Court Opinion

ID: 6954187
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:35:45.718955+00
Date Added: 2024-06-11T16:08:11.031016
License: Public Domain

RYMER, Circuit Judge,
concurring in part and dissenting in part:
Never before has a court held that a subcontractor may sue an agency of the United States, which has not agreed to be sued, for contract monies that the prime contractor should have paid to the subcontractor but *1364didn’t. It has been the law for decades that subcontractors cannot enforce a lien on government property unless the government has waived sovereign immunity. Yet, the majority now says that a district court has jurisdiction to consider a subcontractor’s claim for an equitable lien under the Administrative Procedure Act, because it is not an action for money damages but “an action for specific performance for the payment of money.” Maj. op. at 1358. However, no matter how you slice Blue Fox’s claim, it seeks funds from the treasury to compensate for the Army’s failure to require Verdan to post a bond. Since the law is well settled that this may not be done unless the contracting agency has agreed to be sued, I dissent.
Congress chose to protect those who work on government property (who would otherwise have materialmen’s and workmen’s liens for work on non-government property) primarily through the Miller Act, by requiring contractors to furnish a payment and performance bond, instead of by permitting subcontractors to enforce liens through an overarching waiver of sovereign immunity. The Miller Act gives subcontractors the right to sue on the bond “in the name of the United States for the use of the person suing.” 40 U.S.C. § 270b(b). But neither the Federal Tort Claims Act, the Miller Act, nor the Tucker Act, waives sovereign immunity to permit a subcontractor to sue the United States directly in its own right for monies the subcontractor should have received, but did not receive, from the prime contractor. See Westbay Steel, Inc. v. United States, 970 F.2d 648, 650-51 (9th Cir.1992) (FTCA); Arvanis v. Noslo Eng’g Consultants, Inc., 739 F.2d 1287, 1289-90 (7th Cir.1984) (Miller Act); United Elec. Corp. v. United States, 227 Ct.Cl. 236, 647 F.2d 1082, 1087 (1981) (Tucker Act). As Judge Easterbrook recently observed for the Seventh Circuit, “[W]hen a prime contractor on a federal construction project fails to obtain a Miller Act payment bond and then defaults without paying his subcontractors ... the hapless subcontractor, not the United States, is left holding the bag.” Automatic Sprinkler Corp. v. Darla Envt’l Specialists, Inc., 53 F.3d 181, 182 (7th Cir.1995). Whether felicitous or not, this has been the conventional wisdom for at least fifty years. See United States v. Munsey Trust Co., 332 U.S. 234, 241, 108 Ct.Cl. 765, 67 S.Ct. 1599, 1602, 91 L.Ed. 2022 (1947) (“[Njothing is more clear than that laborers and materialmen do not have enforceable rights against the United States for their compensation.”).
For sure, we indicated in Wright v. United States Postal Service, 29 F.3d 1426 (9th Cir. 1994), that equitable liens may be enforced, like other remedies available to subcontractors may be pursued, when there is a specific waiver of immunity as there is, for example, for the Postal Service, in the Postal Reorganization Act, 39 U.S.C. § 401(1). However, in the absence of an agency waiver, subcontractors cannot achieve “by indirection a result that they could not reach directly under the Miller Act.” Westbay, 970 F.2d at 651 (quoting Arvanis, 739 F.2d at 1292); cf. Wright, 29 F.3d at 1428 (specific waiver in Postal Reorganization Act); Active Fire Sprinkler Corp. v. United States Postal Service, 811 F.2d 747, 754 (2d Cir.1987) (same); J.C. Driskill, Inc. v. Abdnor, 901 F.2d 383, 386 (4th Cir.1990) (waiver of sovereign immunity under Small Business Act not broad enough to support an equitable hen claim by a subcontractor against the SBA).
This is just what the majority has managed to allow. It reasons that the APA waiver recognized in Bowen v. Massachusetts, 487 U.S. 879, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988), is not limited to statutory rights, but whether that is so or not is beside the point unless the government has a duty which can be specifically enforced. Here, it has none. Under the Miller Act there is no question the Army should not have approved the Verdan contract without ensuring that there was an adequate surety bond, but its failure to do so is not actionable. Westbay, 970 F.2d at 650 (citing authorities). The absence of a bond is precisely what caused Blue Fox’s loss — or, put another way, gave rise to its asserted equitable lien against the retainage — in this case. Unlike the majority, I don’t think it matters that the right asserted is equitable, see Pearlman v. Reliance Ins. Co., 371 U.S. 132, 141, 83 S.Ct. 232, 236, 9 L.Ed.2d 190 (1962), because equitable rights held by subcontractors become enforceable only when immunity is waived by the contracting agency. See Wright, 29 F.3d at 1428; Active Fire, 811 F.2d at 754; Unit*1365ed Elec. Corp., 647 F.2d at 1086. Otherwise, the Miller Act provides the remedy available to subcontractors for contractor defaults.
As the Seventh Circuit has remarked:
The result is ... unjust. A subcontractor who fulfills his part of the bargain should not suffer because the prime contractor defaulted, and the government contracting officer had not insisted on compliance with the Miller Act. We agree that there is a practical problem (how widespsread we do not know) that is not addressed by the Miller Act, but that is a problem that can only be addressed, and redressed, by Congress.
Arvanis, 739 F.2d at 1293. Because Congress has not waived the Army’s sovereign immunity, I dissent from Part IIA of the majority opinion, and because even assuming Congress has waived the SBA’s immunity to be sued for an equitable lien1 there is no fund to which Blue Fox can lay claim, I concur in the result of Part IIB.2

. Compare Driskill, 901 F.2d at 386 (subcontractor cannot sue SBA for equitable lien), with ATC Petroleum, Inc. v. Sanders, 860 F.2d 1104, 1113 (D.C.Cir.1988) (subcontractor can sue the SBA for an equitable lien).

. As the SBA never possessed contract funds, there has never been a res to which an equitable lien might attach. In my view, that is dispositive of the legal issue before us, and so I do not join the majority’s discussion of the SBA’s culpability.