EFTA00797875

American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) system or subsystem exceeding $10 million unless certain conditions were Keyeite Yellow Flag - Negative Treatment Distinguished by Gengler v. U.S. ex rel. its Dept. of Defense and met, and (2) Department's failure to Navy. E.D.Cal.. August 24.2006 comply with statute's requirements did F.3d 1368 not render contract void ab initio. United States Court of Appeals, Federal Circuit. Questions answered and case remanded. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Rader, Circuit Judge, concurred in the and result and filed opinion in which Mayer, Lucent Technologies Inc., Chief Judge, and Lourie, Circuit Judge, Plaintiffs—Appellants, joined. v. UNITED STATES, Plager, Circuit Judge, dissented in part, Defendant/Cross—Appellant. concurred in part, and filed opinion. Nos. 95- 5153, 95- 5154. Opinion, 124 F.3d 1471, vacated. May 26, 1999. Synopsis West Headnotes (5) Contractor sued Government under Contract Disputes Act for recovery Ill Public Contracts of expenditures under research and development contract. The Court of • Compensation Federal Claims, John P. Wiese, J., 32 United States Fed.CI. 672, ruled that contract was • Compensation void and that quantum meruit relief Navy contract for was available, but certified questions development of ship-towed. for interlocutory appeal. The Court undersea surveillance system of Appeals originally affirmed, but, was for "major system or on rehearing en banc, the Court subsystem," for purposes of Appeals, Pauline Newman, Circuit of statute prohibiting Judge, held that: (1) Navy contracts for Department of Defense from development of ship-towed, undersea entering into fixed price surveillance system was for "major contracts for development of system or subsystem," for purposes major system or subsystem of statute prohibiting Department of exceeding $10 million unless Defense from entering into fixed price certain conditions were contracts for development of major met, notwithstanding either WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 1 EFTA00797875 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) agency's reliance on separate ab initio, as statute itself statute to define major system did not announce sanction as having $75 million floor of contract invalidity, and or fact that contract was contract had been fully funded over multiple years. performed. Act December 22, 10 U.S.C.A. § 2302(5); Act 1987, § 101(b), Sec. 8118, 101 December 22, 1987, § 101(b), Stat. 1329. Sec. 8118, 101 Stat. 1329. 24 Cases that cite this 9 Cases that cite this headnote headnote 121 Administrative Law and 141 Public Contracts Procedure offr. Unauthorized or Illegal e- Erroneous or Contracts unreasonable construction; United States conflict with statute o- Unauthorized or Illegal Although an agency's Contracts interpretation of a statute Invalidation of government it administers is indeed contract is not a necessary entitled to deference, agency consequence when a statute discretion does not extend or regulation has been to changing a clearly stated contravened, but must be dollar figure. considered in light of the statutory or regulatory Cases that cite this headnote purpose, with recognition of the strong policy of 131 Public Contracts supporting the integrity of 1— Compensation contracts made by and with United States the United States. Compensation 13 Cases that cite this Failure of Department headnote of Defense to comply with statute setting forth internal review and reporting 151 Contracts requirements for fixed price o- Nature and Essentials in contract for development of General major system or subsystem The invalidation of a contract exceeding $10 million did not after it has been fully render such contract void performed is not favored. WESTLAW 2019 Thomson Reuters. No claim to original U.S. Government Works. 2 EFTA00797876 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) amicus curiae Federal Circuit Bar 11 Cases that cite this Association. With him on the brief was headnote Clarence T. Kipps, Jr. Of counsel on the brief were L. James D'Agostino, Reed Smith Shaw & McClay, of McLean, Virginia; and George Hutchinson, Attorneys and Law Firms Executive Director, Federal Circuit Bar Association, of Washington, DC. *1369 C. Stanley Dees, McKenna & Cueno, L.L.P., of Washington, DC, Before MAYER, Chief Judge, argued for plaintiffs-appellants. With NEWMAN, PLAGER, LOURIE, him on the brief was J. Keith Burt. Of CLEVENGER, RADER, SCHALL, counsel on the brief were Thomas R. BRYSON, and GAJARSA, Circuit Suher, and Dean L. Grayson, Lucent Judges. * Technologies, Inc., of Washington, DC. Opinion Bryant G. Snee, Assistant Director, Commercial Litigation Branch, Civil Opinion for the court filed by Circuit Division, Department of Justice, Judge NEWMAN, in which Circuit of Washington, DC, argued for Judges CLEVENGER, SCHALL, defendant-cross appellants. With him BRYSON, and GAJARSA join. on the brief was David M. Cohen, Opinion concurring in result filed by Director. Of counsel on the brief were Circuit Judge RADER, in which Chief Robert D. Hogue, James H. Haag, Judge MAYER and Circuit Judge Attorneys, Office of General Counsel, LOURIE join. Opinion dissenting-in- Department of the Navy, of Arlington, part and concurring-in-part filed by Virginia. Circuit Judge PLAGER. Caryl A. Potter, III, Sonnenschein NEWMAN, Circuit Judge. Nath & Rosenthal, of Washington, DC, We took this appeal and cross-appeal for amicus curiae Electronic Industries en banc to reconsider the questions Alliance and Aerospace Industries of law presented, upon certification Association of America, Inc. With him for interlocutory appeal, concerning on the brief were Elizabeth A. Ferrell, the applicability of § 8118 of the of Washington, DC; Alan M. Posner, Defense Appropriations Act of 1987 to of Chicago, Illinois; and Roger K. a contract between the Department of Heidenreich, of St. Louis, Missouri. the Navy and the American Telephone John Lloyd Rice, Miller & Chevalier, and Telegraph Company. The Court of Chartered, of Washington, DC, for Federal Claims ruled that in view of the WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 3 EFTA00797877 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) failure of the Department of Defense to Diameter Array. The contract was comply with § 8118, the contract, which a "Total Package Procurement," had been performed, was void ab initio. requiring design of shipboard and We now hold that the contract was shore-based electronics, ship-winch not void, and remand to the Court of interface and tow cable, and an Federal Claims for further proceedings acoustic and electronic array some in accordance with this premise. 8,000 feet long, to meet the new Soviet submarine capabilities. The contract required research, development, and The Reduced Diameter Array Contract the delivery and testing of an This contract arose in Cold War engineering development model, at response to the new ultra-quiet a fixed ceiling price of $19,221,630, Soviet submarines, which were and included an option to the difficult to monitor using available Navy to acquire a second engineering technology and equipment. Effective development model at a fixed ceiling antisubmarine response requires that price of $3,510,253, and an additional hostile submarines be reliably detected, option to acquire three production- classified, located, and tracked. The level models at a fixed ceiling price of Navy, among its programs for this $8,475,466. purpose, employed an integrated undersea acoustic sonar system called The contract was successfully the Surveillance Towed—Array Sensor performed by AT & T over a period of System (SURTASS). In SURTASS a five years. With the price adjustments suitably equipped surface vessel tows an to which the Navy agreed during array of undersea detection equipment performance, the final fixed price through the ocean, while the equipment was approximately $34.5 million. AT collects and transmits appropriate data & T states that technical problems for processing on shipboard and for and unknowns arose throughout transmission to shore-based facilities. performance, and that its total cost was The President's Annual Report *1370 at least $91 million. The Navy rejected to the Congress for fiscal 1987, on AT & T's requests for restructuring the the topic of Antisubmarine Warfare contract and other relief, although AT Forces, referred to SURTASS as & T directed attention to § 8118 of "[o]ne of our most important ongoing the Defense Appropriations Act and programs in this area." Id. at 188. relevant Department of Defense policy directives concerning procurement of On December 31, 1987, after research and development for new competitive bidding, the Navy awarded technologies. AT & T a fixed price incentive fee contract for a subsystem of SURTASS, referred to as the Reduced WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 4 EFTA00797878 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) AT & T duly brought suit in the pursuant to unjust enrichment Court of Federal Claims under the principles. Contract Disputes Act. On cross motions for summary judgment the A panel of the Federal Circuit, by split issues arising from the enactment of decision, affirmed the ruling that the § 8118 were presented and argued. contract was void ab initio. The court The Court of Federal Claims ruled also held that no relief was available that § 8118 applied to this contract, to AT & T on any theory, except that it had not been complied with perhaps to replevin the goods that had by the Department of Defense, and been delivered to the Navy. Upon the that the contract consequently was void petitions of both sides we have reheard ab initio. Responding to AT & T's the matter en banc. I proposal that the appropriate remedy was to reform the contract into the cost-reimbursement form favored by Section 8118 ofthe Defense § 8118, the Court of Federal Claims Appropriations Act of1987 held that since there had never been a Concern about the use of fixed price valid contract it could not be reformed. contracts for research and development The court held, however, that AT & *1371 phases pervades defense T was entitled to compensation for procurement. In 1971 Department of its work on the basis of quantum Defense Directive (DODD) 5000.1 meruit, on a theory of implied-in- stated that "[i]t is not possible to fact contract. Before proceeding to determine the precise production cost determine quantum, the court certified of a new complex defense system for interlocutory appeal, in accordance before it is developed," and established with 28 U.S.C. § 1292(d)(2), the the policy of using cost-reimbursement following questions: price terms for procurement of research and development. The Directive (i) whether a contract executed in stated: "Fixed price contracts are violation of statutory restrictions on normally not appropriate for research the obligation and expenditure of and development phases." DODD appropriated funds may be declared 5000.1 & D.9.g (as amended, Sept. void from the start at the instance of 1, 1987). The Federal Acquisitions the performing contractor, and, if so, Regulations governing R & D contracts also embodied this policy. (ii) whether compensation for See, e.g., 48 C.F.R. § 35.006(c) benefits conferred upon the (1984-1998) ("Because the absence of Government (pursuant to the voided precise specifications and difficulties contract) can be predicated on an in estimating costs with accuracy implied-in-fact contract with the (resulting in a lack of confidence in cost amount of recovery to be determined estimates) normally precludes using WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 5 EFTA00797879 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) fixed-price contracting for R & D, the the cost-reimbursement type contract. use of cost-reimbursement contracts is Id. at 11. usually appropriate.") At ensuing hearings on the 1988 The record states that in the 1980s, Defense budget, concern was expressed despite these policy directives, the Navy about the continuing use of fixed returned to fixed price contracting price contracts for high-cost, high- for R & D as part of the risk development projects, as well Total Package Procurement concept. as concern for meeting congressional This in turn led to congressional oversight and allocation obligations investigations and hearings. An under this form of procurement. investigation conducted by the House Department of Defense Appropriations Appropriations Committee concluded for 1988: Hearings Before the that for the development phases Defense Subcomm. of the Comm. on of new technologies, the Navy's Appropriations, 100th Cong., 454- use of fixed price contracting 55 (1987). Legislatively implementing resulted in program delays, cost these concerns, the House included in overruns, contractor claims, non- the Defense Appropriations Act of 1987 participation, and litigation. See the provision that became § 8118: Surveys & Investigations Staff, Report to the Comm. on Appropriations, U.S. § 8118. None of the funds provided House of Representatives: Navy Fixed for the Department of Defense in this Price Contracting in the Research, Act may be obligated or expended for Development, Test and Evaluation fixed price-type contracts in excess of (RDT & E) Account, 100th Cong., $10,000,000 for the development of 1st Sess. (1987). The Report stated a major system or subsystem unless that: "Although Navy officials at the Under Secretary of Defense for the headquarters level have predicted Acquisition determines, in writing, immense success for the acquisition that program risk has been reduced policy, the opinions expressed by Navy to the extent that realistic pricing and other Service field procurement can occur, and that the contract type officials and technical experts indicated permits an equitable and sensible that [fixed price contracting] generally allocation of program risk between [has] proved unsuitable in an R the contracting parties: Provided, & D environment." Id. at ii. The That the Under Secretary may Report concluded that the nature not delegate this authority to any of the work in research and persons who hold a position in the exploratory development contracting Office of the Secretary of Defense "most frequently necessitates" use of below the level of Assistant Under Secretary of Defense: Provided further, That the Under Secretary WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 6 EFTA00797880 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) report to the Committees on Department, and required quarterly Appropriations of the Senate and reports of such awards to the House and House of Representatives in writing, Senate Appropriations Committees. on a quarterly basis, *1372 the The government argues first that '8118 contracts which have obligated did not apply to the Reduced Diameter funds under such a fixed price-type Array contract, thus eliminating any developmental contract. need for the Navy to have complied with the statute. The Court of Federal Pub.L. No. 100-202, § 8118, 101 Claims correctly held otherwise. Stat. 1329, 1329-84 (Dec. 22, 1987). The accompanying Conference Report Section 8118 by its terms applies to reiterated congressional concern that "fixed price-type contracts in excess the risks of failure and of cost of $10,000,000 for the development of uncertainties be allocated equitably a major system or subsystem." The between government and contractor, government argues that the Reduced and stressed the desire to "maintain Diameter Array is not a "major the government's credibility as a system," referring to a memorandum reliable business partner." H.R. Conf. issued six weeks after enactment of § Rep. No. 100-498 at 623 (Dec. 22, 8118 wherein the Under Secretary of 1987). Congress referred to the burden Defense defined "major system" for the of a fixed price contract on the purposes of § 8118 as a system having contractor when the miscalculation of a contract cost of over $75,000,000. In development cost may have been that a Memorandum for Service Acquisition of the government agency as well as Executives, Directors of the Defense the contractor, and to the reluctance Agencies issued February 11, 1988, of some highly qualified firms to enter Under Secretary of Defense for into such contracts. The Conference Acquisition Costello instructed that Report was unambiguous: "Fixed price "[t]he definition of major system at 10 contracts are normally not appropriate U.S.C. § 2302(5) is the definition of for research and development phases." that term for the purpose of [§ 8118]." Id. at 624. Thus Congress acted to This content was incorporated into adjust the risks of developing the SECNAV Instruction 4210.6A (April advanced technologies needed in the 13, 1988). service of national defense. 121 Section 2302(5) is a provision of chapter 137 of Subtitle A— Application of Section 8118 General Military Law, which as then [lj Section 8118 prohibited the award written defined "major system" as a of certain fixed price-type contracts system costing more than $75,000,000 unless the program risk was evaluated at a high level within the Defense WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. EFTA00797881 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) for research, development, test, and Inc., 467 U.S. 837, 842-43, 104 S.Ct. evaluation: 2778, 81 L.Ed.2d 694 (1984) ("if the intent of Congress is clear, that is the 10 U.S.C. § 2302(5). The term "major end of the matter"). system" means a combination of elements that will function together In addition, the AT & T contract to produce the capabilities required itself, and the Space and Naval to fulfill a mission need. The elements Warfare Systems Command's guide may include hardware, equipment, to the SURTASS, described the software or any combination thereof, Reduced Diameter Array as a but excludes construction or other "subsystem." Subsystems were not improvements to real property. A defined in § 2305(5) and were not system shall be considered a major mentioned in the Memorandum of the system if (A) the Department of Under Secretary. However, subsystems Defense is responsible for the costing more than $10,000,000 were system and the total expenditures explicitly included in § 8118. Although for research, development, test, the government now argues that the and evaluation for the system Under Secretary's Memorandum and are estimated to be more than SECNAV Instr. 4210.6A really covered $75,000,000 (based on fiscal year a major system or a subsystem of 1980 constant dollars) or the eventual a major system, this interpretation is total expenditure for procurement of contrary to the plain text of these more than $300,000,000 (based on documents. It is apparent that the fiscal year 1980 constant dollars).... Memorandum was contrary to the statute, and in all events that it did not The government argues that the agency include subsystems such as the Reduced had discretion to define the § 8118 Diameter Array. "major system" in accordance with '2302(5), and thereby to place a The government also argues that not $75,000,000 floor on the systems to all of the funds expended under which § 8118 would apply. However, it the Reduced Diameter Array contract was not within the agency's discretion were appropriated in the corresponding to rewrite § 8118 to replace the statutory Appropriations Act, and thus that threshold of $10,000,000 with that the § 8118 prohibition on obligating of $75,000,000. Although an agency's or expending funds does not apply. *1373 interpretation of a statute Indeed, the contract was structured it administers is indeed entitled to for multi-year incremental funding. deference, agency discretion does not However, it is undisputed that the extend to changing a clearly stated starting research and development dollar figure. See Chevron, U.S.A., Inc. effort drew on several millions of v. Natural Resources Defense Council, WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 8 EFTA00797882 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) dollars of appropriated funds. The the Senate and House Appropriations multi-year funding does not excuse the Committees. Although the government Defense Department from compliance stresses that the contract was awarded with § 8118. only nine days after the enactment of § 8118, this does not excuse the failure of Moreover, contrary to the all compliance. government's argument, which is made but not strongly pressed, this case does not involve a funding deficiency or Consequences ofAgency implicate the Anti—Deficiency Act, 31 Noncompliance With § 8118 U.S.C. § 1341. See Hercules Inc. v. PI We turn to the certified question United States, 516 U.S. 417, 427, 116 of the consequences of this failure S.Ct. 981, 134 L.Ed.2d 47 (1996) ("The of compliance by the Department of Anti-Deficiency Act bars a federal Defense. AT & T states that § 8118 employee or agency from entering into was enacted at least in part for its a contract for future payment of money protection, and that the agency, by in advance of, or in excess of, an failing to obey the law, can not deprive existing appropriation."); see generally AT & T of the protection of the Ferris v. United States, 27 Ct.CI. law. AT & T argues that § 8118 542, 546 (1892) ("An appropriation is a "mandatory statute" restricting per se merely imposes limitations the agency's authority to obligate and upon the Government's own agents ... expend funds, and that the Navy's its insufficiency does not pay the direct contravention of § 8118 rendered Government's debts, nor cancel its the Reduced Diameter Array contract obligations, nor defeat the rights of void ab initio. other parties.") There is no issue in this case of lack of appropriated funds. The government responds that Congress chose and intended to enforce We affirm the determination of the § 8118 *1374 through its oversight Court of Federal Claims that § powers, and that AT & T can not 8118 applies to this contract. The benefit from whatever lapses may government does not dispute that have occurred within the Department the requirements of § 8118 were not of Defense in its compliance with met by the Department of Defense. congressional oversight legislation. The There is no assertion that the Under government stresses that § 8118 did not Secretary of Defense for Acquisitions provide that these fixed price contracts made or had made the program risk were prohibited, but only that the and pricing determinations required Defense Department must review the by § 8118, and no report of this risk and its allocation at a specified contract is stated to have been made to executive level, and must report to Congress on a quarterly basis. WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 9 EFTA00797883 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) history"). Congress simply tightened 14] Legislative intent and precedent the reporting provision, by moving both lead to the conclusion that the from after-the-fact quarterly reports AT & T contract was not void ab to before-award reports. Indeed, the initio as a consequence of the agency's House version of § 8118 had initially noncompliance. Invalidation of the required before-award reports, but contract is not a necessary consequence this was dropped in Conference in when a statute or regulation has been favor of the Senate version "to contravened, but must be considered reduce the appearance of congressional in light of the statutory or regulatory micromanagement." H.R. Conf. Rep. purpose, with recognition of the strong No. 100-498 at 623 (Dec. 22, 1987). policy of supporting the integrity of contracts made by and with the United The Conference Report stated that if States. In United States v. Mississippi Defense Department policy did not Valley Generating Co., 364 U.S. 520, become more uniform, "more severe 81 S.Ct. 294, 5 L.Ed.2d 268 (1961) the restrictions" would be imposed. Id. This Court explained that when a statute remark carries no hint of, and indeed "does not specifically provide for the belies, an interpretation that § 8118 was invalidation of contracts which are intended, upon enactment, to invalidate made in violation of [its provisions]" any contract made without meeting the court shall inquire "whether its internal review and reporting the sanction of nonenforcement is requirements, for such a "restriction" consistent with and essential to would already be extremely "severe." effectuating the public policy embodied The statutory shift to before-award in [the statute]." Id. at 563, 81 reports in succeeding years would be a S.Ct. 294. Thus the policy underlying trivial discipline indeed, if meanwhile the enactment must be considered all of the fixed price contracts within the in determining the remedy for its statutory scope, although in the process violation, when the statute itself does of performance, or as in this case fully not announce the sanction of contract performed, were void ab initio. invalidity. Only a few months after enactment The policy embodied in § 8118 of § 8118 the House Appropriations is elucidated in the congressional Committee reported that the response when § 8118 did not receive "enforcement of existing policy in this full compliance from the Department of area has not yet been demonstrated," Defense. See Alabama Rural Fire Ins. H.R.Rep. No. 100-681 at 147 (June 10, Co. v. United States, 215 Ct.C1. 442, 572 1988), and recommended a pre-award F.2d 727, 733 (1978) ("illegality may reporting requirement (which was be proved with reference to legislative included in the enactment for the next WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 10 EFTA00797884 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) fiscal year). The Senate Armed Services negate any reasonable inference that Committee, considering this renewal, Congress intended simply to render stated explicitly that noncompliance void ab initio, even after full was not intended to be "the basis for performance, any fixed price contract litigating the propriety of an otherwise for which the Under Secretary's review valid contract": of risk allocation and the report to the Committees were omitted. Congress The committee recognizes that there can not have intended to charge are circumstances in which fixed- the contracting partner with adverse price development contracts are consequences depending on whether appropriate (e.g., when costs and the Defense Department carried out the foreseeable program risks can be internal responsibilities and filed the reasonably anticipated), and the reports that Congress required. committee expects the Department to establish clear guidelines under this Nor is it the judicial role to section for use of such contracts. discipline the agency's noncompliance with the supervisory and reporting *1375 It is the intent of the instructions of congressional oversight. committee that this section be See Longshore v. United States, applied in a manner that best serves 77 F.3d 440, 443 (Fed.Cir.1996) the government's interests in the long ("Congress has undoubted capacity to term health of the defense industry, oversee the performance of Executive and that this section not be used as Branch agencies, consistent with its the basisfor litigating the propriety of constitutional authority. It is not for an otherwise valid contract. Nothing this court to instruct Congress on how in this section shall be construed to oversee and manage its creations."); to affect the requirements of section E. Walters & Co. v. United States, 217 8118 of the Department of Defense Ct.CI. 254, 576 F.2d 362, 367 (1978) Appropriations Act, 1988. ("The fact that a procurement practice (Emphasis added.) S.Rep. No. 100- is prohibited does not necessarily mean 326, 100th Cong., 2d Sess. at 105 that it is therefore actionable. The (May 4, 1988). This explicit statement discipline to be administered in such of intent weighs heavily against cases is a responsibility of the cognizant judicial invalidation of "an otherwise procurement officials within the agency valid contract," for the clearly stated [and not] by this court"); cf. National congressional purpose is contrary. Treasury Employees Union v. Campbell, 654 F.2d 784, 794 (D.C.Cir.1981) These congressional responses, made (by statutory requirement that the with knowledge of the agency's Comptroller General report on certain imperfect compliance with § 8118, expenditures "Congress itself is in a WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 11 EFTA00797885 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) position to monitor and enforce its Schoenbrod v. United States, 187 Ct.CI. spending limitations. It is not for 627, 410 F.2d 400, 403-04 (1969). We us to question the effectiveness of take incidental note that the case at existing remedies and infer additional bar also involved a disappointed bidder remedies.") raising post-award objections, *1376 and that none of the objections were Both the DoD administration of § based on § 8118. 8118, and the congressional response to this administration, make clear In Harbor Gateway Commercial that Congress did not intend that Property Owners' Ass'n v. United States this enactment would terminate fully Environmental Protection Agency, 167 performed contracts because of this F.3d 602 (D.C.Cir.1999), a case stressed flawed compliance. in the dissenting opinion hereto, the court voided an EPA action because the 151 Precedent reinforces our conclusion Governor had not signed the request that the Reduced Diameter Array as the statute required. However, contract is not void ab initio. The there was no issue of performance, invalidation of a contract after it has or reliance, or any other contractual been fully performed is not favored. element. It is not before us to decide Precedent shows that those contracts whether either party to the Reduced that have been nullified, based on a Diameter Array contract could have failure to meet a statutory or regulatory voided the contract early in its life requirement, are contracts that have and without penalty; the contract was not been substantially performed. E.g., performed for over five years, with no Alabama Rural Fire Ins. Co. v. United record suggestion from either party that States, 215 Ct.CI. 442, 572 F.2d 727, because of § 8118 there was no contract. 733-34 (1978). In Prestex, Inc. v. United States, 162 Ct.CI. 620, 320 F.2d Judicial reluctance to annul performed 367, 374-75 (1963), the court held a contracts when the government did not contract invalid, and refused to allow comply with a statutory or regulatory any recovery because no performance requirement was explained by the Court had occurred. It is not surprising that of Claims in John Reiner & Co. v. much of the litigation raising issues of United States, 163 Ct.CI. 381, 325 F.2d violation of statute or regulation at the 438, 440 (1963), stating that "the court inception of government contracts has should ordinarily impose the binding arisen in the bid protest context, where stamp of nullity only when the illegality the asserted illegality has been explored is plain." In Reiner the court recognized before substantial performance has the "dilemma" of a contractor who occurred. E.g., CACI, Inc. v. Stone, becomes aware, while deep in the 990 F.2d 1233, 1235 (Fed.Cir.1993); performance of a contract, of a possible WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 12 EFTA00797886 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) procurement illegality he did not cause: (1978) the court sustained a contract the contractor must either continue that was awarded after the contracting to perform a contract of uncertain officer had negligently failed to meet validity, or discontinue performance a regulatory responsibility; the court and risk severe penalties if a court later held that the non-compliance with disagrees with his assessment of the regulation was "a matter for internal illegality. resolution" and "did not render the resultant contract a nullity." In Clark When a contract or a provision v. United States, 95 U.S. 539, 542, 24 thereof is in violation of law but L.Ed. 518 (1877) the Court held a parol has been fully performed, the courts contract void for violation of the statute have variously sustained the contract, of frauds, but allowed recovery on an reformed it to correct the illegal implied contract theory. term, or allowed recovery under an implied contract theory; the courts The entirety of precedent strongly have not, however, simply declared the supports our conclusion that the contract void ab initio. For example, Reduced Diameter Array contract in LaBarge Products v. West, 46 is not void ab initio. Precedent F.3d 1547, 1552-53 (Fed.Cir.1995) does not favor the invalidation, there was an illegal disclosure by based on governmental noncompliance the government during bidding; this with internal review and reporting court noted that the contract had procedures, of a contract that has been been substantially performed and held fully performed by either contracting that a valid contract existed despite party. 2 the violation. In Beta Systems, Inc. v. United States, 838 F.2d 1179, 1185- *1377 Although the parties discuss 86 (Fed.Cir.1988) the court allowed possible remedies, the issue of what reformation of the contract price term relief may be available to AT & T to correct a regulatory violation, stating is not before us, for the Court of that "[t]he risk of unintentional failure Federal Claims did not consider AT of a contract term to comply with a & T's claims on the premise that the legal requirement does not fall solely underlying contract was not void. We on the contractor." In Urban Data have not considered this issue, and Systems, Inc. v. United States, 699 F.2d express no view thereon. 1147, 1154 (Fed.Cir.1983) the court held that a contract price term that was contrary to law did not invalidate Answers to the Certified Questions the fully performed contract. In Trilon For the reasons we have discussed, we Educational Corp. v. United States, conclude that the agency's failure to 217 Ct.C1. 266, 578 F.2d 1356, 1360 comply with the obligations of § 8118 WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 13 EFTA00797887 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) did not render the Reduced Diameter price-type contracts in Array contract void ab initio. Any excess of $10,000,000 failure by the Department of Defense in for the development its internal compliance with § 8118 can of a major system or not be invoked, particularly after full subsystem.... contract performance, either to strip the Navy of authority to have entered into the contract or to bar AT & T from (emphasis added). This particular presenting such claims, if any, that it section of the U.S.Code does not may have. supply a definition of "major system." However, § 2302(5) of title 10 of The second certified question relates to the United States Code, which relates remedy, but is based on the premise that to government procurement contracts the contract was void ab initio. Since generally, defines "major system:" that premise is incorrect, we do not reach the second certified question. The term "major system" means a Costs combination of Each party shall bear its costs. elements that will function together QUESTIONS ANSWERED; CASE to produce the REMANDED. capabilities required to fulfill a mission need.... A system RADER, Circuit Judge, concurring in shall be considered a the result, in which MAYER, Chief major system if (A) Judge, and LOURIE, Circuit Judge, the Department of join. Defense is responsible Because § 8118 of the Defense for the system and the Appropriations Act does not apply to total expenditures for this contract, I concur. Section 8118 research, provides in relevant part: development, test and evaluation for the system are estimated None of the to be more than funds provided for $75,000,000 ... or the Department of (C) the system is Defense in this Act designated a "major may be obligated or system" by the head of expended for fixed- WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 14 EFTA00797888 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) the agency responsible "major system," namely, designation for the system. by the head of the agency. Thus, a project beneath the $75,000,000 threshold of 10 U.S.C. § 2302(5) could Therefore, the term "major system" nonetheless qualify as a "major system" refers to systems either with estimated upon designation by the head of the costs above $75,000,000 or systems agency. "designated a `major system' by the head of the agency responsible for the This court's opinion discounts system." See 10 U.S.C. § 2302(5) (1986). the reasonable reconciliations of Shortly after enactment of § 8118, the $10,000,000 contract amount both the Department of Defense and requirement with the "major system" the Navy incorporated this statutory classification requirement. Under the definition into their interpretation of agency's reasonable interpretation, that section. As the agency charged with the $10,000,000 contract amount interpretation and application of the requirement serves as a floor for statute, the Department of Defense's invoking § 8118 in contracts involving reasonable interpretation of § 8118 a project designated as a "major deserves deference. See Chevron U.S.A., system" by the department head. Inc. v. Natural Resources Defense Furthermore, the $10,000,000 contract Council, Inc., 467 U.S. 837, 844, 104 amount requirement does not lose S.Ct. 2778, 81 L.Ed.2d 694 (1984). its meaning for systems whose estimated costs exceed $75,000,000. The Department of Defense and Navy's Development of a major system interpretation alone gives meaning typically requires multiple contracts to all of the words in the statute. with multiple developers. In these cases, Both the Court *1378 of Federal the $10,000,000 requirement serves as a Claims' interpretation and this court's floor for application of § 8118 to each interpretation in this opinion would contract involved in the development render the "major system or subsystem" of that "major system." Similarly, the language superfluous and would invoke $10,000,000 trigger amount excludes § 8118 for any fixed-price contract from § 8118 any subsystem contracts in excess of $10,000,000. This court within a major system which do not chooses that course on the reasoning satisfy this threshold amount. For these that the agency's interpretation "rewrite reasons, the $10,000,000 threshold [s] § 8118 to replace the statutory continues to govern in conjunction threshold of $10,000,000 with that of with the $75,000,000 threshold for a $75,000,000." This reasoning, however, "major system." In sum, these dual discounts the statute's alternative thresholds work together and provide a method of categorizing a project as a reasonable explanation for the agency's WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 15 EFTA00797889 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) interpretation of these statutes. Because is a "subsystem" of a "major system." reasonable, the agency's interpretation Although AT & T asserted below deserves deference. that the Reduced Diameter Array subsystem was a part of SURTASS, Even without deference to the and that SURTASS was a major system Departments of Defense and Navy, according to the requirements of 10 their proposed interpretation of § 8118 U.S.C. § 2302(5), by consent of the alone gives meaning to all the statute's parties before the Court of Federal terms and should therefore govern this Claims, that issue is not a subject of court's resolution. As noted above, this the certified appeal. For these reasons, I is the only interpretation which supplies would not apply § 8118 to the Reduced meaning to all of the terms of the Diameter Array contract at issue in this statute. Specifically, this is the only appeal. interpretation which gives meaning to the term "major system" as well as the $10,000,000 contract amount PLAGER, Circuit Judge, dissenting-in- requirement. part and concurring-in-part. I must respectfully dissent. The Finally, I read the term "subsystem" in court refuses to honor an explicit § 8118 as linked to "major system" by mandate of an *1379 unequivocal its context within the statute. Although Congressional enactment. "Legislative neither 10 U.S.C. § 2302(5), nor the interpretations of § 8118 proffered history" cannot justify that refusal.' by the Department of the Defense A court has a responsibility to arrive or the Navy address the definition at the right result in a case; it also of "subsystem," the statute itself ties has the obligation to explain itself in a the definition of this term to the manner that does no harm to the fabric term "major system." In essence, this of the law. Though the right result may interpretation would apply § 8118 eventually emerge, the route the court to "major systems and subsystems takes to get there has the potential of major systems." This reading for causing considerable harm to legal preserves the statute's "major system principles that I deem important. or subsystem" requirement rather than expanding application of § 8118 to In the first part of its opinion, the court all fixed-price-type contracts exceeding describes the Government's efforts over $10,000,000. time to adjust the risks that are inherent in cutting-edge R & D contracts so that Furthermore, to my eyes, this appeal they are fair both to the Government does not present the question of and the contractor. See slip op. at 1369- whether this Reduced Diameter Array 70. These efforts begin at least in 1971 with DODD 5000.1, and culminate, WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 16 EFTA00797890 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) for purposes of this case, with the as a matter of law such contracts enactment in 1987 of § 8118 as part were prohibited, and since there could of that year's Department of Defense be no consideration offered for the ("DoD") Appropriations Act. See id. at contractor's promised performance. 1370-72. As the court explains, § 8118 Remarkably, the court reaches exactly prohibited using Government funds for the opposite conclusion, and finds fixed price-type R & D contracts except the contract valid, and presumably under certain conditions. enforceable. For the reasons I shall explain, I cannot join the court in this. The court then sets out the history of the R & D contract at issue in this case, and concludes, correctly, that Section 8118 1. applies to this DoD fixed price-type alleged contract. See id. at 1372-73. The Omitting the inapplicable exception court concludes, again correctly, that language and its related provisos, the exception provided in the statute, the operative words of the statute permitting a fixed price-type R & D are clear and to the point: "None contract under certain conditions, is not of the funds provided for the PoDI applicable since the DoD did not take in this [Appropriations' Act may be the steps necessary to qualify for an obligated or expended for fixed price- exception. See id. type contracts...." It is a rule of constitutional law that, in absence of This is the same conclusion on the an express appropriation, agencies may point reached by the Court of Federal not spend, and a fortiori cannot validly Claims, which this court now affirms. contract to spend, any federal dollars. The court rejects the Government's See U.S. Const. art. I, § 9, cl. 7 various arguments to the contrary, and ("No Money shall be drawn from finally concludes this part of its analysis the Treasury, but in Consequence of with the statement that: "Although the Appropriations made by Law."). The government stresses that the contract Supreme Court earlier reversed us when was awarded only nine days after the in another context we failed to properly enactment of § 8118, this does not apply that principle. See Office of excuse the failure of all compliance." Id Personnel Management v. Richmond, 496 U.S. 414, 110 S.Ct. 2465, 110 Given that the court recognizes the L.Ed.2d 387 (1990). language of the Act to expressly prohibit the use of Government funds Here, we do not have simply an for such a contract, the obvious and omission of authorization to expend; ineluctable conclusion would appear to we have an outright prohibition: be that there was no contract, since "None of the funds *1380 [otherwise WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 17 EFTA00797891 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) appropriated] may be expended ..." for Envtl. Protection Agency, 167 F.3d 602, the precise purpose for which the DoD 607 (D.C.Cir.1999). 4 contracted. Surely it should not be necessary for Congress to have added: In response to the Government's "and we mean it," or perhaps, "and we argument that EPA officials considered mean it, and if you try, it won't be any themselves to be in compliance, and good, so don't even bother." in any event an invalidation of the action would require that the action It is not uncommon for Congress to be done again and would just cost the put prohibitions such as that contained Government more money, the District in § 8118 in Acts appropriating funds of Columbia Circuit answered: to executive branch agencies.' A recent case in point: Congress, in an Appropriations Act which included We refuse to ignore the U.S. Environmental Protection the plain language Agency, 3 specified that "none of of the Act in order the funds made available under to avoid potential this heading may be used by the costs which would Environmental Protection Agency ... not have arisen [for certain described activities affecting had EPA complied states] unless the Administrator with the statute's receives a written request ... from the language in the first Governor of the State...." The EPA, instance. Indeed, when on the basis of an authorizing letter a statute's meaning from a state official, not the Governor, is clear, and the undertook such activity with regard to enactment is within certain property in California. Affected the constitutional interests appealed. authority of Congress, the "sole function of Judge Sentelle, writing for the Court of the courts is to enforce Appeals for the District of Columbia it according to its Circuit, found that the state official's terms." letter did not meet the terms of the statute, and readily concluded that, in the absence of a letter from the Id. at 606 (emphasis added). That seems Governor himself, the EPA action was to be the law on the subject; I know of "null and void," and "was necessarily no cases to the contrary, and the court invalid." Harbor Gateway Commercial here cites none. Property Owners' Ass'n v. United States WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 18 EFTA00797892 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) In this case, AT & T, after due Government could neither offer or negotiation with the Navy, offered pay consideration; no consideration, no to make and sell to the Navy for contract, end of discussion, at least with an agreed fixed price a submarine- respect to contract validity under basic detecting piece of equipment. The Navy contract principles. accepted the offer, and proposed to pay for the work using funds from the 1987 Appropriations Act that contained the 2. express prohibition set out above. As the Harbor Gateway court explained, I cannot agree with the court that the Navy's action was "null and void," the "purpose" of the statute overrides and "necessarily invalid." its express terms. The court tells us that this statute "must be considered Furthermore, the Navy's action in in light of the statutory or regulatory this case was taken for the purpose purpose, with recognition of the strong of entering into a contract. But policy of supporting the integrity of the Navy was legally incapable of contracts made by and with the United using Government funds unless it told States." Slip op. at 1374. Clearly, Congress what it was up to in the however, the purpose of this statute, manner required by the statute, which expressed in no uncertain language, is the Navy chose not to do. (It is exactly the opposite-it is intended to difficult *1381 not to believe that prevent contracts with the United States both parties were fully aware of the in contravention of its terms, not to statute and simply chose to ignore support them. it, though that is of no moment to the issue before us. 5 ) Thus, It has been some years since a not only was the act of contracting court-invented "purpose" so blatantly prohibited by statute, but as a matter repealed a Congressional enactment. of basic contract law no legally- Last century, in Rector, etc. of Holy binding contract could be created: Trinity Church v. United States, 143 offer, acceptance, and consideration U.S. 457, 471, 12 S.Ct. 511, 36 remain a fundamental requirement for L.Ed. 226 (1892), the Supreme Court a legally-binding contract, whether announced that this is a "Christian between private parties or between a nation," and on that basis concluded private party and the Government. that the purpose of a statute that See, e.g., Harbert/Lummus Agrifuels banned immigration of foreign workers Projects v. United States, 142 F.3d could not possibly be to prevent 1429, 1434 (Fed.Cir.1998); Trauma an English clergyman from coming Serv. Group v. United States, 104 F.3d to work in the United States. In 1321, 1325 (Fed.Cir.1997). Here, the this century, and certainly in recent WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 19 EFTA00797893 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) times, purpose-inventing by judges has 501, 65 S.Ct. 335, 89 L.Ed. 414 (1945). received the opprobrium it deserves In the same vein, and more recently, the when used as an excuse for ignoring the Supreme Court, Justice Scalia writing, law. said, "Courts may not create their own limitations on legislation, no matter Professor Dickerson, one of the early how alluring the policy arguments for writers on statutory interpretation, doing so,...." Brogan v. United States, described the process of purpose- 522 U.S. 398, 118 S.Ct. 805, 811-12,139 inventing as if he had this case in mind: L.Ed.2d 830 (1998). In support of its position, the court As with legislative cites various pieces of what it describes intent, the danger in as legislative history. However, a presuming an actual prerequisite to judicial use of legislative legislative purpose history, even relevant legislative beyond what is history, is a finding that *1382 the expressly or impliedly statute at issue is ambiguous. "Our revealed is that the first step in interpreting a statute is to interpreter will either determine whether the language at issue attribute to the statute has a plain and unambiguous meaning a purpose of his own with regard to the particular dispute contriving or search in the case. Our inquiry must cease if for actual purpose so the statutory language is unambiguous relentlessly that he and `the statutory scheme is coherent goes beyond the limits and consistent.' " Robinson v. Shell of the appropriate Oil Co., 519 U.S. 337, 117 S.Ct. available evidence. 843, 136 L.Ed.2d 808 (1997) (Justice Thomas, writing for a unanimous Court) (quoting United States v. Ron Reed Dickerson, The Interpretation and Pair Enters., Inc., 489 U.S. 235, 240, 109 Application of Statutes 92 (1975). S.Ct. 1026, 103 L.Ed.2d 290 (1989)). To the court's credit here, the majority does Writing more formally for the Court a not pretend to find in this unequivocal half-century ago, Justice Jackson said, statute any ambiguity. Rather, it "we take the Act as Congress gave it simply concludes that committee report to us, without attempting to conform it language, nowhere addressed to the to any notions of what Congress would specific problem before us, trumps have done if the circumstances of this statutory clarity. 6 case had been put before it." Western Union TeL Co. v. Lenroot, 323 U.S. 490, WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 20 EFTA00797894 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) The committee report language the the very next sentence in the Report court cites includes certain 1988 House is: "Nothing in this section shall be and Senate reports. In the first place, construed to affect the requirements this so-called legislative history is not of section 8118 of the Department of history - that is, the House and Senate Defense Appropriations Act, 1988." Id. Reports the court cites with such authority (see maj. op. at 1374-75) were written after § 8118 was enacted 3. in 1987, and relate to later-considered legislation. How the views of a later The court finds further justification Congress, not contained in actual for its emasculation of the statute legislation, can be seen as amending or by opining that "Congress can not modifying prior legislative acts, is not have intended to charge the contracting explained. And, even assuming that any partner with adverse consequences of that legislative history is relevant to depending on whether the Defense understanding the 1987 Act, the only Department carried out the internal consistent thread in all of it is the responsibilities and filed the reports expression of congressional irritation that Congress required." Slip op. at and frustration with the DoD's (or at 1375. The response to that observation least the Navy's) stubborn insistence on is that that would appear to be exactly doing what Congress wanted stopped. what Congress intended. AT & T, one of the country's leading government Further, when examined, even the contractors, 7 could be expected to be terms in which the language of the 1988 familiar with government contracting Senate Report was written, heavily laws. It is difficult to imagine that AT relied upon by the court to support & T was unaware of the battle between its conclusion, see maj. op. at 1375, Congress and the DoD *1383 over fail to support the court's view. The these fixed price-type contracts. At the Report states that "this section [not least, it is not irrational for Congress 8118 of the 1987 Act, but a later- to have assumed that a contractor, like proposed section] not be used as the AT & T, proposing to undertake a basis for litigating the propriety of an major R & D contract would know who otherwise valid contract." S.Rep. No. in the DoD to contact regarding the 100-326, at 105 (1988). Since by its requirements for the contract they were terms a contract in direct violation of negotiating, and that the DoD's lawyers 8118 is not "otherwise valid," the would know the relevant law. statement proves nothing with regard to 8118, whether it be the 1987 version What the court seems to have in mind or the proposed 1988 version. And in here, though it does not say so, is case a court should miss that point, the rule, sometimes called the "Golden WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 21 EFTA00797895 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) Rule," that a statute should not be Emphasizing the narrow scope of the understood to call for an absurd result. absurdity exception, Justice Kennedy Just as finding a statute ambiguous went on to note: permits a court to go beyond the terms of the statute in searching for meaning, the Golden Rule permits a court to Where it is clear go beyond the apparent meaning of a that the unambiguous statute when its application would be language of a statute absurd. embraces certain conduct, and it would Justice Kennedy described the Rule not be patently thusly: absurd to apply the statute to such Where the plain language of conduct, it does not the statute would lead to foster a democratic "patently absurd consequences," that exegesis for this Court "Congress could not possibly have to rummage through intended," we need not apply the unauthoritative language in such a fashion.... This materials to consult exception remains a legitimate tool of the spirit of the the Judiciary, however, only as long legislation in order to as the Court acts with self-discipline discover an alternative by limiting the exception to situations interpretation of the where the result of applying the plain statute with which language would be, in a genuine the Court is more sense, absurd, i.e., where it is quite comfortable.... The impossible that Congress could have problem with spirits intended the result, and where the is that they tend to alleged absurdity is so clear as to be reflect less the views of obvious to most anyone. the world whence they come than the views of Public Citizen v. United States Delis those who seek their of Justice, 491 U.S. 440, 470, 109 advice. S.Ct. 2558, 105 L.Ed.2d 377 (1989) (Kennedy, J., concurring). One must wonder whether a statute that orders Id. at 473, 109 S.Ct. 2558 (internal the DoD not to spend money in a citations omitted) (Kennedy, J., wasteful way is "absurd" within the concurring). 8 definition set forth by Justice Kennedy. WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 22 EFTA00797896 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) Actually, the right answer is not that difficult, even accepting the fact that 4. there is no legally-enforceable contract AT & T has no rightful claim to between the parties. AT & T argues another penny of public money. It that, since the contract it made is agreed to build and sell a product to unenforceable, it should be treated as the Government for a fixed price. It having an "implied-in-fact" contract, a performed its end of the deal, and key term of which would be different delivered the goods. The Government from that to which the parties actually likewise performed its part of the deal; agreed. The different term would be it paid AT & T the agreed-upon price that the contract would not be for a (actually more, as a result of negotiated fixed price, but instead would be a add-ons). cost-plus contract. That would take the contract outside the scope of§ 8118, and If the contract had been valid under give AT & T a rightful claim to all the governing law, AT & T would have money for which it asks. no basis for claiming more money; our precedents are unequivocal that That would also make nonsense out full payment *1384 under a valid of the concept of an implied-in-fact fixed price-type contract is all to which contract. An implied-in-fact contract is a form of consensual contract, a contracting party is entitled. 9 The reflecting the basic requirements for risk of loss for misjudging what it such a contract including that of a takes to perform, or for deliberately meeting of the minds. It differs from underbidding, is on the contractor, not the usual express contract only in that the Government. 10 the terms, instead of being expressly stated by the parties, are derived from AT & T now seeks to take advantage their conduct. Nothing here in the of the fact that the deal it made conduct of the parties suggests an with the Government did not result agreement to have a cost-plus contract; in an enforceable contract, which it on the contrary, the parties specifically likely knew (and certainly should have stipulated to a fixed price-type contract. known) when it proposed to enter into the agreement. AT & T demands more If AT & T is to have any remedy money for what it has been fully paid entitling it to more than what it has been to do. The answer to that facially paid, its claim must be based on some nonsensical demand is, in a word, "no." sort of equitable claim for payment for goods sold and delivered, a quantum Perhaps the court thought it could not valebat claim." Even assuming for get there if, in accordance with the discussion purposes that the Court statute, it held the contract invalid. WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 23 EFTA00797897 American Tel. 8 Tel. Co. v. U.S., 177 F.3d 1368 (1999) of Federal Claims could exercise the wasteful, or simply ignorant contractor powers of a court of equity, AT & T cannot foist off on the other contracting has no equity on its side, and therefore party the consequences of its own is not entitled to the intervention of a incompetence. 12 The law in a case like court of equity. this leaves the parties where it found them. 13 AT & T comes to the court with unclean hands. AT & T is not an innocent The en banc court appears unwilling bystander being taken advantage of to give AT & T any more money by a predator government. Both the on its so-called non-contract claim. As Government and AT & T knew exactly I said at the beginning, a court has what they *1385 were doing when they a responsibility to arrive at the right entered into this deal. It simply defies result, but also an obligation to do belief that AT & T was unaware of no harm to the fabric of the law. A 8118 when it purported to contract wrong result is an injustice to one party; with the Government or was unaware distorting important legal principles is a that the Navy was proceeding with the disservice to the entire legal system. contract in the manner the Navy did. It is true that statutory interpretation In any event, that does not matter. The does not occur in a vacuum. Words most that AT & T would be entitled to take meaning from the context in which under any equitable theory is the fair they are used, and, when text and value of the goods sold, and that value context yield genuine doubt, courts may was agreed to by AT & T when it made seek guidance from accepted canons, the deal with the Navy. The goods are from history, and from legislative one-of-a-kind, not to be found on the purpose when it can be authoritatively shelf at your usual military equipment known. In many cases, construing supermarket. There can be no better Congressionally-mandated language is method for determining a fair price for as much an art as it is linguistic science. the goods than to see what a willing But it is not an art in which the picture seller would sell them for to a willing that emerges is without constraints, or buyer. is limited only by the imagination of the artist. AT & T does not allege that it was coerced by the Government, or that There is an established methodology it was caused to enter into the deal that courts employ in construing by fraud. It simply wants more money statutes. As the quoted excerpts for a product it agreed to provide from the Supreme Court show, the for a price that proved, according methodology is well-recognized, even to AT & T, too low. An inefficient, if judges do not always agree on how WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 24 EFTA00797898 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) much weight to give to its various parts case would not require an absurd result, there is neither reason nor justification in a given case. 14 The methodology for reaching beyond the statute to is designed to provide guidance legislative history or supposed purpose *1386 for the exercise of judicial in order to find a different answer. self-discipline, the self-discipline that Further, what little known legislative produces principled decisions. history there is I find inapposite and unpersuasive. Accordingly, I believe it This court has in the past expressly is our duty to apply the statute as it has recognized the governing principles: been given to us by Congress. "A statute is by definition the law to be followed—not disregarded, Thus, my answers to the questions effectively repealed, rewritten, or certified are: (1) yes, the contract is overruled (unless unconstitutional) null, void, and necessarily invalid, as —in the federal courts," In re the Court of Federal Claims correctly Mark Indus., 751 F.2d 1219, 1224 concluded; and (2) no, AT & T is (Fed.Cir.1984), and recently reiterated not entitled to any equitable or other the point: "This court is empowered to remedy on the facts presented, even if rewrite neither statutes nor regulations, the Court of Federal Claims had power however unwise, nor does it have the to grant such a remedy. I respectfully information base nor expertise to do so dissent from the court's contrary view. effectively," Newport News Shipbuilding & Dry Dock Co. v. Garrett, 6 F.3d 1547, 1558 (Fed.Cir.1993). All Citations In sum, since the statute before us is not 177 F.3d 1368 ambiguous and its application to the Footnotes * Circuit Judges Rich and Michel did not participate in this decision. 1 The panel decision of the Federal Circuit, reported at American Tot & Tel. Co. v. United States, 124 F.3d 1471 (Fed.Cir.1997), was vacated and withdrawn, 136 F.3d 793 (Fed.Cir.1998). The decision of the Court of Federal Claims is reported at 32 Fed.Cl. 672 (1995), and the certification for interlocutory appeal is reported at 33 Fed.Cl. 540 (1995). On this rehearing amicus briefs were filed by the Federal Circuit Bar Association and by the Electronic Industries Alliance and Aerospace Industries Association of America. 2 The dissenting opinion would hold the fully performed AT & T/Navy contract void ab initio, stating that the purpose of § 8118 was to "prevent contracts with the United States in contravention of its terms". However, Congress' stated concern was to curb the Navy's use of fixed price R & D contracting so as to "maintain the government's credibility as a reliable business partner: H.R. Conf. Rep. No. 100-498 at 623 (Dec. 22, 1987), not to bar essential defense procurement. The dissent's proposed nullification of this fully performed contract would do little for "the government's credibility as a reliable business partner: 1 A similar reaction was eloquently expressed by Chief Judge Joseph of the Oregon Court of Appeals in an award to his colleagues. See Western Communications, Inc. v. Deschutes County, 100 Or.App. 706, 788 P.2d 1013, 1017 (Or.App.1990) (Joseph, C.J., dissenting-In-part, concurring-in-part). WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 25 EFTA00797899 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) 2 CI. Rust v. Sullivan, 500 U.S. 173, 111 S.Ct. 1759, 114 L.Ed.2d 233 (1991) (construing the phrase -method of family planning" in an Act appropriating funds to the Department of Health and Human Services. subject to a proviso that stated: "None of the funds appropriated under this subchapter shall be used in programs where abortion is a method of family planning."). 3 See Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub.L. No. 104-134, 110 Stat. 1321-298. 4 Judge Wald dissented. She did not disagree with the court's understanding of the consequences of noncompliance with the statute, but dissented on the grounds that the state official's letter was "the functional equivalent" of a governor's letter. See Harbor Gateway, 167 F.3d at 607 (Wald, J., dissenting). 5 As my colleagues know, I spent some years of my life as a sea-going officer in the U.S. Navy; it is not easy for me to be critical of the Service, but the facts are what they are. 6 The concurring opinion stays within established statutory interpretation principles by attempting to redefine the scope of § 8118. Unfortunately, for the reasons well-explicated in the opinion of the court majority, the attempt to have this contract escape the clutches of § 8118 fails. 7 For the year 1987, AT & T was listed as 15th among the Top 100 Federal Contractors, with 1,438 procurement actions worth something over $2 billion. See Federal Procurement Data Center, Govemmentwide Information Systems Division, MVS. GSA, Central Office, Top 100 Federal Contractors 14 (Jan. 25, 1988). AT & T was 16th in 1988. See Federal Procurement Data Center, Governmentwide Information Systems Division, MVS, GSA, Central Office, Top 100 Federal Contractors 14 (Feb. 2, 1989). 8 Justice Rehnquist expressed the same sentiment in United Steelworkers of America v. Weber, 443 U.S. 193, 254, 99 S.Ct. 2721, 61 L.Ed.2d 480 (1979) (Rehnquist, J., dissenting) (-Finding the desired result hopelessly foreclosed by these conventional sources, the Court turns to a third source —the 'spirit' of the Act. But close examination of what the Court proffers as the spirit of the act reveals it as the spirit animating the present majority, not the 88th Congress."). 9 See, e.g., Loral Corp. v. United States, 193 Ct.CI. 473, 434 F.2d 1328, 1330 (1970) ("Mho type of contracts in question are firm fixed-price contracts and once the price was agreed upon, that price remains fixed and it is not subject to further negotiation, unless otherwise provided in the contract.'); see also 48 C.F.R. § 16.202-1 ("A firm fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract."); cf. ITT Fed. Servs. Corp. v. Widnall, 132 F.3d 1448, 1451 (Fed.Cir.1997) (holding that ITT was not entitled to recovery of normal severance costs because in a firm, fixed-price contract situation, the contractor assumes responsibility for all such costs that may be incurred). 10 See, e.g., ITT, 132 F.3d at 1451 (Fed.Cir.1997) (agreeing with the ASBCA that in a firm fixed-price contract situation, the contractor "assumes maximum risk and full responsibility for all such costs that may be incurred"); see also 48 C.F.R. § 16.202-1 (placing upon the contractor "maximum risk and full responsibility for all costs and resulting profit or loss"); Emerald Maintenance, Inc. v. United States, 925 F.2d 1425, 1430 (Fed.Cir.1991) (noting that the risk of loss was on the contractor who "should not be compensated for incurring added expenses resulting from assuming that risk"). 11 An action for goods sold and delivered, "founded on an implied assumpsit or promise, on the part of the defendant, to pay the plaintiff as much as the goods were reasonably worth." Black's Law Dictionary 1244 (6th ed.1990). 12 It should be obvious that, just as AT & T could not claim additional payment for goods for which it has been fully paid, it could not claim ownership of the goods for purposes of recovering them, for example, in a replevin action. A suggestion to the contrary could not be taken seriously. Even if the law would contemplate it, it is hard to imagine a major American contractor, whose fiscal lifeblood comes in substantial measure from contracts with the United States Government, even thinking about replevying a secret government weapon for resale elsewhere. Money is one thing; fiscal suicide is another. 13 See, e.g., Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245, 54 S.Ct. 146, 78 L.Ed. 293 (1933) ("A court of equity acts only when and as conscience commands; and, if the conduct of the plaintiff be offensive to the dictates of natural justice, then, whatever may be the rights he possesses, ... he will be held remediless in a court of equity." (internal quotations omitted) (quoting Deweese v. Reinhard, 165 U.S. 386, 390, 17 S.Ct. 340, 41 L.Ed. 757 (1897))). WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 26 EFTA00797900 American Tel. & Tel. Co. v. U.S., 177 F.3d 1368 (1999) 14 The methodology of statutory interpretation, with all its ramifications, has become one of the darlings of academic discourse, and is offered as a proper subject of study in many of the leading law schools, taught from modem-day casebooks. See, e.g., William D. Popkin, Materials On Legislation: Political Language and the Political Process (Found Press 2d ed.1997); William Eskridge & Philip Frickey, Cases and Materials on Legislation—Statutes and the Creation of Public Policy (West Pub. Co.2d ed.1995); Abner Mikva & Eric Lane, Legislative Process (Little, Brown 1995). End of Document O 2019 Thomson Reuters. No claim to original U.S. Government Works. WESTLAW © 2019 Thomson Reuters. No claim to original U.S. Government Works. 27 EFTA00797901