Research Triangle v. Bd of Gov Fed Res , 132 F.3d 985 ( 1997 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
RESEARCH TRIANGLE INSTITUTE,
Plaintiff-Appellant,
v.
THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM, consisting
of Alan Greenspan in his official
capacity as chairman, and Edward
No. 97-1282
W. Kelley, Jr., Lawrence B.
Lindsey, Susan M. Phillips and
Janet L. Yellen in their capacities as
members of the Board of
Governors; UNITED STATES OF
AMERICA,
Defendants-Appellees.
Appeal from the United States District Court
for the Middle District of North Carolina, at Durham.
Frank W. Bullock, Jr., Chief District Judge.
(CA-96-102-1)
Argued: October 30, 1997
Decided: December 29, 1997
Before RUSSELL, NIEMEYER, and WILLIAMS, Circuit Judges.
_________________________________________________________________
Affirmed by published opinion. Judge Russell wrote the opinion, in
which Judge Niemeyer and Judge Williams joined.
_________________________________________________________________
COUNSEL
ARGUED: Robinson Oscar Everett, EVERETT & EVERETT, Dur-
ham, North Carolina, for Appellant. Bradford Scott Fleetwood, Senior
Attorney, Washington, D.C., for Appellee Board of Governors; Gill
Paul Beck, Assistant United States Attorney, Greensboro, North Car-
olina, for Appellee United States. ON BRIEF: Sandra G. Herring,
EVERETT & EVERETT, Durham, North Carolina, for Appellant.
James V. Mattingly, Jr., General Counsel, Richard M. Ashton, Asso-
ciate General Counsel, Katherine H. Wheatley, Assistant General
Counsel, Washington, D.C., for Appellee Board of Governors; Walter
C. Holton, Jr., United States Attorney, Greensboro, North Carolina,
for Appellee United States.
_________________________________________________________________
OPINION
RUSSELL, Circuit Judge:
This appeal presents a single question of law: whether the Board
of Governors of the United States Federal Reserve System (the
"Board") can be sued in contract in federal court. The district court
found that the doctrine of sovereign immunity shielded the Board
from contract suits in federal court and dismissed this case for lack
of subject matter jurisdiction. Because we can find neither an express
waiver of sovereign immunity in the Board's governing statutes nor
the Board's inclusion in a more general Congressional waiver of
immunity, we agree with the district court's finding, and affirm its
dismissal of the case.
I.
A.
Appellant Research Triangle Institute ("RTI") is a nonprofit scien-
tific research organization headquartered in Research Triangle Park,
North Carolina. RTI sued the Board in the United States District
Court for the Middle District of North Carolina, seeking reimburse-
ment for unforeseen costs incident to a contract that required RTI to
2
perform a survey of the institutions and geographic areas from which
small businesses obtain financial services. The fixed contractual price
for RTI's services was $572,763, but in May of 1989, nearly a year
after the contract was awarded, RTI sought an equitable adjustment
in the amount of $284,079. The Board denied the adjustment in Feb-
ruary 1990, and RTI brought suit. On February 14, 1997, the district
court dismissed the case for lack of subject matter jurisdiction.1 This
appeal followed.
B.
As stated above, the district court dismissed this case for lack of
subject matter jurisdiction based on its finding that the doctrine of
sovereign immunity protected the Board from suit. Because the exis-
tence of sovereign immunity is a question of law, we review this
determination de novo.2
With regard to the federal government and its instrumentalities,
sovereign immunity is presumed and cannot be overcome without an
express and unequivocal statutory waiver.3 Further, any statutory
waiver is strictly construed, with all ambiguities resolved in favor of
the sovereign.4
The jealous protection of the sovereign from suit is deeply rooted
in the common law5 and has been considered a part of the plan of our
Constitution since before its ratification. In arguing for the Constitu-
tion's organization of the judicial branch, Alexander Hamilton wrote
that "[i]t is inherent in the nature of sovereignty not to be amenable
to the suit of an individual without its consent ,"6 and further inferred
_________________________________________________________________
1 Research Triangle Inst. v. Board of Governors, 962 F. Supp. 61
(M.D.N.C. 1997).
2 Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th
Cir. 1994).
3 Lane v. Pena, 116 S. Ct. 2092, 2096 (1996).
4 Id.
5 See Chisholm v. Georgia, 1 U.S. 16, 26-34 (1793) (Iredell, J., tracing
the doctrine of sovereign immunity forward from the time of Edward I).
6 The Federalist No. 81, at 511 (Alexander Hamilton) (Benjamin F.
Wright ed., 1961) (emphasis original).
3
from this precept that "[t]he contracts between a nation and individu-
als are only binding on the conscience of the sovereign, and have no
pretensions to a compulsive force."7 In Kawananakoa v. Polyblank,8
Justice Holmes reaffirmed the doctrine of sovereign immunity "not
because of any formal conception or obsolete theory, but on the logi-
cal and practical ground that there can be no legal right as against the
authority that makes the law on which the right depends."9
More recently, the Supreme Court emphasized the strict require-
ments for a waiver of this immunity, stating that such a waiver "must
be unequivocally expressed in [the] statutory text,"10 and that, as
stated above, "a waiver of the Government's sovereign immunity will
be strictly construed, in terms of its scope, in favor of the sovereign."11
In addition, the Court has also interpreted this broad measure of pro-
tection as extending not only to more traditional governmental enti-
ties, but to all agencies of the federal government.12
A waiver of federal sovereign immunity can be found in one of two
places: in the specific statute governing a governmental entity, or in
one of the broad waivers of immunity made by Congress for certain
classes of federal agencies. The Tucker Act13 and the Contract Dis-
putes Act14 are examples of the latter type of waiver. In each statute,
Congress explicitly waived sovereign immunity with regard to con-
tract actions against certain federal agencies and placed jurisdiction
over those actions in the United States Court of Federal Claims. How-
ever, unless these statutes specify otherwise, they apply only to agen-
cies that operate using appropriated funds, and as a result they do not
waive immunity from contract actions for all agencies.15
_________________________________________________________________
7 Id.
8 205 U.S. 349 (1907).
9 Kawananakoa v. Polyblank, 205 U.S. 349, 353 (1907).
10 Lane, 116 S. Ct. at 2096.
11 Id.
12 See, e.g., FDIC v. Meyer, 510 U.S. 471, 475 (1994).
13 28 U.S.C.A. §§ 1491-1509 (1994 & West Supp. 1997).
14 41 U.S.C.A. §§ 601-13 (1987 & West Supp. 1997).
15 The relevant section of the United States Code states in part that
"[e]very final judgement rendered by the United States Court of Federal
4
II.
A.
In arguing that the Board is subject to a waiver of sovereign immu-
nity, RTI first relies on the Tucker Act case of McDonald's Corp. v.
United States.16 In McDonald's, an independent contractor sued the
Navy Resale and Services Support Office ("NAVRESSO"), an agency
responsible for supervising certain aspects of the Navy's exchanges,
for breach of contract. The Claims Court dismissed for lack of juris-
diction, stating that the Tucker Act did not expressly include
NAVRESSO's predecessor agency within its waiver of sovereign
immunity for the nation's military exchanges. The United States
Court of Appeals for the Federal Circuit disagreed, holding that the
Tucker Act's waiver of immunity included NAVRESSO because
NAVRESSO's supervisory activities fell "within the ambit of `a post
exchange type of operation.'"17
_________________________________________________________________
Claims against the United States shall be paid out of any general appro-
priation therefor . . . ." 28 U.S.C.A. § 2517 (West Supp. 1997). This pro-
vision is generally read as limiting Tucker Act claims to contracts "which
could have been satisfied out of appropriated funds." Kyer v. United
States, 369 F.2d 714, 718 (Ct. Cl. 1966). In United States v. Hopkins,
427 U.S. 123 (1976), the Supreme Court considered a contract action
against the Army and Air Force Exchange Service ("AAFES"), a "non-
appropriated fund instrumentality," that was brought within the scope of
the Tucker Act's waiver of sovereign immunity by an express amend-
ment, now part of 28 U.S.C. § 1491(a)(1). The Court held that the
amendment was clearly designed "to afford contractors a federal forum
in which to sue nonappropriated fund instrumentalities [the military
exchanges] by doing away with the inequitable`loophole' in the Tucker
Act," id. at 126 (internal citations omitted), and affirmed jurisdiction.
Nevertheless, the Court left undisturbed the general"appropriated fund
instrumentality" limitation on the Tucker Act's grant of jurisdiction. As
for the Contract Disputes Act, the only non-appropriated fund activities
it contemplates are those "described in sections 1346 and 1491 of Title
28." 41 U.S.C.A. § 602(a) (West 1994).
16 926 F.2d 1126 (Fed. Cir. 1991).
17 McDonald's Corp. v. United States, 926 F.2d 1126, 1133 (Fed. Cir.
1991) (quoting S. Rep. No. 91-259, at 2 (1969)).
5
RTI relies upon McDonald's for the purpose of drawing a parallel.
RTI argues that, just as NAVRESSO was brought within the pale of
the Tucker Act's waiver of immunity for Navy exchanges because of
its close association with that entity, the Board, for which there is no
express statutory waiver of immunity, should be included within the
waiver for the Federal Reserve banks provided by 12 U.S.C. § 341.
We disagree.
McDonald's inclusion of NAVRESSO in the Tucker Act's waiver
of sovereign immunity for Navy exchanges is patently distinguishable
from RTI's argument that the Board should be included in the statu-
tory waiver of immunity as to federal reserve banks. As McDonald's
made clear, NAVRESSO is an entity established by the Navy itself,
as well as one whose organization and function has changed as the
Navy exchange system has evolved.18 By contrast, the Board has an
expressly independent statutory existence from the Federal Reserve
banks it oversees. Subchapter II of 12 U.S.C. mandates the creation
of the Board, and enumerates its powers,19 which, the Board notes,
primarily involve the regulation of the "member" banks of the Federal
Reserve System and the establishment of general monetary policy.
There is no mention of any ability to sue or be sued with regard to
the Board in Subchapter II. However, separate subsequent subchap-
ters and the sections therein deal with the creation of the independent
Federal Reserve banks and establish their powers, including the
power "[t]o make contracts" and "[t]o sue and be sued, complain and
defend, in any court of law or equity."20
Thus, in attempting to equate this situation with McDonald's, RTI
asks us to conflate the powers of two expressly independent statutory
entities. This we are unwilling to do, and therefore hold that RTI's
argument is unavailing.
B.
Additionally, RTI contends that the Tucker Act's waiver of sover-
_________________________________________________________________
18 Id. at 1127-28.
19 12 U.S.C.A. §§ 241-250 (1987 & West Supp. 1997).
20 Id. at § 341 (West 1987).
6
eign immunity should extend to the Board. RTI asserts that, because
the Board's governing statutes do not explicitly preclude Congress
from funding the Board in an emergency, the Board should be consid-
ered an appropriations-funded agency and thus fall within the Tucker
Act's waiver. However, 12 U.S.C. § 244 clearly states that the money
used to fund the Board (assessments from Federal Reserve banks)
"shall not be construed to be Government funds or appropriated
moneys."21 And in any event, the only authority for the proposition
that Tucker Act jurisdiction exists when Congress could appropriate
money for an entity states that jurisdiction does not exist when there
is "a clear expression by Congress that the agency was to be separated
from general federal revenues."22 As there is such a "clear expression"
in this case, we hold that the Board is not within the Tucker Act's
waiver of sovereign immunity.
Further, even if we were to hold that there was jurisdiction under
the Tucker Act, a district court in this circuit would not have jurisdic-
tion over RTI's claim. Rather, such a claim would have to be brought
in United States Court of Federal Claims. However, as we hold that
the Tucker Act does not waive the Board's sovereign immunity, that
question is not dispositive here.
C.
RTI alternatively argues that the Board's sovereign immunity is
impliedly waived. In so doing, RTI proceeds on two grounds. First,
RTI cites United States v. Winstar Corp.23 for the proposition that
sovereign immunity should not be used to frustrate the reasonable
expectations of private parties who contract with the government.
However, as the Board indicates in its brief, Winstar did not involve
the waiver of sovereign immunity. Rather, immunity in that case had
been clearly waived, and the question before the Court involved the
"unmistakeability doctrine," which regards the sovereign's ability to
limit its own preexisting powers.
_________________________________________________________________
21 Id. at § 244.
22 L'Enfant Plaza Properties, Inc. v. United States, 668 F.2d 1211,
1212 (Ct. Cl. 1982).
23 116 S. Ct. 2432 (1996).
7
No such "unmistakeability" question is at issue here. Additionally,
although the language from Winstar regarding the reasonable expecta-
tions of private parties who deal with the government and the desir-
ability of "the Government's credibility at the bargaining table"24 may
be compelling, it is nevertheless in direct conflict with the law's
demand that there be a clear waiver of sovereign immunity. While it
may be inequitable that the Board cannot be sued on contracts into
which it enters, we recognize that the determination of the propriety
of this arrangement is for Congress, not for us. As Chief Justice Vin-
son wrote in Larson v. Domestic & Foreign Commerce Corp.:
We do not doubt that there may be some activities of the
Government which do not require such [sovereign immu-
nity] protection. There are others in which the necessity of
immunity is apparent. But it is not for this Court to examine
the necessity in each case. That is a function of the Congress.25
Therefore, we find Winstar inapplicable to this case.
We are also unpersuaded by RTI's argument that an implied waiver
should be found in the Board's governing statutes. In its reply brief,
RTI cites a 1992 amendment to 12 U.S.C. § 248 which states that:
The Board may act in its own name and through its own
attorneys in enforcing any provision of this title, regulations
promulgated hereunder, or any other law or regulation, or in
any action, suit, or proceeding to which the Board is a party
. . . .26
This provision, RTI argues, amounts to the "functional equivalent" of
a waiver of sovereign immunity in that it "recognizes that the Board
can be a party to a legal action in its own name."27 Again, while this
argument may be compelling, it cannot withstand the requirement that
_________________________________________________________________
24 United States v. Winstar Corp. , 116 S. Ct. 2432, 2459 (1996).
25 Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 704-
05 (1949).
26 12 U.S.C.A. § 248(p) (1989 & West Supp. 1997).
27 Appellant's Reply Br. at 4.
8
a waiver of sovereign immunity be clear, express, and unequivocal.
By its very nature, an argument of implicitness or equivalence is one
that comprises a recognition of the ambiguity of the matter asserted,
and as such ambiguities regarding sovereign immunity must be
resolved in favor of the sovereign,28 we cannot use it as a ground for
a waiver. Fidelity to the clear authority of sovereign immunity juris-
prudence demands otherwise. Therefore, we hold that the Board's
governing statutes do not waive the Board's immunity from suit in
contract.
III.
Based on the foregoing, we hold that the district court correctly
found that the Board cannot be sued in contract in federal court.29
Accordingly, we affirm the district court's dismissal of this case.
AFFIRMED
_________________________________________________________________
28 Lane, 116 S. Ct. at 2096.
29 Nevertheless, we also recognize, as does the Board (Appellee's Br.
at 13), that the Board is not immune to certain non-contract claims, as
Congress has waived the Board's immunity from suit through statutes
like the Federal Tort Claims Act. See 28 U.S.C.A. § 1346(b)(1993 &
West Supp. 1997).
9