to erroneous
payments. See, e.g., FEMA, 69 Comp. Gen. at 263 (investigative costs
“were a direct consequence of the false claims FEMA paid and increased
the magnitude of the . . . resulting losses”). By contrast, MCC’s appro-

   4 See FCA Recoveries, 28 Op. O.L.C. at 25 n.1 (limiting the opinion’s scope “to the

revolving fund context”); FEMA, 69 Comp. Gen. at 263 (recognizing that the fund at
issue “does not receive any appropriations to cover its administrative expenses or losses”
because “Congress intended [it] to be self-supporting to the greatest extent possible”);
TVA, 2000 WL 230221, at *1 (noting that TVA “charge[s] rates for power that will pro-
duce sufficient revenues to provide funds” for its operational needs).

                                            8
 Applicability of the Miscellaneous Receipts Act to an Arbitral Award of Legal Costs

priations reflect a degree of congressional control over agency appropria-
tions that differs materially from the revolving-fund context. And in all
events, the legal costs at issue are untethered from any initial erroneous
payment. See National Science Foundation—Disposition of False Claims
Act Recoveries, B-310725, 2008 WL 2229784, at *3 (Comp. Gen. May
20, 2008) (declining to apply the refund exception to a recovery of inves-
tigative costs that were “properly [paid] from an appropriation that is
available for incurring costs for such investigations”); FMCSA, 2006 WL
3956702, at *3 (same). Allowing MCC to retain the arbitral award would
therefore present more serious anti-augmentation concerns than are pre-
sent in these revolving-fund cases.

                                  * * * * *
   For the foregoing reasons, we conclude that the arbitral award of legal
costs to MCC does not qualify as a “refund to appropriations” exempt
from the requirements of the Miscellaneous Receipts Act. MCC therefore
must deposit the award in the general fund of the Treasury “without
deduction for any charge or claim.” 31 U.S.C. § 3302(b).

                                          STEVEN A. ENGEL
                                        Assistant Attorney General
                                         Office of Legal Counsel

                                         9