ROSEN, District Judge.
Plaintiff/Appellant RMI Titanium Company appeals the decision of the United States District Court for the Northern District of Ohio dismissing RMI's Complaint in its entirety for lack of subject matter jurisdiction. For the reasons stated herein, we affirm.
This action arises out of the termination of a government contract to supply uranium extrusions. For 25 years, Plaintiff RMI Titanium Company ("RMI") had directly contracted with the Department of Energy (the "DOE") to produce uranium extrusions at RMI's site in Ashtabula, Ohio. In 1988, however, the DOE interposed Defendant Westinghouse Environmental Management Company ("WEMCO")
The RMI/WEMCO subcontract contained a "Disputes" clause which provided that "all disputes arising under or related to this contract" were to be resolved by submitting them to the designated Department of Energy Contracting Officer ("CO"), whose decision would be "final and conclusive and not subject to review by any forum, tribunal or Government agency" except for "an appeal to the DOE Board of Contract Appeals (EBCA)".
Shortly after RMI and WEMCO entered into the subcontract, at the DOE's direction, WEMCO instructed RMI to cease production. In accordance with the Disputes clause, RMI then submitted claims to the Contracting Officer seeking over $125 million in damages for WEMCO's and the DOE's actions. On January 4, 1993, the CO issued his decision finding merit in only one of RMI's claims for which he awarded RMI only $476,837.
Apparently dissatisfied with the Contracting Officer's decision, instead of appealing to the EBCA, four days after the CO issued his decision, on January 8, 1993, RMI instituted this lawsuit, asserting in its Complaint the same allegations it made in its claims to the CO.
In response to RMI's Complaint, the Defendants moved to dismiss pursuant to Fed. R. Civ. Pro. 12(b)(1). The Westinghouse Defendants
District Judge Thomas Lambros referred Defendants' motions to Magistrate Judge David Perelman for Report and Recommendation. The Magistrate Judge, in two lengthy R & Rs, recommended that both the Westinghouse Defendants' and the Government's motions to dismiss be granted. In a 16-page Memorandum Opinion and Order, Judge Lambros adopted Magistrate Judge Perelman's R & Rs and dismissed RMI's action in its entirety. RMI now appeals.
II. FACTUAL BACKGROUND
RMI is a manufacturer of titanium products and a provider of extrusion services. From 1962 through 1988, RMI was under a direct contract with the Department of Energy to provide uranium extrusions which were then sent to the DOE's Fernald, Ohio facility for use in connection with the DOE's nuclear weapons program. RMI used a DOE-owned press and other DOE-owned equipment at RMI's Ashtabula, Ohio site to produce the uranium extrusions. The DOE also permitted RMI to use the government-owned equipment for its own commercial activities which included providing extrusions and other goods for private customers in the automotive, electronic, aerospace and superconductor industries. For this commercial use, RMI paid the DOE a small fee.
THE RMI/WEMCO SUBCONTRACT
In April 1988, at the DOE's request, RMI entered into a subcontract with WEMCO under which RMI continued to provide extrusions to the DOE, only now under the managerial oversight of WEMCO. The subcontract also provided for RMI's continued commercial use of DOE-owned equipment. With respect to such commercial use, the subcontract specifically provided:
[Subcontract, C-1, JA p. 208.]
The subcontract also contained explicit provisions for the resolution of disputes "arising under or relating to" the contract. Article A.20 of the General Provisions of the contract provides:
[JA p. 133.]
Shortly after the execution of the RMI/WEMCO subcontract, the DOE ceased uranium production at Fernald and, therefore, no longer needed the uranium extrusions produced by RMI. In October 1989, the DOE directed WEMCO to cease purchasing uranium extrusions from RMI. According to RMI, WEMCO nonetheless represented that RMI's status as a DOE extrusion resource would continue until September 30, 1991, the formal expiration date of the subcontract.
Subsequently, in January 1990, WEMCO instructed RMI to terminate all extrusion processing of radioactive materials using the DOE equipment but to continue performing environmental remediation at the site as directed by WEMCO. Three months later, in March 1990, WEMCO directed RMI to immediately initiate the de-licensing of all extrusion operations at the Ashtabula facility, effectively putting to an end not only RMI's DOE production but its other commercial production, as well.
Defendants contend that WEMCO's directives came at the instruction of the DOE, and that RMI was aware of that fact. (In defending the motion to dismiss, however, RMI disputes this contending that WEMCO acted solely on its own and for its own private interests.
As evidence of RMI's understanding that the directives originated from the DOE, WEMCO points to RMI's 1990 and 1991 10-K forms submitted to the SEC which include the following statement:
[JA p. 352. See also JA p. 346.]
RMI'S ADMINISTRATIVE CDA CLAIMS
After it was ordered to cease extrusion operations, RMI filed three separate claims with the DOE Contracting Officer as provided in the "Disputes" clause in the RMI/WEMCO contract seeking declaratory relief and recovery of damages in excess of $150 million.
THE AUGUST 1, 1991 CLAIM
In the first claim filed on August 1, 1991, RMI sought $12.13 million in damages for the termination of its DOE extrusion contract, for the loss of its commercial business, and for the loss of environmental clean up fees.
Notwithstanding its acknowledgement of having known at least since 1987 that the DOE's demand for RMI's extrusion services was dwindling, RMI alleged in its August 1991 claim that it relied on WEMCO's assurance that its contract for DOE extrusion services, which was not scheduled to terminate until 1991, would remain unchanged. According to RMI:
[JA p. 218.]
RMI alleged that the termination of its government contract and alleged attendant rights to continue using the DOE press for private commercial business and to control, without WEMCO supervision, the environmental clean up of the Ashtabula site were achieved through WEMCO's "trumped up charges of RMI's supposed incompetence" and that in so doing, WEMCO "acted solely for its own profit." [JA p. 221-222.] However, this assertion is contradicted by the "facts" even as alleged by RMI in its August 1991 claim. In the claim RMI states that it was at a joint meeting of
THE SEPTEMBER 17, 1991 CLAIM
Six weeks later, on September 17, 1991, RMI filed a second claim with the DOE designated Contracting Officer for an additional $15 million in damages which it claimed was owed to it for the loss of environmental management fees it contended it was entitled to under the Subcontract. In RMI's own words, this second claim was "premised on WEMCO's wholesale interference with RMI's restoration and remediation activities under [the] Subcontract." [JA p. 264.]
THE NOVEMBER 10, 1992 CLAIM
In November 1992, RMI filed yet a third claim with the Contracting Officer, and asked for "an immediate Contracting Officer's decision". In this claim, RMI alleged that the DOE refused to acknowledge its funding obligations to RMI under the RMI/WEMCO subcontract for environmental clean up fees. RMI asked the CO to order the DOE to immediately pay to RMI $125 million, which it contended was the anticipated cost of environmental restoration of the Ashtabula site. [See JA 327-330.]
All three of RMI's claims to the DOE Contracting Officer closed with the following "Certification":
ASSIGNMENT OF SUBCONTRACT BACK TO DOE
Before the Contracting Officer issued any decision on RMI's claims, on November 30, 1992, WEMCO and RMI executed a "Modification" to their Subcontract. The purpose of the Modification was to assign the entire subcontract back to the Department of Energy. It also extended the term of the subcontract through March 31, 1993.
The Modification was entered into pursuant to Article A.7 of the Subcontract which provided:
The Modification itself provided:
[JA p. 333.]
THE CONTRACTING OFFICER'S DECISION
On January 4, 1993, the Contracting Officer issued his "final decision" on the three claims. The CO noted that RMI and WEMCO had attempted to settle the claims and they ultimately agreed in August 1992 (i.e., prior to RMI's submission of its last claim for $125 million) to WEMCO's payment of $5,335,875. WEMCO submitted the settlement to the DOE for approval on August 21, 1992. However, on October 27, 1992, DOE rejected the settlement agreement. (Apparently,
In his written decision, the Contracting Officer discussed all of RMI's various claims for lost contract revenues; loss of its private commercial extrusion business; loss of the use of its property during the time required for remediation; loss of the use of the equipment owned by the government and anticipated lost revenues as a result of being denied the right to perform its own remediation and clean-up of the property. The CO found RMI to be entitled to damages under only one of the elements of its three separate claims, to-wit, the claim for lost use of its facilities during the time it would take to complete environmental remediation and restoration. Accordingly, the CO ordered payment to RMI of $476,837.81 to be paid directly to RMI by Treasury Check provided that RMI would sign and return a release for this element of its claim no later than February 8, 1993. Id.
The last section of the CO's Decision is captioned "APPEAL RIGHTS." It provides:
[JA p. 340.]
RMI'S INSTITUTION OF THIS ACTION
Rather than appeal to the EBCA, four days after the CO issued his decision, RMI filed a Complaint in the District Court for the Northern District of Ohio seeking declaratory relief and damages in excess of $150 million. In that Complaint, RMI made essentially the same allegations that it made in its claims to the Contracting Officer, i.e., that the Westinghouse Defendants libeled RMI to the DOE; engaged in a conspiracy to terminate RMI's contract to provide the Government with extrusion services; interfered with and conspired to eliminate RMI's commercial extrusion business to permit Westinghouse to take over the extrusion services market; and conspired to remove RMI from the environmental restoration of its Ashtabula site.
In its Complaint in this action, RMI alleged that it is entitled to damages for these actions under several legal theories of recovery. Plaintiff alleged that the Defendants' "conspiracy to drive RMI out of the commercial extrusion business" amounted to (1) a violation of the Sherman Act and Ohio's Monopoly Statute; (2) tortious interference with business relations, and (3) unfair competition under Ohio law. Plaintiff also alleged that Defendants' accusations of RMI's incompetence and inability to perform its own environmental restoration amount to defamation and a violation of the Lanham Act (Count 4). RMI further alleged a count of "bad faith breach of [RMI's] subcontract" on the part of WEMCO (Count 5) and a count of "estoppel," predicated upon WEMCO's alleged representation in October 1991 that RMI's subcontract would remain unchanged through its scheduled expiration date in September 1991 (Count 6). However, nowhere in Plaintiff's Complaint was it even mentioned that RMI had filed administrative claims with the DOE Contracting Officer and received an unfavorable ruling from the CO.
In response to Plaintiff's Complaint, the Westinghouse Defendants moved to dismiss pursuant to Fed. R. Civ. Pro. 12(b)(1) arguing that the federal court was divested of jurisdiction over Plaintiff's action by virtue of the Contract Disputes Act and/or the Disputes Clause of the RMI/WEMCO Subcontract.
In response to the Westinghouse Defendants' Motion to Dismiss, RMI argued that its claims in this judicial action are not preempted by the Contract Disputes Act contending (1) that claims raised by subcontractors against private parties are not within the province of the CDA and (2) the claims in this action do not arise from any contract with the Government. With respect to the Defendants' alternative argument that the federal court was precluded from hearing Plaintiff's claims by virtue of the Subcontract Disputes Clause, RMI argued that that clause "must be construed to encompass only `sponsorship' claims" — i.e., claims that a subcontractor asks a prime contractor to assert on the subcontractor's behalf — as opposed to "direct" claims asserted by the subcontractor.
The Magistrate Judge and the District Judge rejected all of RMI's arguments and found that RMI's claims in this action were "claims relating to a government contract" and, as a result, all of the claims were subject to the CDA. Therefore, the court concluded that federal court jurisdiction over the claims was preempted. The court also determined that even if the CDA did not govern Plaintiff's action, RMI was precluded from pursuing its claims in a judicial forum by virtue of the Disputes Clause in the RMI/WEMCO Subcontract.
As indicated above, RMI also named a DOE employee, Ray Hansen, as a party-defendant. The Government moved to substitute in for Mr. Hansen and concurrently moved to dismiss contending that RMI's claims against Defendant Hansen were barred by application of the doctrine of sovereign immunity. Alternatively, the Government argued that, even if sovereign immunity did not apply, the claims would only be cognizable under the Federal Tort Claims Act and RMI failed to exhaust its administrative remedies under that Act.
A. STANDARD OF REVIEW APPLICABLE TO DISMISSALS UNDER FED. R.CIV.PRO.12(b)(1)
The Westinghouse Defendants argue that the "clearly erroneous" standard is the appropriate standard of review applicable in reviewing dismissals for lack of jurisdiction under Fed. R. Civ. Pro. 12(b)(1). The Government and Plaintiff argue that Rule 12(b)(1) dismissals, as with dismissals under
The various Rule 12 motions to dismiss on the pleadings (and the standards applicable to such motions) are often confused with each other. In the oft-quoted decision of the Third Circuit in Mortensen v. First Federal Savings and Loan Ass'n, 549 F.2d 884, 890 (3d Cir.1977), the court explained the distinction between dismissals under Rule 12(b)(1) and Rule 12(b)(6):
549 F.2d at 890-891 (emphasis added). See also, Thornhill Publishing Co. v. General Telephone & Electronics Corp., 594 F.2d 730, 732-734 (9th Cir.1979); Williamson v. Tucker, 645 F.2d 404, 412-414 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981); Osborn v. United States, 918 F.2d 724, 728-730 (8th Cir.1990); Holt v. United States, 46 F.3d 1000, 1002-1003 (10th Cir.1995).
The Sixth Circuit adheres to the 12(b)(1)/12(b)(6) distinction noted by the courts in the above-cited cases. In Rogers v. Stratton Industries, Inc., 798 F.2d 913 (6th Cir.1986), the Court explained:
798 F.2d at 915 (footnotes and citations omitted.) See also, Ohio National Life Insurance
In the instant case, Defendants' Rule 12(b)(1) motions did not mount a mere "facial" challenge to the Plaintiff's complaint allegations of jurisdiction. Rather, the district court was called upon to weigh the evidence concerning jurisdiction presented by the parties and decide the jurisdictional facts.
Where a trial court's ruling on jurisdiction is based in part on the resolution of factual disputes, a reviewing court must accept the district court's factual findings unless they are clearly erroneous. Ohio National Life Ins. Co. v. United States, supra, 922 F.2d at 326; Osborn v. United States, supra, 918 F.2d at 732 (if the trial court relied upon its own determination of disputed factual issues, the appellate court must then review those findings under the "clearly erroneous" standard); Holt v. United States, supra, 46 F.3d at 1003. However, review of the district court's application of the law to the facts is de novo. Ynclan v. Department of Air Force, 943 F.2d 1388, 1390 (5th Cir.1991); Holt v. United States, supra.
B. PLAINTIFF'S CLAIMS AGAINST THE WESTINGHOUSE DEFENDANTS ARE PREEMPTED UNDER THE CONTRACT DISPUTES ACT
The Contract Disputes Act, 41 U.S.C. § 601 et seq. (the "CDA"), statutorily provides explicit dispute resolution procedures for all claims "relating to" any express or implied contract entered into by an executive agency for —
41 U.S.C. §§ 602, 605.
The procedures established for contractors' claims are set forth in §§ 605-609 of the Act. Pursuant to the statutory scheme, a contractor's claims against the government which relate to a contract must be submitted to a "contracting officer." 41 U.S.C. § 605(a). The contracting officer's decision is reviewable only through an appeal to an agency board of contract appeals. 41 U.S.C. §§ 605(b), 606, 607.
The term "claims" as utilized in the CDA is to be given broad effect, encompassing all claims and disputes, whether arising under or relating to the contract. Z.A.N. Company v. United States, 6 Cl.Ct. 298, 303 (1984). Thus, in Z.A.N., the court held that the term "claim" as used in the CDA means an "assertion by one of the parties seeking, as a matter of right, the payment of money, adjustment, or interpretation of contract terms, or other relief arising under or relating to the contract." Id.
As set forth above, claims brought "relating to a contract" must be submitted to the appropriate contracting officer, with subsequent appeals to either the agency's board of contract appeals or the United States Claims Court. Once it is determined that the CDA applies to the dispute in question, federal court jurisdiction is precluded. 28 U.S.C. § 1346(a)(2).
Thus, the question presented is whether the Contract Disputes Act applies to Plaintiff's claims against the Westinghouse Defendants. In this case, resolution of this question requires a two-pronged analysis:
1. ALL OF PLAINTIFF'S CLAIMS ARE "ESSENTIALLY CONTRACTUAL"
As the district court observed, for the CDA to apply, it must first be determined that the claims asserted are "essentially contractual" in nature. Megapulse, Inc. v. Lewis, 672 F.2d 959, 967 (D.C.Cir. 1982). The plaintiff's title or characterization of its claims is not controlling. "[A] plaintiff may not avoid the jurisdictional bar of the CDA merely by alleging violations of regulatory or statutory provisions." Ingersoll-Rand Co. v. United States, 780 F.2d 74, 77 (D.C.Cir.1985). Rather, it is the determination of whether the action is essentially a contract dispute that controls. Id. "The classification of a particular action as one which is or is not `at its essence' a contract action depends both on the source of the rights upon which the plaintiff bases its claim, and upon the type of relief sought (or appropriate)." Megapulse, supra at 968.
As set forth above, with respect to RMI's complaints against WEMCO and the Department of Energy, RMI did originally proceed with seeking redress pursuant to the CDA process. It filed three claims with the contracting officer, each of which included an express certification that the claims were being submitted "pursuant to" the CDA as a result of their "relation to a contract." Although RMI now concedes that its "contract" claims (Counts V and VI of the Complaint) are subject to the CDA, it denies application of the CDA to the other four counts in its Complaint which RMI characterizes as "non-contract claims".
To determine whether RMI's judicial action was in essence a contract dispute, the district court examined Plaintiff's Complaint paragraph by paragraph and compared it to the allegations in the three claims submitted by RMI to the CO. Both the magistrate judge and the district judge found that the allegations in the complaint and in the three claims closely parallel each other, some times using the exact same language. Moreover, the concluding section of the complaint captioned "PRAYER FOR RELIEF" and the section headed "INJURY AND DAMAGES" mirror almost word for word the requested relief sought in each of the three claims.
The only difference noted between the claims and the complaint is that the complaint contains allegations of violation of the Sherman Act, 15 U.S.C. §§ 1 and 2, and the Lanham Act, 15 U.S.C. § 1125(a).
However, in this case, the existence of a contract is essential for Plaintiff to maintain its Sherman Act claims. Plaintiff's allegations as to the Sherman Act violations are that WEMCO acted in violation of its contract with RMI and ordered RMI to cease using equipment owned by the DOE for its private commercial extrusion business so as to gain a monopoly of the extrusion business for its sister company Westinghouse Hanford. RMI further claims that WEMCO denied RMI its contractual right to manage the environmental restoration of the facilities to gain a monopoly for itself in the environmental clean up business. Thus, to succeed with its Sherman Act claim, Plaintiff must prove that a contract existed, and that the purpose and effect of the contract is restraint of trade and suppression of competition. See White & White, Inc. v. American Hospital Supply Corp., 723 F.2d 495, 504-505 (6th Cir.1983).
Similarly, the basis for Plaintiff's Lanham Act and defamation claims is that WEMCO lied to the DOE by alleging that RMI was not satisfactorily performing its contractual obligations.
Thus, as the district court found, Plaintiff's allegations of violation of federal and state statutes
Accordingly, the district court concluded, the rights asserted by RMI, "are undoubtedly contractual in nature, as they could not be considered without reliance upon the subcontract [and] analysis of the causes of action raised herein could not be undertaken without addressing the contractual issues raised both before the Contracting Officer and in this proceeding."
Just as the Federal Circuit found in Ingersoll-Rand, supra, Plaintiff's complaint claims in this case are nothing more than "disguised contract claims," and as such, must be resolved under the CDA. See also, Colt Industries, Inc. v. United States, 716 F.Supp. 660 (D.D.C.1989) (plaintiff's claims of violation of the Trade Secrets Act, negligence, and breach of contract held preempted under the CDA because the source of all the rights upon which the plaintiff based its claims was a license agreement with the government).
In support of its "no CDA coverage" argument, Plaintiff relies principally on Megapulse, Inc. v. Lewis, supra. That case is readily distinguishable from the instant action. In Megapulse, the plaintiff sued the Department of Transportation and others for disclosing information concerning Megapulse's development of navigation system which was provided to the Department in attempting to obtain a government contract for its production. Megapulse ultimately did obtain a contract with the Coast Guard to produce a prototype of its system. The Coast Guard subsequently announced that it would accept bids for production of the system. In connection with the bidding process, it disclosed Megapulse's proprietary information to prospective bidders. Megapulse brought suit in the federal district court for the District of Columbia for violation of the federal Trade Secrets Act.
The district court dismissed the action on the basis of CDA preemption. The Federal Circuit reversed. The appellate court determined that jurisdiction in the district court was proper because the claims alleged in the plaintiff's complaint were not based on a contract. As the court explained in that case,
672 F.2d at 968 (some emphasis added).
Not only is Megapulse factually distinguishable from this case, more importantly, it appears that the case may no longer be good law. During the pendency of this appeal, the U.S. Court of Appeals for the District of Columbia Circuit, which was the court that decided Megapulse, rejected the notion of a "pre-contract" exception to CDA preemption in A & S Council Oil Co., Inc. v. Lader, 56 F.3d 234 (D.C.Cir.1995). In A & S, petroleum suppliers brought an action in a federal district court against the Small Business Administration based upon allegations of misconduct on the part of the SBA during pre-contract negotiations for the provision of petroleum to military installations. The district court initially found that it lacked jurisdiction over the action by virtue of the CDA, and transferred the matter to the U.S. Claims Court. The Claims Court found no CDA preemption because the plaintiffs disavowed that they were alleging any contract claims and because the complained of acts of
56 F.3d at 240-241 (citations omitted and emphasis added).
2. RMI'S STATUS AS A SUBCONTRACTOR DOES NOT DEFEAT CDA PREEMPTION
RMI also argues, as it did in the lower court, that even if its complaint is essentially a contract action, the court is not divested of jurisdiction by the CDA because the contract complained of was between RMI and WEMCO, not RMI and the Government. The district court was not persuaded by RMI's argument.
As the district court observed, the position advanced by RMI was squarely rejected in Eastern, Inc. v. Shelly's of Delaware, Inc., 721 F.Supp. 649 (D.N.J.1989). Defendant Shelly's was a general contractor that had a contract with the government for the construction of a new post office building. Shelly's, in turn, entered into a subcontract with the plaintiff, Eastern, to perform roofing work on the new building. Subsequently, Shelly's abandoned the project and another general contractor, Jennings, took over. Eastern continued to work on the project after receiving assurance from Jennings and Shelly's sureties that it would be properly remunerated for its work. After completing a significant amount of roofing work, Jennings terminated Eastern from the project and refused to pay for the work completed.
Eastern filed a complaint in the federal district court in which it named Shelly's, Jennings and the sureties as defendants alleging breach of contract, fraud and conversion. In addition, Eastern named the postal service alleging that as a subcontractor, it held an equitable interest in the contract balance owed by the postal service to the general contractor. The defendants moved to dismiss Eastern's complaint under Fed. R. Civ. Pro. 12(b)(1) arguing that the court lacked jurisdiction over the action by virtue of CDA preemption.
Although Eastern was only a subcontractor which did not have a direct contract with the postal service, the court agreed that Eastern's action was preempted under the CDA. In reaching its conclusion, the Eastern court examined the legislative history of the CDA. The court observed that Congress enacted the CDA to provide a "comprehensive system for adjudicating contract claims against the government." 721 F.Supp. at 651. The court then examined the plaintiff's argument that by its terms, the CDA does not provide for claims brought by subcontractor. Id. While the court acknowledged that the plaintiff's argument had "some appeal", it found that the express purpose of the CDA would be frustrated if subcontractors were allowed to bring judicial actions against government agencies when general contractors were not. Id. The court reasoned:
721 F.Supp. at 651-52 (some citations omitted). See also, Arntz Contracting Co., EBCA No. 187-12-81, 84-3 BCA (CCH) ¶ 17,604, 1984 WL 13945 (1984), aff'd, Arntz Contracting Co. v. United States, 769 F.2d 770 (Fed.Cir.1985) (holding that CDA applied to subcontractor's claims against general contractor).
RMI relies principally on United States v. Johnson Controls, Inc., 713 F.2d 1541 (Fed. Cir.1983) in support of its contention that the CDA does not cover claims by a subcontractor. That case involved a subcontract between a prime contractor (Turner Construction) and subcontractor, Johnson Controls, for the installation of a heating/cooling system in a National Health Institute facility being constructed by Turner pursuant to Turner's contract with the Department of Health, Education and Welfare.
While it is true that in Johnson Controls the court determined that the subcontractor's claims in that case were not subject to the CDA, the court acknowledged that "[o]ver the years, a number of exceptions have been recognized to the general rule that a subcontractor cannot bring a direct appeal against the government." Id. at 1553. The court then discussed these exceptions. Plaintiff here argues that the "express agency" exception (where the subcontractor acts as an agent for the government) discussed by the Johnson Controls court is not satisfied. However, Plaintiff makes no mention of the Johnson court's discussion of another exception — the "otherwise in privity" with the government exception.
With respect to that "otherwise in privity" exception, the court delineated four factors to be considered in determining whether the CDA would apply to a subcontractor's claims: (1) whether the subcontractor and the government had ever had a direct contractual relationship; (2) whether the subcontract with the prime contractor contained an "ABC" clause (i.e., an express disclaimer of privity of contract between the subcontractor and the government); (3) whether the prime contractor was required to obtain a Miller Act payment bond, thereby providing a recourse by the subcontractor other than a direct appeal; and (4) whether there was any provision in any of the contract documents that clearly authorized a direct appeal (to the Board of Contract Appeals) by the subcontractor. Id. at 1553.
Particularly noteworthy, however, is the Johnson Controls court's discussion of the strong impact of a Disputes clause which is not contradicted by evidence establishing that the parties did not intend to provide a right of direct appeal:
713 F.2d at 1554.
The district court in this case discussed Johnson Controls and observed that, "the Federal Circuit Court of Appeals did not hold that there was jurisdiction in the federal courts for the subcontractor to initiate [an action] but, instead, held that in circumstances such as were presented therein subcontractors had limits upon their direct access to the appeal process under the CDA". [JA p. 598]. The court further found Johnson Controls factually distinguishable because "the articulated intent of the parties therein as regards privity, set forth in the contract, was that no contractual relationship existed between the government entity and the subcontractor, and that there was a complete absence of clear contractual consent for direct appeals by the subcontractors of determinations of contracting officers." Id.
RMI's claims in this action present precisely the opposite of the Johnson Controls facts on each factor. First, RMI had a direct contractual relationship with the government for over 25 years before WEMCO entered the scene. Moreover, before this suit was filed (indeed, before the Contracting Officer's decision was even rendered), RMI agreed to the assignment of the subcontract back to the Department of Energy under which WEMCO was "relieved" of all "responsibility" or further "obligation" thereunder. Thus, the "direct contractual relationship" factor of Johnson Controls is satisfied.
Second, the RMI subcontract contains an express Disputes clause which expressly authorized and directs RMI to bring its claims before the DOE contracting officer with a direct right of appeal to the Energy Board of Contract Appeals. As set forth above, even the Johnson Controls court observed that such a clause is "strong" evidence of CDA coverage of a subcontractor's claims.
The foregoing makes clear that even under Johnson Controls, by application of the parameters set forth in that case, RMI was "otherwise in privity" with the DOE as to its claims against the Westinghouse Defendants.
By application of the Johnson Controls factors, other courts have determined that the CDA applied to claims asserted by subcontractors against non-government prime contractors.
For example, the Energy Board of Contract Appeals and the Federal Circuit determined that the CDA applied to the claims of a subcontractor against a prime contractor in Arntz Contracting Co., EBCA No. 187-12-81, 84-3 BCA (CCH) ¶ 17,604, 1984 WL 13945 (1984), aff'd, Arntz Contracting Co. v. United States, 769 F.2d 770 (Fed.Cir.1985). In that case, the University of California, which had a prime contract with the Department of Energy to operate the Lawrence Livermore National Laboratory, entered into a subcontract with Arntz Contracting Co. to construct a building at the Livermore facility to house a Magnetic Fusion Energy Computer Center. Arntz, itself, had no contract with the DOE. A dispute arose between Arntz and the University concerning materials and paint colors for the exterior walls of the building being built. As a result, Arntz's project time had to be extended by 506 days. Arntz claimed that the extended delay was caused by the University and that as a consequence, Arntz incurred substantial damages. Arntz subsequently filed a claim for damages against the University under the Contract Disputes Act.
Despite the University's and the Government's arguments in opposition, the Energy Board of Contract Appeals determined that the CDA applied to Arntz's claims against the University. In reaching its conclusion, the EBCA noted that in many circumstances, the CDA would not apply to claims of a subcontractor against a non-Government prime contractor. However, after examining the terms of the subcontract, the Board found that the DOE retained a degree of control over the project. It also found that most of the Johnson Controls factors were satisfied. Specifically, the Board noted that (1) there was no ABC clause in the subcontract; (2) there was no requirement that the prime contractor obtain a Miller Act bond; and (3) there was an express disputes resolution provision in the subcontract authorizing a direct CDA appeal by the subcontractor to the EBCA. Based on the foregoing, the EBCA concluded:
1984 WL 13945, pp. 10-11. The Federal Circuit subsequently affirmed the EBCA's CDA jurisdiction decision "on the basis of its thorough and well-reasoned opinion." 769 F.2d 770.
In light of the facts and circumstances of this case, and by application of the foregoing authorities, we find that Plaintiff RMI's claims against the Westinghouse Defendants fall within the exclusive jurisdiction of the CDA. Hence, federal court jurisdiction over the claims does not exist.
C. THE GOVERNMENT'S MOTION TO SUBSTITUTE/INTERVENE
RMI also challenges the district court's decision to grant the United States' motion to substitute in this action in the place of named Defendant Ray Hansen, a Department of Energy employee.
Under the Federal Employees Liability Reform and Tort Compensation Act of 1988, 28 U.S.C. § 2679 (the "Westfall Act"), the United States may be substituted in a civil action for money damages brought against a federal employee who is alleged to have committed a common law tort while acting within the scope of his or her employment. Arbour v. Jenkins, 903 F.2d 416, 420 (6th Cir.1990).
In Plaintiff's Complaint, Ray Hansen was described as being an "Acting Manager-Operations, within the DOE, and was formerly Deputy Manager, DOE Field Office, Fernald, where he had oversight responsibility on behalf of the DOE with respect to RMI's contractual relationship with WEMCO". Mr. Hansen was being sued both individually and in his capacity as "an officer, agent, representative or official, as the case may be, of
The Westfall Act provides in pertinent part as follows:
28 U.S.C. § 2679(d)(1).
The Attorney General has delegated to the United States Attorney the authority to provide the Section 2679(d) certification. 28 C.F.R. § 15.3 (1989). In this case, the U.S. Attorney for the Northern District of Ohio provided written certification that Ray Hansen was acting within the scope of his employment with the DOE in connection with the events underlying RMI's suit.
The Attorney General's certification provides prima facie evidence that the employee was acting within the scope of employment. Brown v. Armstrong, 949 F.2d 1007, 1012 (8th Cir.1991). Whether an employee was acting within the scope of his employment is a question of law, not fact, made in accordance with the law of the state where the conduct occurred. Henson v. National Aeronautics and Space Administration, 14 F.3d 1143, 1147 (6th Cir.), amended on reh'g, 23 F.3d 990 (6th Cir.1994). Under Ohio law, an employee acts within the scope of employment if the employee acts within his authority during the course of employment even though acting intentionally or maliciously. Id. See also, Woods v. McGuire, 954 F.2d 388 (6th Cir.1992).
RMI argues in this appeal that the district court did not allow it sufficient opportunity to challenge the U.S. Attorney's certification that Hansen was acting within the scope of his employment. The gist of RMI's argument is that the district court should have allowed it to conduct discovery and to hold an evidentiary hearing so it could mount a challenge to the U.S. Attorney's certification.
The district court noted that RMI had over a year to come forward with evidence to challenge the certification during the pendency of final disposition on the motion for substitution, including having been given a one-month extension of time to file objections to the Magistrate Judge's Report and Recommendation. [JA p. 56.]
The mere fact that a federal employee's actions may have been unlawful or in derogation of the plaintiff's contractual rights is not enough, by itself, to find that the employee's actions were outside his authority. Henson, supra, 14 F.3d at 1148. No hearing on certification is necessary where even if the plaintiff's assertions were true, the complaint allegations establish that the employee was acting within the scope of his/her employment. Id. Where, as here, a plaintiff in his complaint pleads conduct within an individual's scope of employment and merely alleges bad or personal motive, summary dismissal of the scope challenge is warranted.
The scope of employment issue does not focus on the alleged wrongful nature of the employee's actions; rather, the issue is the actions complained of and whether those actions are "so divergent that [their] very character severs the relationship of employer and employee." Osborne v. Lyles, 63 Ohio St.3d 326, 330, 587 N.E.2d 825, 829 (1992).
In this case, RMI merely characterizes Hansen's actions in dealing with the WEMCO subcontract as malicious and reckless. However, as set forth above, even intentional and malicious actions are within an employee's actions if the employee is acting within the course of employment and within his authority. Woods v. McGuire, supra.
For all of the foregoing reasons, we find no abuse of discretion on the district court's part in refusing to permit RMI to complete discovery before granting the Government's motion to substitute in this action in place of Defendant Ray Hansen.
For all of the reasons stated above, the district court's dismissal of this action is hereby AFFIRMED.
[JA p. 116]
Riley involved a third-party complaint for indemnification. In that case, the DOE, which owned a nuclear energy plant, had a contract with Martin-Marietta Corporation for the operation of that plant. Martin-Marietta entered into a contract with ADT for the installation of a fire alarm system. ADT, in turn, subcontracted the fire alarm installation work to Riley Electric. Riley sued ADT for breach of contract and ADT filed a third-party complaint against Martin-Marietta for indemnification. It was in this third-party dispute — which was three times removed from the DOE prime contract — that the court found no CDA preemption. There were no "otherwise in privity" factors present in that case. In fact, the court did not even mention Johnson Controls or any other "otherwise in privity" case. The Allied Systems decision was based entirely on the ruling in Riley. There is no discussion in that case of the statute or applicable case law. The court merely stated in a conclusory fashion that the CDA does not apply to disputes between contractors and subcontractors.
Miller-Stauch is also readily distinguishable. That case involved a Miller Act action on a surety bond. The Miller Act contains an independent exclusive grant of federal court jurisdiction. See 40 U.S.C. § 270b (b), which provides:
Clearly, under such an unambiguous statement of exclusive federal court jurisdiction, the CDA would have no preemptive force.
Moreover, assuming the discovery the RMI sought to complete was to obtain answers to interrogatories and document production requests served upon Hansen, these discovery requests show that RMI was simply concerned about the DOE's knowledge about and documents retained concerning the DOE-WEMCO prime contract and RMI's subcontract with WEMCO. [See JA pp. 496-508.] Even if answers to these requests had been obtained, they would not have provided RMI with any information as to the scope of Hansen's employment.