In Engage Learning, Inc. v. Salazar, No. 2011-1007 (Fed. Cir. Oct. 5, 2011), the United States Court of Appeals for the Federal Circuit clarified that when a contractor alleges the existence of an express or implied-in-fact contract with the government, that allegation is enough for a Board of Contract Appeals to have jurisdiction under the Contract Disputes Act (CDA). The Board should not, at the jurisdictional stage, determine if the contract actually existed; it should determine only that the allegation is not frivolous.
Background
In Engage Learning, the contractor submitted two claims for unpaid invoices against the Bureau of Indian Affairs (BIA) for services it provided in 2002 and 2004. The first claim was for teacher training and school site visits in 2002, which Engage claimed were added to an existing contract by two requisition amendments. These amendments were requested and approved by the contracting officer’s assistant and the Director of the Office of Indian Education Programs; however, neither amendment was incorporated into the contract or signed by the contracting officer.
When Engage submitted a claim for this work, the contracting officer (CO) denied the claim on the grounds that the “invoices are in fact the result of an unauthorized commitment made by a Government employee who did not have the authority to enter into an agreement on behalf of the Government.” Engage provided evidence that the CO’s assistant believed she had authority, and thus Engage believed it was an authorized commitment. Additionally, Engage presented an affidavit from its Vice President stating that the CO verbally authorized the amendments.
The second claim arose from training and support services for a single school in 2004, which Engage provided at the request of the principal. Engage alleged that it had a contract with the school’s principal under the No Child Left Behind Act (NCLBA), which allows a supervisor of a BIA-operated school to procure services without competitive bidding if 5 conditions are met, one of which is approval from the school board. Again, the CO denied this claim stating that there was no contract under the NCLBA because the required conditions were not met.
Board of Contract Appeals Decision
Engage filed an appeal from the CO’s decisions to the Civilian Board of Contract Appeals (BCA or “Board”). The Government moved to dismiss the appeal on the grounds that (1) the Board lacked subject matter jurisdiction to hear the appeal and (2) the complaint failed to state a claim for which relief may be granted. Alternatively, the Government moved for summary judgment on the grounds that the material facts were not in dispute and the Government should win as a matter of law.
The Board granted the Government’s motion to dismiss for lack of subject matter jurisdiction on both the 2002 claim and the 2004 claim. The CDA grants the Board jurisdiction over appeals taken “from a decision of a contracting officer of any executive agency . . . relative to a contract made by that agency.” (emphasis added). This jurisdiction is further limited by 41 U.S.C. § 7102(a) to “any express or implied contract . . . entered into by an executive agency.” The Board dismissed both claims holding that it did not have jurisdiction under the CDA because Engage failed to prove that it had either an express or an implied-in-fact contract with the government for the unpaid services.
Federal Circuit Decision
Engage appealed the BCA’s decision to the United States Court of Appeals for the Federal Circuit. The Federal Circuit found that the Board confused the standard for a motion to dismiss for lack of subject matter jurisdiction with a motion to dismiss for failure to state a claim. The Federal Circuit said that for the Board to have jurisdiction over a CO’s decision that arises “relative to a contract made by that agency,” the contractor need only make a non-frivolous allegation of such a contract. In other words, if the contractor alleges there was an express or an implied-in-fact contract with the government under which the claim arose (and all other claim requirements are met), then the Board has jurisdiction under the CDA. The Board should not weigh the evidence and determine if a contract existed when deciding a motion to dismiss for lack of jurisdiction.
The Federal Circuit found that the Board’s analysis, although labeled a dismissal for lack of jurisdiction, sounded more like an analysis dismissing a case for failure to state a claim. When analyzing whether the contractor has failed to state claim, the Board (or court) will determine whether the contractor alleged each required element of that claim – in this case, whether Engage alleged the required elements needed to prove the existence of a contract. The Board dismissed for lack of jurisdiction because Engage failed under claim 1 to prove the CO’s assistant has authority to enter into a contract and failed for claim 2 to show that the school board approved the contract. However, according to the Federal Circuit, while both of these elements was necessary for stating a claim upon which relief may be granted, neither was necessary for the Board to have subject matter jurisdiction.
The Federal Circuit reversed the Board’s decision with respect to claim 1 because Engage was not required to prove the CO’s assistant has actual authority to prevail in a motion to dismiss for lack of jurisdiction. Additionally, the Federal Circuit held that Engage alleged each element of an implied-in-fact contract and presented a genuine issue of fact as to whether the contract existed by presenting evidence that the CO’s assistant believed she had authority and evidence that the CO verbally authorized the modifications. Therefore, claim 1 should not have been dismissed for lack of jurisdiction or the government’s alternative motions to dismiss for failure to state a claim or for summary judgment.
As for claim 2, the Federal Circuit found that, while Engage’s allegation of a contract with the school principal was enough to show jurisdiction, the claim still should have been dismissed for failure to state a claim upon which relief could be granted. Because one of the required elements of a NCLBA contract was the school board’s approval, Engage should have addressed that element in its original complaint. By failing to allege that the school board approved the contract, Engage failed to meet the required elements of the claim, and thus it should be dismissed, but not on jurisdictional grounds.
The Federal Circuit noted that distinguishing between the different grounds for dismissal “is not merely an intellectual exercise without practical utility.” Rather, unlike a dismissal for lack of jurisdiction, a dismissal for failure to state a claim is a decision on the merits, which can prevent a plaintiff from bringing the claim again. With a dismissal for lack of jurisdiction, the plaintiff can correct the jurisdictional defect and possibly bring the same claim again. Additionally, the Board (or court) treats the facts differently under the two motions. In a motion to dismiss for failure to state a claim, the Board must accept as true all of the factual allegations in the complaint. However, in a motion to dismiss for lack of jurisdiction, only the uncontroverted facts are accepted as true. Therefore, the Federal Circuit emphasized the importance of separating the two motions and accurately addressing the standard for each before improperly dismissing a claim on the wrong grounds.
Katie Calogero is the attorney responsible for the content of this article.