St. Bernard Parish Government v. United States

In the United States Court of Federal Claims
No. 15-637C
(Filed: October 18, 2017)
FOR PUBLICATION
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*
ST. BERNARD PARISH * Motion to Dismiss; RCFC 12(b)(1);
GOVERNMENT, * Emergency Watershed Protection Program
* 7 C.F.R §§ 624.1-624.11; Federal Grant
Plaintiff, * and Cooperative Agreement Act 31 U.S.C.
v. * §§ 6301 et seq.; Anchorage v. United
* States, 119 Fed. Cl. 709 (2015); Rick’s
* Mushroom v. United States, 521 F.3d 1338THE UNITED STATES, * (Fed. Cir. 2008); Hurricane Katrina;
* Consideration; Cooperative Agreement;
* Direct Benefit; Subject Matter Jurisdiction
Defendant. *
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William M. McGoey, St. Bernard Parish District Attorney’s Office, Civil Division,
Chalmette, LA, for Plaintiff.
Reta E. Bezak, Trial Attorney, Chad A. Readler, Acting Assistant Attorney
General, Robert E Kirschman, Jr., Director, Kenneth M. Dintzer, Deputy Director, United
States Department of Justice, Civil Division, Commercial Litigation Branch, Washington,
DC, for Defendant.
OPINION AND ORDER
DAMICH, Senior Judge.
On June 30, 2017, the United States (the “Government”), acting through the
Natural Resources Conservation Service (“NRCS”), filed a motion to dismiss or, in the
alternative, for summary judgment. On the same day, St. Bernard Parish (“the Parish”)
filed a motion for partial summary judgment. In its complaint and motion, the Parish
alleges that the Government breached an agreement with the Parish by not paying it all
the money it was due for the removal of sediment in the Bayou Terre Aux Beoufs in the
aftermath of Hurricane Katrina. The Government moves to dismiss this action for lack of
jurisdiction because the agreement at issue is not a contract but rather a “Cooperative
Agreement” or because the agreement lacked consideration on the part of the
Government. Both motions are fully briefed and the matter is ripe for review.
For the reasons discussed below, the Court GRANTS the Government’s motion
to dismiss.
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I. Statement of Facts
a. The Cooperative Agreement
On April 17, 2009, NRCS and the Parish entered into a “Cooperative Agreement
Locally Led Contracting,” Agreement Number 68-7217-09-0014. See generally A1-
A18.1 This agreement provided that under the provisions of the Emergency Watershed
Protection (“EWP”) Program the “NRCS is authorized to assist the Sponsor in relieving
hazards created by natural disasters that cause sudden impairment in a watershed” and
stated that the parties “agree to install emergency watershed protection measures to
relieve hazards and damages created by Hurricane Katrina.” A1.
The EWP Program authorizes the Secretary of Agriculture “to undertake such
emergency measures for run-off retardation and soil-erosion prevention as may be needed
to safeguard lives and property from floods . . . or any other natural element or force has
caused a sudden impairment of that watershed.” 33 U.S.C. § 701b-1. The Secretary has
since delegated his authority to the NRCS. 7 C.F.R. § 624.1. The EWP Program
provides, “technical and financial assistance . . . to a qualified sponsor . . . when a Federal
emergency is declared by the President or when a local emergency is declared by the
NRCS State Conservationist.” 7 C.F.R. § 624.3. A qualified sponsor within the Program
is “a State government or a State agency or a legal subdivision thereof, local unit of
government, or any Native American tribe or tribal organization . . . .” 7 C.F.R. 624.4(g).
Under the agreement, removal work would be performed in sixteen watershed
areas, among them the Bayou Terre Aux Beoufs, which is the subject of this lawsuit.2
A1. The Cooperative Agreement also stated that the parties agreed that the “described
work is to be constructed at an estimated cost not to exceed $4,318,509.05” for the
sixteen watersheds. A1. The estimated cost to remove the debris in the Bayou Terre Aux
Beoufs watershed was $3,562,180.00. A1.
The Cooperative Agreement provided that the Parish was obligated, inter alia, to
contract for the watershed improvements, pay the contractors, and take responsible
measures necessary to dispose of any and all contractual disputes, claims, and litigation
resulting from the projects listed in the cooperative agreement. A2-4.
The NRCS agreed to “provide 100 percent ($4,318,509.05) of the actual costs of
the emergency watershed protection measures.” A4 (emphasis in original). Actual costs
consist of “contracts awarded to contractors” and the Parish must, in order to receive
reimbursement, “provide records to support costs incurred.” A2. Upon receipt of Form
SF-270 and required receipts, the NRCS would then pay the Parish. A5. The NRCS also
1
“A_” refers to pages of the appendix attached to the Government’s motion.
2
The others include: Bayou La Loutre, River Bend Canal, South Lake Canal,
Little River Bend Canal, Serpas Canal, River Queen Canal, Creely Canal, C. Hebert
Canal, Pirate Canal, Jacob Canal, Jeanfreau Canal, Creedmore Canal, Mascot Ditch,
Willie Smith Canal, and Reunion Canal.
2
agreed that it would “provide the prepared drawings, designs and specifications of the
emergency watershed protection measures.” A5.
b. St. Bernard Parish Contracts With Omni.
In March 2010, the Parish and Omni Pinnacle, LLC (“Omni”) entered into a
contract in which Omni was to remove the sediment in the Bayou Terre Aux Beoufs. See
generally A21-289. Under this contract, the Parish agreed to pay Omni $4,290,300.00
for the debris removal. A22. Although under the terms of the Cooperative Agreement,
the NRCS would reimburse the Parish for the approved expenses incurred by the Parish
for the watershed improvements made by Omni under the contract the NRCS was not a
party to this contract. A22.
The contract between Omni and the Parish stated that the work to be performed
by Omni would be paid on a stated price per cubic yard basis. The original Omni
contract estimated that 119,580 cubic yards of sediment would be removed. A38.
However, after Omni completed its pre-construction survey, the quantity of sediment was
reduced by 59 percent, to only 49,888.69 cubic yards. A296.
Omni completed the Bayou Terre Aux Beoufs removal project in September 2010
and submitted an invoice to the Parish in the amount of $4,746,469.65. A292. In April
2011, this amount was reduced to $4,642,580.58. A309.
c. The Final Contract Amount
On January 5, 2011, Vicki Supler, an NRCS Grants and Agreements Specialist
and NRCS’s designated liaison for the Cooperative Agreement, contacted All South
Consulting Engineers (“All South”), a company that the Parish contracted to manage and
inspect the Bayou Terre Aux Beoufs project. A346. Ms. Supler noted that “the
contractor completed the final ‘as-built’ surveys which showed that 49,888.69 [cubic
yards] of sediment had been excavated.” A295. Ms. Supler then explained that
consistent with the contract specifications, “the only quantity the NRCS will allow
payment for is the 49,888.69 [cubic yards].” A295.
Since the final quantity of removed sediment represented a 59 percent decrease in
the original estimate, the NRCS applied a 59 percent increase in the bid price per cubic
yard. A296. After making this calculation, the NRCS determined that the “allowable
costs the NRCS will make reimbursable to the parish for the works of improvement on
this project” was $2,849,305.60. A296.
All South also reviewed Omni’s invoice and noted certain concerns, especially
with the legality of Omni and the Parish agreeing to continue with the project after
discovering the quantity discrepancies (the 59 percent reduction in sediment removal),
and how Omni’s invoiced price included a markup of 10 percent for profit and 15 percent
for overhead. A298. However, All South recommended payment to Omni in the amount
of $1,758,548.94. A301. The Parish authorized the payment to Omni in that amount and
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then sought reimbursement from NRCS. A303. On July 13, 2011, NRCS approved the
reimbursement to the Parish and the payment was processed through the Department of
Treasury.3 A320.
On January 17, 2014, Omni and the Parish entered into a change order that
adjusted the contract price to $3,243,996.37. A335. Subsequently, the Parish stated that
under the change order and Louisiana law, it was obligated to pay the full amount of the
revised contract. A344. Therefore, the Parish authorized payment of $1,463,447.43,
which equaled the remaining balance owed to Omni minus $22,000.00 in liquidated
damages.4 A344, 347. On April 16, 2014, the Parish filed for reimbursement from
NRCS for that amount. A344.
In May 2014, the NRCS asked the Parish for additional information. A360-70.
Specifically, NRCS requested documentation of, inter alia, the revised unit prices, the
claim that the actual time of the project did not change, the necessity of additional
excavation, and calculations used to devise the new pricing. A360-61.
In August 2014, the Parish responded and maintained that it did not need to
provide further documentation, because the requisite documents were already provided.
A371. After reviewing the Parish receipts, on September 29, 2014, NRCS authorized
payment to the Parish in the amount of $1,107,581.22, which reduced the claim by
$355,898.52. A378. The Parish did not provide anything further to the NRCS and this
suit followed.
II. Standard of Review Under RCFC 12(b)(1) and RCFC 12(b)(6)
Subject matter jurisdiction is a threshold requirement that must be determined for
a court to hear the case. RCFC 12(b)(1). See also Dow Jones & Co. v. Ablaise Ltd., 606
F.3d 1338, 1348 (Fed. Cir. 2010). When considering a motion to dismiss, the Court
considers the facts alleged in the complaint to be true. Reynolds v. Army & Air Force
Exch. Serv., 846 F2d 746, 747 (Fed. Cir. 1988). However, the plaintiff bears the burden
of establishing subject matter jurisdiction by preponderant evidence. Taylor v. United
States, 303 F.3d 1357, 1359 (Fed. Cir. 2002). If the court finds that at any time it lacks
subject matter jurisdiction, it must dismiss the action. RCFC 12(h)(3). Also, if a plaintiff
fails to state a claim upon which relief can be granted, under RCFC 12(b)(6), the
complaint must be dismissed. Lindsay v. United States, 295 F.3d 1252, 1257 (Fed. Cir.
2002) (stating that a complaint must be dismissed “when the facts asserted by the
claimant do not entitle him to a legal remedy.”).
3
As the payment was processed, a deduction of $284,111.77 was made to offset
an unrelated debt owed by the Parish to the Environmental Protection Agency. A389.
4
The project was finished 22 days after the deadline specified by the contract
between Omni and the Parish. A345. The contract stated that every additional day
would result in $1,000 in liquidated damages. A24.
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III. Discussion
a. The Cooperative Agreement Does Not Contemplate Money Damages.
Pursuant to the Tucker Act, the Court of Federal Claims possesses jurisdiction
over express or implied contracts with the United States, 28 U.S.C. § 1491(a)(1), but the
Tucker Act does not establish a substantive right enforceable against the United States for
monetary damages. United States v. Mitchell, 445 U.S. 535, 538 (1980) (“[t]he Tucker
Act is ‘only a jurisdictional statute; it does not create any substantive right enforceable
against the United States for money damages.’”) (internal citations omitted). Therefore,
the plaintiff must provide a separate source of law, which may come “from either a
money-mandating constitutional provision, statute, or regulation, or an express or implied
contract with the United States.” Anchorage v. United States, 119 Fed. Cl. 709, 713
(2015). Stated another way, “when a breach of contract claim is brought in the Court of
Federal Claims under the Tucker Act, the plaintiff comes armed with the presumption
that money damages are available, so that normally no further inquiry is required.”
Holmes v. United States, 657 F.3d 1303, 1314 (Fed. Cir. 2011). However, this
presumption may be rebutted. Anchorage, 119 Fed. Cl. at 713.
Here, the Parish is arguing that the agreement is an express contract with the
NRCS and, therefore, money damages are implied in the agreement per Holmes. Pl.s’
Resp. at 8-11. Consequently, under the motion to dismiss standard, this Court must
presume that this express contract carries with it a presumption of money damages (and
thus Tucker Act jurisdiction). The Government must show that the agreement somehow
rebuts this presumption.
The Government contends that the agreement with the Parish should be
considered a cooperative agreement under the Federal Grant and Cooperative Agreement
Act (“FGCAA”). Def.’s Mot. to Dismiss at 17. The Government argues based on the
precedent set forth in Rick’s Mushroom Serv. v. United States, 76 Fed. Cl. 250 (2007),
aff’d, 521 F.3d 1338 (Fed. Cir. 2008), cooperative agreements, unlike procurement
contracts, are not presumed to provide money damages.
According to 31 U.S.C. § 6305, cooperative agreements are to be used when, “the
principal purpose of the relationship is to transfer a thing of value to the . . . local
government . . . to carry out a public purpose of support or stimulation . . . instead of
acquiring (by purchase, lease, or barter) property or services for the direct benefit or use
of the United States Government.” The Government maintains that this description fits
the current situation perfectly: that the “purpose of the Cooperative Agreement in this
case was not for NRCS to purchase or lease anything from the Parish,” but rather that,
“the agreement stated that NRCS was ‘authorized to assist the Parish’ pursuant to the
EWP program.” Def. Mot. to Dismiss at 17 (citing A1). Namely, that the NRCS would
provide financial and other assistance to the Parish to repair damage from Hurricane
Katrina. Furthermore, the Government notes that the regulations of the EWP Program
specifically provide that the administration of program assistance is to be handled
through cooperative agreements. 7 C.F.R. § 624.2.
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In this case, the Court is persuaded that the agreement at issue is considered a
cooperative agreement and, therefore, the Parish lacks jurisdiction in this Court. The
Cooperative Agreement provided that the Parish would pay the contractors as per its
contract for the watershed improvements in accordance with the NRCS specifications and
in return the Parish would be entitled to the “actual cost” reimbursement of the project
subject to NRCS approval. This agreement does not “acquir[e] (by purchase, lease, or
barter) property or services for the direct benefit or use of the United States
Government.” 31 U.S.C. § 6305. Since the Court construes the agreement between the
NRCS and the Parish as a cooperative agreement, damages cannot be implied; therefore,
the agreement is not money-mandating, unless the Parish can point to a specific provision
mandating a monetary recovery.
This holding is consistent with Anchorage v. United States. First, unlike the
contracts at issue in Anchorage, the agreement between the Government and the Parish is
labeled “Cooperative Agreement.” A1. Second, there is no claim here, as there was in
Anchorage, that the agency did not follow its own specific process for entering into a
cooperative agreement. Anchorage, 119 Fed. Cl. at 714. Third—and most important—
the Anchorage contracts provided for a payment by the municipality of Anchorage to the
government agency in exchange for the agency’s “specialized technical expertise and
input” and for a direct benefit for the government, namely, a service fee, enhancement of
access to a nearby military base and areas and facilities for its use. Anchorage, 119 Fed.
Cl. at 713-15. As this Court concluded in Anchorage, the agreements in that case went
“well beyond transferring ‘a thing of value’ to a local government” and “the value that
the Government was to receive [went] well beyond mere incidental benefit.” Anchorage,
Fed. Cl. at 713.
In addition, the Court notes that the Parish has not pointed to any specific
provision in the agreement contemplating money damages for breach by the NRCS. To
the contrary, the agreement provides that the Parish shall “hold and save NRCS free from
any and all claims or action whatsoever resulting from the obligations undertaken by the
Sponsor under this agreement or resulting from the work provided in this agreement.”
A4. In essence, the agreement language expressly bars exactly what the Parish is
attempting to do in this action.
b. The Cooperative Agreement Does Not Provide A Direct Benefit to the
Government.
To establish an enforceable contract with the Government, the Parish must
demonstrate: a mutual intent to contract, an exchange of consideration, lack of ambiguity
in offer and acceptance, and actual authority on the part of the government representative
to bind the government in contract. City of El Centro v. United States, 922 F.2d 816, 820
(Fed. Cir. 1990). “In the context of government contracts . . . consideration must render a
benefit to the government, and not merely a detriment to the contractor.” Metzger,
Shadyac & Schwarz v. United States, 12 Cl. Ct. 602, 605 (1987) (citations omitted).
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Here, because the NRCS did not receive a direct benefit, the agreement is not an
enforceable contract in this Court. Per the agreement, the Parish would carry out the
necessary debris removal by contracting it out, and the NRCS would reimburse it for the
actual costs. According to the Parish, the benefit flowing to the Government was the
restoration of a natural resource and a reduction in the amount of emergency funds that
the Government would spend in future flooding emergencies. Pl.’s Reply at 2-3. But this
is not the kind of direct benefit that one sees in Anchorage, one that would support the
finding of an exchange between the Parish and the Government. In Anchorage, in
addition to money, the city received the expertise of a government agency, and the
government received direct, tangible benefits—a service fee, a road, and facilities. Here,
the Government receives a generalized benefit, a cleared waterway that would reduce the
damage from future flooding. In Anchorage the government got a new and better port,
but this would not have been enough to find an express contract. This kind of
generalized benefit is the hallmark of a money grant from the government to a locality for
a worthy project that would have an incidental benefit to the government. Furthermore,
pursuing the Parish’s argument to its logical conclusion, every cooperative agreement
would become a contract since cooperative agreements often result in the government
paying for some kind of beneficial improvement. The crucial distinction is between an
incidental and a direct benefit.
The entire purpose of a cooperative agreement is to transfer a thing of value to the
local government from the executive agency. 31 U.S.C. § 6305. This is exactly what the
agreement did, it transferred money from the NRCS to the Parish for sediment removal.
While debris removal is a worthy project, it cannot be construed as providing
consideration (i.e.: a direct benefit) to the government in this context.
IV. Conclusion
For all the reasons stated above, the Court concludes that the agreement between
the Parish and NRCS is a Cooperative Agreement. Accordingly, the Court holds that the
agreement cannot be fairly interpreted as contemplating money damages, thus precluding
the Court’s jurisdiction under the Tucker Act. In addition, even if this Court construed
the agreement to contemplate money damages, no direct benefit flowed to the
Government, thus failing to establish the consideration necessary to form an enforceable
contract against the NRCS. As this Court lacks jurisdiction, the summary judgment
motions need not be addressed.
Therefore, the Court GRANTS the government’s motion to dismiss for lack of
jurisdiction. The Clerk is directed to enter judgment accordingly.
IT IS SO ORDERED.
s/ Edward J. Damich___
EDWARD J. DAMICH
Senior Judge
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