Northrop Grumman Computing Systems, Inc. v. United States , 709 F.3d 1107 ( 2013 )

United States Court of Appeals
for the Federal Circuit
______________________
NORTHROP GRUMMAN COMPUTING SYSTEMS,
INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2011-5124
______________________
Appeal from the United States Court of Federal
Claims in no. 07-CV-613, Judge Francis M. Allegra.
----------------------
NORTHROP GRUMMAN COMPUTING SYSTEMS,
INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2012-5044
______________________
2 NORTHROP GRUMMAN COMPUTING v. US
Appeal from the United States Court of Federal
Claims in no. 11-CV-608, Judge Francis M. Allegra.
______________________
Decided: February 19, 2013
______________________
DAVID C. AISENBERG, Looney Cohen & Aisenberg,
LLP, of Boston, Massachusetts, argued for plaintiff-
appellant in both appeals.
AMANDA L. TANTUM, Trial Attorney, Commercial Liti-
gation Branch, Civil Division, United States Department
of Justice, of Washington, DC, argued for defendant-
appellee in both appeals. With her on the brief were
TONY WEST, Assistant Attorney General, JEANNE E.
DAVIDSON, Director, KIRK T. MANHARDT, Assistant Direc-
tor, and ARMANDO A. RODRIGUEZ-FEO, Trial Attorney.
______________________
Before RADER, Chief Judge, PROST and REYNA, Circuit
Judges.
REYNA, Circuit Judge.
Northrop Grumman Computing Systems, Inc.
(“Northrop”) appeals two decisions of the Court of Federal
Claims (“Northrop I” and “Northrop II”). Both appeals
arise from a single contract between Northrop and U.S.
Immigrations and Customs Enforcement (“ICE”) for the
delivery of computer-network monitoring software.
Because we find that the first claim letter Northrop filed
with the contracting officer was a valid claim under the
Contract Disputes Act (“CDA”), we reverse the Court of
Federal Claims’ decision in Northrop I and remand the
case for further proceedings. We dismiss as moot
Northrop’s appeal in Northrop II.
NORTHROP GRUMMAN COMPUTING v. US 3
I. BACKGROUND
In July 2001, ICE awarded Northrop 1 Contract No.
NAS5-01143, which was a commercial items contract.
Under this Contract, ICE awarded Delivery Order No.
COW-4-D-1025 according to which Northrop would lease
to ICE, and provide support for, network monitoring
software produced by Oakley Networks (“Oakley”). The
Delivery Order provided that Northrop would furnish the
software and services via a lease for one twelve month
base year and three twelve month option years. The base-
year price was $900,000, and each option year was priced
at $899,186. If the Government exercised all three option
years, the Delivery Order would have a total value of
$3,597,558. In the month that followed the Delivery
Order award, ICE executed three modifications at
Northrop’s request. These modifications added clauses
regarding Northrop’s first-priority status, the Govern-
ment’s best efforts to secure funding, and a prohibition on
the Government substituting comparable software for the
Oakley software in the Northrop contract.
In order to obtain Oakley’s software, Northrop was
required to pay Oakley an up-front fee of $2,899,710.
Four days after the Delivery Order award, ICE provided
Northrop with an “essential use statement” that described
the intended use of the Oakley software and was designed
to facilitate third-party funding for the Oakley software.
Thereafter, Northrop entered a private finance agreement
with ESCgov, Inc. for the Oakley software. Under the
terms of the financing agreement, ESCgov would pay
Northrop $3,296,093 in exchange for Northrop’s assign-
1 Northrop Grumman Computing Systems, Inc.
(“Northrop”) is a division of Northrop Grumman Corpora-
tion’s Information Technology segment. At the time of the
award, this division was named Logicon FDC. The con-
tract was modified in October 2004 to reflect the name
change.
4 NORTHROP GRUMMAN COMPUTING v. US
ment to ESCgov of all payments received under the
Delivery Order. ESCgov subsequently assigned its rights
under the Northrop-ESCgov agreement to Citizens Leas-
ing Corp. Neither Northrop, ESCgov, nor Citizens Leas-
ing Corp. notified the Government of the assignments.
On September 30, 2005, ICE sent Northrop formal no-
tification of its decision not to exercise the lease’s first
option year, which was to run from September 30, 2005
until September 29, 2006. Northrop responded on Febru-
ary 22, 2006 with a request for information regarding the
Government’s decision. On April 14, 2006, Northrop
received a response from the contracting officer (“CO”),
who emphasized that there was no “termination,” but that
the Government simply was not in a position to fund the
options due to lack of appropriations.
A. NORTHROP’S FIRST CLAIM (NORTHROP I)
On September 21, 2006, Northrop sent to the CO a
letter with the subject line “Contract Disputes Act Claim
for not Exercising Option Year #1 under COW-4-D-1025 –
Oakley Leasing Agreement.” Northrop notified the CO
that the letter was submitted “[i]n accordance with the
Contract Disputes Act of 1978, 41 U.S.C. 601 et seq., and
the Disputes clause of the Contract.” 2 Northrop asserted
that the Government had breached the contract modifica-
tions made after the Delivery Order’s award, and stated
that the company was seeking $2,697,558.00 in damages.
The letter did not mention the two private financing
assignments. The letter concluded with a certification
2 Congress revised and recodified title 41 of the
United States Code in order to “remove ambiguities,
contradictions, and other imperfections....” Pub. L. No.
111–350, 124 Stat. 3677 (2011). All further citations in
this opinion are to the current version of the CDA, which
is now codified at 41 U.S.C. §§ 7101–7109 (Supp. IV
2006).
NORTHROP GRUMMAN COMPUTING v. US 5
and a request for a final decision. On December 29, 2006,
the CO issued a final decision denying Northrop’s claim.
On August 20, 2007, Northrop filed a complaint before
the Court of Federal Claims appealing the CO’s decision.
The Court of Federal Claims scheduled trial for June 13,
2011. Before trial, the Government learned of Northrop’s
private financing assignments and filed a motion to
dismiss for lack of subject-matter jurisdiction on grounds
that Northrop’s letter was not a valid CDA claim. Specifi-
cally, the Government argued that Northrop’s letter was
not a valid claim because it failed to provide adequate
notice of the nature of the claim, and because it did not
reveal that Northrop’s claim was for third-party losses of
private funders. On June 15, 2011, the Court of Federal
Claims issued its opinion in Northrop I granting the
Government’s motion to dismiss for lack of subject-matter
jurisdiction. Northrop Grumman Computing Sys., Inc. v.
United States, 99 Fed. Cl. 651, 660-61 (Fed. Cl. 2011).
The Court of Federal Claims determined that it did
not have jurisdiction because Northrop’s September 21,
2006 claim letter to the CO did not constitute a valid CDA
claim. The court reasoned that Northrop had not sup-
plied the CO with “adequate notice” of the claim because
it failed to “alert the contracting officer to the potential
application of the Anti-Assignment Act and Severin
doctrine [and] also to put him on notice as to the possible
relevancy of a host of other issues that have been associ-
ated with sponsored or ‘pass-through’ claims.” Id. at 659.
The court stated, “Based on that failure, the court must
conclude that Northrop’s ‘claim’ did not meet the re-
quirements of the CDA, thereby depriving this court of
jurisdiction over this lawsuit.” Id. at 660.
Northrop appealed the Court of Federal Claims’ dis-
missal in Northrop I to our court.
6 NORTHROP GRUMMAN COMPUTING v. US
B. NORTHROP’S SECOND CLAIM (NORTHROP II)
On July 20, 2011, while Northrop I was pending be-
fore the Court of Federal Claims, Northrop filed a second
claim letter with the CO. Like the Northrop I letter, this
letter also contained the subject line “Contract Disputes
Act Claim for not Exercising Option Year #1 under COW-
4-D-1025 – Oakley Leasing Agreement.” The second
claim letter contained much of the same content as the
Northrop I claim letter, but also explained that “Northrop
Grumman Computing financed this lease through various
payments made by ESCGov [sic] and Citizens Leasing
Corporation” and provided documents on the financing
arrangements. Before the CO responded to Northrop’s
second claim letter, Northrop filed its notice of appeal to
our court in Northrop I.
The CO determined that Northrop’s second claim was
the same claim pending before this court in Northrop I,
and that as a result, he lacked authority to resolve
Northrop’s second claim:
Northrop’s July 2011 claim arises from the same
operative facts and is substantially the same
claim as the claim it previously submitted to ICE
dated September 21, 2006. . . . It is the Govern-
ment’s position that because the July 2011 Con-
tract Disputes Act Claim for not exercising option
year #1 under COW-4-D-1025 is substantively the
same claim as the one currently pending before
the Federal Circuit on appeal under 28 U.S.C. §
516, only the Department of Justice possesses the
authority to act.
The CO consequently declined to issue a final decision on
Northrop’s second claim.
Northrop appealed the CO’s refusal to issue a decision
on its second claim to the Court of Federal Claims. The
Court of Federal Claims held that it lacked jurisdiction
NORTHROP GRUMMAN COMPUTING v. US 7
over Northrop’s second complaint (Northrop II). Northrop
Grumman Computing Sys., Inc. v. United States, 101 Fed.
Cl. 362, 365 (Fed. Cl. 2011). In its decision, the court
noted, “[Northrop’s second] complaint asserts the same
claim as [the Northrop I] complaint that was dismissed by
this court for lack of jurisdiction on June 23, 2011.” The
court found that Northrop’s pending appeal in Northrop I
divested the CO of his authority to issue a final decision
on Northrop’s second claim. Without a valid final decision
from the CO, the court concluded that it lacked jurisdic-
tion over Northrop’s second complaint.
Northrop appealed the Court of Federal Claims’ dis-
missal in Northrop II to our court and we consolidated
Northrop I and II. We have jurisdiction under 28 U.S.C. §
1295(a)(3).
II. STANDARD OF REVIEW
We review a grant or denial of a motion to dismiss for
lack of subject-matter jurisdiction de novo. Hewlett-
Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1361 (Fed.
Cir. 2009). As both Northrop I and Northrop II were
dismissed for lack of subject-matter jurisdiction, we
review both dismissals de novo.
III. NORTHROP I
In Northrop I, the Court of Federal Claims concluded
that Northrop’s “claim” did not meet the requirements of
a valid claim under the CDA. Specifically, the court
explained that Northrop’s failure to disclose information
about its third-party financing arrangements deprived the
CO of adequate notice of the basis of the claim because
the claim failed to alert the contracting officer to the
potential application of the Anti-Assignment Act, the
Severin doctrine, and other issues associated with spon-
sored or “pass-through” claims. The court thus concluded
that Northrop had not submitted a valid CDA claim to the
8 NORTHROP GRUMMAN COMPUTING v. US
CO, and accordingly, the court lacked subject-matter
jurisdiction over the Northrop I complaint.
On appeal, Northrop argues that its first claim letter
fully complied with the requirements of the CDA because,
among other grounds, the CDA did not require Northrop
to disclose its third-party financing arrangements. Ac-
cordingly, Northrop asks us to reverse the Court of Feder-
al Claims’ dismissal and remand for adjudication of its
CDA claim.
A prerequisite for jurisdiction of the Court of Federal
Claims over a CDA claim is a final decision by a contract-
ing officer on a valid claim. M. Maropakis Carpentry, Inc.
v. United States, 609 F.3d 1323, 1327 (Fed. Cir. 2010). If
a purported claim is found to be insufficient for any
reason, the insufficiency is fatal to jurisdiction under the
CDA. Sharman Co. v. United States, 2 F.3d 1564, 1568
(Fed. Cir. 1993) (“Under the CDA, a final decision by the
contracting officer on a claim . . . is a ‘jurisdictional pre-
requisite’ to further legal action thereon.”), overruled on
other grounds by Reflectone, Inc. v. Dalton, 60 F.3d 1572(Fed. Cir. 1995). Thus, if Northrop’s claim is an insuffi-
cient CDA claim, the Court of Federal Claims lacks sub-
ject-matter jurisdiction to review both the claim itself and
the CO’s decision.
The CDA establishes some prerequisites for a valid
claim. For example, the CDA requires that a claim by a
contractor be submitted to the contracting officer for
decision, that the claim be in writing, and that the con-
tractor certify claims over $100,000. 3 See 41 U.S.C. §
3 For claims of more than $100,000, the CDA re-
quires the contractor to certify that (1) the claim is made
in good faith, (2) the supporting data are accurate and
complete to the best of the contractor’s knowledge and
belief, (3) the amount requested accurately reflects the
contract adjustment for which the contractor believes the
NORTHROP GRUMMAN COMPUTING v. US 9
7103(a)–(b). In addition to the statutory requirements of
the CDA, we assess whether a claim is valid based on the
Federal Acquisition Regulation(s), the language of the
contract in dispute, and the facts of the case. Reflectone,
60 F.3d at 1575; see also Garrett v. General Elec. Co., 987
F.2d 747, 749 (Fed. Cir. 1993).
The Federal Acquisition Regulation (“FAR”) defines
“claim” as follows:
(c) Claim, as used in this clause, means a written
demand or written assertion by one of the con-
tracting parties seeking, as a matter of right, the
payment of money in a sum certain, the adjust-
ment or interpretation of contract terms, or other
relief arising under or relating to this contract.
However, a written demand or written assertion
by the Contractor seeking the payment of money
exceeding $100,000 is not a claim under the Act
until certified. A voucher, invoice, or other routine
request for payment that is not in dispute when
submitted is not a claim under the Act. The sub-
mission may be converted to a claim under the
Act, by complying with the submission and certifi-
cation requirements of this clause, if it is disputed
either as to liability or amount or is not acted up-
on in a reasonable time.
FAR 52.233–1. In Reflectone, we held that the FAR sets
forth only three requirements of a non-routine “claim” for
money: that it be (1) a written demand, (2) seeking, as a
matter of right, (3) the payment of money in a sum cer-
tain. 60 F.3d at 1575–76.
While a valid claim under the CDA must contain “a
clear and unequivocal statement that gives the contract-
Federal Government is liable, and (4) the certifier is
authorized to certify the claim on behalf of the contractor.
41 U.S.C. § 7103(b)(1)(A)–(D).
10 NORTHROP GRUMMAN COMPUTING v. US
ing officer adequate notice of the basis and amount of the
claim,” the claim need not take any particular form or use
any particular wording. Contract Cleaning Maint., Inc. v.
United States, 811 F.2d 586, 592 (Fed. Cir. 1987). “All
that is required is that the contractor submit in writing to
the contracting officer a clear and unequivocal statement
that gives the contracting officer adequate notice of the
basis and amount of the claim.” Id.Northrop submitted a written claim letter to the CO
in Northrop I. The letter contained clear allegations of
the Government’s breach of specific contractual provi-
sions, and it demanded a specific amount in damages.
The letter was accompanied by the required certification
statement, and it stated a clear request for a final deci-
sion along with the relief sought. As required by the CDA
and the FAR, Northrop’s claim letter was “a clear and
unequivocal statement” that gave the CO adequate notice
of the basis for the alleged breach and specified an
amount of the claim. See Maropakis, 609 F.3d at 1327(quoting Contract Cleaning, 811 F.2d at 592). Northrop’s
claim letter thus satisfied all the requirements listed for a
CDA “claim” according to the plain language of the FAR.
The Court of Federal Claims noted concern that
Northrop’s failure to disclose the details of its financing
arrangements did not give the contracting officer ade-
quate notice of the potential applicability of the Anti-
Assignment Act, the Severin doctrine, or “a host of other
issues that have been associated with sponsored or ‘pass-
through’ claims.” See generally Anti-Assignment Act, 31
U.S.C § 3727, 41 U.S.C. § 15; Severin v. United States, 99
Ct. Cl. 435, 442–43 (1943) (holding that a prime contrac-
tor cannot recover on behalf of subcontractor to whom
prime contractor is not independently liable).
The Court of Federal Claims correctly found that
Northrop’s failure to notify the Government of its assign-
ment rendered the assignment “null and void as against
NORTHROP GRUMMAN COMPUTING v. US 11
the United States” by operation of the Anti-Assignment
Act. The court explained, “That does not mean, however,
that Northrop forfeited its breach of contract claim
against the United States.” Indeed, the court concluded
that Northrop was the proper party to bring the claim.
We agree. See Beaconwear Clothing Co. v. United States,
355 F.2d 583, 591 (Ct. Cl. 1966) (holding, where Beacon-
wear’s assignment of contractual right to receive pay-
ments was void as against the Government, that
“Beaconwear thus remains the only party which has a
legal claim to the amount due under the contract”); Colo-
nial Navigation Co. v. United States, 181 F. Supp. 237,
240 (Ct. Cl. 1960) (“But an attempted assignment of a
claim against the United States does not forfeit the claim.
It leaves the claim where it was before the purported
assignment.”). As such, Northrop is not asserting a pass-
through claim, and the Severin doctrine does not apply in
this case. Beaconwear, 355 F.2d at 591; Colonial Nav.,
181 F. Supp. at 240.
Because Northrop was the proper party to bring the
claim, we disagree that by omitting financing information
Northrop failed to give the contracting officer adequate
notice for the basis of its claim. We therefore hold that
the claim letter Northrop submitted in Northrop I was a
valid claim under the CDA, and the Court of Federal
Claims had subject-matter jurisdiction over the CO’s
decision on that claim.
IV. CONCLUSION
Because we find that the Court of Federal Claims had
jurisdiction over Northrop’s claim in Northrop I, the
Northrop II appeal is moot.
The decision of the Court of Federal Claims in
Northrop I (Appeal No. 2011-5124) is REVERSED AND
REMANDED for adjudication on the merits. Northrop’s
appeal in Northrop II (Appeal No. 2012-5044) is
DISMISSED as moot.
12 NORTHROP GRUMMAN COMPUTING v. US
COSTS
Each party shall bear its own costs.