American Telephone & Telegraph Co. v. United States

48 Fed. Cl. 156, 2000 U.S. Claims LEXIS 229, 2000 WL 1669885
CourtUnited States Court of Federal Claims
DecidedNovember 6, 2000
DocketNo. 93-483 C
StatusPublished
Cited by11 cases

This text of 48 Fed. Cl. 156 (American Telephone & Telegraph Co. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Telephone & Telegraph Co. v. United States, 48 Fed. Cl. 156, 2000 U.S. Claims LEXIS 229, 2000 WL 1669885 (uscfc 2000).

Opinion

OPINION

WIESE, Judge.

INTRODUCTION

an stage in this lawsuit, this court issued an opinion holding that American Telephone & Telegraph Company’s (AT & T) fixed-price incentive-type contract with the Navy was void ab initio and that, in its place, AT & T was entitled to be paid for its contract efforts on an quantum meruit basis pursuant to an implied-in-fact contract. American Tel. & Tel. Co. v. United States, 32 Fed.Cl. 672 (1995).1

The basis for this ruling was the Navy’s failure to comply with a statute — Section 8118 of the Defense Appropriations Act of 1987, Pub.L. No. 100-202, 101 Stat. 1329-84 (1987) — that prohibited the Department of Defense from either obligating or expending appropriated funds on fixed-price contracts involving the acquisition of major systems or sub-systems in excess of $10 million, absent a determination in writing that “program risk has been reduced to the extent that realistic pricing can occur, and that the contract type permits an equitable and sensible allocation of program risk between the contracting parties.” Although the contract that the Navy awarded to AT & T in 1987 came within the scope of Section 8118 — a fixed-price incentive fee contract in the initial amount of $19.2 million involving research, development, and production of a ship-towed undersea radar system — the determination required by the statute was never made. Accordingly, this court concluded that AT & T’s contract was contrary to law and therefore void.

The ruling was reversed on appeal. In an en banc decision entered pursuant to an interlocutory appeal, the Federal Circuit ruled that courts should refrain from invalidating government contracts, particularly where those contracts have been fully performed, unless that outcome is expressly required by the statute or regulation that the contract contravenes or is warranted on the basis of the offended law’s legislative history. In this case, the court of appeals concluded that “[b]oth the DoD administration of § 8118, and the congressional response to this administration, make clear that Congress did not intend that this enactment would terminate fully performed contracts because of this flawed compliance.” 177 F.3d 1368,1375 (1999). Pursuant to this ruling, the case was remanded to this court for further proceedings.

BACKGROUND

In the contract at issue, AT & T agreed to research, develop and produce the sonar component of a ship-towed undersea surveillance system, formally called the Reduced Diameter Array Subsystem (the RDA Subsystem), for the fixed-price of $19 million. In the performance of this work, however, AT & T incurred costs far in excess of the [158]*158adjusted amount of its contract ceiling price. After unsuccessfully seeking the recovery of these additional costs at the administrative level, AT & T brought suit in this court.

In the complaint that it initially presented here, AT & T sought recovery under two counts. Count I asserted a right to contract reformation, ie., conversion of the contract to a cost-reimbursement undertaking, based on the contention that Section 8118, as well as certain procurement regulations and directives, precluded award of the RDA contract as a fixed-price development contract. Count I also advanced the argument that the RDA contract was void for illegality and that AT & T was therefore entitled to recover under quantum meruit. Count II added the argument that reformation was appropriate because the RDA contract resulted from a mutual mistake.

Following the return of the case to this court, AT & T, now joined by Lucent Technologies, Inc., moved to amend the complaint to add new theories of recovery. In the amended complaint, plaintiffs essentially restate the original grounds for relief — illegality and mutual mistake (now Counts I and V respectively) — and add four additional counts. The additional counts allege that the government fraudulently induced the contract (Count II), that the government breached the contract (Count III), that there was a failure of consideration (Count IV), and that the government wrongfully took plaintiffs’ property, without compensation, in violation of the Fifth Amendment to the United States Constitution (Count VI).

The government now moves for dismissal of all counts of the amended complaint. We are urged to dismiss Counts II through TV (fraud in the inducement, breach of contract, failure of consideration) and Court VI (taking), for lack of subject matter jurisdiction, and Count II (fraud in the inducement) for failure to plead fraud with the particularity required under RCFC 9(b). In the alternative, defendant contends that all counts should be dismissed for failure to state a claim upon which relief can be granted. Plaintiffs oppose dismissal and ask that we set the matter for trial on the merits.

On the basis of the parties’ briefs and the oral argument that was heard on October 25, 2000, the court now concludes that the amended complaint should be dismissed for failure to state a claim upon which relief can be granted.

DISCUSSION

We begin our discussion with the government’s contention that the additional grounds for relief that plaintiffs introduced in the amended complaint represent claims not previously submitted to the contracting officer and therefore are claims that may not now be heard by this court. We do not accept this argument.

To be sure, the government is correct on its basic point: under the Contract Disputes Act, 41 U.S.C. §§ 601-613 (1994 & Supp. IV 1998), a contracting officer’s decision on a claim is a prerequisite to this court’s later exercise of jurisdiction over the same claim. Paragon Energy Corp. v. United States, 227 Ct.Cl. 176, 645 F.2d 966, 971 (1981). The problem with the government’s argument, however, rests in its assertion that plaintiffs’ additional grounds for relief are new claims, that is, claims not previously considered by the contracting officer and therefore not now assertable here. We do not agree with this contention. Modern procedural law defines a claim as “an aggregate of facts which in various combinations, all comprising a common core or nucleus of the facts, may support a number of substantive legal theories with corresponding remedies.” Restatement (Second) of Judgments § 24 cmt. c (1982). The same definition applies to claims arising under the Contract Disputes Act. See Placeway Constr. Corp. v. United States, 920 F.2d 903, 907 (Fed.Cir.1990) (recognizing that claims are distinct “if the claims as presented to the [contracting officer] will necessitate a focus on a different or unrelated set of operative facts as to each claim”). The application of this standard dictates rejection of the government’s argument.

Both the claims that AT & T initially submitted to the contracting officer and the additional grounds for relief raised in the amended complaint turn on the same opera[159]

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Bluebook (online)
48 Fed. Cl. 156, 2000 U.S. Claims LEXIS 229, 2000 WL 1669885, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-telephone-telegraph-co-v-united-states-uscfc-2000.