Court Opinion

ID: 4345341
Source: CourtListenerOpinion
Date Created: 2018-11-28 21:01:53.015091+00
Date Added: 2024-06-11T14:49:19.665103
License: Public Domain

In the United States Court of Federal Claims
                                           No. 18-536 C
                                    Filed: November 28, 2018

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                                       *
                                       *
C & L GROUP, LLC, and MAKKO            *
CONSTRUCTION, LLC,                     *                   11 U.S.C. § 365(a) (Bankruptcy,
                                       *                       Executory Contracts And
      Plaintiffs,                      *                       Unexpired Leases);
                                       *                   28 U.S.C. § 1491(a)(1) (Tucker
v.                                     *                       Act Jurisdiction);
                                       *                   Implied-In-Fact Contract;
THE UNITED STATES,                     *                   Privity Of Contract;
                                       *                   RCFC 12(b)(1) (Lack Of Subject
      Defendant.                       *                       Matter Jurisdiction).
                                       *
                                       *
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Charles A. Cuprill, Charles A. Cuprill, PSC Law Offices, San Juan, Puerto Rico, Counsel for
Plaintiff.

Sonia Williams Murphy, United States Department of Justice, Civil Division, Washington,
D.C., Counsel for the Government.

              MEMORANDUM OPINION AND FINAL ORDER GRANTING
                  THE GOVERNMENT’S MOTION TO DISMISS

BRADEN, Senior Judge.

I.     Relevant Factual Background.1

       On October 13, 2015, C & L Group, LLC (“C & L”) entered into a contract with Hospital
Santa Rosa, Inc. (“HSR”) for the construction of the first floor of a hospital in Guayama, Puerto
Rico. Compl. ¶ 6; see also ECF No. 1-8 (C & L/HSR Contract). That same day, Makko
Construction, LLC (“Makko”) entered into an identical contract with HSR for construction of the
mechanical, electrical, fire protection, and air conditioning system at the same hospital. Compl. ¶

       1
         The facts recited herein are derived from: the April 13, 2018 Complaint (“Compl.”);
appendices attached to the April 13, 2018 Complaint, cited by ECF Number; and the Government’s
appendices (“Gov’t App. 1–20”), filed together with the Government’s July 12, 2018 Motion To
Dismiss.
7; see also ECF No. 1-9 (Makko/HSR Contract). Both Contracts required approval from the
Department of Agriculture, Rural Development (“Rural Development”), in the form of
“Concurrences,” prior to becoming effective, since they were “expected to be funded in part with
funds from [] Rural Development.” ECF Nos. 1-8 at 25, 1-9 at 26. The Contracts specifically
stated that “[n]either the United States nor any of its departments, agencies, or employees is or will
be a party to this CONTRACT or any SUBCONTRACT.” ECF Nos. 1-8 at 25, 1-9 at 26. The
Contracts also included a clause that allowed HSR to, “without cause and without prejudice to any
other right or remedy, elect to abandon the PROJECT and terminate the CONTRACT. In such
case the CONTRACTOR shall be paid for all WORK executed and any expense sustained plus
reasonable profit.” ECF Nos. 1-8 at 15, 1-9 at 16.

       On June 23, 2016, Rural Development’s Community Programs Director sent a letter to
Makko confirming that “Rural Development’s subject funds [were] reserved” and that “[c]ontract
payments are approved through certifications and disbursed from the agency’s accounting
system.” ECF No. 1-1 at 1.

       On July 12, 2016, the State Director of Rural Development signed the required
“Concurrences” that represented: “As lender or insurer of funds to defray the costs of this contract,
and without liability for any payments thereunder, Rural Development . . . hereby concurs in the
award of this CONTRACT[.]” ECF Nos. 1-8 at 32, 1-9 at 33.

      Between August 17, 2016 and December 13, 2016, Rural Development issued five
payments to HSR to pay for work that was completed by C & L and Makko. Gov’t App. 1–20.
HSR also submitted payment certifications for each of these payments. Gov’t App. 1–20.

       On November 14, 2016, HSR filed for Chapter 11 protection in the United States
Bankruptcy Court for the District of Puerto Rico (“Bankruptcy Court”). Compl. ¶ 10. On
December 15, 2016, HSR exercised its Chapter 11 right to reject2 the Contracts, noting that the
“construction is being financed by Rural Development.” ECF No. 1-2 at 1. On January 3, 2017,
the Bankruptcy Court granted HSR’s request to reject the Contracts. ECF No. 1-3.

        On March 1, 2017, C & L and Makko each filed a proof of claim against HSR; C & L
requested payment in the amount of $334,171.95 and Makko requested $190,736.98. Compl. ¶
12; see also ECF Nos. 1-4, 1-5.

II.     Procedural History.

        On April 13, 2018, C & L and Makko (hereafter “Plaintiffs”) filed a Complaint in the
United States Court of Federal Claims for payment of $334,171.95, plus interest, and $190,736.98,
plus interest, from Rural Development. ECF No. 1.

       2
        11 U.S.C. § 365 provides, in pertinent part, that a debtor, “subject to the court’s approval,
may assume or reject any executory contract or unexpired lease of the debtor.” 11 U.S.C. § 365(a).

                                                  2
        On June 1, 2018, the Government filed an Unopposed Motion For An Enlargement of Time
to respond to the April 13, 2018 Complaint. ECF No. 5. On June 4, 2018, the court granted the
June 1, 2018 Unopposed Motion. ECF No. 6.

       On July 12, 2018, the Government filed a Motion To Dismiss (“Gov’t Mot.”). ECF No. 7.

        On August 3, 2018, Plaintiffs filed a Response To The Government’s Motion To Dismiss
(“Pls. Resp.”). ECF No. 8.

       On August 17, 2018, the Government filed a Reply In Support Of Its Motion To Dismiss
(“Gov’t Reply”). ECF No. 9.

III.   Discussion.
       A.      Subject Matter Jurisdiction.

        Subject matter jurisdiction is a threshold issue that a court must determine at the outset of
a case. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998) (“The requirement
that jurisdiction be established as a threshold matter ‘spring[s] from the nature and limits of the
judicial power of the United States’ and is ‘inflexible and without exception.’”) (quoting
Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382 (1884)).

       The Tucker Act authorizes the United States Court of Federal Claims with jurisdiction to
adjudicate “any claim against the United States founded either upon the Constitution, or any Act
of Congress or any regulation of an executive department, or upon any express or implied contract
with the United States, or for liquidated damages in cases not sounding in tort.” 28 U.S.C. §
1491(a)(1). The Tucker Act does not “create[] substantive rights.” United States v. Navajo Nation,
556 U.S. 287, 290 (2009). Instead, the Tucker Act is a “jurisdictional provision[] that operate[s]
to waive sovereign immunity for claims premised on other sources of law (e.g., statutes or
contracts).” Id.

        To pursue a substantive right under the Tucker Act, a plaintiff must identify and plead an
independent contractual relationship, Constitutional provision, federal statute, and/or executive
agency regulation that provides a substantive right to money damages. See Todd v. United States,
386 F.3d 1091, 1094 (Fed. Cir. 2004) (“[J]urisdiction under the Tucker Act requires the litigant to
identify a substantive right for money damages against the United States separate from the Tucker
Act[.]”). “The other source of law need not explicitly provide that the right or duty it creates is
enforceable through a suit for damages, but it triggers liability only if it ‘can fairly be interpreted
as mandating compensation by the Federal Government.’” Navajo Nation, 556 U.S. at 1552
(quoting United States v. Testan, 424 U.S. 392, 400 (1976)). “This ‘fair interpretation’ rule
demands a showing demonstrably lower than the standard for the initial waiver of sovereign
immunity.” Holmes v. United States, 657 F.3d 1303, 1309 (Fed. Cir. 2011) (citations omitted).

       B.      Standard of Review.

        Rule 12(b)(1) of the United States Court of Federal Claims (“RCFC”) authorizes a party to
file a motion asserting a “lack of subject-matter jurisdiction.” RCFC 12(b)(1). “In deciding a
motion to dismiss for lack of subject matter jurisdiction, the court accepts as true all uncontroverted

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factual allegations in the complaint, and construes them in the light most favorable to the plaintiff.”
Stephens v. United States, 884 F.3d 1151, 1155 (Fed. Cir. 2018) (citations omitted).

       C.      The Government’s July 12, 2018 Motion To Dismiss.

               1.      The April 13, 2018 Complaint.

         The April 13, 2018 Complaint alleges that the court “has jurisdiction over this cause under
28 U.S.C. § 1491, since it consists of a monetary claim against the United States founded upon an
express or implied contract therewith.” Compl. ¶ 4. Specifically, the April 13, 2018 Complaint
alleges that: (1) Plaintiffs entered into Contracts with HSR, “with the express appearance and
concurrence of . . . Rural Development, as lender or insurer of funds to defray the costs of the
[C]ontract[s]” (Compl. ¶¶ 6–7); (2) “[o]ne of the principal factors and considerations for
[Plaintiffs] entering into their [C]ontracts with HSR was the assurance and guarantee that federal
funds had been dedicated for the construction of the [h]ospital[,]” evidenced by the June 23, 2016
letter (Compl. ¶¶ 8–9); and (3) the money owed to Plaintiffs, in the amount of $334,171.95, plus
interest, and $190,736.98, plus interest, respectively, was “guaranteed by Rural [Development], as
per [Rural Development’s Community Programs Director’s] letter of June 23, 2016 . . . and as
concurred to thereby in their contracts with HSR” (Compl. ¶¶ 15, 17).

               2.      The Government’s Argument.

        The Government argues that the April 13, 2018 Complaint should be dismissed, pursuant
to RCFC 12(b)(1), because “[P]laintiffs’ lack privity of contract with the United States.” Gov’t
Mot. at 2. Plaintiffs entered into contracts with HSR, to which Rural Development concurred as
lender of funds to HSR. Gov’t Mot. at 6. This approval, however, did not bind Rural
Development, because the Contracts expressly state that “[n]either the United States nor any of its
departments, agencies, or employees is or will be a party to this CONTRACT[.]” ECF Nos. 1-8
at 25, 1-9 at 26. The receipt of payments from Rural Development through HSR, after completion
of payment certifications, “does not create a contractual relationship where one does not exist.”
Gov’t Mot. at 7.

               3.      Plaintiffs’ Response.

        Plaintiffs’ respond that Rural Development “expressly appeared in, and concurred with,
the respective [C]ontracts between each Plaintiff and HSR, as lender and insurer of the funds to
defray the costs of such [C]ontracts.” Pls. Resp. at 5. The Contracts consisted of standard form
contracts provided by Rural Development, with all the terms and conditions, and Rural
Development had the right to veto the Contracts by not approving them. Pls. Resp. at 5, 7.
Therefore, based on Rural Development’s “degree of participation, interest and control in
Plaintiffs[’ C]ontracts with HSR, the only conclusion that can be reached is that [Rural
Development] is a party thereto.” Pls. Resp. at 7. The June 23, 2016 letter from Rural
Development’s Community Programs Director provided Plaintiffs with “additional reliance on
Rural [Development]’s participation in the [C]ontracts” and further demonstrates the degree of
Rural Development’s participation as a party to the Contracts. Pls. Resp. at 7.

      In addition, implied-in-fact contracts existed by virtue of the parties’ conduct. Pls. Resp.
at 8. As the June 23, 2016 letter from Rural Development’s Community Programs Director
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indicates, if “Plaintiffs performed the work that they were contracted for, [Rural Development]
would guarantee its payment.” Pls. Resp. at 10. Plaintiffs, “relying on [Rural Development’s]
representations and promises, . . . entered into contracts they otherwise would not have entered
into.” Pls. Resp. at 12.

               4.      The Government’s Reply.

        The Government replies that concurrence with the terms of a contract between private
parties does not establish privity. Gov’t Reply at 2. The fact that a contract has terms and
conditions or standard forms established by Rural Development also does not establish privity.
Gov’t Reply at 2–3. The June 23, 2016 letter from Rural Development’s Community Programs
Director represented only that “project funds [were] reserved and “payments [would be] approved
through certifications[,]” so any reliance was misplaced. ECF No. 1-1 at 1.

         As to Plaintiffs’ argument that implied contracts exist, there was never a meeting of the
minds, because Rural Development disclaimed any responsibility under the Contracts and declined
liability for payments made under the Contracts. ECF Nos. 1-8 at 25, 32, 1-9 at 26, 33. In addition,
Plaintiffs “confirmed their understanding that they had not entered into any implied contracts with
[Rural Development,]” by signing the Contracts that included these disclaimers. Gov’t Reply at
5.

               5.      The Court’s Resolution.

        Under the Tucker Act, the United States Court of Federal Claims has jurisdiction over
claims based on “any express or implied contract with the United States.” 28 U.S.C. § 1491(a)(1);
see also Cinega Gardens v. United States, 194 F.3d 1231, 1239 (Fed. Cir. 1998). “To maintain a
cause of action pursuant to the Tucker Act that is based on a contract, the contract must be between
the plaintiff and the [G]overnment.” Ransom v. United States, 900 F.2d 242, 244 (Fed. Cir. 1990);
see also Erickson Air Crane Co. v. United States, 731 F.2d 810, 813 (Fed. Cir. 1984) (“The
[G]overnment consents to be sued only by those with whom it has privity of contract[.]”). A court
does “not lightly presume that the [G]overnment’s actions give rise to contractual obligations when
the [G]overnment is not a named party to the contract in dispute.” Pac. Gas & Elec. Co. v. United
States, 838 F.3d 1341, 1350 (Fed. Cir. 2016).

        Without an express contractual relationship, a plaintiff only “can establish privity of
contract through an implied-in-fact contract with the United States[.]” Maher v. United States,
314 F.3d 600, 603 n.1 (Fed. Cir. 2002) (citing First Hartford Pension Plan & Trust v. United
States, 194 F.3d 1279, 1289 (Fed. Cir. 1999)). “An implied-in-fact contract is ‘founded upon a
meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from
conduct of the parties showing, in the light of the surrounding circumstances, their tacit
understanding.’” Id. at 606 (quoting Hercules, Inc. v. United States, 516 U.S. 417, 424, (1996));
see also Ransom, 900 F.2d at 244 (“Although the legal consequences of express and implied-in-
fact contracts are the same, an implied-in-fact contract is inferred from the parties’ conduct.”). An
implied-in-fact contract has the same “required elements for contract formation [as an express
contract]—‘a mutual intent to contract including an offer, an acceptance, and consideration[.]’”
Maher, 314 F.3d at 606 (quoting Trauma Serv. Group v. United States, 104 F.3d 1321, 1325 (Fed.
Cir. 1997)).

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         In this case, the April 13, 2018 Complaint alleges that the court has jurisdiction to
adjudicate Plaintiffs’ claim for unpaid expenses incurred under either express or implied contracts
with Rural Development. Compl. ¶ 4. The April 13, 2018 Complaint, however, fails to allege
facts sufficient to show that Plaintiffs were in privity of contract with Rural Development. The
parties to the October 15, 2015 Contracts were Plaintiffs and HSR; Rural Development was not a
party to the Contracts, as further evidenced by the caveat stating that “[n]either the United States
nor any of its departments, agencies, or employees is or will be a party to this CONTRACT[.]”
ECF Nos. 1-8 at 25, 1-9 at 26. Nor do the July 12, 2016 “Concurrences” establish privity with
Rural Development, because they do not displace the October 15, 2015 Contracts’ express
language to the contrary that plainly state Rural Development assumed no liability nor guaranteed
any payment due for work performed under the October 15, 2015 Contracts. ECF Nos. 1-8 at 32,
1-9 at 33; see National Leased Hous. Ass’n v. United States, 105 F.3d 1423, 1436 (Fed. Cir. 1997)
(“[Liability, if any, within an agency’s discretion] is not the type of direct, unavoidable contractual
liability necessary to trigger a waiver of sovereign immunity, the inevitable result of finding privity
of contract.”). In sum, the October 15, 2015 Contracts “simply do not show privity of contract”
between Plaintiffs and Rural Development. Id. at 1243; see also Pac. Gas, 838 F.3d at 1351
(holding that the Government was not in privity of contract with the plaintiffs, in part, because
“[n]o parties other than the individual participant and the relevant exchange were listed on any
contract”).

        The April 13, 2018 Complaint also fails to allege facts sufficient to establish an implied-
in-fact contract, because it fails to allege any facts to support a “meeting of minds” between
Plaintiffs and Rural Development. See Maher, 314 F.3d at 606. The express language in the
October 15, 2015 Contracts and July 12, 2016 “Concurrences” affirmatively states that Rural
Development did not intend to contract with Plaintiffs. ECF Nos. 1-8 at 25, 32, 1-9 at 26, 33; see
Carter v. United States, 98 Fed. Cl. 632, 636 (Fed. Cl. 2011) (“A court will not . . . imply an
agreement between two parties when there was none, nor can a court imply privity when there was
no meeting of the minds between the particular parties.”). And, the confirmation by the
Community Programs Director at Rural Development that “Rural Development’s subject funds
[were] reserved” and that “[c]ontract payments [would be] approved through certifications and
disbursed from the agency’s accounting system” does not allege an intent to contract. ECF No. 1-
1 at 1.

        To the extent that the April 13, 2018 Complaint can be read to allege the creation of
implied-in-fact unilateral contracts, the correspondence from the Community Programs Director
made no promise of payment. ECF No. 1-1 at 1; see Wells Fargo Bank, N.A. v. United States, 88
F.3d 1012, 1018 (Fed. Cir. 1996) (holding that a unilateral contract is formed “between the
[G]overnment and a private party if promissory words of the former induce significant action by
the latter in reliance thereon”) (citations omitted). And, to the extent that the April 13, 2018
Complaint can be read to allege a claim of promissory estoppel, the court does not have jurisdiction
to adjudicate such a claim. See Lawndale Restoration Ltd. P’ship v. United States, 95 Fed. Cl.
498, 506 (Fed. Cl. 2010) (“Promissory estoppel is another name for an implied-in-law contract
claim.”) (citations omitted); see also Hercules, 516 U.S. at 423 (holding that Tucker Act
“jurisdiction extends only to contracts either express or implied in fact, and not to claims on
contracts implied in law”).

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IV.    CONCLUSION.

        For these reasons, the court has determined that the April 13, 2018 Complaint does not
allege sufficient facts to establish subject matter jurisdiction. Accordingly, the Government’s July
12, 2018 Motion To Dismiss is granted. The Clerk of Court is directed to enter judgment
accordingly.

       IT IS SO ORDERED.

                                                     s/ Susan G. Braden
                                                     SUSAN G. BRADEN
                                                     Senior Judge

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