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Lee v. United States

United States Court of Appeals, Federal Circuit

July 13, 2018

SEH AHN LEE, IRINA RYAN, AHMAD NARIMAN, MARK PEACH, Plaintiffs-Appellants
v.
UNITED STATES, Defendant-Appellee

          Appeal from the United States Court of Federal Claims in No. 1:15-cv-01555-CFL, Judge Charles F. Lettow.

          David Leo Engelhardt, Themis, PLLC, Washington, DC, argued for plaintiffs-appellants. Also represented by John Pierce, Michael Cone.

          Hillary Stern, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Chad A. Readler, Robert E. Kirschman, Jr., Reginald T. Blades, Jr.

          Before Reyna, Bryson, and Stoll, Circuit Judges.

          Bryson, Circuit Judge.

         Plaintiffs Seh Ahn Lee, Irina Ryan, Ahmad Nariman, and Mark Peach each entered into agreements to provide services to Voice of America ("VOA"), a U.S. government-funded broadcast service. The agreements were in the form of a series of individual purchase order vendor ("POV") contracts that each plaintiff entered into over several years with the Broadcasting Board of Governors ("BBG"), which oversees VOA.

         Unhappy with the terms of their contracts, the plaintiffs filed a class action complaint alleging that, along with other individuals who have served as independent contractors for VOA, they should have been retained through personal services contracts or appointed to positions in the civil service. If their contracts had been classified as personal services contracts or they had been appointed to civil service positions, the plaintiffs alleged, they would have enjoyed enhanced compensation and benefits. The Court of Federal Claims ("the Claims Court") dismissed the plaintiffs' first amended complaint, and subsequently denied their request for leave to file a proposed second amended complaint.

         On appeal, the plaintiffs raise several contract-based claims, seeking damages for the loss of the additional compensation and benefits to which they contend they were entitled. We agree with the trial court that the plaintiffs have set forth no viable theory of recovery. We therefore affirm.

         I

         In 2014, the Office of Inspector General for the U.S. Department of State and the BBG ("OIG") issued a report that was critical of the BBG's use of POV contracts, concluding that the BBG was using such contracts in some cases to obtain personal services. The following year, the plaintiffs brought this action in the Claims Court, contending that it was improper for the BBG to obtain their services through POV contracts, and that they were entitled to be treated as federal employees, with all of the pay and benefits applicable to such employees. As relevant to this appeal, the plaintiffs sought damages based on three theories: breach of express contract, breach of implied-in-fact contract, and quantum meruit.[1]

         The Claims Court granted the government's motion to dismiss the plaintiffs' first amended complaint. First, the court noted that the plaintiffs' breach of contract claim was "not based on an entitlement to money damages under these express contracts," but instead was based on an implied contract theory under which they alleged they were entitled to additional pay and benefits. Lee v. United States ("Lee I"), 127 Fed.Cl. 734, 744-45 (2016). The court next held that the plaintiffs "failed to make a non-frivolous claim of an implied-in-fact contract with the government above and beyond the provisions of their express contracts." Id. at 745. Finally, the court noted that it "generally does not have jurisdiction over quantum meruit or implied-in-law contract claims." Id. The court recognized that an exception to that general rule applies, and that recovery under a quantum meruit measure of damages is available, when a contractor provides goods or services in good faith under an express contract that is later rescinded for invalidity. Id. at 745-46 (citing Int'l Data Prods. Corp. v. United States, 492 F.3d 1317, 1325 (Fed. Cir. 2007), and United States v. Amdahl Corp., 786 F.2d 387, 393 (Fed. Cir. 1986)). Finding that the express contracts at issue in this case were not invalid, the court held that the exception did not apply to this case and that the court lacked jurisdiction over the plaintiffs' quantum meruit claim. Id. at 746.

         The plaintiffs filed a motion for reconsideration and sought leave to file a proposed second amended complaint. The court denied the motion, holding that the proposed amendments were futile. Lee v. United States ("Lee II"), 130 Fed.Cl. 243, 248, 252-53 (2017). The court first held that the proposed second amended complaint failed to state a claim for breach of express contract because the allegations in the complaint did not plausibly allege a breach of the POV contracts with the plaintiffs.[2] Id. at 256. With regard to the implied-in-fact contract theory, the court held that the plaintiffs had not sufficiently alleged a basis for finding that their express contracts were void or that an implied-in-fact contract existed apart from their express contracts. The court therefore dismissed the plaintiffs' implied-in-fact contract theory. Id. at 256-59. Finally, the court dismissed the amended quantum meruit claim because the complaint again failed to plausibly allege that the plaintiffs' express contracts were void or that the plaintiffs had not been paid the contract rate in full. Id. at 259-60.

         The plaintiffs appeal both decisions.

         II

         With regard to their claim for breach of express contract, the plaintiffs argue that the trial court erred (1) in dismissing the claim for breach of express contract set forth in their first amended complaint, and (2) in denying leave to amend with respect to the claim of breach of express contract set forth in their proposed second amended complaint.

         A

         In support of the breach of express contract theory presented in their first amended complaint, the plaintiffs argue on appeal that the scope of their work was "materially limited" by the use of terms such as "independent contracting" and "non-personal services" in their contracts. According to the plaintiffs, the BBG "breached these limits" in its administration of the contracts.

         The first amended complaint, however, did not allege that the breaches of the plaintiffs' contracts consisted of requiring them to provide personal services outside the terms of the contracts. Instead, the complaint focused on the failure to compensate them as if they were either federal employees or had been retained under personal services contracts.[3] It alleged that the BBG breached its contractual obligation to compensate them "as providers of personal services working in the manner of federal employees." For relief, the complaint demanded "back pay for the wrongfully withheld benefits, tax payments, and wages and salaries . . . as damages for breach of their express or implied contracts for the provision of personal services."

         In asserting that the breach of their contract rights consisted of the failure to compensate them for providing personal services, the plaintiffs ignored the fact that their contracts specifically designated them as independent contractors who were not providing personal services and set forth their compensation accordingly. For that reason, the trial court properly concluded that the BBG did not breach any contractual obligations with respect to the plaintiffs' compensation, and that the alleged contract breaches were necessarily based on an implied contract to provide (and be compensated for) personal services, rather than on ...


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