The Overly Complicated Law of Getting Your Money Back From the Government

I invited Prof. Burbank to provide a discussion of this recent appellate decision reversing a judgment from the Court of Federal Claims.  Burbank has previously written about confusing elements of the Tucker Act and the scope of claims for “illegal exaction.” In typical law professor style, she writes here that the court came to the “right conclusion but for the wrong reason.”   – Dennis.

Guest Post by Renée A. Burbank, Clinical Lecturer at Law and Robert M. Cover Fellow at Yale Law School

Boeing v. U.S. (Fed. Cir. August 10, 2020)

The Boeing Company holds over $28 billion in contracts with federal government, mostly with the Department of Defense. Those contracts are governed by the Federal Acquisition Regulation (FAR), which dictates all manner of procurement procedures and contract clauses, and includes non-negotiable requirements for federal contracts. Boeing argues that one such requirement concerning price adjustments to contracts based on changes in cost accounting, FAR 30.606, is incompatible with 41 U.S.C. § 1503(b). On a plain reading of the two provisions, they do seem point in opposite directions:

Statute: 41 U.S.C. § 1503(b) Regulation: 48 C.F.R. § 30.606(a)(3)(i), (ii)
“[T]he Federal Government may not recover costs greater than the aggregate increased cost to the Federal Government . . . on the relevant contracts subject to the price adjustment.” The agency “shall not combine the cost impacts” of multiple changes at once, and will thus recover costs of any change that increases costs of the government.

When Boeing made several cost accounting adjustments, some of which lowered costs to the government and some of which raised them, the government followed the FAR provision and made Boeing pay for the raised costs without offsetting the lowered costs. Boeing paid, but it also sued.

Now, you might wonder whether the regulation does, in fact, violate the statute, and whether multiple cost accounting changes are properly included in a single “price adjustment.” But the trial court never got there, and neither will this blog post.

Instead, Boeing is important because the Federal Circuit allowed the case to go forward at all. Between this case and last week’s decision in NVLSP v. US, it has been a good month for people who want sue the federal government for overcharging them. As both cases demonstrate, historically, it’s been a tricky business to sue the federal government for an “illegal exaction” (i.e., when the government illegally requires money or property be paid to it, directly or in effect) without being thwarted by sovereign immunity. With its decision in Boeing, the Federal Circuit finally clarified that an illegal exaction claim need not be based on a “money-mandating” provision.  This removes many of the obstacles and confusion that has often prevented plaintiffs from reaching the merits of their illegal-exaction arguments.

The government argued that money-mandating provisions were required in both NVLSP and Boeing. Under the government’s theory, federal courts lack jurisdiction over illegal exaction claims unless the statutory or regulatory provisions allegedly violated are “money-mandating.” A money-mandating statute is, quite simply, one that requires the government to pay money to someone. For example, the Military Pay Act is money-mandating because it says military personnel “are entitled” to be paid. 37 U.S.C. § 204. Therefore, if a servicemember is wrongfully dismissed, they can sue for back pay. By contrast, neither the PACER fees statute at issue in NVLSP or the cost accounting standards statute in Boeing requires the government to pay money to anyone. Instead, they require people to pay money to the government.  Therefore, the government argued, because the statutes contained no mandate for the government to pay money, much less a requirement that money be paid as damages for the violation of those statutes, they were not money-mandating, and federal courts lacked jurisdiction to hear the plaintiffs’ claims at all.

In both cases, the Federal Circuit rejected the government’s argument.  In Boeing, the Court went a step further and clarified prior confusing case law, largely stemming from dicta a 2005 Federal Circuit decision, and definitively held that an illegal exaction claim does not need to be based on a money-mandating provision. This opens up a wide variety of potential illegal exaction claims. Any time a person or organization has to pay money to the government or to a third party because of the government’s incorrect interpretation of its legal authority, that person can potentially recover the money back under an illegal exaction claim. Because illegal exactions are not limited to a specific doctrinal area of law, the claim can provide relief whenever the federal government oversteps its bounds and creates direct monetary damages.

In my opinion, the Federal Circuit reached the right conclusion but for the wrong reason. The reason the statute allegedly violated doesn’t need to be money-mandating isn’t because illegal exactions are a special type of statutory claim that needn’t be money-mandating.  Instead, illegal exaction claims don’t have to be based on statutes (or regulations or constitutional provisions) at all. They are, properly understood, common law claims. As I explain in a recent article on illegal exactions, the history of illegal exactions demonstrates that the claim fits best in a common law framework. It also is the best interpretation of the Tucker Act, which provides courts with jurisdiction over illegal exaction claims in the first place. The Tucker Act (and its identical language in the Little Tucker Act) waives sovereign immunity for three types of claims, namely claims “[1] founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or [2] upon any express or implied contract with the United States, or [3] for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. §§ 1291(a)(1), 1346(a)(2). The first category comprises money-mandating claims, i.e., claims that can be brought under the statutes themselves. The second category includes contract claims. The third category is illegal exactions. Notice that the last category does not include the requirement that they be “founded upon” any constitutional, statutory or regulatory provision. Instead, they are simply a non-tort, non-contract claim for damages. Like a common law claim for unjust enrichment, it should be sufficient under an illegal exaction theory to simply claim that the government has taken the plaintiff’s property without a legal basis. No written provision required, money-mandating or not.

Unfortunately, the neither the NVLSP panel nor the Boeing panel quoted, much less examined, the Tucker Act.  But the cases go a long way to clarify that illegal exaction claims cover a lot more than the government wishes they did.

3 thoughts on “The Overly Complicated Law of Getting Your Money Back From the Government

  1. 1

    The PTO has no statutory authority for the “operating reserve.” The PTO has no statutory for many of its proposed fees set to go into effect Oct. 1.

    Discussed at link to uspto.gov

    1. 1.1

      More ways in which “getting your money back” will be problematic.

    2. 1.2

      … maybe the Office could also charge for putting out poor design drawings, with an extra charge for better drawings in the image file wrapper…

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