S & E CONTRACTORS, INC. v. UNITED STATES
Argument of Geoffrey Creyke Jr.
Chief Justice Warren E. Burger: We will hear arguments next in Number 88, S&E Contractors against the United States.
Mr. Creyke you may proceed whenever you are ready.
Mr. Geoffrey Creyke Jr.: Mr. Chief Justice and may it please the Court.
This case involves the 1961 Federal Construction contract in which additional work and extra work doubled the original anticipated effort.
There was an administrative appeal pursued through the Atomic Energy Commission under the disputes process as it is popularly called which was won by the contractor and accepted by the Atomic Energy Commission.
However, on its own initiative, the General accounting office blocked payment of this, forcing the contractor into Court of Claims, and it is from then that the case is here.
In this Court, the Department of Justice contends that the intervention in this proceeding on the part of the Court of claims is not material.
We say it is the gravament of the entire situation and only by a review of all of these circumstances and a consideration of the impact of this, as well as, all of these circumstances can the court properly determine a solution to the problem which has been created by this.
The case involves the rights of the contractors, it involves the finality of the agency decision, it involves an interpretation of the so called Wunderlich Act of 1954 and that we ask that the Court hold that the finding by the Atomic Energy Commission accepted by it and not appealed by it as such be determined to be the final action of the Government and binding on the parties in this case.
Reviewing the history, this was originally a contract for a $1,272,000.00 to consume a 180 days starting on August of 61.
They would have build a large concrete test based at the Atomic naval reactor test station in Idaho.
The contract was not the security classified, it was a standard form 2323A type of contract with the usual (Inaudible) clauses for equitable adjustments of changes, suspension, the work, change conditions, and the time extensions in the regular standard disputes Clause.
There were six change orders which were agreed upon, an increased the contract price by a little over a $100,000.00.
However, the bulk of the claims for additional work were denied by the contracting officer.
The work was completed and accepted 325 days after the original time which of course threw it into winter work in the mountains of Idaho in winter.
The claims for additional compensation under the then prevailing practice and rules of the Atomic Energy Commission were referred to a hearing examiner.
During December of 62, conducted at 13 day full adversary hearing.
At the conclusion of this, he found for the contractor, however, this finding has never yet been implemented.
The costs of this work were borne by the contractor and they still remain unpaid.
The merits of the claims as such are not in issue, rather, it is the treatment of the disposition of them that is an issue.
Generally speaking, they are very ordinary type of claims, delay, inside access, additional concrete work, failure of the Government to furnish team, excuses for delay for unusually severe weather, order to accelerate and work around the clock alleging behind schedule when in fact the time extension would put the contractor on schedule and a back field claim.
Following the decision by the examiner for S&E contractors, there was an appeal by the contracting officer to the commission itself.
And there were two decisions of the commission itself in essence affirming the decision of the examiner making only one minor modification that had to do with the number of days and site access when they start out.
In other words, administratively, there was not only a determination by the contracting officer and by the examiner but the action by the full commission itself.
This is addressed with the general practice today throughout the Government where these cases are heard by Contract Appeal Boards and there is only one administrative determination.
The case was treated in the Court of Claims as being analogous to these types of cases.
While the negotiations were in progress with respect to the amount of the settlement as result of these determinations, a certifying officer asked the General Accounting Office for a ruling on $32,000.00 worth of items which were not directly related to these claims.
However, the General Accounting office on its own initiative is contending that it had a right to review the determinations as to substantial evidence, fact, and law, did so, conduct a review, and did block the continuation of the negotiations and any payment.
And after 33 months of consideration, rendered a 266 page opinion December of 1966 calling that S&E had no valid claim against the Government and in its own comments in that brief of the Government before this Court today, in fact arising this as an advance notice of disallowance.
Placed in this situation, the contractor brought suit in the Court of claims, a reference to the commissioner there resulted in his opinion recommending a finding for S&E contractors.
This finding would be based on a breach of contract, failure to pay the administrative award recognizing that the parties can contract for their own remedies, finding that the General Accounting Office was in excess of its authority, and particularly stressing that this was an ordinary type of case in which there was no issue of fraud or over reaching involved.
Unknown Speaker: Mr. Creyke.
Mr. Geoffrey Creyke Jr.: Yes sir, Mr. Chief Justice.
Unknown Speaker: I take it.
There is no question of fraud or over reaching here?
Mr. Geoffrey Creyke Jr.: Correct sir.
Unknown Speaker: Was there a reason why S&E waited so long to institute its action in the Court of Claims?
Mr. Geoffrey Creyke Jr.: The matter was under consideration for 33 months by the General Accounting Office.
During this period of time, the reasons were this; Practical consideration is one, two, the hope that the General Accounting Office could be convinced, one, that they had no jurisdiction and two, that the findings were correct.
Unknown Speaker: That is almost three years; there were no legal reasons why they have to withhold the suit?
Mr. Geoffrey Creyke Jr.: The law with respect to the right to claim a breach of contract had certainly not evolved to a point then, when you could make a determination, and in our judgment, that under those conditions, a breach had occurred, perhaps this was a judgment matter.
It involved of course, a very practical problem of contractor in these financial circumstances, starting another action in the Court of Claims which could easily have resulted in even greater delay.
(Inaudible), it might have been better to do so Your Honor.
Unknown Speaker: One last question while I have you interrupted.
Was the price that was sought by the certifying officer chronologically earlier than the decision by the commission itself?
Mr. Geoffrey Creyke Jr.: It was between the two decisions Your Honor.
There was a first decision of November 1963 where the commission granted a partial review and affirmed some of the other claims.
The partial review had to do essentially with the time extension.
That was in November, the request of the GAO was March of 1963 and the final decision of the commission itself was May 1963.
Following the decision of the commissioner, the Government sought request for review, review was granted.
The General Accounting Office filed an amicus brief in the Court of Claims and of course the Court of Claims opinion came down on a 4:3 decisions stating that as of no material difference how the non-payment came about.
If the case reached the Court, it would review it under the standards of the Wunderlich Act.
Essentially, the standards there would be the standards of supporting by substantial evidence that the plaintiff involved in this claims, and the opinion of the Court of Claims remanded the case to its commissioner for such review.
The dissent saw the case in what we believe to be the broader issues and the important issues that is, that is necessary for the Courts to give guidance and help the machinery of the Government in handling disputes processes as we will work out.
It pointed out that the Atomic Energy Commission with the representative of the Government in that case, that it sought another review.
The General Accounting Office was not a party and not authorized to act, the Department of Justices, his Attorney, was not authorized to act in the matter unless, the agency delegated with a responsibility of carrying out function sought its intercession.
Also, it was very strongly stressed that this will have a chaotic effect on the operation of the Disputes Clause which is so essential to the Government as well as to industry in doing business with the Government, and that people were entitled to certainty, and that under these circumstances with doubt existing, and with the right existing apparently in various parties, to take issue with the termination which apparently had been resolved between the parties themselves.
As Judge Collins in his dissents says that the Government would be foolish to pay any award.
In this case, we seek a holding that there was a breach of contract and the failure to pay this award and asked that the Court of Claims be reversed.
Now, here the Government seems to disclaim the General Accounting office, it asserts that its position is independent of that.
We do not agree with that in any way whatsoever, we feel as of the gravamen of the case.
The Government also claims that it has an independent right to set up these defenses in a proceeding ignoring what gave rise to the proceeding and ignoring altogether the impact of creating this vague, undefined procedure which gives absolutely no guidance to contractors, Government or industry other than to throw the whole procedure which has been established over a long period of time into a State of uncertainty.
The state of uncertainty, which will impact not only upon contractor but upon bankers, sureties, suppliers, their subcontractors, and others.
This developed a vehicle for Disputes Clause has proved very workable and very advantageous to Government and to contractors over a period of years.
It provides a means whereby the Governments work can go forward, it can change and improve the product or the infrastructure as it sees fit.
Permits smaller firms to bid, because they finance the contract of Government fund, they pay 90% as they go along and note that in the changes and disputes article, the contractor must proceed right there.
This power requiring a contractor to proceed as the contract is interpreted by the Government is the key to the whole thing and the key to what happened here.
He had an obligation to go forward and do this work even though his work was doubled and even though he was barely able to fund it.
If a decision is subject to a collateral attack, that certainly no longer exist and parties will no longer in our judgment want to cover Government work or if they do so they will set up large contingencies in any bid they make and it will disadvantage everyone.
This Court has held repeatedly that the parties have the right to contract for their own remedies.
The uncertainty that arises from this goes to the fact that when the decisions of this Court in 1951 and to and the Moorman and the Wunderlich cases were decided, the court in effect announced this principle and invited Congress to change the standards from that broad being the sole ground of review as established by those decisions.
Congress did and passed this Act which is negative in nature, not jurisdictional.
It does not give powers to anyone, it merely says that no provision of a contract can limit the judicial review to cases where fraud is alleged provided that the decisions of the heads of an agency will be final unless they are fraudulent or capricious or arbitrary or grossly erroneous, so as to imply bad faith or is not supported by substantial evidence, and that no contract shall have a provision making a decision of an official, final, and plastered into the wall.
The interpretation of this presents a very perfecting Clause so acknowledged by anyone who has had to deal with it.
In the initial hearings, when it was proposed that an act fee set up, that there was provision in the bill then proposed that a Comptroller General be set up as a layer of review along with Courts of competent jurisdiction.
Objection was made to this by industry, by attorneys and by officials of the Government agencies who were concerned of creating another layer of review and impacting on their ability to implement the Government’s business.
That provision was taken out of the bill and in the summation of the report, the final draft of the bill that it stated very clearly that there was no intention to change the powers of the General Accounting Office.
It is most difficult to separate the position of the Government and the General Accounting Office and we say they are inseparable.
We say it was invasive that the General Accounting Officer would have certain powers to intercede in these proceedings.
We believe it was intended that they be limited to the powers that they had before the Wunderlich Act in 54, was not adopted.
And we believe that those powers only relate to protect the Government from fraud and overreaching or with respect to anything which would be of an auditing nature.
In other words, matters having to do with physical aspects of the law and not matters having to with the substance of the contract itself.
On that, we say that the Atomic Energy Commission has confidence by many decisions of this Court is the empowered sole authorized agent of the Government and not only by the law, the Atomic Energy -- excuse me?
Unknown Speaker: In that connection, the commission’s decision still stands is it not?
It has never changed its determination.
Mr. Geoffrey Creyke Jr.: That is correct.
Now, I answer that this way.
The Department takes the position in this brief, in this Court.
That the acquiescence in the opinion of the Comptroller General of December 66 constitutes an action, we would say otherwise.
We say that practically speaking, being told by your banker you have no more money and acting accordingly, plus being susceptible, being personally back-charged for payments so made does not create an independent action.
Further, the letter which is Exhibit A of the petition on page 10 of the appendix clearly indicates that the commission says, it will take no action inconsistent with the ruling of the Comptroller General.
Chief Justice Warren E. Burger: Did the commission participate in any way on the Court of Claims case?
Mr. Geoffrey Creyke Jr.: No Your Honor.
The Department of Justice represented the United States in the Court of Claims.
The General Accounting office participated in the Court of Claims.
Two more points.
One, there is no need for the General Accounting Office to be involved in this case.
The Government is completely protecting the Atomic Energy Commission as the management, technical, legal, staff.
In this instance they had an extended set of review, three decisions at three levels, the normal case that is sufficient.
They will undoubtedly, under these circumstances, that the governments occasionally, there were mistakes made in favor of the contractors, mistakes made in favor of the Government.
But this is the way a $50 billion per annum business has to work.
By and large absence and propriety, those provisions have proved the advantage of everyone and should be permitted to stand.
If I may address it in this context Your Honor.
Chief Justice Warren E. Burger: Very well Mr. Creyke.
Argument of Irving Jaffe
Mr. Irving Jaffe: Mr. Chief Justice and may it please the Court.
The issue in this case is simply this, whether in a Disputes Clause decision, the Government has the right in a Court to challenge a decision favorable to the contractor.
In this particular case, the decision of the Atomic Energy Commission or that of its hearing examiners which was not disturbed is still the only decision that was handed down.
It is the only decision that is before the Court of Claims, it is the only decision that the pleadings placed before the Court of Claims and to which the answer and petition were addressed.
The General Accounting office did not change that decision.
The Department of Justice did not change that decision.
There has been no review in the sense that the petitioner alleges which has altered or in anyway interfered with the Atomic Energy’s Commission except to subject that the decision itself was not final and not being final, that payment could not be made there under.
Now, the Atomic Energy Commission may disagree with that.
It may feel that the decision which is handed down is sound.
Even so, it seems to me it is the height of prudence.
If the suggestion is made to it by GAO, by its own General Counsel, by any respected attorney that if there is doubt cast on whether or not the criteria for finality as enunciated in the Wunderlich Act have not been met, then payment should not be made as one way in which judicial review can be compelled, so that the standards of finality may be applied to that decision.
Furthermore, it might very well be suggested and if it is not so, that payment would have been improper under those circumstances, because payment is only required in connection with a final decision of an agency or a board of contract appeal.
Now, the General Accounting Office did nothing more than review this.
They reviewed it in response to a request from a certifying officer.
That certifying officer was acting under a statute which gave it -- give him the permission and the authority to seek an advanced opinion as to what the accounting treatment would be in the event a payment which he was asked to make be made.
The General Accounting Office in considering that, that request was discharging a statutory duty.
In discharging that statutory duty, it was required to determine whether or not and if this payment were made and it was making a post audit, would it accept to it, would it disallow it.
And in making that determination, it must apply of course the applicable principles of law.
In a disputes situation, the only applicable principles of law are the standards provided by the Wunderlich Act.
The Wunderlich Act says that a payment that is a decision will be final, if it is not fraudulent, if it is not arbitrary or capricious, is supported by substantial evidence, or is not so clearly erroneous or not so grossly erroneous as to imply bad faith.
Now, those are the principles which he must apply.
And in applying those, he came to the conclusion that if he were to review this, he does not think that the decision met those standards, therefore, he would be compelled to disallow it.
And he so advised, it was only advice to the commission.
What he told the commission was, that if you make this payment, I will be compelled to disallow it.
He did not say you cannot make it.
He could not say you cannot make it --
Chief Justice Warren E. Burger: But you think that is deterrent is it not?
Mr. Irving Jaffe: Yes, it is a deterrent, but it is a not a legal deterrent.
It is a deterrent in that no one wants to risk having a payment disallowed.
But how bad a deterrent is that Mr. Chief Justice, if you know that the matter can be submitted to a Court, is submission of an issue to a Court for final determination.
Such a great risk or is it such a great burden that everyone should shy clear of it?
All that it does and all that the General Accounting Officer can do is take an action that will precipitate Judicial review.
Would it have made any difference if the payments had been made?
And then the Department of Justice at the request, either of GAO or of the agency, had sued for a three turn on the ground that it was an illegal payment, because it was not paid in pursuance of a final decision.
The Judicial review would have occurred one way or the other.
Chief Justice Warren E. Burger: Where would they amplificated that?
Mr. Irving Jaffe: In the District Court, because in the Court of Claims, the defendant is always the United States and not the plaintiff.
Now, the petitioner has alleged that the gravamen of this suit is the intervention and inter-possession of the Comptroller General.
It is the contention of the Government that the role of the General Accounting Office played in this case is wholly irrelevant to the issue, the issue being whether or not, a favorable decision to a contract that maybe challenged by the Government in Court.
Now, the action of the General Accounting Office is in our opinion irrelevant because it did not precipitate the suit.
And even if it did, it does not make any difference because that only gives rise at that point, whether or not, we can challenge it.
But I do not believe that it precipitated the suit any more than the certifying officer precipitated the suit in addressing an inquiry to it.
What did precipitate the suit by the petitioner instead of by the Government was the failure of the Atomic Energy Commission to make payment.
Now, the Legislative history which the petitioner’s brief devotes a good deal of space too is, in our opinion, significant only and that, it shows that Congress did intend or access to the Courts to test the finality criteria of that Act to be available to both parties and not to one.
The petitioner, it seems to me, goes far afield when he addresses his remarks to the role of the GAO was at one time intended to play in this situation.
Some of the statutes, not the initial one, shortly thereafter, included the General Accounting Office as a level of review equal to that of the Courts.
At that point, there was much opposition to the inclusion of the General Accounting Office.
The opposition came from industry and from the Government and from the private party.
But this review is not the review that was ever granted.
That review was the right to change that opinion, to modify it, reverse it, to make a binding determination on both contractual parties just as would a court.
Now, that was eliminated.
It no longer has that, it did not do it now.
This review did not change any part of the decision, that being so, the legislative history is only helpful for the other aspects for which it is mentioned by both parties and that is, whether or not, the congress intended that Judicial review would be available to both parties, the Government and the contractor.
And in that connection, there were proposals submitted to the congress expressly to limit judicial review or access to the Courts to seek judicial review to the contractor alone.
The Congress did not adopt any of those proposals.
One of those proposals was made by the American Bar Association.
Their proposal confined judicial review to one requested by the contractors.
This was not merely something that submitted to the Congress which may have been overlooked, because one of the leading witnesses before the committees, Mr. Franklin M. Schultz, addressed himself specifically to that problem.
He pointed out that the bill as proposed and as enacted would on its face appear to make judicial review available to both parties.
And when Congress has been tied, asked them what was pointed out, that was precisely what it would do is to show that is what disturbs me.
Precisely what disturbs him and then proposed that the ADA proposal which confided only to the contractor be adopted.
And that was not adopted.
The congressional committee at least that was considering it was well aware of the request by some few people that it be limited to the contractor.
Not only that, Mr. Creyke says that at no time did anyone assume, that anyone, but the General Accounting Office would be an avenue for review on behalf of the Government.
The congressional history shows that Mr. Congressman Willis was asked specifically the question, who on the part of the Government would ask for the judicial review and his response was the Department of Justice, the Department of Defense as well as the General Accounting Office.
There was nothing here that went by unnoticed.
And the testimony, even the report, indicates very clearly that the lack of judicial review in essence of -- as a result of this Court’s decisions in the Moorman and Wunderlich cases, that the lack of judicial review, meaningful judicial review to either of the party worked as much to the disadvantage of the Government as it did to the contractor.
And that both parties should have a day in Court and have access to the Court for review in accordance with standards which the Congress believed would be more meaningful.
And that is precisely what the Wunderlich Act did.
Chief Justice Warren E. Burger: Let me now clarify little bit, if I may Mr. Jaffe.
Suppose this advice of the Comptroller General, the advice not to pay had been disregarded.
Suppose the Atomic Energy Commission simply said, in effect, we have confidence in our conclusion and paid the money.
Then the Comptroller General might assume for the moment, if you recommended to suit for over payment.
The ultimate decision on that would be made where?
Mr. Irving Jaffe: At the Department of Justice.
Chief Justice Warren E. Burger: The Department of Justice would then become really the -- for all practical purposes but final reviewing authority would they not?
Mr. Irving Jaffe: Yes, if you use the word review and the sense of making the mitigative determinations which is the responsibility imposed upon it by statute.
In that sense, yes, it reviews every litigation request that comes before it.
We do not institute suit at every request of the agencies nor do we defend every suit in which an agency is sued.
Indeed, in a situation identical to this one.
Not too long ago where an agency did refuse to make payment in accordance with a board of contract appeals decision, and the contractor sued in the Court of Claims.
We did not answer that case because our review preparatory to filing an answer convinced us that the decision of the board was supported by a substantial evidence, did meet the criteria of the Wunderlich Act and when the agency continue to refuse to pay, we consented to the entry of judgment.
Chief Justice Warren E. Burger: What happens?
Mr. Irving Jaffe: Pardon.
Chief Justice Warren E. Burger: What happens if not frequently it is rather uncommon occurrence.
Mr. Irving Jaffe: Well, I think I would have to say Mr. Chief Justice that is an infrequent occurrence.
That is the only instance of which I know.
I think it is significant too, especially since the petitioner has painted a black picture of what happens if you affirm the Court of Claims’ decision in the contracting field, that since at least, the time when the Court of Claims decided the Langenfelder case in 1965 and it set forth their view that the Department of -- the Government rather had a right to judicial review under the Wunderlich Act and to challenge a board decision.
We have not had any flood of litigation in which that has occurred nor even more significantly for the past two-and-half or more years since the attorney general had issued his opinion of January 1969, in which he encouraged the agencies to review themselves, the decisions of the board, and if they thought that one of those decisions did not meet the criteria, to sent it to the Department of Justice for an advance opinion.
We have had very, very few and as far as I know, none in which we recommended that the decision be challenged.
So I do not anticipate the flood at all.
Justice Harry A. Blackmun: Mr. Jaffe
Mr. Irving Jaffe: Yes sir.
Justice Harry A. Blackmun: Is your remark you have just made, your explanation of why this issue arises only in 1971?
It seems to me it is a late date for it to arise.
Mr. Irving Jaffe: Well, it is.
I am not certain Mr. Justice Blackmun that I can give you an adequate answer.
I do not know why it has arisen in this form or in any form at this time because I had always been of the impression that it was a generally conceded right for the Government to challenge a board decision that was favorable to the contractor.
Indeed, in the Langenfelder case, the Court then, Judge Davis, in a footnote or perhaps in the body lists, many cases in which precisely that was done since at least the Wunderlich Act.
It is very difficult to go earlier than the Wunderlich Act, because there was very little to review, on kind of work both ways, neither the Government nor the contractor could upset a decision except in case of fraud or over reaching.
Justice Harry A. Blackmun: For, so the Wunderlich Act is what 20 years old?
Mr. Irving Jaffe: 1954 it was enacted.
Justice Harry A. Blackmun: Case is 20 years ago?
Mr. Irving Jaffe: Yes, yes it is.
Now, I would like to touch briefly on the role of the Department of Justice in all litigation.
I have alluded to it already.
But as this Court knows the relationship between the Department of Justice and its client agencies, if I may refer thast way to the various department and agencies of the Government is not the same as the ordinary attorney client.
Because by statute, the Department of Justice must make a judgment with respect to whether litigation shall be pursued or instituted or whether or not, it shall be defended.
That requires it to make a judgment on the merits of the case.
His client cannot discharge him.
His client, if you will, is stuck with the Department of Justice.
Now, the Department of Justice under those circumstances is charged with the responsibility of a much more serious review of what is presented by any litigation or what if, that is either defensive or prosecuted and that decision is an important one.
Therefore, and in this case, I wish to point out the Department of Justice was not involved at any stage in the dispute process prior to the decision of the Atomic Energy Commission.
It was not involved in this case after the decision of the Atomic Energy Commission and did not get involved until we received a copy of the petition that had been filed in the Court of Claims by this plaintiffs.
At that point, we did what we are required to do.
We examined it, we examined the petition, we looked at the record before the Atomic Energy Commission.
We determined as we had to, whether or not, there were any Wunderlich Act defenses that could be interposed to this.
We came to the conclusion that there were.
In fact, we came to the conclusion that there was such a defense that ought to be interposed with respect to each and every claim that was asserted in the petition, say one.
Well, I am not even sure of that.
We paid one but I think we found something objectionable to that too.
Now, that is doing only what the law requires us to do.
We must do that for the petitioner to subject that we had only one function to perform, and that is to inquire whether there have been fraud or over reaching.
And otherwise, to consent to the entry of judgment even if it was clear that there was no evidence to support the decision.
Or that, it was clearly erroneous as a matter of law or that Section 322 came into play of the Wunderlich Act, that is a question of law, was decided wrongfully, or should we submit it to the Court.
We did not reverse the decision, we did decide that the Court ought to pass on it, and that is what our answer does, confined to the record before the Atomic Energy Commission.
No one placed before the Court of claims, the lengthy opinion of the General Accounting Office.
No one submitted to the Court of Claims, saving our answer.
Any of the analysis of the Department of Justice has though or an opinion or a review which have any, any effect on this decision or changed it in any way.
That is the role of the Department of Justice.
It is its traditional role, it is a statutory role, that is not a review in the sense a petitioner uses it or that the dissent in the Court below uses it.
Now, I wish to point out here that some of the underlying argument that must necessarily appear in this case, is the suggestion that the Boards of Contract Appeals, I saw this suggestion, I will state it specifically.
Act for the head of the department that they are responsible to the same authorities as is for example the contracting officer.
In a broad sense that is true.
The board of contract appeals however, and the Atomic Energy Commission or the hearing examiner if you will in this case act solely in a judicial capacity.
We call it quasi judicial because they are not judges, but their sole function is a judicial one.
The proceedings that appear before them, that go on before them are adversary ones.
To the extent that any administrative proceeding can be, particularly, in the last few years, it is a full due process hearing based upon a record, no ex parte communication.
Now, the suggestion must be, if the Government cannot challenge the decision of such a body, that, that body is not in partial, that that body always renders a decision, which the Government would have no reason to question.
The fact of the matter is otherwise.
As with any judicial body, they maybe wrong, they can always issue a decision which maybe erroneous as a matter of law, just as any Court may.
The evidence upon which they rely may not amount to substantial evidence.
I should add that there is no suggestion, I am sure no rational suggestion such is made one of the dissent below that, what we do here is try to re-weigh the evidence in the sense of seeing, if there is a preponderance of evidence to overcome the findings of the Court below or a less than a preponderance to overcome the board below, that is not so.
We know what substantial evidence is, we do not retry the case and neither does the petitioner retry the case in the Court of Claims as he suggests when it is challenged.
Because all determinations are made on that record as this Court said it must and it be on the case.
Chief Justice Warren E. Burger: Mr. Jaffe, we assume that the Comptroller General was correct on all his points, what is the dollar difference between his positions, and if I can put it in that rough way, and the amount that the Atomic Energy Commission was prepared to pay out.
Mr. Irving Jaffe: No amounts have been determined.
The Comptroller General determine in no amount --
Chief Justice Warren E. Burger: They must be known generally, are they not?
Mr. Irving Jaffe: Well, generally they may because at the time that the Comptroller General expressed his opinion that the Wunderlich Act standards would not be met by the decisions in this case.
The negotiation was going forward between the contractor and the contracting officer to determine the amounts that would be due under the claims that had been approved and allowed by the commission and the hearing examiner.
Indeed, the claims that were sent over by the certifying officer, were part of these disputes.
Those were the ones that in the commission’s first order, it had decided not to review and in which the amount would fit.
For that reason, the certifying officer was requested to pay it.
And it was that request that he sent over to the General Accounting Office.
Now, the General Accounting Office went into all the claims because one of them, at least one of them has represented a claim by us, that is an offset by us, that would depend on whether or not the contractor had been entitled to extensions of time because of delays.
But that claim was still under consideration.
Chief Justice Warren E. Burger: What is the resolution of the basic problem then?
Mr. Irving Jaffe: Well, let me --
Chief Justice Warren E. Burger: appreciation.
Mr. Irving Jaffe: In this particular case, assuming that any of the claims of the contractor are upheld either way, either as result of judicial action or by this Court saying that the action has already been taken and no one can question it, there still would have to be negotiation between the contractor and the Atomic Energy Commission.
No amounts have been determined.
I wish to add --
Chief Justice Warren E. Burger: Not to be subject to the same sequence of events?
Mr. Irving Jaffe: Yes, as a matter of fact --
Chief Justice Warren E. Burger: But differently.
Mr. Irving Jaffe: Yes, as a matter of fact, the Commission in its decision in sending it back to the contracting officer, did so expressly would be subject to return to the Commission if there was any objection or any dispute with respect to the amounts.
Yes that is quite so.
I wish also to point out that this Court and the Court of Claims will never know quite properly what the difference is between the GAO opinion and the Atomic Energy Commission.
Because the GAO opinion is not properly before the Court nor may it consider it.
Now, the commissioner -- the GAO opinion is before the Court in an indirect way because the Court’s commissioner asked for it and got it, it is a public document.
Chief Justice Warren E. Burger: Did he make any specific findings with respect to any portion of the Comptroller General’s report?
Mr. Irving Jaffe: No, except -- not, no, not with respect to the report.
No one has considered and no one has ever suggested, at least with all the Comptroller General, that his analysis is before any Court.
It is only the decision of the atomic Energy Commission that is being subjected with judicial scrutiny, no other opinion.
Now, I would like to advert to a point that I should have made sometime ago and started to.
I believe that the statute itself requires no record to legislative history for its clarity except, as I indicated earlier to show that it does contemplate; it was intended to provide for access to the Courts for judicial review for all parties.
I think our brief amply make reference to the areas of the legislative history which support that.
Now, the -- strangely, the petitioner now says that we have access to the Courts only for fraud or overreaching.
In other words, that the Wunderlich Act created standards only for the benefit of one party.
Of course, both parties were subject to the fraud test for over turning an opinion.
But now, only the Government is still held to that standard but not the contractor, the contract that has a much more liberal law, standard of review.
He can receive a reversal if the board was wrong as a matter of law or if the findings were not supported by substantial evidence.
The Government they say however must show fraud no matter how wrong their board’s decision is, the Government may not have a Court, not itself, have a Court turn all attorneys or if it is not supported by substantial evidence or indeed any evidence, the Government is not free to have a Court pass upon that.
Now, that I submit is directly contrary, that theory, that hypothesis to the language of the Wunderlich Act.
The Wunderlich Act says that no provision of any contract entered into relating to finality of any decision of the head of the department shall be pleaded in any suit.
But such a decision shall be fined, now such a decision means any decision.
If it is not fraudulent or capricious etcetera.
Now it also says that it may not pleaded as being limited to fraud that is not good because of fraud but the petitioner says that that is the only allegation we can make.
He says the Government is required to defend only on that basis, not the other.
I believe that the argument is suspicious and I believe that the Congress intended and the Congress did provide standards for review and those standards for review are applicable to both parties and it is in the language of I believe the report, a two ways spree.
Chief Justice Warren E. Burger: Do you see any ambiguity Mr. Jaffe or lack of clarity between the main body of Section 321 and that proviso? Do they meet end to end or is there a gap there?
Mr. Irving Jaffe: No, I do not think there is a gap Mr. chief Justice, I believe that in the first sentence or the Clause before they proviso is specifically Congress's intention to overcome in so many words, the Wunderlich decision.
Section 322 overcomes in so many words, as I see it, the Moorman decision.
And the proviso sets forth the standards that Congress thinks should form the scope of judicial review for the decision -- or review of the decision.
I believe that is a cohesive law with no inconsistency.
Because you will see that in the proviso they do include fraud.
Chief Justice Warren E. Burger: Yes, but then there is a catch all or capricious or arbitrary or grossly, so grossly erroneous as to imply bad faith.
Some critics of the proviso have suggested that this was giving one hand and taking away with the other.
It is just not clear frankly to me that the things could be -- .
Mr. Irving Jaffe: Well I must admit that I considered it clear and had no difficulty between the two provisions.
Chief Justice Warren E. Burger: Very well.
Mr. Creyke you have 12 minutes left.
Rebuttal of Geoffrey Creyke Jr.
Mr. Geoffrey Creyke Jr.: Thank you Your Honor.
I would like to just question one or two things that the assistant to the Attorney General had said and make final comment.
With respect to the recitation of the history of the Wunderlich Act and the exchange between Congressman Willis and Franklin Schultz is where we have on page 8 of our reply brief continued the discussion which the Government had worked to point it out there.
In the final exchange, Mr. Willis said to Mr. Schultz, this judicial review referred to in that passage there referring to a review by the GAO.
And GAO has been left deliberately out as compared to S24 or that is persuasive sir.
In other words, the exchange was not included in the Government’s brief or in the Government’s comments here.
With respect to the opinion of the Comptroller General, it is pointed out in that as well as in its old comments which are in the appendix to the Government brief in this case, that S&E contractors had no valid claim against the Government, they are quoting in the appendix here their determination.
Also, as I have stated previously, they could describe that action as an advanced disallowance of the payment.
The Government has undertaken to state that we, state that the Government has no rights in situations other than fraud.
Our position is not advisable, our position is that, the Government’s rights have been properly protected by the agency, truly qualify personnel and legal staffs under normal circumstances that deal with the routine business.
And that the certainty and finality and the powers of that agency to deal with commissions and responsibilities assigned to it demand the Government and for contractors that it carry out those powers without being susceptible to collateral attack in ordinary circumstances.
No one has ever denied and indeed the Justice Department has brought out in the opinion of the attorney general in 1969 that it has a common law right to pursue whatever remedies exist for payments under mistake of the law or mistake of the fact.
The reference to the Langenfelder case, I respectfully disagree with two.
There are one or two cases cited in the Langenfelder opinion where in the dictum, Judge Davis did make some comments with respect to the powers of the General Accounting Office.
However, an examination of those cases would show that none of them was in any such a review as this ever conducted.
In other words, a comprehensive review of a complicated interrelated claim essentially involving questions under the contract.
One of the cases said in the Langenfelder involved a back charge after termination and other required the right to recover back interest from the contract of which he had recovered from the State of California under an agreement where there was cost plus contract.
But in no case, was there a comprehensive and factual review such as this.
And in fact, in the decisions of the Court of Claims, to the best of my knowledge, that issue has not been raised with respect to this point.
We raise the issue not because we are here to tell the Government how it should be run, we would rather not, we would rather, you collected our money in 1961 or 2 or at least in 1964 and going on about our business.
Instead, we lie here inert while other agencies assert what we conceive to be essentially abstract powers.
The Government has complete control of the Government contract, the regulations and indeed Congress, overall interpreted by this Court.
If they wanted to as the Department of Transportation has recently done and set up the precise vehicle for a review of instant, Board of Contract Appeal’s decision, they can do so.
But in doing so, I think it will destroy the efficacy of the changes, clause and the disputes procedure, and it did affect and detract contractor’s interest in participating in Government works.
I seriously question whether the agency's desire the result of which the Court of Claims, majority opinion would yield in this case.
Where does the powers stop?
This Court has said clearly and unequivocally in the Mason & Hanger in the amnesty cases where there is a delegation of a factor like function to represent it to the United States is not going to be challenged by any one or that the department expressly ruled in that case.
This un-presented action of work is a disaster in this contract.
It spent ten years flat on its back, unable to proceed, still not repaid for the money expanded.
I ask this Court to deal with the whole problem to restore the disputes process to the manner in which it has judicially worth and which will adhere to the benefit, contract, as Government and the like.
Thank you very much
Chief Justice Warren E. Burger: Thank you Mr. Creyke.
Thank you Mr. Jaffe.
The case is submitted.
Argument of Geoffrey Creyke, Jr.
Chief Justice Warren E. Burger: We'll here arguments next in number 70-88, S & E Contractors against the United States.
Mr. Creyke, you may proceed whenever you're ready.
Mr. Geoffrey Creyke, Jr.: Mr. Chief Justice, may it please the Court.
This case is also here for re-argument, and it comes from the United States Court of Claims.
It involves the finality under a 1961 Federal Construction Contract of an administrative disputes decision favorable to the contractor, allowing payment for certain routine contract changes, which decision was accepted by the contractor and by the agency, the Atomic Energy Commission.
What was collaterally attacked by the Comptroller General on his own initiative precluding payment and forcing us to suit in the Court of Claims.
There is no issue as to the authority to enter the contract, obligate funds or indeed to conduct the disputes process.
Neither is there any allegation of any fraud, wrongdoing or impropriety whatsoever on the part of anyone connected with the contractor or the AEC.
The matter is simply one in which we say the Comptroller General in an overreaching of his powers has blocked payment of the resolution of this matter under the disputes process, forcing the contractor into litigation.
The Department of Justice here, takes the position that the action of the Comptroller General is immaterial and although it is not supported by the Atomic Energy Commission in it's pursuit of this, nevertheless contends that this creates a right of judicial review of this procedure.
The case was decided by the Court of Claims in a 4 to 3 Opinion, the majority holding that regardless of what precipitated the litigation, there would be a judicial review conducted under the standards of the Wunderlich Act of 1954.
And the case was remanded to the Commissioner of the Court of Claims for hearing on the merits.
Therefore the case is not here on the merits as such, but on the question of the finality of this determination under the disputes process and the rights of the contract, to which he is asserting to hold that disputes process having been accepted by the agency was final.
And it is not subject to collateral attack.
The case therefore involves a contract between the agencies and an interpretation of this Wunderlich Act.
If I may briefly review the history of the case itself, it is laid out as a chronology on page one of the appendix.
It was a Lump sum competitively bid Federal construction contract to build a portion of the Atomic Reactive Test Station for the navy in Idaho.
The original sum was $1,272,000 and the contract performance period was 180 days or to run from August 1961 to February 1962.
The contract was entered into on a US Standard Form 23, 23A and so forth, well with the contact of the 1953 edition with the normal and usual act, with adjustment clauses for changes, change conditions and other factors in the contact.
It worked, however, due to extra work and extra time, actually consumed 325 days or in effect approximately double the time of performance and the expenditures involved.
Six claims arose out of this and amounting to $1,950,000 and claims for an additional 120 days in time extensions.
They are routine claims.
Nothing extraordinary other than the magnitude of them in relation to the basic contract and the type of thing that is encountered in almost all federal construction contacts.
Denied by the Contracting Officer, a timely appeal taken, they were referred by the Atomic Energy Commission under it's then existing practice to an examiner, who heard in a 13-day hearing, the claims in an adversary proceeding found in December of 1962, for the appellant here on liability.
The matter was remanded by him to the contacting officer to negotiate quantum.
The Contacting Officer appealed to the commission itself.
This proceeding to this extent being a little different from your normal Board of Contract Appeals type of proceeding which is prevalent throughout most of the Federal departments today.
The full Commission --
Justice William J. Brennan: Including this Commission, Mr. Creyke?
Mr. Geoffrey Creyke, Jr.: Sir today, they have a Board of Contract Appeals, just as does the Department of Defense does, yes sir.
On November 1963, the full Commission reaffirmed some of the claims and granted a review by the full Commission on several, mostly pertaining to time extensions.
In May 14, 1963, the Commission itself in a formal act affirmed the claims other than a slight modification on one regarding time of site access which it remanded for negotiation, and directed the contract --
Justice William J. Brennan: Do I gather that today, that kind of action would be taken not by the Commission itself required by --
Mr. Geoffrey Creyke, Jr.: By the Atomic Energy Commission Board of Contract appeals which is very much like the counter part of The Armed Services Board of Contract appeals, yes sir, Your Honor.
There was this remand to the contracting officer again in May of 1963 then by the full Commission, but in the meanwhile the dispersing officer had addressed an inquiry to the General Accounting Office regarding certain set offs involving about $32,000, items which were independent of the merits of the claims themselves, so found by the Commissioner of Court of Claims who reported on this.
But the request which went to the General Accounting Office expressly stated that it was not to be construed as a request for a review of or concurrence in the decision.
Nevertheless the General Accounting Office did contending that it had a right acting in an executive capacity and under the standard of the Wunderlich Act to review the entire decision, did so taking 33 months to do it and in a 260-page opinion, set aside the entire decision.
It allowed not one set, it allowed not one day's time extension and in it's own papers filed in these proceedings, it characterizes this action as an advanced notice of dis-allowance.
Justice William J. Brennan: You said they set aside, is that what GAO did or --
Mr. Geoffrey Creyke, Jr.: Perhaps I inadvertently used the word set aside, I should have said, they simply blocked the payment of this taking the position that the contractor was not entitled to any compensation and --
Justice William J. Brennan: And suppose despite GAO's expressing disapproval, AEC had gone forward nevertheless and paid it, now what would have been the risk in making the payment that the members of the commission would tell you?
Mr. Geoffrey Creyke, Jr.: I would suppose they would be subjected to the possible charges personally or their bond being charged by the Comptroller General, with the amount so dispersed if his position had --
Justice William J. Brennan: And the amount involved was about a million dollars, wasn't it?
Mr. Geoffrey Creyke, Jr.: Sir, the amount claimed was $1,950,000.
Justice William J. Brennan: Well, I mean you agreed settlement was for how much?
Mr. Geoffrey Creyke, Jr.: Well there was never an agreed settlement.
Justice William J. Brennan: Oh!
Mr. Geoffrey Creyke, Jr.: The examiner found liability, the commissioner affirmed liability --
Justice William J. Brennan: So the amount had not been fixed?
Mr. Geoffrey Creyke, Jr.: The amount had not been resolved.
Justice William J. Brennan: Now whatever it was --
Mr. Geoffrey Creyke, Jr.: It was in negotiation, the amount claimed was of $1,950,000.
Justice William J. Brennan: Well, if the payment had been made, if a settlement that been agreed upon and the payment made, the million dollars whatever the amount was, then the members of the commission ran the risk by paying it of the personal liability?
Mr. Geoffrey Creyke, Jr.: Correct sir, or a liability under bonds or the Dispersing Officer might have run that risk.
That is not altogether [Attempt to Laughter] clear to me to the full extent of that --
Justice William J. Brennan: But I expect it --
Mr. Geoffrey Creyke, Jr.: It would be as we view it, a total deterrent to making a dispersion.
Justice William J. Brennan: But if you or I were members of the commission, we'd hesitate twice, were that sort of (Inaudible) making the payment.
Mr. Geoffrey Creyke, Jr.: Agreed, quite agreed, Mr. Justice White.
Justice John Paul Stevens: What happened to the petitioner in the meantime, petitioner still in business?
Mr. Geoffrey Creyke, Jr.: Sir the petitioner is not in business.
He has been unable to continue in business ever since this.
Justice William O. Douglas: Is there anything in the record about this?
I don't want to pick up every time.
Mr. Geoffrey Creyke, Jr.: I would say there is no -- nothing in the record itself to this effect, bearing in mind sir, that the record as such can only be the record of the Atomic Energy Commission [Attempt to Laughter] proceeding as reviewed under the motion for summary judgment proceeding in the Court of Claims.
Chief Justice Warren E. Burger: The claimant has and if they receive some money, will they receive interest from the time when it was due?
Mr. Geoffrey Creyke, Jr.: Under the present State of the Law, no sir.
Chief Justice Warren E. Burger: Court of Claims cannot make an allowance of interest as such, can it?
Mr. Geoffrey Creyke, Jr.: No it cannot.
There have been some decisions in recent years which have enabled the Court of Claims to recognize that in an overhead expense certain interest occurring during a period of extended overhead while that work was being performed, but there is no basis for allowing interest for the period beyond the time when the contract was completed which was of course in 1962.
Chief Justice Warren E. Burger: It would take special legislation to treat that aspect of the problem, I imagine?
Mr. Geoffrey Creyke, Jr.: I'd think it would.
There is a remote possibility [Attempt to Laughter] that had been discussed that one might go for an amendment without consideration under Public Law 87653, but I -- that these unprecedented of this, simply serving as run through I think.
Justice William J. Brennan: Mr. Creyke in the -- then you had to bring the lawsuit?
Mr. Geoffrey Creyke, Jr.: Correct.
Justice William J. Brennan: Now in that lawsuit, government defended of course, is this 260-page memorandum of any binding affect on anyone in the lawsuit?
Mr. Geoffrey Creyke, Jr.: None whatsoever, sir.
Justice William J. Brennan: It's as if it were never written?
Mr. Geoffrey Creyke, Jr.: It is a published opinion and therefore we feel free to refer to it because it's in the opinions of the Comptroller General.
Justice William J. Brennan: But the issue --
Mr. Geoffrey Creyke, Jr.: But the issue in this suit, once we have brought it in the Court of Claims.
It came to an issue on cross motions for summary judgment.
Justice William J. Brennan: Those cross motions have to be decided by the Court of Claims independently of this 260-page memorandum or anything said in it?
Mr. Geoffrey Creyke, Jr.: Yes.
But it should be noted that in the Court of Claims not only the Department of Justice, but an attorney from the General Accounting Office appeared with the government.
At a later point they diverted it and we faced with more than one adversary, but initially, in the initial motion, it was a filed not only by the department, but by the -- joined in by the Comptroller General.
If I may discuss the Court of Claims proceeding where the brief --
Justice Lewis F. Powell: May I ask a question --
Mr. Geoffrey Creyke, Jr.: Yes sir.
Justice Lewis F. Powell: What is the scope of the review of GAO, was it de novo?
Mr. Geoffrey Creyke, Jr.: They have reviewed it as I understand it on the basis of saying that it was a review as to whether the decision of the AEC affirming the examiner's decision was supported by substantial evidence and whether it was correct as a matter of law and they found, it was not.
Justice Lewis F. Powell: Did GAO accept findings of the fact by the AEC or its examiner?
Mr. Geoffrey Creyke, Jr.: Negative.
Justice Lewis F. Powell: He made his own findings of fact.
Mr. Geoffrey Creyke, Jr.: Absolutely, yes sir, that's correct.
Justice Lewis F. Powell: No payment could be made in face of that decision by GAO?
Mr. Geoffrey Creyke, Jr.: Practically speaking that is correct, yes sir.
Justice William J. Brennan: The only practically speaking, the AEC could have gone ahead and told its Dispersing Officer to pay it anyway, couldn’t it?
Mr. Geoffrey Creyke, Jr.: I think the Dispersing Officer would have been within his own rights to independently refuse to make that, at the direction -- either of his Superior.
Justice William J. Brennan: And neither was going to risk making that payment for fear of the personal liability, if they did in the face of the disapproval of the General Accounting Office, wasn't that it?
Mr. Geoffrey Creyke, Jr.: I quite agree.
Justice William J. Brennan: And when you answered Mr. Justice Powell, this was a de novo review, I gathered it's not a review of any kind, whatever that 260-page memorandum is, it has no legal affect except there is a statement of why GAO disapproved, wasn't that it?
Mr. Geoffrey Creyke, Jr.: Yes.
Chief Justice Warren E. Burger: Historically I understand there have been occasions where payments were made not withstanding the opposition of the Comptroller General, but that was where the Attorney General took the opposite position?
Mr. Geoffrey Creyke, Jr.: Historically and particularly in the period of the 19th Century, there were numerous cases and some in this century where the attorney general took entirely different view of the rights of the Comptroller General and specifically held that in matters vested in the discretion of the administrative official that he had no right to superimpose his judgment.
And one of the big issues in this case will be whether that was altered by the Wunderlich Act.
In other words, this Court in Mason & Hanger, very clearly held that Comptroller General had no right to adjudicate.
Justice William J. Brennan: What I am telling Mr. Creyke, in this very case, the problem is that, the Attorney General had said, no I don't agree with the Comptroller General and I am not going to send this to him, might he have done that?
Mr. Geoffrey Creyke, Jr.: Yes.
Justice William J. Brennan: And the General Accounting Office would be helpless to do anything about it?
Mr. Geoffrey Creyke, Jr.: I think that --
Justice William J. Brennan: And judgment would have gone as a course for your claim?
Mr. Geoffrey Creyke, Jr.: I think that's correct, But our point here is, that there would be no case on which to make such a determination were not for the improper, unwarranted and illegal act of the Comptroller General.
In fact you go back just a second to proceeding in the Court of Claims, I think it's important to bring out, that having been referred to the commissioner first, he made a recommendation to the court, that the court find that this was a breach of contract and that it render summary judgment.
Justice William J. Brennan: Tell me, Mr. Creyke, suppose the Comptroller General had not taken the action he did, but the dispersing officer for whatever reason, he just refused to pay, you'd then still have the suit wouldn't you?
Mr. Geoffrey Creyke, Jr.: If the Dispersing Officer had refused to pay in accordance with the --
Justice William J. Brennan: No the GAO did nothing, but the dispersing officer just refused to pay, you'd still have to sue, wouldn't you?
Mr. Geoffrey Creyke, Jr.: I believe not, because I think it would have been taken away from him by the action of the Commission by which he would be bound since there is a formal act as the Commission and the hypothetical situation you are projecting as I understand it would entail a reversal of position on the part of the Commission itself or its representative --
Justice William J. Brennan: You don't get a check until a Dispersing Officer fills it out and send it to you, do you?
Mr. Geoffrey Creyke, Jr.: That's correct.
Justice William J. Brennan: Now, so he doesn't fill it it out and doesn't send it to you.
Then what's your position, what do you have to do?
Mr. Geoffrey Creyke, Jr.: If such a situation were to occur then I would suppose in due course if we were unable to resolve it, we would have the possibilities of either seeking mandamus action which has been done in some cases, where it involved simply a ministerial action to carry out an obligation of the United States, or the possibility of bringing an action in the Court of Claims.
Justice William J. Brennan: In either event, the Attorney General would defend your action, I take it?
Mr. Geoffrey Creyke, Jr.: In either event, the Attorney General would have the responsibility defending a suit against the United States --
Justice William J. Brennan: I suppose the Attorney General were then to say, well GAO might have thought this was alright, but I don't and I am going to defend it on the ground on which the GAO said it should have been set aside?
Mr. Geoffrey Creyke, Jr.: Well, this is a procedure which actually the attorney general suggested in that opinion of January, 1969, which we took such strong issue.
In other words, in effect he suggested that anyone within the Government, who was not satisfied had the right to short circuit it [Attempt to Laughter], if you will, the disputes process and throw the thing into litigation whereby the contractor who was playing by the Government's rules accepted this onerous contract with all the incumbent responsibilities of caring forth changes, that is expensive, of carrying forward at his expense in accordance with the contracting officer's determination, while the dispute is being resolved that he would still have the additional onus, having one of carrying on this litigation.
Now that is not the way the disputes process works.
Chief Justice Warren E. Burger: Mr. Creyke, I am not sure I follow those hypothetical situations as they evolved in this colloquy, but if the Comptroller General had taken no position and if the Atomic Energy Commission had approved the payment, but it's Dispersing Officer refused to pay the Atomic Energy Commission might solve that by just getting a new Dispersing Officer might they not?
Mr. Geoffrey Creyke, Jr.: Quite --
Chief Justice Warren E. Burger: In other words, he has no authority to interpose himself or a legal authority to interpose himself between the decision of the Commission and a contractor?
Mr. Geoffrey Creyke, Jr.: Absolute case of insubordination because in this situation by statute the Atomic Energy Commission is the delegated representative of the government and in this situation the Commission itself has acted, has made a determination and that determination has never yet been altered.
Justice William O. Douglas: But I suppose that in light of that theory is Professor Petrowitz (ph) in his amicus brief filed suggests you would have been a suit against government for damages for breach of the disputes contract?
Mr. Geoffrey Creyke, Jr.: I agree with that theory.
Now in fact the Commissioner White's opinion in the Court of Claims held that this non payment in our case constituted a breach of contract because the remedies as suggested -- as required were not carried out were unavailable.
Justice William O. Douglas: That sometimes takes a long time to assert factual --
Mr. Geoffrey Creyke, Jr.: I could say it took [Attempt to Laughter] a long time in this case Mr. Justice Douglas.
One of our problems in this case of course is that S&E Contractors are taking on that one but three adversaries really in a sense, although we have no conflict with the Atomic Energy Commission at this point in time.
We do have problems on the one hand of the Comptroller General and on the other hand with the Attorney General.
As I started to say a little bit ago in the initial proceedings in the Court of Claims, they were together.
Later after the Commissioner found for S&E and after we filed -- excuse me, the government jointly filed a brief seeking review and we responded, they split and took different positions and filed a amicus brief on behalf of the Comptroller General asserting different positions from those which the Department of Justice had asserted.
The Department of Justice seem to bottom its case on this nebulous right of making independent review notwithstanding the circumstances of how the matter came about.
It is our position that you simply cannot arrive at such a situation without giving recognition to and approval of what it is a breach of contract and an illegal act, the failure on the part of the agency of United States, the Atomic Energy Commission to carry out it's agreement with this contractor.
And from time immemorial, this Court has recognized the rights of encouraged parties to provide methods whereby they could resolve their own disputes.
In the case of the government, this has been recognized particularly in Jone’s case 120 years ago as well as in the Mason & Hanger case to which I adverted to a little while ago which both specifically involved an attempt by the Comptroller General to overrule the head of an agency on a routine contract matter and there this Court held that there was no such power.
Now was this authored by the Wunderlich Act; remember that case, excuse me that Act came about as a result of two decisions of this Court in 1950 and 1951 whereby this Court in upholding the rights of parties to contract for their own remedies said that they have contracted the way the right to judicial review.
In the Moorman case involving questions of law and in the Wunderlich case involving questions of fact, the Court suggested that the Congress felt a different standard should be applied, it was a matter for Congress to undertake.
Congress did enact this Wunderlich Act, we have it on page 3 and 21 of our own petition, it's short --
Justice William J. Brennan: Well, Mr. Creyke apart from the Wunderlich Act, I guess all the way back you said 100 years ago or so?
Mr. Geoffrey Creyke, Jr.: We have cited the Jone’s case in 1850, yes.
Justice William J. Brennan: Yeah, and Kihlberg and rest of them and certainly these were all done, this was a contractual matter, wasn’t it?
Mr. Geoffrey Creyke, Jr.: Correct.
Justice William J. Brennan: And they -- how the parties would contract as I recall it that be the decision to an official or one of them, and that any matter in dispute would be resolved by him and that his decision would be final and conclusive, that's as much as the closest said in history, isn't that right?
The original form of clause was a very short thing, that wasn't it --
Mr. Geoffrey Creyke, Jr.: Yes.
Justice William J. Brennan: I gather a fraud exception was engrafted by the courts, wasn’t it?
Mr. Geoffrey Creyke, Jr.: Excuse me.
Justice William J. Brennan: The fraud exception, the exception for fraud?
Mr. Geoffrey Creyke, Jr.: Yes, it actually came about more or less concurrently because in Wunderlich decision, you had said --
Justice William J. Brennan: No, no, I am getting back to 1878 at the time of Kihlberg.
At that time, the form of the clause, the Disputes Clause was simply that decision of an official of one of the contracting parties would be conclusive and binding and Court said that that was enforceable in the absence of fraud, is that right?
Mr. Geoffrey Creyke, Jr.: Yes, Your Honor.
Justice William J. Brennan: And if there were a fraud, then even the party who is official had been agreed upon as the one who should make -- should decide the dispute, even that party could attack the award, could he not, for frauds?
Mr. Geoffrey Creyke, Jr.: I regard it it as analogous to a situation in the private contract where there is fraud --
Justice William J. Brennan: Well, as a matter of fact this whole thing grew out of a private contract provision, didn't it?
Mr. Geoffrey Creyke, Jr.: Yes.
Justice William J. Brennan: Railroad construction (Inaudible).
Mr. Geoffrey Creyke, Jr.: It has been characterized as a tantamount to arbitration by some although we see it does not keep it all the time.
Justice William J. Brennan: Well, now you have a contract in which you have a provision which expands, doesn't it, on the initial form of the Disputes Clause, from the simple clause and includes these exceptions, that's -- it maybe set aside where fraudulent frauds expressly stated and then four of the exceptions.
Now just as a matter a contract law and to the old line of cases why isn’t got enforceable, just as the initial clause was always enforceable and the fraud exception of course.
Why you'd have to get to the Wunderlich Act here?
Mr. Geoffrey Creyke, Jr.: It is not enforceable if you please Mr. Justice Brennan because there was no effort to enforce it on the part of the official and the government, the Atomic Energy Commission.
Justice William J. Brennan: Well, how does the clause read?
Mr. Geoffrey Creyke, Jr.: It is on page 3 or 21 of our brief.
Justice William J. Brennan: Yes, page 5 I guess, isn’t it?
Justice William O. Douglas: Unless its fraudulent, no claim is fraudulent --
Mr. Geoffrey Creyke, Jr.: None Your Honor.
Justice William J. Brennan: No, but there is and it goes on unless it's fraudulent or capricious or arbitrary or so grossly erroneous as necessary to imply bad faith or not supported by substantial evidence, and that's the one that's involved here, isn't it, Page 6?
Mr. Geoffrey Creyke, Jr.: Yes, yes it runs (Voice Overlap) I am sorry, I didn't.
Justice William J. Brennan: Well, I don't quite understand why -- and the only thing since Kihlberg these clauses have been enforceable with a suit of either, why that isn’t enforceable is to all those grounds from the --
Mr. Geoffrey Creyke, Jr.: Sir, if you take the exact wording of the clause, it's plainly intended only to provide for the contractor because it says the decision shall be final and conclusive unless the contractor may also or otherwise furnishes a contract --
Justice William J. Brennan: Do you mean is this to say now that the government under this clause cannot attack as it always could ever since Kihlberg, the act of its own official for fraud?
Mr. Geoffrey Creyke, Jr.: No, it is not sir.
I am just saying, the government cannot attack under this clause, the decision of the contracting officer and of the commissioner.
Justice William J. Brennan: No, that isn't what it says.
It's the decision of the Commission or its duly authorized representative for the determination of such appeals which I take it would be the Contract Appeals Court today, shall be final and conclusive unless determined by a court of competent jurisdiction to have been fraudulent, does not mean the government could attack him for fraud?
Justice William O. Douglas: No fraud here I understand?
Mr. Geoffrey Creyke, Jr.: No fraud.
Justice William J. Brennan: Alight, or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence, which is the ground, isn’t it?
Mr. Geoffrey Creyke, Jr.: Yes it is.
But this clause in its application has always been construed as only for writing -- for a means for a contractor to go forward with these appeals.
It is --
Justice William J. Brennan: I suggest not where fraud was involved.
It was always, even without the word fraud in the Disputes clause, the government could attack the word its own official for fraud, couldn’t it?
Mr. Geoffrey Creyke, Jr.: It could for fraud.
Justice William J. Brennan: Alright, well now they have put the word fraud in the provision itself and then added some other grounds of attack.
Mr. Geoffrey Creyke, Jr.: Clause which is in question here of course was not the one (Inaudible) clause, which is a little different.
This is the clause for our contract and we are --
Justice William J. Brennan: Yeah, this is a clause -- what I am reading from --
Mr. Geoffrey Creyke, Jr.: Yes it is the clause under our contract and --
Justice William J. Brennan: Yeah, what you like I gather negotiate it with the government.
I say I take it when the contract was entered into --
Mr. Geoffrey Creyke, Jr.: The word negotiated [Attempt to Laughter] has broad implications --
Justice William J. Brennan: You would not have had the contract if you hadn’t agreed to a contract which included that provision I take it, isn't that right?
Mr. Geoffrey Creyke, Jr.: It's correct, Your Honor.
I would like to conclude by saying that I feel that this case is one in which the broad aspects of this entire problem, the application of the disputes process, its value to the government and contracting industry should be given very serious consideration.
That the power to control the incidence of contract including this should be limited to those of the using agency, that it determine it traditionally although the construction might indicate the power existed by the government to process this.
In fact, over years there is no background or no experience of it having been done, that the government has the power to write contracts and regulations to give itself powers of review which it did not do so here.
And that it would be a last time done to this contract as well as to the entire contracting industry, if this case is not overruled.
Chief Justice Warren E. Burger: Mr. Creyke.
Justice Harry A. Blackmun: Mr. Creyke, let me follow through on --
Mr. Geoffrey Creyke, Jr.: Yes sir, Mr. Justice Blackmun.
Justice Harry A. Blackmun: Justice Brennan’s questions because I am not sure that you proffered full import of it.
I think it is his position that at all times the government could appeal on the ground of fraud, at all times prior to one that it elected any time.
Mr. Geoffrey Creyke, Jr.: Yes, Your Honor.
Justice Harry A. Blackmun: And the next step is that by putting in language of fraud into the contract that this didn't disturb that rule and by putting in other grounds for appeal, the implication is that the government can appeal with respect to all those other grounds as well and what I would like to get is your answer to that suggestion?
Mr. Geoffrey Creyke, Jr.: As I reach the background of that Mr. Justice Blackmun, the intention of putting that reference to throw in there and is brought out in the amicus brief of the American Bar was to expressly overcome, restrict standards established by this Court in limiting a contractor's right over due.
In the Wunderlich decision, the cases where fraud was alleged, said that shall not be limited to that and that the same nevertheless shall be presumed final unless not supported by substantial evidence as well as not fulfilling the other four standards as set out in the later part of that article.
Chief Justice Warren E. Burger: Mr. Creyke, since you've answered that last question after you revealed and we'll give you the three minutes you were trying to save and we'll enlarge you accordingly Mr. Jaffe.
Argument of Irving Jaffe
Mr. Irving Jaffe: Mr. Chief Justice, may it please the Court.
The real issue in this case is whether or not the government may challenge in court a decision favorable to a contractor rendered by an agency under the Standard Disputes Clause, on the ground that it does not meet the standards of the Wunderlich Act.
Now it should be borne in mind that the only decision placed before the Court of Claim was not the GAO's opinion, not anything that the department justice had done but the Atomic Energy Commission decision and that decision is challenged.
That is the finality of that decision is challenged in our answer on the ground that does not comport with the standards of the Wunderlich Act.
Chief Justice Warren E. Burger: We are going to the practical matters that we have brought in the colloquially.
If the General Accounting Office had never got into this situation at all, what would the Atomic Energy Commission have done at the conclusion of its funds?
Mr. Irving Jaffe: Well, let me answer that question --
Chief Justice Warren E. Burger: Are we to assume that they would have paid the contractor?
Mr. Irving Jaffe: In the normal course of events as happens with all of these contracts, the matter would have been continued and concluded before the contracting officer which was where the Atomic Energy Commission is centered, presumably an amount that was due, since they found the government liable on several of the claims, would have ultimately been determined and paid by the agency's disbursing or certifying officer.
However, I would like to answer the question that was posed by Mr. Justice Brennan.
Suppose that the disbursing officer had not paid, this is not a hypothetical situation, except for this particular case because the disbursing officer of another agency, not so long ago refused to pay.
I say that mandamus would not lie, it's not a ministerial act because that decision which the disbursing officer refused to pay could be subjected to challenge by the very device of refusing to pay.
It is not a decision which requires payment unless it is one which is not fraudulent, not arbitrary or capricious, not clearly so erroneous as to imply bad faith.
It must be supported by substantial evidence and one step more, it must be correct as a matter of law that Section 320, the second section of the Wunderlich Act.
So that on any of these grounds, there is no -- if there is -- any of those grounds are not met, there is no requirement to pay.
Now the disbursing officer assuming that he came to the conclusion that this decision was infirm under the standards of the Wunderlich Act, could not be compelled in mandamus in my opinion to pay, it is not a ministerial act required and the case that be subjected to judicial scrutiny.
In this case, there has not yet been a determination by a court of competent jurisdiction, namely the Court of Claims that this decision of the Atomic Energy Commission has any viability whatever or that any payment is required.
The reason it has not reached that decision is because the plaintiff has contended and this Court has granted certiorari that the standards of the Wunderlich Act are available only to the contractor, that there was nothing under the Wunderlich Act which enabled the government to challenge the decision of its own agency.
Justice William O. Douglas: That depends on who the government is?
Mr. Irving Jaffe: Well, I think I can answer that Mr. Justice Douglas.
Justice William O. Douglas: Is the government the AEC in this case, or is it the Department of Justice?
Mr. Irving Jaffe: Well, I think what you are really asking me is the mechanics of procedure as to how the matter gets into court and it can get into court in a variety of ways.
The government as Congress in Willis said, when the question was posed to it in the consideration of the Wunderlich Act, said that it might be the General Accounting Office, it might be the Department of Justice, it might be the agency involved.
Now let us assume, for example, another means by which this could have come to court and how the government would have asserted its rights.
Suppose, for example, the disbursing officer did pay as what have been true in a normal course of events, and then the General Accounting Office in auditing these accounts looks at this decision and comes to the conclusion that it's erroneous as a matter of law on the basis of the decision on its face and therefore transmits it to the Department of Justice with the request that we look into for the purpose of recouping money erroneously or illegally paid because the decision of an agency, under a Disputes Clause was not entitled to finality under the Wunderlich Act.
Now that would be another way as the Attorney General said in his opinion of January 6, 1969 in which this could be tested.
Justice William J. Brennan: Mr. Jaffe, what's the risk that the Commission ran here after the GAO-260 page memorandum?
Had they paid, had they gone through with the payment, who would have taken what risk?
Mr. Irving Jaffe: Well, the risk -- there is a risk, Mr. Justice Brennan, because the statutes which govern the General Accounting Office also provide that if a payment is illegally or erroneously made, and I wouldn't going to the bad faith or the other factors that exist, but just plainly the illegally or erroneously, that he may charge the accountable officer for that payment --
Justice William J. Brennan: Personally?
Mr. Irving Jaffe: -- personally, or through his bondman.
I wish to mention in passing that this is so seldom use that I can find no case that's upheld it absent corruption or venality, but nevertheless on its face that is a remedy which is available.
And it is --
Justice William J. Brennan: Well, is the practice in government when GAO indicates disapproval of a payment about to be made, is it the general practice to make it or sometimes GAO defines or what happens?
Mr. Irving Jaffe: The general practice is I must admit to use discretion as a better part of valor and not pay.
However, there are innumerable circumstances in which the agency had, having received an opinion of the General Accounting Office usually an advanced opinion, that a payment if made, would be disallowed by him in the subsequent audit of accounts and incidentally the General Accounting Office uses language which indicates that it's -- his opinion, that it is advisory, I advise, etcetera, as he did in this case.
However, I think will not pay, but I submit that that's a matter of prudence, particularly in this kind of a situation and they should not pay because it never results in anything other then a resort to the courts where and no one has ever contended --
Justice William J. Brennan: Well, I suppose there is as was here, when a suit is brought, what could the Attorney General do about the lawsuit?
Mr. Irving Jaffe: One of two things.
He would examine as he did in this case.
The decision -- the Attorney General did not get into this suit at all for any purpose or in any way interfered or intervened in the disputes process --
Justice William J. Brennan: Till the lawsuit?
Mr. Irving Jaffe: -- until the lawsuit was filed.
When we received the petitions that were filed in the Court of Claims, we did with that petition exactly what we do with every other petitions, summons or complaints which we receive.
We obtain from the interested agency, all the background data, their advice and assistance which we got here and we examine into it.
We were aware at that point of the action of the Comptroller General.
We paid no attention to it because we knew that what they say was not binding in court and that we had a statutory responsibility to exercise a litigative judgment.
Justice William J. Brennan: So you could have confessed judgments --
Mr. Irving Jaffe: We certainly could have as we did in another case not so long ago where the GAO was not involved I must admit, but where the disbursing officer refuse to pay.
The decision of the Board of Contract Appeals of his agency because he thought it was an unsound decision.
We disagreed with that disbursing officer and confessed to the entry of judgment, and it was a substantial sum.
Now in this particular case, we did examine the record, that is the record before the agency, we examined it from the point of view of the evidence that was submitted.
We examined it from the point of view of the decisions of the hearing examiner which were not disturbed by the Atomic Energy Commission and we examined the decision of the Atomic Energy Commission to the extent that it passed on any other claims.
We came to the conclusion which only coincidental was almost the same as that of the Comptroller General, that this decision, in this case, did not satisfy the standards of the Wunderlich Act.
Justice William J. Brennan: Well, tell me Mr. Jaffe, could you have defended simply on the basis of the provisions or the clause that which Creyke and I were discussing without reference to the Wunderlich Act?
Mr. Irving Jaffe: Oh!
I think we could, if we had no Wunderlich Act because I do not think that there was anything in the Wunderlich Act or in the judicial precedence which would make that kind of a contract provision unenforceable.
However, I do want to add that the language in this contract tracks the language of the Wunderlich Act and is virtually the same, and I call to the Court's attention that the Wunderlich Act is worded that in terms of no provision of any contract may limit finality only to fraud, provided however that finality will attach unless the decision of the head of an agency or the Board of Contract Appeals.
So the fact that the AEC in this case was the agency whose decision is itself does not make it any different at all from that of a Board of Contract Appeals, there is no immunization from the -- any greater immunization from the head of the department between a Board of Contract Appeals and the head of the agency itself.
Now of course, the way the petitioner would have this Court construe this contract would be in direct contravention of the language of the Wunderlich Act.
The petitioner contends that the Disputes Clause in this contract must be read as he argues, as limiting the government to setting a decision of an agency aside only if it can show fraud or overreaching.
That the entire history says he, which we dispute of the Wunderlich Act shows that the recourse to the courts for judicial review was intended to be available only to the contract --
Justice William J. Brennan: Who wrote the Wunderlich Act, actually wrote it?
Mr. Irving Jaffe: Actually written by the General Accounting Office in my opinion.
Justice William J. Brennan: And this is an argument that the General Accounting Office wrote on behalf of the government a statute which would limit attack down these contracts only to attach by the contract?
Mr. Irving Jaffe: Well of course, the General Accounting Office never had that in mind as the legislative history clearly shows.
Justice William J. Brennan: This seem rather peculiar I should think --
Well generally --
Justice William J. Brennan: -- the General Accounting Office would be acting as the agent of the contractor against such legislation.
Mr. Irving Jaffe: The General Accounting Office repeatedly stated to the committee that it was acting for this legislation not only for the benefit of the contractor, but because the narrow limited test of fraud hampered the government and hampered the GAO in auditing accounts.
Justice William J. Brennan: Now the General Accounting Office though in the initial draft that it offered as the substitute for the McCarran proposal?
Mr. Irving Jaffe: Yes.
Justice William J. Brennan: The McCarran proposal did have more than just an expanded basis of judicial review, it also would have if it had got that legislation as I remember, it also would have had the authority itself like to act as a Court of Claim.
Mr. Irving Jaffe: Now yes – now let me comment on that Mr. Justice Brennan.
The original statute as drafted by GAO I believe included unless the General Accounting Office or a court found etcetera, etcetera.
Now the interpretation of that clause in my opinion would have equated the General Accounting Office precisely as if it were a court, it would have had authority to reverse an opinion --
Justice William J. Brennan: Well the GAO itself would do that when it got to the house and then -- in the succeeding (Voice Overlap)
Mr. Irving Jaffe: Yes.
It itself suggested the substitute which eliminated the words General Accounting Office or a court.
Now of course the statute speaks in terms of judicial review and there was never any question of access to a court.
Justice William J. Brennan: The expanded ground of the judicial review remained as GAO initially wrote it in the first substitute for the McCarran?
Mr. Irving Jaffe: Yes and the GAO felt at that time and I submit to this Court that they were correct, that the GAO authority would not be hampered, that is the authority that they wanted to have and that they felt they always did have before this Court's decision in the Wunderlich case.
The -- that to in auditing accounts to use a broader standard of review and indeed they must.
For them to determine whether a payment is or will be illegal or unlawful, or within the contemplation of statute or law, they must apply the applicable principles of law.
In a contract dispute, those applicable principles and the standards to be applied are those set forth in the Wunderlich Act.
So whether or not they are mentioned when they audit accounts, when they render an advance opinion in order to determine whether it is or will be a lawful expenditure, they must apply the applicable law, the Wunderlich Act.
Now the –- there is no suggestion I'm sure and none have been made, that the Wunderlich Act in any way repealed those provisions of the law which give to the General Accounting Office the authority to render an advance opinion to a certifying officer as was the case here or to audit accounts and to disallow items which were illegally or erroneously paid.
Now in a contract matter that must be the standard of the Wunderlich Act.
Now I will not dwell on the legislative history because we believe that it supports the view that the government has equal access to the courts for the contract without question.
However, the legislative history --
Chief Justice Warren E. Burger: Excuse me my interrupting you.
In this case let me pose the question Mr. Justice Douglas put.
Right at that stage at this problem when you say the government, you mean what entity, what part of the government?
Mr. Irving Jaffe: I mean any of the agency, the General Accounting Office or the Department of Justice.
I think what we are really speaking about is not who is the only person who may speak, but who and under what circumstances can the matter be precipitated into a court review.
Now I think that that can occur in many ways.
I think the most usual way would be by failing to pay.
Now who is going to make that determination?
Perhaps the best answer is how that determination has been made and there are many instances which have occurred in the past prior to this case, prior to the (Inaudible) case, there are many cases that Mr. -- that judge -- that Judge Davis of the Court of Claims detailed in the line of case.
The usual way is not to pay and who determines that?
Normally it's the general counsel of the agency, who -- and how does that come about?
The angry trial attorney that we always have him, the angry trial attorney who has lost the case before his Board, who feels that the Board was wrong, that they have no legal sense that they are way off base, complains to the general counsel.
In 99 cases out of a 100, he addresses (Inaudible) perhaps even more, but occasionally the general counsel is persuaded and the general counsel will block the payment.
It doesn't go to GAO at all and that precipitates payment.
Occasionally the matter will be submitted to the Department of Justice.
Somebody in the agency and it has to be someone high up because we do not accept communications from trial attorneys or lower stafficial ones, there is someone in the general counsel's office or an assistant secretary will write to us and say they are disturbed about an opinion as did Mason, as did FAA, as did several agencies, and the question they asked us is not to intervene in the disputes process, as the petitioner would have you believe, the decision has already been rendered.
The disputes process is at a close.
The question is if we don't pay will you defend us?
Will this withstand scrutiny?
Now so far unfortunately we found that it wouldn't withstand scrutiny.
All we could find is that if we were the judges, we would have decided differently, but that's no reason for challenging, as the courts have frequently said.
We haven't found one yet, although several have been submitted to us, where we thought we would defend it, but that is a method in which it could be done.
Sometimes the GAO will come across it either by advance opinion as happened here or perhaps in a post audit.
I can't imagine how else at the moment, although there maybe other ways, it would come -- the government would have this right of appeal which I submit is a misnomer.
We're not appealing, we are seeking judicial review.
We don't change the opinion, neither Department of Justice did, the GAO did not.
The only opinion before the Court is the Atomic Energy Commission opinion.
It is not true to say that they still are restraining at the least to pay this man, want to go forward.
They've assisted us in our defense.
They are yielding, whether or not they still agree with their decision, they are yielding to the possibility that the GAO was reasonable or maybe right.
Chief Justice Warren E. Burger: Well, isn't that chiefly Mr. Mr. Jaffe, because once it wanted the litigation, the Atomic Energy Commission would have lost the control.
Mr. Irving Jaffe: It lost complete control Your Honor, but I am speaking about --
Chief Justice Warren E. Burger: The Attorney General has the sole control once the litigation has started.
Mr. Irving Jaffe: That is correct.
Chief Justice Warren E. Burger: But if the Atomic Energy Commission had just decided to ignore the Comptroller General and pay the money out that would in all probability had been the end of the matter, would it not?
Mr. Irving Jaffe: That probably would have been the end of the matter but perhaps not.
I should remind the Court of the possibility that in this particular case, for example, the Comptroller General having written a 260-page opinion might not have ignored the matter had it been paid.
But he would be powerless to do anything except to send it to the Department of Justice for prosecution, either against the surety, against the disbursing officer, or perhaps, which is more likely, against the recipient of the money as in the contract we could recoup it if we agree.
Chief Justice Warren E. Burger: It doesn't happen very often, does it?
Mr. Irving Jaffe: Very very seldom.
I should add here -- in this particular case, the only real relief available was not to pay.
The reason I say that is because prior to the completion of this contract, the -- all payments there under, at least six months before the contract was completed while it was being performed, that all payments here under were assigned to a bank.
I therefore wonder why we speak so much about the -- how contractor went out of business, because of the delay in payment.
Contractor received, almost, that is we paid the full contract price after this contract.
These are the extras, the things that have not yet been determined that they are entitled to payment on.
And any payment we decide or is ultimately decided that S & E Contractors are entitled to, we'll not go to S & E Contractors, but to the bank, because when they have assigned to --
Chief Justice Warren E. Burger: (Voice Overlap) rule about having a businessman after the proceeds of the contract with the government is pledged as collateral for bank, is there?
Mr. Irving Jaffe: No, there isn't.
I merely say that, the failure hasn't thrown him out of business.
Chief Justice Warren E. Burger: But, we have no way of knowing that one way or the other really, have we?
Mr. Irving Jaffe: Well, except from that fact alone, we don't and therefore, I think it should not be urged upon the Court that it did, except from that fact alone that the payments were assigned to a bank, who alone is entitled to payment.
There are many factors we believe that put them out of business --
Justice William J. Brennan: What's the issue that would be decided in the Court of Claims on the merits?
Mr. Irving Jaffe: What issue --
Justice William J. Brennan: What issue will be decided on the merits in the Court of Claims?
Mr. Irving Jaffe: Whether or not the decision of the Atomic Energy Commission is entitled to finality under the standards of the Wunderlich Act.
Justice William J. Brennan: Well, what standard -- what standards?
Mr. Irving Jaffe: Oh!
We are challenging it on two standards only, that either is not supported by substantial evidence of the commission's allowances and in many instances that it's erroneous as a matter of law.
Justice William J. Brennan: I see.
That's under the Second Section?
Mr. Irving Jaffe: Under the Second Section that it cannot be final on any part of law.
Now the -- I had been about to speak briefly about the legislative history.
The legislative history of course, as some lawyer in the field once said has a little bit of everything for everybody and therefore it's little confusing.
What we had originally was a proposal, a Wunderlich Act proposal, which would have included the GAO equally with the Courts.
That was deleted and the GAO was taken out and the word Court was taken out, but we still speak of the judicial review.
It was quite clear, we say, from the legislative history.
Two things were quite clear, that this access to the Courts for judicial review under the standard that they were setting forth was available to both parties.
The reason that I say that it was aware is because there were bills before the Congress, including one presented by the American Bar Association specifically to limit this judicial review to the contractors.
The Congress did not accept any of those.
There were debates on whether or not this wouldn't be equally available to the government as well as the contractor and that the Congress had indicated that they thought it was.
There is no suggestion that it isn't available to them and there is certainly nothing on the face of the Act which indicates that it is available only to the contractor.
The Act itself would seem to make that clear.
It says any decision of the head of the department and any such decision shall only have finality, if it is not fraudulent or capricious, etcetera.
Now it doesn't say any decision adverse to a contractor and I don't think that, that should be read in, particularly in the light of the legislative history.
It is also strange, it seems to me, that the argument should be made, that the Wunderlich Act actually provides with two standards; one standard for the contractor which covers this entire panoply of broadened standards and quite another for the government.
The government is limited to fraud and overreaching, that is precisely what it was the Wunderlich Act was seeking to overcome.
As a matter of fact, if that were true, then the language of the Wunderlich Act, which says that no provision of any contract shall limit any decision of a head of an agency or of a Board of Contract Appeals to fraud, would again have to be interpolated as meaning only as against the contractor's complaint, but it could be so limited as far as the government was concerned.
I submit that there is nothing in the language, nothing in the history, nothing in logic which would call for that view.
I submit that the government should have and does have equal access to the courts to challenge the decisions of an agency head or of a Board of Contract Appeal on the basis set forth in the Wunderlich Act, that is that the standards there have not been met, that no finality should therefore attach to the decision and therefore, no payment, if one is ordered should legally or lawfully be made under such a decision.
Now the question that's raised, who is the government?
I have answered in the only way that I can, the normal way in which the government gets a case into Court.
Now that could be done normally in one of the three ways I suggested.
I don't think we need to look for any others, that's ample protection for the government.
The payment can be made as the Attorney General said and we can seek to recoup it in a private suit of our own, if it in fact was erroneous.
Now we would have to test in that suit in the District Court.
Justice William J. Brennan: How -- will this procedure go on everyday in the week?
Mr. Irving Jaffe: The disputes procedure goes on everyday in the week.
The involvement of not paying a decision of a Board of Contract Appeals rises very rarely.
The way that -- frankly, the way in which the government's access to the Courts has arisen in the past most frequently has been where a contractor submits several claims to a Board.
The Board rules in the contractor's favor with respect to three or four of them and rules against him with respect to two or three of them and he is to satisfy with the two or three, which have been adverse to him and he institutes a suit in the Court of Claims seeking to set aside the Board's decision with respect to those which were adverse and we in defending again, what is the entire record.
We come to the conclusion that the Board was correct in denying the two or three it did, but was incorrect in allowing two of the four that they had allowed because it wasn't supported, let's say by substantial evidence or was erroneous as a matter of law.
We have done that in many, many instances and we have been successful and in some.
Now that's merely another manner in which the government has asserted its right to test a decision rendered under the Disputes Clause, under the standards of the Wunderlich Act.
Now in this particular case, payment was stopped, that's happened before too and then the contractor goes into Court.
Had we paid this one, we would never have been able to recoup it because we can't recoup it from a bank and (Inaudible).
31 U.S.C. 203 prohibits that procedure, so that we would have been out.
So in this case, even if it had wanted to pay and let it go the other way, the Atomic Energy Commission would have been ill-advised to do so.
Chief Justice Warren E. Burger: We have knowing on this record, of course, whether the bank kept all of this or whether they kept half of it or some other part, do we?
Mr. Irving Jaffe: Well, well we do.
I don't think I am -- to be speaking myself, paragraph 20 of the petition in this very case and then here, it says, petitioner assigned its rights to amounts to be received under this contract to the First Citizens Bank of Dallas, Texas, September 12, 1961, the contract was completed and accepted in June of 1962.
Chief Justice Warren E. Burger: That doesn't prevent your recovery, your recoupment against that principle.
Mr. Irving Jaffe: Against the principle sir?
Chief Justice Warren E. Burger: Yes.
Mr. Irving Jaffe: Oh!
No, not against the principle, but he would not have received the money and I don't know that we would have -- I mean, it would have been, well that's correct.
Chief Justice Warren E. Burger: We don't know anything about that, do we?
Mr. Irving Jaffe: We don't know anything about the situation there, although we did know in 1966, when the payment had to be made.
Chief Justice Warren E. Burger: So when you say the government must have its day in Court, it certainly has a day in Court by the recoupment route, does it not?
Mr. Irving Jaffe: It could, that could be one way, but I don't think that, that should militate against seeking its day in Court in other way.
Bear in mind, if you please Mr. Chief Justice, if this decision is not entitled to finality, the payment should not be made.
So withholding the payment is not in any sense a penalty, it's doing something we may not be required to do.
Justice William J. Brennan: In that contract itself?
Mr. Irving Jaffe: Under the contract itself.
We are only required to make certain payments under the contract.
It's the same as any private dispute, where one of the parties of the contract says I don't owe you this money and the other says you do.
Now this --
Justice William J. Brennan: This via breach of contract, I guess?
Mr. Irving Jaffe: Oh!
It definitely cannot be a breach of contract because if it were, then the holding that as a breach would be holding contrary to the terms of the Wunderlich Act.
Justice William J. Brennan: And for these terms of the contract?
Mr. Irving Jaffe: And for the terms of this contract, which tried here.
Justice Harry A. Blackmun: Mr. Jaffe, I am still bothered I think by your answer to Justice Douglas' question as to who is the government.
What comes to me out of your explanation is that this contractor has three tiers to overcome, the agency, the Comptroller General and the Attorney General?
Mr. Irving Jaffe: He really doesn't have three tiers to overcome.
All he has, if it please you Mr. Justice Blackmun -- first, the General Accounting Office is never a threat to the contractor.
He needn't wait one moment for the General Accounting Office to have or to consider the advance opinion or any advance request from any disbursing or certifying officer.
He can go into Court immediately he hears that the General Accounting Office's views has been solicited.
So the General Accounting Office provides no tier to him at all.
It is one mean for the government to be aware that there may be an illegal payment about to made or if it is made to recoup it.
That's the manner in which the General Accounting Office entered the picture but it's not a tier of review as such.
Now, the Department of Justice comes in only if an agency should decide to ask the department first, will you defend us or in this case for example, where the Comptroller General has issued an opinion in which he says that this would be an invalid payment, the agent -- the head of the department could come in and say to us, do I have to listen to the Comptroller General?
And we could as we have as recently as 1969, told the agencies your accountable officers need not hear to the Comptroller General.
We think you can make the payment, and we so direct you.
So that -- I don't know to what extent these tiers are review, really are administrative hurdles.
All it is really is, do we have a basis for defending a suit or for prosecuting a suit, and neither of them do I think the Court should assume that the contractor is entitled to money, any money or any payment until the Court has had opportunity to scrutinize that decision under the standards of the Wunderlich Act.
Until then, it is not a order or a decision in types of the finality which requires any payment.
Justice William J. Brennan: What I expect Mr. Jaffe, this maybe a very cumbersome and difficult and in terms of modern business quite inefficient way of doing things.
That's the way Congress has ordered -- that you suggest to the way Government should be carried on it.
Mr. Irving Jaffe: I think that that's the natural consequence of the Wunderlich Act and the terms of the contract would require I.
Justice William J. Brennan: And of the very existence of the GAO.
If Comptroller General supposedly -- the congressional (Inaudible).
Mr. Irving Jaffe: Yes sir he is.
Justice William J. Brennan: Unless you are going to abolish him I don't see how --
Mr. Irving Jaffe: We can't avoid he is looking at, either before or after, and in either event there will be a suit --
Justice William J. Brennan: May be he ought to be abolished when I was in that position, I used to think so.[Laughter]
Mr. Irving Jaffe: I am not authorized to comment on that.
Chief Justice Warren E. Burger: Mr. Jaffe.
Mr. Irving Jaffe: Yes sir.
Chief Justice Warren E. Burger: The Comptroller General's function is essentially a post audit function, is it not?
Mr. Irving Jaffe: It is.
Chief Justice Warren E. Burger: He is not part of the discretionary decision say during the evolution of these.
Mr. Irving Jaffe: No, sir he is not.
Chief Justice Warren E. Burger: He is strictly an auditor.
Mr. Irving Jaffe: Correct, except for one provision, 31 U.S.C. 74 and 31 U.S.C. 82d, give to the Comptroller General on request, the right to render advance opinions which was precisely what was done here.
So that he does come into it in a pre-audit system, if an Executive Branch Officer that is the disbursing officer or a certifying officer asked him for an advanced opinion and that was what was done here.
Chief Justice Warren E. Burger: That's advisory only.
Mr. Irving Jaffe: And that's advisory.
Chief Justice Warren E. Burger: Now if dispute, disagreement, difference in position evolves between the contracting agency and the Comptroller General, the Attorney General really becomes the referee, does he not?
Mr. Irving Jaffe: Well, he becomes a referee with punch because his decision is binding on the agency.
Chief Justice Warren E. Burger: Thank you Mr. Jaffe.
Mr. Creyke, you have three minutes left.
Rebuttal of Geoffrey Creyke, Jr.
Mr. Geoffrey Creyke, Jr.: Thank you, Mr. Chief Justice.
A study of the intent history of the Wunderlich Act will disclose that the Comptroller General in the 82nd Congress having sought to and having been included expressly in a Bill as a tier of review --
Justice William J. Brennan: He did write the bill, didn't he, Mr. Creyke?
Initially Mr. McCarran introduced the bill.
Mr. Geoffrey Creyke, Jr.: That is --
Justice William J. Brennan: Then would substitute for that Bill, well, I am sure I have read the same history available to you and the Comptroller General -- and it was substituted for McCarran bill, the bill of the Comptroller General.
Bill of the Comptroller General -- I don't know Your Honor who wrote the --
Justice William J. Brennan: Of course, you find in the history so it says.
Well, I don't know who wrote the first (Voice Overlap)
Mr. Geoffrey Creyke, Jr.: In the 82nd Congress, when the Bill was under consideration that he would be included, he was. Strong objection --
Justice William J. Brennan: But he wrote the very Bill that included him, the Comptroller General wrote the very bill that included him?
Mr. Geoffrey Creyke, Jr.: Oh!
(Voice Overlap) 82nd and that's the one I don't know who wrote.
Justice William J. Brennan: And I don't either, I think you (Inaudible).
But the bill, it became law is the one that the Comptroller General wrote with one minor exception and the deletion of the provision which gave him with the courts the power of independent review.
Mr. Geoffrey Creyke, Jr.: provision for the Comptroller General represented a compromise proposed by him, correct Mr. Justice Brennan.
Due to objections raised by the Department of the Defense Contractors and others that they would create this additional tier of review which is proved so awkward in this situation.
Justice William J. Brennan: Well didn't they actually referred it, would make the GAO as second Court of Claims as a worthy --
Mr. Geoffrey Creyke, Jr.: And his letter which I have in the House Report 1380, says and in effect, it is intended -- it is not intended to be the change the jurisdiction or to grant any new jurisdiction or to recognize the jurisdiction which he has.
What we say is not intended.
Now with respect to the overall intent of the Act one, we don't believe that it was ever intended any using agency would attack its own decisions by fraud.
With respect to fraud, otherwise there are always remedies available to the Government and otherwise but the procedure as it has been afforded here to just take away from the disputes process it's efficacy is simply calamitous within the operation of the system as it now works.
When a contractor signs a government contract, and he agrees to the changes clause and do the work as its changed and he agrees to the Disputes Clause, he says he will keep right, I am going to his expects as the Government interprets the contract and which he did here, that I think the quid pro quo involved there of those unlimited powers being granted to the Government, and the Government given its right of decision itself.
Chief Justice Warren E. Burger: Thank you Mr. Creyke, and thank you Mr. Jaffe.
The case is submitted.