Crown Coat Front Co., Inc. v. United States

363 F.2d 407

• Court: Court of Appeals for the Second Circuit
• Decided: October 10, 1966
• Docket: 34, Docket 29710
• Status: Published

Opinions

WATERMAN, Circuit Judge

(with whom Chief Judge LUMBARD, Judges MOORE and SMITH, and in a separate statement, Judge FRIENDLY, concur. Judge ANDERSON dissents in a separate opinion with whom Judges KAUFMAN, HAYS and FEINBERG concur):

Plaintiff-appellant, on July 31, 1963, commenced its action against the United States in the United States District Court for the Southern District of New York. After the Government answered, pleading among other things that the action was time-barred, both parties moved for summary judgment. The court below granted the Government’s motion and dismissed the complaint on the ground that the complaint had not been filed within six years after plaintiff’s cause of action had accrued. 28 U.S.C. § 2401(a). Plaintiff’s appeal from the dismissal was heard by a panel of this court composed of Judges Waterman, Hays and Anderson, and while the case was sub judice before the panel, the active circuit judges, on December 9, 1965, voted to consider the case in banc without further briefs or oral argument. The thrust of appellant’s claim on appeal is that it was required fully to exhaust the administrative remedies it had agreed to pursue under the “disputes clause” of its contract before it could institute a suit against the United States, and that, having filed its suit within six years after the final decision in the matter by the Armed Services Board of Contract Appeals, it had therefore filed within six years from the date that its right of action accrued.¹

The Government, meeting this thrust, briefed its case on the sole issue whether, “pursuant to 28 U.S.C. § 2401(a), a contractor’s ‘right of action’ against the Government ‘first accrues’ (i) on the date of the alleged breach of contract by the Government, or (ii) on the date of a decision of the ASBCA denying the contractor’s claim.”

On May 14, 1956 the appellant entered into a contract with the Government to manufacture and deliver 89,786 felt canteen covers for a total agreed price of $60,691.76. The contract called for the use of mildew-resistant felt, made in accordance with certain established specifications, and provided for the submission of samples to the Government for testing and inspection, prior to manufacture. It also stipulated that if these samples did not meet specifications, the Government had “the right either to reject them or to require their correction.” In addition, the agreement included the standard “disputes” clause which required that, in the first instance, “any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided” by the Contracting Officer, from whose decision an appeal could be taken to the Armed Services Board of Contract Appeals (ASBCA).²

In accordance with the contract, appellant submitted four lots of felt samples for testing and inspection. After making laboratory tests in October and November 1956, the Government rejected the samples. Thereupon the appellant requested, and the Government agreed to accept, the delivery of the canteen covers made from the non-conforming felt. A contract modification of $.005 less per unit — a total of $270.01 — was agreed upon. Final delivery was made on December 14, 1956, and in all other respects the modified contract was fully performed.

The appellant claims that it was not until nearly five years later that it first learned the Government had improperly tested the samples by submitting them to a different test than contemplated by the contract. On October 4, 1961, appellant’s counsel wrote the Contracting Officer and demanded (1) a refund of the $270.01 price adjustment, and (2) an equitable adjustment for alleged increased extra production costs resulting from the initial rejection of the samples. On February 21, 1962, the Contracting Officer filed a decision in which he found that the Government had determined by “an established commercial test method” that the felt samples were nonconforming, and that the price reduction was proper. By opinion dated February 28, 1963, the ASBCA affirmed the Contracting Officer’s denial of the claim. On July 31, 1963, five months after the ASBCA decision, but more than six years after the December 14, 1956 final delivery of canteen covers and presentation of the final invoice, appellant brought this suit under the-Tucker Act, 28 U.S.C. § 1346(a) (2), demanding the $270.01 and a sum “not exceeding $10,000 as the court may deem just and equitable” as compensation for the alleged extra production costs. As stated above, on cross-motions for summary judgment the district judge dismissed the complaint, holding that it had been time-barred by the six year limit³ within which Congress had authorized suspension of the Government’s sovereign immunity from suit.⁴ This appeal followed. We affirm the district court.

At the outset we agree with the finding of the court below that the alleged breach of the contract occurred at the very latest on December 14, 1956. That was the date of the final delivery of the canteen covers found to be nonconforming by the use of a test not contracted for. The right of action against the Government accrued at the time of the breach of the agreement by the Government and not at some later time. This would appear to be settled by McMahon v. United States, 342 U.S. 25, 72 S.Ct. 17, 96 L.Ed. 26 (1951) where the Supreme Court held in a much more appealing case that a seaman’s claim for injuries arose when he was injured, and not when his claim had been finally administratively disallowed. The Court specifically rejected both the contention that the seaman could not sue until disallowance and that he had no cause of action until then. As the Court pointed out, even where statutes are to be construed liberally for the benefit of seamen, “it is equally true that statutes which waive immunity of the United States from suit are to be construed strictly in favor of the sovereign,” supra at 27, 72 S.Ct. at 19. Hence there the two year period of limitation built into the Suits in Admiralty Act⁵ was held to begin to run as of the date of the injury.

Following McMahon, and after the passage of the Wunderlich Act, May 11, 1954, e. 199, 68 Stat. 81, 41 U.S.C. §§ '321-322, we, in States Marine Corp. of Del. v. United States, 283 F.2d 776 (2 Cir. 1960) ruled against a libelant who claimed that the Government in December 1954 had breached a contract with it. We so ruled because the plaintiff’s libel had not been filed until September 1957, even though during 15 months of the elapsed 33 months the contractor’s • claim had been under consideration, first by the Contracting Officer and then by the ASBCA, pursuant to a “Disputes” clause in the contract like the “Disputes” clause in appellant’s contract.⁶

In fact, in States Marine we disposed of every claim appellant makes here. We held that the contractor should not await final decision of the ASBCA, in accord with his agreement to submit disputes to the agency officers, before commencing a protective suit, and that the time-bar period did not begin to run from the time of the final decision of the ASBCA, but, as the right of action accrued at the time of the breach, the time-bar began to run then. Moreover, we held, supra at 779, that the running of the time-bar was not tolled during the period when the claim was under administrative consideration.

Unless a reason exists for differently treating a suit brought pursuant to the permission granted by the Tucker Act from a suit brought pursuant to the permission granted by the Suits in Admiralty Act, we would be required to overrule the law of this circuit laid down in States Marine and reaffirmed in Isthmian S. S. Co. v. United States, 302 F.2d 69 (2 Cir. 1962) if we were to grant relief to the appellant here.

After final briefs had been filed by the parties the Third Circuit handed down its opinion in Northern Metal Co. v. United States, 350 F.2d 833 (3 Cir. 1965). In that case McMahon was followed as to the fixing of the time when the two-year time-bar began to run, but, in direct conflict with the opinion of our court in States Marine Corp. of Del. v. United States, supra, and the decisions following it (including the district court opinion appealed from in Northern Metal Co. v. United States, 230 F.Supp. 38 (E.D.Pa. 1964)) the Third Circuit held that the running of this time-bar was tolled during the pendency of the administrative proceedings. The issue of such a- possible tolling of the Tucker Act’s six-year time-bar had not been comprehended within the thrust of appellant’s contentions, see footnote 1; and that fact, together with the square conflict of the two circuits relative to the tolling of the Suits in Admiralty Act’s two-year time-bar, .caused the panel sua sponte to refer adjudication of the case to all the active judges.⁷

Though the more recent Suits in Admiralty Act appears in the U. S. Code, section for section, much as it was when adopted in 1920, and the various provisions, section for section, of the eighty-year old Tucker Act are split up, here and there, in Title 28 of the Code, both Acts of Congress are grants of rights to sue the Government, which, being the sovereign, has full immunity from standing any suit at all. As such, both Acts set forth the kinds of claims that may be brought, the courts within which these specified claims are to be litigated, and the length of time within which these specified claims may be presented after the causes of action arose, or accrued. These built-in limitations upon a more complete waiver of sovereign immunity spell out the ambit within which a would-be litigant seeking recovery from the sovereign must operate; in short, unless the would-be litigant operates within the area of the statutory grant, he is outside the jurisdiction the sovereign granted him, whether his cause of action is an impermissible one, he is in the wrong' forum, or his time in which to act has expired.

Of the time-bar condition, we said in States Marine:

“The two year time-bar of the Suits in Admiralty Act is unlike a time-bar period prescribed under an ordinary Statute of Limitations. Under an ordinary time-bar statute a claim is not extinguished after the statutory period has elapsed. It is only unenforceable. The time-bar of the Suits in Admiralty Act renders a claim against the United States not only unenforceable, but extinguishes the claim itself, for when the sovereign, immune from suit, consented to be sued it was made a condition of the right to sue that suits so authorized had to be brought within the time-bar period. McMahon v. United States, supra [342 U.S. 25, 72 S.Ct. 17, 96 L.Ed. 26 (1951)] ; Sgambati v. United States, supra [172 F.2d 297, 298, cert. denied, 337 U.S. 938, 69 S.Ct. 1514, 93 L.Ed. 1743 (1949)].

“It therefore follows that despite any maritime contractual agreements that parties may enter into with the United States such contractual agreements may not extend the time-bar period of two years prescribed by Section 5 of the Suits in Admiralty Act within which suit against the United States may be commenced. United States v. Wessel, Duval & Co., D.C. S.D.N.Y.1953, 115 F.Supp. 678. Accord, Atlantic Carriers, Inc. v. United States, D.C.S.D.N.Y.1955, 131 F.Supp. 1. Jurisdiction to hear a case brought at a later date than two years after the cause of action arose cannot be awarded to the court by agreement.” 283 F.2d 776, 778.

What we said in States Marine about the time-bar of the Suits in Admiralty Act applies to the time-bar of the Tucker Act. A Tucker Act claim is extinguished when the limiting time expires. The claim being extinguished, the court’s jurisdiction is gone, and jurisdiction to adjudicate the claim cannot be conferred upon the court by any agreement.

Prior to the passage of the Tucker Act in 1887, a suit could be brought against the United States in the Court of Claims provided it was brought within six years after the right to suit had accrued. The Tucker Act, adopted March 3, 1887, awarded a claimant whose claim against the Government was for a sum under $10,000 the right to present his claim to a specified United States District Court or Circuit Court “Provided, That no suit against the Government of the United States, shall be allowed under this act unless the same shall have been brought within six years after the right accrued for which the claim is made.” The provision of the Tucker Act granting grace to suitors to sue in a district court is now found in 28 U.S.C. § 1346(a) (2); the time-bar limitation is now found, since the 1948 edition of the Judicial Code, in 28 U.S.C. § 2401(a). These two subsections, each derived from the Tucker Act, should be read in connection with each other, Section 2401(a) jurisdiction-ally limiting the exercise of the right to sue which the sovereign granted under 28 U.S.C. § 1346(a).

In October 1887, the same year that the Tucker Act was adopted, in deciding an appeal to the U.S. Supreme Court from a decision of the Court of Claims, Justice Harlan stated in Finn v. United States, 123 U.S. 227, 232-233, 8 S.Ct. 82, 85, 31 L.Ed. 128, with reference to the permissive six-year period then, and now, applicable to that Court, the following:

The general rule that limitation does not operate by its own force as a bar, but is a defence, and that the party making such a defence must plead the statute if he wishes the benefit of its provisions, has no application to suits in the Court of Claims against the United States. An individual may waive such a defence, either expressly or by failing to plead the statute; but the government has not expressly or by implication conferred authority upon any of its officers to waive the limitation imposed by statute upon suits against the United States in the Court of Claims. Since the government is not liable to be sued, as of right, by any claimant, and since it has assented to a judgment being rendered against it only in certain classes of cases, brought within a prescribed period after the cause of action accrued, a judgment in the Court of Claims for the amount of a claim which the record or evidence shows to be barred by the statute would be erroneous.

In United States v. Greathouse, 166 U.S. 601, 17 S.Ct. 701, 41 L.Ed. 1130 (1897) the Tucker Act was construed, again by Mr. Justice Harlan. Finn v. United States was cited and followed. The Court held:

We may add that it was not contemplated that the limitation upon suits against the Government in the District and Circuit Courts of the United States should be different from that applicable to like suits in the Court of Claims. 166 U.S. at 606, 17 S.Ct. at 703. (Emphasis supplied.)

Shortly thereafter, in United States v. Wardwell, 172 U.S. 48, 19 S.Ct. 86, 43 L.Ed. 360 (1898) the matter has been laid to rest in the Supreme Court for seventy years. Mr. Justice Brewer, beginning the opinion for the unanimous Court in that ease stated, p. 52, 19 S.Ct. p. 88:

Section 1069, Rev.St., is not merely a statute of limitations, but also jurisdictional in its nature, and limiting the cases of which the Court of Claims can take cognizance. Finn v. United States, 123 U.S. 227 [8 S.Ct. 82, 31 L. Ed. 128].

This “jurisdictional” interpretation of the six-year time-bar has never been overruled by the United States Supreme Court. And the Court, consistent with this interpretation, has rejected the contention that the jurisdictional time-bar should not begin to run until after an administrative denial of a claimant’s claim when that contention has been advanced on the theory that there is no ground for a suit in court until all administrative remedies have been exhausted. Soriano v. United States, 352 U.S. 270, 77 S.Ct. 269, 1 L.Ed.2d 306 (1957).

Appellant states in his complaint that the decision of the Armed Services Board of Contract Appeals “is not entitled to finality under 68 Stat. 81, 41 U.S.C. §§ 321-322 for the reasons that it was capricious, arbitrary and not supported by substantial evidence * * Apparently this reference to the so-called “Wunderlich” Act of 1954 was intended to nip in the bud any government defense that this ASBCA decision was a final disposition of plaintiff’s claims. Of course this reference in its complaint brought pursuant to 28 U.S.C. § 1346(a) (2) is not construable as pleading a separate right to review that administrative result, and, too, as we have above stated, the fact of this decision has no bearing upon the accrual of plaintiff’s right to sue. Soriano v. United States, supra; McMahon v. United States, supra; States Marine Corp. of Del. v. United States, supra; Northern Metal Co. v. United States, supra, 350 F.2d at 836.

Even as we cannot accept February 28, 1963 as the date when appellant’s claim accrued we also cannot accept November 14, 1962 as the date of accrual, the date the Government refunded the erroneously withheld prompt payment discounts. A refunding adjustment made years after the final delivery of goods and the submission of a voucher for payment of those goods is not a “final voucher” submitted by the contractor, and, as pointed out by the court below, appellant’s right to sue accrued when its work was completed and its final voucher was submitted. See B-W Construction Company v. United States, 100 Ct.Cl. 227 (1943); Austin Engineering Co. v. United States, 88 Ct.Cl. 559; Acorn Decorating Corporation v. United States, 174 F.Supp. 949, 146 Ct.Cl. 394 (1959). As was said by the Court of Claims in Pink v. United States, 85 Ct.Cl. 121, cert. denied, 303 U.S. 642, 58 S.Ct. 641, 82 L.Ed. 1102 (1938):

* * * It has been repeatedly held by this court that under a contract to perform work, the completion and acceptance date starts the statute to run. It is the completion of the service called for under the contract, and not the date of any payment subsequently made.

Finally, it is clear that when Congress passed the Wunderlich Act that body did not intend to grant any new period of permissive delay within which the built-in six-year time-bar of the Tucker Act might be tolled. The House Committee Report is explicit on the point and demonstrates that Congress was fully aware of the established law and did not intend to affect it. H.R.Rep.No. 1380, 83d Cong., 2d Sess. (1954), 2 U.S.Code & Ad.News, pp. 2191, 2196 (1954), see Cosmopolitan Mfg. Co. v. United States, 297 F.2d 546, 549, 156 Ct.Cl. 142, cert. denied, sub nom. Arlene Coats v. United States, 371 U.S. 818, 83 S.Ct. 36, 9 L.Ed. 2d 60 (1962).

In view of the foregoing, we reiterate what we said in States Marine Corp. of Del. v. United States, supra, 283 F.2d at 779, and hold here that inasmuch as the six-year limitation is a restriction upon the jurisdiction of the district court, the running of the six-year time-bar could not be extended by the Disputes Clause agreement of the parties, or tolled during the period that appellant’s claim was being administratively considered.

In general, see United States v. Utah Construction and Mining Co., 86 S.Ct. 1545 (June 6, 1966) and United States v. Carlo Bianchi & Co., 373 U.S. 709, 83 S.Ct. 1409, 10 L.Ed.2d 652 (1963), if a claimant is uncertain whether he should proceed at once with a Tucker Act suit or first submit a dispute, pursuant to his agreement, to the ASBCA, he may always protect himself by instituting a “protective suit” within the six-year period permitted by the Tucker Act, staying its progress until after a final administrative decision, and then bringing it forward if the administrative decision is adverse to him.

The judgment below is affirmed.

1 . Appellant’s brief sets forth the questions involved as follows:

“1. AVhere the ‘Changes’ clause of the contract provides that any failure to agree to a contract price adjustment is a dispute concerning a question of fact within the meaning of the ‘Disputes’ clause, and the ‘Disputes’ clause provides a procedure for the settlement of disputes arising under the contract, 'must not the contractor pursue such administrative remedy and secure a final decision thereof before he may institute suit? Negatived by the Court below.

“2. AVhere the plaintiff-appellant brings suit within the statutory period of six years after the final decision of the Armed Services Board of Contract Appeals under the ‘Disputes’ article of the contract, is plaintiff-appellant barred by the statute of limitations? Affirmed by the Court below.”

In its reply brief, filed August 27, 1965, appellant reiterated the position that “Since plaintiff-appellant’s suit was filed within six years from the date that its right of action accrued, it was timely,” and that it “could not have sued until the decision of the Armed Services Board of Contract Appeals was rendered on February 28, 1963.”

2 . Such a clause is required for most government contracts. See 32 C.F.It. § 7.103-12 and 32 C.F.R. § 596.103-12. The clause in question in this case reads as follows:

“Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. AVith-in 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the Secretary, and the decision of the Secretary or his duly authorized representative for the hearing of such appeals shall, unless determined by a court of competent jurisdiction to have been fraudulent, arbitrary, capricious, or so grossly erroneous as necessarily to imply bad faith, be final and conclusive; provided that, if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any appeal proceeding under this clausé, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer’s decision.”

3 . Section 1346(a) (2) of Title 28 U.S.Code derives from the so-called Tucker Act, the Act of March 3, 1887, 24 Stat. 505, c. 359, entitled ""An act to provide for the bringing of suits against the Government of the United States.” It presently reads:

Ҥ 1346. "United States as defendant. (a) The district courts shall have original jurisdiction, concurrent with the Court of Claims,, of:

í}! * * *

(2) Any other civil action or claim against the United States, not exceeding $10,000 in amount, founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.”

The Tucker Act was a comprehensive statute and also included among other provisions a predecessor provision to the present 28 U.S.C. § 2401(a), which now reads:

Ҥ 2401. Time for commencing action against United States.

(a) Every civil action commenced against the United States shall be barred unless the complaint is'filed within six years after the right, of action first accrues. The action of any person under legal disability or beyond the seas at the time the claim accrues may be commenced within three years after the disability ceases.”

4 . We should make mention that the appellant, as a third string to its bow, attempted unsuccessfully to convince the district court that if, despite appellant’s arguments otherwise, the six-year period began to run prior to the final administrative .. order, it began to run at a date later than December 14, 1956, on November 14, 1962. On this date the appellant received a refund from the Government of $646.06 which the ASBCA had determined in a different proceeding had been erroneously deducted as prompt payment discounts the Government should not have withheld. As will appear from our later discussion herein we agree with the district court that ithere is no merit to this contention.

5 . Section 5 of the Suits in Admiralty Act, March 9, 1920, e. 95, 41 Stat. 525; 46 U.S.C. § 745.

6 . See footnote 2, supra, and footnote 1 in States Marine Corp. of Del. v. United States, supra at 777.

7 . Appellant’s action was commenced seven and one-half months after the six year jurisdictional limitation began to run, but if the time when administrative proceedings were pending is to be excluded from computation, the action was not time-barred,