WEINER, Senior District Judge:
The Secretary of the Navy brought this action seeking a refund of approximately $2 million allegedly overpaid to Southwest Marine Incorporated's predecessor in interest, Northwest Marine Iron Works (NMIW), for overhaul work completed on the U.S.S. Duluth in 1986. The action was heard initially by the Armed Services Board of Contract Appeals (ASBCA), which entered judgment for Southwest. The Navy filed an appeal with the United States Court of Appeals for the Federal Circuit, which held it had no jurisdiction to hear the case and transferred it to the United States District Court for the Southern District of California. Dalton v. Southwest Marine, Inc., 120 F.3d 1249 (Fed.Cir.1997) ("Dalton I"). The district court reversed the ASBCA, entered judgment in favor of the Navy and remanded to the ASBCA for computation of damages. Jurisdiction in the district court was premised upon the exception to 41 U.S.C. § 607(g)(1)(b) for marine contracts as discussed by the Federal Circuit in Dalton I.
The underlying facts are not in dispute. The Navy let out the contract to NMIW to overhaul the U.S.S. Duluth in August 1985; the work was completed and the ship redelivered to the Navy in 1986. The contract was a "fixed-price, incentive contract," which is something of a misnomer since it does not contain a fixed price. Rather it is a cost-plus arrangement, under which the Navy reimburses the contractor for its actual allowable costs, adjusted according to a contractually-defined formula, which is limited by a ceiling price. Thus, the actual price of the work is not determined at the time the contract is let. Once final cost is determined, the final price is then determined with a profit to the contractor calculated as the work is performed pursuant to a formula. Prior to determination of the final price, progress payments are made to the contractor, subject to standard clauses allowing for adjustment for over and under payments and a Credits Provision Clause
On October 29, 1986, four months after redelivery, NMIW filed a Chapter 11 petition in District of Oregon. The Navy's contracting officer (CO) for the Duluth and Supervisor of Shipbuilding were both aware of the petition, and the Navy filed claims regarding other work NMIW had performed on other ships. No claim was ever asserted over the work on the Duluth. NMIW's Second Amended Plan of Reorganization was approved by the bankruptcy court on March 20, 1987. It provided that unsecured claims in excess of $1,000 would be converted into interest bearing debentures of the reorganized company in a principal amount equal to the allowed unsecured claim, and for the repayment of that principal out of the reorganized company's net income.
In April 1987, one month after confirmation of the plan, NMIW submitted forms to the Navy identifying final contract costs of $25,093,862 on the Duluth. On December 21, 1988, the Navy agreed to settle NMIW's claims. On April 3, 1989, the CO executed a modification increasing the ceiling price to $23,295,752. Thereafter, NMIW submitted an invoice to the Navy claiming payment of $2,811,077, i.e. the new ceiling price less all prior progress payments and the agreed upon sum to be retained for closeout. The CO approved the invoice the next day.
Meanwhile, in the interim period between when NMIW submitted its final cost calculation and the date the CO approved the new the ceiling price, NMIW signed a letter of agreement with Southwest which
By letter of April 21, 1989, the Navy notified NMIW that it had learned that at least one of the company's creditors had agreed to forgive some indebtedness, and was considering a recoupment action for fees it had paid the contractor, and for which NMIW was no longer obligated to pay out as costs to others. NMIW maintained that the Navy had no right to participate in a compromise of debts occurring in conjunction with bankruptcy proceedings. On May 11, 1994, after several years of unsuccessful negotiations, the CO issued a final decision holding that the Navy had overpaid NMIW $2,161,287. The CO determined that debt concessions fell within the meaning of the Credits Provision Clause.
Southwest appealed the CO's decision to the ASBCA pursuant to the Contract Disputes Act (CDA), 41 U.S.C. § 607(d).
The Board disagreed, holding that forgiveness of the debentures received under the reorganization plan could not be considered an overpayment by the Navy under the fixed-price incentive contract.
Instead, the Board granted the cross motion of Southwest which argued that once a contractor performs the contract and incurs costs, payment is due without regard to whether the contractor has actually paid his suppliers or may have payment disputes with them. Finding that the contract included a provision requiring
Following the Navy's appeal to the Federal Circuit, and that court's transfer of the appeal to the district court in August 1997, the Navy took no action to prosecute the appeal for six months, leading to the filing by Southwest of a motion to dismiss for want of prosecution. The motion was denied by the district court by order of April 6, 1998. It found that the delay was not unreasonable because the Navy made a good faith effort to inquire into whether the case was actually transferred and received incorrect information from the district court clerk's office. It was not notified of the transfer until October 27, 1997. The court also refused to find that the passage of time between the Navy's initial claim for reimbursement in 1989 and the CO's decision in 1994 should preclude the Navy from appealing the Board decision.
Thereafter the district court issued an order and two amended orders "granting appellant's appeal." Only the second amended order, which the district court specifically said was not a final order, is before us on appeal.
Having found that the Board misapplied bankruptcy law to preclude recoupment, the district court went on to conclude that the Board also erred in determining that the Navy could not recover its overpayments under the contract based on the voluntary post-petition debt concessions. It found, without engaging in any further analysis, that the Navy was entitled to reimbursement under the Credit Provision Clause and the IPR Clause.
In granting in part and denying in part Southwest's motion for reconsideration which led the issuance of the second amended order, the district court specifically declined to amend the prior order to designate it as a final order. It stated:
This appeal followed.
The standard of review of an appeal from the ASBCA is provided by statute. Under 41 U.S.C. § 609(b), in an appeal by either the contractor or the government, "notwithstanding any contract provision, regulation, or rules of law to the contrary, the decision of the agency board on any question of law shall not be final or conclusive, but the decision on any question of fact shall be final and conclusive and shall not be set aside unless the decision is fraudulent, or arbitrary, or capricious, or so grossly erroneous as to necessarily imply bad faith, or if such decision is not supported by substantial evidence."
We address first the issue of our own jurisdiction. The Navy argues the district court's order was not final nor certified as a controlling question of law immediately appealable under 28 U.S.C. § 1292(b). It asserts that, in general, orders which grant partial summary judgment as to liability but leave open the question of damages are by their nature interlocutory under Fed.R.Civ.P. 56(c); it adds that in the specific context of a government contracts case, an ASBCA decision in a bifurcated action, addressing only entitlement and not quantum, is not a final order subject to appeal. In response, Southwest argues that, since the district court was sitting as a court of admiralty, its order, even if interlocutory, is appealable under 28 U.S.C. § 1292(a)(3). That section permits appeals of "[i]nterlocutory decrees ... determining the rights and liabilities of the parties to admiralty cases in which appeals from final decrees are allowed." We agree that jurisdiction is provided by § 1292(a)(3).
In its decision, the Federal Circuit determined that there was no dispute that the contract involved in this case was wholly maritime. Dalton I, 120 F.3d at 1250; see also Southwest Marine of San Francisco, Inc. v. United States, 896 F.2d 532, 533 (Fed.Cir.1990) ("San Francisco"), citing New Bedford Dry Dock Co. v. Purdy, 258 U.S. 96, 99, 42 S.Ct. 243, 66 L.Ed. 482 (1922) (a contract for ship repairs is a maritime contract; one for original construction is not). From this premise, the Federal Circuit determined that the case must be transferred because it had no appellate jurisdiction under the CDA over a case involving a maritime contract. Dalton I, 120 F.3d at 1251-52. The conclusion that the Duluth repair contract is a maritime contract is the law of the case
We have previously held that § 1292(a)(3) is an exception to the final judgment rule and, therefore, is construed narrowly. Seattle-First National Bank v. Bluewater Partnership, 772 F.2d 565, 568 (9th Cir.1985). It permits appeals only when the order appealed from determines the rights and liabilities of the parties. Id.; Arkin v. White Cloud Charter Boat Co., Inc. (In re White Cloud Charter Boat Co., Inc.), 813 F.2d 1513, 1515 (9th Cir. 1987). The purpose of the provision is to allow a party found liable in admiralty proceedings to take an immediate appeal without submitting to a protracted trial of the damage issues. In re Complaint of Nautilus Motor Tanker Co., Ltd., 85 F.3d 105, 110 n. 3 (3rd Cir.1996); Slatton v. Martin K. Eby Construction Co., Inc., 491 F.2d 707, 708 (8th Cir.1974). We have held that even an entry of partial summary judgment can be the subject of an interlocutory maritime appeal so long as the requirement that the order appealed determined the rights and liabilities of the parties is satisfied. Kesselring v. F/T Arctic Hero, 30 F.3d 1123, 1125 (9th Cir.1994) (where district court's determination that certain crewmen held preferred wage liens on equipment eliminated any possibility of recovery by equipment owner, owner's rights were actually determined and interlocutory appeal was permissible.)
Here, the district court order unquestionably determined the rights and liabilities of Southwest. It found as a matter of government contract law that the Navy could not be barred from recovering its overpayments and that it was entitled to reimbursement. It remanded to the Board only for a calculation of quantum. As the Board was given no further opportunity to adjudicate the Navy's entitlement, Southwest's liability to make reimbursement was settled. Under § 1292(a)(3), the district court's order is thus appealable.
Southwest next argues that the district court improperly exercised jurisdiction in deciding the Navy's appeal because under the CDA the Navy has no right of appeal from ASBCA decisions on maritime contracts. Seizing upon language in the Federal Circuit's decision in San Francisco, that "Congress in enacting the Contract Disputes Act of 1978 assured that no change was made in the existing appellate path of disputes involving maritime contracts", 896 F.2d at 534, Southwest argues that, since pre-CDA the Navy had no right of appeal to the courts from an adverse Board decision absent fraud, the district court had no jurisdiction to hear the appeal. See S & E Contractors, Inc. v. United States, 406 U.S. 1, 19, 92 S.Ct. 1411, 1421, 31 L.Ed.2d 658 (1972); Coburn, The Contract Disputes Act of 1978, (New York 1982) ¶. 2-5. Southwest's argument misreads the holding of San Francisco and ignores specific provisions in the CDA permitting the government to file appeals of adverse determinations. The court's use of the phrase "appellate path" was a reference to jurisdiction, not the substantive question of whether a party enjoys the right of appeal.
San Francisco was concerned only with the jurisdictional question of where appeals from agency contract boards of appeal involving maritime contracts must be brought. It did not address the question of whether the CDA permits appeals by the government. In that case, the Federal Circuit determined that jurisdiction over matters arising in admiralty, including maritime contracts, was unaffected by the passage of the CDA because, (1) prior to its passage, such jurisdiction was traditionally vested in the district courts, Id., 896 F.2d at 534 ("Jurisdiction over matters arising in admiralty, including maritime contracts, has traditionally been with the federal district courts."); and (2) during its consideration of the CDA, Congress made clear that such jurisdiction was intended to
The Federal Circuit's conclusion, that passage of the CDA did not change the way in which maritime contract cases are to be brought, does not establish that the substantive provisions of CDA, granting the Navy the right to appeal adverse decisions, do not apply to maritime contract cases. As the Federal Circuit has already held in this case, "[n]othing in section 603 of the Contract Disputes Act excludes maritime contracts from the purview of the Contract Disputes Act." Dalton I, 120 F.3d at 1251. The only caveat to this proposition is that, in enacting 41 U.S.C. § 603, Congress specifically provided that appeals from agency boards of contract appeals under § 607 and judicial review under § 609 arising out of maritime contracts, shall be governed by chapter 20 or 22 of Title 46 as applicable, to the extent that those chapters are not inconsistent with this chapter.
In addition, there are at least two other sections of the CDA which support the conclusion that agencies as well as contractors may appeal decisions from contract boards of appeal. Section 607(g)(1)(B) specifically provides that the agency head may, with the approval of the Attorney General, seek judicial review in the Federal Circuit; § 609 provides that in the event of such appeal under § 607 "by a contractor or the Government" questions of law shall be reviewed de novo, while questions of fact shall be final and conclusive.
Thus, the statutory scheme of §§ 603, 607 and 609 provides (1) for appellate jurisdiction in the district courts for maritime contract suits; (2) for appellate jurisdiction in the Federal Circuit for all other appeals from ASBCA rulings; and (3) an otherwise uniform rule that either contractors or agency heads may seek judicial review of adverse decisions. Accordingly, the district court's exercise of appellate jurisdiction over this maritime contract suit was proper.
Southwest next argues that the district court abused its discretion
In ruling on the motion, the district court held
Southwest asserts that it did not have to demonstrate that the Navy's delay was unreasonable or that it suffered actual prejudice and the district court's requiring it to do so was an abuse of discretion. This argument lacks merit.
In Moneymaker v. CoBen (In re Eisen), 31 F.3d 1447, 1451 (9th Cir. 1994), we held that we require the district court to weigh five factors to determine whether to dismiss a case for lack of prosecution: "(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its docket; (3) the risk of prejudice to the defendants; (4) the public policy favoring the disposition of cases on their merits; and (5) the availability of less drastic sanctions." More specifically, on the issue of prejudice, we stated that
Id. at 1452-53 citing Anderson v. Air West, Inc., 542 F.2d 522, 524 (9th Cir. 1976). Thus, Southwest's assertion that it did not have to demonstrate unreasonable delay or that it suffered actual prejudice is inaccurate. Unreasonable delay is the foundation upon which a court may presume prejudice. Its failure to show the delay was unreasonable made the presumption of prejudice rebuttable and, in turn, made Southwest's failure to show actual prejudice a proper basis for the district court's denial of the motion.
Southwest next argues, that even if the district court had jurisdiction to reverse the summary judgment in its favor, its decision, while sitting as a court of appeal, to grant summary judgment to the Navy, was improper since it made no finding that there were no genuine issues of disputed fact. This argument also bears little weight. What Southwest describes as disputed factual contentions are actually disputed legal contentions which the district court rightfully decided.
Southwest identifies two allegedly disputed facts upon which the district court relied: (1) the Navy's factual contention that NMIW accepted progress payments without actually paying the subcontractors for their costs; and (2) the Navy's factual contentions that post-petition obligations
Whether NMIW accepted progress payments without paying the subcontractors was not in dispute. The record before the district court included the entire history of the Navy's payments to NMIW as found by the ASBCA.
The Navy's alleged factual contentions that post-petition obligations replaced the original pre-petition ones were not factual contentions at all. Rather they were a subpart of its legal argument that, whether or not the pre-petition debts were extinguished by the reorganization, the Navy's efforts to recover costs related only to the creditor's voluntary surrender of their debentures, and thus bankruptcy law was not implicated in the issue of whether the Navy was entitled under the contract to share in those cost reductions. Finally, the Navy's contention that NMIW sought reimbursement on the entirety of the costs, even though it knew they would be compromised by the subcontractors' acceptance of the reorganization plan, was also not genuinely disputed. The ASBCA found that NMIW forwarded the invoices to the Navy on April 5, 1989 without making any mention of the stock purchase agreement between NMIW and Southwest, which was conditioned upon the debentures being compromised.
Arriving at long last at the main substantive issue in this appeal, we believe it can be stated succinctly: Does bankruptcy law trump government contract law and prevent the Navy from recouping its overpayment to NMIW? The district court correctly held that the answer to this question is no.
The ASBCA concluded, applying bankruptcy law principles, that the Navy may not take advantage of the subcontractors' forgiveness of the debentures received under the reorganization plan. It reasoned that the subcontractor's compromise of the debentures could not constitute a forgiveness, rebate or credit of the Duluth contract costs under the Credits Provision Clause because the inability of the creditors to collect their pre-confirmation Duluth claims was due to the bankruptcy discharge and not any voluntary action on their parts. As the debentures replaced those pre-confirmation claims, the Board concluded their post-confirmation compromise as part of the acquisition agreement likewise could not inure to the Navy's benefit. The basis for this reasoning is not supported by the record. The record clearly showed that the claimed reduction in Duluth contract costs was based not on NMIW's bankruptcy discharge or the debenture holders' inability to collect their
Confirmation not only discharges the debtor from its pre-confirmation debts, it also revests all of the property of the estate back in the debtor, and all the property dealt with in the plan is revested free of all claims and interests of the creditors, 11 U.S.C. § 1141(b)-(d). Importantly, while the plan binds pre-confirmation creditors, it does not bind post-confirmation creditors. See 8 Collier on Bankruptcy, ¶ 1141.02 (15th Rev. ed.2000); Holywell Corp. v. Smith, 503 U.S. 47, 53-54, 112 S.Ct. 1021, 1025, 117 L.Ed.2d 196 (1992) (trustee appointed under plan-established trust liable for post-confirmation taxes because binding nature of the confirmed plan reaches only pre-confirmation obligations); see also Shure v. State of Vermont (In re Sure-Snap Corp.), 983 F.2d 1015 (11th Cir.1993) (confirmation discharged pre-confirmation liabilities only; debtor not protected from post-confirmation creditor for debt arising from voluntary post-confirmation activity related to asset that was formerly part of estate). As we stated in a different context, once the bankruptcy court confirms a plan of reorganization, the debtor is free to go about its business without further supervision or approval of the court, and concomitantly, without further protection of the court. Hillis Motors, Inc. v. Hawaii Automobile Dealers' Ass'n, 997 F.2d 581, 589 (9th Cir.1993), citing Pettibone Corp. v. Easley, 935 F.2d 120, 122 (7th Cir.1991). The court in Pettibone noted that, "[f]ormerly a ward of the court, the debtor is emancipated by the plan of reorganization. A firm that has emerged from bankruptcy is just like any other defendant in a tort case: it must protect its interests in the way provided by the applicable non-bankruptcy law...." Id. See also Norwest Equipment Finance, Inc. v. Nath (In re D & P Partnership), 91 F.3d 1072, 1074 (8th Cir.1996) (generally, once the plan has been confirmed, the estate of the debtor and the bankruptcy court's jurisdiction ceases to exists). As the Navy's claim against NMIW/Southwest for recoupment of the overpayment arose out of the debenture holder's post-confirmation decisions to compromise their post-confirmation claims, it was error for the ASBCA to equate the debentures with the debenture holder's pre-confirmation claims.
As the district court concluded, the correct focus should have been upon how the debenture holders' voluntary relinquishment of their rights affected NMIW's claim for costs on the Duluth project, a question wholly distinct from the operation of the bankruptcy discharge. Once the bankruptcy law aspect of the case is disposed of, the Navy's right to recoupment under straightforward government contracting law becomes clear. Under the Credits Provision Clause, Southwest was required to credit back to the Navy any income, rebate, allowance or other credit related to an allowable cost, which was received by or accrued to the contractor. The debenture holder's agreement to forego collection of the debentures satisfied this definition. It was related to the claimed cost—there would have been no debentures had NMIW actually paid its subcontractors for the Duluth work—and it accrued to the contractor since Southwest no longer had to pay them their full principle. Accordingly, the contracting officer's final decision that the debenture concessions fell within the meaning of the Credits Provision Clause was correct, the ASBCA's application of bankruptcy law was error, and the district court conclusion that the Navy was entitled to reimbursement was correct.
San Francisco, 896 F.2d at 534.