Opposition Brief — Mayfair Construction Co. v. United States

Supreme Court, U.S.

ay NOV 9 1988

No. 88-423

JOSEPH.F. SPANIOL, JR.

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In the Supreme Court of the United States

OCTOBER TERM, 1988

MAYFAIR CONSTRUCTION COMPANY, PETITIONER

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

MEMORANDUM FOR THE UNITED STATES IN OPPOSITION

CHARLES FRIED

Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

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TABLE OF AUTHORITIES

Page

Cases:

Chevron U.S.A. Inc. v. Natural Resources Defense Coun-

Rb a oF). 4

Statutes and regulations:

Contract Disputes Act of 1978, 41 U.S.C. 601 ef seg. .... 2,4

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45 Fed. Reg. (1980):

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(1)

Jn the Supreme Court of the Anited States

OCTOBER TERM, 1988

No. 88-423

MAYFAIR CONSTRUCTION COMPANY, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

MEMORANDUM FOR THE UNITED STATES IN OPPOSITION

Petitioner, a construction company, seeks review of the

court of appeals’ decision affirming the determination of

the Armed Services Board of Contract Appeals that peti-

tioner was not entitled to interest on the sum contained in

a settlement proposal.

1. In September 1980, the Department of the Air

Force awarded a contract to petitioner in the amount of

$4,176,296 for the “Pacer Down” facilities restoration

project at McConnell Air Force Base, Kansas. The con-

tract contained a disputes clause that incorporated by

reference the March 1979 version of the Defense Acquisi-

tion Regulation Disputes Clause.' In January 1982, the

' Defense Acquisition Regulation (DAR) 7-602.6(b) (Disputes)

(1979) contained the following definition of “claim” (44 Fed. Reg.

12524 (1979)):

(1) a written request submitted to the Contracting Officer;

(1)

2

contracting officer terminated the contract for the conve-

nience of the government. Petitioner, in June 1982, sent a

letter to the contracting officer containing a “termination

settlement proposal” in the amount of $990,937.29. Two

months later, petitioner sent a second letter to the con-

tracting officer denominating the earlier settlement pro-

posal as a “claim” under the Contract Disputes Act of 1978

(CDA), 41 U.S.C. 601 ef seq.; petitioner also enclosed a

“certification” of the proposal as a claim. In June and

August 1984, petitioner submitted certified updates to the

settlement proposal, both of which tendered settlement

costs less than the original settlement offer of $990,937.29.

Pet. App. 3-5, 46.

In December 1984, petitioner submitted an updated ter-

mination settlement proposal in the amount of $610,172,

and certified this latest proposal as a claim under the

CDA. In that proposal, petitioner included a request for

$146,612.12 in interest, which petitioner designated as an

element of its settlement expenses. Ultimately, in February

1985, petitioner and the government entered into Termina-

tion Supplemental Agreement No. A00001. Under that

agreement, the government paid petitioner the undisputed

amount of $438,346 for its termination costs; the agree-

ment expressly reserved petitioner’s demand for interest.

The contracting officer, however, denied petitioner’s in-

terest demand, concluding that the settlement proposal

and its various updated versions were not “claims” as

defined by the applicable regulations incorporated in the

original contract. Pet. App. 4-5, 46-48.

(2) for payment of money, adjustment of contract terms, or

other relief;

(3) which is in dispute or remains unresolved after a reason-

able time for its review and disposition by the Government; and

(4) for which a Contracting Officer’s decision is demanded.

2. Petitioner appealed the contracting officer’s deci-

sion to the Armed Services Board of Contract Appeals

(Board). The Board determined that the Disputes Clause

of the contract defined “claim” to require the existence of

a dispute. The Board found that “[e]xcept for the interest

sought ($146,612.12), the settlement amount ultimately

agreed upon ($438,346) was only $25,213.88 less than

[petitioner’s] updated proposal in December 1984

($610,172). Thus, aside from the interest issue introduced

Eeipaitienen counsel, the termination for convenience

settlement proceeded to agreement without apparent

dispute” (Pet. App. 62). Given the absence of the requisite

dispute, the Board concluded that no “claim” existed. Ac-

cordingly, the Board held that petitioner was not entitled

to interest and denied petitioner’s appeal. Pet. App. 5,

61-66. |

3. The court of appeals affirmed. The court concluded

that substantial evidence supported the Board’s factual

finding that no dispute existed between petitioner and the

government. Moreover, under the controlling disputes

clause in the contract, “no claim exists unless it involves a

dispute” (Pet. App. 6). Accordingly, petitioner was not en-

titled to interest because its termination settlement pro-

posal did not constitute a claim under the contract. Pet.

App. 6-8.?

? Because the contract itself resolved petitioner’s request for in-

terest, the court of appeals did not address petitioner’s contention that

the CDA does not require that a “claim” involve a disputed matter

(Pet. App. 9-10).

Judge Bennett dissented. He first disagreed with the Board’s conclu-

sion that there was no “dispute.” In his view, the record showed that

the parties had substantial disagreements. Pet. App. 12-15. Judge

Bennett also concluded that the CDA does not require a “claim” to be

disputed and that the parties, by contractual provisions, should not be

able to “sidestep[ }” (Pet. App. 23) Congress’s intention of permitting

contractors to recover interest (Pet. App. 15-29).

4

4. The decision of the court of appeals is correct. It

does not conflict with any decision of this Court or of any

other court of appeals. Accordingly, review by this Court

is not warranted.

a. The CDA provides for the payment of interest on

“claims” due contractors (41 U.S.C. 611), but does not de-

fine the meaning of a “claim” for these purposes. See 41

U.S.C. 601 (“Definitions”). Petitioner contends (Pet.

8-11), nevertheless, that the CDA mandates a definition of

claims that includes — and thus requires the payment of in-

terest on all contract settlements, regardless of whether

any issues are in dispute. But petitioner points to nothing

in either the language or the legislative history of the CDA

to suggest that Congress specifically intended to require

such a definition of a claim. The 1979 Defense Acquisition

Regulation defining claims more narrowly to include only

matters that are in dispute was therefore entirely consis-

tent with the statute, and thus was entitled to judicial

deference. See Chevron U.S.A. Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984).

Ih any event, as the court of appeals made clear (Pet.

App. 9 n.*), petitioner’s request for interest was governed

by a disputes clause incorporated by the parties into the

contractual provision that controlled the transaction. As

the court of appeals correctly pointed out (Pet. App.

9-10), under these circumstances it was irrelevant whether

the CDA implicitly adopts a broader definition of a claim,

because “this would not mean that the CDA prohibits the

parties from agreeing to such a requirement, and there is

nothing in the language of the CDA to suggest such a pro-

hibition” (ibid. (emphasis in original)). Accordingly, given

the express terms of petitioner’s contract, the court of ap-

peals correctly concluded that petitioner’s settlement pro-

posals were not “claims” requiring payment of interest.?

* Petitioner does not challenge the court of appeals’ upholding of

5

b. Inany event, the court of appeals’ resolution of that

narrow issue has no prospective importance. The contract

clause contested in this case, Defense Acquisition Regula-

tion (DAR) 7-602.6(b) (Disputes) (1979), was superseded

by a clause issued on April 30, 1980, which applied to

solicitations issued on or after June 1, 1980. The 1980

regulation does not contain the requirement which the

court of appeals found to be dispositive, namely, that a

“claim” must involve a matter in dispute. 45 Fed. Reg.

31035-31037 (1980); see Pet. App. 8-9, 90-100. The court

of appeals’ decision accordingly concerns what is at most a

problem of diminishing importance and thus does not

warrant this Court’s review.

It is therefore respectfully submitted that the petition

for a writ of certiorari should be denied.

CHARLES FRIED

Solicitor General

NOVEMBER 1988

the Board’s factual finding that petitioner's settlement was not a

“disputed” claim.

US GOVERNMENT PRINTING OFFICE 1968— 24169060753