United States Court of Appeals for the Federal Circuit
2006-5096, -5117
CHAPMAN LAW FIRM CO.,
Plaintiff-Appellant,
v.
GREENLEAF CONSTRUCTION CO., INC.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Cross Appellant,
and
MICHAELSON, CONNOR & BOUL, INC.,
Defendant-Appellee.
James S. DelSordo, Cohen Mohr, LLP, of Washington, DC, argued for plaintiff-
appellant.
Alexander J. Brittin, Brittin Law Group, PLLC, of McLean, Virginia, argued for
plaintiff-appellee.
Sameer Yerawadekar, Trial Attorney, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for
defendant-cross appellant. With him on the brief were Peter D. Keisler, Assistant
Attorney General, and Mark A. Melnick, Assistant Director. Of counsel on the brief were
Kimberly Nash, Senior Trial Counsel, and Robert J. Brown, Attorney-Advisor,
Procurement & Administrative Law Division, United States Department of Housing and
Urban Development, of Washington, DC.
Margaret A. Dillenburg, Law Offices of Margaret Dillenburg, P.C., of Washington,
DC, for defendant-appellee.
Appealed from: United States Court of Federal Claims
Judge Thomas C. Wheeler
United States Court of Appeals for the Federal Circuit
2006-5096, -5117
CHAPMAN LAW FIRM CO.,
Plaintiff-Appellant,
v.
GREENLEAF CONSTRUCTION CO., INC.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Cross Appellant,
and
MICHAELSON, CONNOR & BOUL, INC.,
Defendant-Appellee.
__________________________
DECIDED: June 11, 2007
__________________________
Before NEWMAN, LOURIE, and PROST, Circuit Judges.
Opinion for the court filed by Circuit Judge PROST. Circuit Judge NEWMAN concurs in
part and dissents in part.
PROST, Circuit Judge.
Chapman Law Firm Co. (“Chapman”) appeals a June 7, 2006, decision by the
United States Court of Federal Claims declining to dismiss a bid protest filed by
Chapman in light of a proposed corrective action by the United States that the court
determined lacked a rational basis and was contrary to law. Chapman Law Firm Co. v.
United States, 71 Fed. Cl. 124 (2006) (“Chapman I”). The United States cross-appeals
the Court of Federal Claims’ rejection of its proposed corrective action and the court’s
refusal to dismiss the case after the United States proposed a second, revised
corrective action. Chapman Law Firm Co. v. United States, No. 06-CV-330 (Fed. Cl.
June 20, 2006) (“Chapman II”). We affirm the Court of Federal Claims’ denial of the
motion to dismiss in light of the first proposed corrective action; however, because the
Court of Federal Claims improperly entered judgment for plaintiffs rather than
dismissing the case after the United States proposed its revised corrective action, we
reverse and remand for the Court of Federal Claims to dismiss.
I. BACKGROUND
This case arises out of a bid protest filed by Chapman in relation to a competitive
procurement initiated in August 2003 by the United States Department of Housing and
Urban Development (“HUD”) for management and marketing services for single-family
housing owned by HUD in Michigan and Ohio. As part of this procurement, HUD
employed a “cascading” procedure in which small businesses were first considered for
the contract. Only if there was inadequate competition among small businesses would
non-small businesses be considered.
Chapman, which competed as a small business, was awarded the contract on
September 30, 2005. On April 19, 2006, however, HUD decided to terminate
Chapman’s contract for convenience and issue a new competitive solicitation pursuant
to Federal Acquisition Regulation § 15.206(e). In response, Chapman filed a bid protest
action in the Court of Federal Claims, contesting HUD’s termination of Chapman’s
2006-5096, -5117 2
contract, cancellation of the existing solicitation, and issuance of a new solicitation.
Michaelson, Connor & Boul, Inc. (“MCB”), the incumbent contractor, and Greenleaf
Construction Co., Inc. (“Greenleaf”), a competing offeror for the contract whose small
business status was disputed by Chapman, intervened.
On May 19, 2006, the United States filed a motion to dismiss the protest action
pursuant to Federal Rule of Civil Procedure 12(b)(6), based on HUD’s decision to
implement voluntary corrective action. As part of this corrective action, HUD proposed
reinstating Chapman’s contract and the original solicitation, and canceling a proposed
“bridge” contract with MCB. The Court of Federal Claims, however, declined to rule on
the United States’ motion to dismiss until it received further information regarding the
specifics of the proposed corrective action. On May 30, 2006, the United States
provided the requested supplemental information in support of its motion to dismiss,
indicating that HUD would: (1) reinstate Chapman’s previously awarded contract, but
issue a stop work order against the contract so that corrective action could be taken; (2)
issue an amendment to all offerors in the competitive range at both small business and
unrestricted competition tiers identifying various changes that had occurred since the
original solicitation was issued; (3) issue a discussion letter to Chapman to review
matters raised in a January 17, 2006, Government Accountability Office (“GAO”) bid
protest decision; and (4) request a final proposal revision from Chapman, ostensibly the
only offeror in the small business tier, prior to requesting and reviewing proposals
submitted by other offerors at the unrestricted tier. The Court of Federal Claims,
however, denied the United States’ motion to dismiss, finding that the proposed
corrective action lacked a rational basis and was contrary to law because, among other
2006-5096, -5117 3
things, it did not include Greenleaf in the small business tier despite an intervening
determination by the Small Business Administration (“SBA”) that Greenleaf was indeed
a small business.
In response, HUD indicated it would proceed with the reevaluation in the manner
suggested by the Court of Federal Claims, including both Chapman and Greenleaf in
the small business tier. The United States then renewed its motion to dismiss. Rather
than granting the renewed motion to dismiss, though, the Court of Federal Claims
instead entered judgment in favor of Chapman and Greenleaf. In doing so, the Court of
Federal Claims noted that Chapman and Greenleaf “were instrumental in achieving the
final outcome,” and “[t]hrough their persistence . . . [had] materially altered the legal
relationship among the parties.” Chapman II, slip op. at 2. Furthermore, the Court of
Federal Claims noted that granting the motion to dismiss might limit Chapman and/or
Greenleaf from applying for attorney fees under the Equal Access to Justice Act
(“EAJA”), but that the entry of judgment for plaintiffs would leave open the opportunity
for Chapman and/or Greenleaf to pursue them at a later date. Id. Chapman appeals
the Court of Federal Claims’ denial of the United States’ original motion to dismiss. The
United States cross-appeals the same issue, as well as the Court of Federal Claims’
entry of judgment rather than granting the renewed motion to dismiss. We have
jurisdiction pursuant to 28 U.S.C. § 1491.
II. DISCUSSION
A. Standard of Review
This court reviews the Court of Federal Claims’ conclusions of law de novo.
Glendale Fed. Bank, F.S.B. v. United States, 239 F.3d 1374, 1379 (Fed. Cir. 2001).
2006-5096, -5117 4
However, within that context, the review of an agency’s procurement decision is
narrowly circumscribed. Prineville Sawmill Co. v. United States, 859 F.2d 905, 909
(Fed. Cir. 1988); NFK Eng’g, Inc. v. United States, 805 F.2d 372, 376 (Fed. Cir. 1986).
This court can only set aside an agency’s action that is “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A); see
Advanced Data Concepts, Inc. v. United States, 216 F.3d 1054, 1057 (Fed. Cir. 2000).
Similarly, our review of the denial of a motion to dismiss a complaint pursuant to
Rule 12(b)(6) of the Court of Federal Claims is also limited. The court must determine
“whether the claimant is entitled to offer evidence to support the claims,” not whether
the claimant will ultimately prevail. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). In
doing so, the court “must accept as true all factual allegations in the complaint, and . . .
indulge all reasonable inferences in favor of the non-movant.” Sommers Oil Co. v.
United States, 241 F.3d 1375, 1378 (Fed. Cir. 2001). “[U]nless it appears beyond doubt
that the plaintiff can prove no set of facts in support of his claim which would entitle him
to relief,” the complaint should not be dismissed. Conley v. Gibson, 355 U.S. 41, 45-46
(1957).
B. Review of the Proposed Corrective Action
On appeal, Chapman and the United States both argue that the Court of Federal
Claims erred when it determined that the Government’s first proposed corrective action
was unreasonable. According to Chapman, the Court of Federal Claims’ finding that
Greenleaf should be included in the small business tier of the competitive range is in
error since the SBA decision that Greenleaf was a small business came after the
contract was awarded to Chapman. According to the Government, the Court of Federal
2006-5096, -5117 5
Claims erred because the Government’s first proposed corrective action placed the
parties in the same positions they occupied prior to the events giving rise to the protest
and rendered all of Chapman’s and Greenleaf’s legally cognizable claims either moot or
premature. We reject each of these arguments.
First, the SBA determination that Greenleaf was a small business applies to this
procurement because there had not been a binding final award. Moreover, the
Government was requesting a revised proposal from Chapman and possibly other
offerors. Second, the Government’s argument that its first proposed corrective action
rendered all of Chapman’s and Greenleaf’s claims moot or premature is also incorrect,
as the corrective action effectively left out Greenleaf. Simply put, the Court of Federal
Claims’ inquiry into the reasonableness of the Government’s first proposed corrective
action, and the court’s subsequent determination that the proposed corrective action
was not reasonable, were proper.
C. Denial of the Renewed Motion to Dismiss
The Government also cross-appeals the Court of Federal Claims’ refusal to
dismiss the case in response to the revised proposed corrective action, which included
both Chapman and Greenleaf in the small business tier.
Rather than granting the motion to dismiss, the Court of Federal Claims entered
judgment in favor of Chapman and Greenleaf. In so doing, the Court of Federal Claims
stated that Chapman and Greenleaf “materially altered the legal relationship among the
parties.” Chapman II, slip op. at 2. Considering that “[g]ranting [the Government’s]
renewed motion to dismiss might limit Chapman, and possibly Greenleaf, from applying
2006-5096, -5117 6
for attorneys’ fees,” the Court of Federal Claims entered judgment to leave open the
opportunity of applying for such fees. Id.
In its holding, the Court of Federal Claims appears to have borrowed language
from Buckhannon Board and Care Home, Inc. v. West Virginia Department of Health
and Human Resources, 532 U.S. 598, 605 (2001), in which the Supreme Court rejected
the use of the “catalyst theory” as justification for the recovery of attorney fees. In
Brickwood Contractors, Inc. v. United States, 288 F.3d 1371, 1380 (Fed. Cir. 2002), we
held that this rejection extended to the EAJA fee context as well. Under the catalyst
theory, a plaintiff is considered a “prevailing party” if it achieves the desired result
because the lawsuit brought about a voluntary change in the defendant’s conduct—no
judicially sanctioned change in the legal relationship of the parties is required. In
Buckhannon, the Supreme Court rejected this theory, saying that
[a] defendant’s voluntary change in conduct, although perhaps
accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the
necessary judicial imprimatur on the change. [Precedent] counsel[s]
against holding that the term ‘prevailing party’ authorizes an award of
attorney’s fees without a corresponding alteration in the legal relationship
of the parties.
532 U.S. at 605.
Merely stating that there has been an alteration in the legal relationship of the
parties as the Court of Federal Claims did, however, is insufficient, by itself, to avoid
running afoul of the Supreme Court’s pronouncement in Buckhannon; our precedent
requires that there must be an actual, court-ordered alteration in the legal relationship in
the parties in the form of an entry of judgment or a consent decree. See Brickwood,
288 F.3d at 1380.
2006-5096, -5117 7
Here, the court’s entry of judgment was not only unnecessary, it was improper.
None of the parties objected to the substance of the revised proposed corrective action.
The only opposition to the Government’s motion to dismiss was raised by Chapman,
and that was only because Chapman wanted attorney fees. In fact, Chapman indicated
it was amenable to a dismissal—provided the court indicated it was a “prevailing party”
for EAJA purposes.
Although securing attorney fees may understandably affect a party’s litigation
strategy, the availability of EAJA fees is not an appropriate consideration for a court
when determining how to dispose of a case. When, during the course of litigation, it
develops that the relief sought has been granted or that the questions originally in
controversy between the parties are no longer at issue, the case should generally be
dismissed. And while the Supreme Court has recognized an exception to this rule when
the defendant voluntarily ceases the challenged practice, see Ne. Fla. Chapter of the
Associated Gen. Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 662 (1993),
the exception does not apply to this case. 1 As explained in County of Los Angeles v.
Davis, 440 U.S. 625, 631 (1979), the voluntary cessation exception may be refuted
when there clearly is no “reasonable expectation” that the alleged violation will recur and
“interim relief or events have completely and irrevocably eradicated the effects of the
alleged violation.” (Citations omitted).
1
Although the Court of Federal Claims’ opinion states that “[t]his is not a
case where the procuring agency voluntarily elected to follow a proper remedial course,”
Chapman II, slip op. at 2, the opinion is simply incorrect. The fact that the Government
revised its proposed corrective action after the Court of Federal Claims rejected its first
proposal does not make the revised proposal any less voluntary.
2006-5096, -5117 8
Here, the Court of Federal Claims had already determined that the revised
corrective action was reasonable, and was required to assume that the Government
would carry out the corrective action in good faith. See T&M Distribs., Inc. v. United
States, 185 F.3d 1279, 1285 (Fed. Cir. 1999) (“Government officials are presumed to
act in good faith, and ‘it requires “well-nigh irrefragable proof” to induce a court to
abandon the presumption of good faith.’” (quoting Kalvar Corp. v. United States, 543
F.2d 1298, 1301-02 (Ct. Cl. 1976))). The revised corrective action adequately
addressed the effects of the challenged action, and the Court of Federal Claims had no
reasonable expectation that the action would recur. Accordingly, the Court of Federal
Claims should have dismissed the case. Entering judgment for plaintiffs was, therefore,
improper.
III. CONCLUSION
We affirm the Court of Federal Claims’ denial of the Government’s motion to
dismiss in light of its first proposed corrective action; however, because the Court of
Federal Claims improperly entered judgment for plaintiffs after the Government revised
its proposed corrective action, we reverse and remand for the Court of Federal Claims
to dismiss the complaint.
COSTS
No costs.
AFFIRMED-IN-PART, REVERSED-IN-PART, AND REMANDED
NEWMAN, Circuit Judge, concurring in part, dissenting in part.
I would affirm the rulings of the Court of Federal Claims as to not only
Chapman’s appeal, but also the government’s cross-appeal.
2006-5096, -5117 9