DEPARTMENT OF THE ARMY v. BLUE FOX, INC.
Verdan Technology, Inc.,, a prime contractor, failed to pay Blue Fox Inc., a subcontractor, for work completed on a construction project for the Department of the Army. Under the Miller Act, a contractor working on any public building or public work of the US must post a bond for possible defaults. However, the Army treated the work agreement as a "services contract," and removed Verdan's bond requirements. When Verdan failed to pay Blue Fox, it directly sued the Army. Blue Fox sought an "equitable lien" on any funds from the Verdan contract not paid to Verdan, or any funds available or appropriated for the completion of the project, and an order directing payment of those funds to it. The District Court concluded that it lacked jurisdiction over the matter, and thus ruled in favor of the Army because the waiver of sovereign immunity in the Administrative Procedure Act (APA) did not apply to Blue Fox's claim. The Court of Appeals held that the APA waives immunity for equitable actions, thus allowing Blue Fox's equitable lien.
Can subcontractors on federal projects force the government to pay when prime contractors fail to do so?
Legal provision: Administrative Procedure, or Administrative Orders Review
No. In a unanimous decision, announced by Chief Justice William H. Rehnquist, the Court ruled that "unless waived by Congress, sovereign immunity bars subcontractors and other creditors from enforcing liens on government property or funds to recoup their losses." The APA prohibits people and companies with grievances from suing the government for monetary damages. Blue Fox's lien was ruled "merely a means to the end of satisfying a claim for the recovery of money."
Argument of Jeffrey A. Lamken
Chief Justice Rehnquist: We'll hear argument next in 97-1642, the Department of the Army v. Blue Fox, Inc....
We'll wait just a minute, Mr. Lamken.
Mr. Lamken: Mr. Chief Justice, and may it please the Court:
For well over a century, it has been settled law that no plaintiff may obtain money from the United States Treasury absent an act of Congress entitling the plaintiff to the money or creating the... or authorizing the creation of a right to that money.
That rule has been repeatedly recognized in this Court's cases, including Buchanan v. Alexander, United States v. Nordic Village, United States v. Testan, OPM v. Richmond, and Republic National Bank.
Probably nowhere has that rule been more often repeated than in the context of subcontractor efforts to obtain payment from the United States under an equitable lien theory when the prime contractor that should have paid this prime contract... the subcontractor does not.
Justice Ginsburg: Mr. Lamken, I note you're getting down to this specific case, but for the broad, sweeping proposition you announced originally, I'm thinking of cases like Westcott v. Califano where Congress said benefits go to fathers not mothers, and this Court said that such a statute... its constitutionality could be saved by including mothers for benefits, for unemployment compensation benefits.
How does that fit with your theory that unless there's a specific act that covers this, no money will be paid from the Treasury?
Mr. Lamken: Well, Your Honor, I would say that in that case the Court was construing the statute in a manner to save its constitutionality consistent with Congress' purpose.
If Congress' express purpose was to exclude somebody that the Court thought was constitutionally included... constitutionally had to be included in the category, then the answer would be that the statute could not be enforced at all.
The Court could not blue pencil in against Congress' intent a category of people or an entitlement to money that Congress did not want to be entitled.
So, that would have to be categorized as a case where the Court construed the statute in order to make it constitutional and therefore it read the statute as providing for a payment to those individuals.
Justice Ginsburg: That's something maybe a lawyer could follow, but the statute said unemployed father and the Court said unemployed mothers will be paid under this statute as well.
Mr. Lamken: Yes.
It's possible, Your Honor, that the Court stretched quite a bit to save the constitutionality of that statute.
But that does not change the underlying principle that absent a statute, nobody may obtain money from the... from the public Treasury, and the courts are not entitled under principles of common law or equity to create entitlements.
The other difference...
Justice Ginsburg: But you could have that kind of loose interpretation of a statute that would accommodate the kind of case I just described.
Mr. Lamken: I'm sorry.
Could you repeat the question?
Justice Ginsburg: You could... you said absent a statute, but you just described a statute that on its face doesn't cover something, but will be construed by a court to cover something and that fits within your theory.
Mr. Lamken: I think it would, but there's another point to it, which is when we say that absent a statute, we include in statutes all positive sources of law that are above common law and court-made law and we would include the Constitution.
So, if the Constitution required a payment from the United States Treasury... and I think it would be rare that it would.
If the Constitution required a payment from the United States Treasury, then the Court might have it within its power to order that payment be made.
Chief Justice Rehnquist: No such problem is raised... involved here, is it?
Mr. Lamken: No, I don't believe that there is any constitutional question in this case.
Justice Kennedy: In this... in this case before the Army paid Verdan in 1994, could it have said, you know, we have $ 86,000 we're going to pay Verdan, but we have notice that Blue Fox hasn't been paid?
We're going to put this money into a... a court escrow account and... and allow Blue Fox to make its claim in court.
Could you have done that?
Mr. Lamken: The... the Army could not have done that without declaring the prime contractor in default.
So long as the contract was in force, it was contractually obligated to pay the prime contractor.
If it had decided that the prime contractor was in default because it had failed to pay Blue Fox, then it could proceed with the contract.
It would hire a replacement prime contractor, and if at the end of the day there was money left over on the contract that was owed to the prime contractor, it could satisfy the contractual obligation to pay the original prime contractor for the work it did by filing interpleader.
Justice Stevens: But couldn't they have said the contractor was in default because it didn't post a bond?
Mr. Lamken: Pardon?
Justice Stevens: Could not the contractor have been in default for failure to post a bond under the Miller Act?
Mr. Lamken: That's an interesting theory.
Because the contract itself did not require a Miller Act bond... in fact, the requirement of a bond had been deleted... it would have been I think another stretch to suggest that the contractor had breached a condition of the contract...
Justice Stevens: Not as much as the stretch as that case was, though.
Unidentified Justice: [Laughter]
Mr. Lamken: I... I think...
Justice Stevens: Because it's clear they... oh, you did dispute at one time whether there was a bond obligation, didn't you?
Mr. Lamken: The district court specifically found that there was no bond required.
However, in the Ninth Circuit, and I think for purposes of this court decision, it's fair to assume that there was a bond requirement and that it was improper to have deleted it.
Justice Kennedy: Well, wasn't Verdan in default for not having paid Blue Fox?
Mr. Lamken: That is a possibility that Verdan was in default for the... of the contract conditions by not paying by... Blue Fox in a timely fashion.
Justice Kennedy: But, I mean, it all depends on whether you declare there's a default?
Mr. Lamken: That's correct.
The contract... the Government has the... the ability and oftentimes the duty to overlook minor defaults in the contract to make sure that the contract is completed in a timely fashion.
So, it has the option sometimes of declaring a default, replacing the prime contractor, oftentimes at greater expense, or it may overlook minor defaults, complete the contract to the best of its ability.
Justice Kennedy: Well, if you... if you have the... the discretion... let's assume there were facts here that would have allowed you to declare a default... to pay the money into... into a fund where interpleader is allowed, which is ultimately going to allow Blue Fox to... to obtain the money, then there's no really appropriations problem, is there?
Mr. Lamken: No, I don't believe that the United States has discretion.
Justice Kennedy: So, you... could you have paid Blue Fox directly?
Mr. Lamken: No.
The United States could not have paid Blue Fox.
Justice Kennedy: Simply because you need a court order?
There's a difference in your doing it voluntarily and having a court order?
Mr. Lamken: No.
The difference is that the only way the United States could pay out money would be if it were contractually obligated to do so.
So long as it's contractually obligated to pay the prime contractor...
Justice Kennedy: But I thought you just said it could be paid into an interpleader fund if you declared default.
Mr. Lamken: Under one condition and that condition is that the money is actually still owed to the prime contractor.
If it's owed to the prime contractor...
Justice Kennedy: Well, that was true here.
You paid Verdan twice, $ 86,000 once and $ 84,000 later.
Mr. Lamken: $ 86,000 in total in two payments, and I think there's another one for $ 1,000...
Chief Justice Rehnquist: Yes.
Mr. Lamken: But the... the contract had not yet been completed.
At that point in time, at the time Verdan potentially defaulted by failing to pay Blue Fox on time, the contract had not been completed.
So, the United States was under an obligation to use that money to complete the contract, to hire a replacement contractor and to complete it, which is what it did.
At the end of the day, there was no money left over.
So, there was no money owed to the prime contractor Verdan.
Accordingly, it couldn't pay that money out.
It wasn't owed under contract.
I think even under equitable lien principles, the requirement is that before a subcontractor can claim money, that money has to be owed to the prime contractor for which it worked.
And even the GAO would not allow the Army to pay out money to a subcontractor unless that money was actually earned and owed to the prime contractor for which it worked.
I should also point out that in... we... in our view the position of the GAO in the Federal circuit which have suggested the United States may voluntarily pay out that money is incorrect.
The United States is under an obligation to pay the money to the prime contractor that earned it.
If it's not earned under the contract, it may not be paid out.
Does that answer your question?
Chief Justice Rehnquist: Yes.
Mr. Lamken: Okay.
Because respondent seeks a payment of money from the United States Treasury, respondent has the obligation of pointing to a statute that entitles it to recover that money from the United States or authorizes the...
Justice O'Connor: What's the nature of a recovery in a suit to enforce an equitable lien?
Mr. Lamken: Your Honor...
Justice O'Connor: Is it specific relief or... or what?
Mr. Lamken: In our view it would be an action for money damages.
It would not constitute specific relief.
We believe that there's three reasons for that.
The first and the most simple, in the facts of this case, the actual res, the actual fund to which the lien supposedly attached, has been dissipated.
It no longer exists.
Even at common law it was recognized that once the funds to which the lien allegedly attached, what was left to the complainant was not a claim for specific relief, but a claim for damages, a claim... a general claim against the assets of the debtor.
Justice Kennedy: Even if you had notice before you disbursed the fund?
Mr. Lamken: Even if you had notice before you disbursed the fund.
What was left was a general claim.
You would lose... for example, you would lose your priority over other creditors.
All that was left was a claim for damages.
Justice Stevens: If that is correct, that would be a simple basis for deciding the case.
So, you don't have to get into all this Appropriations Clause business, do you?
Mr. Lamken: That is correct.
It would be a very simple and very narrow case for deciding this particular case.
But the lower courts are currently struggling with very broad issues that come out of the Court's decision in Bowen and section 702.
Justice Stevens: Which you'd like us to decide even if not necessary to dispose of this case.
Mr. Lamken: Pardon?
Justice Stevens: Which you would like us to decide even though not necessary to dispose of this case if you're right on the point you just made.
Mr. Lamken: Yes, Your Honor.
I think that the reason we asked the Court to take the case was not because of the specific narrow problem with the decision below.
Chief Justice Rehnquist: That was the question presented in the petition for certiorari, the more general one, was it not?
Mr. Lamken: Whether or not that... yes, whether or not anyone could recover...
Chief Justice Rehnquist: respondents to bring an action in Federal district court for an equitable... is Bowen the only authority for an equitable lien against the Government?
Mr. Lamken: I... Bowen itself wasn't an equitable lien case, and I don't believe that there are any cases from this Court...
Chief Justice Rehnquist: Are there any cases from this Court authorizing an equitable lien against the Government?
Mr. Lamken: Not that I know of, no.
Not... not against property in the possession of the Government that the Government itself owned in advance.
The only possible cases I could think of that would be contrary are cases where the United States acquired property after a lien had been imposed on it, and the question was, did the United States acquire greater rights than the transferor that transferred the property to it.
And the Court in a case Armstrong v. Georgia, I believe it was... the name was Armstrong... held that the United States cannot get greater rights than the transferor itself had.
But in no case has this Court ever held that a plaintiff may obtain a lien on United States funds held by the Treasury.
In fact, in case after case it has held that the United States' property and funds are not subject to liens and are not subject to the imposition of money payment obligations...
Justice Souter: But Bowen did say, didn't it, although it wasn't dealing specifically with equitable liens, that the... that the time had come to stop recognizing sovereign immunity with respect to... to equitable claims?
I mean, that's in Bowen, isn't it?
Whether... whether it was too broad a statement, we can argue about, but isn't that what the Court said?
Mr. Lamken: No, I think Bowen is actually quite a narrow decision.
Justice Souter: I'm talking about what the Court said.
Didn't the Court say something in substance like what I... I just said to you?
Mr. Lamken: I do not recall a statement from the Court indicating that any cause of action, no matter what basis, was now viable against the United States so long as it could be enforced by specific means.
We believe that was the basic mistake the Ninth Circuit made below.
It read the 1976 amendment to the APA as in effect saying that any cause of action or the courts could impose payment obligations on the Treasury so long as, at the end of the day, the mechanism for enforcing that payment obligation would be specific relief rather than money damages.
This Court has made clear that any plaintiff that seeks to obtain money from the Government must overcome two inherent aspects of sovereignty.
One is the immunity of the United States to suit, due to the fact that the United States cannot be called into court without its consent.
And the second is the immunity of the United States' property and funds to seizure, liens, and encumbrances without Congress' express consent.
Chief Justice Rehnquist: Well, in this case what's the difference between a recovery of damages and a recovery of the kind of specific relief that the Ninth Circuit said you could recover?
Mr. Lamken: We don't believe that there is a difference.
Justice O'Connor: There isn't much, is there?
Mr. Lamken: And in fact, it's... if this very claim had been brought... for example, if Verdan had asked for this money from the United States under its contract, that claim itself would clearly have been one for money damages under the contract.
If respondent had sought the money from Verdan under its contract, again it would have been money damages.
Justice Kennedy: Suppose a surety had paid the subcontractor and then tried to get the money.
Mr. Lamken: We believe that that claim also would not be viable against the United States, that it too would have been a claim for money damages.
Justice Kennedy: Would that position be surprising to the surety companies?
Mr. Lamken: It would be surprising to surety companies.
Under a... under the Federal... well, under the APA they would not... we don't believe they'd be able to... they would not be able to prevail.
In the Federal circuit, in cases that we believe are mistaken, the Federal circuit has described that action that the surety brings as a contract action and therefore within the scope of the waiver of immunity of the Tucker Act.
Justice Kennedy: But isn't... doesn't our Pearlman case establish that the sureties can recover?
Mr. Lamken: Excuse me?
Justice Kennedy: The Pearlman case that came from this Court, Justice Black's decision?
Mr. Lamken: Not against the United States.
Pearlman was a suit between a surety and a trustee of the contractor, and the United States had already parted with the funds.
Nowhere in Pearlman does it state that the... that the surety has a right of action against the United States.
As a matter of fact, I think it's very important, if you look very closely at the Court's opinion, the basis on which the surety is able to prevail over the contractor is that it is asserting the rights of the United States.
It is, through the doctrine of subrogation, stepping into the shoes of the United States and asserting the right to the funds that the United States would have been able to assert against the contractor.
Justice Breyer: Why isn't that an implied contract?
When it says implied contract in the Tucker Act, does that include restitution of contracts implied by law?
Mr. Lamken: No, it does not.
It specifically excludes contracts implied in law.
Only contracts implied in fact may be brought under the Tucker Act.
In fact, that this Court's decision I think...
Justice Breyer: So, that's actually what you're after in this case.
Your... your theory in this case is there is no... there is... you cannot assert a claim, an equitable claim, against some money.
Nobody can without a statute specifically saying it.
You can't do it under restitution law, and therefore sureties simply can't recover against the United States unless Congress takes some action.
Mr. Lamken: I think that is correct.
That is our position.
Justice Breyer: That's pretty...
Mr. Lamken: The Court actually does not have to go that far.
Justice Kennedy: No, no.
Justice Breyer: But I mean, the next thing, as soon as we decide this, you'll go back to the Court of Claims and say their court... their cases are wrong and get that up here, and that's part two and then it's over.
Justice Scalia: Is that...
Mr. Lamken: Potentially but I think that the... this particular theory that the Court of Federal Claims has proceeded on is not implicated in this case.
The Court of Federal Claims has said that the surety steps into the shoes of the prime contractor and can assert the prime contractor's contract rights against the United States.
Since the Tucker Act does express the United... waive the United States immunity to suit and allow for damages for breach of contract, those decisions wouldn't necessarily be called into question by this Court's decision.
We believe that they are incorrect.
As a matter of surety law, they're upside down, but they are not necessarily implicated by what the Court would do today.
Justice Souter: Well, following Justice Breyer's question, going back to my earlier colloquy with you, what I was trying to get at and not remembering very precisely was this.
I've got Bowen in front of me.
At... at 899, Justice Stevens quoted from Judge Bork in the court of appeals there in... in characterizing the legislative history.
The quotation includes this.
Both reports go on to say that the time has now come to eliminate the sovereign immunity defense in all equitable actions for specific performance against a Federal agency or officer acting in an official capacity.
And this Court then, at the end of... of that quotation and... and much more, said thus the combined effect of the 1970 hearing and the 1976 legislative material is to demonstrate conclusively that the exception for an action seeking money damages should not be broadened beyond the meaning of the plain language.
If we follow that rationale, it seems to me that we would have difficulty in accepting your... your very starchy position that if there is otherwise an accepted equitable basis for going after the res, that would still be impossible under this statute.
It seems to me if we accept that rationale, it... it would be perfectly possible, in fact, the only thing that we could do.
You might still win, by the way, because the res was gone.
I'm not saying... casting any doubt on that point.
But on the legal theory or the equitable theory, it seems to me you... you would have a tough row to hoe if we accept what... what we wrote in Bowen.
Mr. Lamken: I think that that... the legislative history quoted there can't be taken literally because the statute itself is directly to the contrary.
For example, the statute goes on and says, nothing herein affects other limitations on judicial review or the power or duty of the court to dismiss or deny relief on any other appropriate legal ground or confers authority, so that...
Justice Souter: Well, that's... that's... that's right, but... but that leaves open the question what grounds would be considered binding or legitimate after this... this act is... is passed.
And it seems to me that in... in Bowen at least, this Court thought that the kind of equitable claim that is being made here, leaving aside the problem of exhaustion of the res, would be a claim that was no longer precluded.
Mr. Lamken: I... I would disagree with that, Justice Souter, for two reasons.
The first is in Bowen the Court had no reason to consider whether or not section 702, in effect, licensed courts to create rights to money from the Treasury under common law or equitable principles because in that case there was a statute that entitled the plaintiff to the money.
And it's clear that Congress has the authority to create that right to the money.
The question and what the Ninth Circuit read section 702 as doing is creating an implied authorization for the courts under common law or under equitable principles to create a right to the money where Congress had not using equitable principles.
Justice Souter: Well, of course, that's... that's very true, but the... the fact is that the only language that... that Congress used in... in... in the section 702 amendment was the money damages language, and the money damages language, if it is read in a straightforward and plain fashion, would certainly authorize what the court was doing here, assuming there was anything for equity to attach.
Mr. Lamken: Justice Souter, no, I don't think so.
I think that it's improper given the fact that waivers of immunity are strictly construed and especially those that are a claim to create money payment obligations against the United States, I think it's improper to read...
Justice Souter: Then the court should simply... then the Congress should simply have said money.
Mr. Lamken: No, no.
Justice Souter: It said money damages.
Mr. Lamken: That's correct, but what... I think what your question implies is that the exclusion of money damages implies in the courts the power to create, as a substantive matter, new rights to money so long as in... in the end you can collect the money without it being money damages.
And that is a leap that you cannot make.
And I think, for example, United States v. Testan is a very good example of that.
In Testan, the statute specifically stated that the Court of Claims would have jurisdiction to enter judgments on claims against the United States based on, among other things, statutes.
This Court held that as a matter of sovereign immunity, the Government's immunity to suit, the ability to haul the United States into court, had been waived, but if the statute did not take the further step of creating a right to money from the United States based on any particular statute.
And so, based on... if there was a simple statutory violation, the Court of Federal Claims could not give damages for that... the violation of the statute.
It could only give money for the violation of the statute if the statute itself provided that right.
The same thing happened again in Nordic Village.
The statute waived immunity, saying that the judgments of the courts would bind the United States, but since the statute itself did not expressly state that the court could create new money payment obligations against the United States, this Court held that it applied only to non-monetary relief.
In other words, what the courts cannot do is create substantive new rights to money.
Section 702 is not a license for them to step out and say, well, this previous right, equitable liens, was not enforceable.
It never applied to the United States.
It now applies as a substantive matter.
Justice Breyer: 702 can't do...
Justice Souter: Just... just one last question.
Is it your position that... that under the 702 language as amended, no equitable right could be recognized which is not otherwise authorized by statute or only an equitable right which would require the payment of money?
Mr. Lamken: I think, Your Honor, that section 702 does not authorize the courts to create any substantive rights at all.
Justice Souter: So, the answer would be no equitable right could be recognized regardless of traditional equity principles.
Mr. Lamken: That's correct.
Traditional equity principles do not operate against the United States, and section 702 does not make them operate against the United States.
What it simply says is where you have a right to relief under a statute or some other force of law... or some other source of law that applies to the United States, you may get that relief so long as the relief doesn't constitute money damages.
If it does constitute money damages, you should go to the Tucker... go to the Court of Claims under the Tucker Act.
And therefore... so, that... that is the very mistake we believe the Ninth Circuit made.
It read section 702 as an implied authorization, and it doesn't have any language that would suggest it's an implied authorization to create new substantive rights to money.
It stands in contrast to example... to the Federal Tort Claims Act which has express language both waiving the United States immunity to suit and authorizing courts to create new substantive rights to money.
Justice Breyer: Now, that's... that's going to be a hard theory, isn't it?
The... I take it that here there is an ongoing right, whether mistaken or not, for the surety of an unpaid sub to assert a claim against a fund held by the United States insofar as that fund represents money earned by but not yet paid to the general contractor.
Mr. Lamken: There is... under a Federal circuit...
Justice Souter: Yes, all right.
Mr. Lamken: the contract right...
Justice Breyer: There is that kind of right.
So, it isn't 702 that anyone says created that right.
It's there in the law, and it wouldn't... I mean, the Court of Claims says there is such a right.
Mr. Lamken: The Court of Claims says that contracts create that right.
Justice Breyer: Fine.
Mr. Lamken: That's correct.
Justice Breyer: So... so, now how could we say, unless... we'd either have to say although the surety has that right, the principal doesn't, or we'd have to decide whether that right really exists or not before we could say that you haven't created one out of 702 because, you see, there is one out there independently of 702.
Mr. Lamken: I don't think you need to get into a metaphysical debate as to whether or not the right is somehow out there but not enforceable.
We all have to just... the only thing that has to be accepted is absent the express statement of Congress that equitable rights should be applying to the United States, as a matter of law they don't.
Section... the Tucker Act... under the Tucker Act, the Court of Federal Claims has basically read the ability to enforce contract claims as making certain rights enforceable, one of them being the right to assert the rights of the United States against the United States in subrogation.
And they have read the Tucker Act as making that right enforceable.
The question is whether 702 actually also reaches out and takes...
Justice O'Connor: No.
Justice Breyer: You would say the question under 702 is whether this right, which the Court of Claims says exists in respect to sureties... and let's imagine exists there in respect to subs... can be enforced in a Federal district court because to enforce it in a Federal district court is not to assert a claim for money damages, but is rather to assert a claim for the thing itself, namely the payment out of the pre-existing fund.
I mean, that... that would be the logic of it, wouldn't it?
Nobody is saying 702 creates the substantive right.
702 permits you to enforce in a district court that right which has been... that... well, I don't...
Mr. Lamken: Well, no, I understand the argument, but I don't think that 702 says that substantive rights to money that are otherwise not enforceable against the United States become enforceable simply because that nature of that right would be specific relief.
The... the only thing it says is that the suit shall not be dismissed on the grounds that it's against the United States.
It overcomes the United States' immunity to suit, but it does not take the further and necessary step of making the United States substantively liable for the payment of money.
I think I wanted to turn very...
Justice Kennedy: One thing.
I thought you disagreed with the... in this Court you would disagree that the surety would have a right against a fund that the Government is holding and has not paid to the prime contractor.
Mr. Lamken: Absolutely, Your Honor.
We would disagree with that emphatically, and we believe that the Court's cases, including Martin Surety and Pearlman, support our view that the...
Justice Kennedy: How does the... if that view prevails, how does the surety protect itself as a practical matter against just what happened here?
Mr. Lamken: The usual rule is what the surety does is when it sees a breach, it goes to the United States and enters into what's called a takeover agreement.
Justice Kennedy: In other words, it just has to audit performance on a constant basis.
Mr. Lamken: Pardon?
Justice Kennedy: It has to audit performance on a constant basis.
Mr. Lamken: Well, even under surety law, the... it cannot assert a right to subrogation unless it notifies the United States that there has been a breach.
That... that obligation exists no matter what.
Chief Justice Rehnquist: I know there was no Miller Act bond.
Was there a performance bond?
Mr. Lamken: There was no performance bond in this case either.
The United States took a loss on this contract.
To quick... to turn quickly, the last point.
We believe that because this is a lump sum payment of money for the remedy of retroactive past harms, it is by definition money damages.
Bowen is very different because the judgment in that case was going to cover ongoing relationships between the State and the Federal Government.
When the payment is a simple, naked money judgment covering past wrongs, we believe it was by definition money... a money judgment...
Justice Ginsburg: That was Judge...
Mr. Lamken: excuse me... money damages.
Justice Ginsburg: Judge Rymer's position, wasn't it, that this is a... this is a claim for money damages?
It's been artfully pled.
Mr. Lamken: That was her position, and she's... and her specific statement was there's no duty here which may be specifically enforced.
In other words, the United States has no duty to pay the subcontractor which may be specifically enforced.
And what they've attempted to do is plead around the claim which was basically based... and if you look at the complaint, paragraph 19... on the United States' failure to post a Miller Act bond.
If there are no further questions at this time, I'll reserve the remainder of my time for rebuttal.
Argument of Thomas F. Spaulding
Chief Justice Rehnquist: Very well, Mr. Lamken.
Mr. Spaulding, we'll hear from you.
Mr. Spaulding: Mr. Chief Justice, and may it please the Court:
My client was in a dilemma.
It was under contract to continue to perform the work.
It had no choice but to keep working.
On the other hand, Verdan wasn't paying it.
It had... it did the only thing it could do which was write to the Government and say, please either pay us or withhold or suspend the payments to Verdan.
I think it's important to recognize here that the Government's position mixes the merits and the jurisdiction up.
The... for purposes of the jurisdictional issue, we should look at the funds' still being there as of the date Blue Fox wrote the letter because...
Justice Ginsburg: Which... which funds are we talking about?
The first payment?
Because there was a takeover contractor that the funds were paid to in the end.
Mr. Spaulding: Yes, Your Honor.
Justice Ginsburg: So, which... which money are we talking about?
Mr. Spaulding: We're talking about the first one.
If none of these $ 86,000 had gone to Verdan, if it was... if that money was all still there, assume it had been enjoined or the Government had stopped... the Government would be making the same argument here, that what we're asking for is money damages.
So, I don't really think it's the... it's the point that, well, the money is all gone now, and so therefore, you know, getting money from a different source would be money damages.
Justice Scalia: They would be making the same argument, but... but in these circumstances, they don't have to.
They... they have an additional argument, which is that there just ain't no fund there.
There might have been a fund when you wrote the initial letter, but by the time you brought the lawsuit, what was the fund that you were seeking to... to obtain?
Mr. Spaulding: Well, I... I would disagree, Your Honor.
The... the money is... is there until the Comptroller General balances the books, and they have 5 years within which to do that, to... for example, the reason... the Government says the fund is depleted, but it paid out well over $ 100,000 to Verdan for the construction part of this contract.
Those were unauthorized payments, but yet it relies on those, bootstraps its argument on those unauthorized payments...
Justice Scalia: Where does this fund exist?
I mean, it... it didn't exist in the... all the authorized money had been spent.
Mr. Spaulding: Well...
Justice Scalia: Where... where is this fund other than in the general treasury?
I mean, is the whole general treasury is an equitable fund for your attachment?
Mr. Spaulding: No, Your Honor.
It's... Congress appropriates money for these... obviously for these projects after passing an authorizing statute.
So, the money is there.
It's... it's... it's been...
Justice Breyer: It had been spent.
Justice Scalia: All of the authorized money had been spent, hadn't it?
Mr. Spaulding: Your Honor, the money here is a form of bookkeeping entries in terms of... the monies... the money...
Justice Scalia: No, it is not.
It's... I mean, no.
Justice Souter: Your... your lien theory is that there is an object to which your lien attaches, and that object was gone when the money was paid out.
It seems to me you're making two arguments.
You're saying there was an equitable lien against the res, the money, and there was also an equitable obligation on the part of the Government not to do... not to dispose of that thing the minute we put the Government on notice.
It seems to me you're making two separate claims, aren't you?
And... and your... your... they're independent claims.
You may well be right on... on the lien theory.
I don't see the basis on which you are necessarily right against the Government prior to getting a court order to enforce it on your second theory.
Mr. Spaulding: Well, Your Honor, assuming for the sake of argument, if that's the Court's holding, I think what would happen, if the only reason this is money damages is that would send a signal to every construction lawyer to run into Federal district court to file a TRO as soon as a payment is missed, or even if the... your client...
Chief Justice Rehnquist: What would be the authority for doing that, to run into Federal court and file a... an action for a TRO against the Government?
Mr. Spaulding: Well, Your Honor, assuming, as we have to for the sake of the argument here, is that the subcontractor has rights to the funds, as we were discussing earlier, that if the surety has these rights, the subcontractor himself has...
Chief Justice Rehnquist: I don't see that.
Justice Ginsburg: But I don't see that having made that assumption.
I mean, there's the contract and the contract is with the prime contractor.
It seems to me that you're... you're trying to create a contract running between the United States and the subcontractor that doesn't exist and then saying, and even better, not only do we have a contract, but it's secured.
Now, of course, we have to wait to see that the... that the prime contractor is going to default, but we have created a contract between the subcontractor and the United States.
That's what it seems to me you've done, and I don't see how you get to that.
Mr. Spaulding: Well, Your Honor, there's a premise to your question which is at the basis of our rights are in contract, and that's not correct.
The basis of our rights arise by operation of law.
We have the right to the fund for the very reason that... that the sureties have that right.
I mean, the sureties' rights to subrogation...
Justice Ginsburg: I mean, what law?
You're talking... you could talk about tort law, contract law, by operation of law.
It seems to me this is Government contract.
So, contract is the most natural body of law at which to look, but what other law if not contract law?
Mr. Spaulding: This is Federal common law, Your Honor, which has been recognized by this Court...
Justice Ginsburg: But common law is also contract law, tort law, property law.
Chief Justice Rehnquist: Are you talking about cases like Pearlman and...
Mr. Spaulding: Yes, Your Honor.
We're talking about Pearlman and Henningsen where they... they recognized that there are equitable obligations of the Government or of the owner.
Chief Justice Rehnquist: Certainly the Government wasn't involved in either of those cases.
I mean, the Government was not a party in either of them, was it?
Mr. Spaulding: No.
In... in the Pearlman case, the... the money was actually in the hands of the trustee in bankruptcy.
That's correct, Your Honor.
Chief Justice Rehnquist: And isn't that true of Henningsen too?
The Government was not a party?
Mr. Spaulding: The Government was not a party, but there... these cases are important for purposes of... I mean, I think they shed light on the appropriations issue here to, is that the money was available.
And... and in this case, I would submit that the Government was a stakeholder in this case.
And certainly in all the suretyship cases, that's the rule that the... this money doesn't belong to the Government anymore.
Chief Justice Rehnquist: Well, but the Government... you know, when you're dealing with a... with a body that has sovereign immunity, you just don't likely say they were a stakeholder unless there is some authority.
You would have been entirely protected if there had been a Miller Act bond here, would you not?
Mr. Spaulding: In this case, yes, Your Honor, we would have been.
Chief Justice Rehnquist: And... and I take it your client knew that there was no Miller Act bond when you came in?
Mr. Spaulding: No.
No, he did not, Your Honor.
He did what most construction contractors do.
My client is an experienced Federal construction contractor, and he assumed that the law was complied with, and I think he's entitled to that presumption.
And then when he didn't get paid, he started calling around and... and found out, you know, who's this guy's bonding company, and he found out right around June 15th that there was no bond here.
Justice Breyer: There's no bond.
Mr. Spaulding: Of course, nobody from the SBA or the Army ever told him about that, notwithstanding...
Justice Kennedy: Why not?
Justice Ginsburg: Hadn't there been a dispute and the Government finally said, well, we're going to classify this as a service contract and therefore service contracts don't come under the Miller Act?
Wasn't that known that this... that this contractor had been classified as a service contract?
Mr. Spaulding: Well, no one told my client that, Your Honor, and it was... obviously, if... if he would have obtained the whole contract and read the whole thing, that would have been said there, but... I mean, the...
Justice Ginsburg: Well, how would you find out whether this was typed a construction contract or a service contract?
Mr. Spaulding: Well, it... in order to come up with the bonding requirement, one needs to... to... at least what the thinking was in the Army and the SBA at the time, what we need to do is first classify either services or construction.
We only need to get the bond if it's a construction.
Now, what the Ninth Circuit characterized as conscious avoidance of the Miller Act was going on here because the... they didn't want...
Justice Ginsburg: But that's not... I'm asking you the question.
I... I want to know whether a particular contract has been typed by the Government a service contract and therefore not under the Miller Act or a contract that is subject to the Miller Act.
How would I find that out if I wanted just that information?
Mr. Spaulding: I think probably, Your Honor, somewhere there's the standard industrial classification, SIC, codes and 1731 is construction.
If it's the 4833, it's... it's for services.
But the point here is...
Justice Ginsburg: So, just by looking at the number on the contract, if I were in this business, I would know that.
Mr. Spaulding: I... I believe so, Your Honor, that... that somewhere in the... if not in the contract itself, certainly in the... in the... the documents that the contracting agency generates, they have to assign a SIC code to this.
But that... that isn't determinative as far as a... whether a Miller Act bond is required.
I mean, Miller Act... the statute says that a bond is required for any contract.
Justice Ginsburg: Yes, and I could understand if you say we have... the United States committed a tort.
It didn't insist on a Miller Act bond when it should have and my client was hurt.
And then my question is, yes, but there's the Federal Tort Claims Act and this doesn't seem to come under it.
Mr. Spaulding: No.
And... and that's not our claim at all, Your Honor.
We're not saying that... that please remedy our loss because of the Government's misconduct in not getting a Miller Act bond.
That's not our claim.
Nor is our claim a contract based claim that... that we're... we're entitled to the monies that Verdan was supposed to pay us but did not.
I think that that's... that's what Judge Rymer viewed it as, but under that view, we would be entitled to be made whole irrespective of the fund.
All we're seeking... and this what distinguishes this from a contract case... is we're seeking if there is money in the fund, that we're entitled to that.
Justice Breyer: But where does that come from?
Let... let me make an heroic assumption.
Go back to June 15th, all right, and at that point you've written your letter.
And let's imagine that there is a fund at that time, which fund represents money that the Government has set aside to pay the contractor for work already performed, but it has not yet been paid.
And your client is not paid, the sub.
And I will assume heroically that if that fund existed, the later disbursement of the fund doesn't matter because equity presumes to have been done what should have been done, and therefore it reconstitutes the fund.
Now, on that heroic assumption, what is the source of law that says that you are entitled to assert your equitable lien?
For I take it that the Government argues, well, 702 may waive sovereign immunity for whatever... I don't know... I won't put this argument in their mouths.
I'll make it.
That... but nonetheless, there has to be a source of law somewhere.
There has to be a statute or something because 702 can't make up an equitable right where none exists, and the fact that private contractors or subs have such a right is beside the point when you deal with the Government because there is no general statute that says equitable principles automatically apply to the Government.
And we have to find a source of law.
So, since 702 can't be that source of law, what is?
Mr. Spaulding: Pearlman, Your Honor.
Justice Breyer: Pearlman.
Mr. Spaulding: The Pearlman doctrine allows the sureties to recover these monies.
It's... the whole... that whole concept is structured on the... on the notion...
Justice Breyer: Oh, my goodness, you know, what they've done in the Court of Claims on that is that they've said that the surety, rather than being subrogated to the rights of the sub, which is what normal subrogation is about, somehow falls into the shoes of the contractor prime and can sue on the basis of the contract with the Government.
That's my understanding of it.
Now, if I'm right on that understanding, that wouldn't even help you aside from the fact that... aside from the fact that that's a rather dubious theory.
I mean, how did they get from the rights of the sub to put him in the shoes of the prime.
I don't know how they did that.
I'm not sure I'm right on that, but I'm not sure, even if that's right, how that would help you because you don't have a contract with any Government on any theory.
Mr. Spaulding: And I think that's a different question, Your Honor, but... but... but the notion of... which is squarely within the holding of Pearlman, that the subcontractors have equitable rights which arise under Federal common law, and the surety steps into those rights by paying the subcontractor...
Justice Breyer: Where did Pearlman find the... the source of the equitable right against the Government?
You just made it up?
Mr. Spaulding: Your Honor, the... Justice Black's, you know, words were that, you know, we're not going to set aside these principles that are... are so embedded in our commercial practices, our economy, this Court's decisions.
They cited Henningsen, Prairie State Bank, and then they cited 19th century decisions of this Court dealing with subrogation in order to do that.
Justice Breyer: So, your answer to what they're saying about the source of law is Pearlman is the source of law.
All we're concerned about is whether 702 permits you to enforce that law in a Federal district court.
Mr. Spaulding: That's correct.
And... and I would agree with what Mr. Lamken said, that we're not relying on 702 itself to give us the rights.
Chief Justice Rehnquist: You can't really rely on Pearlman or Henningsen except perhaps by analogy because the Government was not a party to either of those cases.
Mr. Spaulding: Your Honor, they... they form the source of our rights.
I think there's really two components of what we're talking here: and what are we suing for; what is our right
And we look at Pearlman because it says that there is this right that the subcontractor has.
And the Court of Claims in all the other cases have discussed this in the past...
Chief Justice Rehnquist: We're not bound by Court of Claims cases here.
Mr. Spaulding: No, you're not.
Of course not, Your Honor.
But what I'm saying is... is that this right is there.
It belongs to the subcontractor and... and I think that's a given so long as one accepts the Pearlman doctrine.
Justice Kennedy: Yes, but there are lots of rights that can't be enforced because of sovereign immunity.
Mr. Spaulding: That... that's correct, Your Honor.
And then we go over to the Bowen situation and I think it's... it's quite clear in this situation that we're not dealing with money damages.
And we talked in our brief at some length about the origins of equitable liens and how they're distinct from a compensatory device, and the Government doesn't disagree with that.
I mean, they put all of their... of their eggs in the Appropriations Clause basket as far as that, but they don't really seem to continue to argue that an equitable lien is money damages.
Justice Kennedy: Could you just put a regular materialman's lien on... on the Government's building?
Mr. Spaulding: No, you could not, Your Honor.
Justice Kennedy: Well, why?
Mr. Spaulding: A materialman's lien would arise under State law.
I think that would have Supremacy Clause implications and it's... and certainly goes far beyond what the limited circumstance of this case...
Chief Justice Rehnquist: That was the whole reason for the Miller Act, wasn't it, was that you couldn't get a lien against Government property of a materialman?
And so, the idea was to have a surety come in and guarantee the payments.
Mr. Spaulding: That's true, Your Honor, and... and that wasn't done.
The Miller Act certainly was... was passed against a backdrop of immunity.
But this is a very narrow case.
A situation like this only comes up when there is no Miller Act bond, and so it's... it's really a very narrow situation.
It's not at all going to take the... take the place of the Miller Act remedy, and... and it's... it's quite a narrow situation.
Justice Souter: What is the... what is the source of the lien that you're claiming?
Is it a State law source?
Mr. Spaulding: No, Your Honor.
It's what we were discussing.
Justice Souter: It's a Pearlman source.
Mr. Spaulding: It's the Pearlman right of unpaid laborers and materialmen to be paid out of the remaining fund.
Justice Souter: And that... that has its origin in... in Federal equity law?
Mr. Spaulding: Yes, that has its... its origin in this Court's earlier cases which we were discussing earlier.
That is the source of our rights, and that these rights have been recognized for decades, albeit unenforceable by a subcontractor itself.
Now, generally most...
Justice Souter: Well, although we haven't done... recognized it for decades, could we by a like authority recognize a Federal materialman's lien?
Mr. Spaulding: Well...
Justice Souter: In other words, what I'm getting at is... is your answer to Justice Kennedy, an answer which really divides this case from... from the others, from the materialman's case.
Mr. Spaulding: No, I don't think there's a Federal materialman's lien itself, Your Honor.
Justice Souter: Where did the Federal equitable lien come from?
Some judge thought it up.
Why can't some judge think up a materialman's lien?
Mr. Spaulding: This is limited to the situation where we're talking about the unpaid laborers and materialmen as in Pearlman, Your Honor.
You know, beyond that, conceptually speaking, someone could say that... that, well, anybody down the chain might have some kind of a claim, but the origins of this in this Court's opinions are based upon people who contribute to Federal construction projects.
And that was the situation in Prairie State Bank and Henningsen and so forth.
The Pearlman doctrine itself is... has got... has got to the point of being a bedrock principle, and millions of dollars a year are disbursed based upon the settled set of rules we have as the result of Pearlman.
Justice Breyer: So then wouldn't it make sense, if you accept Pearlman... now, I don't know the... say, okay, maybe Pearlman gives you this equitable right.
Let's assume heroic assumption number two, we're not so heroic.
All right, assume that.
Then say, but all right, when somebody asserts that right against a fund, they're really asking for money, and because they're asking for money, they better go to the Court of Claims because this is a kind of Government contracting matter that the Court of Claims is good at.
Then your contrary authority is Bowen, and then I think what the Government says is, no, Bowen was a special situation, a situation in which you had an ongoing financial relationship over a long period of time between a State and the Federal Government with money passing back and forth nonstop every minute, and that's different.
What do you think of that?
Mr. Spaulding: Your Honor, we would love to go to the Court of Claims if we could.
I mean, that's... there's no question that we can't.
The Court of Claims has said we don't have standing, and that's... to bring a contract kind of... contract-based claim for the money.
Justice Breyer: So, the Pearlman claim is not contract-based.
Mr. Spaulding: No.
And Pearlman itself makes clear in a footnote that the... this right arises by operation of law.
It does not arise out of a contract.
Justice Ginsburg: By operation of what law?
Mr. Spaulding: It arises out of the subrogation laws we were talking about earlier, Your Honor, is that, you know, when a surety pays off the debt of someone else...
Justice Ginsburg: If I were going to type that, would I say, well, it... it belongs in the realm of secured contract law as opposed to some other kind of law?
Mr. Spaulding: Well, I think it's... it's the suretyship law or the law of subrogation, Your Honor, that it... and Pearlman cites the 19th century cases of this Court as support of that, that in order to prevent unjust enrichment, it's only fair that when a surety...
Justice Ginsburg: And I hear all of these descriptions of this case, but... as equitable, but as I see it, at its core what's happening is the subcontractor says when the contractor defaults and doesn't pay us, at that point we have a direct right of action against the United States for the money that the contractor should have paid us.
That's really what it is, and then you can put all kinds of labels on it, but isn't that what it is, that you have a right to money from the United States when the contractor defaults?
Mr. Spaulding: I would disagree with that characterization, Your Honor.
One... one could assert a contract-based claim because certainly we have a loss and we would want to be compensated for that loss, but that's not our claim.
That misreads our claim.
What we're asking for is to be paid out from the remaining fund if any.
Now, if we were asking to be compensated for the loss we suffered because Verdan didn't pay us, conceivably we would be entitled to our full loss, irrespective of the content of the fund.
And that's what distinguishes this... this claim from a breach of contract case.
One doesn't necessarily have to... to even use the same amount.
I mean, we're not relying on the... on the Verdan contract in order to quantify it.
We're saying that prevent unjust enrichment, we should be entitled to that money.
My client used its labor, its resources, borrowed money to build this building.
The Government uses it every day.
Justice Scalia: This happens all the time when people are confronted with the defense of sovereign immunity.
That's the whole beauty of the defense.
It lets the Government get off when the Government ought to pay.
That's what it's all about.
I mean, the fact that... that... you know.
It's just not persuasive as to the issue that's before us.
It's whether the Government can get away with not paying what it ought to pay.
That's the whole issue.
Mr. Spaulding: Well, Your Honor... and I would suggest that that's what Congress was reacting to when it passed the 1976 amendment to section 702, is that there was this outcry that this just isn't fair, that otherwise meritorious suits are being thrown out of court...
Justice O'Connor: Well, but you've already conceded that 702 doesn't give you the underlying right.
So, we're back to that old question again.
Mr. Spaulding: Your Honor, a right isn't based upon 702, but the waiver of immunity is.
And... and what they said in 702 is, is that we can come into court and that immunity is not a barrier in order to proceed.
But we have these rights otherwise, and for decades they've been tried... subcontractors have tried to enforce them and couldn't because of the bar of sovereign immunity.
And that's why these Postal Service cases are important where three circuits, in a case of... of the Post Office where there's a clear waiver of immunity in the Postal Reform Act, have said that the subcontractor lien cases, based upon Pearlman rights, can go forward where immunity is waived.
And the source of those is... is what we were talking about earlier under Pearlman...
Justice Scalia: But that's under a Post Office statute that has a sue-or-be-sued provision, and it's just not the same as the United States, eo nomine, as we say.
The Post Office has a special statute governing its... its immunity.
Mr. Spaulding: And, Your Honor, section 702 is a statute which waives immunity.
It's a broad waiver of immunity.
What this Court said is an important part of a... of a... of a special piece of legislation which waives immunity in all cases...
Justice Ginsburg: Mr. Spaulding, I may be a little rusty in my memory of 702, but I thought the prime thing that motivated that provision was that the United States should not have sovereign immunity available to it in non-monetary claims.
Now, they did use the word money damages, but I thought that the whole thrust of that act was when you're seeking relief other than money from the Government, the Government shouldn't have the defense of sovereign immunity, that it waived immunity for non-monetary claims.
I don't see anything in the history of 702 that indicates Congress was thinking about, yes, this waiver applies when money is involved.
Mr. Spaulding: Well, that was the whole point in Bowen, Your Honor, is that... is that the Court said that Congress used the more limiting words, money damages, as opposed to monetary relief in 702.
Justice Ginsburg: I... yes, I know what... what Bowen said, but as far as what drove 702, wasn't it that the United States should not have sovereign immunity for non-monetary relief?
In the... in the congressional history of... of what led to 702, it was the United States using sovereign immunity when there was no pocketbook claim at stake.
Mr. Spaulding: I... I would disagree, Your Honor.
I think what Congress was looking at is a... especially if you look at the...
Justice Ginsburg: Is... is there something in the legislative history of 702 that indicates they were thinking in terms of monetary relief that could be characterized as equitable rather than legal?
Mr. Spaulding: What... what they talk about, Your Honor, is the 1970 hearing, which is quite extensive, and they were talking about all... all the cases of... of sovereign immunity where, in particular, cases would be thrown out if they would expend themselves on the public Treasury or somehow result in the disposition of unquestionably sovereign property.
And there's a lot of discussion there about the... the two major waivers for money damages, the tort claims and the Tucker Act.
And... and I think one could look at those... look at the legislative history and say what... what Congress had in mind was simply we're not going to tread upon either of those.
So, I mean, nothing here is going to give something that the Tort Claims Act forbids, for example, misrepresentation claims, or nothing gives what... what the Court of Claims could give under the Tucker Act, for example.
But by using the term money damages rather than monetary relief, Congress made very clear that there can be kinds of what Judge Bork called in the Maryland case specific monetary relief, which is transfers of money from one side to the other without... just transfers of the money without being... without it being money damages.
Chief Justice Rehnquist: If... ordinarily, you know, you get a judgment for money damages.
Then the damages are transferred from the defendant to the plaintiff.
How is this any different from money damages?
Mr. Spaulding: Well, Your Honor, in Bowen this Court defined damages.
Chief Justice Rehnquist: Yes.
I didn't agree with Bowen at the time.
Unidentified Justice: [Laughter]
Mr. Spaulding: I... I know, but Your Honor, it's interesting because even in the view of the dissenting judges in Bowen and Justice White's separate opinion, everybody agreed that the Court would have jurisdiction as to prospective economic relief.
All nine of the Justices involved were in agreement as to that point.
So... so, as to the point... specific point, here, if we go back to when my client wrote the letter as to a request to enjoin enforcement or dissipation of those monies, I think even under the dissenting opinion in Bowen, we wouldn't have that problem because we're talking about prospective monetary relief, and that's not damages under any of the Justice's versions of... in Bowen.
Justice Breyer: But if Bowen applies here, then Bowen applies in 702, et cetera, applies whenever there's a specified fund of money that the Government has.
But if that's so, then many Court of Claims cases... many, perhaps most... will suddenly be dissipated throughout the 9 or 10 or 12 or 13 circuits, and there goes the exclusive jurisdiction of the Court of Claims, which seems counterproductive.
Justice Stevens: All right.
Justice Breyer: Now, I've just made a statement.
It's really a question.
Justice Scalia: What do you think?
Well, it's even worse than that.
Justice Breyer: Well, I mean, what I want to know is that... what's his response to that.
Mr. Spaulding: Well, I... I think that's the point Justice Scalia made in his dissent, that carried to its logical conclusion the Claims Court would be...
Justice Breyer: But you have to argue to the contrary on that.
So, what... what is your contrary?
Mr. Spaulding: Well, we're not... we don't have a claim that could be brought into the... in the Court of Federal Claims.
Justice Breyer: I know but, you see...
Mr. Spaulding: This is an...
Justice Breyer: Bowen seems... if Bowen doesn't apply here and we treat this as money damages, you've had it.
Justice Stevens: Right?
Mr. Spaulding: That's correct.
Justice Breyer: Okay.
But I say if Bowen does apply here, then we've suddenly got Bowen applied to any fund of money held by the Government, and if we have that, then suddenly the Court of Claims jurisdiction that seems to be exclusive dissipates.
And that's a bad result of agreeing with you.
So, I want you to comment on why, nonetheless, we should agree with you.
Why am I wrong in other words?
Mr. Spaulding: Your Honor, I think what the Court should do if they agree with me is limit this to cases arising through operation of law, which is a... a right arising out of Federal common law, which is a very, very narrow kind of case.
All those other cases...
Justice Breyer: Restitution.
Mr. Spaulding: Yes, restitution, specific relief in restitution.
So, we wouldn't get... any other... any other case where somebody is evading the... the Claims Court avenue by going into Federal district court.
And as I said, we would love to be in Claims Court if we could, but unfortunately, as... as the dissenting judge said, the hapless subcontractor ends up holding the bag.
I mean, obviously that's not fair.
But the question here is that we're just asking for our day in court.
And... and what the Government is saying is that... is that even... even freezing this as of June 15th, we're still dealing with money damages.
And... and... as I mentioned it, under all nine Justices' views in Bowen, a claim for prospective monetary relief is not money damages.
And... and that's really the issue here on the jurisdictional like he... Mr. Lamken talked about, well, you know, maybe the fund has been dissipated as a matter of... of substantive... of lien law, I'm going to lose, but that goes to the merits.
I mean, we can get into, you know, whether the money is still there.
Perhaps... perhaps these... some of these payments to Verdan were unauthorized.
I mean, Verdan has to submit certifications with its request for progress payment saying that we're going to pay the subcontractor.
Perhaps there's... there's a...
Chief Justice Rehnquist: Thank you, Mr. Spaulding.
Mr. Spaulding: Thank you, Your Honor.
Rebuttal of Jeffrey A. Lamken
Chief Justice Rehnquist: Mr. Lamken, you have 2 minutes remaining.
Mr. Lamken: The basic principle that we believe should control this case is that anybody seeking money from the United States must show a waiver of immunity and a substantive source of law applicable to the United States giving them a right to the money.
In our view, neither section 702 nor Pearlman make equity a source of substantive law applicable to the United States that gives rise to the right to money from the Treasury.
In Pearlman, the United States was not a party and the rights that were recognized were rights to money that operated against only other private parties.
In fact, in OPM v. Richmond, there existed in that very case a waiver of immunity, but the court rejected the notion that the... that the lower Federal courts could create a right to money under the theory of equitable estoppel.
We think the same rule applies to creating rights to money under a theory of equitable liens.
Justice Stevens: May I just ask one question about the phrasing of the question presented in your cert petition?
It asks whether section 702 permits respondent to bring an action, so forth and so on, which seems to me to raise squarely the sovereign immunity question whether this is a money damage case or not.
I don't see that it raises the question whether there's any other source of... of law that would support the claim.
Mr. Lamken: I think it squarely raises that question for two reasons.
First, the... the way we read the Ninth Circuit decision... I think the proper way to read it... is that section 702 renders certain sources of law applicable to the United States and create the liens, so that section 702 in a real sense permits people to assert...
Justice Stevens: Well, it should have been permits or authorizes.
Mr. Lamken: Permits or... permits...
Justice Stevens: But you're saying that they read it as an authorization statute, not merely as a waiver of sovereign immunity.
Mr. Lamken: That's correct, but I think that the second answer is that that in fact is a sovereign immunity issue and the Court consistently has treated the creation of substantive monetary rights against the United States as an issue of sovereign immunity.
It treated it... that as an issue of sovereign immunity in the United States v. Testan.
It created... treated it as an issue in the United States v. Nordic Village, and it treated it again as an issue of sovereign immunity in United States v. Idaho because sovereign immunity has two inherent components.
One is an immunity to suit, and the other is an immunity of the United States' property and its funds to seizure and encumbrances.
And any plaintiff seeking to get money from the Treasury must overcome both.
It must show both jurisdiction in the Federal court and that Congress has affirmatively intended money to be leaving the Treasury based on this source of law.
And I... thank you.
Chief Justice Rehnquist: Thank you, Mr. Lamken.
The case is submitted.