Reply Brief — Department of Army v. Blue Fox, Inc.

FILED

NOV 10 1996

No. 97-1642 OFFICE OF Th ERK

In the Supreme Court of the

OCTOBER TERM, 1998

THE UNITED STATES DEPARTMENT OF THE ARMY,

PETITIONER

v.

BLUE Fox, INC.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

REPLY BRIEF FOR THE PETITIONER

SETH P. WAXMAN

Solicitor General

Counsel of Record

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

TABLE OF CONTENTS

Section 702 excludes respondent’s suit from the scope

of the immunity waiver

Respondent’s claim does not seek “judicial review”

of “agency action”

The relief respondent seeks is impliedly forbidden

9...

TABLE OF AUTHORITIES

Cases:

Active Fire Sprinkler Corp. v. United States Postal

Serv., 811 F.2d 747 (2d Cir. 1987)

Admiralty Constr. v. Dalton, 156 F.3d 1217 (Fed. Cir.

—

Armstrong v. United States, 364 U.S. 40 (1960)

Balboa Ins. Co. v. United States, 775 F.2d 1158

(Fed. Cir. 1985)

Block v. North Dakota, 461 U.S. 273 (1983)

Bor-Son Bldg. Corp. v. Heller, 572 F.2d 174 (8th

00 ———————————————

Bowen v. Massachusetts, 487 U.S. 879 (1988) 1, 2, 11, 13,

14, 16, 19

Brecht v. Abrahamson, 507 U.S. 619 (1998) 6

Buchanan v. Alexander, 45 U.S. (4 How.) 20

8,4

C. T. Willard Co. v. City of New York, 142 N. V. S. 11

(Sup. Ct. 1913) 14

Cannon v. University of Chicago, 441 U.S. 677

(1979)

City of Houston v. HUD, 24 F.3d 1421 (D.C. Cir.

Equitable Sur. Co. v. McMillan, 234 U.S. 448

(1914)

II

Cases Continued:

FDIC v. Meyer, 510 U.S. 471 (1994) .

Federal Election Comm'n v. Akins, 118 8, Ct. 1777

(1998)

FHA v. Burr, 309 U.S. 242 (1940)

Finn v. United States, 123 U.S. 227 (1887)

Franchise Tax Bd. v. United States Postal Serv.,

467 U.S. 512 (1984)

Furlong v. Shalala, 156 F.3d 384 (2d Cir. 1998)

Henningsen v. United States Fidelity & Guar. Co.,

208 U.S. 404 (1908)

Hercules, Inc. v. United States, 516 U.S. 417

(1996)

Houston v. Ormes, 252 U.S. 469 (1920)

Hubbard v. Administrator, EPA, 982 F.2d 581

(D.C. Cir. 1992)

J. N. Bateson Co. v. United States, 484 U.S. 586

(1978)

Katz v. Cisneros, 16 F.3d 1204 (Fed. Cir. 1994) ...............

Kennedy Elec. Co. v. United States Postal Serv.,

508 F.2d 954 (10th Cir. 1974)

Knote v. United States, 95 U.S. 149 (1877)

Lujan v. National Wildlife Fed'n, 497 U.S. 871

(1990)

McCarty v. McCarty, 453 U.S. 210 (1981)

Mellon v. Orinoco Iron Co., 266 U.S. 121 (1924)

Morgan v. Goodwin, 355 So. 2d 217 (Fla. Dist. Ct.

App. 1978)

Munro v. United States, 303 U.S. 36 (1988)

National Sur. Corp. v. United States, 118 F. gd

1542 (Fed. Cir. 1997)

Naval Facilities Eng Command, In re, 57 Comp.

Gen. 176 (1977)

14

17

11,12

12, 14,

OPM v. Richmond, 496 U.S. 414 (1990) ....... 8, 4, 6, 8, 9, 11

Patsy v. Board of Regents, 457 U.S. 496 (198272

Pearlman v. Reliance Ins. Co., 871 U.S. 182

17

(1962) 5, 6, 7, 20

III

Cases Continued: Page

Prairie State Bank v. United States, 164 U.S. 227

(1896) 5

Republic Nat'l Bank v. United States, 506 US.

80 (1992) 8, 4. 5

Richardson v. Morris, 409 U.S. 464 (1973) 18

Schmitz v. Societe Internationale, 249 F. Supp. 757

D. D. C. 1966), cert. denied, 387 U.S. 908 (19877 7

Sea-Land Serv., Inc. v. Alaska R. R., 659 F.2d 248

(D.C, Cir. 1981), cert. denied, 455 U.S. 919

(1982) .... 13

Sharp v. Weinberger, 798 F. 2d 1521 (D.C. Cir.

1986) 19

Stizell Weller Distillery v. Wallace, 30 F. Supp.

1010 (D.D.C, 1940) 7

Stockman v. FEC, 188 F.3d 144 (5th Cir. 1998 10

Transamerica Premier Ins. Co. v. United States,

82 Fed. Cl. 308 (1994) 12

Trans-Bay Engineers & Builders, Inc. v. Hills, 551

F.2d 370 D. C. Cir. 1976) 4

United Elec. Corp. v. United States, 647 F. 2d 1082

(Ct. Cl.), cert. denied, 454 U.S. 863 (1981) 10

United States Coast Guard—Payment of Contract

Retainages to Subcontractors, In re, No. B-218813,

1986 WL 63364 (Comp. Gen. Apr. 9, 1986) 12

United States Fidelity & Guar. Co. v. United

States, 475 F.2d 1877 (Ct. Cl. 1973) 6

United States v. Alabama, 318 U.S. 274 (194) —

United States v. Jones, 131 U.S. 1 (1889) 18

United States v. MacCollom, 426 U.S. 317 (1976) ........... 4

United States v. MacDonald Constr. Co., 295 F.

Supp. 1368 (E.D. Mo. 1968) 14

United States v. Mitchell, 468 U.S. 206 (1983 11

United States v. Munsey Trust Co., 382 U.S. 234

(1947) 2, 5, 7

United States v. Testan, 424 U.S. 392 (1976). 4. 11

Cases—Continued: Page

Wright v. United States Postal Serv., 29 F.3d 1426

(9th Cir. 1994) 4

Yee v. City of Escondido, 508 US. 519 (192) . 17

U.S. Const. Art. I, § 9, Cl. 7 (Appropriations

Clause) 8,4,6

Constitution and statutes:

Administrative Procedure Act, 5 U.S.C. 702 (as

amended) passim

Tucker Act, 28 U.S.C. 1346(a)(2), 1491 . 2, 11, 12, 14, 17,

18, 19, 20

Miller Act, 40 U.S.C, 270a et seq. 2, 20

5 U.S.C. 7708(a\(1) 8

5 U.S.C. 77, x

89 U.S.C. 401 9, 10, 18

42 U.S.C. 1396b(a) 11

Miscellaneous:

8 D. Dobbs, The Law of Remedies (1998) 14

Restatement (First) of Restitution and Unjust

Enrichment (proposed final draft, Mar. 4, 1996) .............. 14

S. Rep. No. 996, 94th Cong., 2d Sess. (1976) 9, 10

Sovereign Immunity: Hearing Before the Subcomm.

on Admin. Practice and Procedure of the Senate

Comm. on the Judiciary, 91st Cong., 2d Sess.

(1970) 9, 18

In the Supreme Court of the United States

OcTOBER TERM, 1998

No. 97-1642

THE UNITED STATES DEPARTMENT OF THE ARMY,

PETITIONER

U.

BLUE Fox, INc.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

REPLY BRIEF FOR THE PETITIONER

Respondent does not dispute that this Court has uni-

formly rejected attempts to impose new financial obligations

on the Treasury except as Congress by law expressly

authorizes (see Gov't Br. 17-23), and that this Court repeat-

edly has held that subcontractors on government projects

have no direct claim against the government (see Gov't Br.

23-28). Respondent, however, argues that the 1976 amend-

ment to the Administrative Procedure Act— which inserted

a partial waiver of sovereign immunity into 5 U.S.C. 702—

altered those settled principles and opened the Treasury to

new (and potentially limitless) non-statutory payment obli-

gations, so long as the relief can be characterized as “equit-

able” in nature.

Respondent’s theory cannot be reconciled with the fun-

damental principle that money from the Treasury is not

something to which anyone is entitled absent an Act of Con-

gress creating that right. It thus conflicts with Section 702’s

exclusion of “money damages,” which bars recovery of

money from the Treasury unless public funds were “the very

thing” to which the claimant “was entitled” from the govern-

ment in the first instance, Bowen v. Massachusetts, 487 U.S.

(1)

879, 895, 900 (1988), and with Section 702’s preservation of

the “duty of the court to * * * deny relief on any other

appropriate legal or equitable ground.” It ignores Section

702’s limitation on the waiver of immunity to suits for

“judicial review” of “agency action.” And it disregards the

effect of other statutes—the Tucker Act and the Miller

Act—that impliedly forbid the monetary relief respondent

seeks.

I. SECTION 702 EXCLUDES RESPONDENT'S SUIT

FROM THE SCOPE OF THE IMMUNITY WAIVER

A. The waiver of sovereign immunity in 5 U.S.C. 702 ex-

cludes suits seeking “money damages.” Respondent does

not dispute that, under Bowen, monetary relief constitutes

“money damages” within the meaning of Section 702 unless

money from the Treasury was “the very thing” to which the

claimant “was entitled” from the government in the first

place. 487 U.S. at 895, 900 (quotation marks omitted); Gov't

Br. 14-16.

Respondent contends (Br. 10), however, that general

principles of equity “entitled” it to money from the Treasury.

Even setting aside the fact that the equities hardly favor

respondent,’ the allegedly “well-established equitable rights

! While respondent blames the Army for failing to require Verdan to

post a payment bond, respondent ignores the fact that it could have asked

Verdan to prove that it had posted a bond, yet failed to do so. Gov't Br. 4.

Respondent likewise blames the Army for paying Verdan after respon-

dent complained of partial non-payment. When the Army investigated

Verdan's missed payment, however, Verdan advised that it would pay

respondent promptly. J.A. 27. Nor was it clear that withholding money

from Verdan would have benefitted respondent: “It is hardly reasonable

to withhold money in order to assure payments which perhaps can be

made only from the money earned.” United States v. Munsey Trust Co.,

332 U.S. 234, 243 (1947). Besides, respondent could have protected its own

rights (without involving th» Army) by bringing its equitable lien claim

against Verdan—the contr: tor that owed it money—and demanding im-

mediate payment or an ir’ anction against dissipation. Respondent, how-

ever, did no such thing. Finally, while respondent accuses the Army of

of subcontractors to impose liens upon prime contract funds”

(ibid.) cannot create an entitlement to public funds in the

Treasury. Only an Act of Congress can do that. See U.S.

Const. Art. I, § 9, Cl. 7; Gov’t Br. 16-23; OPM v. Richmond,

496 U.S. 414, 416, 424, 432 (1990); Buchanan v. Alexander,

45 U.S. (4 How.) 20 (1846) (money in Treasury cannot be

garnished by creditors of payees without statutory consent);

Knote v. United States, 95 U.S. 149, 154 (1877); Republic

Nat'l Bank v. United States, 506 U.S. 80, 94 (1992).

As a result, respondent’s discussion (Br. 12-16) of the ori-

gins of equitable liens is irrelevant. Money from the Trea-

sury cannot be “the very thing” to which anyone is “enti-

tled” unless an Act of Congress creates a payment obligation

or authorizes its creation; judge-made principles of equity

are insufficient. See, e.g., Richmond, 496 U.S. at 426 (“equit-

able estoppel” is not “a basis for money claims against the

Government”). In this case, respondent and its amici can

identify no Act of Congress that obligates the United States

to pay subcontractors when the prime contractor does not,

or that licenses courts to impose such an obligation as a

matter of common law or equity. Consequently, this suit

must be dismissed as an action for money damages. Dia

Navigation Co. v. Pomeroy, 34 F.3d 1255, 1266-1267 (3d Cir.

1994) (action is for “specific relief” only if it seeks “funds to

which a statute allegedly entitles” the plaintiff); Hubbard v.

Administrator, EPA, 982 F.2d 531, 536 (D.C. Cir. 1992)

(“Bowen's holding does nothing for [plaintiff's] cause”

because the plaintiff’s “basic claim is not for enforcement of

any legal mandate that the EPA pay him a sum of money.”).

B. Respondent attempts to circumvent that result in

three ways. None succeeds.

“conscious avoidance” of Miller Act bonding requirements, Resp. Br. 3,

respondent ignores the genuine debate within the Army as to whether the

contract as a whole was for services rather than construction and thus

exempt from the bonding requirement. J.A. 44, 52.

4

1. Respondent admits that Richmond and its predeces-

sors reject the imposition of money-payment obligations on

the Treasury based on equity alone, but contends that those

cases apply only where an Act of Congress affirmatively

prohibits the payment the plaintiff seeks. Resp. Br. 26-27.

That argument sets the Appropriations Clause on its head:

“The established rule is that the expenditure of public funds

is proper only when authorized by Congress, not that public

funds may be expended unless prohibited by Congress.”

United States v. MacCollom, 426 U.S. 317, 321 (1976). The

argument is also foreclosed by Richmond's central holding,

which is that “payments of money from the Federal

Treasury are limited to those authorized by statute.” 496

U.S. at 416.“ Nor does it distinguish Richmond's pre-

decessors, Buchanan, Knote, and Republic National Bank.

In none of those cases was there a statute prohibiting dis-

bursement; yet in each this Court recognized that no right to

public money in the Treasury could arise except as provided

by an Act of Congress. Buchanan, 45 U.S. (4 How.) at 20;

Knote, 95 U.S. at 154; Republic Nat'l Bank, 506 U.S. at 94.

2 Respondent also seeks to distinguish Richmond on the ground that

the primary case relied on there United States v. Testan, 424 U.S. 392

(1976)—was a money damages action in the Court of Claims. Resp. Br. 29.

But Richmond was not a Court of Claims case; it was (as respondent

claims this suit is) an action for judicial review of agency action—OPM's

refusal to award the claimant a disability annunity. See p. 8, infra. In any

event, the fact that the principle first was articulated in cases brought in

the Court of Claims—the specialized court where most non-tort monetary

claims against the United States had to be heard—is immaterial, for the

principle applies regardless of where suit is brought.

Nor does it matter that additional funds have been appropriated to

the Army for its operations and maintenance. Even where Congress has

appropriated money to an agency (or created a fund for the payment of

judgments), the Appropriations Clause bars courts from disbursing that

money in the agency’s stead except “on the basis of a judgment based on a

substantive right to compensation based on the express terms of a specific

statute.” Richmond, 496 U.S. at 482. Indeed, in Buchanan, 45 U.S. (4

How.) at 20, the money had been appropriated and was actually in the

2. To*the extent respondent argues (Br. 11) that this

Court has already declared that subcontractors can obtain

equitable liens against the United States with respect to

public funds, respondent errs. This Court repeatedly has re-

jected such claims. United States v. Munsey Trust Co., 332

U.S. 234, 241 (1947) (Nothing is more clear than that

laborers and materialmen do not have enforceable rights

against the United States for their compensation.”); E.

uitable Sur. Co. v. McMillan, 234 U.S. 448, 455 (1914) (liens

permissible on private property not “permissible in the case

of a Government work”); J. W. Bateson Co. v. United States,

434 U.S. 586, 589 (1978) (liens “cannot attach to Government

property”); Gov’t Br. 36-37 (citing additional cases).

Moreover, as explained in our opening brief (at 36-40), the

cases respondent and its amici cite for the contrary proposi-

tion—Prairie State Bank v. United States, 164 U.S. 227

(1896), Henningsen v. United States Fidelity & Guaranty

Co., 208 U.S. 404 (1908), and Pearlman v. Reliance Insur-

ance Co., 371 U.S. 182 (1962)—did not involve claims for

funds vis-a-vis the United States itself. Rather, they con-

cerned the competing claims of private parties on funds the

United States had removed from the Treasury and as to

which it had disclaimed any right or interest. Gov't Br. 36-

40. As a result, those cases establish only that equitable doc-

trines may govern the relative priority of private claimants

with respect to money, not in the Treasury, in which the

United States has no interest. They cannot be read as hold-

ing that equitable doctrines alone can give subcontractors

rights in public funds vis-a-vis the United States itself, or as

overruling, sub silentio, the established principle that no

hands of the Navy purser for payment to sailors; this Court held that the

Appropriations Clause barred the attempt to garnish it nonetheless. See

also McCarty v. McCarty, 453 U.S. 210, 229 n.23 (1981) (noting that doc-

trine of non-attachability of government funds established in Buchanan

rests on the Appropriations Clause rather than sovereign immunity).

right to public funds in the Treasury may arise except as

Congress by statute directs. Those issues were not before

the Court. Brecht v. Abrahamson, 507 U.S. 619, 631 (1993)

(decision binding precedent only as to issues “squarely ad-

dressed”). When such equitable claims to public funds have

been squarely presented, this Court has rejected them. See,

e.g., Richmond, supra.

Amicus Surety Association of America is thus mistaken to

read Pearlman as holding that sureties can, through “subro-

gation,” assert the rights of unpaid subcontractors against

the United States; it likewise errs in concluding that subcon-

tractors themselves must therefore have such rights against

the United States. Surety Ass’n Br. 10-12. Because Pearl-

man involved “a dispute between the trustee in bankruptcy

of a government contractor and the contractor’s payment

bond surety,” 371 U.S. at 133, over funds in which the United

States had no interest and had “turned over to the bank-

rupt’s trustee,” id. at 134, it did not address whether naked

principles of equity could (consistent with the Appropria-

tions Clause) afford sureties or subcontractors a right to

funds in the Treasury as against the United States itself.

Instead, to the extent Pearlman (like its predecessors) ad-

dresses the relative priority of subcontractor and surety

claims by reference to their “equitable rights,” the rights it

recognizes are with respect to the claims of other private

parties, which operate oniy once the United States has dis-

claimed any interest in, and parted with, the disputed funds.

See 371 U.S. at 136 (resolution of case depends only on

whether surety’s “right” was “prior” to the bankrupt con-

tractor’s); see also Gov’t Br. 38-40; United States Fidelity &

Guar. Co. v. United States, 475 F.2d 1377, 1382 (Ct. Cl. 1973)

(rights recognized in Pearlman and predecessors are rights

7

“vis-a-vis other claimants to the e but not as against

“the Government“).

4 Respondent’s assertion that Henningson “specifically noted that the

government had ‘equitable obligations to see that the laborers and supply-

men were paid’” (Resp. Br. 10-11) misreads that case. Henningson, like

the other cases, involved a dispute between private parties over funds

that were outside the Treasury. Gov't Br. 38-39 & nn. 18-19. Moreover,

the passage from which respondent quotes—which states that the surety’s

payment on the bond had “released the Government from all equitable

obligations to see that laborers and supplymen were paid,” 208 U.S. at

410—did not suggest that laborers and suppliers (or, therefore, the surety

through subrogation) had a judicially enforceable right to money from the

United States. Munsey, and the longstanding rule it embodies (see Gov’t

Br. 23-28), refute that proposition. And while the quoted passage from

Henningson may describe what the government ought to do with retained

funds where (unlike here) it does not need the funds to complete the

contract—and therefore describes an obligation that is “equitable” in a

non-technical sense (ie, a moral obligation)—it in any event refers to an

obligation to see that laborers and suppliers are paid, not an enforceable

obligation of the United States to pay them itself.

Respondent’s further assertion that Houston v. Ormes, 252 U.S. 469,

474 (1920), and Mellon v. Orinoco Iron Co., 266 U.S. 121 (1924), recognize

the right of private parties to encumber public funds through equitable

liens, see Resp. Br. 20 n.4, is incorrect. Those cases (like the rest) hold

only that private parties can obtain equitable rights with respect to the

claims of other private entities. Houston, 252 U.S. at 473 (plaintiff had “an

equitable right in the fund as against Sanders [the other private party)”

(emphasis added)); Mellon, 266 U.S. at 124 (dispute between the Limited

Company and Orinoco over rights in certificate). Besides, in those cases

the money had been specifically appropriated to create a separate fund to

pay claims; the government did not assert a proprietary or possessory

right to the fund; and payment was a mere “ministerial duty.” Houston,

252 U.S. at 473; Mellon, 266 U.S. at 125; see Schmitz v. Societe Inter-

nationale, 249 F. Supp. 757, 762 (D. D.C. 1966) (Mellon and Houston do not

apply unless “Treasury officials [are] charged with the performance of no

duty other than the ministerial duty of making disbursement of the fund,”

and “the fund [is] an especially earmarked account * * * and the United

States [has] no claim or interest in the fund.”), cert. denied, 387 U.S. 908

(1967); Stitzell Weller Distillery v. Wallace, 30 F. Supp. 1010, 1014 (D.D.C.

1940) (similar). Nor do those cases address remedies against the United

States after the funds are paid to another private party, as occurred here.

8

3. Relying on decisions interpreting the Postal Service’s

sue-and-be-sued clause, 39 U.S.C. 401, respondent argues

(Br. 11-12) that Section 702’s limited waiver of immunity

eliminates any barrier to “equitable lien” suits and the crea-

tion of other “equitable” rights to public funds. See also

Surety Ass’n Br. 13-14; Amer. Subcontractors Br. 14-15.

a. This Court already has rejected the theory that a

waiver of immunity can, by itself, give rise to monetary lia-

bility against the United States. See FDIC v. Meyer, 510

U.S. 471, 484 (1994) (government instrumentality not liable

unless there is both a “waiver of sovereign immunity” and a

“source of substantive law” applicable to the government

that “provides an avenue for relief”). Indeed, Richmond

demonstrates that point. There, the statute governing re-

view—like Section 702 here—partially waived the immunity

of the United States to suits for “judicial review,” permitting

the agency to be named as defendant. 496 U.S. at 418; 5

U.S.C. 7703(a)(1), (2). There, the claimant—like respondent

here—asserted a right to federal funds under an equitable

theory that Congress had not authorized by statute. 496

U.S. at 416. And there the Court held that, despite the

waiver of immunity, equity alone could not create a substan-

tive entitlement to money in the Treasury, because Congress

had not conferred such a right by statute. Id. at 416, 424,

426, 432. That very holding disposes of respondent’s claim

that, given the partial waiver in Section 702, judge-made

principles of equity tan create an entitlement to public

money in the Treasury here.

See pp. 13-14, infra. Respondent’s reliance (Br. 20 n.4) on United States v.

Alabama, 313 U.S. 274 (1941), and Armstrong v. United States, 364 U.S.

40 (1960), is also misplaced. Those cases merely hold that, when the

United States acquires property that is already encumbered, its rights are

subject to that encumbrance. Nowhere do they hold that unencumbered

public money, already held in fee simple by the United States, can become

encumbered by “operation of law” where no Act of Congress so provides.

Nor can respondent’s argument be reconciled with the

legislative history of the 1976 amendment to Section 702. As

explained in our opening brief (at 35-36), it was uniformly

understood that the waiver of immunity would not necessi-

tate additional appropriationſs] of funds,” S. Rep. No. 996,

94th Cong., 2d Sess. 19 (1976). Indeed, the drafters of the

1976 amendment assured Congress that “(t]he monetary lia-

bility of the United States is left totally unchanged,” Sover-

eign Immunity: Hearing Before the Subcomm. on Admin.

Practice and Procedure of the Senate Comm. on the Judici-

ary, 91st Cong., 2d Sess. 50 (1970) (Senate Hearing), and re-

assured Congress that the United States’ historic immunity

to garnishment actions had been preserved as well, id. at

134. Under respondent’s view, however, the 1976 amend-

ment to Section 702 broadly expanded the government’s lia-

bility, subjecting the Treasury to money-payment obliga-

tions in equity—including “equitable liens,” and “restitu-

tion,” see Resp. Br. 10, 15—whenever the relief can be char-

acterized as “equitable” and “specific.” See id. at 15-16.

b. For similar reasons, the court of appeals decisions in-

volving the Postal Service’s sue-and-be-sued clause, cited by

respondent and its amici,’ do not assist them. In Franchise

Tax Board v. United States Postal Service, 467 U.S. 512, 520

(1984), this Court explained that the Postal Service’s sue-

and-be-sued clause, 39 U.S.C. 401, does not merely waive the

Postal Service’s immunity, but also “launche[s] the Postal

Service into the commercial world” and makes its “liability”

5 See Resp. Br. 11-12 (citing Active Fire Sprinkler Corp. v. United

States Postal Serv. 811 F.2d 747, 756 (2d Cir. 1987); Kennedy Elec. Co. v.

United States Postal Serv., 508 F.2d 954 (10th Cir. 1974); Wright v. United

States Postal Serv., 29 F.3d 1426 (9th Cir. 1994)); Surety Ass’n Br. 13-14

(same cases); Amer. Subcontractors Br. 14-15 (same cases). The Subcon-

tractors also cite two non- Postal Service cases—Trans-Bay Engineers &

Builders, Inc. v. Hills, 551 F.2d 370 (D.C. Cir. 1976), and Bor-Son Build-

ing Corp. v. Heller, 572 F.2d 174 (8th Cir. 1978)—but those cases too in-

volve the construct ion of a sue-and-be-sued clause.

10

in commercial matters largely “the same as that of any other

business.” Following that decision and its predecessor, FHA

v. Burr, 309 U.S. 242 (1940), lower courts have sometimes

concluded that 39 U.S.C. 401 authorizes them to impose

liability on the Postal Service under equitable or common

law theories (without regard to the Service’s governmental

character) as if the Service were “any other business.” See

United Elec. Corp. v. United States, 647 F.2d 1082, 1084 (Ct.

Cl.) (some courts of appeals read the “broad, unlimited

legislative declaration that the Postal Service could ‘be

sued’” as leaving them “free to apply doctrines applicable to

private persons, including principles of restitution * * * to

conclude that the equities of [a] subcontractor lalre

paramount to those of the [Postal Service]“), cert. denied,

454 U.S. 863 (1981).

Even if we assume, arguendo, that those lower court deci-

sions are correct, Section 702 does not evince a similar intent

to launch each and every federal agency “into the commer-

cial world,” or to subject the Treasury to monetary liability

under judge-made equitable doctrines like “any other busi-

ness.” To the contrary, as pointed out in our opening brief

(at 20-21, 32-33), the 1976 amendment to Section 702 was

“purely procedural in nature,” S. Rep. No. 996, supra, at 19,

and avoided recognizing any source of substantive law—

equitable or otherwise—as a basis for imposing new mone-

tary liability against the United States. Gov’t Br. 20-21, 33

n.14 (contrasting text of Section 702 with Tucker Act,

Federal Tort Claims Act, and 39 U.S.C. 401); pp. 8-9, supra;

see also Furlong v. Shalala, 156 F.3d 384, 394 (2d Cir. 1998)

(“The APA is merely a procedural vehicle for review of

agency action; it does not confer a substantive right” or

“property interest.”); Stockman v. FEC, 138 F.3d 144, 152

n.14 (5th Cir. 1998) (APA does “not declare self-actuating

substantive rights, but rather. merely provide[s] a

vehicle for enforcing rights which are declared elsewhere”

(internal quotation marks omitted)).

11

Because Section 702 does not itself impose substantive

money- payment obligations on the United States (or license

courts to ereate them), any plaintiff seeking publie funds

under Section 702 must locate a right to that money in the

text of some other federal statute. United States v. Mitchell,

463 U.S. 206, 216-217 (1983) (where statute “does not create

any substantive right enforceable against the United

States,” the “substantive right must be found in some other

source of law” (internal quotation marks omitted)); Testan,

424 U.S. at 398; Richmond, 496 U.S. at 416, 424, 432. In

Bowen, the plaintiff could locate such a statute, because its

monetary claim was predicated on the Medicaid Act’s dec-

laration that “the Secretary * * * shall pay to each State”

certain appropriated sums. 42 U.S.C. 1396b(a) (emphasis

added); see 487 U.S. at 900 (“suit seekls] to enforce the

statutory mandate itself, which happens to be one for the

payment of money”). Respondent, in contrast, effectively

concedes that it cannot identify any statute entitling it to

public funds. Consequently, the money respondent seeks

from the Treasury is not something (much less the “very

thing”) to which respondent was entitled from the govern-

ment, 487 U.S. at 895,° and its claim was properly dismissed

6 The American Subcontractors Association contends that a statutory

right to compensation is not necessary because the Federal Circuit per-

mits sureties—but not suboontractors to sue the United States under

the Tucker Act for retained contract funds. See Subcontractors Br. 17

(citing National Surety Corp. v. United States, 118 F.3d 1542 (Fed. Cir.

1997)). As explained in our opening brief, however, that decision (and

others like it) do not hold that naked principles of equity, by themselves,

can give rise to governmental payment obligations. Instead, they premise

liability on the (sometimes strained) notion that the right of sureties to

claim retained contract funds from the United States is based on contract;

the Tucker Act, of course, expressly recognizes contract claims as a basis

for monetary relief. See Gov’t Br. 40 n.20; see also Admiralty Constr. v.

Dalton, 156 F.3d 1217, 1222 (Fed. Cir. 1998) (subrogation sometimes “en-

titles sureties to succeed to the contractual rights of the [prime] contrac-

tor against the government”); Balboa Ins. Co. v. United States, 775 F.2d

12

by the district court as a prohibited action for money

damages.

1158, 1160 (Fed. Cir. 1985) (surety “is as much a party to the Government

contract as the contractor”); National Surety, 118 F.3d at 1547 (surety is

beneficiary of government retainage clause); Transamerica Premier Ins.

Co. v. United States, 82 Fed. Cl. 308, 312 (1994) (Al surety that has paid

materialmen’s claims can come directly against the Government” because

“the surety is subrogated * * * tothe right of the contractor to use these

funds in the event he has paid his materialmen.”). Setting aside the flaws

in that reasoning, see Gov't Br. 40 n.20, it does not help respondent, since

respondent disclaims any contract rights against the Army, and could

assert such rights only in the Court of Federal Claims in any event, see

pp. 18-19, infra.

For similar reasons, Tucker Act and Government Accounting Office

opinions stating that the government may voluntarily pay an unpaid sub-

contractor with retained contract funds owed to the prime contractor,

Resp. Br. 26-28, do not advance respondent's cause. Those opinions all

address situations in which the government retained a set percentage of

contract funds to ensure a performance that was ultimately completed, but

(for reasons unrelated to performance) the funds were not turned over to

the prime contractor. See, e g., In re Naval Facilities Eng'g Command,

57 Comp. Gen. 176, 178 (1977); In re United States Coast Guard—Pay-

ment of Contract Retainages to Subcontractors, No. B-218813, 1986 WL

63364 (Comp. Gen. Apr. 9, 1986). Because the money was owed to the

prime contractors under the contracts, the GAO (following Federal Circuit

precedent) allowed government agencies to satisfy their enforceable con-

tract obligations by depositing the funds with a court and filing an inter-

pleader; the court then determined who had the superior right to the

funds. 57 Comp. Gen. at 178; 1986 WL 63364, at *2. Because the Army

does not owe money to anyone under the contract in this case, those

decisions do not help respondent; the Army is permitted to pay money out

to satisfy its contract obligations, but it is not permitted to give out

federa! funds gratis. Indeed, the decisions upon which respondent relies

expressly bar payment in the present circumstances, as they reject any

notion that a subcontractor can receive public funds that have not been

earned by, and are not owed under contract to, its prime contractor. 57

Comp. Gen. at 178 (funds that were “not earned by the defaulted con-

tractor” cannot be paid out; only “money earned by the [prime] contractor

but retained by the Government to assure contract performance” may be

interpleaded).

13

C. The 1976 amendment to Section 702 not only expressly

bars claims for “money damages,” but also declares that

“(njothing herein * * * affects other limitations on judicial

review or the power or duty of courts to deny relief on any

other appropriate legal or equitable ground.” 5 U.S.C. 702.

As explained in our opening brief (at 32-33), the established

rule that equity cannot by itself impose money-payment obli-

gations on the Treasury constitutes precisely such a “limita-

tion” on judicial review and a “legal or equitable ground” for

denyling]!“ monetary relief.“ See Sea-Land Serv., Inc. v.

Alaska R. R., 659 F.2d 243, 244-245 (D.C. Cir. 1981) (R. B.

Ginsburg, J.) (fact that substantive source of law relied upon

does not apply to the United States or “expose” its “instru-

mentalities to liability” is grounds for dismissal under Sec-

tion 702), cert. denied, 455 U.S. 919 (1982). For that reason

as well, respondent is incorrect to assert (Br. 29-31) that the

requirement of a statutory right to payment is an improper,

extra-textual barrier to monetary relief.

D. That respondent seeks “money damages” is made es-

pecially clear by the fact that the specific fund to which

respondent claims entitlement has been dissipated. See

Gov't Br. 30-31 n.13. Thus, while respondent argues that

equitable liens historically were thought of as “specific

relief” because they create a right to a specific fund, Resp.

Br. 13-18, that description does not fit cases where, as here,

the specific fund to which the lien allegedly attached has

ceased to exist. In such circumstances, the money the plain-

tiff seeks is a substitute for the very thing to which it was

allegedly entitled, and is barred under Section 702 as money

damages. See Bowen, 487 U.S. at 895; City of Houston v.

HUD, 2A F.3d 1421, 1428 (D.C. Cir. 1994).

That cases under the Tucker Act (Resp. Br. 18-19; Surety

Ass’n Br. 19-21) and under the Postal Service’s sue-and-be-

sued clause (Resp. Br. 20-21) have permitted recovery de-

spite dissipation of the fund changes nothing. If the fund no

longer exists, then the monetary relief sought ceases to be

14

“specific relief” and constitutes “money damages” under

owen, see City of Houston, supra, and at common law as

well, see Restatement (First) of Restitution and Unjust

Unrichment § 215, at 204 (proposed final draft, Mar. 4, 1936)

(where property is dissipated, claimant cannot enforce lien

or trust but instead “has only a personal claim against the

wrongdoer”); id. § 161, at 20 (similar). Indeed, the fact that

respondent and its amici rely on Tucker Act cases confirms

that such an award constitutes damages, since the Tucker

Act largely precludes equitable relief. See Gov’t Br. 47-48."

7 Respondent’s protest (Br. 21-23) that the Army dissipated the funds

after respondent filed its suit and prayed for (but did not move for) an

injunction against dissipation, is factually and legally without merit. The

Army paid Verdan the money to which respondent claims entitlement

long before respondent filed suit. Resp. Br. 1-2 (Verdan was paid between

July and October of 1994; action was filed in April of 1995). And while the

Army paid the replacement prime contractor, Dynamic, after respondent

brought suit, respondent could not—even if the equitable lien doctrine

applied—have any conceivable basis for demanding that money. A sub-

contractor’s equitable lien can attach only to funds actually earned by its

prime contractor and owed to the prime contractor under the contract. 3

D. Dobbs, The Law of Remedies 470 (1993) (subcontractor can enforce its

claim only “against any funds still held by the landowner * * * which are

owed to the general contractor”), 57 Comp. Gen. at 178 (no claim in equity

for “the contract amount that was not earned by the defaulted prime]

contractor”), United States v. MacDonald Constr. Co,, 295 F. Supp. 1363,

1366 (E.D. Mo. 1968) (“This equitable lien, however, only extends to funds

in the hands of the [debtor] which it has determined are due and payable

to the prime contractor under the terms of the prime contract.”); Morgan

v. Goodwin, 355 So.2d 217, 219 (Fla. Dist. Ct. App. 1978); C. T. Willard Co.

v. City of New York, 142 N.Y.S. 11, 24 (Sup. Ct. 1913). Respondent

nowhere alleges that the money paid to Dynamic, which was for work that

Verdan never did, was owed to Verdan. To the contrary, the district court

specificaily found that the money paid to Dynamic corresponded to work

that Verdan never completed. Pet. App. 23a; see also J.A. 60, 61.

15

II. RESPONDENT'S CLAIM DOES NOT SEEK “JUDI-

CIAL REVIEW” OF “AGENCY ACTION”

Respondent’s “equitable lien” claim falls outside the scope

of the waiver of immunity in Section 702 for the further

reason that it is not a suit for “judicial review” of “agency

action.” See Gov't Br. 42-43. In fact, respondent’s suit is

precisely the sort of non-“review” commercial claim that

placement of the waiver into the Administrative Procedure

Act was meant to bar. See id. at 43-44.

A. Respondent asserts that the waiver of immunity in

Section 702 is not limited to suits for “judicial review” of

“agency action,” and instead extends to “all non-damages

actions seeking relief from official misconduct.” Resp. Br.

35-36. But the very fact that the waiver appears in Section

702, the APA provision providing for “judicial review” of

“agency action,” refutes respondent’s contention. Gov't Br.

42. Indeed, respondent does not dispute that Congress (and

the 1976 amendment’s drafters) repeatedly noted that the

waiver was placed in Section 702 for the specific purpose_of

ensuring that it would apply only where Section 702 applies.

Gov't Br. 42-43. Insofar as respondent claims that Section

702 permits suits other than those for “judicial review” of

“agency action,” its argument can be reconciled with neither

the statutory text nor Lujan v. National Wildlife Federa-

tion, 497 U.S. 871, 882 (1990) (stating that anyone “claiming a

right to sue [under Section 702] must identify some ‘agency

action’ that affects him in the specified fashion,” and that “it

is judicial review ‘thereof’ to which he is entitled”). See

Gov't Br. 45-46.

B. Respondent does not deny that its suit is framed as a

commercial claim for money rather than judicial review of

agency action. Gov't Br. 44-45. Nonetheless, respondent

asserts that its equitable lien claim in substance seeks

“review” of the Army’s “action” of “continu[ing] payment of

contract funds ($86,132.33) to Verdan,” and the payment of

16

“$84 910.53 to [Dynamic].” Resp. Br. 34. If the supposed

obligation to withhold payments from Verdan and Dynamic

was the duty the Army allegedly breached and that is now

subject to judicial review, however, then the only specific

relief respondent can claim is an order requiring the Army to

withhold the funds. Respondent, however, does not ask for

such an order (and the funds already have been paid out).“

Instead, respondent demands a cash payment for itself. Be-

cause that remedy would not require the Army to give re-

spondent the very thing to which it claims it was entitled,

and would instead give respondent money in compensation

for the loss it suffered when Verdan failed to pay respon-

dent, it constitutes the sort of “substitute” monetary remedy

that Section 702 and Bowen bar as “money damages.” See

Bowen, 487 U.S. at 893.

The argument also fundamentally fails to explain how

respondent’s “equitable lien” theory can be reconciled with

the waiver’s limitation to actions] in * * * court” for

“judicial review” of “agency action,” 5 U.S.C. 702. See Gov't

Br. 36. Respondent does not dispute that, under its theory,

an equitable lien was levied on public money in the Treasury

once respondent advised the Army that the prime contrac-

tor, Verdan, had not paid it. Even if we were to assume

(incorrectly) that a suit to foreclose on such a lien could be

construed as “an action in * * court” for “judicial review”

of “agency action,” nothing in Section 702 waives immunity

to permit the automatic imposition of a lien on United States

Treasury funds in the first instance. Imposing a lien on

government funds is not “an action in * * * court.” It is not

8 Because a subcontractor has no enforceable rights against the

United States, respondent would not in any event have standing to sue to

require the Army to withhold (or recover) funds from Verdan or Dynamic,

because that relief would not result in payment to respondent to redress

its injury. See, ., Federal Election Comm'n v. Akins, 118 S. Ct. 1777,

1783 (1998).

17

a suit for “judicial review.” And it does not on

action.” See Gov't Br. 46.“ en seed

III. THE RELIEF RESPONDENT SEEKS IS IM-

PLIEDLY FORBIDDEN BY OTHER STATUTES

Federal courts lack “authority to grant relief” under the

APA “if any other statute that grants consent to suit

expressly or impliedly forbids the relief which is sought.” 5

U.S.C. 702. In this case, the Tucker Act, 28 U.S.C.

134600 ), 1491, bars the remedy respondent seeks by prohi-

biting equitable relief in contract actions against the United

States and by precluding relief on implied-in-law payment

claims like that asserted by respondent. Gov't Br. 47-50.

* Respondent's claim (Br. 33) that this argument was not raised before

the Ninth Circuit is without merit. Because the Army argued in the Ninth

Circuit that this suit is outside Section 702’s waiver (see C.A. Br. 9), the

Army may “make any argument in support of that claim” in this Court,

Yee v. City of Escondido, 503 U.S. 519, 583 (1992); “parties are not limited

to the precise arguments they made below.” /bid. Moreover, because the

issue is sovereign immunity, even a complete failure to raise the issue

below would not bar its assertion here. See, ¢.g., Munro v. United States,

* ——— RGD GOON)

explained, sovereign immunity is sufficiently “jurisdic-

Lr

fortiori particular arguments in support thereof can be raised for the

first time on appeal. Finn, 123 U.S. at 232; cf. Patsy v. Board of Regents,

457 U.S. 496, 516 n.19 (1982) (sovereign immunity “sufficiently partakes of

the nature of a jurisdictional bar that it may be raised by the State for the

first time on appeal” (internal quotation marks omitted)). Respondent's

further claim that the argument is not within the question presented also

lacks merit. The question presented asks whether 5 U.S.C. 702 permits

the assertion of an “equitable lien” against the government. See Pet. i. If

such a claim falls outside the waiver of immunity in Section 702 because it

does not seek judicial review of agency action, the answer to that question

is “no.” Moreover, the issue was identified in the certiorari petition. See

Pet. 20-21 (whether relief is money damages is linked to the nature of

WWW

18

A. Seeking to overturn the unanimous agreement of the

courts of appeals (see Gov’t Br. 48 n.25), amicus Chamber of

Commerce denies (Br. 16) that the Tucker Act impliedly

forbids equitable relief in contract suits. The unavailability

of such relief, it argues, is a coincidence flowing from the

fact that the Tucker Act designates the Court of Federal

Claims—which largely lacks authority to give equitable

relief—as the forum for most contract claims. Congress,

however, is presumed to know the legal framework within

which it acts. See, eg., Cannon v. University of Chicago,

441 U.S. 677, 696-697 (1979). When it vests jurisdiction over

certain causes of action (contract suits) in a court that lacks

authority to grant equitable relief, the natural conclusion is

that Congress intended such relief to be barred. In fact, this

Court has drawn precisely that conclusion, holding that dis-

trict courts, which have concurrent jurisdiction over Tucker

Act claims for less than $10,000, are also barred from afford-

ing equitable relief on contract claims against the United

States. Richardson v. Morris, 409 U.S. 464, 465-466 (1973)

(per curiam); see also United States v. Jones, 131 U.S. 1, 17-

19 (1889).

To the extent there could be any doubt as to whether the

Tucker Act “impliedly forbids” equitable relief on contract

claims within the meaning of Section 702, the legislative his-

tory of the 1976 amendment dispels it. As one of the drafters

of the amendment explained: “You cannot get specific

performance of a Government contract; injunctive and

declaratory relief are unavailable. * \* * The bill makes it

entirely clear that this situation is not affected in the

slightest. * * * [Tjhe Tucker Act is in fact an act con-

senting to suit which impliedly forbids injun.<ive and de-

claratory relief.” Senate He ~ing, supra, at 50 (Prof. Cram-

ton). Although that statement and many others like it—

made in both Committee Reports and hearings—are cited

19

and quoted in our opening brief (at 48-49 n.26), the Chamber

of Commerce ignores them.“

B. Respondent argues, however, that the Tucker Act

does not bar its equitable lien action because the Tucker Act

does not “consent” to “equitable lien” suits. Resp. Br. 37-38

(quoting Katz v. Cisneros, 16 F.3d 1204 (Fed. Cir. 1994)).

Nothing in the “impliedly forbids” proviso, however, limits

its application to statutes that consent to the particular

action the plaintiff seeks to assert. To the contrary, if the

statute consents to suit for the general subject matter of the

plaintiff's suit, but bars the relief the plaintiff seeks, the

relief is “impliedly forbididen]“ within the meaning of

Section 702. Cf. Block v. North Dakota, 461 U.S. 273, 286

n.22 (1983) (if suit is untimely under an jother statute,” that

statute forbids relief under Section 702).

Respondent’s alternative argument—that its claim does

not fall within the subject matter of the Tucker Act because

it is not a contract claim, Resp. Br. 38-39—fares no better.

Respondent’s claim necessarily is based on contract: As the

court of appeals recognized, absent Verdan’s contract with

the Army (and respondent’s contract with Verdan), respon-

dent would have no claim at all. See Pet. App. 7a (respon-

dent seeks “the very thing to which it is entitled under the

contract”). Respondent, moreover, characterizes its action

as a suit for “restitution,” “unjust enrichment,” or satisfac-

Nor does this Court’s reference in Bowen to equitable relief on

contracts (Chamber of Commerce Br. 18-19) support the Chamber's view.

Bowen was not a contract case; and it did not address the “impliedly for-

bid{s}” language of Section 702. The Bowen passage merely gives an ex-

ample of the sort of remedy that, in private contract actions, may be con-

sidered “specific relief” rather than damages. 487 U.S. at 895. It thus can

hardly be read to suggest that such relief is not impliedly precluded by the

Tucker Act. Indeed, the language upon which the Chamber relies is a quo-

tation from an opinion of the D.C. Circuit, which has long recognized that

the Tucker Act “impliedly forbid[s}” equitable relief in contract actions.

Sharp v. Weinberger, 798 F 2d 1521, 1523 (D.C. Cir. 1986) (Scalia, J.).

20

tion of a payment obligation arising “by operation of law.”

See Resp. Br. 13-16, 38-39. Those characterizations are

merely alternative formulations for implied-in-law con-

tracts—obligations that arise not because a party has agreed

to be bound, but rather from the perception that the party

ought to be bound. Gov't Br. 49. Because the Tucker Act

bars such suits, and permits suits only on express and

implied-in-fact contracts, Hercules, Inc. v. United States, 516

U.S. 417, 423-424 (1996), respondent’s demand for monetary

relief on those claims is “impliedly forbid{[den}” under the

APA.”

R X X * *

For the foregoing reasons and those stated in our opening

brief, the judgment of the court of appeals should be

reversed.

Respectfully submitted.

SETH P. WAXMAN

Solicitor General

NOVEMBER 1998

1 Contrary to respondent’s assertion (Br. 39-43), Pearlman did not

reject the argument that the Miller Act “impliedly forbids” subcontractor

equitable lien actions. See Gov't Br. 49-50, n.27. That case addressed

neither the “impliedly forbids” language of Section 702 nor the ability of

subcontractors to assert claims directly against the government. Instead,

it held that the Miller Act does not affect the rights of sureties to seek

money from other private parties through subrogation. 371 U.S. at 139-

140; see pp. 5-7, supra. Thus, it nowhere addressed whether the Miller

Act, because it provides subcontractors with a special cause of action (in

the name of the government) on the payment bond, impliedly precludes

subcontractors from seeking other remedies against the government.