United States v. T&W Edmier Corp

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-1237
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
T&W EDMIER CORP.,
Defendant-Appellant.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 05 C 3079—Harry D. Leinenweber, Judge.
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ARGUED SEPTEMBER 8, 2006—DECIDED OCTOBER 10, 2006
____________
Before CUDAHY, EASTERBROOK, and MANION, Circuit
Judges.
EASTERBROOK, Circuit Judge. After T&W Edmier Corp.
completed its work on a reservoir in Deerfield, Illinois, it
asked the Army Corps of Engineers for $32 million in
addition to the agreed price of $11 million. It asserted that
the extra $32 million was justified by the expense of
removing hazardous materials. When the parties could
not reach an agreement, Edmier initiated a formal proceed-
ing under the Contract Disputes Act of 1978, 41 U.S.C.
§§ 601-13. A contracting officer, who took evidence and
made an initial decision, see 41 U.S.C. §605(a), concluded
that Edmier was entitled to about $3.5 million on top of
2 No. 06-1237
what it had received (the $11 million plus some supplemen-
tal payments to which the Corps agreed). The Corps paid in
full. Edmier was not satisfied, however, and asked the
Armed Services Board of Contract Appeals for more. After
plenary consideration, the Board decided that Edmier is
entitled to only $1.9 million. 2003 ASBCA LEXIS 122 (Dec.
11, 2003). The United States asked Edmier to return the
excess $1.6 million and, when it refused, filed this collection
proceeding.
Edmier’s initial position in the district court was that the
Board had awarded it $1.9 million in addition to the
contracting officer’s award of $3.5 million, so that the
United States was the debtor rather than the creditor. Even
a quick review of the opinion shows, however, that the
Board reckoned from scratch, not from the contract price
plus agreed supplements plus the contracting officer’s
addition. So Edmier moved to a fallback: that the
suit should be dismissed for lack of subject-matter juris-
diction. The United States had invoked 28 U.S.C. §1345,
which reads: “Except as otherwise provided by Act of
Congress, the district courts shall have original jurisdiction
of all civil actions, suits or proceedings commenced by the
United States, or by any agency or officer thereof expressly
authorized to sue by Act of Congress.” According to Edmier,
the Contract Disputes Act “otherwise provides” by requiring
the United States, as well as any private contractor, to
submit disputes to a contracting officer and the appropriate
appellate board. The United States was the respondent
rather than the petitioner in the proceedings already held
and therefore, Edmier maintained, must start over with its
own petition to a contracting officer. The district court
disagreed and entered judgment in the United States’ favor
for $1.7 million (the overpayment plus interest). 2005 U.S.
Dist. LEXIS 28831 (N.D. Ill. Nov. 16, 2005).
What Edmier’s argument has to do with subject-matter
jurisdiction is a mystery. The Contract Disputes Act
No. 06-1237 3
scarcely mentions the jurisdiction of the Article III courts.
It permits (and sometimes requires) contractors to file their
suits in the Court of Federal Claims, see 41 U.S.C. §609(a),
but does not say where or when the United States may sue.
It therefore does not “otherwise provide” anything about
jurisdiction within the meaning of §1345. Cf. Breuer v. Jim’s
Concrete of Brevard, Inc., 538 U.S. 691 (2003).
Edmier maintains that the United States failed to
exhaust administrative remedies created by the Contract
Disputes Act. Exhaustion may be a condition to suit (or
to success in court) but is rarely a limit on subject-matter
jurisdiction. See, e.g., Mathews v. Eldridge, 424 U.S. 319,
328 (1976); Weinberger v. Salfi, 422 U.S. 749, 766-67 (1975);
Abdelqadar v. Gonzales, 413 F.3d 668, 670-71 (7th Cir.
2005). As the Supreme Court has explained frequently,
there is a difference between case-processing rules and
limits on jurisdiction. See Eberhart v. United States, 126 S.
Ct. 403 (2005); Scarborough v. Principi, 541 U.S. 401(2004); Kontrick v. Ryan, 540 U.S. 443 (2004). To say that
Congress has authorized the federal courts to decide a class
of disputes is to say that subject-matter jurisdiction is
present. Congress has authorized the judiciary to entertain
debt-recovery suits by the United States. See 28 U.S.C.
§1331, §1345. A plaintiff’s failure to take required pre-
litigation steps may lead to defeat in court, but it is not a
defect in the tribunal’s adjudicatory competence. (To put
this otherwise, failure to exhaust administrative remedies
may be waived or forfeited, while an absence of subject-
matter jurisdiction may not.)
Let us consider, then, the right question: Does the
Contract Disputes Act require the United States to file its
own administrative claim in order to recover an overpay-
ment that ensues from a decision by the Board that the
United States owes less than the contracting officer
awarded? No, it does not. The Act does not require the
United States to file an administrative claim in any situa-
4 No. 06-1237
tion, as far as we can make out. What is required when the
government seeks a payment from the contractor is not an
independent claim, but a decision. Here is the pertinent
text, the first two sentences of §605(a): “All claims by a
contractor against the government relating to a contract
shall be in writing and shall be submitted to the contracting
officer for a decision. All claims by the government against
a contractor relating to a contract shall be the subject of a
decision by the contracting officer.” So the contractor must
submit a claim, but when the government seeks a recovery
it is enough that the issue “shall be the subject of a decision
by the contracting officer.”
The difference in language is not hard to appreciate. The
contractor files a claim, which leads to a “decision”; if that
“decision” is in the government’s favor, no further claim is
required. Why would one be? The goal of an exhaustion
requirement is to ensure that a dispute receives full
administrative consideration. The agency finds essential
facts and may facilitate compromise, avoiding the need
for litigation. Once the administrative decision has been
made, and the parties ask a court for review, it matters not
which party initiated the administrative proceeding. It
could matter if the statute made the administrative
appeal a ratchet: the Board could increase, but never
reduce, the contracting officer’s award. Then the only
way to determine whether the contracting officer’s deci-
sion was too high (and, if so, how much too high) would
be to initiate a separate proceeding. That would entail
wasted motion, however, compared with an approach that
allows the administrative appeal to adjust the contract-
ing officer’s award in either direction. Because the Contract
Disputes Act allows the appellate board to make an inde-
pendent decision and decrease as well as increase the
award, there is no reason to rerun the process before the
United States may collect any net balance in its favor.
No. 06-1237 5
The sort of dispute that these parties are having arose
only because the United States paid the contracting officer’s
award without waiting for the outcome of Edmier’s adminis-
trative appeal. If we were to accept Edmier’s position in this
litigation, one logical response by the Executive Branch
would be to refuse to pay until the administrative process
had run its course—for then there would never be a need to
file another administrative proceeding in order to recoup
the difference. (A new administrative claim would mean
delay in collection, and from the government’s perspective
a year’s delay in trying to collect from many small and
thinly capitalized contractors is the same thing as allowing
the money to evaporate. The contractor will be judgment
proof.) Inducing the government to defer payment would not
assist contractors, however; many a small firm has liquidity
problems and cannot wait another year or two to be paid.
The approach exemplified here—pay at once whatever the
contracting officer awards, and settle up promptly after the
Board makes a final decision—is favorable to contractors in
the main. The Contract Disputes Act does not compel the
United States to act otherwise.
AFFIRMED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—10-10-06