Tuba City Regional Health Care Corporation v. United States of America ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
TUBA CITY REGIONAL HEALTH CARE :
CORPORATION, :
:
Plaintiff, : Civil Action No.: 13-639 (RC)
:
v. : Re Document Nos.: 18, 24
:
UNITED STATES OF AMERICA et al., :
:
Defendants. :
MEMORANDUM OPINION
DENYING DEFENDANTS’ MOTION TO DISMISS; AND
FINDING AS MOOT PLAINTIFF’S MOTION FOR REFERRAL TO MAGISTRATE
I. INTRODUCTION
Plaintiff brought this action pursuant to the Contract Disputes Act of 1978, 41 U.S.C.
§§ 7101–09 (“CDA”). The Government moved to dismiss for lack of subject matter jurisdiction
under Federal Rule of Civil Procedure 12(b)(1), arguing that there was neither an actual nor a
deemed final decision by the contracting officer when the complaint was filed. For the reasons
that follow, the Court will deny the Government’s motion.
II. FACTUAL AND PROCEDURAL BACKGROUND
The claims in this case arise from a long-standing dispute between the Indian Health
Service (“IHS”) and the tribal healthcare providers who contract and compact with that agency to
carry out its responsibility to provide health services to American Indians and Alaska Natives.
These providers enter into contracts with the IHS pursuant to the Indian Self-Determination and
Education Assistance Act, 25 U.S.C. §§ 450–58 (“ISDEAA”). The tribal healthcare providers
can receive two types of funding in these contracts. The first is the “secretarial amount,” which
is the amount that the IHS would have otherwise provided for the operation of the programs if
they were run by the government. See id. § 450j-1(a)(1). The IHS also covers “contract support
costs,” which compensate for administrative and compliance costs. See id. § 450j-1(a)(2).
For many years, the IHS underpaid Tuba City Regional Health Care Corporation
(“TCRHCC”) and other tribal contractors for their contract support costs. See Cherokee Nation
of Okla. v. Leavitt, 543 U.S. 631, 636 (2005). The Supreme Court held that the government’s
promises to pay these costs were legally binding. See id. at 634. More recently, the Supreme
Court held that legislative spending caps on aggregate contract support costs limited the
aggregate amount the IHS could pay, but any contractor not paid in full could nonetheless
recover damages from the Judgment Fund, 31 U.S.C. § 1304, in contract claims. See Salazar v.
Ramah Navajo Chapter, 132 S. Ct. 2182, 2193–94 (2012).
On September 17, 2012, TCRHCC sent a letter to IHS contracting officer Frank Dayish
detailing underpayments and damages for fiscal year 2006 and explaining the theories on which
those damages were premised. See Defs.’ Mot. Dismiss Ex. 1, ECF No. 18-2. On November 5,
2012, TCRHCC sent five more letters to Dayish, detailing its claims for underpayment and
damages for fiscal years 2007–2011. See id. Each letter contained a signed certification as
required by the CDA. See id. The total dollar amount of the claims in each letter exceeded
$100,000. See id. Each letter contained a spreadsheet explaining TCRHCC’s claims. See id.
Dayish responded to TCRHCC’s September 17, 2012, letter on November 16, 2012.
This letter stated, “I anticipate that I will issue a final contracting officer’s decision by March 16,
2013.” Defs.’ Mot. Dismiss Ex. 2, ECF No. 18-3. On January 2, 2013, Dayish responded to
TCRHCC’s November 5, 2012, letters with five letters requesting certain additional information
from TCRHCC in support of its claims, including the contract support costs actually incurred by
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TCRHCC during the relevant time period. Dayish’s letters stated, “If you submit sufficient
information to issue a final decision on your claims as requested above, the IHS anticipates that
it will issue a final decision on the claims by May 3, 2013.” Defs.’ Mot. Dismiss Exs. 3–7, ECF
Nos. 18-4 to 18-8. On January 25, 2013, TCRHCC responded to Dayish’s request, taking the
position that the requested information and documents were not relevant. Under TCRHCC’s
interpretation of the ISDEAA, “[t]he[] sums are not payable based on receipts and vouchers for
‘actual’ expenditures; rather, they are due in advance so that TCRHCC has the funds to provide
the contracted services.” Pl.’s Opp’n Ex. D, ECF No. 19-5.
On February 11, 2013, Dayish sent a letter to TCRHCC that purported to grant himself a
second extension of the deadline for issuing a final decision on the fiscal year 2006 claim. See
Defs.’ Mot. Dismiss Ex. 8, ECF No. 18-9. The letter stated: “The IHS anticipates that it will
issue a final contracting officer’s decision by May 3, 2013.” Id. This letter was sent to
TCRHCC more than 140 days after the claim was filed.
On April 26, 2013, Dayish sent another letter to TCRHCC. See Defs.’ Mot. Dismiss
Ex. 9, ECF No. 18-10. In this letter, Dayish purported to grant himself a third extension for the
fiscal year 2006 claims, and a second extension for the fiscal year 2007–2011 claims. See id. at
1. The letter again requested the information and documents that TCRHCC had previously
declined to submit. See id. at 2. The letter also stated that Dayish again “anticipated” that the
IHS would make a decision by October 22, 2013. Id.
Before a decision was rendered, TCRHCC filed this action on May 3, 2013, seeking
monetary damages under the CDA. See Compl., ECF No. 1. The Government has moved to
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dismiss the case for lack of jurisdiction, arguing that TCRHCC failed to exhaust its
administrative remedies. 1 See generally Defs.’ Mot. Dismiss, ECF No. 18.
III. ANALYSIS
A. Legal Standard
Federal courts are courts of limited jurisdiction, and the law presumes that “a cause lies
outside this limited jurisdiction . . . .” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,
377 (1994); see also Gen. Motors Corp. v. EPA, 363 F.3d 442, 448 (D.C. Cir. 2004) (“As a court
of limited jurisdiction, we begin, and end, with an examination of our jurisdiction.”). It is a
plaintiff’s burden to establish by a preponderance of the evidence that the court has subject
matter jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
Because subject matter jurisdiction focuses on a court’s power to hear a claim, the court
must give the plaintiff’s factual allegations closer scrutiny than would be required for a Rule
12(b)(6) motion for failure to state a claim. See Macharia v. United States, 334 F.3d 61, 64, 69
(D.C. Cir. 2003); Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13
(D.D.C. 2001). Thus, a court’s analysis of subject matter jurisdiction is not confined to the
allegations contained in the complaint. Hohri v. United States, 782 F.2d 227, 241 (D.C. Cir.
1986), vacated on other grounds, 482 U.S. 64 (1987). Instead, “where necessary, the court may
consider the complaint supplemented by undisputed facts evidenced in the record, or the
complaint supplemented by undisputed facts plus the court’s resolution of disputed facts.”
1
TCRHCC has filed a motion asking the Court to refer the Government’s motion to a
magistrate judge, either to mediate the issues raised in the Government’s motion or for a report
and recommendation. See generally Pl.’s Mot. Ref. Mag., ECF No. 24. Because the Court
resolves the Government’s motion to dismiss, TCRHCC’s motion is moot.
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Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992) (citing Williamson v. Tucker,
645 F.2d 404, 413 (5th Cir. 1981)).
The CDA governs disputes arising out of ISDEAA contracts. See 25 U.S.C.
§ 450m-1(d). For a court to have subject matter jurisdiction under the CDA, “the contractor
must submit a proper claim—a written demand that includes (1) adequate notice of the basis and
amount of a claim and (2) a request for a final decision.” M. Maropakis Carpentry, Inc. v.
United States, 609 F.3d 1323, 1328 (Fed. Cir. 2010). Additionally, “[a] contracting officer’s
actual or deemed final decision is . . . a predicate for . . . jurisdiction under the CDA.” Claude E.
Atkins Enters., Inc. v. United States, 27 Fed. Cl. 142, 143 (1992). Because it is undisputed that
there has not been an actual final decision on TCRHCC’s claims and that TCRHCC’s claims
were properly certified, the question is whether there has been a deemed final decision. See 41
U.S.C. § 7103(f)(5).
B. Deemed Denials
The CDA states: “A contracting officer shall, within sixty days of receipt of a submitted
certified claim over $100,000—(A) issue a decision; or (B) notify the contractor of the time
within which a decision will be issued.” 41 U.S.C. § 7103(f)(2) (emphasis added). This
provision allows a contracting officer, if they wish, to pick their own deadline. Once picked,
however, that deadline is firm. “Failure by a contracting officer to issue a decision on a claim
within the required time period is deemed to be a decision by the contracting officer denying the
claim and authorizes an appeal or action on the claim . . . .” Id. § 7103(f)(5).
Dayish stated that he “anticipated” that he would issue a final decision on the fiscal year
2006 claims by March 16, 2013, and that he would issue a final decision on the fiscal year 2007–
2012 claims by May 3, 2013. See Defs.’ Mot. Dismiss Exs. 2–3. Even assuming that these
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statements were firm enough to comply with § 7103(f)(2), 2 once the deadlines passed, the claims
were constructively denied under the plain language of the CDA, despite Dayish’s attempts to
further extend the deadlines. See 41 U.S.C. § 7103(f)(5). Thus, TCRHCC was authorized to
appeal, and this Court has jurisdiction.
The Government argues that its subsequent attempted extensions were reasonable
because the claims are complex. Defs.’ Reply 7, ECF No. 20. But the CDA provides no
exception to the § 7103(f) timing requirements for complex claims. If a claim is complex, the
contracting officer can, within 60 days of receipt of the claim, pick a deadline that gives him
plenty of time to evaluate the claim. See 41 U.S.C. § 7103(f)(3) (“The decision of a contracting
officer on submitted claims shall be issued within a reasonable time . . . taking into account such
factors as the size and complexity of the claim.”). Once that deadline passes, however, the claim
is deemed denied, no matter how complex it is. See id. § 7103(f)(5). The contractor can ignore
any further attempts to extend the deadline; 3 the CDA “permits a contractor to treat the passage
2
Dayish’s statements may not comply with § 7103(f)(2) because Dayish did not commit
to issue final decisions by the specified dates. See Claude E. Atkins, 27 Fed. Cl. at 145. His
statements certainly constitute predictions about when decisions will be issued, but they do not
seem to constitute commitments to issue decisions by the specified dates. See American Heritage
Dictionary of the English Language (5th ed. 2013) (defining the word “anticipate” as meaning
“[t]o see as a probable occurrence; expect”). However, the Court need not reach this issue here.
If Dayish’s language was too vague, the claims would have been deemed denied as of November
17, 2012, and January 5, 2013, respectively. If the officer’s language was clear, the claims
would have been deemed denied as of March 16, 2013, and May 3, 2013, respectively.
TCRHCC filed suit after all of these possible deadlines had elapsed.
3
The Government cites Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995) (en
banc), for the proposition that a contracting officer can delay issuing a final decision pending the
receipt of further information. That very same case warns against the possibility that the
contracting officer might “continually, indeed endlessly, seek information and prolong
negotiations without issuing an appealable decision . . . thereby probably delaying rather than
accelerating any possible settlement.” Id. at 1582. The Court reads Reflectone as reiterating the
requirements of § 7013(f): The contracting officer can pick a deadline, but once picked, that
deadline is firm. See id. at 1582–83.
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of the due date specified in the initial sixty days as a deemed decision even if the contracting
officer attempts to further extend the due date.” Claude E. Atkins, 27 Fed. Cl. at 145.
The Government argues that TCRHCC has not provided the documents that “it needs to
evaluate the claims being made and engage in settlement discussions.” Defs.’ Reply 12. This
would only be relevant if the Government were contesting certification. 4 The CDA provides no
exception to the § 7103(f) timing requirements for claims that the contracting officer later
determines to be insufficiently supported by documentation. See Orbas & Assocs. v. United
States, 26 Cl. Ct. 647, 650 n.3 (1992) (“Although the [contracting officer] may ask for
information to supplement a claim, in the absence of some understanding with the plaintiff that it
will defer filing a complaint, the [contracting officer] must still comply with [§ 7103(f)(2)].”). If
the contracting officer believes the claims are unsupported at the time a final decision is required
to be made, the contractor may deny the claims. Alternatively, the contracting officer may
abstain from issuing a decision; when the deadline passes, the claim will be deemed denied. In
either case, the contractor may appeal; the contracting officer does not have the power to let the
claim languish in bureaucratic purgatory.
The Government also argues that the purpose of the CDA is “to induce resolution of
more contract disputes by negotiation prior to litigation . . . .” S. Rep. No. 95-1118, at 1 (1978),
4
The Government argues that even if TCRHCC formally complied with the certification
requirement of § 7103(b), the statute “reiterates the contractor’s obligation to provide accurate
and complete supporting data . . . .” See Defs.’ Resp. Ct. Order 2, ECF No. 28. The
jurisdictional requirement is not as stringent as the Government suggests—“[a]ll that is required
is that the contractor submit . . . a clear and unequivocal statement that gives the contracting
officer adequate notice of the basis and amount of the claim.” Contract Cleaning Maintenance
Inc. v. United States, 811 F.2d 586, 592 (Fed Cir. 1987); accord Tunica–Biloxi Tribe of La. v.
United States, 577 F. Supp. 2d 382, 410 (D.D.C. 2010) (“The requirement that the contractor
provide notice of the amount of the claim means only that the amount claimed must be stated in a
manner which allows for reasonable determination of the recovery available at the time the claim
is presented and/or decided by the contracting officer.”).
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reprinted in 1978 U.S.C.C.A.N. 5235, 5235. But this is not the only purpose of the statute—it is
also supposed to “insure fair and equitable treatment to contractors and government agencies.”
Id. Moreover, if the only purpose of the statute were to ensure that contract disputes would be
resolved outside of court, § 7013(f) would have been omitted entirely; that would have ensured
that a contractor could never get into court to resolve a contract dispute with the government
without the government’s acquiescence.
The Government’s invocation of statutory purpose is particularly inapt in this case. Both
sides agree that the only way settlement can occur is if the litigation proceeds; otherwise, the
Government cannot pay judgments out of the Judgment Fund. Pl.’s Opp’n Ex. A at 2, ECF
No. 19-2 (containing a letter from the IHS stating that “the Judgment Fund is authorized to pay
only under certain conditions, such as a settlement agreement between the parties . . . after the
Tribe has appealed the decision of the Agency’s awarding official . . . to Federal court”).
Allowing the litigation to go forward is a prerequisite to any successful mediation.
IV. CONCLUSION
For the foregoing reasons, the Court will deny the Government’s motion to dismiss for
lack of subject matter jurisdiction. An order consistent with this Memorandum Opinion is
separately and contemporaneously issued.
Dated: April 25, 2014 RUDOLPH CONTRERAS
United States District Judge
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