Court Opinion

ID: 3132800
Source: CourtListenerOpinion
Date Created: 2015-10-20 15:01:48.750049+00
Date Added: 2024-06-11T11:46:10.867960
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

              ROBERT DOURANDISH,
                 Plaintiff-Appellant

                           v.

                  UNITED STATES,
                  Defendant-Appellee
                ______________________

                      2015-5091
                ______________________

    Appeal from the United States Court of Federal
Claims in No. 1:14-cv-00937-CFL, Judge Charles F.
Lettow.
               ______________________

              Decided: October 20, 2015
               ______________________

   ROBERT DOURANDISH, San Mateo, CA, pro se.

    PAUL D. OLIVER, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washing-
ton, DC, for defendant-appellee. Also represented by
BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR., REGINALD
T. BLADES, JR.
                 ______________________
2                                        DOURANDISH   v. US

     Before NEWMAN, CLEVENGER, and O’MALLEY, Circuit
                      Judges.
CLEVENGER, Circuit Judge.
    Pro se plaintiff Robert Dourandish is the co-owner of
Quimba Software, Inc. (“Quimba”). This action arose out
of a contract between Quimba and the Air Force Research
Laboratory. The Court of Federal Claims dismissed Mr.
Dourandish’s complaint for lack of subject matter jurisdic-
tion. A separate action before that court, between Quimba
and the United States based on the same contract, is
currently pending. Quimba Software, Inc. v. United
States, No. 1:12-cv-00142-MCW (Fed. Cl. filed Mar. 1,
2012). For the reasons explained below, we affirm.
                      BACKGROUND
     On July 10, 2003, Quimba entered into a cost-plus-
fixed-fee contract with the Air Force Research Laboratory,
number F30602-03-C-0185. Mr. Dourandish signed the
contract for Quimba in his capacity as one of its executive
officers, noting both the company’s name and his title in
his own handwriting.
    The contract provided that Quimba would submit in-
voices for its costs to the Defense Contract Audit Agency
(“DCAA”). The government would “make payments to
[Quimba] when requested as work progresses . . . in
amounts determined to be allowable by the Contracting
Officer in accordance with Federal Acquisition Regulation
(FAR) subpart 31.2 in effect on the date of this contract
and the terms of this contract.” Those payments would
reimburse Quimba’s “properly allocable and allowable
indirect costs . . . .”
    The following discussion is drawn from Mr. Douran-
dish’s allegations. The contract was awarded to Quimba
conditional on it bringing its accounting system into
compliance with DCAA’s requirements. Compl. ¶¶ 7, 8,
13. Quimba’s co-owners began work on the contract in the
DOURANDISH   v. US                                        3

third quarter of 2003, but were told they would not be
paid until Quimba’s system complied with DCAA’s stand-
ards and DCAA approved of Quimba’s indirect rates. Id.
¶¶ 11, 14.
    In February 2004, after Quimba improved its account-
ing system, DCAA approved a payment of $30,321.77.
Quimba also initiated an audit of its indirect rates. Dur-
ing that audit, DCAA and Quimba disputed whether the
deferred salaries Quimba sought to pay its co-owners
were allowable under the FAR’s cost-accounting stand-
ards. Id. ¶ 19. They worked to resolve the issue through
multiple audits in 2004. Id. ¶¶ 20-41.
    On November 24, 2004, DCAA approved Quimba’s in-
direct rates, including its request for deferred compensa-
tion. Id. ¶ 42. Then, on January 26, 2005, DCAA sent
Quimba a draft audit report that questioned whether the
deferred compensation could be paid. Id. ¶ 47. At this
point, Quimba had not yet been paid for salaries incurred
during 2004, and DCAA initiated a Risk Review of the
contract based in part on the fact that its founders were
“not paying” themselves. Id. ¶¶ 48, 52.
    Quimba completed its performance under the contract
in March 2005. Id. ¶ 57. Following completion, it submit-
ted invoices for all of its unpaid work and was paid. Id. ¶¶
61–63. Then it submitted a rate proposal for all of its
unpaid costs, including the deferred compensation. DCAA
approved the proposal in June 2005, and Quimba was
paid. Id. ¶¶ 65–66.
    In May 2007, DCAA initiated an audit of Quimba’s
2004 incurred cost proposal. Id. ¶ 67. The record shows
that the Contracting Officer issued a Final Decision in
March 2011, disallowing $149,085 in executive compensa-
tion costs Quimba incurred during fiscal year (“FY”) 2004.
Under the FAR provision in effect when the contract was
formed, “[f]or closely held corporations, compensation
costs covered by this subdivision shall not be recognized
4                                          DOURANDISH   v. US

in amounts exceeding those costs that are deductible as
compensation under the Internal Revenue Code and
regulations under it.” FAR § 31.205-6(b)(2)(i) (2002). The
Contracting Officer disallowed the compensation because
he agreed with the DCAA auditor’s report, which “ques-
tioned the proposed labor costs for the owners because
they exceeded the actual labor costs paid and reported as
compensation under IRS Regulations.”
    As a result, the government levied a debt of
$91,992.77 against Quimba. Quimba challenged the debt
in the Court of Federal Claims. Quimba Software, Inc. v.
United States, No. 1:12-cv-00142-MCW (Fed. Cl. filed
Mar. 1, 2012). That case remains pending, and we express
no view on any aspect of that proceeding.
    On October 3, 2014, Mr. Dourandish separately filed
this action in the Court of Federal Claims. The first count
of his complaint alleges that the government breached its
contract with Quimba. The second count alleges that the
government “violated Mr. Dourandish’s rights, as guaran-
teed under the US Constitution and codified under the
Civil Rights Act, by unjustly interfering with his ability to
seek federal contracts.”
    Following the government’s motion, the court dis-
missed for lack of subject matter jurisdiction under Fed-
eral Rule of Civil Procedure 12(b)(1). Dourandish v.
United States, 120 Fed. Cl. 467 (2015). Mr. Dourandish
appealed. We have jurisdiction under 28 U.S.C.
§ 1295(a)(3).
                        DISCUSSION
    This court reviews de novo whether the Court of Fed-
eral Claims had jurisdiction. Estes Express Lines v. Unit-
ed States, 739 F.3d 689, 692 (Fed. Cir. 2014). The plaintiff
bears the burden of proving subject matter jurisdiction by
a preponderance of the evidence. Id. When deciding a
motion to dismiss for lack of subject matter jurisdiction,
DOURANDISH   v. US                                         5

we accept the complaint’s uncontested factual allegations
as true and construe them in the light most favorable to
the plaintiff. Id.
    The Tucker Act grants the Court of Federal Claims
jurisdiction over claims for money damages against the
United States that are “founded either upon the Constitu-
tion, or any Act of Congress or any regulation of an execu-
tive department, or upon any express or implied contract
with the United States, or for liquidated or unliquidated
damages in cases not sounding in tort.” 28 U.S.C.
§ 1491(a)(1) (2011). It is a purely jurisdictional statute
that does not itself create any substantive rights. See
United States v. Testan, 424 U.S. 392, 398 (1976). To
invoke jurisdiction under the Tucker Act, a party must
therefore identify a substantive right in another source of
federal law that “can fairly be interpreted as mandating
compensation by the Federal Government for the damag-
es sustained.” Id. at 400 (quotation omitted); see also
United States v. Mitchell, 463 U.S. 206, 217 (1983).
                            I
    “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 government . . . .” Ransom v.
United States, 900 F.2d 242, 244 (Fed. Cir. 1990). That is,
the plaintiff and the government must be in privity of
contract. Cienega Gardens v. United States, 194 F.3d
1231, 1239 (Fed. Cir. 1998). Either direct privity or status
as a third-party beneficiary confers standing to sue the
government. See Anderson v. United States, 344 F.3d
1343, 1352 (Fed. Cir. 2003).
    “In order to prove third party beneficiary status, a
party must demonstrate that the contract not only reflects
the express or implied intention to benefit the party, but
that it reflects an intention to benefit the party directly.”
Glass v. United States, 258 F.3d 1349, 1354 (Fed. Cir.
2001), opinion amended in other respects on reh'g, 273
6                                         DOURANDISH   v. US

F.3d 1072 (Fed. Cir. 2001). “Specifically, in order to make
a shareholder a third party beneficiary, the contract must
express the intent of the promissor to benefit the share-
holder personally, independently of his or her status as a
shareholder.” Id. at 1353–54.
    Mr. Dourandish does not contend that there was a
contract between himself and the government. Instead, he
argues that he has standing to sue because he was an
intended third-party beneficiary of the contract between
Quimba and the Air Force Research Laboratory. The
Court of Federal Claims found that Mr. Dourandish was
at most an indirect beneficiary because the contract does
not evidence any intent to benefit him personally. It
therefore held that he lacked standing to sue.
    On appeal, Mr. Dourandish argues that the contract
evidences an intent to benefit him directly. Some of the
evidence he identifies arose before the parties entered into
the contract. He tells us that Quimba’s proposal identified
him by name as a Senior Investigator and included his
salary as an expected cost, and also that before it awarded
the contract the Air Force Research Laboratory asked him
to provide documentation justifying his proposed hourly
rate. The record does not contain the proposal or any
documentation of pre-award discussions, and even if it
were before us, the parol evidence rule would prevent it
from changing the contract’s terms. See TEG-Paradigm
Envtl., Inc. v. United States, 465 F.3d 1329, 1338–39 (Fed.
Cir. 2006). Regardless, this evidence would show at most
that Mr. Dourandish was an employee of Quimba who
was expected to perform work on the contract. It does not
show intent to benefit him directly.
    Within the contract itself, Mr. Dourandish relies on
FAR § 52.232-09, which it incorporates. That provision
limits the government’s ability to withhold payments, but
excludes withholdings related to wages or hours from its
coverage. Mr. Dourandish asserts that this clause shows
DOURANDISH   v. US                                       7

the parties’ intent to benefit him as an employee of Quim-
ba. It appears unlikely that this provision benefits em-
ployees, but assuming that it does, nothing in its adoption
indicates the parties’ intent to benefit Mr. Dourandish
directly.
    Mr. Dourandish also points to the course of perfor-
mance on the contract. He contends that, when DCAA
repeatedly determined that it could not pay Mr. Douran-
dish’s deferred salary, it demonstrated the parties’ intent
to benefit him. He also notes that the government initiat-
ed a risk audit of Quimba’s contract on the basis that it
was failing to pay its co-owners. Both are implausible; he
was harmed, not helped, by DCAA’s refusal to pay de-
ferred salaries, and the risk audit was for the govern-
ment’s benefit. In any event, both happened after the
contract was formed and is not evidence of the parties’
intent at the time of formation.
    None of this evidence evidence indicates an intent to
benefit Mr. Dourandish personally, independent of his
status as a shareholder. He has therefore not established
that he was a third-party beneficiary to the contract
between Quimba and the Air Force Research Laboratory.
    Separate from his third party beneficiary argument,
Mr. Dourandish presents three arguments as to why he
has standing based on the contract between Quimba and
the government.
    First, he argues that he was the real party in interest
in the contract between Quimba and the government. In
support he cites Rule 17(a) of the Rules of the Court of
Federal Claims, which provides in relevant part that “a
party with whom or in whose name a contract has been
made for another’s benefit” may sue in its own name
“without joining the person for whose benefit the action is
brought.” That rule governs the Court of Federal Claims’
procedures and does not purport to set out when a party
has standing. See Rules Ct. Fed. Cl. 1.
8                                        DOURANDISH   v. US

    Second, Mr. Dourandish analogizes himself to a sub-
contractor, where Quimba is the prime contractor. In
general, subcontractors are not in privity with the gov-
ernment, but privity between the subcontractor and the
government may exist if the prime contractor acted as an
agent of the government when it entered into the subcon-
tract. United States v. Johnson Controls, Inc., 713 F.2d
1541, 1550–51 (Fed. Cir. 1983). Mr. Dourandish gives us
no reason to think that the same rule should apply here,
where he was a co-owner of Quimba rather than a subcon-
tractor. He also presents no argument as to why the
criteria Johnson Controls sets out for subcontractor
privity are met. See id. at 1551.
    Third, Mr. Dourandish contends that he has standing
as a creditor beneficiary. See D & H Distrib. Co. v. United
States, 102 F.3d 542, 546–47 (Fed. Cir. 1996) (“In the case
of a contract in which the promisee provides goods or
services to the promisor, it has long been settled that a
clause providing for the promisor to pay the proceeds of
the contract to a third party is enforceable by the third
party where the payment is intended to satisfy a present
or future liability of the promisee to the third party.”).
That is not the case. No clause required Quimba to pay
the proceeds of the contract to Mr. Dourandish. Further,
there is no suggestion that any such payment would be
intended to satisfy a debt of the government.
                            II
    Mr. Dourandish contends that the government violat-
ed his Fourteenth Amendment due process rights when it
“knowingly refused to rescind an erroneous levy” by
leaving the Contracting Officer’s Final Decision in place
after admitting that it contained an error.
    The Court of Federal Claims dismissed this claim for
lack of jurisdiction because the Fourteenth Amendment
does not mandate the payment of money damages.
DOURANDISH   v. US                                         9

    We affirm. “The law is well settled that the Due Pro-
cess clauses of both the Fifth and Fourteenth Amend-
ments do not mandate the payment of money and thus do
not provide a cause of action under the Tucker Act.”
Smith v. United States, 709 F.3d 1114, 1116 (Fed. Cir.
2013) (citing LeBlanc v. United States, 50 F.3d 1025, 1028
(Fed. Cir. 1995)).
                             III
    Mr. Dourandish argued below that the government
violated his Fifth Amendment due process rights through
an “illegal exaction.” An illegal exaction claim arises when
money is “improperly paid, exacted, or taken from the
claimant [by the government] in contravention of the
Constitution, a statute, or a regulation.” Norman v.
United States, 429 F.3d 1081, 1095 (Fed. Cir. 2005) (quot-
ing Eastport S.S. Corp. v. United States, 372 F.2d 1002,
1007 (Ct. Cl. 1967)).
     Illegal exaction claims are an exception to the general
rule that the Court of Federal Claims lacks jurisdiction
over due process claims. That court has jurisdiction over
illegal exaction claims “when the exaction is based on an
asserted statutory power.” Aerolineas Argentinas v. Unit-
ed States, 77 F.3d 1564, 1573 (Fed. Cir. 1996). “To invoke
Tucker Act jurisdiction over an illegal exaction claim, a
claimant must demonstrate that the statute or provision
causing the exaction itself provides, either expressly or by
‘necessary implication,’ that ‘the remedy for its violation
entails a return of money unlawfully exacted.’” Norman,
429 F.3d at 1096 (quoting Cyprus Amax Coal Co. v. Unit-
ed States, 205 F.3d 1369, 1373 (Fed. Cir. 2000)).
    The court dismissed Mr. Dourandish’s illegal exaction
claim for lack of jurisdiction, because his claims derive not
from an “asserted statutory power” but from contract.
    Mr. Dourandish did not appeal the dismissal of his
Fifth Amendment due process claim. If he had, however,
10                                         DOURANDISH   v. US

we would affirm. Mr. Dourandish points to no statutory
basis for his illegal exaction claim.
                             IV
    Mr. Dourandish’s complaint alleges that the govern-
ment violated the Civil Rights Act by “unjustly interfering
with his ability to seek federal contracts.” Compl. ¶ 109.
      The court dismissed this claim for lack of jurisdiction
because, by statute, “[t]he district courts shall have
original jurisdiction of any civil action . . . [t]o recover
damages or to secure equitable or other relief under any
Act of Congress providing for the protection of civil rights
. . . .” 28 U.S.C. § 1343(a)(4) (2011).
    Mr. Dourandish also did not appeal the dismissal of
his Civil Rights Act claim. If he had, we would affirm.
Original jurisdiction over claims under the Civil Rights
Act is vested in the district courts.
                             V
    Finally, Mr. Dourandish argues that he has standing
to sue on Quimba’s contract with the government because
Quimba is a closely held corporation and, as one of its co-
owners, his interest overlap significantly with those of the
company. In support, he points to Burwell v. Hobby Lobby
Stores, Inc., 134 S. Ct. 2751 (2014). He contends that case
held that the owners of a closely held corporation are
indistinguishable from the corporation itself, and there-
fore that they may sue on its contracts.
    Mr. Dourandish’s argument misreads Hobby Lobby.
Hobby Lobby interpreted the Religious Freedom Restora-
tion Act of 1993, 107 Stat. 1488, 42 U.S.C. § 2000bb et
seq., and held that regulations requiring closely held
corporations to provide health insurance coverage for
methods of contraception that violated the sincerely held
religious beliefs of the corporations’ owners violated that
statute. Hobby Lobby, 134 S. Ct. at 2759. It has no bear-
DOURANDISH   v. US                                     11

ing on whether the co-owner of a closely held corporation
has standing to sue on the corporation’s contracts.
                      CONCLUSION
    Accordingly, the Court of Federal Claims’ dismissal of
Mr. Dourandish’s complaint for lack of jurisdiction is
                      AFFIRMED.
                         COSTS
   No costs.