United Federal Leasing, Inc. v. United States , 33 F. App'x 672 ( 2002 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED FEDERAL LEASING, 
INCORPORATED,
Plaintiff-Appellant,
v.
UNITED STATES OF AMERICA,
Defendant-Appellee,  No. 01-1395
and
EMC CORPORATION OF
MASSACHUSETTS, a/k/a EMC
Corporation,
Defendant.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Gerald Bruce Lee, District Judge.
(CA-00-1418-A)
Argued: October 30, 2001
Decided: April 17, 2002
Before WIDENER, TRAXLER, and KING, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Erica Steinacker Stoecker, Herndon, Virginia, for Appel-
lant. Rachel Celia Ballow, Assistant United States Attorney, Alexan-
2 UNITED FEDERAL LEASING v. UNITED STATES
dria, Virginia, for Appellee. ON BRIEF: Michael E. Geltner,
GELTNER & ASSOCIATES, P.C., Washington, D.C., for Appellant.
Kenneth E. Melson, United States Attorney, John A. Dietrich, Senior
Trial Counsel, Office of the General Counsel, DEPARTMENT OF
THE NAVY, Alexandria, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
The issue on appeal is whether United Federal Leasing’s (United)1
claim against the United States (government) is based in contract or
tort. The district court concluded that it lacked jurisdiction over Unit-
ed’s suit since its claims were inextricably grounded in contract, and
thereby governed by the Contract Disputes Act of 1978, 41 U.S.C.
§ 601 (amended). Finding United’s claim to be a contract dispute, we
affirm the district court’s dismissal for lack of subject matter jurisdic-
tion.
In 1987, the government entered into a contract (prime contract)
with Electronic Data Systems Corporation (EDS) for the leasing of
computer equipment to the Navy. As in many government contracts,
the prime contract contained escape clauses allowing the government
to terminate for various reasons without breaching the contract. These
clauses provided for early termination of the prime contract upon the
government timely notifying EDS. In addition, the prime contract,
through clause H17.1, described the removal responsibilities for the
computer equipment upon contract termination.
To fulfill its lease with the government, EDS then subcontracted
with EMC Corporation (EMC), a manufacturer and vendor of com-
1
At the time of contracting, United’s name was MLC Group, Inc.
UNITED FEDERAL LEASING v. UNITED STATES 3
puter equipment. This contract referred to the Federal Acquisition
Regulations and the Contract Disputes Act procedures of the prime
contract. The EDS-EMC contract required EMC to provide computer
equipment in exchange for the lease payments EDS was to receive
from the government. In 1996, the government issued delivery orders
to lease EMC computers for forty-two months under the prime con-
tract. EMC still owned the computers and reserved the option to
assign both the government’s lease payments and title to the equip-
ment. EMC exercised this option and assigned its rights to United for
financing of the computer equipment. United is a commercial equip-
ment lessor/ financier. The EMC-United agreement gave ownership
of the computers to United and required EMC to dismantle and
remove the computer equipment from the government’s sites upon
termination of the prime contract.
On August 31, 1998, the government’s contracting officer gave the
required 30-day notice to EDS for lease termination effective Septem-
ber 30, 1998. Both parties agree that the notice and termination were
in compliance with the prime contract. Upon termination, United
requested EMC to de-install the equipment and make it available for
pickup. EMC failed to do so. United then contacted EDS, demanding
the computers’ availability on October 1, 1998. EDS promptly
responded that the prime contract was satisfied; therefore, EDS no
longer had any rights or interests in the equipment since it assigned
its rights EMC. United also contacted the government, informing it
that United owned the computer equipment and demanded the equip-
ment for removal and remarketing. On October 19, the government
responded to United by stating it had terminated the lease at issue, the
prime contract was between the Navy and EDS, and the Navy had "no
contractual arrangement with your company, [so] you will need to
pursue your interest with whomever you have contracted with for this
equipment." We are told at oral argument that, ultimately, EMC
removed the computers in mid-November, 1998.
On October 21, 1998, United claimed under the Federal Tort
Claims Act that the government converted its computer equipment
and sought damages of $560,000. In February 2000, the government
denied the claim, whereupon United sued both EMC and the govern-
ment on August 21, 2000. United sought damages for the six-week
period following the termination of the prime contract when the gov-
4 UNITED FEDERAL LEASING v. UNITED STATES
ernment was in possession of the computer equipment. The district
court granted the government’s motion to dismiss for lack of subject
matter jurisdiction on March 2, 2001. United has subsequently settled
with EMC.
Appellate jurisdiction exists under 28 U.S.C. § 1291, as a final
judgment from the district court. We review de novo the district
court’s dismissal of the case for lack of subject matter jurisdiction.
See Evans v. B. F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999).
While the federal government is normally shielded from liability,
the government has waived immunity under the Federal Torts Claims
Act, 28 U.S.C. § 2671 (FTCA), and the Contract Disputes Act of
1978, 41 U.S.C. § 601 (amended) (CDA). The FTCA does not create
a new cause of action, but provides that the United States is liable for
torts "in the same manner and to the same extent as a private individ-
ual . . . ." 28 U.S.C. § 2674. Jurisdiction for suit under the FTCA
exists in United States District Court. 28 U.S.C. § 1346.
The CDA provides for legal recourse against the government for
disputes arising from the procurement of property and services by the
federal government.2 41 U.S.C. § 602(a). The CDA requires an initial
filing with the contracting officer for any governmental contract dis-
pute. 41 U.S.C. § 605(a). Necessary appeals proceed to the agency’s
board then to the Court of Federal claims. 41 U.S.C. § 607, 609.
Unlike the FTCA, the CDA limits jurisdiction to the Court of Federal
Claims, rather than U.S. District Courts. United States v. J&E Salvage
Co., 55 F.3d 985, 987 (4th Cir. 1995) (citing S. Rep. No. 1118, 95th
Cong., 2d Sess. 10, reprinted in 978 U.S.C.C.A.N. 5235, 5244 (noting
that "U.S. district court jurisdiction is eliminated from Government
contract claims")).
If the basis of this case is in tort, the district court erred in dismiss-
ing United’s claim under the FTCA; however, if United’s claim is
contractual, the district court correctly dismissed the case since
2
Case law defines "procurement" as an acquisition by purchase, lease,
or barter, or property or services for the direct benefit or use of the fed-
eral government." New Era Constr. v. United States, 890 F.2d 1152,
1157 (Fed. Cir. 1989).
UNITED FEDERAL LEASING v. UNITED STATES 5
United did not pursue the required procedural recourse. United argues
that this is a mere conversion case, suitable for disposition under the
FTCA. It contends that the nature of the complaint is one for tort —
specifically that United owned the computer equipment and the gov-
ernment converted this equipment during the six-week period after
the termination of the prime contract.
We agree with the district court, however, that this claim is con-
tractual. The essence of its opinion, with which we agree, follows:
Plaintiff cannot overcome this Court’s lack of jurisdiction
by framing the claim against the United States as a tort
claim. See J & E Salvage, 55 F.3d at 988 (stating that nei-
ther contractors nor government may bring contract action
in district court simply by recasting claims in tort language
or as statutory or regulatory violation). Notwithstanding
Plaintiff’s arguments, Plaintiff’s conversion claim sounds in
contract because it is necessary to look at the terms of the
contracts between Plaintiff, EMC, EDS, and the Navy to
find the source of the rights Plaintiff claims in the computer
equipment. See id. (noting that the source of the rights
claimant sought to vindicate were rooted firmly in contract).
Plaintiff’s claim for conversion is based on Plaintiff’s
asserted "right to possession" of the equipment. (Compl.
¶¶ 41-43.) Plaintiff asserts that it possessed the equipment
that Defendant has failed to return as a result of the "EMC-
MLC Federal contract," by which EMC sold and assigned
to Plaintiff all of EMC’s right and interest in the equipment
and granted Plaintiff a security interest in the equipment.
(Id. ¶ 14.) As in the Fourth Circuit case of J & E Salvage,
it is impossible to ignore the terms of the contract docu-
ments in deciding whether Plaintiff had a right of possession
over the equipment. See J & E Salvage, 55 F.3d at 988;
Wood, 961 F.2d at 199 (stating that a claim was based in
contract, not tort, when the only way plaintiff could succeed
in proving conversion was to prove existence of a contract
sufficient to give him ownership interest). Therefore, Plain-
tiff’s "claims of ‘conversion’ . . . are merely transparent
reformulations of [a] contract dispute." J & E Salvage, 55
F.3d at 989. In short, Plaintiff cannot invoke the jurisdiction
6 UNITED FEDERAL LEASING v. UNITED STATES
of this Court by framing a claim as other than contractual,
when, in fact, "the genesis of any wrongdoing by the United
States was breach of contract." Coffey, 626 F. Supp. at 1248;
see also Wood, 961 F.2d at 198 (holding that jurisdiction
lies in Claims Court where cause of action arises primarily
from a contractual undertaking).
The judgment of the district court is accordingly
AFFIRMED.