Federal Circuit Year-In-Review 2011
Certainty and Uncertainty in Federal Government Contracts Law
Daniel P. Graham*; Brian Walsh**; W. Barron A. Avery***; Jon Burd****; Tracye Winfrey Howard*****; Heidi Bourgeois******
Table of Contents
I. Introduction 1
II. 2011 By the Numbers 8
III. The Federal Circuit On Appeal 15
A. The “Go Away” Principle—General Dynamics Corp. v. United States 16
B. Parallel Suits Seeking Different Relief---United States v. Tohono O'dham Nation. 22
C. Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. 28
IV. Key Federal Circuit Decisions That Enhance Certainty in Government Contracts Law 32
A. OCIs, “Hard Facts,” and the Deference Due to Contracting Agencies and GAO Protest Recommendations—Turner Construction Co. v. United States 32
B. Whether Contractors Can Challenge Negative Performance Evaluations Under the CDA—Todd Construction L.P. v. United States 40
C. SNF Damages—Boston Edison Co. v. United States 47
D. Standing To Sue The Government: When Is a Shareholder or Holding Company Able to Sue? —First Annapolis Bancorp, Inc. v. United States 55
E. Elimination of the NAFI Doctrine—Slattery v. United States 59
F. Congress’s Ability to Remove the COFC’s Tucker Act Jurisdiction—Cardiosom, LLC v. United States 64
G. The Role of Impossibility in Sovereign Acts Analysis—Klamath Irrigation District v. United States 68
H. The Bounds of the Offer and Implied Contract—Chattler v. United States 72
I. Suretyship and Equitable Subrogation—Lumbermens Mutual Casualty Co. v. United States 76
J. Clarifying the Standard for Invoking Board of Contract Appeals Jurisdiction Under the Contract Disputes Act—Engage Learning, Inc. v. Salazar 86
V. Key Federal Circuit Decisions that Inject Uncertainty Into Government Contracts Law 88
A. Consistency at the Expense of Accuracy—Gates v. Raytheon 88
B. Resetting the Legal Elements for Equitable Estoppel—Mabus v. General Dynamics C4 Systems, Inc. 92
C. The “Unavoidable Delays” Defense in Spent Nuclear Fuel Cases—Southern Nuclear Operating Co. v. United States 99
VI. Conclusion 104
I. Introduction
When creating the Federal Circuit, one of Congress’s principal concerns was the “special need for nationwide uniformity” in certain areas of the law.[1] The “Federal Circuit was designed to provide ‘a prompt, definitive answer to legal questions’” in areas of law where “appellate courts reach inconsistent decisions on the same issue, or in which—although the rule of law may be fairly clear—courts apply the law unevenly when faced with the facts of individual cases.”[2] Contract disputes involving the Federal Government “present one of the principal areas in which Congress sought such uniformity,” and, therefore, Congress vested the Federal Circuit with jurisdiction over “‘all federal contract appeals in which the United States is a defendant.’”[3]
In 2011, the Federal Circuit made substantial progress in achieving its objective of providing “definitive answers”—i.e., greater certainty—in Government Contracts law. For example, Turner Construction Co. v. United States made clear that plaintiffs must identify concrete indications of actual or potential organizational conflicts of interest (OCIs) in order to successfully challenge a contract award in a bid protest, and that a procuring agency’s assessment of such an OCI should be given deference.[4] Turner rejected a Government Accountability Office (GAO) recommendation that the award be canceled due to an OCI, agreeing with the Court of Federal Claims (COFC) that the GAO’s OCI findings were based on “vague allegations” or “mere suspicion and innuendo,” rather than “hard facts,” and that the GAO had failed to appropriately consider the agency’s analysis.[5] Similarly, in Todd Construction L.P. v. United States, the Federal Circuit clarified that a contractor can dispute a negative performance evaluation under the Contract Disputes Act (CDA), settling a split between the Court of Federal Claims and the Boards of Contract Appeals on this issue.[6] Boston Edison Co. v. United States addressed several issues pertaining to the damages available in cases involving the Government’s ongoing breach of contracts to collect and dispose of nuclear waste.[7] And in Slattery v. United States, an en banc panel of the Federal Circuit effectively eliminated the Non-Appropriated Funds Instrumentality Doctrine, which for years had served as a confusing and sometimes arbitrary limitation on the COFC’s Tucker Act jurisdiction.[8]
In three appeals, however, the Federal Circuit injected substantial uncertainty into its government contracts jurisprudence. Over the objections of five judges in two written dissents, the Court in Gates v. Raytheon Co., refused to rehear a 2009 decision that appeared to acknowledge that prior Federal Circuit precedent had potentially misinterpreted a key statute providing for the recovery of interest by the Government for violations of the Cost Accounting Standards (CAS) in certain cost accounting matters.[9] By contrast, a threejudge panel in Mabus v. General Dynamics C4 Systems, Inc., appears to have replaced the test for equitable estoppel that had been applied to government contracts cases for the last 40 years with a test derived from the Court’s patent jurisprudence.[10] The panel’s majority opinion is not clear whether or when the old test may still apply, and the application of estoppel in that case effectively meant that “the [G]overnment need not know the content of its contracts and the contractor cannot rely on a provision that is for its benefit.” An approach that the dissent correctly recognized “[does] not impart stability to government contracting.”[11] And in Southern Nuclear Operating Co. v. United States, another three-judge panel appeared to contradict a key en banc opinion in the saga of the Spent Nuclear Fuel (SNF) litigation.[12]
More so than in past years, it is difficult to identify “unifying themes” in the Federal Circuit’s precedential government contracts decisions.[13] What struck us instead was the ability of most of those decisions—disparate as they may be—to further Congress’s desire for “definitive answer[s]” to important questions in government contracts law.[14] Accordingly, this Article proceeds in four parts: Section II provides a statistical overview of each judge’s participation in the Court’s 2011 government contracts decisions. Section III then examines how the Federal Circuit’s government contracts jurisprudence fared before the Supreme Court in 2011. Sections IV and V discuss the key Federal Circuit decisions that enhance and detract from the goal of certainty in government contracts law.
Before proceeding, we recognize that the Court lost its last original member on July 6, 2011, when Judge Friedman passed away at the age of 95.[15] To those who knew Judge Friedman only through his Court biography or in the many articles written in his memory since his passing, Judge Friedman was an impressive man. Between arguing over 80 cases before the Supreme Court, serving more than 30 years as a federal judge—beginning with his appointment as the last Chief Judge of the Court of Claims—and his nearly 70 years in government service, Judge Friedman had one of the most distinguished legal careers of the last 100 years. However, to those who knew Judge Friedman the man (his family, his colleagues, his more than 40 law clerks, and those he interacted with every day inside and outside the court),[16] the most impressive thing about the Judge was not that he was an amazing jurist—but that he was an amazing person. His humility, kindness, and zeal for life are the traits that those who knew him only hoped they could one day come close to mirroring. Those are also the traits that make him missed by so many.
For the government contracts bar, Judge Friedman’s passing leaves the Federal Circuit without one of its most experienced Judges. As a practical matter, given the Federal Circuit’s diverse subject matter jurisdiction and the fact that government contracts appeals represent approximately six percent of the Court’s caseload,[17] it is unreasonable to expect that the Federal Circuit will ever have more than a handful of Judges with pre-nomination experience in government contracts. The Federal Circuit’s expertise in government contracts depends primarily on the judge’s experience with this area of the law as judges (i.e. reviewing briefs, precedent, and other authorities; hearing oral argument; and deciding appeals). Indeed, a critical concern for the government contracts bar discussed below is whether the Federal Circuit’s judges can develop this expertise given the relatively small volume of government contracts appeals that they handle. Regardless, as the last original member of the Federal Circuit and a former Court of Claims Judge, it is reasonable to assume that Judge Friedman had more experience deciding government contracts appeals than any of his colleagues on the Court. His presence on the Court, therefore, will be greatly missed by the entire the government contracts bar.
II. 2011 By the Numbers
Achieving Congress’s objective of “nationwide uniformity” in government contracts law requires that the Federal Circuit develop a degree of expertise in this area of the law. As former Chief Judge Paul Michel recognized in 2010, “the Federal Circuit has less [g]overnment contracts expertise and less opportunity to develop such expertise than did the Court of Claims, leading to what Judge Michel called ‘less than optimal doctrinal development’ by the Federal Circuit in the [g]overnment contracts area.”[18] Chief Judge Michel went on to suggest that “the appointment of one or more individuals with [government contracts expertise and experience] could go a long way towards raising the [C]ourt’s understanding of the real-world effects of its decisions in the [g]overnment contracts area.”[19]
We certainly agree with Chief Judge Michel that the Federal Circuit’s government contracts jurisprudence would benefit from the appointment of Judges with “real-world” experience advising government contractors or procuring agencies and litigating protests and disputes. Presently, the only judges on the Court with significant prenomination experience in government contracts law are Chief Judge Rader and Judge Mayer, owing principally to their previous service on the Claims Court (now the Court of Federal Claims).[20] Realistically, however, the appointments process will not fundamentally change the Federal Circuit’s government contracts expertise. Government contracts appeals represented approximately six percent of the Federal Circuit’s caseload in FY 2011,[21] and this level has held steady for the last five years.[22] Examined from a different angle, the Federal Circuit’s precedential decisions in government contracts appeals represented little more than ten percent of the precedential opinions issued in 2011.[23] Although “one or more” is certainly better than none, it is not reasonable to expect that the Federal Circuit will ever have more than a handful of judges with substantial pre-nomination experience in government contracts.[24] As a result, the Court’s judges will have to develop its expertise in government contracts “on the job.”
In his review of the Federal Circuit’s 2010 Government Contracts decisions, Professor Steven Schooner analyzed the number of precedential opinions each Federal Circuit Judge participated in for both 2010 and 2009, noting the number of occasions that each Judge wrote for the panel or majority, as well as the number of occasions that each Judge wrote separately to concur or dissent.[25] Professor Schooner’s analysis noted several salient points, including: “most Federal Circuit judges were not exposed to a large number of [g]overnment contracts cases”; and “only one Federal Circuit judge, Judge Bryson, wrote more than two government contracts related decisions.”[26] Based on his analysis, Professor Schooner questioned “whether this rather light volume of government contracts decisions permits judges to become specialists.”[27]
Table 1 below provides the same information for 2011, and, on the whole, begs the same question:
Table 1: Government Contracts Activity Per Federal Circuit Judge 2011
Judge / Partic-ipated / Drafted / Partic-ipated w/o writing / Concur-ring / Dissen-tingActive Judges
Rader / 5 / 0 / 5 / 0 / 0
Lourie / 6 / 1 / 5 / 0 / 0
Bryson / 9 / 1 / 7 / 0 / 1
Gajarsa[28] / 7 / 1 / 1 / 1 / 4
Linn / 8 / 2 / 6 / 0 / 0
Dyk / 9 / 3 / 6 / 0 / 0
Prost / 8 / 4 / 4 / 0 / 0
Moore / 6 / 2 / 4 / 0 / 0
O'Malley / 6 / 2 / 4 / 0 / 0
Reyna / 0 / 0 / 0 / 0 / 0
Wallach / 0 / 0 / 0 / 0 / 0
Senior Judges
Clevenger / 2 / 0 / 2 / 0 / 0
Friedman / 0 / 0 / 0 / 0 / 0
Newman / 8 / 1 / 3 / 0 / 4
Archer Jr. / 0 / 0 / 0 / 0 / 0
Mayer / 2 / 0 / 2 / 0 / 0
Plager / 3 / 3 / 0 / 0 / 0
Schall / 2 / 1 / 1 / 0 / 0
The data set forth in Table 1 is similar to the data for 2010 in one important respect—judges generally were not exposed to a significant number of government contracts cases. As in 2010, every judge participated in fewer than ten government contracts related appeals that generated a precedential opinion. The active judges, excluding Judge Reyna who was sworn into the Court on April 7, 2011,[29] and Judge Wallach who was sworn in on November 18, 2011,[30] participated in an average of seven government contracts related appeals that generated a precedential opinion. This represents only a modest increase from 2010, when Professor Schooner observed that “the vast majority of judges participated in fewer than half a dozen, government contracts related matters.”[31]