INSURANCE COMPANY OF THE WEST v. USA
Filing
33
PUBLISHED OPINION--Filed this date. The Clerk is directed to enter judgment. Signed by Judge Lawrence J. Block. (smm)
United States Court of Federal Claims
No. 09-509 C
September 8, 2011
Insurance Company of the West,
Plaintiff,
v.
Surety; Contract Disputes
Act; Anti-Assignment Acts;
Equitable Subrogation;
Waiver; Silence as Assent
United States of America,
Defendant.
Christopher M. Bunge, Watt, Tieder, Hoffar & Fitzgerald, L.L.P., Irvine, CA, for
plaintiff.
James W. Poirier, Commercial Litigation Branch, Civil Division, United States
Department of Justice, Washington, DC, for defendant.
OPINION and ORDER
Block, Judge.
On August 4, 2009, plaintiff, Insurance Company of the West (“ICW”) filed this action,
pursuant to the Contract Disputes Act (“CDA”), 1 in which it seeks to appeal, as equitable
subrogee and assignee of the W.R. Chavez Construction Company, Inc. (“Chavez”), a
contracting officer’s final decision denying additional compensation to Chavez on its claims for
delayed project completion and additional work. On December 3, 2009, defendant filed a
motion to dismiss for lack of jurisdiction, pursuant to Rule of the Court of Federal Claims
(“RCFC”) 12(b)(1). See Def.’s Mot. to Dismiss at 1. Therein, defendant argues that plaintiff
cannot maintain an action under the CDA because plaintiff is not the contractor, id. at 4, has not
identified any assignment from the contractor, Chavez, to plaintiff that is effective against the
1
As this court explained in Redland Co., Inc. v. United States, the enactment of Public Law No.
111-350 reorganized Title 41 of the United States Code and in particular the CDA. See 97 Fed.
Cl. 736, 740 n.1 (2011); Pub. L. No. 111-350, 124 Stat. 3677 (2011). The provisions of the
Contract Disputes Act of 1978, originally located at 41 U.S.C. §§ 601–13, are now found at
41 U.S.C. §§ 7101–09. See Pub. L. No. 111-350 § 7, 124 Stat. at 3860; Envtl. Safety
Consultants, Inc. v. United States, 97 Fed. Cl. 190, 195 (2011) (recognizing the change in
statutory provisions). The new codification removes nearly all references to the “Contract
Disputes Act.” See Pub. L. No. 111-350 § 5, 124 Stat. at 3841–50. However, for the sake of
familiarity the court will continue to refer to the new codification as the Contract Disputes Act or
CDA.
government, id. at 6, and has not alleged facts sufficient to show it is an equitable subrogee, id.
at 7. Because plaintiff was not the contractor and has not demonstrated that the government has
waived the protections of the Assignment of Claims Act, 31 U.S.C. § 3727, to allow plaintiff to
assert the contractor’s claims, it cannot maintain this action. Accordingly, defendant’s motion to
dismiss is GRANTED.
I. BACKGROUND
In September 1999, Chavez entered into Contract Number N68711-99-D-6203 with the
U.S. Department of the Navy (“the Navy”) to design and construct the “Live Fire Survivability
Test & Evaluation Complex,” (“the project”) located at Naval Air Weapons Station China Lake
in California. Am. Compl. ¶ 5. Pursuant to the Miller Act, Chavez was required to obtain
payment and performance bonds. See 40 U.S.C. § 3131 (requiring a prospective contractor to
furnish performance and payment bonds before the federal government awards a construction
contract in excess of $100,000). In the event that a contractor defaults on a contract, a
performance bond guarantees that a construction project will be completed, while a payment
bond guarantees that subcontractors and suppliers will be paid for their contributions to a project.
See United Pacific Ins. Co. v. United States, 464 F.3d 1325, 1326 n.2 (Fed. Cir. 2006). Plaintiff
issued both of these bonds to Chavez, thereby becoming Chavez’s surety. Am. Compl. ¶ 5.
Chavez then entered into the contract with the Navy and began work on the project in September
1999. Am. Compl. ¶ 10.
On March 26, 2001, Chavez executed a General Indemnity Agreement for the benefit of
plaintiff. See Ulibarri Decl. Ex. A at 1 [hereinafter “GIA”]. In the General Indemnity
Agreement, Chavez assigned to plaintiff “all monies due or to become due to [Chavez] as a
result of the contract covered by [the] Bonds, including . . . proceeds of any delay or other
damage claims” and “all other rights of [Chavez] in or growing out of the contract covered by
[the] Bonds.” GIA ¶ 5. The General Indemnity Agreement provided that “[t]his assignment
shall be effective as of the date of [the] Bonds, but only in the event of a Default of this
Agreement.” Id. The General Indemnity Agreement also defined default to include failure to
perform any contract covered by the bonds, failure to pay bills incurred in connection with any
contract covered by the bonds, and failure to comply with the terms of the General Indemnity
Agreement. Id. ¶ 4.
In August 2002, Chavez and plaintiff jointly notified the Navy that Chavez would not be
able to meet its obligations under the bonds issued by plaintiff. Am. Compl. ¶ 6. At that time,
Chavez and plaintiff also requested that the Navy direct to plaintiff all future payments that
would otherwise be owed to Chavez, including payments for the settlement of any claims
Chavez had against the Navy. Id.; Ulibarri Decl. ¶ 10.
Following this request, Chavez continued working on the project with the assistance of
plaintiff. Am. Compl. ¶ 7. In particular, plaintiff provided financing to Chavez and also paid
Roel Construction Company (“Roel”) to assist Chavez in completing the project. Ulibarri Decl.
¶ 5. The Navy was aware that Roel was assisting Chavez. Montgomery Decl. ¶¶ 4–5. Roel
assigned a project superintendent who did daily work on the project and a project manager who
attended weekly meetings with the Navy. Id. While plaintiff and Roel were assisting Chavez,
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the Navy met with Chavez, Roel, and plaintiff to discuss settlement of certain claims that Chavez
had asserted against the Navy for project delays and for additional work required by the Navy.
Ulibarri Decl. ¶ 9. An employee from the Navy advised plaintiff and Roel to submit a formal
request for equitable adjustment in order to seek additional compensation on Chavez’s claims.
Ulibarri Decl. ¶ 8.
In late January 2004, Chavez’s principals, Wilfred and Deborah Chavez, each executed a
“Compromise Settlement and Mutual Release Agreement” (“Compromise Settlement”) with
plaintiff. See Am. Compl. Ex. B. Each Compromise Settlement established the rights of the
respective parties in light of the fact that Chavez was unable to perform its construction contracts
and had defaulted on the bonds issued by plaintiff. See id.
Despite plaintiff and Roel’s assistance, Chavez was unable to complete the project, and
plaintiff, as the issuer of the performance bond, became responsible for its completion. Id. ¶ 7.
Plaintiff, Chavez, Roel, and the Navy entered into a four-party agreement on May 26, 2004 (the
“Four-Party Agreement”) under which Roel would complete all remaining work on the project.
Id. Ex. A ¶ 1. The parties agreed that Roel would find its own surety to furnish payment and
performance bonds for the project’s completion. Id. Ex. A ¶ 2.
On March 8, 2007, Chavez submitted a written claim to the Navy seeking $1,466,799.34
as compensation for alleged project delays and additional work. Id. ¶ 17. In its claim, Chavez
noted that “[d]ue to [Chavez]’s inability to complete the project, ICW . . . assumed responsibility
for completing the project. [Chavez] thereafter assigned to ICW all rights to any claims against
the [g]overnment.” Def.’s Reply App. at 5. The contracting officer (“CO”) for the Navy issued
a written decision on November 2, 2008, granting Chavez additional compensation in the amount
of $6,068 for delays resulting from base closures following the attacks on September 11, 2001,
but otherwise denying Chavez’s claim. Am. Compl. ¶ 18. However, the Navy also asserted its
own claim against Chavez for $85,043.00 because the government allegedly changed the
contract specifications in a way that reduced Chavez’s cost of performance. Id.; Def.’s Mot. to
Dismiss App. at 35.
Plaintiff then filed this action seeking compensation under the CDA on the claims denied
by the CO in his November 2, 2008, decision. See Am. Compl. ¶¶ 18, 20. In its complaint,
plaintiff relies on its alleged status as Chavez’s equitable subrogee and assignee as the basis for
this action. See id. ¶ 20. Defendant thereafter filed a motion to dismiss for lack of subjectmatter jurisdiction, arguing that the plaintiff is not a “contractor,” which is a prerequisite to
plaintiff’s suit under the CDA. Def.’s Mot. to Dismiss at 1.
Thus, defendant argues that
equitable subrogation provides no basis for plaintiff’s claims. Id. at 7. Furthermore, according
to defendant, plaintiff has failed to show an assignment from Chavez to plaintiff that is effective
against the government. Id. at 1. After the parties completed briefing, the court conducted a
hearing on the motion to dismiss. See Tr. at 1.
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II. JURISDICTION AND STANDARD OF REVIEW
A. Jurisdiction and Procedure Under the CDA
It is historically true that the United States cannot be sued in law or equity without its
consent. See United States v. Mitchell, 463 U.S. 206, 212 (1983); Cardiosom, L.L.C. v. United
States, No. 2010-5109, 2011 WL 3835406, at *2 (Fed. Cir. Aug. 31, 2011), available at
http://law.justia.com/cases/federal/appellate-courts/cafc (recognizing sovereign immunity as part
of American common law). Such waivers are strictly construed in favor of the sovereign. Orff v.
United States, 545 U.S. 596, 601–02 (2005). It is for this reason that “[j]urisdiction over any suit
against the [g]overnment requires a clear statement from the United States waiving sovereign
immunity, together with a claim falling within the terms of the waiver.” United States v. White
Mountain Apache Tribe, 537 U.S. 465, 472 (2003) (citations omitted). Pertinent for the purposes
of this court, “[t]he Tucker Act contains such a waiver, giving the Court of Federal Claims
jurisdiction to award damages” for any claim founded upon any express or implied contract with
the United States. Id.; see 28 U.S.C. § 1491(a)(1). Furthermore, the Tucker Act waives
sovereign immunity for assignees of the claim, unless a statute bars such an assignment. Ins. Co.
of the W. v. United States, 243 F.3d 1367, 1375 (Fed. Cir. 2001) (“We conclude that the Tucker
Act must be read to waive sovereign immunity for assignees as well as those holding the original
claim, except as barred by a statutory provision.”).
To be sure, as long recognized by the Federal Circuit, examples of such statutory bars are
the Assignment of Claims Act, 31 U.S.C. § 3727, and the Assignment of Contracts Act,
41 U.S.C. § 15 (collectively the “Anti-Assignment Acts” or the “Acts”). In essence, these Acts
withdraw the Tucker Act’s waiver of sovereign immunity. See Ins. Co. of the W., 243 F.3d at
1375. So, as explained more fully below, the Anti-Assignment Acts render an assignment
ineffective against the United States unless the assignment complies with the requirements
contained in the Acts or the government waives the protection of the Acts. See Delmarva Power
& Light Co. v. United States, 542 F.3d 889, 892–93 (Fed. Cir. 2008) (explaining the AntiAssignment Acts and their requirements). Consequently, when either of the Anti-Assignment
Acts renders an assignment ineffective against the United States, the waiver of sovereign
immunity found in the Tucker Act is withdrawn. See Ins. Co. of the W., 243 F.3d at 1375. And
without that waiver of sovereign immunity, no jurisdiction would exist to adjudicate the claim.
See id.; White Mountain Apache Tribe, 537 U.S. at 472.
Furthermore, to add some complexity to the sovereign immunity waiver analysis, the
Tucker Act confers upon this court “jurisdiction to render judgment upon any claim by or against
. . . a contractor arising under” the CDA. 28 U.S.C. § 1491(a)(2), amended by Pub. L. No.
111-350, § 5(g)(7), 124 Stat. at 3848. Logic dictates that any right to sue in this court based on
the Tucker Act’s CDA jurisdictional waiver is contingent on the terms and conditions contained
in the CDA. See Inter-Coastal Xpress, Inc. v. United States, 296 F.3d 1357, 1365 (Fed. Cir.
2002); 28 U.S.C. § 1491(a). For instance, instead of being able to sue directly in this court for a
claim against the federal government, a contractor must first follow the procedures established
by the CDA. See M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1327–28 (Fed.
Cir. 2010); Pub. L. No. 111-350, § 3, 124 Stat. at 3816–26 (codified at 41 U.S.C. §§ 7101–09).
These procedures, for example, require a contractor to first submit a claim to the contracting
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officer responsible for administering that contract. 41 U.S.C. § 7102(a)(1). The contracting
officer is then required to issue a written decision on the contractor’s claim. 41 U.S.C.
§ 7103(d). And if the contractor is dissatisfied with the contracting officer’s decision, the
contractor, then and only then, may seek review of that decision in the Court of Federal Claims
within twelve months of the date that the contracting officer issues the decision. 2 41 U.S.C.
§ 7104(b).
B. Standard of Review for Motion To Dismiss Pursuant to Rule 12(b)(1)
It is black letter law that the plaintiff, as the party invoking federal jurisdiction, has the
burden of establishing jurisdiction by a preponderance of the evidence if the facts are in dispute.
See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1194–95 (2010); Kokkonen v. Guardian Life Ins. Co.
of Am., 511 U.S. 375, 377 (1994). Consequently, there exist two categories of jurisdictional
challenges. If the defendant seeks dismissal under Rule 12(b)(1) by arguing that plaintiff’s
allegations are insufficient to establish jurisdiction—a so-called “facial” challenge—then these
allegations must be taken as true and construed in the light most favorable to the plaintiff.
Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583 (Fed. Cir. 1993).
In contrast to the “facial” challenge is the “factual” challenge, whereby the defendant
contests “the factual basis for the court’s subject matter jurisdiction.” In such a case, “the
allegations in the complaint are not controlling and only uncontroverted factual allegations are
accepted as true for purposes of the motion.” Id. (citations omitted). Disputed facts in the
motion to dismiss are subject to fact-finding by the court, which “may weigh relevant evidence”
to determine the factual basis for jurisdiction. Ferreiro v. United States, 350 F.3d 1318, 1324
(Fed. Cir. 2003).
III. DISCUSSION
A. Plaintiff’s Jurisdictional Arguments
The dual issue of jurisdiction in this case revolves around the status of plaintiff, that is,
whether the court may entertain this action under the CDA when plaintiff litigates, not as a
contractor, 3 but as an equitable subrogee or assignee of Chavez, the actual contractor. Am.
Compl. at 1. Taking equitable subrogation first, plaintiff posits two bases for jurisdiction. The
first of these arguments (raised only in plaintiff’s briefs) relies on the Tucker Act’s grant of
jurisdiction over “any express . . . contract with the United States.” 28 U.S.C. § 1491(a)(1). To
be sure, the Federal Circuit has established that this Tucker Act jurisdictional grant does indeed
allow a surety, after fulfilling its obligations under the bonds it issued, to become equitably
subrogated to the rights of a defaulting contractor and to assert the contractor’s right to the
2
Instead of filing in the Court of Federal Claims, the contractor may elect to appeal the
contracting officer’s decision to the appropriate agency board of contract appeals within ninety
days of the contracting officer’s decision. 41 U.S.C. § 7104(a).
3
See Tr. at 31:18–19, 52:6–8 (plaintiff’s counsel acknowledging that Chavez, not ICW, is the
contractor).
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contract balance. See, e.g., Ins. Co. of the W. v. United States, 243 F.3d 1367, 1375 (Fed. Cir.
2001) (holding that “a subrogee . . . may rely on the waiver of sovereign immunity in the Tucker
Act and bring suit against the United States”); Balboa Ins. Co. v. United States, 775 F.2d 1158,
1161 (Fed. Cir. 1985).
But this argument dies an unnatural death because it was raised for the very first time in
plaintiff’s briefs. See Pl.’s Opp’n at 8. Plaintiff, in fact, admits that no equitable subrogation
claim based on the Tucker Act can be found in the complaint. Tr. at 40:20–41:1. 4 The import of
this is that the court cannot consider the Tucker Act equitable subrogation claim. See Bissessur
v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir. 2009) (citing Car Carriers, Inc. v. Ford
Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984) (“[I]t is axiomatic that the complaint may not be
amended by the briefs in opposition to a motion to dismiss.”)); Lawmaster v. Ward, 125 F.3d
1341, 1346 n.2 (10th Cir. 1997) (refusing to consider a claim not alleged in the plaintiff’s
complaint); Charles v. Rice, 28 F.3d 1312, 1319 (1st Cir. 1994) (same); McGrath v. United
States, 85 Fed. Cl. 769, 772–73 (2009) (same). For a court to do so would work an injustice.
Indeed, the purpose of notice pleading under the Federal Rules of Civil Procedure, and this
court’s rules (which are based on the federal rules), is to prevent unfairness by avoiding
“litigation by ambush.” Res. Recycling Corp., Inc. v. United States, 56 Fed. Cl. 612, 618 (2003)
(quoting Cubic Def. Sys. v. United States, 45 Fed. Cl. 450, 466–68 (1999)).
This, however, does not end the matter of plaintiff proceeding as an equitable subrogee
because still to be decided is whether an equitable subrogation claim under the CDA is
jurisdictionally viable. See Am. Compl. ¶¶ 9, 20. It is not. Federal Circuit precedent, binding
on this court, see, e.g., Principal Mut. Life Ins. Co. v. United States, 50 F.3d 1021, 1025 (Fed.
Cir. 1995) (citing W. Seattle Gen. Hosp., Inc., v. United States, 1 Cl. Ct. 745, 746 (1983)), does
not recognize an equitable subrogee as being a “contractor” for purposes of the CDA. See
Fireman’s Fund v. England, 313 F.3d 1344, 1351 (Fed. Cir. 2002) (“Even if Fireman’s Fund
were equitably subrogated to any claim that [the contractor] may have had against the
government, that did not make Fireman’s Fund a party to the contract between [the contractor]
and the United States for purposes of the [Contract] Disputes Act.”); accord Winter v. FloorPro,
Inc., 570 F.3d 1367, 1371 (Fed. Cir. 2009); United Pac. Ins. Co. v. United States, 464 F.3d 1325,
4
THE COURT: Okay. So show me in the complaint where [the Tucker Act
allegations are]. I’m having trouble figuring [it] out. It sure looks to me like it’s
an appeal under the [CDA] and that’s what you’re alleging here.
[PLAINTIFF’S COUNSEL]: It is, Your Honor. That’s exactly what it is.
Maybe inartfully pled, but in the alternative, there is a Tucker Act cause of action
that ICW can pursue. It was briefed in my—
THE COURT: No, no, no, no, no. I just want to know where in the
amended complaint there [are] Tucker Act allegations.
***
THE COURT: [I]t sure looks like solely a [CDA] case.
[PLAINTIFF’S COUNSEL]: I would agree, Your Honor. I would agree.
I mean, perhaps like I said inartfully pled, but for the purposes of today [the
hearing on the motion to dismiss] I would agree it’s a CDA Claim . . . .
Tr. at 39:7-40:25.
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1327 (Fed. Cir. 2006); United Pac. Ins. Co. v. Roche, 380 F.3d 1352, 1355 (Fed. Cir. 2004);
Admiralty Constr. Inc. v. Dalton, 156 F.3d 1217, 1221 (Fed. Cir. 1998).
The holdings of these cases all rest on the plain meaning of “contractor” contained in the
CDA. See 41 U.S.C. § 7101(7). When interpreting a statute, a court must first divine the plain
meaning of the applicable text. See, e.g., McNeill v. United States, 131 S. Ct. 2218, 2221–22
(2011) (“As in all statutory construction cases, we begin with the language itself [and] the
specific context in which that language is used.” (alteration in original) (internal quotation
marks omitted)). Here, it is a simple matter because the CDA itself provides the definition of a
contractor as “a party to a Federal Government contract other than the Federal Government.”
41 U.S.C. § 7101(7). As the plain meaning of the statute makes clear, because an equitable
subrogee is not a party to a government contract, equitable subrogation does not allow a surety to
bring claims pursuant to the CDA. See Fireman’s Fund, 313 F.3d at 1351. Indeed, faced with
the burden of having to breach this stone fortress, plaintiff’s counsel at oral argument—
understandably and to his credit—dropped the jurisdictional contention that plaintiff may
proceed in this case as an equitable subrogee under the CDA. Tr. at 29:16–30:1. 5
This leaves as the sole remaining issue the question of whether plaintiff may proceed
under the CDA as the assignee of Chavez. Defendant makes several arguments in support of its
motion to dismiss. In denying that plaintiff’s status as an assignee provides jurisdiction, and
echoing the Federal Circuit’s definitional argument in Fireman’s Fund, defendant argues that an
assignee may never bring an action under the CDA because an assignee, like an equitable
subrogee, is not a contractor as defined by the CDA. See Def.’s Reply at 2–3 (citing Fireman’s
Fund, 313 F.3d at 1351); Tr. at 4:13–16. Defendant also contends that there was never a valid
assignment from Chavez to plaintiff and there can be no waiver of the Anti-Assignment Acts for
something that never existed in the first place. See Def.’s Reply at 11.
But resolution of the pending motion does not require radical measures. See Morse v.
Frederick, 551 U.S. 393, 431 (2007) (Breyer, J., concurring in the judgment in part and
dissenting in part) (“[T]he ‘cardinal principle of judicial restraint’ is that ‘if it is not necessary to
decide more, it is necessary not to decide more.’” (quoting PDK Labs., Inc. v. Drug Enforcement
Admin., 362 F.3d 786, 799 (D.C. Cir. 2004) (Roberts, J., concurring in part and concurring in the
judgment))); cf. Ashwander v. TVA, 297 U.S. 288, 346–48 (1936) (Brandeis, J., concurring)
(stating that the Court should refrain from deciding a constitutional issue when other grounds for
deciding the case exist). Because there has been no conduct that can be construed as a waiver of
the Anti-Assignment Acts, whether a valid assignment existed or not, the court lacks jurisdiction
5
THE COURT: Let’s turn to the Firem[a]n’s Fund case for the statutory
analysis, which seems to prohibit equitable subrogation cases under the CDA and
may or may not allow it where there’s a valid assignment because the [c]ourt
didn’t really get to that issue.
[PLAINTIFF’S COUNSEL]: Right.
THE COURT: Okay. Are you dropping the equitable subrogation claim
under the CDA in light of that case?
[PLAINTIFF’S COUNSEL]: In light of that case, yes, Your Honor.
Tr. at 29:16–30:1.
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to hear these claims. See Ins. Co. of the W., 243 F.3d at 1375 (holding that the Anti-Assignment
Acts withdraw the Tucker Act’s waiver of sovereign immunity for assignees).
Therefore, the court need not address the broader issue of whether the Court of Federal
Claims can ever have jurisdiction over a case in which an assignee seeks to bring suit under the
CDA. Instead, the court needs to address only the issue of whether the protections of the AntiAssignment Acts here have been waived by defendant. This requires some explanation.
B. The Anti-Assignment Acts
In general, the Anti-Assignment Acts together bar the assignment of: (1) a claim against
the government, (2) a government contract, or (3) some lesser or future interest in a government
contract. 6 See Fireman’s Fund, 313 F.3d at 1349 (“These two provisions [the Anti-Assignment
Acts] together broadly prohibit . . . transfers of contracts involving the United States or interest
therein, and assignment of claims against the United States.”); 31 U.S.C. § 3727 (pertaining to
claims); 41 U.S.C. § 15 (pertaining to contracts). As the bifurcated nature of the AntiAssignment Acts makes apparent, there are different types of assignment and which Act applies
depends on what the assignee seeks to assert. See Tuftco Corp. v. United States, 614 F.2d 740,
744 n.4 (Ct. Cl. 1980). The Assignment of Claims Act “pertains to claims for work already
done.” Id. If not for the Assignment of Claims Act, an assignment of the right to assert claims
would allow the assignee to bring any claim that the assignor might have against the government.
See Delmarva Power & Light Co. v. United States, 542 F.3d 889, 893–94 (Fed. Cir. 2008)
(recognizing that an assignment of claims, when not barred by the Assignment of Claims Act,
validly assigns the assignor’s claims to the assignee). In contrast to the Assignment of Claims
Act’s focus on completed work, the Assignment of Contracts Act “involv[es] executory
contracts” and “is more concerned with continuing obligations.” Tuftco, 614 F.2d at 744 n.4.
An assignment of contracts could involve an assignment of contract performance, see Tuftco,
614 F.2d at 741–42, or of a lesser interest in a contract such as the right to receive payments
from a contract, see D & H Distrib. Co. v. United States, 102 F.3d 542, 547–48 (Fed. Cir. 1996).
As the Anti-Assignment Acts make apparent, an assignment of the right to receive
payments is different from an assignment of the right to assert claims. See Fireman’s Fund, 313
F.3d at 1349 (noting the differences between the two provisions of the Anti-Assignment Acts).
In addition, different rights need not be assigned together. See Delmarva, 542 F.3d at 892-93
(recognizing that the case before it concerned only an assignment of claims, not an assignment of
contracts or an interest in a contract). Accordingly, an assignment of only the right to receive
payments from a claim does not carry with it the right to assert the assignor’s claims under the
CDA. Thomas Funding Corp. v. United States, 15 Cl. Ct. 495, 501 (1988); see also Produce
Factors Corp. v. United States, 467 F.2d 1343, 1347 (Ct. Cl. 1972) (not allowing the plaintiff to
bring a breach of contract action because it was only assigned payments).
6
Although the Anti-Assignment Acts bar the types of assignments referred to above, they do
contain an exception not relevant here for assignments to “financing institutions,” a classification
that does not include plaintiff. See Fireman’s Fund, 313 F.3d at 1350 (citing Royal Indemnity
Co. v. United States, 117 Ct. Cl. 736, 746 (1950)) (noting that a surety is not a “bank, trust
company, or other financing institution”).
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It is important to note that prohibiting an assignee of payments from asserting claims also
furthers a purpose behind the Anti-Assignment Acts. The Anti-Assignment Acts were designed
“to prevent possible multiple payment of claims, to make unnecessary the investigation of
alleged assignments, and to enable the [g]overnment to deal only with the original claimant.”
United States v. Shannon, 342 U.S. 288, 291 (1952) (quoting United States v. Aetna Sur. Co.,
338 U.S. 366, 373 (1949)); see also Dominion Resources, Inc. v. United States, 641 F.3d 1359,
1367 (Fed. Cir. 2011) (Gajarasa, J., concurring-in-part and dissenting-in-part) (quoting Shannon,
342 U.S. at 291–92). 7
Indeed, the prevention of the burden of facing multiple claims is a significant purpose
behind the CDA as well. CDA was also intended to prevent the government from having to deal
with multiple and duplicative claims by making the contractor the government’s “single point of
contact.” Admiralty Const., Inc. v. Dalton, 156 F.3d 1217, 1220 (Fed. Cir. 1998). If assignees of
payments were able to proceed under the CDA, the government would be at risk of having to
litigate the same case multiple times—once with the contractor and again with any assignees of
payments, an untenable situation in light of what Congress intended. See Thomas Funding, 15
Cl. Ct. at 501.
To be sure, in the context of this case, it would be strange for the court not to give some
effect to the dual statutory purpose—that of proscribing multiple lawsuits—found in both sets of
acts. And it would equally be remiss for the court not to require a clear showing of any
governmental relinquishment of that enhanced dual protection, given the importance of those
two statutes to this case. In fact, that is current law. Precedent binding on this court recognizes
the prerogative of the government to waive its protection, to lift its immunity to suit. See
Delmarva, 542 F.3d at 893; D & H Distrib., 102 F.3d at 546. However, the law also requires
that such a waiver be clearly made, for it is the sovereign that is being sued. See Ins. Co. of the
W., 243 F.3d at 1375; D & H Distrib., 102 F.3d at 546.
Regardless of whether the Assignment of Claims Act or the Assignment of Contracts Act
is implicated, the legal analysis for waiver is the same. See Delmarva, 542 F.3d at 893–94
(noting that “‘the concerns of the two [Anti-Assignment Acts] and the legal concepts involved in
their applicability are the same.’” (quoting Tuftco, 614 F.2d at 744 n.4)). The government can
expressly waive the protections of either of the Anti-Assignment Acts by clearly stating its
intention to do so. See, e.g., Delmarva, 542 F.3d at 891 (accepting a waiver as valid based on the
government counsel’s express statement that the government was waiving the Anti-Assignment
Acts). However, even if the government does not expressly waive the Anti-Assignment Acts,
implied waiver can still be found based on the government’s conduct. See Tuftco, 614 F.2d at
745 (finding that the government can, through its conduct, waive the Anti-Assignment Acts).
7
The Supreme Court has recognized other purposes for the Anti-Assignment Acts. One is to
prevent “persons of influence from buying up claims against the United States” and using their
influence to exert political or other improper pressure in prosecuting those claims. United States
v. Shannon, 342 U.S. 288, 291 (1952) (quoting United States v. Aetna Sur. Co., 338 U.S. 366,
373 (1949)); see also Patterson v. United States, 354 F.2d 327, 329 (Ct. Cl. 1965).
-9-
To determine whether the government has implicitly waived the Anti-Assignment Acts,
courts look at all conduct that can be construed as amounting to a waiver. The Supreme Court’s
opinion in Johnson v. Zerbst, 304 U.S. 458 (1938), has most often been cited as authority for this
aptly named “totality of the circumstances” test. But because the equitable in nature totality of
the circumstances test requires looking at any and all actions, the dangers of vagueness and
contradiction often rear their ugly hydra-like heads in this approach. Thus, some defining
parameters need to be drawn to supply context. Zerbst does this by requiring that conduct must
demonstrate “an intentional relinquishment or abandonment of a known right or privilege”
before waiver can be found. Id. at 464. 8 Indeed, common sense dictates that certain uniform
characteristics be present before waiver can be found. These sine qua non “core components”
must include some sort of relinquishment or renunciation, freely made, of something of value for
a waiver to be found to exist.
To be sure, Tuftco Corp. v. United States, binding authority for this court, uses slightly
different, but materially the same, core component language as Zerbst to find waiver. Tuftco,
614 F.2d at 746. It is doubly important to the case at bar because it too involves the issue of a
waiver of the Anti-Assignment Acts. In Tuftco, the Department of Housing and Urban
Development (“HUD”) entered into a contract for the purchase of mobile homes. Id. at 741.
The contractor then assigned performance under this contract to Tuftco. Id. Although Tuftco
performed the contract and received some payments from HUD, other payments due under the
contract were sent to the original contractor. Id. at 745–46. Tuftco then filed suit in the Court of
Claims arguing that, as an assignee, it was entitled to the payments sent to the original
contractor. Id. at 743. HUD argued that the contracting officer lacked the authority to assent to
the assignments because the Assignment of Contracts Act, 41 U.S.C. § 15, prohibited this
assignment of contract performance or payments. Tuftco, 614 F.2d at 743.
In holding that the assignment of the payments was valid (ergo, payments should have
been made to the assignee Tuftco and not to the original contracting party), the court observed
that the government may waive its rights under the Assignment of Contracts Act through conduct
that shows ratification—or as the court termed it, “recognition”—of the assignment. See id. at
745 (citing Maffia v. United States, 163 F. Supp. 859, 862 (Ct. Cl. 1958); G.L. Christian &
Assocs. v. United States, 312 F.2d 418, 423 (Ct. Cl. 1963), cert. denied, 375 U.S. 954 (1963)).
Thus, to the court “ratification” demonstrated waiver. See id. The court concluded that the
8
The definition of waiver as an intentional relinquishment or abandonment of a known right or
privilege predates Zerbst, which is a Sixth Amendment right to counsel case. See, e.g., Hoxie v.
Home Ins. Co., 32 Conn. 21, 40 (1864) (defining waiver as “the intentional relinquishment of a
known right”). Following Zerbst, this test has become the standard employed in a variety of
situations. See, e.g., Standard Indus., Inc. v. Tigrett Indus., Inc., 397 U.S. 586, 587 (1970)
(quoting Zerbst in the context of a waiver of a patent invalidity claim); Massie v. United States,
166 F.3d 1184, 1190 (Fed. Cir. 1999) (quoting Zerbst in the context of a waiver of a breach of
contract claim involving undelivered annuity payments); Emps. of Dep’t of Pub. Health &
Welfare, Mo. v. Dep’t of Pub. Health & Welfare, Mo. 452 F.2d 820, 825 (8th Cir. 1971) (quoting
Zerbst in the context of a waiver of state sovereign immunity); Hermes Consol., Inc. v. United
States, 58 Fed. Cl. 409, 415–16 (2003) (quoting Zerbst in the context of a waiver of a breach of a
jet fuel contract claim).
- 10 -
contracting officer in the case was “fully aware” of the assignments, ratified them, and
communicated his ratification and assent to plaintiff. Id. at 743.
The court in Tuftco noted that the soundest method for the government to manifest assent
to an assignment would have been to enter into a novation agreement. 9 Id. at 745. Because there
was no novation agreement in the case, the court looked at “the totality of the circumstances”
surrounding the government’s conduct—such as the receipt of a written notice of assignment,
letters that detailed the assignment, and other actions—to reach the conclusion that the
assignment was valid and waiver clearly occurred. Id. at 745–46. The court used somewhat
different terminology than the Supreme Court did in Zerbst. The Tuftco court used the phrase
“knowledge, assent, and action,” 10 the fulfillment of which in an assignment setting would
establish a ratification amounting to a waiver. Id. at 746. On the other hand, the Supreme Court
in Zerbst used the phrase “intentional relinquishment or abandonment of a known right or
privilege” to determine the existence of waiver. Zerbst, 304 U.S. at 458. But what is significant
is that regardless of which set of words are used, i.e., which terminology of “core components” is
applied, in practice the results as to finding waiver would almost certainly be the same.
Nevertheless, the above summary comparison reveals a tension in the law. On the one
hand, a reasonable inference in Tuftco was sufficient to satisfy a totality of the circumstances
test. See Tuftco, 614 F.2d at 746; see also United States v. Kelley, 482 F.3d 1047, 1050 (9th Cir.
2007) (stating that a determination based on the “totality of the circumstances” includes
“reasonable inferences”); Blanchard v. Peerless Ins. Co., 958 F.2d 483, 488 (1st Cir. 1992)
(holding that summary judgment was precluded unless no reasonable trier of fact could draw
“any other inference from the totality of the circumstances”); Eltech Sys. Corp. v. PPG Indus.,
Inc., 903 F.2d 805, 810 (Fed. Cir. 1990) (allowing the use of inference when considering all the
circumstances).
On the other hand, the general rule in law is that when something must be clearly shown
then mere inference will not suffice. See, e.g., White Mountain Apache Tribe, 537 U.S. at 472
(holding that jurisdiction over any suit against the government requires a clear and unambiguous
statement from the United States waiving sovereign immunity) (citations omitted); Helvering v.
Fitch, 309 U.S. 149, 156 (1940) (stating that the grounds for relief “must be bottomed on clear
and convincing proof, and not on mere inferences and vague conjectures”); Aspex Eyewear, Inc.
v. Clariti Eyewear, Inc., 605 F.3d 1305, 1316 (Fed. Cir. 2010) (stating that “[i]ntent to deceive
9
A novation agreement substitutes an original party to a contract with a new party. See
Ginsberg v. Austin, 968 F.2d 1198, 1200 (Fed. Cir. 1992); Hicks v. United States, 89 Fed. Cl.
243, 257 (2009) (quoting Restatement (Second) of Contracts § 280 (1981) (defining novation as
“a substituted contract that includes as a party one who was neither the obligor nor the obligee of
the original duty”)); see generally Black’s Law Dictionary 1168 (9th ed. 2009) (defining
novation).
10
The full quote of the language used by the Tuftco court is as follows: “It is enough to say that
the totality of the circumstances presented to the court establishes the [g]overnment’s recognition
of the assignments by its knowledge, assent, and action consistent with the terms of the
assignment.” Tuftco, 614 F.2d at 746.
- 11 -
cannot be inferred . . . but must be separately proved by clear and convincing evidence”);
Waskow v. Associated Press, 462 F.2d 1173, 1176 (D.C. Cir. 1972) (doubting that piling “an
inference upon an inference” could ever provide “convincing clarity”). Thus, tension exists
between the requirement that the Anti-Assignment Acts be clearly waived, see D & H Distrib.,
102 F.3d at 546, and the use of a totality of the circumstances test relying on inference to show
that waiver, see Zerbst, 304 U.S. at 464; Tuftco, 614 F.2d at 746. That being said the relevant
precedent is not irreconcilable. Although such an occurrence is likely to be rare, it is possible that
in some cases the totality of the circumstances may be enough to clearly demonstrate waiver, as
the Court of Claims, the predecessor to the Federal Circuit, held in Tuftco. See 614 F.2d at 746.
Finally, in addition to the “core components” of Zerbst and Tuftco, which give form to
the gelatinous “all the circumstances” waiver test, other formulations have been derived to
ascertain when waiver occurs in the context of the Anti-Assignment Acts. While not as
fundamental as core components, the fulfillment of which is conceptually mandatory for any
waiver, certain “guideposts” have been established that are helpful in ascertaining waiver. These
guideposts establish factors that may help define assignments and waivers of the AntiAssignment Acts in a government contract setting.
For instance, in Riviera Finance, this court developed four guideposts to aid its analysis:
(1) Did “the assignor and/or the assignee sen[d] notice of the assignment”; (2) Did the
contracting officer “sign[] the notice of assignment”; (3) Did the contracting officer “modif[y]
the contract according to the assignment”; and (4) Did the contracting officer “sen[d] payments
to the assignee.” Riviera Fin. of Tex., Inc. v. United States, 58 Fed. Cl. 528, 530 (2003).
Guideposts such as these can serve as a starting point for analysis. See Van Orden v. Perry, 545
U.S. 677, 700 (2005) (Breyer, J., concurring) (noting that while “prior tests provide useful
guideposts . . . no exact formula can dictate a resolution to such fact-intensive cases”); Smith v.
Doe, 538 U.S. 84, 97 (2003) (noting that the relevant factors “are neither exhaustive nor
dispositive, but are useful guideposts” (citations and internal quotations marks omitted)).
Nevertheless, these guideposts are not talismanic tests that substitute for the process of
applying the law. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 465 (1996) (Scalia,
J., dissenting) (quoting Hanna v. Plumer, 380 U.S. 460, 466–67 (1965)) (noting that the relevant
test “‘was never intended to serve as a talisman’”); NLRB v. Int’l Longshoremen’s Ass’n, 473
U.S. 61, 81 (1985) (stating that the “various linguistic formulae and evidentiary mechanisms”
employed by the Court “are not talismanic nor can they substitute for analysis.”); see also
Riviera, 58 Fed. Cl. at 530 (noting that the four factors it mentions are not exhaustive). With this
warning in mind, the court turns toward the primary conflict in this case, the application of the
Anti-Assignment Acts.
C. Application of Anti-Assignment Acts to This Case
It is initially helpful to explain exactly what plaintiff believes the source of the relevant
assignment is and what law applies to both the assignment and the waiver of that assignment.
Plaintiff relies on the so-called “assignment” mentioned in the General Indemnity Agreement
- 12 -
(“GIA”) to support its assignment claim. 11 Pl.’s Sur-Reply at 5. Specifically, plaintiff relies on
Chavez’s purported assignment to plaintiff of “all monies due or to become due to [Chavez] as a
result of the contract covered by [the] Bonds . . . and proceeds of any delay or other damage
claims.” Id. (quoting GIA ¶ 5).
But, it is uncertain exactly which Anti-Assignment Act statute plaintiff contends was
waived. In its opposition to defendant’s motion to dismiss, plaintiff refers to “the Assignment of
Claims Act” but then cites both 31 U.S.C. § 3727 (the Assignment of Claims Act) and 41 U.S.C.
§ 15 (the Assignment of Contracts Act). See Pl.’s Opp’n at 5. And Chavez, in its claim, stated
that it “assigned to ICW all rights to any claims.” Def.’s Reply App. at 5. But at the hearing,
plaintiff’s counsel stated that “what’s being asserted here is that it was a waiver of the AntiAssignment Act as to contract rights.” Tr. at 38:5–7. That being said, it is clear that the
Assignment of Claims Act is the relevant act in this case because plaintiff seeks to assert claims
for work that it alleges to have already been performed. See Tuftco, 614 F.2d at 744 n.4.
It is also clear that plaintiff’s argument that the Navy waived the Assignment of Claims
Act’s protection against lawsuit, see Pl.’s Sur-Reply at 5, is based on a proffered set of facts that,
when taken together, allegedly demonstrate waiver, see Pl.’s Opp’n at 6. Therefore, according to
plaintiff, the “totality of the circumstances” test has been met. Id. (quoting Tuftco, 914 F.2d at
746). Yet, as we shall see, plaintiff does not adequately explain precisely how its alleged facts
bundled together show waiver. While facts to John Adams may indeed be “stubborn things,” 12 a
mere proffering of disparate facts, as plaintiff has done, is a weak reed indeed.
To be sure, plaintiff does concede that the Riviera Finance guideposts are inapplicable
here. According to plaintiff this is so because, applying the guideposts, it did not send written
notice of the assignment to the Navy, the Navy’s CO neither signed any notice of assignment nor
modified the contract to reflect an assignment, and the Navy never paid plaintiff pursuant to any
assignment. See Tr. at 36:2–19 (plaintiff’s counsel stating that the “four factors [from Riviera
Finance] are not applicable to this case today”); Riviera, 58 Fed. Cl. at 530 (listing four factors
the court considered relevant to determine waiver of the Anti-Assignment Acts). On the other
hand, plaintiff contends that the following alleged facts, taken together, demonstrate a waiver of
the Assignment of Claims Act by the Navy. See Am. Compl. ¶ 6; Pl.’s Opp’n at 5–6; Pl.’s SurReply at 6–7. These are reduced to bullet points by the court for clarity. The court notes that
plaintiff does not in any pleading discuss the relevance of its proffered alleged facts to the waiver
issue, except for the last bullet point:
11
Originally, plaintiff argued that the Settlement Agreements signed by Chavez’s principals
contained the relevant assignment. Pl.’s Opp’n at 5. However, plaintiff now relies solely on the
GIA. Tr. at 54:7–12 (plaintiff’s counsel stating that “the only effective assignment as to
[Chavez] was through the indemnity agreement” and therefore the indemnity agreement is “what
we need to focus on”).
12
John Adams, Argument in Defense of the Soldiers in the Boston Massacre Trials (December
1770), quoted in John Bartlett, Bartlett’s Familiar Quotations 351 (Justin Kaplan ed., 17th ed.
2002).
- 13 -
•
According to plaintiff, after Chavez defaulted on its obligations to plaintiff, both
Chavez and plaintiff in August 2002 notified the Navy of the default and
requested that the Navy make any future payments to plaintiff, rather than to
Chavez. Am. Compl. ¶ 6; Pl.’s Opp’n at 6; Pl.’s Sur-Reply at 7;
•
The Navy was aware that plaintiff provided assistance to Chavez, including the
hiring of Roel to assist and consult with Chavez on the project. Pl.’s Opp’n at 6;
Pl.’s Sur-Reply at 6;
•
The Navy included plaintiff and Roel in settlement discussions regarding
Chavez’s claims, with the Navy instructing plaintiff and Roel to submit a request
for equitable adjustment for Chavez’s claims. Pl.’s Sur-Reply at 6;
•
To show the Navy’s notice and recognition of an assignment, plaintiff relies upon
language in a March 8, 2007, claim that Chavez submitted to the Navy that
allegedly stated that the claim was made “on behalf of ICW.” See Pl.’s Opp’n at
6; Am. Compl. ¶ 17. In its only explanation made to justify its facts, plaintiff
contends that the Navy’s failure to object to this language in the claim
demonstrates waiver by the government because the government “did not reserve
its right to claim the protections” of the Anti-Assignment Acts. Pl.’s Opp’n at 6.
Taken together these alleged facts could conceivably raise an inference that the Navy
may have known of an assignment of claims and assented to it. After all, the Navy was aware
that Chavez was receiving assistance from plaintiff and had agreed to have any future payments
on the project sent to plaintiff. See Pl.’s Opp’n at 6. Employees from the Navy also held
discussions with plaintiff about the settlement of Chavez’s claims and told plaintiff to submit a
request for equitable adjustment to pursue Chavez’s claims. See Pl.’s Sur-Reply at 6. And when
Chavez ultimately did assert its claims, it specifically declared that it had assigned all the rights
to those claims to plaintiff. See Pl.’s Opp’n at 6. Thus, taking all these circumstances into
account, it was not wholly unreasonable for plaintiff to believe that the Navy considered plaintiff
to be entitled to Chavez’s claims. This belief could have been reinforced by the Navy’s silence.
Ultimately, however, the inference is judged not by plaintiff’s subjective view, but rather
by an objective look at the totality of the circumstances. See Zerbst, 304 U.S. at 464; Tuftco, 614
F.2d at 746. Here, this inference is not strong enough to show the requisite clear assent to the
assignment. See D & H Distrib., 102 F.3d at 546. This is because, rather than being a model of
clarity, the circumstances here are fraught with ambiguity. This ambiguity is poison to the sort
of clarity required for a waiver of the Anti-Assignment Acts and the withdrawal of the
sovereign’s consent to suit. See, e.g., Orff, 545 U.S. at 601–02 (waivers of sovereign immunity
must be strictly construed); Ins. Co. of the W., 243 F.3d at 1375.
Take plaintiff’s first bullet point allegation—that waiver of the statutory prohibition
against assignment was shown by the August 2002 notice to the Navy both of Chavez’s default
on plaintiff’s bonds and the request to the Navy to forward all future payments to plaintiff. It is
ambiguous because there is a reasonable explanation other than the one plaintiff proffers. For
instance, the notice requested payments from the Navy, but did not make mention of any
- 14 -
assignment. The import of this is that the August 2002 notice at most informed the Navy that
plaintiff had been assigned the right to any payments by Chavez. It says nothing about plaintiff’s
vicarious right to assert claims that Chavez might have against the Navy. See id. Furthermore,
an assignment of payments does not by itself allow the assignee to bring claims under the CDA.
See Thomas Funding, 15 Cl. Ct. at 501. And critically here, the complaint avers only CDA
claims, not a claim for payments that might be owed to Chavez. See supra note 4 (plaintiff’s
counsel acknowledging that the complaint asserts only CDA claims); Am. Compl. ¶¶ 10–17. In
short, the default notification did not provide the Navy with the clear, unambiguous knowledge
required for a waiver that would allow plaintiff to assert the type of claims it asserts in its
complaint.
The facts alleged in the second bullet point suffer from the same malady. The Navy’s
knowledge that plaintiff and Roel were assisting Chavez to complete the project does not by
itself equate to knowledge or recognition of an assignment. Clearly put, it was in plaintiff’s
interest to assist Chavez even without any assignment because plaintiff, as the performance bond
surety, would ultimately be responsible for performing any work left uncompleted by Chavez.
See United Pacific Ins. Co., 464 F.3d at 1326 n.2 (explaining that a performance bond surety
guarantees project completion if the contractor defaults). Thus, plaintiff’s behavior could
rationally reflect the actions of a prudent surety. See Ins. Co. of the W., 243 F.3d at 1370–71
(noting that a surety must fulfill its obligations under the bonds it issued to be equitably
subrogated to the contractor’s rights). Here again, the ambiguity of the meaning of the assistance
undermines plaintiff.
The third bullet point suffers from a failure of proof. Here, plaintiff argues that the Navy
recognized its right to assert Chavez’s claims when, following Chavez’s default, plaintiff and
Roel participated in settlement discussions with the Navy during which time they were told to
submit a formal request for equitable adjustment to pursue Chavez’s claims. Significantly,
plaintiff does not indicate who specifically from the Navy relayed this offer or whether the
alleged person had authority to act for the government. See id. It is well-established that only
certain government employees can bind the government. See, e.g., Flexfab, L.L.C. v. United
States, 424 F.3d 1254, 1260 (Fed. Cir. 2005) (quoting City of El Centro v. United States, 922
F.2d 816, 820 (Fed. Cir. 1990) (noting that in the context of government contracts “the
[g]overnment representative whose conduct is relied upon must have actual authority to bind the
government.”)). Indeed, it is an authorized official, such as the contracting officer, who must
have knowledge of the assignment and assent to it, rather than some unknown employee. United
Cal. Disc. Corp. v. United States, 19 Cl. Ct. 504, 510 (1990); see D & H Distrib., 102 F.3d at
546 (finding waiver where the contracting officer’s conduct showed assent to the assignment);
Tuftco, 614 F.2d at 747 (same). It is the plaintiff who bears the burden of establishing the
official’s “actual” authority; not even apparent authority will suffice. See Winter v. Cath-dr/Balti
Joint Venture, 497 F.3d 1339, 1344 (Fed. Cir. 2007) (requiring the plaintiff to show that the
“contract was modified by someone with actual authority”); Federal Crop Ins. Corp. v. Merrill,
332 U.S. 380, 384 (1947) (“anyone entering into an arrangement with the [g]overnment takes the
risk of having accurately ascertained that he who purports to act for the [g]overnment stays
within the bounds of his authority”).
- 15 -
Regardless of the authority issue, plaintiff’s reliance on one unattributed statement
instructing it to submit Chavez’s equitable adjustment claim ignores the surrounding
circumstances that demonstrate patent ambiguity. It certainly raises questions. Why were both
plaintiff and Roel told by this unnamed official to bring the alleged equitable adjustment claim if
what plaintiff seeks to prove is that it was the sole assignee of Chavez’s claim? See Ulibarri
Decl. ¶ 8. In any event, a vague statement made under ambiguous circumstances by some
unnamed, unidentified government official is not sufficient to show the intentional
relinquishment and clear assent or recognition required for waiver of the Assignment of Claims
Act. See Zerbst, 304 U.S. at 464; Tuftco, 614 F.2d at 746; D & H Distrib., 102 F.3d at 546.
Plaintiff’s final waiver argument, found in the fourth bullet point, is based on the claim
Chavez filed with the Navy that purportedly notified the Navy that plaintiff had been assigned
Chavez’s rights. See Pl.’s Opp’n at 3. On March 8, 2007, Chavez filed a claim with the Navy
seeking additional compensation for project delays and additional work. See id. In the claim
language was included that declared that Chavez “assigned to ICW all rights to any claims
against the [g]overnment.” 13 Def.’s Reply App. at 5. Plaintiff relies on this language to argue
that since the Navy was “notified” of the assignment, the Navy’s failure to object was somehow
tantamount to recognition of the assignment. See Pl.’s Opp’n at 3, 6.
It is dubious whether the language in the claim by itself is enough to clearly show that the
Navy recognized the ostensible assignment—especially since it was Chavez, and not plaintiff,
who brought the claim. Simply put, this (and other factors surrounding the purported
assignment) indicates that it is highly unlikely that the Navy gave its clear assent to the
assignment. See D & H Distrib., 102 F.3d at 546.
Plaintiff’s argument that silence is golden, see Pl.’s Opp’n at 6, is based on a doctrine at
least as old as Roman law: qui tacet consentire videtur (one who is silent may be seen to have
given consent). 14 What will determine the legitimacy of tacit consent are the circumstances
surrounding the silence, particularly if rights and privileges are implicated. It is presumed that
the innocent party will speak out or otherwise respond to a possible infringement of a right or
privilege. See Georgia v. South Carolina, 497 U.S. 376, 389 (1990) (holding that in a
jurisdictional dispute over the Barnwell Islands, South Carolina established sovereignty over the
islands by prescription and acquiescence due to inaction of Georgia in objecting to South
Carolina’s exercise of taxation and other incidents of sovereignty); United States v. Midwest Oil
Co., 236 U.S. 459, 472–73 (1915) (noting that “[g]overnment is a practical affair intended for
practical men,” and the rule, that long acquiescence in a governmental practice raises a
presumption of authority, applies to the practice of withdrawals by the executive of lands opened
by Congress for occupation); see also Harbert/Lummus Agrifuels Projects v. United States, 142
13
Plaintiff asserts that Chavez filed this claim “on behalf of ICW.” Am. Compl. ¶ 17. However,
the words “on behalf of ICW” do not appear in the claim. See Def.’s Reply App. at 1–11.
14
See United States v. Irvine, 511 U.S. 224, 242 (1994) (Scalia, J., concurring) (applying the
principle of qui tacet consentire videtur to the disclaimer of a bequest); Thompson v. United
States, 227 F.2d 671, 674 (5th Cir. 1955) (citing the principle of qui tacet consentire videtur in
the context of a criminal case); see generally Black’s Law Dictionary 1866 (9th ed. 2009)
(defining qui tacet consentire videtur as “A party who is silent appears to consent”).
- 16 -
F.3d 1429, 1433–34 (Fed. Cir. 1998) (holding that the surrounding facts did not indicate that the
contracting officer’s silence amounted to assent).
Accordingly, the resolution of plaintiff’s tacit consent argument requires the court to
apply the ancient “all the circumstances” standard by reviewing the circumstances surrounding a
possible waiver of the statutory right or privilege created by Congress in the Assignment of
Claims Act. See Zerbst, 304 U.S. at 464 (waiver is shown by looking at the totality of the
circumstances); Delmarva, 542 F.3d at 891 (waiver of prohibition against assignment of claims);
Tuftco, 614 F.2d at 746 (waiver of prohibition of assignment of contract payments). This
standard is nothing more than the long-held legal rule that when interpreting words and phrases
courts must look to context as the key to understanding. See Jones v. United States, 527 U.S.
373, 389 (1999) (stating that “[s]tatutory language must be read in context and a phrase ‘gathers
meaning from the words around it’” (quoting Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307
(1961))); Allied Tech. Grp., Inc. v. United States, No. 2010-5131, 2011 WL 2275775, *7 (Fed.
Cir. June 9, 2011) (stating that a “contract must be interpreted as a whole in a manner that gives
reasonable meaning to all its part and avoids conflicts in, or surplusage of, its provisions”
(quoting Burnside-Ott Aviation Training Ctr. v. Dalton, 107 F.3d 854, 860 (Fed. Cir. 1997))).
In support of its argument, plaintiff contends that the failure of the Navy to object to the
assignment provision meant that it “did not reserve its right to claim the protections afforded
under the Assignment of Claims Act.” Pl.’s Opp’n at 6. As plaintiff tells it, this means that “[a]s
with Tuftco, the [g]overnment’s silence is an implicit recognition of Chavez’s assignment of its
rights under the contract to ICW.” Id. Essentially, this is the extent of plaintiff’s argument.
To be sure, plaintiff misunderstands the nature of both Anti-Assignment Acts and
misconstrues Tuftco. It is not incumbent upon the government to reserve the protections of the
Anti-Assignment Acts. Rather, the Anti-Assignment Acts protect the government unless they
are clearly waived, see Delmarva, 542 F.3d at 893; D & H Distrib., 102 F.3d at 546, and silence
can amount to waiver only when an “all the circumstances” review indicates such a waiver. See,
e.g., Georgia, 497 U.S. at 389.
Furthermore, plaintiff misconstrues Tuftco because the waiver in Tuftco did not stem
from the government’s silence, as plaintiff asserts, but in reality from the words and conduct of
the government’s CO. See Tuftco, 614 F.2d at 745. In Tuftco, the assignee and assignor
contacted the CO prior to making the assignments and were assured by the CO that the
assignments would be proper and that the government would assent to them. Id. Following
finalizing the terms of the assignments, the parties sent written notice of the assignments to the
CO. Id. at 746. The CO thereafter wrote on the notice “assignment acknowledged,” and also
added his signature and the date he signed the document. Id. Significantly, the government
acted in accordance with the assignments by making payments required by the assignments. Id.
Such facts, taken together, demonstrate unambiguous conduct clearly amounting to a waiver.
See id. No such circumstances are present in our case.
Indeed, looking at the Navy’s silence in context, the court finds its significance vague at
best. It was Chavez that made the claim against the Navy. The conflict to be resolved was
between them. Any other declaration or writing in the claim relating to a third party, not
- 17 -
necessary to the underlying dispute, without more, can hardly be said to bind the Navy to a
future commitment to that third party.
What happened after Chavez submitted its claim to the Navy was quite simple. The
Navy’s CO thereafter issued a decision to Chavez, the submitter of the claim. See Def.’s Mot. to
Dismiss App. at 35–36. Unlike what happened in Tuftco, the Navy did not address or respond to
the ostensible assignee, our plaintiff, see id. at 1, nor did it make any payments to plaintiff, see
Tr. at 36:2–19. The court finds that the circumstances surrounding this case do not demonstrate
that the Navy’s silence clearly amounted to a tacit acceptance, or, as the Tuftco court would put
it, a “recognition” of an assignment from Chavez to plaintiff.
In sum, without both knowledge and assent the Navy cannot be found to have
intentionally relinquished the protections of the Anti-Assignment Acts. See Zerbst, 304 U.S. at
464; Tuftco, 614 F.2d at 745. The circumstances relayed by plaintiff do not singularly or
collectively clearly show waiver of the Assignment of Claims Act by the Navy. Because
plaintiff, who asserts jurisdiction as an assignee, cannot bring Chavez’s claims without such a
waiver, defendant’s motion to dismiss must be granted. See Ins. Co. of the W., 243 F.3d at 1375.
IV. CONCLUSION
For the reasons stated above, defendant’s MOTION to dismiss this action for lack of
jurisdiction is GRANTED. The Clerk is directed to take the necessary actions to dismiss this
matter.
IT IS SO ORDERED.
/Lawrence J. Block
s
Lawrence J. Block
Judge
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