Volentine and Littleton v. United States

145 F. Supp. 952, 136 Ct. Cl. 638, 1956 U.S. Ct. Cl. LEXIS 138

• Court: United States Court of Claims
• Decided: November 7, 1956
• Docket: 62-54
• Status: Published

Opinions

MADDEN, Judge.

The plaintiff partnership had a contract with the Government to clear the timber from the site of the reservoir which was to be created by the Whitney Dam on the Brazos River in Texas. It •sues to recover alleged extra costs which it incurred because of the Government’s actions, and liquidated damages assessed against it by the Government. The plaintiff says that while it was performing the contract, the Government closed "the dam and thereby inundated the lower part of the plaintiff’s work.

The plaintiff’s contract contained a provision, lodging in the Government’s ■contracting officer the power to decide ■disputes arising under the contract concerning questions of fact, giving to the contractor the right to appeal from such decisions to the head of the department, and providing that decisions so arrived at should be final. The contracting officer, upon claims made by the plaintiff, ■made awards which the plaintiff regarded as inadequate. It appealed to the head ■of the department who gave it no further relief. It now sues in this court, alleging that the departmental decision was not final because it was arbitrary, •capricious, fraudulent and not based on •substantial evidence.

The plaintiff’s allegations are obviously intended to place its case within the coverage of the act of May 11, 1954, 68 Stat. 81, 41 U.S.C.A. §§ 321-322, which says:

“That no provision of any contract entered into by the United States, relating to the finality or conclusiveness of any decision of the head of any department or agency or his duly authorized representative or board in a dispute involving a question arising under such contract, shall be pleaded in any suit now filed or to be filed as limiting judicial review of any such decision to cases where fraud by such official or his said representative or board is alleged: Provided, however, That any such decision shall be final and conclusive ^unless the same is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence.

“Sec. 2. No Government contract shall contain a provision making final on a question of law the decision of any administrative official, representative, or board.”

Long before the enactment of this statute, this court and the' Supreme Court of the United States has made decisions placing important limitations upon the finality provisions written into Government contracts. Cases in which the court concluded that the departmental decision was arbitrary, capricious, so grossly erroneous as to imply bad faith, or was not supported by substantial evidence, were held to be, by logical implication, not intended to be covered by the finality provision. But the Supreme Court, in United States v. Wunderlich, 342 U.S. 98, 72 S.Ct. 154, 96 L.Ed. 113, held that the only situation not validly covered by the finality clause was that of actual intentional fraud perpetrated by the departmental officials.

At the instigation of contractors and their counsel, the statute quoted above was enacted. Its legislative history shows that, in general, its purpose was to restore the law to what it was generally thought to be before the Supreme Court’s decision in the Wunderlich case.

In the instant' case, the plaintiff introduced, before our commissioner, evidence intended by it to show that the Government had breached its contract, and that there was no substantial support for the departmental decision that it had not done so. The plaintiff then rested.

The Government declined to introduce any evidence in its defense, taking the position that the plaintiff had failed to produce the only piece of evidence which was material at that stage of the case, i. e., the record of the evidence which was before the contracting officer and the head of the department when they made their decisions adverse -to the plaintiff. The Government says that one cannot apply the derogatory language which the statute uses to the departmental decision, unless one knows the evidence on which the decision was based, which might have been very different evidence from that presented in this court.

There is logic in the Government’s position. But we do not adopt it. It would require two trials in many cases involving this question. The first trial would include the presentation of the “administrative record” and its study to determine whether, on the basis of what was in it, the administrative decision was tolerable. But the so-called “administrative record” is in many cases a mythical entity. There is no statutory provision for these administrative decisions or for any procedure in making them. The head of the department may make the decision on appeal personally or may entrust anyone else to make it for him. Whoever makes it has no power to put witnesses under oath or to compel the attendance of witnesses or the production of documents. There may or may not be a transcript of the oral testimony. The deciding officer may, and even in the departments maintaining the most formal procedures, does, search out and consult other documents which, it occurs to him, would be enlightening, and without regard to the presence or absence of the claimant.

If we were to attempt to make a decision on the basis of the “administrative record” it would be a considerable task, in many cases, to gather together the pieces of that so-called record and get them all under our eyes at once. A helpful step in doing that would be to put the deciding officer on the stand and ask him what- he knew when he made his decision. That step would, of course, be unthinkable.

The second trial referred to above would be the trial on the merits, with all relevant evidence admissible, whether it was in the “administrative record” or not. That trial would be necessary in every case where we decided, on the first trial, that the departmental decision was not final.

What the Government asks us to do would run counter to the traditional handling of this problem. As we have said, the law as we applied it before the Supreme Court’s decision in the Wunder-lich case was substantially the same as what is in the 1954 statute. It was judge-made law instead of legislature-made law. There would have been the same logical reason for dividing such lawsuits into two stages then as now. But it was never done, nor, we think, urged upon the court. We think that those who agitated for the 1954 act, and the Congress which passed it, intended that, under the statute, we should go on as we had been doing before the Supreme Court’s decision. If this is a correct assumption, we should not, in order to tidy up the logic of our procedure, introduce new steps which might well have the effect of confusing the issues and delaying their decision.

In cases raising the questions discussed herein, the plaintiff must, in his petition, do more than repeat the derogatory language of the statute. He must allege facts which, if proved, will show that the departmental decision was intolerable, and hence was deprived of finality by the statute. Then there may be cases in which the plaintiff’s own proof, before the introduction of any evidence by the Government, will show that the departmental decision, though we might disagree with it, was adequately founded. In such cases the modern substitute for a demurrer to the evidence would stop the case at that stage. In any event, we think that the procedure which worked reasonably well before the statute was enacted, should not now be discarded.

Although, as appears above, the Government declined to introduce any evidence at the hearing before our commissioner, we shall not foreclose it from now introducing evidence, if it wishes to do so. It was seeking to obtain a decision on an important legal question and we • will- not penalize it for having done so. The case is remanded to the commissioner of this court, who will proceed with it in the regular course.

It is so ordered.

JONES, Chief Judge, and WHITAKER, Judge, concur.