The United States District Court for the District of Columbia released a Memorandum Opinion and Order this month which could be the first step in providing a new forum for claimants in certain contract disputes with the federal government. See Yee v. Jewell, Civil Action No. 16-490 (RDM), 2017 WL 78473 (D.D.C. Jan. 9, 2017). Depending on the outcome, plaintiffs may be permitted to seek relief other than monetary damages (such as an injunction or specific performance) for the government's breach of contract in federal district court. The Court did not issue a substantive ruling, but it has asked the parties to brief the issue by March 27, 2017, making this a case to watch.
Since the 1980s, the D.C. Circuit has held that contract actions seeking more than $10,000 in monetary relief from the federal government must generally be brought in the United States Court of Federal Claims. See, e.g., Megapulse, Inc. v. Lewis, 672 F.2d 959, 967-70 (D.C. Cir. 1982); Albrecht v. Comm'n on Employee Benefits, 357 F.3d 62, 67-68 (D.C. Cir. 2004). Such actions could not be brought in federal district court. The reason is the legal concept of sovereign immunity, which prohibits lawsuits against the government unless it has consented to the filing of such lawsuits by legislation. The D.C. Circuit had interpreted federal statutes to only consent to such suits in the Court of Federal Claims, not in other courts such as the District Court for the District of Columbia. As a result, the overwhelming majority of claims alleging breach of contract by the federal government are currently heard before the Court of Federal Claims in Washington, D.C.
The Yee case hints at a possible change to this rule, however, which would allow contract claims against the federal government that are not seeking monetary damages to be filed in federal district court. The case hinges on the interaction of two federal statutes that together may waive sovereign immunity in such suits in federal district court: the Tucker Act and the Administrative Procedure Act (the "APA").
The Tucker Act provides the Court of Federal Claims with jurisdiction over (and so waives sovereign immunity as to) "any claim…against the United States founded…upon any express or implied contract with the United States…" 28 U.S.C. § 1491(a)(1). The federal district courts have concurrent jurisdiction with the Court of Federal Claims for such claims that do not exceed $10,000 in amount. 28 U.S.C. § 1346(a)(2). For years, the D.C. Circuit read these portions of the Tucker Act to mean that contract claims against the federal government in excess of $10,000 had to be brought in the Court of Federal Claims. See Sharp v. Weinberger, 798 F.2d 1521, 1523-24 (D.C. Cir. 1986). This has continued even after the U.S. Supreme Court indicated in 1988 that the Tucker Act did not necessarily grant the Court of Federal Claims exclusive jurisdiction over contract claims against the federal government in excess of $10,000. See Bowen v. Massachusetts, 487 U.S. 879, 910 n. 48 (1988); Transohio Sav. Bank v. Dir., Office of Thrift Supervision, 967 F.2d 598, 612-13 (D.C. Cir. 1992).
In Yee, the plaintiff is the state of California, which is pursuing a contract claim against the U.S. Department of the Interior. The Court indicated that California will likely rely on Section 702 of the APA to argue that sovereign immunity has been waived. As a result, California will have to show (1) it is not seeking money damages and (2) that no other statute "expressly or impliedly forbids the relief which is sought." See 5 U.S.C. § 702.1 Relief other than money damages (specific relief) generally includes injunctions, declaratory judgments, and specific performance of contract terms. The big issue is whether the Tucker Act is a statute which "expressly or impliedly forbids" the specific relief that California is seeking. Though the D.C. Circuit has always construed the Tucker Act to impliedly forbid reading Section 702 of the APA to waive sovereign immunity for contract claims in federal district court, it has acknowledged the "force" of the argument that the Supreme Court's 1988 holding in Bowen upends this conclusion. See Transohio Sav. Bank, 967 F.2d at 611-12. Depending on the outcome at the district court level in Yee, the D.C. Circuit may have to consider anew whether to interpret the Tucker Act and the APA to permit contract claims for specific relief in federal district court.
The consequences of a final ruling in California's favor could be large for those litigating contract disputes with the federal government. In effect, contract claims for damages in excess of $10,000 would be brought in the Court of Federal Claims, while contract claims for specific relief would be brought in federal district court. Previously, plaintiffs seeking specific relief had to either include such a request in a claim for damages made in the Court of Federal Claims, or had to demonstrate in federal district court that they were entitled to such relief (for example, an injunction) because the government's conduct was a violation of statutory law or the U.S. Constitution.2 See Transohio Sav. Bank, 967 F.2d at 610-11. A new regime splitting responsibility for contract claims against the federal government between federal district court and the Court of Federal Claims could be on the horizon. Because it could one day provide an easier road to declaratory or injunctive relief, Yee is a case worth watching for federal contractors.
[1] In addition, APA Section 702 plaintiffs must state a claim that "an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority…" Id.
[2] However, "'[j]urisdiction under the Tucker Act cannot be avoided by…disguising a money claim' as a claim requesting a form of equitable relief." Kidwell v. Dep't of Army, 56 F. 3d 279, 284 (D.C. Cir. 1995) (citing Van Drasek v. Lehman, 762 F.2d 1065, 1071 n. 11 (D.C. Cir. 1985)).