Court Opinion

ID: 2805521
Source: CourtListenerOpinion
Date Created: 2015-06-04 05:02:15.875623+00
Date Added: 2024-06-11T12:09:12.991926
License: Public Domain

In the United States Court of Federal Claims
                                       No. 13-365C
                                   (Filed: June 3, 2015)

                                            )
 UNITED STATES ENRICHMENT                   )
 CORPORATION,                               )       Motion to Dismiss for Lack of Subject
                                            )       Matter Jurisdiction; Contracts Dispute
                      Plaintiff,            )       Act; Presenting Claim to Contracting
                                            )       Officer; Final Indirect Rates;
 v.                                         )       Provisional Rates; Department of
                                            )       Energy
 THE UNITED STATES,                         )
                                            )
                      Defendant.            )
                                            )

       Thomas A. Lemmer, Denver, CO, for plaintiff.

       James P. Connor, Civil Division, United States Department of Justice, Washington, DC,
with whom were Stuart F. Delery, Principal Deputy Assistant Attorney General, and Bryant E.
Snee, Acting Director, for defendant.

                  OPINION ON PARTIAL MOTION TO DISMISS

FIRESTONE, Judge.

       Pending before the court is the partial motion to dismiss of defendant United

States on behalf of the Department of Energy (“DOE” or “government”) pursuant to Rule

12(b)(1) of the Rules of the United States Court of Federal Claims (“RCFC”). The

government asks this court to dismiss Counts II, IV, and VI of the amended complaint

filed by plaintiff, United States Enrichment Corporation (“USEC”). Counts II, IV, and

VI of USEC’s amended complaint challenge the final indirect cost rates the government

adopted in 2013 for work performed by USEC at DOE’s gaseous-diffusion plants in

Portsmouth, Ohio and Paducah, Kentucky from 2003 through 2005.
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       At issue in this motion is whether the certified claim USEC submitted on

December 2, 2011 satisfies the claim requirement for jurisdiction under the Contract

Disputes Act (“CDA”), 41 U.S.C. § 7104, and 28 U.S.C. § 1491(a)(2). The certified

claim demanded payment of $11,217,504 from DOE based on USEC’s proposed final

indirect rates for 2003 through 2005. The government argues that this court must dismiss

the counts in USEC’s amended complaint challenging the final indirect rates for 2003

through 2005 on the grounds that USEC’s 2011 claim before the Contracting Officer

(“CO”) pre-dated DOE’s final indirect rate determination and thus cannot satisfy the

CDA’s pre-filing claim requirements. USEC argues in response that its 2011 certified

claim and the amended complaint demanded that the DOE adopt the same final indirect

costs rates on the same basis. Therefore, USEC argues that filing a second claim for the

same final indirect rates is unnecessary to establish jurisdiction.

       For the reasons set forth below, the court agrees with USEC that its certified claim

satisfies the jurisdictional prerequisites for filing a CDA claim in this court. Therefore,

the government’s partial motion to dismiss is DENIED.

I.     BACKGROUND
       Pursuant to § 52.216-7 of the Federal Acquisition Regulations (“FAR”), 48 C.F.R.

§ 52.216-7, and USEC’s contracts with DOE, USEC is entitled to recover its allowable

indirect costs (e.g., overhead and general administrative costs) that are allocable to the

contract. Each year, USEC and the government must agree to provisional billing rates,

intended to approximate USEC’s actual anticipated indirect costs, which USEC uses to

bill the government as work progresses. Id. at § 52.216-7(e)(1). After the fiscal year is

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over, USEC is required to submit an Incurred Cost Submission (“ICS”) containing its

actual indirect costs so that final rates can be determined. If the actual rates exceed the

amount the government paid USEC under the provisional billing rates, DOE is required

to pay USEC the difference. Id. at § 52.216-7(h)(1).

       USEC submitted its ICS for FYs 2003, 2004, and 2005 on December 29, 2006,

June 29, 2007, and December 28, 2007, respectively. These submissions identified what

USEC considered to be the correct final indirect rates to which USEC believed it was

entitled. The rates for each year exceeded the provisional billing rates for those years.

However, no final rates were set at that time. On July 22, 2011, USEC submitted

invoices to DOE for the difference between amounts paid to USEC for FYs 2003 through

2009 based upon provisional billing rates and the amounts due to USEC based upon the

application of the final rates in USEC’s ICS for FYs 2003 through 2009. On December

2, 2011, USEC submitted a certified claim to the CO demanding payment of breach of

contract damages of $11,217,504 that USEC believed was owed to it for its indirect costs

for FYs 2003 through 2009. On June 1, 2012, DOE denied the claim.

       USEC filed its initial complaint in this court on May 30, 2013. Counts II, IV, and

VI of the complaint alleged “Failure to Establish Final Indirect Cost Rates for FY” 2003,

2004, and 2005, respectively. Compl. ¶¶ 123, 158, 189. In December of 2013, the DOE

set the final indirect rates for FY 2003, 2004, and 2005. However, the final rates that

DOE established were lower than the rates USEC identified in its ICS for each year. The

final rates set by DOE were higher than the provisional rates that USEC had already been

paid, but still lower than the rates that USEC had proposed in its ICSs. Consequently, on

                                              3
August 8, 2014, USEC amended its complaint and changed the headings for Counts II,

IV, and VI to “Failure to Establish Proper Final Indirect Cost Rates for FY” 2003, 2004,

and 2005, respectively. Am. Compl. ¶¶ 109, 125, 140 (emphasis added).

       The government filed a partial motion to dismiss Counts II, IV, and VI on October

13, 2014. Oral argument was held on February 26, 2015. During the oral argument, the

court requested further briefing from the parties. Supplemental briefing was completed

on April 1, 2015.

II.    STANDARD OF REVIEW
       The standard of review for a motion to dismiss for lack of subject-matter

jurisdiction is well established in this court. The court must have subject matter

jurisdiction before proceeding on the merits. Aerolineas Argentinas v. United States, 77

F.3d 1564, 1572 (Fed. Cir. 1996). If the Court determines that it does not have subject-

matter jurisdiction over the claim, the action must be dismissed without prejudice.

Wheeler v. United States, 11 F.3d 156, 160 (Fed. Cir. 1993). The non-movant bears the

burden of establishing subject-matter jurisdiction by a preponderance of the evidence. K-

Con Bldg. Sys., Inc. v. United States, 778 F.3d 1000, 1004 (Fed. Cir. 2015) (quoting

Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (1988)). “When

reviewing a motion to dismiss for lack of subject matter jurisdiction, a court accepts only

uncontroverted factual allegations as true for purposes of the motion.” Banks v. United

States, 741 F.3d 1268, 1277 (Fed. Cir. 2014) (citing Gibbs v. Buck, 307 U.S. 66, 72,

(1939). Further, “disputed facts outside the pleadings are subject to the fact finding of

the court.” Engage Learning, Inc. v. Salazar, 660 F.3d 1346, 1355 (Fed. Cir. 2011).

                                             4
III.   DISCUSSION
       The sole issue before the court is whether USEC’s December 2011 claim

challenging DOE’s failure to pay USEC the indirect rate USEC had proposed and

seeking $11,217,504 satisfies the claim requirement for a challenge to the final indirect

cost rates set by DOE in 2013. The CDA requires that “[e]ach claim by a contractor

against the Federal Government relating to a contract . . . be submitted to the [CO] for a

decision.” 41 U.S.C. § 7103(a)(1). This rule exists in order “to create opportunities for

informal dispute resolution at the [CO] level and to provide contractors with clear notice

as to the government’s position regarding contract claims.” Applied Companies v.

United States, 144 F.3d 1470, 1478 (Fed. Cir. 1998) (citing S. Rep. No. 95-1118, at 1

(1978), reprinted in 1978 U.S.C.C.A.N. 5235, 5235). A claim is defined as “a written

demand or written assertion by one of the contracting parties seeking, as a matter of right,

the payment of money in a sum certain . . . .” 48 C.F.R. § 52.233-1(c). A claim need not

be submitted in any particular form, but must provide “a clear and unequivocal statement

that gives the [CO] adequate notice of the basis and amount of the claim.” K-Con, 778

F.3d at 1005 (quoting Contract Cleaning Maint., Inc. v. United States, 811 F.2d 586, 592

(Fed. Cir. 1987)). Thus, before the court can assume jurisdiction over the claim, the court

must ensure that the contractor submitted a claim to the CO including the amount sought

and an adequate explanation of the basis for the request. K-Con, 778 F.3d at 1005. 1

1
 The court must also ensure that the lawsuit is timely, meaning that the CO is given the
opportunity to act on the claim. Affiliated Constr. Grp., Inc. v. United States, 115 Fed. Cl. 607,
612 (2014). Once a claim is submitted to the CO, a contractor must wait for a final decision
denying the claim before the contractor may file an appeal before the appropriate board of
contract appeals or in this court. A claim is deemed denied if the contractor does not receive a
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       Because litigant must exhaust this process for each claim before filing a suit in this

court, it is important to determine whether the claim before the court is the same claim as

was presented to the CO. Id. In order to determine whether the claim submitted to the

CO pursuant to the CDA is adequate to confer jurisdiction over the corresponding count

in the plaintiff’s complaint, the court is to consider whether the CDA claim and the count

before the court “either request different remedies (whether monetary or non-monetary)

or assert grounds that are materially different from each other factually or legally.” Id.

(emphasis in original) (citing Contract Cleaning, 811 F.2d at 592).

       However, the circuit explained that courts must apply these rules in a “practical

way.” K-Con, 778 F.3d at 1005. The purpose of the claim requirement is to give “the

[CO] an ample pre-suit opportunity to rule on a request, knowing at least the relief sought

and what substantive issues are raised by the request,” id., before a plaintiff can bring a

suit in this court. Consequently, the rule that a complaint may not seek a different

remedy or be based on a different factual or legal predicate should not be imposed in such

a way to preclude all adjustments of plaintiff’s claim “‘based upon matters developed in

litigation.’” Id. (quoting Tecom, Inc. v. United States, 732 F.2d 935, 937-38 (Fed. Cir.

1984)). The K-Con court also noted that “merely adding factual details or legal

argumentation does not create a different claim.” K-Con, 778 F.3d at 1006.

response within 60 days, unless the CO notifies the contractor of the time within which a
decision will be issued. 41 U.S.C. § 7103(f)(1), (2), (5); 41 U.S.C. § 7104. Here, there is no
dispute that USEC waited the requisite amount of time before filing in this court.
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       The government argues that USEC’s present challenge to the final rates must be

dismissed because USEC never submitted a challenge to the final rates that the DOE set

in 2013. According to the government, because final indirect rates had not been set until

2013, USEC’s 2011 claim cannot serve as a jurisdictional predicate for the amended

complaint’s challenge to final indirect rates. The government argues that, once DOE set

the final indirect cost rates in 2013, USEC was required to present its challenges to

DOE’s final rates to the CO through submission of a new certified claim.

       USEC counters that this court has jurisdiction over its claim because its current

objections to the final indirect cost rates set by DOE in 2013 are “based on the same set

of operative facts” and seek the same relief as the claim submitted to the [CO] in 2011.

Pl.’s Opp. 10 (ECF No. 49). Specifically, USEC argues that it seeks exactly the same

result—to be paid the final indirect rates that USEC identified in its ICSs—based upon

the same set of facts and under the same legal theory in both the 2011 claim submitted to

the [CO] and in USEC’s amended complaint. Therefore, according to USEC, the two

claims are the same under K-Con because the CO had adequate opportunity to review and

act on USEC’s demands before USEC filed suit in this court. USEC argues that requiring

it to submit a second identical claim to the CO and await a second decision would be

purposeless because USEC’s hypothetical second claim for final indirect rates would be

identical to its first claim, which the CO has already rejected.

       In resolving the government’s motion, the court begins by reviewing the

allegations in USEC’s 2011 claim before the CO and comparing it to the allegations

                                              7
made in USEC’s amended complaint. 2 Fundamentally, as the circuit stated in K-Con,

the court’s task is to make sure that CDA’s adjudication scheme is not undermined “by

circumventing the statutory role of the [CO] to receive and pass judgment on the

contractor’s entire claim.” Affiliated Constr. Grp., 115 Fed. Cl. at 612 (citing

Cerberonics, Inc. v. United States, 13 Cl. Ct. 415, 418 (1987)).

       In its 2011 claim, USEC asserted in the opening paragraph that “USEC submits a

certified claim under the [CDA]. . . for payment of breach of contract damages equaling

unreimbursed indirect costs allocable to a total of 20 cost-reimbursement contracts and

work authorizations for services USEC provided . . . ” Pl.’s Opp. Ex. A at 1. USEC’s

claim further states that, “DOE’s failure to establish accurate provisional rates and its

failure to agree to actual indirect rates have damaged USEC in the amount of

$11,217,504. A detailed breakdown of this figure is provided in Exhibit 1.” Id. The

conclusion to the claim states, “USEC is entitled to recover as breach of contract

damages $11,217,504 in indirect costs it has incurred and properly invoiced under

[USEC’s contract], plus applicable interest under the [CDA].” Id. at 14. In sum, the

2011 claim is a demand that the DOE set final provisional rates that match the rates in

2
  The court notes that the connection between disputes over setting final indirect cost rates and
final cost rates was explored in SRI International, ASBCA No. 56353, 11-2 BCA, 56,353, 2011
WL 4916298 (Oct. 5, 2011). In SRI, the Armed Services Board of Contract Appeals held that
contractors are permitted to initiate CDA disputes challenging an agency’s failure to issue final
indirect cost rates in order to ensure that certain costs are included in a final rate determination
and that any decision regarding the proper indirect rate issued in those disputes must be carried
forward to the agency’s final rate determination with interest. Thus, in the context of a challenge
to provisional rates, COs have the legal and factual basis for the final indirect rates sought by the
contractor and the opportunity to rule on the contractor’s proposed final indirect rates.
                                                  8
USEC’s proposals, which USEC asserts are allowable costs under the FAR and its

contracts with the DOE.

       As noted above, in Counts II, IV, and VI of the amended complaint, USEC is

seeking damages for DOE’s alleged “failure to establish proper final indirect cost rates”

for 2003 through 2005. Am. Compl. ¶¶ 109, 125, 140. Count II of the amended

complaint contains the following allegations:

       112. On December 1, 2010, USEC submitted its revised FY 2003 ICS, as
       requested by DOE.

       113. With the exception of sludge removal costs, which USEC did not
       include in its Claims, USEC’s indirect costs included in USEC’s FY 2003
       ICS are allowable pursuant to FAR § 31.201-2.

       ....

       117. On December 17, 2013, while this litigation was pending before the
       Court, DOE unilaterally determined final indirect cost rates for FY 2003.

       118. The final rates that DOE determined are less than the rates identified
       in USEC’s revised FY 2003 ICS.

       119. The unilaterally set rates do not allow USEC to recover all allowable
       indirect costs to which USEC is entitled under FAR § 52.216-7.

       ....

       121. USEC is entitled to judgment that DOE breached the DOE Contracts
       by failing timely to negotiate and agree to, and reimburse USEC based on,
       appropriate final FY 2003 indirect cost rates that reflect costs allowable
       under FAR Subpart 31.2 and reimbursable under FAR § 52.216-7.122.
       USEC is entitled to judgment that DOE breached the DOE Contracts by
       unilaterally setting final rates that are insufficient to permit USEC to
       recover its allowable indirect costs in accordance with FAR § 52.216-7 and
       other relevant clauses.

       123. USEC is entitled to judgment that DOE’s contractual breaches have
       damaged USEC through DOE’s failure to reimburse USEC for all

                                             9
       allowable indirect costs in accordance with FAR § 52.216-7 and other
       relevant contract clauses.

Am. Compl. ¶¶ 112-123. Counts IV and VI contain the same allegations for the 2004 and

2005 FYs, respectively.

       The court finds, based on its comparison of the amended complaint and the 2011

claim, that DOE’s final indirect cost rate determination in 2013 does not require

submission of a new claim to the CO. In 2011, the CO reviewed for breach of contract

based on DOE’s failure to accept USEC’s indirect rate proposal and pay USEC the

indirect costs it had incurred and properly invoiced. The 2011 claim was not asking the

DOE to set just any final rates, but rather requested the specific final rates that USEC had

identified in its ICSs and, later, in its amended complaint. The 2011 claim thus gave the

CO the ability to pass judgment on USEC’s indirect cost claim and to consider whether

DOE owed USEC the claimed amounts. USEC’s 2011 claim was for breach of contract

due to DOE’s failure to set final indirect rates consistent with USEC’s rate request. The

amended complaint presents a breach of contract claim also based on DOE’s failure to

accept USEC’s rates when DOE issued its 2013 final rate determination. The fact that

DOE later finalized indirect cost rates does not change the nature of the dispute between

the parties or the grounds for the dispute. 3

3
  Requiring USEC to file a second identical claim would not only be a waste of time and
resources, but also would have potentially severe financial ramifications for USEC. The CDA
provides that “[i]nterest on an amount found due a contractor on a claim shall be paid to the
contractor for the period beginning with the date the [CO receives the contractor’s claim.” 41
U.S.C. § 7109(a)(1). Therefore, if USEC ultimately prevails in this litigation, it could lose the
interest that has been accruing on its 2011 claim if it is required to submit an entirely new claim.
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       The government argues that the amended complaint does not rely on the “same

operative facts” as the 2011 CDA claim because the amended complaint discusses the

final indirect rates that the agency set in 2013, which had not been set in 2011 when

USEC filed its CDA claim demanding that the DOE set final indirect rates. However,

this argument is not compelled by precedent in this circuit. In K-Con, the circuit noted

that the court may go beyond the “face of the claims” to determine if the claims are

essentially for the same underlying dispute. K-Con, 778 F.3d at 1006 (citing Sharman

and Scott Timber Co. v. United States, 333 F.3d 1358, 1366 (Fed. Cir. 2003)). Here, a

review of the 2011 claim demonstrates that DOE’s contract officers understood that

USEC was seeking payment of the indirect costs it had submitted to DOE in its ICSs and

that DOE’s failure to accept USEC’s indirect cost request and pay USEC the amounts

claimed amounted to a breach of the contracts and work authorizations at issue. Thus,

the CO had the opportunity in 2011 to accept or reject USEC’s indirect rate proposal for

the years in question. USEC has not changed the final indirect costs requests. In such

circumstances, there is no reason for USEC to go back to the CO and make a new claim.

       Therefore, for the reasons stated above, the government’s partial motion to dismiss

is DENIED. The parties shall submit a joint status report with proposed next steps by

Monday, June 15, 2015.

       IT IS SO ORDERED.

                                                          s/Nancy B. Firestone
                                                          NANCY B. FIRESTONE
                                                          Judge

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