Court Opinion

ID: 9462656
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:46:37.617647+00
Date Added: 2024-06-11T17:37:42.241148
License: Public Domain

LEVENTHAL, Circuit Judge
(dissenting in part):
This is a contract case in which plaintiff Jonal Corporation, a Maryland Corporation, which entered into a contract with the District of Columbia to build certain water pollution control plant buildings for $297,-000, claims money due for work done.1 The complaint was filed on April 4, 1973, at a time when a civil action filed in the District of Columbia, even between residents of the District, was within the exclusive jurisdiction of the United States District Court if the amount in controversy exceeded $50,-000.2
On June 19, defendant District of Columbia moved for summary judgment, setting forth that a dispute arose between the parties as to the interior height of the buildings, called for by notes on certain contract drawings, and as to which party was to perform certain paving work, turning on the meaning of language in the revision block of another contract drawing; that after supplying the buildings and performing the work requested by the agents of the District, Jonal filed claims for an equitable adjustment of price and an extension of time; that these claims were denied by the Project’s contracting officer; that plaintiff appealed to the District of Columbia Contract Appeals Board, was accorded a full evidentiary hearing, and that the Board upheld the decision of the Contracting Officer.3
On July 5, 1975, the plaintiff filed a Counter-Statement of Undisputed Facts. This document referred to the Disputes clause of the contract4 providing that disputes concerning questions arising under *1200the contract shall be decided by the contracting officer, subject to appeal to the Contract Appeals Board, whose decision shall be final and conclusive; and in the meantime the contractor shall diligently proceed with the work as directed.
Paragraph 12 of the Counter-Statement, quoted in the margin,5 sets forth the organization of the Contract Appeals Board under Organization Order No. 9 of the then Commissioners of the District of Columbia.
Paragraphs 13, 14 and 15 of the Counter-Statement set forth the members of the Board as follows: Louis C. Robbins, Assistant Corporation Counsel, as chairman; Lou Frana, an Assistant Corporations Counsel; and Gerald I. Sawyer, a contracting officer in the D.C. Department of Highways. “Mr. Sawyer attended only the morning session of the hearing on Appeal CAB, No. 355, although the hearing lasted almost two days.” In these appeals counsel for the District of Columbia was James E. Lemert, assigned by the Corporation Counsel.
A Preliminary Statement filed by plaintiff — apparently along with the Counter-Statement — stated that the District’s motion papers indicated it was attempting to limit the court’s review to a “Wunderlich Act” review, as to whether there is substantial evidence in the record; that plaintiff submits that before the court decides whether review is so limited it must first decide plaintiff’s contention that Order No. 9 violates the due process clause, and its further contention that Order No. 9 and the Contract Appeals Board, as constituted in CAB No. 355 and 356, also violates the provisions of the Wunderlich Act, 41 U.S.C. § 321. The Preliminary Statement concluded: “Plaintiff reserves the right to file a supplement opposing the claim of finality to be accorded the rulings of the Board in these cases after the issues raised by this pleading are resolved.”
I
The first question is whether the principles of the Wunderlich Act apply so as to curtail judicial review in this case, and if so to what extent.
A
In general, dispute clauses in District of Columbia contracts are subject, in the same *1201way as a Federal contract, to the Wunderlich Act principle.6
The contract provisions for finality of decisions of the Contract Appeals Board are not applicable as written, in that they are not conclusive as to questions of law, and are conclusive as to matters of fact if, and only if, they are supported by substantial evidence. Kenny Construction Co. v. District of Columbia, 105 U.S.App.D.C. 8, 262 F.2d 926 (1959); District of Columbia v. Heman Ward, Inc., 261 A.2d 836 (D.C.C.App.1970).
Under this “substantial evidence” rule, the law of Government contracts has become assimilated to doctrines of administrative law. United States v. Carlo Bianchi & Co., Inc., 373 U.S. 709, 715, 83 S.Ct. 1409, 1413, 10 L.Ed.2d 652, 657 (1963). However, the decision of the Contract Appeals Board is not reviewable under the Administrative Procedure Act of the District of Columbia. Gunnell Construction Co. v. Contract Appeals Board, 282 A.2d 556 (D.C.C.App.1971). Judge Nebeker stated (at p. 558): “Where the result reached by the Board does not satisfy the parties concerned they are left with the traditional remedies at law and any questions of contractual rights should be resolved in a suit on the contract.” And so in case of a dispute arising under the contract where the claim is made for money due pursuant to its provisions, the party may bring a suit on the contract, which the court will determine on the basis of whether there was substantial evidence to support the Board’s findings. However, when the claim is for breach of contract, and not a dispute arising under the contract, the court provides an independent judicial determination. United States v. Utah Construction Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966). Utah also sets forth that if a “breach” claim overlaps a “dispute arising under the contract,” any matter litigated before the Board in regard to dispute aris-. ing under the contract is to be determined on the “substantial evidence” Wunderlich Act standard, and is not to be relitigated de novo in court.
B
This is general learning and background. What plaintiff says is that the principle of limited judicial review is not applicable at all in the case of a serious defect in the establishment and procedures of the Board of Contract Appeals.
Where there is such a defect in the organization and operation of a board of contract appeals, it does not have minimum objectivity, and the Wunderlich limitation may not govern the court hearing the contract action. The Supreme Court has stated “on several occasions that the parties will not be required to exhaust the administrative procedure if it is shown by clear evidence that such procedure is ‘inadequate or unavailable.’ It may be that the contracting officer or the Board of Contract Appeals so clearly reveals an unwillingness to act and to comply with the administrative procedure in the contract that the contractor or supplier is justified in concluding that those procedures have thereby become ‘unavailable.’ ” United States v. Grace & Sons, Inc., 384 U.S. 424, 429-30, 86 S.Ct. 1539, 1542-1543, 16 L.Ed.2d 662, 667 (1966) (citations omitted). See, e. g., Baltimore Contractors, Inc. v. United States, No. 272-70, Order of Trial Judge Spector, at 4 n. 5 (Ct.Cl., Trial Div., June 17, 1975), referring, inter alia, to a complaint that board members shared a small office with an attorney for the contracting officer.
C
Plaintiff sought to present an issue of that kind in regard to the Board of Contract Appeals of the District of Columbia. This contention was not considered by the trial judge. He referred to the doctrine that federal court jurisdiction premised on a federal question must appear on the face *1202of a well-pleaded complaint.7 The trial judge held that plaintiffs constitutional claim “must fail for want of jurisdiction since the claim was not properly pleaded as a matter of form.”
In my view, this was error. This was not a case of federal question jurisdiction, but a case of simple jurisdiction of any contract claim involving more than $50,000 (see note 2). In accordance with Gunnell, plaintiff brought a suit on the contract. It was only ' when the District relied on a defense of finality that plaintiff had need to advance his constitutional claim to undercut that • defense. This rebuttal did not have to be pleaded on the face of the complaint. The same considerations apply to plaintiff’s claim that, apart from any constitutional requirement, the plaintiff is not bound by the Board decision in view of the requirement by implication from the Wunderlich Act of a disputes clause board and procedure that satisfy minimum Wunderlich Act requirements.
D
That brings us to a consideration of the plaintiff’s claim of unfairness. Appellee District argues that any complaint about the structure and composition of its Contract Appeals Board is frivolous.
Plaintiff’s papers attack the composition of the Board of Contract Appeals of the District of Columbia on the ground that it is “indefensible” to provide for resolution of a contract dispute by two lawyers of the Corporation Counsel’s staff, and another contracting officer.
It is commonplace for Federal agencies and departments to draw heavily on the general counsel’s office to staff members of boards of contract appeals.8 It is fair to assume that this fact alone would not undercut the Wunderlich Act, especially since the Bianchi ruling did not advert to the dissent of Justice Douglas and his reference to “subnormal administrative procedures,” 373 U.S. at 721, 83 S.Ct. at 1415,10 L.Ed.2d at 662.
However, plaintiff identifies a problem not generally applicable to Federal agencies, that the D.C. Corporation Counsel is actively engaged in contract litigation, which in the Federal Government is the responsibility of a separate department (Justice), and that the D.C. Corporation Counsel was at one and the same time both defending against Jonal’s claim and prosecuting a claim of the District against Jonal for liquidated damages (Br. 17).
Moreover, counsel for the District advised the court at oral argument that the District considers itself free under its regulations to permit the Corporation Counsel not only to assign members of his staff to the board, but to make such assignment, on a part-time duty basis, in such a way that on one day a lawyer may be a member of the board, sitting as a judge in a case tried by another member of the staff of the Corporation Counsel, although the day before and the day after he may be working alongside that colleague, or even under his supervision, in another matter.
Appellee says the Supreme Court in Mar-cello v. Bonds, 349 U.S. 302, 75 S.Ct; 757, 99 L.Ed. 1107 (1955), has already upheld the constitutionality of deportation hearings by inquiry officers who are under the general supervision of a district or regional office. Deportation hearings have special tradition and requirements, due to exigencies of volume and location. Moreover, they are subject to a full administrative review by a national board of immigration appeals, staffed by members who are not subject to other assignment within the Immigration and Naturalization Service (INS), and it is only that board’s independent evaluation of *1203the evidence that is entitled to “substantial evidence” deference by the courts.9 In Marcello, the Court was able to thrust aside a claim that prejudgment affected the hearing inquiry by stressing that the board of immigration appeals had been insulated (pp. 313-14, 75 S.Ct. 752, 763, 99 L.Ed.2d 1107, 1117).
Except for INS cases, the only application of the Marcello doctrine has been in the domains of rulemaking,10 which is poles apart from specific contract determination.
Moreover, I do not base my approach on constitutional grounds — or a lack of power in the legislature to prescribe a certain procedure even though lacking in optimum fairness. In the present case the legislative intent is not specifically delineated, as was the deportation legislation reviewed in Mar-cello, and there is room for the application of the doctrine that the legislature will be presumed to have contemplated procedures and organization that comport with basic fairness as discerned in the light of contemporary standards.11
The problem cannot be dismissed by saying that the same agency can combine prosecutorial and adjudicatory functions. An agency thus constituted may be called on to provide some separation during the course of adjudication. I do not say that the board as constituted is inadequate; I merely say that there is an issue that requires ventilation, as to how it works.
The District Court took note of the constitutional issue raised by plaintiff, but did not refer to the statutory issue — whether the board as constituted and operated was the kind of board that the Wunderlich Act had in mind as entitled to the “substantial evidence” rule. There are legislative-type recommendations that the boards of contract appeals should be restructured in the direction of complete separation from contracting officials and the general counsel’s office.12 But even assuming no change in *1204statutes, the question is to what extent the Wunderlich Act gives boards drawn from offices of general counsel and contracting officers full “substantial evidence” deference if there is day-to-day intermeshing of duties and varied working relationships with the officials presenting particular claims.
In my view, the case should be remanded so that the district judge may conduct a hearing that would flesh out how the board operates, and the working relations of members of the board to other employees in the Office of the Corporation Counsel, before he proceeds to decide whether, and to what extent, its decisions are entitled to the benefit of the “substantial evidence” rule.
E
The District Court alluded, without a ruling, to the possibility of estoppel.13
The mere fact that Jonal exhausted a non-judicial remedy is not an estoppel on Jonal to claim that the non-judicial ruling is not conclusive on the court in the contract suit. The doctrine of primary jurisdiction may require exhaustion of a non-judicial remedy even when there will be no application of the “substantial evidence” rule.14 For years prior to Bianchi, contractors first prosecuted appeals to boards of contract appeals, and then obtained independent review in the Court of Claims. This remedy is still open as a “fail safe,” when the board remedy is marred.
As for the claim that plaintiff is estopped for failure to present its challenge to the board, I do not see how an estoppel doctrine could be operative if the board was in no position to remove the problem of domination by the Corporation Counsel of which plaintiff complained. That condition inheres in the regulations binding on the board. Plaintiff’s contention did not mean that the board, established pursuant to the regulations, had to cease forthwith. It had a role in making the record, assuming no procedural irregularity, and in screening out the need for court litigation in those cases where even such a board would conclude that the contracting officer had failed to make the equitable adjustment promised by the contract.
It would have been better procedure for plaintiff to state its position to the board. And its failure to do so might weaken its position to maintain certain contentions — a point I need not now crystallize. It suffices here to say it was not completely precluded from presenting an attack on the nature of the board in support of a claim that the board’s decision was not entitled to the benefit of the “substantial evidence” rule.
I dissent from the failure to require the district court, on remand, to consider the questions identified in this opinion in order to determine whether Wunderlich’s “substantial evidence" principle is operative. Assuming that principle is operative, I concur in the court’s order of remand, which accepts an alternative presentation of appellant, to assure there has been full submission on the sufficiency of the evidence on the whole record, and a considered ruling identifying whether there is substantial evi*1205dence supporting the decision of the board of contract appeals.15

. Jonal alleges (a) it was required to erect two water pollution control plant buildings to a height allegedly higher than that called for by the specifications, at a cost of $6,491: (b) it was required to do paving work not called for by the contract, at a cost of $25,635.13, and (c) the additional work delayed final completion with a resulting extra cost of $30,000. Finally Jonal claims a $9,600 unpaid balance on the contract.

. D.C.Code Ann. § 11-501(4) (1973).

. Appeal No. 355 (building height claim), No. 356 (paved claim).

. “Article 15. Disputes — Except as otherwise specifically provided in this Contract, all disputes concerning questions arising under this Contract shall be decided by the Contracting Officer subject to written appeal of the Contractor within thirty (30) days to the Contract Appeals Board, whose decision shall be final and conclusive upon the parties thereto, subject to the limitations of Sec. 3(b)(2) of Reorganization Plan No. 5 of 1952. In the meantime *1200the Contractor shall diligently proceed with the work as directed.” (App. 8)

. The Contract Appeals Board, D.C. was established on June 6, 1968 by Organization Order No. 9 of the then Commissioners of the District of Columbia, Title 1, District of Columbia Code, at 235-36 (1973 ed.), and provides in pertinent part as follows:
“PART VI
“Contract Appeals Board, D.C. — A. There is established a Contract Appeals Board, D.C., consisting of one or more active or retired Assistant Corporation Counsel designated by the Corporation Counsel, one of whom shall serve as Chairman of the Board, and two or more persons appointed or designated by the Commissioners from among officers assigned to the Corps of Engineers and detailed to assist the Commissioners pursuant to Sec. 503(b) of Reorganization Plan No. 3 of 1967, or from among active or retired District of Columbia officers and employees who have had practical experience in the administration of government contracts. Except as otherwise provided by its rules, all business of the Board shall be conducted by panels of not less than three members at least one of whom shall be an active or retired Assistant Corporation Counsel member, but any two members of a panel shall constitute a quorum for the transaction of any business of the Board.
“No person shall serve as a member of a panel in the decision of any case in which the appeal has been taken from the action of a Contracting Officer or Alternate Contracting Officer of the department of which he is, or at the time of his retirement was, the Director or an employee, or in which he has participated directly in any aspect of the award or administration of the contract involved.
“D. The Chairman of the Contract Appeals Board shall, from time to time, assign members to panels of the Board, shall be responsible for obtaining the necessary secretarial assistance for the Board and for maintaining centralized custody over all records of the Board, and may, from time to time, designate a member to serve as acting chairman during his own absence, disqualification or disability.”

. The Wunderlich Act, 41 U.S.C. § 321, is so named because it modified the result in United States v. Wunderlich, 342 U.S. 98, 72 S.Ct. 154, 96 L.Ed. 113 (1951).

. C. Wright, Law of Federal Courts 59-62 (2d ed. 1970). See, Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 390-95, 91 S.Ct. 1999, 2001-2004, 29 L.Ed.2d 619, 623-626 (1971). Bell v. Hood, 327 U.S. 678, 681, 66 S.Ct. 773, 776, 90 L.Ed. 939, 942 (1946).

. See, passim, H. C. Petrowitz, Report prepared for the Senate Select Committee on Small Business, Operation and Effectiveness of Government Boards of Contract Appeals, S.Doc.99, 89th Cong. 2d Sess. (1966). Professor Petrowitz’s study is cited in S & E Contractors, Inc. v. United States, 406 U.S. 1, 17-18, 92 S.Ct. 1411— 1420, 31 L.Ed.2d 658, 670 (1972).

. See 1 C. Gordon and H. Rosenfeld, Immigration Law and Procedure § 1.10, at 1-51, 1-59 (Rev. ed. 1975):
Since 1939 the Board has been completely apart from the Immigration and Naturalization Service. It is a separate body in the Department of Justice, responsible only to the Attorney General, which reviews the determinations of immigration officers. Under the present allocation of responsibilities the Board is divorced from the enforcement apparatus and it is a quasi-judicial body with exclusively appellate functions.
•is * * * * *
The Board thus can make its own independent determinations on questions of fact and law, and on whether discretionary relief should be granted. However, the Board will take into account that the special inquiry officer is primarily the trier of the facts with a better opportunity to assess credibility, and ordinarily will not alter his factual determinations. The Board’s decisions are subject to limited judicial review. .
The functions of the Board, as described by its chairman, see Finucane, Procedure before the Board of Immigration Appeals, 31 Interpr. Releases 26, 30 (Common Council for American Unity, 1954):
If the case presents an issue as to the credibility of witnesses, due consideration is always given to the conclusions reached by the Special Inquiry Officer who had the witness before him, but the Board is in no sense bound by the findings of the Special Inquiry Officer even if supported by competent and substantial evidence. In a word, the Board may make a de novo review of the record and makes its conclusions and findings irrespective of those made by the Special Inquiry Officer.
The Supreme Court has held that although the board was established by the Attorney General, and not by statute, the Attorney General is bound by his own regulations, which require that the decisions of the board reflect its own independent judgment and not the dictate of the Attorney General. Accardi v. Shaughnessy, 347 U.S. 260, 74 S.Ct. 499, 98 L.Ed. 681 (1954).

. American Telephone & Telegraph Co. v. FCC, 449 F.2d 439, 455 (2d Cir. 1971).

. Thompson v. Washington, 162 U.S.App.D.C. 39, 52, 497 F.2d 626, 639 (1973).

. See H. C. Petrowitz, Report prepared for the Senate Select Committee on Small Business, Operation and Effectiveness of Government Boards of Contract Appeals, Sen.Doc.99, 89th Cong. 2d Sess. 148-49 (1966): “Board independence. Boards of contract appeals should be as independent of contracting and legal activities of the agencies within which they are established as possible. Only by doing this will the necessary confidence in their objectivity be developed. This means that board members should not be organizationally associated with contracting offices, procurement policy offices, or the office of general counsel, which in most agencies has the responsibility of defending *1204against claims before the boards. No matter how carefully an agency may try to isolate board members from the other activities within the office of general counsel, having the board organizationally within that office inevitably casts a shadow on its independence.”
The Report of the Commission on Government Procurement (1972) recommended that agency boards of contract appeals be retained “as quasi-judicial forums and strengthened by adding additional safeguards to assure objectivity and independence. * * * Agency boards would be more objective if all members of the boards were selected in a manner that minimized their ties to the agency head. This would be achieved if they were chosen in the same manner as hearing examiners under the Administrative Procedure Act.” (vol. 4, pp. 20, 21) The Commission also recommended that contractors be given the option of direct access to the courts (id. at 23).

. “In view of the fact that Jonal submitted to the jurisdiction of the Board without constitutional challenge it is open to question, as the District has suggested, whether Jonal is not now estopped to raise that issue.”

. Wheelabrator Corp. v. Chafee, 147 U.S.App. D.C. 238, 248, 455 F.2d 1306, 1316 (1971).

. The district judge provided only a conclusory recital that there was substantial evidence supporting the Board’s disposition, without a single reference in his opinion, which discusses other issues in some depth, to a single item of the underlying evidence, nor even a bare citation to an exhibit or page transcript.