Gardiner v. VI Water Power Auth , 145 F.3d 635 ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
6-8-1998
Gardiner v. VI Water Power Auth
Precedential or Non-Precedential:
Docket 96-7565
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Recommended Citation
"Gardiner v. VI Water Power Auth" (1998). 1998 Decisions. Paper 136.
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Filed June 8, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 96-7565
FITZROY GARDINER, d/b/a
WESTERN TRADING ENTERPRISES
v.
VIRGIN ISLANDS WATER & POWER AUTHORITY
VIRGIN ISLANDS WATER & POWER AUTHORITY,
Third-Party Plaintiff
v.
THE FEDERAL EMERGENCY MANAGEMENT AGENCY;
THE ARMY CORP OF ENGINEERS;
THE UNITED STATES GEOLOGICAL SOCIETY
Third-Party Defendants
Virgin Islands Water &
Power Authority,
Appellant
On Appeal from the District Court of the Virgin Islands
Division of St. Croix
(D.C. Civil Action No. 90-cv-00295)
Argued April 8, 1997
Before: BECKER, ROTH and WEIS, Circuit Judges
(Opinion Filed June 8, 1998)
John K. Dema, Esq. (Argued)
Carey-Anne Moody, Esq.
Law Offices of John K. Dema
1236 Strand Street, Suite 103
Christiansted, St. Croix
U.S. Virgin Islands 00820-5008
Attorneys for Appellee
John J. Cooney, Esq. (Argued)
Venable, Baetjer, Howard & Civiletti
1201 New York Avenue, N.W.
Suite 1000
Washington, DC 20005
Barbara Twine-Thomas, Esq.
Virgin Islands Water & Power
Authority
P.O. Box 1450
Charlotte Amalie, St. Thomas
U.S. Virgin Islands 00804
Attorneys for Appellant
OPINION OF THE COURT
ROTH, Circuit Judge
When Hurricane Hugo hit the Virgin Islands on
September 17 and 18, 1989, it destroyed the potable water
delivery system on St. Croix. The Virgin Islands Water and
Power Authority (WAPA),1 and officials of the United States
government immediately began efforts to restore water
service, using fresh water wells. Because the equipment
being used at each well site was in high demand on the
island, FitzRoy Gardiner and his company, Western Trading
Enterprises (Gardiner), were hired to perform security and
maintenance service at the wells 24 hours a day. The bill
for Gardiner's services over the following ten weeks came to
$1,245,178, of which WAPA has paid $616,538. In this
action Gardiner sought the balance from WAPA. WAPA
_________________________________________________________________
1. WAPA has the statutory obligation to provide water for the residents
of the Virgin Islands, V.I. Code Ann. tit. 30 S 105(a).
2
based its refusal to pay on its contention that it did not
contract with Gardiner but that Gardiner contracted
instead with the United States.
I. Factual Background
In the days following the hurricane, the United States
and WAPA worked together to implement a water
distribution system using about 45 fresh water wells
located in well fields owned by WAPA. Each well required a
pump and a generator to power it. From the wells, water
was pumped into storage tanks and then into pressurized
distribution lines. These too required pumps and
generators. The Army Corps of Engineers, along with the
Federal Emergency Management Agency (FEMA) and WAPA,
obtained the necessary equipment, which was apparently
owned, at least in part, by the federal government.
By early October the new system was in place, but
security at the wells quickly became a serious problem
despite a tightly-enforced curfew to prevent violence and
looting. The lack of electric power on the Island made the
generators very desirable; the wells themselves were located
in remote areas, covered with dense vegetation up to six
and a half feet high. WAPA employees provided security
services during the first few days of October, until several
employees were threatened by persons who were attempting
to steal the generators and pumps. The United States
Army, the National Guard, and the Virgin Islands Police
Department refused to provide the necessary 24 hour
security. WAPA acknowledges that providing the security
was hazardous work.
Bruce Green, an employee of the United States Geological
Survey assigned by FEMA to work on the Islands, and
Romeo Cipriani, Superintendent of the Water Distribution
System for WAPA on St. Croix, met with Gardiner in early
October to discuss security at the well fields. Gardiner had
previously worked for WAPA and was already doing work
for WAPA on another project. Green and Cipriani reviewed
the problems at the wells with Gardiner, and Gardiner
orally agreed to provide both security and maintenance
services 24 hours a day. According to Bruce Green's
3
deposition, Gardiner was told at this initial meeting that
WAPA would be reimbursed by the federal government for
the payments to Gardiner. Gardiner, on the other hand,
testified that he did not learn this until later. There was no
written contract. Gardiner began to perform the services
immediately. He had people in the field within hours. By all
accounts, Gardiner and his crews were resourceful and
highly successful. In order to assure uninterrupted service,
Gardiner constructed shelters for his crews at the wells. His
crews kept the equipment fueled and performed
maintenance services such as changing oil, adjusting
carburetors, and repairing and replacing filters, mufflers,
starter cords, and other parts. When three generators
failed, Gardiner replaced them with his own.
On October 25, 1989, Gardiner, Cipriani, and Fred
Rounsaville of the Army Corps of Engineers met to discuss
Gardiner's fee for his services. Gardiner agreed to lower his
rates from $30 to $22.50 per person per hour during the
day and from $35 to $27.50 per hour at night.2 In a
memorandum discussing this negotiation, Rounsaville
wrote that the "charges of $30 and $35 per hour" were
"excessive and I requested a meeting with Mr. Cipriani of
WAPA, the contractor and Mr. Green." Rounsaville also
wrote that he thought the new rates were still too high but
that "I agreed to the hourly rates" because of the
"importance of providing drinking water to the residence
[sic]." Gardiner, according to the memo, threatened to
withdraw all workers by nightfall if his terms were not met.
Finally, Rounsaville's memo states that "I discussed this
with John Swanson and he agreed with my conclusion even
though the rates were higher than usual the need
outweighed the costs."
The United States was still unhappy with Gardiner's fees,
however, and on November 2, 1989, Rounsaville and
_________________________________________________________________
2. These figures are taken from the district court's opinion at page 6.
The
court's findings of fact and conclusions of law, which followed the bench
trial on damages, reflect that the billing was actually somewhat more
complicated. Findings of Fact and Conclusions of Law at PP 17-22. The
billing rates and amount of damages are not at issue on this appeal
except that WAPA has challenged the award (but not the amount) of
prejudgment interest.
4
Gardiner agreed to lower the rates to $20 per hour during
the day and $25 per hour at night, beginning with the sixth
week of service. WAPA maintains that none of its employees
participated in this meeting.
As discussed by Green, Cipriani, and Gardiner at their
initial meeting, Gardiner submitted his invoices to WAPA.
On November 2, 1989, WAPA paid the invoices, which
totaled $282,275 for the weeks ending October 7 and 14.
Gardiner received payment for the last two weeks of
October, more than $334,000, on approximately November
7. The checks to Gardiner were signed by Nellon Bowry,
chief financial officer of WAPA, and Alberto Bruno-Vega,
Executive Director of WAPA.
On November 21, 1989 the WAPA Governing Board
passed a resolution that, according to Bruno-Vega's
deposition testimony, ratified his expenditures in excess of
$75,000 in the immediate wake of the hurricane. The
resolution provided in part:
WHEREAS, in an informal emergency meeting of the
Governing Board, and in other meetings of the
Governing Board's Finance Committee, since Hurricane
Hugo, the Governing Board informally granted the
Executive Director the authority to temporarily
negotiate, sign and execute contracts and other
transactions of the Authority for amounts in excess of
$75,000, without prior consent of the Governing Board;
therefore,
BE IT RESOLVED BY THE GOVERNING BOARD: that
the Executive Director of the Authority, Alberto Bruno-
Vega, be authorized to negotiate, sign and execute
contracts and other necessary transactions of the
Authority for amounts in excess of $75,000, without
prior consent and knowledge of the Governing Board,
during the Authority's emergency efforts to restore
service and to repair its facilities from the damage
caused by Hurricane Hugo. Said authorization shall
terminate upon the entry of a resolution of the
Governing Board expressly terminating said temporary
authorization.
After paying Gardiner for the last two weeks of October,
WAPA refused to make any further payments. WAPA paid
5
Gardiner $616,538 in total, covering the first four weeks of
services. Gardiner billed WAPA a total of $1,245,178 for the
ten weeks of services. Gardiner testified that he was shown
a check in the middle of November that had been made out
to him by a WAPA employee, but that he was told there was
a problem and it would not be delivered immediately. WAPA
did not, however, tell Gardiner to stop protecting the wells
or to seek payment from the federal government. Gardiner
continued to provide services through the middle of
December. Beginning in November, WAPA charged its
customers for the water supplied by the well fields.
Under the system set up for Gardiner's payments, WAPA
paid Gardiner and then sought reimbursement from the
United States. WAPA claims that it stopped paying Gardiner
when it realized that FEMA might not reimburse it for
Gardiner's services. WAPA has stipulated that each time it
requested reimbursement for expenses, it had tofile a "form
No. 270," which stated, in part that "FEMA is not a party
to this contract." Damage Survey Reports ("DSR"), which
accompany requests for assistance after a natural disaster,
were compiled by Fred Rounsaville and submitted to FEMA.
Although Rounsaville approved Gardiner's rates and told
WAPA officials that senior FEMA officials approved them as
well, FEMA initially authorized payment of $830,000 to
WAPA, more than $400,000 less than Gardiner was owed.
This figure was further reduced by the Inspector General's
review of the billing after Gardiner had finished the work.
After this audit, FEMA agreed to reimburse WAPA a total of
only $443,000.
II. Procedural Background
Gardiner filed suit against WAPA in November, 1990, in
the District Court of the Virgin Islands. The complaint
alleges that WAPA breached a contract with Gardiner when
it refused to pay for Gardiner's services.
On January 25, 1991, WAPA filed a third party complaint
against FEMA, the Army Corps of Engineers and the United
States Geological Society. The third party defendants, along
with Gardiner, moved to dismiss. The court granted the
motion on April 17, 1991, in a two page order, which read
in part:
6
The third party plaintiff having conceded that the
jurisdiction of the third party claim belongs with the
United States Claims Court; and
It appearing that the United States Claims Court does
not have jurisdiction over the plaintiff's claim against
the Virgin Islands Water and Power Authority as that
court does not have jurisdiction over suits between
private parties [citation omitted]...IT IS...ORDERED
that the motion of the third party defendants is
granted....
On July 12, 1991, WAPA moved to "Amend and/or
Reinstate a Third-Party Complaint and a Cross Claim
Against the United States of America and to Transfer Entire
Matter to the United States Claims Court." WAPA argued in
support of the second motion that under 28 U.S.C. S 1631,
the district court could transfer the case to the Court of
Claims after joining the United States as a party.
The district court granted WAPA's motion to amend
and/or reinstate its third party complaint on June 30,
1992. The district court reasoned that the transfer was
appropriate pursuant to 28 U.S.C. S 1406(c). Gardiner
appealed. The Court of Appeals for the Federal Circuit
reversed and remanded on September 2, 1993. The Court
of Appeals determined, in part, that "the district court
relied on 28 U.S.C. S 1406(c) as it existed prior to 1982 in
transferring this case to the claims court," that this statute
"was repealed by Congress in 1982," and no longer
provided the court with authority to transfer the case. The
Court of Appeals also noted that WAPA did not allege in its
pleadings that it had a contract with the United States and
that WAPA therefore did not state "a claim upon which
relief may be granted by the claims court."
On September 10, 1993, WAPA renewed its earlier
motion, dated May 10, 1991, to dismiss for failure to join
an indispensable party, the United States. The district
court heard argument on the motion on December 20,
1993, and denied it "for the reasons stated on the record."
The court stated that "[t]his is a case we've struggled with
and struggled with, and based on law and a growing equity
of claims of injustice [sic] compelled and must be denied."
The court also said that it would let WAPA use "the
7
evidence of FEMA assurances" and the evidence of an
agreement between the plaintiff and the United States "to
disprove the plaintiff 's claim of a contract between it and
WAPA." WAPA filed a notice of appeal on January 19, 1994.
The appeal was dismissed for lack of jurisdiction on
November 18, 1994.
The district court granted a motion by Gardiner for
partial summary judgment on August 17, 1995. The court
held that Gardiner and WAPA had a binding contract, but
reserved the issue of damages for trial. After a bench trial
on January 23 and 24, 1996, the court issued findings of
fact and conclusions of law on August 14, 1996. The court
found that WAPA owed Gardiner $628,640 for unpaid
services performed by Gardiner under the contract and that
WAPA was liable for prejudgment interest in the amount of
$377,184. The interest represented 9% simple interest per
annum from December 9, 1989, to August 8, 1996. The
court entered judgment for Gardiner in the amount of
$1,005,824. The court also awarded Gardiner attorney's
fees and set a briefing schedule to determine the amount.
WAPA appealed to this Court on September 12, 1996.
The district court had jurisdiction of this case under 48
U.S.C. S 1612. We have appellate jurisdiction under 28
U.S.C. S 1291.
III. Motion to Dismiss for Lack of an
Indispensable Party
WAPA argues that under Federal Rule of Civil Procedure
19(b) the district court should have dismissed this case
because the United States is an indispensable party which
cannot be joined. WAPA maintains that because the United
States was not a party, WAPA was not able to demonstrate
that Gardiner contracted with the United States instead of
with WAPA. WAPA bases this claim in part on the fact that
it had only limited discovery against the United States.
WAPA also contends that this action will impact the United
States because the decision will resolve some of the terms
of the contract, such as the amount that Gardiner is
entitled to recover. Finally, WAPA claims that failure to
include the United States as a party forces WAPA to
assume the risk of inconsistent obligations.
8
In determining whether a district court should have
dismissed a case under Rule 19(b) for failure to join an
indispensable party, we must make a preliminary
determination that the non-joined party cannot be joined
under Rule 19(a). Only if a party cannot be joined under
Rule 19(a), does Rule 19(b) come into play.3 Shetter v.
_________________________________________________________________
3. Federal Rule of Civil Procedure 19 provides in part that:
(a) Persons to be Joined if Feasible. A person who is subject to
service of process and whose joinder will not deprive the court of
jurisdiction over the subject matter of the action shall be joined
as
a party in the action if
(1) in the person's absence complete relief cannot be accorded
among those already parties, or
(2) the person claims an interest relating to the subject of the
action and is so situated that the disposition of the action in the
person's absence may
(I) as a practical matter impair or imped the person's ability to
protect that interest or
(ii) leave any of the persons already parties subject to a
substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of the claimed interest.
If the person has not been so joined, the court shall order that
the
person be made a party. If the person should join as a plaintiff
but
refuses to do so, the person may be made a defendant, or, in a
proper case, an involuntary plaintiff. If the joined party objects
to
venue and joinder of that party would render the venue of the
action
improper, that party shall be dismissed from the action.
(b) Determination by the Court Whenever Joinder Not Feasible.
If a person as described in subdivision (a)(1)-(2) hereof cannot be
made a party, the court shall determine whether in equity and good
conscience the action should proceed among the parties before it,
or
should be dismissed, the absent person being thus regarded as
indispensable. The factors to be considered by the court include:
first, to what extent a judgment rendered in the person's absence
might be prejudicial to the person or those already parties;
second,
the extent to which, by protective provisions in the judgment, by
the
shaping of relief, or other measures, the prejudice can be lessened
or avoided; third, whether a judgment rendered in the person's
absence will be adequate; fourth, whether the plaintiff will have
an
adequate remedy if the action is dismissed for nonjoinder.
(emphasis added).
9
Amerada Hess Corporation, 14 F.3d 934, 941 (3d Cir.
1993); Janney Montgomery Scott, Inc. v. Shepard Niles, Inc.,
11 F.3d 399, 404 (3d Cir. 1993).
We exercise plenary reviews over a Rule 19(a)
determination to the extent that it is based on conclusions
of law; as to subsidiary findings of fact we apply a clear
error standard. HB General Corp. v. Manchester Partners,
L.P., 95 F.3d 1185, 1189 (3d Cir. 1996) (citing Janney, 11
F.3d at 404). Rule 19(b) determinations are reviewed for an
abuse of discretion. HB General Corp., 95 F.3d at 1189.
Even assuming that the United States could not have
been joined under Rule 19(a), we cannot conclude that the
district court abused its discretion in refusing to dismiss
under Rule 19(b). See Schulman v. J.P. Morgan Inv.
Management, Inc., 35 F.3d 799, 806 (3d Cir. 1994). Under
Rule 19(b), the district court had to decide whether the
United States's participation in the litigation was so
important that "in equity and good conscience the
action...should be dismissed, the absent person being thus
regarded as indispensable." The four factors listed in the
Rule are not exhaustive, but they are the most important
considerations in deciding whether to dismiss the action.
Wright, Miller & Kane, Federal Practice and Procedure
S 1608 at 91 (2d Ed. 1986).
The first and second factors under Rule 19(b) are "to
what extent a judgment rendered in the person's absence
might be prejudicial to the person or those already parties,"
and to what extent such prejudice can be avoided. Here,
there is little danger of prejudice to the absent party -- the
United States -- if this case goes forward without it. Indeed,
the United States does not want to become a party to the
suit, strongly suggesting that its interests will not be
impeded if the suit goes forward without it. See Sindia
Expedition v. Wrecked & Abandoned Vessel, 895 F.2d 116,
121 (3d Cir. 1990) (reasoning that Rule 19(a)(2)(I) did not
apply because New Jersey was "manifestly unconcerned
with any adjudication in its absence");4 see also Peregrine
_________________________________________________________________
4. The first factor under Rule 19(b) overlaps considerably with the Rule
19(a) analysis. Wright, Miller & Kane, Federal Practice and Procedure
S 1608 at 91.
10
Myanmar Ltd. v. Segal, 89 F.3d 41, 49 (2d Cir. 1996).
Moreover, there is no prejudice to Gardiner in excluding the
United States. Gardiner can recover fully from WAPA, the
party with whom Gardiner claims it has a contract.
WAPA, on the other hand, argues that the absence of the
United States has seriously hampered WAPA's effort to
show that there was no contract between WAPA and
Gardiner. WAPA has not, however, come forward with much
to support this claim. Indeed, as Gardiner points out,
WAPA deposed a number of federal officials: Fred
Rounsaville, Edward Orchowski, Steve Singer, Thomas
Barbee, Adair Martin, David Shriver, Wynn Fuller, Colonel
Cox, and Gerald Connolly. Despite the depositions, WAPA
claims that it was unable to obtain relevant "internal
documents" from the government, but WAPA has not
presented specific evidence of prejudice. Although we do
not suggest that WAPA must identify beforehand the
contents of the documents that it seeks, WAPA must
nonetheless identify with greater specificity the information
that it needs. For example, WAPA might, argue that it could
not show which federal officials had the implied authority
to contract with Gardiner because it was not given
information about their jobs and responsibilities. Or WAPA
might assert that it could not learn who the contracting
officers on St. Croix were immediately after Hugo hit. WAPA
has not, however, made any such contention. Given the
extensive discovery permitted in this case, WAPA should be
able to identify any missing information with more detail
than the phrase "internal documents."
WAPA also argues that it "runs the risk of inconsistent
adjudication of its rights" if the United States is not joined
because, if Gardiner prevails, WAPA must then pursue a
remedy against the United States in a different action. The
risk of inconsistent judgments, although mentioned
specifically in Rule 19(a)(2)(ii), is relevant under Rule 19(b)
as well. Schulman, 35 F.3d at 806. In general, however, "a
defendant's right to contribution or indemnity from an
absent non-diverse party does not render that absentee
indispensable pursuant to Rule 19." Janney, 11 F.3d at
412. In Janney, we considered an agreement in which
Janney would serve as an advisor to Underwood and its
11
subsidiary, Shepard Niles. Janney sued Shepard Niles, and
Shepard Niles contended that Underwood, as a co-obligor to
the contract, was a party to be joined if feasible under Rule
19(a). If joined, Underwood would have destroyed diversity
jurisdiction.
We concluded that the outcome of the case would be"res
judicata or collateral estoppel as between Janney and
Shepard Niles," but that Janney "remain[ed] free to claim
contribution or indemnity from Underwood." We went on
the explain that "a defendant's right to contribution or
indemnity from an absent non-diverse party does not
render that absentee indispensable pursuant to Rule 19."
11 F.3d at 412 (quoting Bank of America National Trust and
Savings Association, 844 F.2d 150, 1054 (3d Cir. 1988)). A
defendant may implead the absent party under Federal
Rule of Civil Procedure 14, but is not required to do so,
"and if it does not, its right to bring a separate action for
contribution or indemnity is unaffected." Id.5
In this case, unlike Janney, the defendant does not have
the option to implead the absent party because we lack
jurisdiction over the United States. Indeed, the third-party
complaint which WAPA filed against FEMA, the Army Corps
of Engineers, and the United States Geological Society, was
dismissed for lack of jurisdiction. But the reasoning of
Janney -- if a defendant does not implead an absent party,
there is no legal effect on its rights of contribution or
indemnification -- applies with equal force here.6 WAPA is
free to pursue any claim it has against the United States in
_________________________________________________________________
5. Some courts, and Wright, Miller & Kane, reason that joint obligors to
a contract "are treated as Rule 19(a) parties, but are not deemed
indispensable under Rule 19(b). Wright, Miller & Kane, Federal Practice
& Procedure S 1613 at 182-183."
6. WAPA suggests that the terms of a contract between it and the United
States could be determined in the litigation between WAPA and Gardiner.
Specifically, WAPA points to the issue of what rates Gardiner was
entitled to receive. It is not clear, however, how the determination of
the
rates in a contract between Gardiner and WAPA necessarily resolves the
issue of the reimbursement which the United States may have agreed to
pay WAPA. WAPA, for example, may have agreed to pay Gardiner's high
rates, while the United States may have contracted with WAPA to
reimburse standard or reasonable rates. We express no opinion on these
issues and raise them only to note the problems in WAPA's claim.
Contrary to WAPA's claim, this litigation will only bind the parties
involved and those in privity with them; this does not appear to include
the United States. 18 Moore's Federal Practice, S 132.01[1] (Matthew
Bender 3d ed.)
12
a separate action. We recognize that this is a less
convenient remedy for WAPA. Nevertheless, it is a means of
resolving WAPA's claim of the risk of inconsistent
obligations.
WAPA's final argument on the issue of prejudice is that
the district court did not permit it to present its defense
that Gardiner contracted not with WAPA, but with the
United States. In support, WAPA points to the district
court's statements that the involvement of the United
States was not "material" or "pertinent." These statements
reflect, however, the district court's conclusion that
Gardiner had demonstrated that Gardiner and WAPA had a
contract, making summary judgment appropriate. If the
district court determined that a contract existed between
WAPA and Gardiner, Gardiner was entitled to summary
judgment, regardless of what agreement WAPA may have
had with the United States. We will consider the district
court's grant of summary judgment in the next section. We
note only that whatever "prejudice" may have enured from
the district court's conclusions on materiality and
pertinence goes only to the issue of the propriety of
summary judgment. The district court's statement that
certain activities by federal officials were not"material" to
its determination that Gardiner's contract was with WAPA
was made in the context of the consideration of summary
judgment and it has no bearing on whether joinder of the
United States was feasible under Rule 19(b).
The third factor under Rule 19(b) is "whether a judgment
rendered in the person's absence will be adequate." This
element allows the court to consider whether the relief it
may grant will be an adequate remedy for the plaintiff.
Provident Bank & Trust Co. v. Patterson, 390 U.S. 102, 112
(1968). Wright, Miller & Kane, Federal Practice & Procedure
S 1608 at 116. This factor weighs, in our view, in favor of
WAPA. WAPA's claim, as construed by the district court,
will be resolved in one action. Moreover, as we note above,
the possibility that the defendant may have a claim for
contribution or indemnity does not render an absentee
indispensable. The right to contribution and indemnity
should not, therefore, be considered to cause inadequacy of
the resulting judgment.
13
The fourth Rule 19(b) factor, whether the plaintiff has a
remedy if the action is dismissed, counsels strongly against
dismissal in this case. WAPA argues that "Gardiner could
have filed the same action in the Court of Federal Claims,
where all parties could be joined in one action, for a
conclusive and mutually consistent resolution of their
rights and responsibilities." The problem with this
argument, however, is that Gardiner does not allege that he
had a contract of any sort with the United States. Gardiner
has not alleged a cause of action against the United States;
thus, he does not have a remedy in the Court of Claims.
Unless Gardiner claims a contractual relationship with the
United States, the Court of Claims simply has no
jurisdiction over the case. The Court of Appeals for the
Federal Circuit reversed Judge Brotman's transfer of the
case to the Court of Claims for exactly this reason-- that
court had no jurisdiction over a dispute between WAPA and
Gardiner. Decision of the Court of Appeals for the Federal
Circuit, September 2, 1993; Appendix at 2167, 2171-2172.
WAPA's argument that Gardiner should file in the Court of
Claims implies that Gardiner has to rewrite his claim to
assert that his contract was with the United States. Such
a revision would, however, provide no remedy for the claim
that Gardiner makes against WAPA for breach of contract.
With these considerations in mind, we conclude that the
district court did not abuse its discretion in denying the
Rule 19(b) motion. Gardiner would have had to have alleged
an entirely new cause of action against the United States in
order to bring this suit in the Court of Claims. Indeed,
Gardiner would have had to have alleged something that it
maintains did not exist -- a contract with the United
States. Moreover, WAPA's claim of prejudice in discovery
matters, as we have seen, adds little. For these reasons, it
was well within the discretion of the district court to deny
WAPA's motion.
IV. Summary Judgment
In granting summary judgment for Gardiner, the district
court reasoned that neither Cipriani for WAPA nor Green
for FEMA had the authority to enter into a contract on
behalf of the parties that they represented. The district
14
court concluded, however, that the actions of Cipriani were
later ratified by Bruno-Vega and the WAPA Board, resulting
in an enforceable contract. On the other hand, the court
reasoned that there "is simply no evidence of ratification of
the agreement by any other individual who could have
ratified a contract entered into by Mr. Green." The court
accordingly granted summary judgment on the issue of
liability in favor of Gardiner and against WAPA. We exercise
plenary review. Public Interest Research of N.J. v. Powell
Duffryn Terminals Inc., 913 F.2d 64, 71 (3d Cir. 1991).
WAPA make three basic arguments that summary
judgment for Gardiner was error. First, it points to evidence
that FEMA officials ratified Green's actions and made
binding the alleged contract between Green and Gardiner.
Second, WAPA argues that in this emergency situation
where the United States played a large role in negotiating
and overseeing the contract, WAPA can recover if it proves
an implied-in-fact contract, even if no "contracting officer"
with specific authority to bind the United States approved
the contract. Finally, WAPA maintains that, even if it had a
contract with Gardiner, there is evidence that the contract
included a term that Gardiner would only be paid to the
extent that WAPA was reimbursed by the government,
precluding summary judgment for Gardiner.
The government enters into contracts with the public
through "contracting officers." LDG Timber Enterprises, Inc.
v. Glickman, 114 F.3d 1140, 1143 (Fed. Cir. 1997). The
Federal Acquisition Regulation ("FAR") defines a contracting
officer as "a person with the authority to enter into,
administer and/or terminate contracts and make related
determinations and findings." 48 CFR S 2.101 (1996). The
regulations also provide that "[c]ontracts may be entered
into and signed on behalf of the Government only by
contracting officers," 48 CFR S 1.601(a), and that
"[c]ontracting officers may bind the Government only to the
extent of the authority delegated to them." 48 CFR S 1.602-
1(a). Part 4401 of FAR "sets forth policies and procedures
concerning the Federal Emergency Management Agency
Acquisition Regulation (FEMAAR) System." 48 CFR
S 4401.000. This part states the qualifications required for
contracting officers within FEMA and explains that except
15
for "disaster-related activities and unusual circumstances
as determined by the head of the contracting activity, it is
policy to delegate contracting officer authority to individuals
rather than positions." 48 CFR SS 4401.603-2(a) and
4401.603-3.
As the discussion above makes clear, only those with
specific authority can bind the government contractually;
even those persons may do so only to the extent that their
authority permits. Moreover, a party who seeks to contract
with the government bears the burden of making sure that
the person who purportedly represents the government
actually has that authority:
Whatever the form in which the Government functions,
anyone entering into an arrangement with the
Government takes the risk of having accurately
ascertained that he who purports to act for the
Government stays within the bounds of his authority.
The scope of this authority may be explicitly defined by
Congress or be limited by delegated legislation,
properly exercised through the rule-making power. And
this is so even though, as here, the agent himself may
have been unaware of the limitations upon his power.
Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947).
This allocation of risk, the Court reasoned, "does not
reflect a callous outlook," but instead "merely expresses the
duty of all courts to observe the conditions defined by
Congress for charging the public treasury," whether those
conditions appear in the statutes themselves or are part of
regulations that implement those statutes. Id. at 384-385.
Other policy grounds supporting this rule were stated more
recently by the Federal Circuit: "The United States
Government employs over 3 million civilian employees.
Clearly, federal expenditures would be wholly
uncontrollable if Government employees could, of their own
volition, enter into contracts obliging the United States."
City of El Centro v. U.S., 922 F.2d 816, 820 (Fed. Cir. 1990).
In this case, Gardiner claims that WAPA's defense that
Gardiner actually had a contract with the United States,
not WAPA, is defeated by WAPA's failure to identify a
contracting officer who could have bound the United States.
16
We agree. It is undisputed that Bruce Green had no such
authority; neither did Gerald Connolly, the federal
coordinating officer for the Virgin Islands disaster, or
Steven Singer, the deputy federal coordinating officer for St.
Croix. WAPA argues that it has presented evidence of
ratification of the contract by "senior officials in the FEMA
disaster relief effort," namely Connolly and John Swanson.
WAPA has pointed to absolutely no evidence that Swanson
had the authority to contract on behalf of the government.
The record is clear that Connolly did not. Although WAPA
contends it has been unable to get information that it needs
from the United States during the course of this litigation,
it deposed at least five FEMA officials and has pointed to no
unanswered question as to who the contracting officers
were in FEMA or on St. Croix. Because there is no evidence
to support WAPA's claim that the contract was ratified by
someone in the federal government who had the authority
to do so, summary judgment was appropriate unless, as
WAPA also argues, the approval of a contracting officer was
not necessary.
WAPA maintains that no contracting officer needed to
approve the agreement for the United States because this
case comes within a "branch of the implied-in-fact contract
doctrine that applies specifically in emergency situations."
To prove an implied-in-fact contract, the party alleging that
contract must show the same elements required in an
express contract: offer, acceptance, and consideration. See
Trauma Services Group v. United States, 104 F.3d 1321,
1325 (Fed. Cir. 1997). Proof of an implied-in-fact contract
comes not from an express agreement, however, but from
"conduct of the parties showing, in the light of the
surrounding circumstances, their tacit understanding." Id.(quoting Hercules, Inc. v. United States, 116 S.Ct. 981, 985
(1996) (quoting Baltimore & Ohio R.R. Co. v. United States,
261 U.S. 592, 597 (1923))). Significantly, an implied-in-fact
contract, like an express contract, must include
authorization (whether implied or express) by an agent with
the authority to bind the United States. Trauma Services,
104 F.3d at 1326; City of El Centro, 922 F.2d at 820.
WAPA argues that the required authorization can be
implied from the high-ranking officials who tacitly approved
17
the contract and that because this was an emergency
situation a contracting officer was not required to bind the
United States. There is, as WAPA maintains, evidence that
federal officials played a major part in negotiating and
overseeing Gardiner's contract to provide security and
maintenance services. This evidence also indicates that the
federal government may have benefitted from the security
services because of its ownership of the generators. Federal
officials also negotiated fee reductions on at least two
occasions; in one instance WAPA claims that none of its
officials were even present. WAPA sought and obtained
assurance from Rounsaville that the rates were acceptable
to FEMA officials. Apparently, Rounsaville also cleared the
rates with John Swanson and Gerald Connolly, FEMA's
coordinating officer in the Virgin Islands. The Hurricane
Hugo emergency required, at least initially, quick action by
WAPA and federal officials.
We cannot agree with WAPA, however, that this evidence
creates a genuine issue of material fact as to whether the
actions of the senior FEMA officials bound the United
States in a contract with Gardiner. The possibility that the
contract was implied-in-fact does not dispense with the
requirement that those whose course of conduct show
contractual intent have the actual authority to bind the
government. Trauma Services, 104 F.3d at 1326. "Senior"
officials may or may not have contracting authority; WAPA
has come forward with nothing suggesting that those
involved with the procurement of Gardiner's services did.
See City of El Centro, 922 F.2d at 821 (placing burden of
showing that government agent had requisite contracting
authority with the party seeking to show an implied-in-fact
contract with the government).7
_________________________________________________________________
7. In some situations authority to bind the government can be implied
"when such authority is considered to be an integral part of the duties
assigned to a [g]overnment employee." H. Landau & Co. v. United States,
886 F.2d 322, 324 (Fed. Cir. 1989) (quoting J. Cibinic & R. Nash,
Formation of Government Contracts 43 (1982)). WAPA has not advanced
this argument however, and has accordingly not pointed to evidence
specifically suggesting that the authority to bind the government was
"necessary or essential" to the duties of the federal officials involved.
Roy
v. United States, 38 Fed. Cl. 184, 188 (1997). It seems that to the extent
18
Neither does the urgency of the situation suggest a
different outcome. WAPA relies on Halvorson v. United
States, 126 F. Supp. 898 (E.D. Wash. 1954), in which the
court concluded that under the emergency conditions
created by a blizzard, the United States was responsible for
the costs incurred when federal officials directed
contractors to remove snow from the interior of a buildings
that was under construction. The contractors had made
clear that the building should not include uncovered
ventilation slots, but the Corps of Engineers insisted that it
should. As the contractors predicted, snow blew into the
interior of the unfinished buildings, threatening to do
substantial damage if it melted. The local job inspector, and
his immediate supervisor, directed the contractors to
remove the snow, which significantly reduced damages. The
Corps of Engineers refused to pay for the removal. The
court reasoned that:
Whether or not the Resident Inspector, Mr. Jackson,
and his supervisor, the Resident Engineer, had
authority to bind the government by express contract,
or to modify the written contract by oral agreement,
they did, in the emergency situation created by the
_________________________________________________________________
such authority was an integral part of the duties assigned to the first
officials that arrived on the Island, it would not extend to a contract
for
services lasting ten weeks. Moreover, application of this doctrine is
based
on "the existence of some express actual authority." Id. at 189, n.18.
Thus in Landau, the Federal Circuit concluded that two federal officials
who had the authority to co-sign for withdrawals from a joint bank
account that provided advance financing to government contractor, may
have had the implied authority to bind the government. A supplier to the
contractor sought letters from the federal officials -- who were not
contracting officers -- guaranteeing payment from the joint bank
account. The officials provided two such letters, the contractor did not
pay, and the government argued that its guarantee was invalid because
the officials lacked authority to bind it. The court concluded that the
explicit authority to draw checks on the account, considered with the
responsibility of finding suppliers, "may have carried with it the
implicit
authority to assure suppliers that they would be paid for providing the
materials." 886 F.2d at 324. Here, WAPA has pointed to no official who
had express actual authority, of any sort, from which further authority
could be implied.
19
damage done by the blizzard, have authority to direct
the contractors to proceed at once to minimize the
damage by immediate remedial action.
126 F. Supp. at 900.
Whatever the continuing vitality of this doctrine, it is
inapposite here. First, in Halvorson the government and the
plaintiffs had already entered into a contract with each
other, duly authorized by a contracting officer of the United
States. Payment for the snow removal would fall either to
the government -- the party who was benefited by the
removal and whose negligence created the problem in the
first place -- or to the contractor had who recommended
constructing the building so as to avoid the problem.
In this case, the existence of a contractual relationship
between Gardiner and the United States is itself at issue.
Standard Form 270, provided by the government of the
Virgin Islands for use in requesting reimbursements from
the United States, explains that
FEMA is not a party to this contract. Disputes arising
between the parties to the contract will be resolved
between the contractual parties by such means are
available under the contract. Payment to the
CONTRACTOR will not be contingent upon FEMA
reimbursement
Thus, it appears that FEMA believed that there was no
contract between it and Gardiner and that WAPA and
Gardiner should sort out between themselves any disputes
over payment. Moreover, even if the government benefited
from Gardiner's services because it owned the generators,
WAPA's benefit was at least as substantial because
Gardiner enabled WAPA to restore drinking water, and
ultimately to charge its customers for that water.
Moreover, despite the devastation created by Hurricane
Hugo and the urgent need to supply a fresh water to the
island, the policy implicit in Halvorson does not apply here.
In Halvorson, the contractor's efforts were directed at
removing snow as quickly as possible before a thaw melted
the snow and destroyed the interior of the building. To this
end it used "all of [its] men on the job and all of the men
20
they could employ in Havre," and even so some of the snow
melted before it was removed. 126 F. Supp. 900. In this
case, on the other hand, Gardiner provided emergency
services for ten weeks, the provision of those services
ultimately involved the highest level officials in WAPA, and
the emergency brought federal officials with contracting
powers to the Virgin Islands, although WAPA has presented
no evidence that these officials were involved in this
contract. If this case concerned only emergency services
provided in the first hours or days after the hurricane, we
would consider this claim in a different light, particularly in
view of WAPA's evidence of significant involvement of
federal officials in all aspects of procuring Gardiner's
services. But the federal government reimbursed WAPA in
the amount of $443,000, which paid for more than thefirst
two weeks of services by Gardiner. WAPA had ten weeks
during which it could have made sure that a contracting
officer approved any contract between Gardiner and the
United States or it could have asked Gardiner to
discontinue his services. WAPA did neither.
Finally, WAPA argues that summary judgment was
inappropriate because "the Gardiner contract, whomever it
was with, contained a term that payment would be made
only in amounts FEMA found were reimbursable." Gardiner
asserts that this issue was not raised in the district court
and should not be considered on appeal. WAPA responded,
in its reply brief, that the "evidentiary submission on this
point in district court refutes Gardiner's contention that
this issue is being raised for the first time on appeal." At
oral argument, WAPA maintained that this issue had been
raised to the district court through WAPA's disputed
findings of fact, particular disputed fact number eight,
submitted in opposition to Gardiner's motion for summary
judgment. This factual submission presents evidence that
Gardiner knew the government thought his rates were too
high and that the government negotiated with Gardiner to
reduce his charges. It does not, however, show that there
was a contract term that Gardiner would be paid only those
amounts that FEMA found to be reasonable.
As a "general rule" we do not review "issues raised for the
first time at the appellate level." United Parcel Serv. v.
21
Intern. Broth. Local No. 430, 55 F.3d 138, 140 n. 5 (3d Cir.
1995). Although we have the discretion to review an
argument not raised below, we will ordinarily refuse to do
so. Id.; see also Singleton v. Wulff, 428 U.S. 106, 120-121
(1976). WAPA's argument that "evidentiary submissions"
supporting its new claim preserved the issue on appeal is
essentially a claim that new arguments should be
considered on appeal, as long as the evidence supporting
them was submitted to the district court. In United Parcel,
however, UPS failed to raise a legal theory -- that a clause
of the contract violated public policy -- and we refused to
consider that theory on appeal, although the evidence in
support of the theory was presented to the district court.
We considered a new legal theory for the first time on
appeal in Salvation Army v. N.J. Dept. of Community Affairs,
919 F.2d 183, 196 (3d Cir. 1990), but only because the
case law on the subject had changed.
WAPA has not persuaded us that this is a case in which
we should disregard our general rule and consider on
appeal a new argument in opposition to summary
judgment. Nothing unusual, like an intervening change in
the law or the lack of representation by an attorney,
prevented WAPA from raising this issue below. This claim,
moreover, contradicts WAPA's main argument -- that it had
no contract with Gardiner. WAPA may have decided not to
take such a position in the district court for fear that it
would undermine WAPA's central claim. Under these
circumstances, in the interest of fairness to the district
court and to the plaintiff, not to mention the conservation
of judicial resources, we will not consider this claim.8
_________________________________________________________________
8. We will also affirm the award of pre-judgment interest. WAPA has
argued in opposition to this award that pre-judgment interest cannot be
awarded against the United States or against a party, like WAPA, that
has a right to seek indemnity from the United States. Although the
principle of sovereign immunity bars the collection of pre-judgment
interest against the United States, courts have not extended the United
States' sovereign immunity to a private party, even when the private
party has an explicit indemnity agreement with the United States. See,
e.g., Rochester Methodist Hospital v. Travelers Insurance Co., 728 F.2d
1006, 1012-13 (8th Cir. 1984). In reaching this conclusion, the
Rochester court reasoned that sovereign immunity bars recovery only
22
V. Conclusion
For the reasons stated above, we will affirm the district
court's denial of WAPA's Rule 19(b) motion and we will also
affirm the judgment in favor of Gardiner.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
when the suit is in fact a suit against the United States; in a suit for
damages against a government agent, it is the agent who is liable even
if the agent then turns to the United States for reimbursement. The
present case is in fact an easier one because WAPA does not have an
explicit indemnity agreement with the federal authorities. For this
reason, a verdict against WAPA does not indirectly constitute a
determination of liability against the United States.
WAPA further contends that it would be inequitable to award pre-
judgment interest against WAPA because the non-payment to Gardiner
was a result of FEMA's failure to pay WAPA after FEMA had assured
WAPA that its payments to Gardiner would be reimbursed. This
contention is merely a recharacterization of WAPA's argument that
reimbursement by FEMA was a precondition to its duty to pay Gardiner.
Since we have upheld the district court's entry of summary judgment for
Gardiner, it follows that the award of pre-judgment interest is equitable.
The district court has determined that WAPA's duty to pay on the
contract was independent of any reimbursement agreement between
WAPA and the US government. Whether it is equitable to award pre-
judgment interest to Gardiner relates to the relationship between
Gardiner and WAPA, and WAPA failed to pay on the contract when
payment was due.
23