Mendez v. United States , 2015 U.S. Claims LEXIS 670 ( 2015 )

In the United States Court of Federal Claims
No. 14-497C
(E-Filed: May 29, 2015)
)
JOSE MENDEZ, ) Confidential Informant;
) Compensation, Restitution, or Reward;
Plaintiff, ) Judicial Forfeitures; Breach of Express
) or Implied-In-Fact Contract; Express
v. ) or Implied Actual Authority; Subject-
) Matter Jurisdiction; Statute of
THE UNITED STATES, ) Limitations; RCFC 12(b)(1); RCFC
) 12(d) Conversion of RCFC 12(b)(6)
Defendant. ) Motion to RCFC 56 Motion
)
Kenneth Foard McCallion, New York, N.Y., for plaintiff.
Alexander Orlando Canizares, Trial Attorney, with whom were Joyce R. Branda, Acting
Assistant Attorney General, Robert E. Kirschman, Jr., Director, and Bryant G. Snee,
Deputy Director, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice, Washington, D.C., for defendant.
OPINION AND ORDER
CAMPBELL-SMITH, Chief Judge
Plaintiff Jose Mendez (Mendez) was a confidential informant whose assistance
and cooperation, over roughly nine years, contributed to the government’s successful
criminal prosecution of numerous mafia principals and subsequent forfeiture of their
significant assets. See generally Compl., Jun. 10, 2014, ECF No. 1. Mendez alleges that,
despite his contributions, the government later reneged on its promises to pay Mendez for
his services as an informant, which was in breach of their alleged agreement and of the
implied duty of good faith and fair dealing. Id. ¶¶ 29–37 (Counts II and III).
Before the court is defendant’s motion to dismiss plaintiff’s breach claims for lack
of jurisdiction or alternatively, for failure to state a claim under Rules 12(b)(1) and
12(b)(6) of the Rules of the Court of Federal Claims (RCFC or Rule), respectively.
Def.’s Mot. Dismiss (Def.’s Mot.), ECF No. 12. Defendant argues there were never any
promises or agreements to pay Mendez for his confidential informant services and the
evidence on which Mendez relies to substantiate his claims actually refutes them. Id. at
3. Alternatively, even if government officials made promises or purported to enter
agreements with Mendez, defendant contends that the government cannot be liable
because the officials either lacked actual authority to bind the government or were
divested of such authority by intervening statutes. Id. at 3, 22–23. Furthermore,
plaintiff’s claims allegedly accrued, if at all, beyond the statute of limitations. Id. at 3.
The court held oral argument on defendant’s motion on April 8, 2015. See Tr., Apr. 8,
2015, ECF No. 24.
I. Background1
From December 1995 through April 1997, plaintiff Jose Mendez managed a
casino in Peru pursuant to a professional services contract with casino principals Jose
Miguel Battle Sr. (Battle) and others. See Compl. ¶ 4; id. at Ex. B (Mendez Aff., Mar.
28, 2007, ¶ 1). In May 1997, Mendez sued his employers in Florida Circuit Court for
nonpayment of back wages, expenses, and commissions ($794,712), but the case was
dismissed for improper venue owing to a contract clause requiring suit in Peru. See
Compl. ¶¶ 4, 6; Mendez Aff. ¶ 7.
In preparing Mendez’s employment case, his attorney John Spittler (Attorney
Spittler) concluded, “Battle and his associates were using the Casino to facilitate a huge
racketeering and money laundering operation, which involved the ‘laundering’ of
illegally obtained funds originating in the United States.” Compl. ¶ 5; see also Mendez
Aff. ¶ 3 (detailing Mendez’s own misgivings about the casino’s principals, their illegal
activities, and consequences). Attorney Spittler then communicated with representatives
of the United States government who expressed interest in seeing “all of the original
accounting, financial and international banking records of the Casino and its owners that
were in the possession of Mendez.” Compl. ¶ 7; Mendez Aff. ¶ 13. Apparently the
government was already investigating Battle as the “undisputed leader of La
Corporacion, the largest Cuban organized crime syndicate in the United States [that for
decades] had profited from illegal gambling, narcotics distribution[,] and extortion,
enforcing its objectives through contract murder.” See Compl. at Ex. J (O’Bannon Mem.,
Apr. 6, 2005, at 1); see also id. ¶ 25 (identifying Exhibit J as a report authored by
Supervisory Special Agent (SSA) O’Bannon); Tr. 12:8–16 (similar).
By “late April of 1998,” Mendez began acting as an “agent/informant in the
investigation and prosecution of members of the . . . cartel headed by Battle.” Compl.
¶ 8. Mendez contends that he provided the government with significantly helpful
information: (i) “original books and records of the Casino, all original bank financial
documents, and other relevant files;” (ii) “the names, addresses, and telephone numbers
1
The facts recited in this section do not constitute findings by the court; rather,
unless otherwise noted, all of the stated facts are either undisputed or alleged and
assumed to be true for purpose of the pending motions.
2
of the individuals working with Battle in his racketeering enterprise . . ., e.g., attorneys,
accountants, bankers, businessmen, couriers, etc., many of whom were later named in the
indictment;” (iii) “evidence relating to the participation of Battle and his ‘partners’ in the
racketeering enterprise;” (iv) “detailed information concerning the properties and bank
accounts of these individuals;” and (v) “the identification of corroborating witnesses.”
Id. ¶¶ 14–15; see generally id. at Ex. D (Spittler Narrative, Jun. 8, 2005, at 3); O’Bannon
Mem. 2; Mendez Aff. ¶ 9; Tr. 28:8–16. Mendez avers that, at the government’s request,
he worked with government accountants to unpack the illegal financial activities of Battle
and his associates. Mendez Aff. ¶ 20. Mendez also purports to have “provided all, or
virtually all, of the information” used by the government to identify and tally an
estimated $1.57 billion in assets held by Battle and his associates that were later subject
to criminal forfeiture by the government. Compl. ¶ 17; Spittler Narrative 3; see infra Part
I.D (discussing United States v. Battle, No. 04-20159 (S.D. Fla.)).
In order to provide this wealth of information and services, Mendez and Attorney
Spittler allegedly met with various government officials on numerous occasions over the
course of approximately nine years, from 1998 to 2007. See Mendez Aff. ¶¶ 10–11; Tr.
28:21–24. Mendez’s primary point-of-contact appears to have been Agent Dave Shanks.
See Compl. ¶ 15; Mendez Aff. ¶ 10. Among others in contact with Mendez and Attorney
Spittler were Supervisory Special Agent (SSA) Robert O’Bannon of the Diplomatic
Security Service (DSS) at the State Department who led the Battle investigative team,
and who was succeeded later by Special Agent in Charge (SAC) Mike Foster. Id. ¶¶ 18–
19. Assistant U.S. Attorney (AUSA) Robert Lehner was the initial lead prosecutor in
Battle, and was succeeded later by AUSA Tony Gonzalez. Compl. ¶ 19. AUSA Alison
Lehr of the Miami Civil Forfeiture Division also became involved in Battle as the
criminal forfeitures took center stage later in proceedings. Id. ¶ 21.
Mendez testified in June 2002 before a grand jury in Miami regarding Battle, his
associates, and their activities. Mendez Aff. ¶ 12. Mendez further contends that,
throughout these nine years, his life and the lives of his family members remained under
physical threat from Battle and his associates. See Tr. 28:21–24.
A. Disputed 1998 “Restitution/Compensation Agreement”
In dispute is whether Mendez and government officials ever entered an agreement
to compensate Mendez for his assistance as a confidential informant (CI). Mendez avers
that, on his behalf, Attorney Spittler met with AUSA Lehner in early 1998 at the Miami
office of the United States Attorney. Compl. ¶ 9. Also in attendance were
representatives of “other relevant agencies.” Tr. 32:6; O’Bannon Mem. 1. At the
meeting, Mendez alleges that the parties verbally agreed that “[i]n consideration for
Mendez’s cooperation, services and assistance, . . . Mendez would be paid, as
compensation and/or restitution, the outstanding salary and commissions owed him as
general manager of the Casino, namely $791,712, plus accrued interest, reasonable fees
and costs.” Compl. ¶¶ 8–9; cf. O’Bannon Mem. 1 (“Government representatives
3
unanimously agreed to fully assist the CI in his efforts to recoup the referenced financial
losses . . . .”). Ostensibly, Mendez would be paid out of assets seized by the government
in the course of its criminal prosecution of Battle and his associates for racketeering and
money laundering. See Compl. ¶ 19; see O’Bannon Mem. 1.
The terms of this verbal agreement allegedly were “memorializ[ed]” in a letter
from Attorney Spittler to AUSA Lehner dated March 18, 1998. Compl. ¶ 9. Attorney
Spittler wrote, in relevant part:
Regarding our discussion in your office it will be necessary to have an
agreement(s) entered into between Mr. Mendez and the appropriate United
States government official(s) with the authority to bind the government (e.g.
yourself, the AUSA handling the forfeiture case, an assistant at the Attorney
General’s office regarding rewards pursuant to 18 USC 3059, etc.).
The agreement(s) should include that Mr. Mendez will be entitled to
restitution prior to the government receiving any fine, penalty, or other
monies and same stipulation will be included in all court documents . . . .
It is anticipated that restitution/reward to [Mendez] will come from
[the criminal forfeiture of Battle’s] ranch and its contents . . . in Homestead,
Florida[]. The amount of restitution will be the damages requested in
[Mendez’s employment lawsuit] which [was] approximately $791,712.00 +
legal interests from January 1, 1996 + reasonable attorneys[’] fees + punitive
damages.
Id. at Ex. A (Spittler Letter, Mar. 18, 1998). The letter further provided, “in
consideration for the above,” Mendez would provide documentation, testify before a
grand jury, and comply with other requests. Id. Attorney Spittler asked AUSA Lehner to
call him “regarding drafting of the appropriate agreement(s) and scheduling Mr. Mendez
for debriefing.” Id. at 2.
According to Mendez, the government refused this invitation to reduce the verbal
agreement to a formal writing signed by the parties. See Compl. ¶ 11. Mendez avers,
“[a]fter receiving the March 18th letter, AUSA Lehner advised [Attorney] Spittler that the
verbal agreement with Mendez could not be reduced to writing” for “Mendez’s own
protection.” Id. In “the absence of any formal written agreement[,]” Mendez contends
he was told, “there would be no written document that would have to be divulged to any
of the defendants’ attorneys, who would ‘blow his cover.’” Id. In addition, because
“there was ample evidence that Battle [allegedly] had murdered numerous persons, both
within his own drug trafficking network as well as some individuals outside of it[,] . . .
Mendez and his family would be in mortal danger” if Battle became aware that Mendez
4
was cooperating with the government. Id. ¶ 12; see also Tr. 32:11–25.2 Nevertheless,
AUSA Lehner purportedly “gave repeated assurances that the verbal agreement with
Mendez was ‘as good as gold’ and would be honored by the government.” Compl. ¶ 13.
B. Disputed 2002 Amendment
Mendez further avers that by “May of 2002, Attorney Spittler was advised by
Agent Shanks that AUSA Gonzalez wanted to modify the original
restitution/compensation agreement between Mendez and the government.” Id. ¶ 20. In
turn, Mendez contends that Attorney Spittler and SSA O’Bannon reached a verbal
agreement on modification. Id. Attorney Spittler then purportedly memorialized the
modification in a facsimile transmitted to SSA O’Bannon, dated June 3, 2002. Id. That
communication refers to an “original agreement between Joe Mendez, agent Shanks,
AUSA Bob Lehner, [SSA O’Bannon] and [Attorney Spittler].” Id. at Ex. E (Spittler
Facsimile, June 3, 2002). The two “[a]dditions” to the 1998 “[a]greement” allegedly
“agreed to” by the parties were: (1) “the moneys owed to Mr. Mendez for restitution
from the forfeited properties [would] be paid directly to [an escrow account set up by
Attorney Spittler];” and (2) “in lieu of direct payment to [the escrow account] from the
first moneys/assets forfeited, . . . Mendez [agreed to forego filing any] liens on Battle [or
his co-defendants’] properties/assets prior to government seizure in the criminal case.”
Id.
On September 25, 2002, Attorney Spittler asked AUSA Lehr, of the Civil
Forfeiture Division-Miami, when the government would pay Mendez from the forfeitures
of Battle’s assets. Compl. ¶ 21. “In response, AUSA Lehr requested that Attorney
Spittler send her evidence of the Agreement, which Attorney Spittler did the next day,
and again the following month.” Id.; see also id. at Ex. F (Spittler Facsimiles, Sept. 26,
2002 & Oct. 1, 2002) & Ex. G (Spittler Facsimile, Sept. 27, 2002). Neither AUSA Lehr
nor anyone else from the government appears to have responded to any of the facsimiles.
See Compl. ¶¶ 21–22.
In March 2004, Attorney Spittler’s co-counsel, Karen Read (Attorney Read),
spoke with AUSA Lehr regarding Mendez and another of Attorney Read’s clients named
Harold Marchena (who it appears was also a witness or informant in Battle). See id. ¶ 23.
In a subsequent facsimile, Attorney Read followed up, referring to the “restitution
agreements between the United States government” and Mendez and Marchena, and
notifying AUSA Lehr that her office was “prepared to file an equitable lien for both Mr.
Mendez and Mr. Marchena on various properties over which [AUSA Lehr and the
2
“Indeed, when Battle eventually became aware that Mendez was cooperating with
the government,” Mendez avers that “[he] and the other members of his family were
forced into hiding, and they presently remain in seclusion.” Compl., Jun. 10, 2014, ECF
No. 1, ¶ 12.
5
government generally] . . . have [current] responsibility.” Id. at Ex. H (Read Facsimile,
Mar. 29, 2004, at 1).
C. Disputed Other Promises/Agreements
Sometime in 1998 or thereafter, Mendez alleges that he also “became an official
confidential informant (‘CI’) with the U.S. Department of State, DSS.” Compl. ¶ 18.
Mendez further avers that “SAC Foster [of DSS] had a verbal agreement with the
Department of State senior staff recommending that Mendez, as its CI, be paid $2 million
or 20% of all amounts recovered, whichever was greater [(the DSS Compensation
Promise)].” Id. ¶ 19. “SAC Foster also [allegedly] told Spittler that DSS would make a
recommendation to the [Department of Justice (DOJ)] and the IRS that they also pay
Mendez in a similar manner, i.e., 20% of all amounts recovered.” Id. It is unclear from
Mendez’s complaint whether Mendez relies upon these DSS, DOJ, and IRS-related
promises as separate and distinct agreements on which he sues for breach, or whether
these alleged promises were the means for carrying out the 1998 agreement.
D. The Battle Case—Criminals Prosecutions & Asset Forfeiture
By early 2004, the government indicted Battle and approximately twenty-four
associates for illegal gambling in violation of 18 U.S.C. § 1955 and racketeering
conspiracy in violation of 18 U.S.C. § 1962(d). See Def.’s Mot. 7 & Ex. 1 (Indictment
11–12, 16–17, Battle (Mar. 16, 2004)); see also Compl. ¶ 8 (citing Battle). The
indictment also provided for forfeiture of all property constituting or derived from a
violation of 18 U.S.C. § 1955, which was estimated to be worth at least $1.57 billion.
Indictment at 17–32; see also Def.’s Mot. 7; Compl. ¶ 16.
Thereafter, the Battle court entered a series of orders of criminal forfeiture in
March 2006, December 2006, January 2007, and January 2010, against Battle and his co-
defendants, directing the forfeiture to the United States of property connected to the
criminal violations. Def.’s Mot. 7 & Ex. 2 (Forfeiture Orders, Battle). In turn, on July 5,
2006, Battle and his co-defendants were found guilty by a jury of the RICO conspiracy
charged in the indictment. Def.’s Mot. 7 & Ex. 3 (Special Verdict Form, Battle (Jul. 25,
2006)) (detailing the jury’s finding that the property listed therein was subject to
forfeiture because it was “obtained directly or indirectly [from Battle and his co-
defendants’] racketeering activity”).
E. Mendez’s Efforts to Collect
Following the criminal convictions, on February 27, 2007, Mendez filed in the
Battle case for an equitable lien against the assets to be forfeited, seeking to recover the
funds allegedly promised Mendez pursuant to the alleged 1998 verbal
Restitution/Compensation Agreement. See Compl. at Ex. C (Notice of Lien & Mem. of
Law (Notice of Lien), Battle (Apr. 4, 2007)); see also Compl. ¶ 14; Def.’s Mot. 7–8
6
(discussing same). On April 5, 2007, the government responded to the Notice of Lien
with a motion to strike, arguing that Mendez failed to meet the prerequisites for
lienholder status under the RICO statute, 18 U.S.C. § 1963. Def.’s Mot. 8 & Ex. 4 (Mot.
Strike Claims of Harold Marchena & Jose Mendez, Battle (Apr. 5, 2007)). On March 3,
2008, a United States Magistrate Judge granted the government’s motion, finding in
relevant part that Mendez failed to establish the requisite legal right, title, or interest in
any specific property subject to forfeiture under 18 U.S.C. § 1963(l)(6). Id. at Ex. 5
(Magistrate Order, Battle (Mar. 3, 2008)) & Ex. 6 (Order, Battle (Nov. 21, 2008)
(substantially affirming Magistrate)).
Mendez also separately tried to obtain money judgments in Florida Circuit Court
against two of Battle’s associates and fellow principals in the casino. See Compl. ¶ 24.
Mendez was successful obtaining those judgments, dated July 1, 2008 and August 8,
2008, in the amounts of $791,712.00, plus prejudgment interest, id. at Ex. I (Final
Judgments, Mendez v. Marquez, No. 08-21101-CA-10 (Fla. Cir. Ct.)); however, there is
no evidence Mendez has ever been able to collect.
Lastly, in June 2012, Mendez sought unsuccessfully to obtain Department of
Justice approval to receive compensation for his informant services. Def.’s Mot. 8. In
Mendez’s petition for remission to the DOJ’s Asset Forfeiture and Money Laundering
Section (AFMLS), he argued that he qualified as a “victim” of offenses committed by
Battle and his co-defendants and was owed compensation. Def.’s Mot. 8–9; id. at Ex. 7
(Petition for Remission, undated, with exhibits). On May 8, 2013, the AFMLS denied
Mendez’s petition because he was neither a “victim” of the crime underlying the
forfeiture nor a valid lienholder entitled to remission. Def.’s Mot. at Ex. 8 (DOJ Letter
1). He was not a “victim” because there was an insufficient link “between the alleged
unpaid employment wages and the racketeering charges underlying the forfeiture.” Id. at
1 (citing 28 C.F.R. § 9.8(a) (2012), defining “victim”). Nor was he a valid lienholder
because he became a judgment creditor (based the 2008 Florida Circuit Court judgments)
only after the seizure of the property for forfeiture. Id. at 1–2 (citing 28 C.F.R. §
9.6(f)(1) (2012), stating that a judgment creditor will be recognized as a lienholder only if
the judgment was recorded before the seizure of the property for forfeiture).
According to Mendez, at some undefined date, AUSA Lehr also denied the
existence of any agreement obligating the government to pay Mendez for his services as
an informant. Compl. ¶ 26. To date, Mendez has not received any compensation or
restitution from the government. Id.II. Procedural Posture
Mendez’s complaint seeks compensation or restitution for the information and
services he provided to the government in connection with the Battle case “in an amount
of not less than that promised under the Agreements, namely, a minimum of . . .
($791,712), plus interest, reasonable attorneys’ fees and costs, the exact amount to be
7
determined at a hearing on the matter, plus any statutory awards this Court deems fair and
just.” Id. at 11–12 (“wherefore” clause). His allegations originally took the form of
seven counts, id. ¶¶ 27–50, although Mendez has since agreed to dismiss, voluntarily and
without prejudice, Count I (declaratory judgment) and Counts IV through VII (unjust
enrichment, promissory estoppel, equitable lien, and fraud), Pl.’s Mem. in Opp’n (Pl.’s
Opp’n), ECF No. 18, at 2 n.1. This leaves for adjudication only Counts II and III,
alleging breach of express or implied-in-fact contract and breach of the implied duty of
good faith and fair dealing.
Defendant moves to dismiss these counts on Rule 12(b)(1) and 12(b)(6) grounds.
See generally Def.’s Mot. The government argues that subject-matter jurisdiction is
lacking over Mendez’s express and implied breach of contract claims, as well as his
implied covenant of good faith and fair dealing claim, because (i) the evidence relied
upon by Mendez belies the existence of any mutuality of intent to be bound or to
contract; (ii) the agents with whom Mendez dealt lacked authority to bind the
government; and (iii) Mendez’s claims accrued, if at all, more than six years ago and thus
are outside the statute of limitations. Id. at 2–3, 19. Alternatively, if jurisdiction exists,
then for these same reasons the alleged breaches fail to state a claim upon which this
court could grant relief. Id. at 11.
III. Subject-Matter Jurisdiction
A. Express or Implied-in-Fact Contract
The Tucker Act vests this court with jurisdiction to hear claims against the United
States founded on an “express or implied contract.” 28 U.S.C. § 1491(a)(1) (2012);
Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1324 (Fed. Cir. 1997). For purposes
of Tucker Act jurisdiction, alleged contracts enjoy a presumption that money damages
are available for breach. Holmes v. United States, 657 F.3d 1303, 1314 (Fed. Cir. 2011).
“[A]ny agreement can be a contract within the meaning of the Tucker Act, provided that
it meets the requirements for a contract with the government . . . .” Trauma Serv. Grp.,
104 F.3d at 1326. Thus, the alleged express or implied contract may be oral or written.
See Warr v. United States, 46 Fed. Cl. 343, 350 (2000) (exercising jurisdiction over
alleged oral agreement). If the alleged contract is implied, it must be implied-in-fact; the
court’s jurisdiction does not encompass contracts implied-in-law.3 Hercules, Inc. v.
3
“An implied-in-fact contract is one founded upon a meeting of minds and ‘is
inferred, as a fact, from the conduct of the parties showing, in the light of the surrounding
circumstances, their tacit understanding.’” Hanlin v. United States, 316 F.3d 1325, 1328
(Fed. Cir. 2003) (quoting Balt. & Ohio R.R. v. United States, 261 U.S. 592, 597, 43 S.
Ct. 425, 426–27 (1923)); Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1326 (Fed.
Cir. 1997) (quoting Hercules, Inc. v. United States, 516 U.S. 417, 423, 116 S. Ct. 981,
986 (1995)). In contrast, contracts based on implied-in-law theory (i.e., a quasi-contract
or unjust enrichment theory) do not arise from mutual assent between the parties and,
8
United States, 516 U.S. 417, 423–24, 116 S. Ct. 981, 986 (1996); see Hanlin v. United
States, 214 F.3d 1319, 1321 (Fed. Cir. 2000); City of El Centro v. United States, 922 F.2d
816, 820 (Fed. Cir. 1990); U.S. Home Corp. v. United States, 92 Fed. Cl. 401, 410-11
(2010).
To survive a Rule 12(b)(1) challenge to jurisdiction, the Federal Circuit has held
unambiguously that “jurisdiction . . . requires no more than a non-frivolous allegation of
a contract with the government.” Engage Learning, Inc. v. Salazar, 660 F.3d 1346, 1353
(Fed. Cir. 2011) (citing, e.g., Lewis v. United States, 70 F.3d 597, 602, 604 (Fed. Cir.
1995)); see also Hanlin, 214 F.3d at 1321 (explaining that a non-frivolous allegation of
the existence of an implied-in-fact contract is sufficient to confer jurisdiction unless
another statute divests the court of jurisdiction). Thus, a plaintiff merely “must show that
either an express or implied-in-fact contract underlies its claim.”4 Trauma Serv. Grp.,
104 F.3d at 1325 (Fed. Cir. 1997) (“A well-pleaded allegation [of express or implied-in-
fact contract] in the complaint is sufficient to overcome challenges to jurisdiction.”
(citing Spruill v. Merit Sys. Protection Bd., 978 F.2d 679, 686 (Fed. Cir. 1992))); see also
U.S. Home Corp., 92 Fed. Cl. at 411 (explaining that “[a] non-frivolous jurisdictional
allegation is one that asserts that the plaintiffs are ‘within the class of plaintiffs entitled to
recover under the money-mandating source’” (quoting Jan’s Helicopter Serv., Inc. v.
FAA, 525 F.3d 1299, 1309 (Fed. Cir. 2008))). Thus, “[w]hen this court hears such a
jurisdictional challenge, ‘its task is necessarily a limited one.’” Patton v. United States,
64 Fed. Cl. 768, 773 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct.
1683, 1686 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183, 104 S.
Ct. 3012 (1984)). The relevant issue in a motion to dismiss under Rule 12(b)(1) “‘is not
whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer
evidence to support the claims.’” Id. (quoting same).
therefore, are not actually contracts but rather legal fictions created by the courts to
impose legal duties on one or both parties to prevent injustice. Lumbermens Mut. Cas.
Co. v. United States, 654 F.3d 1305, 1316 (Fed. Cir. 2011); see also City of Cincinnati v.
United States, 153 F.3d 1375, 1377 (Fed. Cir. 1998) (citing Hercules, 516 U.S. at 423,
116 S. Ct. at 986); Merritt v. United States, 267 U.S. 338, 340–41, 45 S. Ct. 278, 279
(1925); Russell Corp. v. United States, 537 F.2d 474, 482 (Ct. Cl. 1976)).
4
“Non-frivolousness” for purposes of jurisdiction is not well-defined in case law.
By way of comparison, “frivolous claims” for which it is not “in the interest of justice” to
transfer to another forum under the transfer statute, 28 U.S.C. § 1631, are claims that
“include spurious and specious arguments and distortion and disregard of the record[,]
. . . involve legal [conclusions] not arguable on the merits, . . . or [are claims] whose
disposition is obvious.” Galloway Farms, Inc. v. United States, 834 F.2d 998, 1000 (Fed.
Cir. 1987) (internal quotation marks omitted).
9
For purposes of jurisdiction, there is no further inquiry into whether the allegations
of the complaint state a non-frivolous claim on the merits. Jan’s Helicopter Serv., 525
F.3d at 1309 (drawing distinction between jurisdiction and merits in the context of a
takings claim). Indeed, “[t]he [Supreme] Court [has] made clear that the merits of the
claim [are] not pertinent to the jurisdictional inquiry.” Jan’s Helicopter, 525 F.3d at 1307(discussing United States v. White Mountain Apache Tribe, 537 U.S. 465, 123 S. Ct.
1126 (2003)). Thus, the actual existence of a contract is not a jurisdictional matter but
rather a decision on the merits of the case. See Engage Learning, 660 F.3d at 1355(addressing jurisdiction over contract dispute under the Contract Disputes Act (CDA), 41
U.S.C. §§ 7101–7109); Gould, Inc. v. United States, 67 F.3d 925, 930 (Fed. Cir. 1995)
(explaining that the trial court must first take jurisdiction before it can determine whether
the elements of the alleged contract have been met); Total Med. Mgmt. v. United States,
104 F.3d 1314, 1319 (Fed. Cir. 1997) (“[T]he law is clear that, for the Court of Federal
Claims to have jurisdiction, a valid contract must only be pleaded, not ultimately
proven.” (citing Spruill, 978 F.2d at 686; Gould, 67 F.3d at 929))).
As noted by the Federal Circuit, “[c]ourts frequently confuse or conflate the
distinction between subject matter jurisdiction and the essential elements of a claim for
relief.” Engage Learning, 660 F.3d at 1353 (citing Arbaugh v. Y & H Corp., 546 U.S.
500, 503, 511, 126 S. Ct. 1235, 1238, 1242 (2006) (“On the subject-matter
jurisdiction/ingredient-of-claim-for-relief dichotomy, this Court and others have been less
than meticulous.”); Moden v. United States, 404 F.3d 1335, 1340 (Fed. Cir. 2005)).
“Jurisdiction in this context refers to the power of a court to hear and decide a case—
subject matter jurisdiction.” Gould, 67 F.3d at 929 (citing Spruill, 978 F.2d at 686). “A
dismissal for lack of jurisdiction means that the subject-matter of the dispute is one that
the court is not empowered to hear and decide.” Id. In contrast, “[a] dismissal for failure
to state a claim . . . is a decision on the merits which focuses on whether the complaint
contains allegations[] that, if proven, are sufficient to entitle a party to relief.” Id.“Jurisdiction, therefore, is not defeated . . . by the possibility that the averments might fail
to state a cause of action on which petitioners could actually recover.” Do-Well Mach.
Shop, Inc. v. United States, 870 F.2d 637, 639 (Fed. Cir. 1989) (quoting Bell v. Hood,
327 U.S. 678, 682, 66 S. Ct. 773, 776 (1946)); accord Trauma Serv. Grp., 104 F.3d at
1325; Gould, 67 F.3d at 929.
The Federal Circuit has addressed a number of circumstances in which a merits
inquiry has bled inappropriately into a jurisdictional inquiry. See, e.g., Hanlin, 214 F.3d
1320 (reversing dismissal for lack of jurisdiction where plaintiff made non-frivolous
allegation of contract implied-in-fact and no other statute divested the Court of Federal
Claims of jurisdiction); Trauma Serv. Grp., 104 F.3d at 1324–28 (rejecting the trial
court’s dismissal for lack of jurisdiction but affirming its decision for failure to state a
claim where contract was alleged but could not be shown); Gould, 67 F.3d at 929–30
(finding error in the dismissal of a breach of contract claim for lack of jurisdiction
10
because the complaint’s allegation of the existence of an express contract was sufficient
to confer jurisdiction even where the contract was alleged to be a statutory violation).
In Brach v. United States, for example, the Court of Federal Claims dismissed a
taxpayer’s breach of contract action against the Internal Revenue Service (IRS) for lack
of jurisdiction on the ground that the taxpayer failed to establish the existence of a
contract, but the Federal Circuit held that the trial court possessed jurisdiction over the
case based on the plaintiff’s allegation of a contract. 98 Fed. Cl. 60, 65 & n.10, 69–70
(2011), aff’d on other grounds, 443 F. App’x 543, 546 (Fed. Cir. 2011). Jurisdiction
existed notwithstanding the Federal Circuit’s concurrence with the trial court that no
contract to pay out a tax refund actually existed because the improper government forms
were used and the IRS agents lacked the requisite authority to contract. 443 F. App’x at
547–48. Such facts did not divest the court of jurisdiction, but rather warranted dismissal
of the action for failure to state a claim. Id. at 549.
Similarly, in Engage Learning, the Federal Circuit found that the Civilian Board of
Contract Appeals erred in holding it lacked jurisdiction under the CDA because Engage
failed to establish it had a contract with the government for unpaid services. 660 F.3d at
1349, 1353. Engage was not required to prove it had either an express or an implied-in-
fact contract to establish jurisdiction. Id. at 1353 (applying Tucker Act, 28 U.S.C.
§ 1491(a), jurisprudence). Rather, it need only have asserted a “non-frivolous allegation
of a contract with the government.” Id. Thus, even though Engage failed to plead all of
the requisite conditions for the formation of a contract in that case, the Board should have
recognized it was not divested of jurisdiction over Engage’s claim. Id. at 1354–56.
Accordingly, the Board was directed on remand to accept jurisdiction and only thereafter
to review the merits (dismissing on the latter grounds, if appropriate). Id. at 1356.
Here, Mendez puts forth non-frivolous allegations of an express or implied-in-fact
contract with the government, see Compl. ¶¶ 2–26, 29–37, asserting with specificity
material terms of the alleged agreement and surrounding facts and circumstances. “[T]he
requirements for an implied-in-fact contract are the same as for an express contract; only
the nature of the evidence differs.” Hanlin, 316 F.3d at 1328; accord Russell Corp. v.
United States, 537 F.2d 474, 482 (Ct. Cl. 1976); Thermalon Indus. v. United States, 34
Fed. Cl. 411, 414 (1995). The party must show a mutual intent to contract including
offer, acceptance, and consideration. City of El Centro, 922 F.2d at 820; see also Trauma
Serv. Grp., 104 F.3d at 1325; Thermalon, 34 Fed. Cl. at 414; Fincke v. United States, 675
F.2d 289, 295 (Ct. Cl. 1982). A contract with the United States also requires that the
government representative who entered or ratified the agreement had actual authority to
bind the United States. Trauma Serv. Grp., 104 F.3d at 1325; City of El Centro, 922 F.2d
at 820; see also Harbert/Lummus Agrifuels Projects v. United States, 142 F.3d 1429,
1432 (Fed. Cir. 1998) (“It is well established that the government is not bound by the acts
of its agents beyond the scope of their actual authority.” (citing, e.g., Fed. Crop. Ins.
Corp. v. Merrill, 332 U.S. 380, 384, 68 S. Ct. 1, 3 (1947))).
11
Mendez avers each of the elements for the formation of contract. See discussion
supra Part I. In brief, his contract allegations center upon an alleged meeting of the
minds at a 1998 in-person meeting with government officials at the Miami U.S.
Attorney’s Office and through conduct thereafter over the course of nine years. See
Compl. ¶ 9; O’Bannon Mem. 1. Mendez allegedly agreed to serve as a confidential
informant (and grand jury witness, if necessary) against Battle and his associates. Compl.
¶¶ 8–9; cf. O’Bannon Mem. 1. In exchange, Mendez would recover from the
government an amount at least equivalent to the back pay, fees, expenses, and costs, he
unsuccessfully sought to recover in employment litigation against Battle. See Compl. ¶¶
4, 8. Mendez also presents a plausible explanation for why the alleged verbal agreement
or, alternatively, implied-in-fact agreement, was never reduced to a formal writing signed
by the parties. Id. ¶¶ 11–12; see also Tr. 32:11–25. In addition, even if the contract was
not express, it was implied-in-fact as allegedly manifested in the parties’ conduct over the
ensuing nine years. E.g., id. ¶¶ 11, 13, 19–23, 25; see generally O’Bannon Mem. He
further alleges that the individuals with whom he dealt had authority and/or that their
agreements were ratified by supervisory individuals with the requisite authority. See
Pl.’s Opp’n 2, 10, 20–23; Tr. 27:23–25, 31:19–32:25, 40:22–42:6; see also Compl. Ex. A
(Spittler Letter, Mar. 18, 1998).
In support of his allegations, Mendez also attaches to his complaint
contemporaneous communications from Attorney Spittler and Attorney Read to
government officials, which were sent periodically over the course of nine years
purporting to memorialize material terms (although they seemingly went unanswered by
the government). See Compl. at Exs. A, E–F, H. Mendez also attaches to his complaint
his own affidavit, a narrative from his attorney, and an internal DSS draft memorandum
authored by SSA O’Bannon, all of which generally corroborate his allegations. Id. at
Exs. B, D, J. Moreover, there can be no dispute that Mendez alleges money damages, id.
(“wherefore” clause), and that, if successful in his suit, money damages would be the
appropriate remedy, see Holmes, 657 F.3d at 1314 (explaining money damages are
presumed in breach of contract suits). Regardless of the ultimate veracity or sufficiency
of these allegations, a “non-frivolous” allegation of express or implied contract clearly
“underlies” Mendez’s claim, and that is all that is required to confer jurisdiction on this
court. See Engage Learning, 660 F.3d at 1353; Trauma Serv. Grp., 104 F.3d at 1325.
The government argues that Mendez’s allegations are insufficient, refuted by the
very evidence on which he relies, incorrect, and/or “implausible” and “unpersuasive.”
Def.’s Mot. 3, 18–20. But, these challenges go to whether Mendez has stated a claim and
the ultimate validity and enforceability of the contract. See Trauma Serv. Grp., 104 F.3d
at 1325–28 (affirming dismissal for failure to state a claim based on insufficient evidence
of breach); Henke, 43 Fed. Cl. at 25–26 (granting defendant summary judgment based,
inter alia, on plaintiff’s failure to adduce sufficient evidence that alleged discussions
amounted to a mutual intent to contract or assent to plaintiff’s understanding).
12
Likewise, although the government argues that AUSAs and field agents lack the
requisite authority to contract under the common law, Def.’s Mot. 20–24, such challenges
to authority weigh not against jurisdiction but against whether a plaintiff has stated a
claim upon which this court may grant relief. E.g., Jumah v. United States, No. 2010-
5076, 385 F. App’x 987, 988–90 (Fed. Cir. Jul. 9, 2010), aff’g, 90 Fed. Cl. 603, 608–14
(2009) (exercising jurisdiction over a breach of contract claim, but dismissing it under
Rule 12(b)(6) where plaintiff, a confidential informant, failed to allege facts
demonstrating the existence of an oral contract, including a plausible claim that the
government representative with whom he dealt had authority); Krupnick v. United States,
No. 07-367 CQ, 2008 WL 1709022, at *5, *8 (Fed. Cl. Apr. 9, 2008) (exercising
jurisdiction over plaintiff’s allegation of the government’s promise to pay plaintiff a
specific reward of fifteen percent, but then granting dismissal for failure to state a claim,
considered under summary judgment standards, based on the lack of an allegation and the
lack of evidence that the government representative had actual authority to bind the
United States to agreement); McAfee v. United States, 46 Fed. Cl. 428, 431–32, 434–38
(2000) (exercising jurisdiction over a breach of contract allegation but ultimately
dismissing it for failure to state a claim where plaintiff could not establish that the
government representative who allegedly entered the agreement was authorized to bind
the United States).
Alternatively, such challenges may be resolved on summary judgment. E.g., Doe
v. United States, 100 F.3d 1576, 1578–79, 1584–85 (Fed. Cir. 1996) (affirming, in
relevant part, the trial court’s grant of summary judgment to defendant on a breach of
contract claim where the informant failed to raise a material fact issue as to the
government representative’s lack of actual authority to promise reward); JEM Transp.,
Inc. v. United States, 120 Fed. Cl. 189, 191 (2015) (exercising jurisdiction over a breach
of contract claim arising from an alleged contract extension, but granting summary
judgment to defendant based on undisputed facts that the alleged extension was never
signed or approved by an individual with authority to bind the government); Cornejo-
Ortega v. United States, 61 Fed. Cl. 371, 374–76 (2004) (granting defendant summary
judgment where the informant failed to show that any of the parties with whom he dealt
had authority to enter into a reward contract of the sort he alleged); Warr, 46 Fed. Cl. at
350–52 (finding jurisdiction over an alleged breach of oral agreement but then converting
a motion for failure to state a claim to one for summary judgment and finding in
defendant’s favor that the alleged oral agreement did not exist because plaintiff could not
establish the government’s obligation to pay); Henke v. United States, 43 Fed. Cl. 15,
25–28 (1999) (granting summary judgment to defendant on plaintiff’s breach of oral
contract claim where evidence was insufficient to establish an express or implied contract
with the government agency and, even if the purported agreement existed, the
government agent did not have authority to approve the agreement and the plaintiff failed
to show ratification).
13
Such challenges to authority also have been resolved after trial. E.g., Leonardo v.
United States, 63 Fed. Cl. 552, 579 (2005) (entering judgment for defendant on plaintiff’s
breach of contract claim based on lack of evidence adduced at trial to establish a
“‘meeting of the minds’ between plaintiff and a person with authority to bind the
government on the terms of plaintiff’s alleged [] bailment contract”). In any event, based
on the foregoing, a government representative’s authority to bind the government plainly
bears—as a matter of common law—upon the validity of a purported agreement and is
not a basis for divesting this court of its jurisdiction over such an agreement.
Nor do the forfeiture statutes relied upon by the government, see Def.’s Mot. 23
(discussing the Department of the Treasury Forfeiture Fund, 31 U.S.C. § 9703, and the
Department of Justice Assets Forfeiture Fund, 28 U.S.C. § 524(c)), somehow displace or
preempt this court’s jurisdiction over an alleged contract with the government.
Section 9703, and authority interpreting it, confirms that the Treasury Forfeiture
Fund may be used for law enforcement purposes including, in relevant part,
compensation for informants; for information or assistance leading to forfeitures or
relating to a money laundering violation; or for reimbursing private persons for expenses
incurred assisting the government. See 31 U.S.C. § 9703(a)(2); United States v.
$133,735.30 Seized from U.S. Bancorp Brokerage Account No. 32130630, 139 F.3d 729,
730–31 (9th Cir. 1998); United States v. Cuellar, 96 F.3d 1179, 1185–86 (9th Cir. 1996)
(Wiggins, J., concurring). The same is true for the use of assets under the Assets
Forfeiture Fund. See 28 U.S.C. § 524(c); Perri v. United States, 340 F.3d 1337, 1340–43
(Fed. Cir. 2003); Doe v. United States, 58 Fed. Cl. 479, 481–83 (2003). However, while
both statutes are money-authorizing, any compensation that either entity actually pays out
is subject to the discretion of the secretary at each entity. 28 U.S.C. § 524(c)(1)(A), (C);
31 U.S.C. § 9703(2). Accordingly, authorities confirm section 524(c) is not money-
mandating and therefore cannot be a source of jurisdiction for this court. Perri, 340 F.3d
at 1340–43 (discussing 28 U.S.C. § 524(c)); Doe, 58 Fed. Cl. at 481–82 (same); see also
Aboo v. United States, 86 Fed. Cl. 618, 626 (2009), aff’d, 347 F. App’x 581 (Fed. Cir.
2009) (“Because the asset forfeiture statute [28 U.S.C. § 524(c)] gives the Attorney
General or his delegate the discretion to determine whether to make a compensatory
award, the statute cannot appropriately be interpreted as being money-mandating.”)
(citing Perri, 240 F.3d at 1342). By logical extension, the same would be true for section
9703, although no reported opinions appear to have addressed the issue specifically.
Here, therefore, defendant is correct that jurisdiction would be lacking to the extent
Mendez asserts a right to compensation under either statute.
However, to the extent Mendez alleges the government inadequately pursued or
frustrated Mendez’s opportunity for compensation under these statutes in breach of the
14
alleged 1998 agreement or the implied duty of good faith and fair dealing,5 the forfeiture
statutes do not affect this court’s jurisdiction over Mendez’s breach claims. Likewise, to
the extent the government relies on either statute to render void or voidable any purported
agreement between Mendez and the government, then such challenges are to the merits of
Mendez’s breach claim and are not a basis for divesting or preempting this court’s
jurisdiction over an alleged contract. See U.S. Home Corp., 92 Fed. Cl. at 409
(explaining that “several precedential decisions [exist that have] affirmed this court’s
Tucker Act jurisdiction over contract claims, despite the fact that the subject matter of the
contracts at issue might otherwise have been governed by statutory schemes under which
claims could not be litigated in this court” (citing, e.g., California v. United States, 271
F.3d 1377, 1383 (Fed. Cir. 2001) (affirming this court’s jurisdiction over a breach of
contract claim, because no “unambiguous evidence in the text or legislative history of
[the Flood Control Act of 1928, 33 U.S.C. § 702c (2006) showed] that Congress had
‘withdrawn the Tucker Act grant of jurisdiction’”))); see also Salles v. United States, 156
F.3d 1383, 1383–84 (Fed. Cir. 1988) (per curiam) (affirming the trial court’s summary
judgment dismissing a confidential informant’s breach claim based on a finding that the
government officials’ authority to contract was “limited by . . . 28 U.S.C. § 524(c), which
does not authorize payment promises providing for a percentage of all seizures, as
alleged”); cf. Gould, 67 F.3d at 929 (holding that the court was not divested of
jurisdiction over a contract based on an allegation that the contract was illegal because
the court “must first take jurisdiction over the case before it decides whether an illegality
. . . [is a] proper basis . . . [for] dismissal . . . [for] failure to state a claim”); U.S. Home
Corp., 92 Fed. Cl. at 407–10 (holding that a breach claim based on deed covenants was
not jurisdictionally displaced or preempted by an environmental statute).
In sum, Mendez’s complaint presents well-pleaded, non-frivolous allegations of a
contract that underlies his breach claims; these allegations are sufficient to confer
jurisdiction on this court under 28 U.S.C. § 1491(a)(1).
5
“Every contract imposes upon each party a duty of good faith and fair dealing in
its performance and enforcement.” Metcalf Const. Co. v. United States, 742 F.3d 984,
990 (Fed. Cir. 2014) (citing Restatement (Second) of Contracts § 205 (1981)
(Restatement), quoted in Alabama v. North Carolina, 560 U.S. 330, 130 S. Ct. 2295,
2312 (2010)). “Failure to fulfill that duty constitutes a breach of contract, as does failure
to fulfill a duty ‘imposed by a promise stated in the agreement.’” Id. (quoting
Restatement § 235). The Federal Circuit “[has] long applied those principles to contracts
with the federal government.” Id. (citing, e.g., Precision Pine & Timber, Inc. v. United
States, 596 F.3d 817, 828 (Fed. Cir. 2010); Malone v. United States, 849 F.2d 1441,
1445–46 (Fed. Cir. 1988)).
15
B. Mendez’s Claims Are Not Time-Barred Under 28 U.S.C. § 2501Although Mendez’s well-pleaded allegations of contract confer jurisdiction on this
court, the court can only exercise that jurisdiction if Mendez’s breach claims accrued
within the court’s statute of limitations. Claims against the United States must be “filed
within six years after such claim first accrues.” 28 U.S.C. § 2501 (2012); see John R.
Sand & Gravel Co. v. United States, 552 U.S. 130, 133–35 (2008) (providing that the six-
year limitations period is an “absolute” limit on the ability of the Court of Federal Claims
to reach the merits of a dispute); FloorPro, Inc. v. United States, 680 F.3d 1377, 1381
(Fed. Cir. 2012) (holding that the limitations period imposed by section 2501 is
“jurisdictional, and may not be waived or tolled”). “A claim accrues ‘when all the events
have occurred which fix the liability of the Government and entitle the claimant to
institute an action.’” Patton, 64 Fed. Cl. at 774 (quoting Kinsey v. United States, 852
F.2d 556, 557 (Fed. Cir. 1988)). “Claims for breach of contract generally accrue at the
time of the breach.” Id. (citing Brighton Vill. Assocs. v. United States, 52 F.3d 1056,
1060 (Fed. Cir. 1995)). “A claim does not accrue, however, ‘unless the claimant knew or
should have known that the claim existed.’”6 Id. (quoting Kinsey, 852 F.2d at 557 n.*);
see also Banks v. United States, 741 F.3d 1268, 1279–80 (Fed. Cir. 2014) (“The accrual
of a claim against the United States is suspended, for purposes of 28 U.S.C. § 2501, until
the claimant knew or should have known that the claim existed (‘the accrual suspension
rule’).” “Alternatively, ‘[a] claim accrues when damages are ascertainable.’” Patton, 64
Fed. Cl. at 774 (quoting Shermco Indus., Inc. v. United States, 6 Cl. Ct. 588, 591 (1984)).
Mendez filed his complaint on June 10, 2014; thus, his breach of contract and
good faith and fair dealing claims must have accrued, if at all, no earlier than June 10,
2008 (six years prior). The government asserts that Mendez’s claims accrued, if at all, in
either 2004 or 2007 and thus, are barred by limitations. Def.’s Mot. 16–17. In support of
its position, the government points to Attorney Read’s March 2004 threat to AUSA Lehr
that Mendez was “prepared to file an equitable lien,” as well as the February 2007 filing
of a Notice of Lien in Battle, as evidence that Mendez knew at those times that the
government did not consider itself obligated to pay Mendez any compensation. Id. at 17.
Alternatively, the government contends that Mendez had to know of the government’s
6
“For the accrual suspension rule to apply, the claimant ‘must either show that the
defendant has concealed its acts with the result that plaintiff was unaware of their
existence or it must show that its injury was ‘inherently unknowable’ at the accrual
date.’” Banks v. United States, 741 F.3d 1268, 1280 (Fed. Cir. 2014) (quoting Young v.
United States, 529 F.3d 1380, 1384 (Fed. Cir. 2008) (quoting Martinez v. United States,
333 F.3d 1295, 1319 (Fed. Cir. 2003) (en banc))); see also Patton v. United States, 64
Fed. Cl. 768, 776 (2005) (holding that these conditional exceptions are met “only where
[a plantiff’s] due diligence would not have prompted discovery” at an earlier date).
16
opposition to payment when the government filed its Motion to Strike the Notice of Lien
on April 5, 2007. See Tr. 9:5–10:4.
Mendez responds that “[i]t is axiomatic that, in order for a breach of contract
claim to accrue, there must first be a breach.” Pl.’s Opp’n 11 (citation omitted). Thus,
according to Mendez, “the date when [his] claim first accrue[d], [would be] the date the
Government first denie[d] the claim for payment.” Id. (citations omitted). In this case,
Mendez contends, that date was “May 8, 2013, when [Attorney Spittler] received a letter
from the U.S. Department of Justice stating that Mendez’s Petition [for Remission] to the
U.S. Attorney General was denied.” Id. at 12; see also Def.’s Mot. at Ex. 8 (DOJ Letter,
May 8, 2013) (denying Petition for Remission). Government resistance prior to 2013
allegedly had more to do with objecting to the method Mendez was taking to recover the
money (e.g., the equitable lien in Battle) than any aversion to honoring the parties’
alleged 1998 agreement. See Pl.’s Opp’n 12–13. Indeed, after the 2008 denial of
Mendez’s equitable lien, the government allegedly provided Mendez with “substantial
encouragement and assistance” in his preparation and filing of the Petition for Remission
with the Attorney General, up to and including providing him with necessary forms in
2012. Id. at 13–15. This support is evidenced in SSA O’Bannon’s internal DSS
memorandum, as well as SSA O’Bannon’s affidavit filed in this case. Id. at 14.
Based on the record presently before the court, the court finds that the statute of
limitations began to run on or about January 14, 2010, when the final judicial order of
forfeiture was entered. See Def.’s Mot. at Ex. 2 (Forfeiture Orders); Tr. 16:9–20
(explaining significance of the 2010 final order of forfeiture). The preponderance of the
evidence suggests that, about that time or shortly thereafter, Mendez’s alleged right to
compensation out of the forfeitures ripened, Mendez “knew or should have known that
[his] claim [for compensation] existed,” see Kinsey, 852 F.2d at 557 n.*, and his
“damages [were] ascertainable,” see Shermco Indus., 6 Cl. Ct. at 591. Counsel for
Mendez conceded as much at oral argument. Tr. 29:16–21, 38:9–21. Counsel for the
government effectively did as well. See Tr. 53:20–54:11. Thus, based on this finding,
the court concludes at present that Mendez’s complaint lodged roughly four-and-a-half
years later, on June 10, 2014, was filed within the court’s six-year statute of limitations.
However, the court does not discount the possibility that the weight of the evidence will
shift if subsequent discovery reveals, inter alia, that Mendez’s right to payment accrued
earlier or that he knew or should have known earlier that the government would not
honor the allege agreement; alternatively, discovery also might reveal that the
government had been concealing its intention to disclaim the alleged agreement, such that
the doctrine of accrual suspension might apply to extend the limitations period. The
parties are forewarned, therefore, that the court may revisit the limitations issue at a later
date if the evidence so warrants. See Folden v. United States, 379 F.3d 1344, 1354 (Fed.
Cir. 2004) (“Subject-matter jurisdiction may be challenged at any time by the parties or
by the court sua sponte.” (citing Fanning, Phillips & Molnar v. West, 160 F.3d 717, 720
(Fed. Cir. 1998))).
17
IV. The Rule 12(b)(6) Motion Is Deferred for Consideration Under Rule 56
Having found that the court may exercise jurisdiction over Mendez’s breach
claims, the government urges dismissal of those breach claims on the alternate theory that
Mendez fails to state claims upon which this court may grant relief.7 Def.’s Mot. 1, 24–
25 (invoking Rule 12(b)(6)).
The government’s arguments under Rule 12(b)(6) are essentially the same as its
arguments under Rule 12(b)(1)—namely, there can be no breach of contract where there
never existed a contract in the first instance. The government contends, specifically, that
Mendez’s allegations are insufficient and implausible based on the lack of evidence of
mutuality of intent. Id. at 17–20, 24. Furthermore, even if government representatives
made the alleged promises, such promises purportedly are invalid and/or unenforceable
because the representatives lacked express or implied actual authority to bind the
government to pay Mendez for his services. Id. at 20–25. Alternatively, the government
representatives were divested of authority by the RICO statute, 18 U.S.C. § 1963(g), and
the statutes governing the Treasury Forfeiture Fund, 31 U.S.C. § 9703, and the DOJ
Assets Forfeiture Fund, 28 U.S.C. § 524(c), id. at 22–23, which vest sole discretion to
compromise forfeiture assets and/or to reward informants with the Attorney General and
the heads of the relevant agencies, respectively, see supra Part III. In support of its
position, the government attaches to its motion copies of a myriad of documents
evidencing Mendez’s efforts to collect on the government’s alleged promise to pay
compensation and the reasons those efforts were unsuccessful. See Def.’s Mot. at Exs.
1–8. The government also attaches to its reply brief copies of a government
Memorandum filed in Battle discussing contract issues, Def.’s Reply, ECF No. 21, at Ex.
9, as well as a DOJ handbook entitled “The Attorney General’s Guidelines on Seized and
Forfeited property,” dated July 1990 and marked amended November 2005, id. at Ex. 10.
Mendez responds that “[t]he evidence of a mutuality of intent and interest in
entering into an implied-in-fact contract is extensive and unambiguous.” Pl.’s Opp’n 16.
For example, Mendez avers that Attorney Spittler’s 1998 letter to AUSA Lehner is not
evidence of on-going negotiations, as argued by the government, but rather is an attempt
to memorialize a verbal agreement and arrange for its reduction to a formal writing. Id.
at 19–20. In addition, “[f]ar from the ‘silence’ that the Government claims was its only
response to plaintiff’s representations regarding the existence of an oral agreement, the
7
In order to state a claim for breach of contract, Mendez must allege: (1) a valid
contract between the parties (i.e., mutuality of intent evidenced by offer, acceptance, and
consideration, as well as requisite authority); (2) an obligation or duty arising out of the
contract; (3) a breach of that duty; and (4) damages caused by the breach. See Trauma
Serv. Grp., 104 F.3d at 1325 (elements of valid contract with the government); San
Carlos Irrigation & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir. 1989)
(elements of breach).
18
Government repeatedly assured Mendez and his attorney that there was, in fact, an oral
agreement regarding Mendez’s compensation, and that the Government intended to honor
that agreement.” Id. at 16 (internal citation omitted); see also id. at 20–23. Furthermore,
“the Government readily agreed to the insertion of a handwritten addition to the standard
immunity agreement with the U.S. Attorney’s Office which specifically acknowledged
[the existence of the 1998 restitution agreement].” Id. at 21. In addition, Mendez
contends that AUSA Lehner or others did have implied actual authority. See id. at 23. In
support of his opposition to dismissal, Mendez provided as exhibits to his briefing
substantive affidavits from himself, SSA O’Bannon, and Attorney Spittler, as well as
various documents that were attached as exhibits to the furnished affidavits. See Mendez
Aff., Dec. 11, 2014, ECF No. 18-1 (Mendez Second Aff.); O’Bannon Aff., Dec. 5, 2014,
ECF No. 18-2; Spittler Aff., Dec. 19, 2014, ECF No. 18-3.
The problem for the court is that the parties rely extensively on the contents of the
exhibits and affidavits appended to their briefing to support their Rule 12(b)(6)
arguments, such that the court cannot consider the merits of their arguments without
considering the affidavits and documents themselves. Of particular interest to the court
are the affidavits attached to Mendez’s opposition brief and the DOJ handbook attached
to the government’s reply brief. In any event, all of these materials attached to the
briefing are outside the pleadings. Thus, the court must convert the government’s Rule
12(b)(6) motion to dismiss for failure to state a claim to a motion for summary judgment.
See RCFC 12(d) (“If, on a motion under RCFC 12(b)(6) . . . , matters outside the
pleadings are presented to and not excluded by the court, the motion must be treated as
one for summary judgment under RCFC 56.”). In Advanced Cardiovascular Systems,
Inc. v. Scimed Life Systems, Inc., for example, the Federal Circuit vacated a dismissal
pursuant to Federal Rule of Civil Procedure 12(b)(6) where the trial court had considered
materials outside the pleadings, because in those circumstances “the rules governing
summary judgment must apply.” 988 F.2d 1157, 1164 (Fed. Cir. 1993); accord U.S.
Home Corp., 92 Fed. Cl. at 407 (converting a motion where both the plaintiff and the
defendant appended materials to their briefing that were integrally related to the merits of
their arguments for and against dismissal); Krupnick, No. 07-367 CQ, 2008 WL
1709022, at *1, *7–8 (Fed. Cl. Apr. 9, 2008) (converting a motion and finding in favor of
defendant based on the lack of evidence of requisite authority); Cornejo-Ortega, 61 Fed.
Cl. at 372–76 (granting judgment to defendant on a motion to dismiss converted to
summary judgment based on the lack of evidence that the parties with whom plaintiff had
dealt possessed the requisite authority to bind the government to pay an informant under
a purported reward contract); Warr, 46 Fed. Cl. at 350–52 (converting a motion and
finding for defendant on summary judgment that no oral contract existed).
Challenges to a government representative’s authority to contract are commonly
addressed on summary judgment. See Salles, 156 F.3d at 1383–84 (affirming trial
court’s summary judgment, which found that the confidential informant failed to adduce
evidence of requisite authority to support the allegation of an oral contract with the
19
government for the payment of a percentage of the value of seizures and forfeitures that
the informant helped the government obtain); Bailey v. United States, 40 Fed. Cl. 449,
469 (1998) (explaining that, in the record before the court on a motion to dismiss, there
was “insufficient evidence” to determine (i) at what level the discussions occurred
between the parties, which resulted in plaintiff providing certain information based on the
belief he would be paid; and (ii) whether someone with the requisite authority approved
the arrangement that the plaintiff claimed resulted in the alleged contract); see also
Sommers Oil Co. v. United States, 241 F.3d 1375, 1379–81 (Fed. Cir. 2001) (finding the
complaint was sufficient to state a claim for breach of contract by the government and
remanding for a determination on the merits whether any government official was
actually authorized to make a promise to pay the plaintiff-informant and what regulatory
or statutory provision authorized the official to do so); cf. Harbert, 142 F.3d at 1430 (Fed.
Cir. 1998) (affirming in part, and reversing in part, the Court of Federal Claims’ post-trial
fact-intensive findings on authority and ratification relating to an alleged oral contract).
Furthermore, in converting the motion, the court must provide the parties with an
opportunity to litigate the government’s Rule 12(b)(6) challenge through the procedures
afforded by Rule 56. See RCFC 12(d) (“All parties must be given a reasonable
opportunity to present all the material that is pertinent to the motion.”); see also Levy v.
United States, 10 Cl. Ct. 602, 605–06 (1986) (allowing the parties in a real estate sale
breach of contract suit to supplement initial briefing on a motion to dismiss, to which
defendant had attached exhibits related to the real estate sale, with “additional legal
argument and materials in support of, or opposition to, summary judgment”); cf. Gary v.
United States, 67 Fed. Cl. 202, 204, 218 (2005) (granting a motion to dismiss for lack of
jurisdiction based on the plaintiff’s failure to adduce evidence in support of actual
authority or ratification after the court permitted discovery on the issue of whether a
contract existed between them). For these reasons, the court reserves the government’s
Rule 12(b)(6) challenge to the complaint for further proceedings.
V. Conclusion
Mendez has agreed to dismiss voluntarily Count I (declaratory judgment) and
Counts IV through VII (unjust enrichment, promissory estoppel, equitable lien, and
fraud). With respect to remaining Counts II and III, alleging breach of express or
implied-in-fact contract and breach of the implied duty of good faith and fair dealing, this
court has jurisdiction for the reasons set forth in Part III, supra. Further, the court
converts the government’s Rule 12(b)(6) challenge to Counts II and III to a motion for
summary judgment for the reasons set forth in Part IV, supra.
Accordingly, it is hereby ORDERED that
(1) The Clerk’s office is directed to DISMISS Count I and Counts IV through VII
of the Complaint pursuant to Rule 41(a)(2), without prejudice;
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(2) Defendant’s Motion to Dismiss, filed November 5, 2014, is DENIED in part
and CONVERTED in part to a summary judgment motion, as follows:
(a) Defendant’s Rule 12(b)(1) and 12(b)(6) challenges to Count I and
Counts IV through VII of the Complaint are DENIED as moot in light
of plaintiff’s voluntary dismissal of those counts;
(b) Defendant’s Rule 12(b)(1) challenge to Counts II and III is DENIED;
(c) Defendant’s Rule 12(b)(6) challenge to Counts II and III of the
Complaint is CONVERTED to a Rule 56 motion for summary
judgment and the court DEFERS ruling on defendant’s summary
judgment motion; and
(3) On or before June 17, 2015, the parties shall FILE a Joint Status Report
proposing a schedule for further proceedings with respect to discovery and
summary judgment and stating the extent to which the parties have determined
whether any or all of the claims before the court may be settled. Settlement
negotiations and alternative dispute resolution should be considered as
alternatives to litigation.
s/ Patricia Campbell-Smith
PATRICIA CAMPBELL-SMITH
Chief Judge
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