In the United States Court of Federal Claims
No. 18-548C
(E-Filed: October 17, 2018)
)
ALUMINUM SHAPES, LLC, )
)
Plaintiff, )
) Contract; Settlement Agreement in
v. ) Civil Enforcement Context; Lack of
) Contract-Based Jurisdiction.
THE UNITED STATES, )
)
Defendant. )
)
Thomas S. Biemer, Philadelphia, PA, for plaintiff. Christie Callahan Comerford, Erik L.
Coccia, Margret Spitzer Persico, Philadelphia, PA, and Matthew W. Horn, Chicago, IL,
of counsel.
Robert C. Bigler, Trial Attorney, with whom were Chad A. Readler, Acting Assistant
Attorney General, Robert E. Kirschman, Jr., Director, Tara K. Hogan, Assistant Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice,
Washington, DC, for defendant.
OPINION
CAMPBELL-SMITH, Judge.
The court has before it defendant’s motion to dismiss, ECF No. 7, which is
brought pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal
Claims (RCFC). Plaintiff filed an opposition brief, ECF No. 10, to which the government
replied, ECF No. 11. Oral argument was neither requested by the parties nor deemed
necessary by the court.
The only issue before the court is whether a settlement agreement, which arose in
the context of a civil enforcement action brought by the Occupational Safety and Health
Administration (OSHA) of the United States Department of Labor (DOL), gives rise to
contract-based jurisdiction over plaintiff’s claims in this court. For the reasons stated
below, the settlement agreement between DOL and plaintiff Aluminum Shapes, LLC
(Aluminum Shapes) does not provide this court with jurisdiction over contract-based
claims. Accordingly, defendant’s motion to dismiss pursuant to RCFC 12(b)(1) is
GRANTED.
I. Background
Aluminum Shapes operates an aluminum extrusion facility in New Jersey.
Compl., ECF No. 1 at 2. In 2015, an OSHA inspection of the facility resulted in
$308,000 in fines assessed against plaintiff. Id. Plaintiff contested the fines, and the
parties negotiated a settlement which was accepted by the Chief Judge of the
Occupational Safety and Health Review Commission (Commission). Id. at 3. As part of
the settlement agreement, Aluminum Shapes paid $170,000 in fines. Id.
Plaintiff contends that OSHA thereafter violated certain elements of the settlement
agreement. Id. at 4. The contract breaches alleged in the complaint include an improper
inspection of Aluminum Shapes’ facility by OSHA in January 2017, and an improper
assessment of fines in the absence of good faith negotiations. Id. at 4-5. New fines were
assessed against Aluminum Shapes in the amount of $1,922,895. Id. at 5.
In this suit, Aluminum Shapes alleges one count of breach of contract, and another
count of breach of the implied covenant of good faith and fair dealing. Id. at 5-7.
Aluminum Shapes seeks damages sustained as a result of the breach of contract,
including, apparently, any fines that plaintiff may ultimately pay for the OSHA violations
discovered during the January 2017 inspection.1 See id. at 6 (describing the damages
flowing from the breach as including OSHA fines that may be paid by plaintiff, and the
costs of defending against the assessment of those fines). The court reserves any further
discussion of relevant facts for the analysis section of this opinion.
II. Tucker Act Jurisdiction
The Tucker Act delineates this court’s jurisdiction. 28 U.S.C. § 1491 (2012).
That statute “confers jurisdiction upon the Court of Federal Claims over the specified
categories of actions brought against the United States.” Fisher v. United States, 402
F.3d 1167, 1172 (Fed. Cir. 2005) (en banc) (citations omitted). These include money
damages claims against the federal government founded upon the Constitution, an act of
Congress, a regulation promulgated by an executive department, any express or implied
contract with the United States, or any claim for liquidated or unliquidated damages in
cases not sounding in tort. Id. (citing 28 U.S.C. § 1491(a)(1)).
1
Thus, one goal of plaintiff’s suit may be to secure payment from the United States
to offset any fines arising from OSHA violations discovered at Aluminum Shapes’
facility in January 2017.
2
Not all contracts, however, give rise to jurisdiction in this court. See, e.g., Rick’s
Mushroom Serv., Inc. v. United States, 521 F.3d 1338, 1343 (Fed. Cir. 2008) (“The
government’s consent to suit under the Tucker Act does not extend to every contract.
(citing Sanders v. United States, 252 F.3d 1329, 1335 (Fed. Cir. 2001); Kania v. United
States, 650 F.2d 264, 268 (Ct. Cl. 1981))). Most relevant here, Kania and Sanders
exclude certain types of contracting by the United States in its sovereign capacity from
the jurisdictional ambit of the Tucker Act. See, e.g., Stovall v. United States, 71 Fed. Cl.
696, 698 & n.2 (2006) (discussing contracting in the government’s sovereign capacity,
and citing to Kania and Sanders, in particular).
The Kania and Sanders line of cases excludes from this court’s jurisdiction most
claims founded on contracts arising in the “criminal or quasi-criminal” context. Id. at
701 (citing cases). For an example of a contract arising from a quasi-criminal matter, this
court in Stovall cited Trudeau v. United States, 68 Fed. Cl. 121, 129 (2005), aff’d, 186 F.
App’x 998 (Fed. Cir. 2006) (table). 71 Fed. Cl. at 701. Trudeau is a key decision for the
jurisdictional analysis required here.2
III. Standard of Review for Motions Brought under RCFC 12(b)(1)
When reviewing a complaint to determine its jurisdiction over a plaintiff’s claims,
this court must presume all undisputed factual allegations to be true and construe all
reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236
(1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982);
Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir. 1988) (citations
omitted). Plaintiff bears the burden of establishing subject matter jurisdiction by a
preponderance of the evidence. Reynolds, 846 F.2d at 748 (citations omitted). If
jurisdiction is found to be lacking, this court must dismiss the action. RCFC 12(h)(3).
IV. Analysis
As a preliminary matter, there is no real dispute that OSHA citations and fines
must be contested before the Commission, not in this forum. ECF No. 10 at 12; ECF No.
11 at 16. Thus, to the extent that plaintiff’s suit could be construed to directly challenge
the fines assessed against it by OSHA after the January 2017 inspection, this court has no
jurisdiction over such a claim. See, e.g., Sturm, Ruger & Co. v. Chao, 300 F.3d 867,
2
As defendant notes in its reply brief, plaintiff studiously avoids any discussion of
Trudeau, even though defendant, in its opening brief, contended that Trudeau resolved
the jurisdictional question at issue here. See ECF No. 7 at 14-17; ECF No. 11 at 7-10,
12, 15. Plaintiff’s failure to discuss Trudeau is mystifying, especially in light of the fact
that plaintiff extensively relies on Stovall, ECF No. 10 at 14, 16, 18-19, 21, 24, an
opinion which presents Trudeau as an example of a contract claim which arose in a quasi-
criminal context and thus did not fall within this court’s contract-based jurisdiction.
3
873-74 (D.C. Cir. 2002). Indeed, plaintiff acknowledges that its direct challenge to the
new citations and fines is currently before the Commission. ECF No. 10 at 8, 12.
Plaintiff insists, however, that it may pursue that challenge before the Commission
and simultaneously seek damages for breach of contract in this forum. Id. at 12-13,
23-25. The government suggests that there would be substantial overlap between the two
proceedings and that allowing this suit to move forward would “undermine the
exclusivity of the Commission’s jurisdiction.” ECF No. 11 at 18. The court need not
resolve this dispute because Kania and its progeny compel a jurisdictional ruling in
defendant’s favor.
A. Kania
The claim in Kania was for money damages flowing from the alleged breach of an
agreement between Mr. Kania and a prosecutor, an agreement which was alleged to have
traded truthful testimony for freedom from prosecution. 650 F.2d at 266-67. Jurisdiction
was lacking, however, for a claim based on Mr. Kania’s type of contract. Id. at 267. The
jurisdictional analysis in Kania has several elements.
First, the Court of Claims stated this general principle:
The contract liability which is enforceable under the Tucker Act consent to
suit does not extend to every agreement, understanding, or compact which
can semantically be stated in terms of offer and acceptance or meeting of
minds.
Id. at 268. Most contracts giving rise to Tucker Act jurisdiction were distinguishable
from Mr. Kania’s agreement with the prosecutor, because in those contracts, the
“sovereign steps off the throne and engages in purchase and sale of goods, lands, and
services, transactions such as private parties, individuals or corporations also engage in
among themselves.” Id. Thus, a distinction was made in Kania between “proprietary”
and “sovereign” contracts, although that distinction may be subject to some dispute. See
Stovall, 71 Fed. Cl. at 698 (noting that “Kania distinguishes between contracts relating to
proprietary versus sovereign actions,” but observing that the distinction was “only loosely
mapped”).
As for plea agreements, and criminal enforcement proceedings generally, Kania
requires a contract claimant to meet a heightened burden:
[T]he court would look for specific authority in the [Assistant United States
Attorney] to make an agreement obligating the United States to pay money,
and spelling out how in such a case the liability of the United States is to be
determined.
4
650 F.2d at 268. Further, criminal courts were seen as the proper forum to police
agreements in the context of criminal enforcement proceedings, not our predecessor
court, the Court of Claims:
It would be reasonable to expect that the court which is to police and, in
appropriate cases enforce, agreements for plea bargains, or witness
protection, or for immunity, will be the courts in which are or will be pending
the criminal prosecutions to which the agreements relate. If this means that
money damages for breach are nowhere available, this is the case in any
claim area where the Congress has not seen fit to grant its consent to be sued.
It is particularly unreasonable to suppose that Congress in enacting the
Tucker Act intended for this court to intervene in the delicate and sensitive
business of conducting criminal trials.
Id. at 268-69 (citing United States v. Jones, 131 U.S. 1 (1889)). In sum, Kania first
discussed the difference between proprietary and sovereign actions, and then noted that
there are special requirements, and special concerns, that may limit this court’s
jurisdiction over contracts in the criminal enforcement setting.
B. Sanders
The analytical framework in Sanders is somewhat truncated compared to the
analysis in Kania. In Sanders, the United States Court of Appeals for the Federal Circuit
acknowledged that for government contracts in the criminal context, “a damages remedy
is not ordinarily available.” 252 F.3d at 1334 (citing Kania, 650 F.2d at 268).
The Federal Circuit then proceeded to examine Mr. Sanders’ agreement with a
prosecutor to determine whether that agreement fit within the circumstances identified in
Kania that permit a suit for money damages to proceed in this court. Sanders, 252 F.3d at
1335 (citing Kania, 650 F.2d at 268). Particular emphasis was put on the agreement’s
terms that might explicitly address monetary damages for breach:
In other words, a claim for money damages for the alleged breach of such an
agreement may not be maintained unless that agreement clearly and
unmistakably subjects the government to monetary liability for any breach.
Id. The Federal Circuit panel concluded with a statement that it was following Kania,
and that agreements in the criminal context must contain “an unmistakable promise to
subject the United States to monetary liability” to come within the ambit of Tucker Act
jurisdiction. Sanders, 252 F.3d at 1336. Thus Sanders, like Kania, holds contract
claimants in the criminal enforcement context to a heightened standard. Unless the
agreement underlying the claim explicitly addresses government liability for monetary
5
damages in the event of breach, no jurisdiction for that contract claim will lie in this
court.
C. Criminal and Quasi-Criminal Contexts Distinguished from Other Contexts
Although the distinction between proprietary versus sovereign actions in Kania
may not always guide this court’s analysis, see, e.g., Carter v. United States, 102 Fed. Cl.
61, 65-66 (2011) (distinguishing Kania), Kania is binding precedent for this court. Kania
continues to be cited by the Federal Circuit for the proposition that not all contracts
support jurisdiction in this court. See Rick’s Mushroom, 521 F.3d at 1343 (citing Kania,
650 F.2d at 268). In the court’s view, Kania and Sanders provide the tools for the
jurisdictional analysis required here.
As noted in Stovall, contracts that arise in criminal and quasi-criminal settings are
precisely the type of sovereign actions that were addressed in Kania and Sanders. 71
Fed. Cl. at 698-702 & nn.2, 6. In the court’s view, it is helpful to distinguish between the
jurisdictional analysis in these criminal or civil enforcement cases, and the jurisdictional
analysis that is required by cases involving other scenarios. For example, jurisdiction in
this court exists for some claims founded on settlement agreements resolving
discrimination claims. E.g., Holmes v. United States, 657 F.3d 1303, 1312 (Fed. Cir.
2011); Stovall, 71 Fed. Cl. at 701-02. Tucker Act jurisdiction also is available for claims
founded on contracts for certain types of government assistance. See, e.g., San Juan City
Coll. v. United States, 391 F.3d 1357, 1360-61 (Fed. Cir. 2004) (citing Sanders, among
other authorities, to find jurisdiction over a claim founded on an agreement to receive
student financial aid from a federal program); Carter, 102 Fed. Cl. at 65-66 (finding
jurisdiction over a claim based on a contract to receive dry milk from a federally-funded
assistance program). When this court considers contracts that arise in criminal or civil
enforcement proceedings, however, Kania and Sanders compel a jurisdictional analysis
that is quite exacting.3 See, e.g., Phang v. United States, 87 Fed. Cl. 321, 328-30 (2009)
(applying Kania and Sanders and finding no jurisdiction over contract claims based on a
plea agreement), aff’d, 388 F. App’x 961 (Fed. Cir. 2010); Trudeau, 68 Fed. Cl. at 129-
31 (applying Kania and Sanders to a contract claim arising from a settlement agreement
in a “civil enforcement action” and finding no jurisdiction).
D. Trudeau
3
The contract in question must arise between the criminal suspect/defendant (or the
target of the civil enforcement proceeding) and the government. The court does not
address here contracts between confidential informants and federal investigators. See
SGS-92-X003 v. United States, 85 Fed. Cl. 678, 707-08 (2009) (distinguishing Kania and
Sanders, in part because prosecutorial discretion played no part in the confidential
informant’s contract with federal investigators).
6
As defendant argues, this court in Trudeau confronted a similar, perfectly
analogous situation which resolved the jurisdictional question posed by this suit. ECF
No. 7 at 14-17; see also ECF No. 11 at 7-10, 12, 15. Instead of challenging OSHA
citations and fines, Mr. Trudeau faced civil enforcement actions brought by the Federal
Trade Commission (FTC) to address Mr. Trudeau’s allegedly false and misleading
infomercials, some of which suggested that Mr. Trudeau’s health supplements could cure
cancer and other diseases. Trudeau, 68 Fed. Cl. at 124. The parties entered into a
settlement agreement which was adopted by the district court in a “Stipulated Order.” Id.
at 124-25. That order stated that the district court retained jurisdiction over disputes
regarding the enforcement of the Stipulated Order; most importantly, the Stipulated Order
permanently enjoined Mr. Trudeau from the creation or dissemination of infomercials
and obliged him to pay $2 million in “‘equitable monetary relief.’” Id. (citation omitted).
The FTC issued a press release summarizing the effects of the Stipulated Order.
Id. at 125. Mr. Trudeau unsuccessfully tried to convince the FTC to retract the press
release, and sought relief in both a district court (but not in the district court that retained
jurisdiction over the Stipulated Order) and in this court. Id. at 125-26. His district court
suit sought a rewording of the FTC press release, but was dismissed. Id. at 126.
In this court, Mr. Trudeau sought breach of contract damages. Id. He alleged that
the parties’ agreement, embodied in the Stipulated Order, was a contract giving rise to
Tucker Act jurisdiction. Id. That contract was allegedly breached by the FTC’s press
release, and Mr. Trudeau’s damages included “injuries to his business . . . created [by the]
public perception that he is a ‘habitual false advertiser.’” Id. at 126 (citation omitted).
The court’s jurisdictional analysis excluded any consideration of the district
court’s retention of jurisdiction over the enforcement of the Stipulated Order. Id. at 131.
Instead, the court focused its analysis on the type of contract alleged by Mr. Trudeau, and
whether that type of contract gives rise to Tucker Act jurisdiction. Id. at 127-31. In a
thorough and painstaking analysis, the court found that Kania and Sanders left no doubt
that the agreement ending the civil enforcement actions against Mr. Trudeau was not a
contract that supported jurisdiction in this court. Id. at 131.
The court will not reproduce here the exhaustive jurisdictional analysis set forth in
Trudeau. The distinction between sovereign and proprietary actions of the United States
was discussed at some length, as was the enduring vitality of the holdings in Kania and
Sanders.4 Id. at 127-30. The court observed that criminal enforcement and civil
4
This court in Trudeau, 68 Fed. Cl. at 127, did not follow
United States v. Zajanckauskas, 346 F. Supp. 2d 251 (D. Mass. 2003), in its application
of the precedent of Kania and Sanders. The court finds the jurisdictional analysis in
Trudeau to be more persuasive than the one presented in Zajanckauskas, which relied, in
7
enforcement actions were actions that could only be undertaken by the sovereign. Id. at
129. For the civil enforcement actions against Mr. Trudeau, the court held that the FTC
was acting in the government’s sovereign capacity. Id. at 129-30. Accordingly, the
agreement which settled those consolidated actions was a contract undertaken in the
government’s “sovereign, not proprietary, capacity.” Id. at 130.
The court noted, however, that the precedent in Kania and Sanders contemplates
the possibility that even a contract undertaken in the government’s sovereign capacity
could give rise to Tucker Act jurisdiction. Such a contract, however, must contain an
“unmistakable promise to subject the United States to monetary liability in the event of a
‘breach’ of that [contract].” Id. at 131 (citing Sanders, 252 F.3d at 1336). The Stipulated
Order contained no such term.
The court’s jurisdictional ruling was summarized as follows:
Because the Government, through the FTC, was acting in a sovereign
capacity when it agreed to entry of the Stipulated Order and because plaintiff
has failed to establish that the Stipulated Order contained an unmistakable
promise to subject the United States to monetary liability in the event of a
“breach” of that Order, see Sanders, 252 F.3d at 1336, this Court lacks
subject matter jurisdiction over plaintiff’s breach of contract claim.
Trudeau, 68 Fed. Cl. at 131. The court now applies the holdings in Kania, Sanders and
Trudeau to the instant case.
E. No Jurisdiction for Contract Claims Founded on Settlement Agreement
Achieved by Parties to Civil Enforcement Action
The contract between Aluminum Shapes and DOL, in the form of a Stipulated
Settlement Agreement that was approved by the Commission, arose from a civil
enforcement action against Aluminum Shapes. See ECF No. 1 at 1; ECF No. 1-2 at 2-10;
ECF No. 1-3 at 2-4; ECF No. 10 at 8; ECF No. 10-1 at 37-46. Pursuant to the precedent
of Kania, Sanders and Trudeau, the United States entered into this contract in its
sovereign capacity. Thus, jurisdiction will lie for plaintiff’s suit only if the Stipulated
part, on contract law principles stated in the precedent of another circuit. See
Zajanckauskas, 346 F. Supp. 2d at 253, 259 (citing United States v. McLaughlin, 957
F.2d 12, 16 (1st Cir. 1992)). The court notes, too, that the contract in Trudeau arose in a
civil enforcement setting, whereas the contract in Zajanckauskas arose, according to the
district court, in the immigration context, where citizenship and denaturalization were at
issue. 346 F. Supp. 2d at 258-59. In the court’s view, Trudeau is the more analogous
case and provides more persuasive guidance.
8
Settlement Agreement “clearly and unmistakably subjects the government to monetary
liability for any breach.” Sanders, 252 F.3d at 1335.
Defendant argues that the Stipulated Settlement Agreement contains no such
language. ECF No. 7 at 15-17; ECF No. 11 at 14-15. The court agrees. Plaintiff
misreads relevant precedent and argues that no “unmistakable promise to subject the
United States to monetary liability,” Sanders, 252 F.3d at 1336, is required. See ECF No.
10 at 18 (“[I]t is irrelevant that the Settlement Agreement does not expressly authorize
monetary damages in the event of breach because the agreement resolved a civil
enforcement proceeding and, thus, money damages are presumptively available for
breach.”). Plaintiff’s position ignores the jurisdictional analysis in Trudeau and is
unavailing.
Plaintiff’s only analysis of the text of the Stipulated Settlement Agreement,
regarding the presence or absence of any unmistakable promise for money damages from
the government in the event of breach, is contained in a footnote. ECF No. 10 at 18 n.5.
Relying on Holmes, plaintiff asserts that the requirement stated in Sanders is met because
the Stipulated Settlement Agreement “does not specifically state that money damages are
not available for breach.” ECF No. 10 at 18 n.5 (citing Holmes, 657 F.3d at 1315-16).
This argument fails to persuade.
First, Holmes did not address a contract arising in the criminal or civil
enforcement context, and is thus distinguishable from this case. See 657 F.3d at 1311
(noting that the agreements at issue in that case resolved discrimination claims brought
by the plaintiff, not enforcement actions brought against the plaintiff). As the court noted
earlier in this opinion, that distinction is fundamental to the correct application of the
precedent in Kania and Sanders. See supra. Nor does the Holmes opinion focus on the
heightened standard particular to criminal or civil enforcement cases; thus, Holmes
provides no guidance as to how to identify an “unmistakable promise to subject the
United States to monetary liability.” Sanders, 252 F.3d at 1336.
Second, plaintiff’s proposed application of Sanders, where an agreement that
“does not specifically state that money damages are not available for breach,” ECF No.
10 at 18 n.5, “clearly and unmistakably subjects the government to monetary liability for
any breach,” Sanders, 252 F.3d at 1335, is not credible. Plaintiff offers no authority for
its interpretation of the requirement in Sanders for an unmistakable promise of money
damages in the event of breach, and plaintiff’s interpretation of Sanders is nonsensical.
See Sanders, 252 F.3d at 1336 (holding that the government’s liability for monetary
damages in the event of breach “should not be implied”).
Because plaintiff’s interpretation of the Stipulated Settlement Agreement cannot
be reconciled with Kania, Sanders and Trudeau, it must be rejected. The Stipulated
Settlement Agreement does not clearly subject the government to liability for monetary
9
damages in the event of breach. Lacking such an unmistakable promise, the Stipulated
Settlement Agreement cannot support jurisdiction in this court for plaintiff’s contract
claims.
V. Conclusion
For the reasons explained in this opinion, plaintiff’s contract claims must be
dismissed for lack of subject matter jurisdiction pursuant to RCFC 12(b)(1).
Accordingly, defendant’s motion to dismiss, ECF No. 7, is GRANTED. The clerk’s
office is directed to ENTER final judgment for defendant DISMISSING plaintiff’s
complaint, without prejudice.
IT IS SO ORDERED.
s/Patricia E. Campbell-Smith
PATRICIA E. CAMPBELL-SMITH
Judge
10