[00:00:08] Speaker ?: No. [00:00:56] Speaker 01: Okay, our next case is Lee versus United States 17-1643. [00:01:03] Speaker 01: Mr. Engelhardt? [00:01:06] Speaker 01: Let's wait just a couple of minutes, just a little bit, until we settle down a little. [00:01:21] Speaker 01: Okay, I believe we're ready. [00:01:24] Speaker 01: And you're reserving five minutes of your 15 minutes for rebuttal, correct? [00:01:28] Speaker 04: Yes, Your Honor. [00:01:29] Speaker 01: OK, you may proceed. [00:01:30] Speaker 01: Thank you. [00:01:31] Speaker 04: May it please the court, David Englehart, for the appellants. [00:01:35] Speaker 04: We are appealing a premature dismissal of an appellant's first amended complaint on defenses that the government never raised, that the trial court raised to a sponty without ever having us brief them in advance or even know that they were coming. [00:01:51] Speaker 04: And that dismissal was followed by a very swift entry of final judgment, which the trial court erroneously held raised the bar for leave to amend under Rule 15. [00:02:03] Speaker 04: And that was among the reasons why our second amended complaint, as proposed, was rejected. [00:02:10] Speaker 04: And so we are here today on errors in the rejection of both complaints. [00:02:16] Speaker 04: And frankly, there have been errors in simply acknowledging [00:02:20] Speaker 04: what the claims written in the two complaints are. [00:02:25] Speaker 04: Since the beginning of the case, in both complaints at issue, appellants alleged breach of express contract, remedies by implied contract terms, and quantum merit, all on the alternative. [00:02:40] Speaker 04: Now, having read the First Amendment complaint, the agency did not object to the sufficiency of the pleading. [00:02:47] Speaker 04: They did not raise a Rule 12b6 motion. [00:02:50] Speaker 04: They moved only for dismissal under the Contract Disputes Act for lack of exhaustion of administrative remedies. [00:02:58] Speaker 04: The trial court did not rule on that basis, and it raised 12b6 and jurisdictional defenses on its own. [00:03:07] Speaker 04: And the trial court's jurisdictional defense was essentially equivalent to a 12b6 analysis. [00:03:13] Speaker 04: So that was all the trial court acting sui sponte. [00:03:17] Speaker 04: And in fact, [00:03:18] Speaker 04: Everything we need to have survived the trial court's suesponti defenses is summarized in the first paragraph of the trial court's first opinion at issue today. [00:03:28] Speaker 04: The trial court there explained quite accurately that appellants provided personal services to the Board of Broadcasting Governors under contracts that scoped and paid only for independent contracting for non-personal services. [00:03:45] Speaker 04: Now, there's a lot more detail that we allege with respect to our claims. [00:03:48] Speaker 04: But if we stopped right here on the words of the trial court, we allege, and the trial court saw, but ultimately didn't rule upon, legally sufficient claims for uncompensated out-of-scope work in breach of express contract. [00:04:08] Speaker 04: Now, we further showed that the acquisition of personal services by contract [00:04:13] Speaker 04: which the trial court acknowledged happened in its own opinion, that acquisition was prohibited and unlawful and therefore opened the door to the implied remedies in quantum Maryland. [00:04:25] Speaker 01: Why was it unlawful? [00:04:26] Speaker 04: Because there is a regulation in the federal acquisition regulations that says agencies shall not issue contracts for personal services except [00:04:41] Speaker 04: within a numerical limit set by commons. [00:04:43] Speaker 01: And there was 60. [00:04:44] Speaker 01: There's a numerical limit of 60. [00:04:46] Speaker 04: Numerical limit of 60. [00:04:47] Speaker 01: Why isn't, how many clients are you representing? [00:04:51] Speaker 01: How many individuals? [00:04:52] Speaker 04: We represent four individuals in this case, and another 200 or so will join the class as it stands today. [00:05:01] Speaker 01: You're at court with four. [00:05:03] Speaker 01: With four. [00:05:04] Speaker 01: And how do you know those four are not within the 60? [00:05:07] Speaker 04: Well, I know first because the government has never so contended. [00:05:11] Speaker 04: And I know second, because the contracts say on their face, this is a contract for non-personal services. [00:05:18] Speaker 01: But that was one of the court's findings. [00:05:20] Speaker 01: If you had no evidence that showed that year four should not be within the 60. [00:05:27] Speaker 04: We're here on a threshold motion on the pleadings. [00:05:30] Speaker 04: The trial court engaged in premature fact finding when it made that case. [00:05:34] Speaker 04: If the government wishes to show that it is A, legally allowed, [00:05:39] Speaker 04: and be factually capable of reaching into the pot of 616 contracts that were denominated for non-personal services, but under which they acquire personal services. [00:05:55] Speaker 04: They think they can reach in that pot of 616 and pull out our four and fit them into the 16 contracts that are left under their authorization. [00:06:05] Speaker 01: That's your job, not the court's job. [00:06:08] Speaker 04: I submit it's the government's job as the defendant to raise that defense and to make that defense. [00:06:13] Speaker 01: But you'd have to plausibly allege. [00:06:16] Speaker 04: We are more than plausibly there, your honor. [00:06:19] Speaker 04: If you look at the odds out of the 616 contracts. [00:06:25] Speaker 03: Is that 616 contracts or 616 employees or contractors? [00:06:29] Speaker 04: 616 contractors at all given times. [00:06:35] Speaker 03: Is that 616 people? [00:06:37] Speaker 04: 616 people. [00:06:38] Speaker 03: They're not companies. [00:06:39] Speaker 03: I understood that some of these individuals had multiple contracts. [00:06:44] Speaker 03: Over the years, one at a time annually. [00:06:46] Speaker 03: Okay, so the total number of contracts is in excess of 616? [00:06:50] Speaker 04: Oh, it's in the thousands. [00:06:52] Speaker 04: There have been 660 providers of personal service to the Broadcasting Board of Governors each year for the last [00:07:03] Speaker 04: 16 years, roughly. [00:07:06] Speaker 04: Now, the turnover has been not constant. [00:07:09] Speaker 04: Most of these people have annual contracts running back to back. [00:07:12] Speaker 04: Now, if we look at the trial court's analysis of the unused authorization, the 16, that only covers 16 out of 616. [00:07:23] Speaker 04: 60 were authorized. [00:07:28] Speaker 04: They used 40. [00:07:29] Speaker 04: They've got a gap of 16. [00:07:30] Speaker 04: 616 people [00:07:34] Speaker 04: which takes us from 44 up to 660, were providing personal services under contracts that were scoped for non-personal services and that the government didn't try to fit within its authorization. [00:07:50] Speaker 04: At most, 1 38th of the 616 can be fitted into the 16. [00:07:57] Speaker 04: The odds against the government making that showing are 38 to 1. [00:08:03] Speaker 04: This is a civil case. [00:08:04] Speaker 04: we're bound for preponderance of the evidence standard. [00:08:08] Speaker 04: We only have to get to 51%. [00:08:11] Speaker 04: I'm at 38 out of 39. [00:08:13] Speaker 04: That's about 97%, 98%. [00:08:14] Speaker 04: I think we pleaded pretty well. [00:08:17] Speaker 04: And if that's the defense on which we lose, that's an error of law, because we have established much more than a preponderance of evidence. [00:08:27] Speaker 04: We've got them 38 to 1. [00:08:30] Speaker 04: They think they can make the factual showing that these really were among the 16 unused authorized contracts. [00:08:37] Speaker 04: They can try to do it. [00:08:38] Speaker 04: But the contracts on their face say they can't make that showing. [00:08:42] Speaker 04: Because the contracts on their face say this is not one of the authorized contracts. [00:08:49] Speaker 04: If it were one of those, it would have said this is a personal services contract. [00:08:53] Speaker 04: These contracts say you will not provide personal services, and you are an independent contractor. [00:08:59] Speaker 04: And by the way, both of those provisions were breached. [00:09:02] Speaker 04: And when the trial court found lack of pleading of breach of express contract, he missed those breaches and at least five others. [00:09:14] Speaker 03: Now, as I understand it, your position is that the breach came because the government exercised various [00:09:25] Speaker 03: powers that go beyond the powers that it was entitled to exercise with respect to independent contractors, particularly and specifically undue supervision, let's call it that. [00:09:35] Speaker 03: That is absolutely correct. [00:09:38] Speaker 03: And yet your damages seem to be your argument that they really should have been paid as if they had been employees. [00:09:47] Speaker 03: I mean, why is it not the case that your damages are attributable to any loss that you suffered by virtue of the additional supervision that you had to endure? [00:10:00] Speaker 04: Well, there are different ways to measure the damage. [00:10:02] Speaker 04: And again, I believe it's premature. [00:10:04] Speaker 03: I'm asking you, why is your way of measuring it the right way to measure? [00:10:09] Speaker 04: In fact, it's the government's way. [00:10:11] Speaker 04: The figure we use, $20,000 to $30,000 per contractor, per year of service, is their estimate. [00:10:18] Speaker 03: Well, it's their estimate of how much more that your employees would have been paid if they had been actual government employees. [00:10:28] Speaker 03: But my question is, why is that the correct measure of damages as opposed to whatever loss they suffered by virtue of their having this additional supervision? [00:10:39] Speaker 04: I cannot rule out the possibility that on the law when we get there, that will be the analysis of damages. [00:10:48] Speaker 04: We do know that they provided a service that was more valuable and a service for which they would have charged more if they knew going into the contract that that's what they were going to do. [00:10:59] Speaker 04: You could look at their loss as the lost opportunity to earn what an employee learns. [00:11:04] Speaker 03: Except that they presumably, because the agency wasn't hiring them as employees, the agency had decided that is not the course it wanted to follow. [00:11:13] Speaker 03: I mean, I suppose your answer is that, well, if the agency had been told it couldn't follow the course of doing contractors, they would have opted to hire them as employees. [00:11:22] Speaker 03: But we don't know that. [00:11:23] Speaker 04: Well, that is correct. [00:11:24] Speaker 04: But they could have pursued opportunities elsewhere in the world of employment. [00:11:28] Speaker 04: The bargain they made here was a quid pro quo. [00:11:30] Speaker 04: The quid pro quo is stated in the contracts. [00:11:33] Speaker 04: We cited three specific pages in the briefs in the record. [00:11:38] Speaker 04: Actually, I'm sorry. [00:11:40] Speaker 04: It's Appendix 907, paragraph 12. [00:11:44] Speaker 04: There is an express quid pro quo as between the provision of non-personal services as an independent contractor and the reduction in pay. [00:11:57] Speaker 04: The contract on page Appendix 907 says, [00:12:05] Speaker 04: You will not be subjected to direct supervision. [00:12:08] Speaker 04: You will not provide personal services. [00:12:10] Speaker 04: You will not be supervised in the manner and method of performance. [00:12:15] Speaker 04: Accordingly, you will not get benefits. [00:12:18] Speaker 03: I'm sorry. [00:12:19] Speaker 03: What page again of the appendix? [00:12:21] Speaker 04: 907 of the appendix. [00:12:22] Speaker 03: All right. [00:12:23] Speaker 03: I'm looking at 907. [00:12:23] Speaker 03: That's part of the complaint. [00:12:26] Speaker 03: Is that what you're referring to? [00:12:28] Speaker 04: I'm sorry. [00:12:29] Speaker 04: That's the complaint where we allege it. [00:12:31] Speaker 04: The quid pro quo is expressly stated [00:12:33] Speaker 04: at appendix 1044, 1215, and 1870 to 71. [00:12:40] Speaker 04: That's a selection from individual contracts representing three of the four contracts. [00:12:47] Speaker 00: So looking at page 1044, what language are you relying on? [00:12:51] Speaker 04: There are two pieces of language. [00:12:52] Speaker 04: They follow one another. [00:13:02] Speaker 04: In one place, it says, [00:13:04] Speaker 04: the following limits apply to your scope of service. [00:13:08] Speaker 04: And then it says, accordingly, you will not be entitled to the following types of compensation. [00:13:16] Speaker 04: And that is a quid pro quo of limited service. [00:13:25] Speaker 04: And that scope of limited service was breached in exchange for a lesser pay. [00:13:30] Speaker 04: Now, in the very middle, [00:13:33] Speaker 01: Just a quick reminder, you're into your rebuttal time. [00:13:39] Speaker 04: Having pointed that page out to you and the two others, which are a quid pro quo of limited service for limited pay, there's another measure of damage that would be applicable to the alternative claims, which are for quantum arrow it if these contracts are voided in their entirety or for [00:14:01] Speaker 04: pay by implied terms if only the payment terms are replaced. [00:14:05] Speaker 04: For those propositions, we cited the AT&T case and the Barrett line of cases, among others. [00:14:12] Speaker 04: Those cases, Barrett holds that when under the FAR, a payment term is prohibited, that payment term falls away, and a fair market value is provided under an implied term. [00:14:24] Speaker 04: AT&T says, holds, that when [00:14:30] Speaker 04: The issuance of a contract has violated a regulation or statute with a public policy that is sufficient to support avoidance. [00:14:42] Speaker 04: The contract is avoided in its entirety. [00:14:45] Speaker 01: AT&T says that when a statute or regulation has been contravened, which is what you're saying, that the statute was contravened, [00:14:53] Speaker 01: But that does not necessarily result in the invalidation of the contract. [00:14:57] Speaker 01: It does not necessarily. [00:14:58] Speaker 01: You have to look at the public. [00:15:00] Speaker 01: You're using that to say that it does result in invalidation of the contract. [00:15:06] Speaker 04: I am saying that AT&T sets up a test for invalidation, that the plaintiff there failed to satisfy, but that we do satisfy. [00:15:14] Speaker 01: Do you see what I'm saying? [00:15:16] Speaker 01: I think AT&T works against your argument. [00:15:20] Speaker 04: I read it, Your Honor, as setting up a test. [00:15:22] Speaker 04: We will invalidate a contract if you meet this test. [00:15:27] Speaker 04: The test is the public policy of the violated statute. [00:15:30] Speaker 04: The plaintiff contractor in AT&T was faced with a statute that had legislative history that foreswore the remedy of invalidation. [00:15:41] Speaker 04: The AT&T court relied heavily on that in finding we're not going to invalidate this contract. [00:15:47] Speaker 04: The Senate committee [00:15:48] Speaker 04: records at least one statement to the effect that we don't want a violation of this statute to lead the litigation over validity. [00:15:57] Speaker 04: Another bad fact that the AT&T plaintiff had that we do not have is that the statute itself was not intended to protect the plaintiff contractor. [00:16:15] Speaker 04: violated regulation here was most definitely intended to protect providers of personal services. [00:16:21] Speaker 04: When that regulation says, you shall not acquire personal services by contract, it's forcing the government to hire providers of personal services as employees, if not within an authorized use of personal service contracts, which pay more. [00:16:40] Speaker 04: That regulation forces them to hire these contractors if they want their personal services, and therefore pay them more. [00:16:48] Speaker 04: That's the logic of the statute. [00:16:51] Speaker 04: The subsection above the prohibition says, hiring providers of personal service on contracts circumvents the civil service laws. [00:17:04] Speaker 04: The next section says, except as authorized, you shall not do it. [00:17:08] Speaker 04: They were supposed to hire us. [00:17:10] Speaker 04: under the civil service laws, which include the laws for higher rates of pay. [00:17:15] Speaker 03: Could I ask just a quick question? [00:17:16] Speaker 03: Because I think you're running out of time. [00:17:19] Speaker 03: But besides excess supervision, is your complaint about the way your employees or your contractors were required to do their work? [00:17:33] Speaker 04: In addition to excess supervision, which is the only alleged breach that the trial court grappled with, [00:17:40] Speaker 03: or that the government are talking about. [00:17:55] Speaker 03: Are those the only other things that you're pointing to? [00:17:58] Speaker 03: Those? [00:17:59] Speaker 03: No, not at all. [00:17:59] Speaker 03: What else? [00:18:00] Speaker 03: We're not pointing to them, period. [00:18:01] Speaker 03: What do you point to? [00:18:02] Speaker 04: The government points to them. [00:18:03] Speaker 03: I understand, but what do you point to? [00:18:06] Speaker 04: Working like employees and not as independent contractors. [00:18:09] Speaker 03: But that's just a generalization. [00:18:11] Speaker 03: What is it exactly besides supervision we've already covered? [00:18:15] Speaker 03: What is it besides supervision that you're complaining about? [00:18:18] Speaker 04: Doing the same work that the federal employees are doing. [00:18:21] Speaker 04: Working exactly like a federal employee, which is not allowed in the law. [00:18:25] Speaker 03: What does that mean in practical senses? [00:18:28] Speaker 03: If they weren't being supervised, but they were asked to perform as contractors the same services, what does that violate? [00:18:37] Speaker 04: It violates the contract. [00:18:39] Speaker 00: Why? [00:18:39] Speaker 00: Because the contract says specifically, you're going to have to do this kind of work, and this is how you're going to be paid. [00:18:45] Speaker 00: So how would that violate the contract? [00:18:49] Speaker 04: The contract says, again, you will be an independent contractor. [00:18:53] Speaker 04: That term has a meaning. [00:18:55] Speaker 04: It's a legal meaning. [00:18:56] Speaker 04: And independent contractors. [00:18:59] Speaker 03: And the most important feature of that is the degree of supervision. [00:19:02] Speaker 03: It's whether you're operating on your own or you're operating under the close supervision of your employer. [00:19:08] Speaker 03: What I keep trying to get from you is what else besides supervision is there? [00:19:13] Speaker 04: In the FAR, the same regulation, subsection D, independent contractors [00:19:21] Speaker 04: shall not do the work of federal employees. [00:19:23] Speaker 04: They shall not do the same kinds of tasks, and they will not work on integral government missions. [00:19:28] Speaker 04: Those are the two breaches beyond the obvious that we have discussed. [00:19:33] Speaker 01: OK. [00:19:34] Speaker 01: All right. [00:19:35] Speaker 01: So you're well out of time, but we're going to restore you a little bit of rebuttal time, OK? [00:19:39] Speaker 01: Thank you. [00:19:39] Speaker 01: OK. [00:19:40] Speaker 01: Let's hear from the government. [00:19:41] Speaker 01: Councillor Stern. [00:19:50] Speaker 02: May I please report? [00:19:52] Speaker 02: The Court of Federal Claims dismissed this complaint for lack of jurisdiction and failure to state a claim for relief, and went through a very thorough analysis of each aspect of the jurisdictional and then the failure to state a claim. [00:20:04] Speaker 02: And I think maybe it would be most helpful just to walk it through in a similar way. [00:20:09] Speaker 02: In terms of jurisdictional, of course, jurisdictional ruling, the court found that plaintiffs claimed a breach of implied in fact contract did not create jurisdiction. [00:20:19] Speaker 00: Can you start with the express contracts, since that's what we were just discussing? [00:20:24] Speaker 02: The court found that the plaintiffs failed to state a claim for relief with respect to their claimed breach of express contract. [00:20:32] Speaker 02: The express contracts, the court looked at the language of the express contracts. [00:20:37] Speaker 02: The express contracts specifically set out that the individuals were supposed to work, for example, at specific locations, use government equipment, and be answerable [00:20:49] Speaker 02: to contracting officers or representatives of contracting officers in terms of their performance of work. [00:20:55] Speaker 02: And the court further found that the only allegations that the appellant had raised were very, very generalized claims that they were subject to supervision, which was not significantly different than the requirements of the contract that they be answerable to the government for the performance of the work as any contractor is answerable to the government. [00:21:15] Speaker 02: Many of the allegations, in fact, in the complaint [00:21:19] Speaker 02: are not even allegations that these plaintiffs performed work under pervasive and extensive supervision that would be in contradiction to the express terms of the contract. [00:21:29] Speaker 02: They were simply references to the Inspector General's report that addressed [00:21:36] Speaker 02: the sampling of contracts that the inspector general had looked at, but not specifically made findings with respect to these plaintiff's contracts. [00:21:45] Speaker 02: So all in the end, all the court really had to look at in terms of the allegations in the complaint were very few, very general allegations that the appellants were subject to supervision. [00:21:59] Speaker 02: And the court found that that was not a plausible allegation of breach of contract when the contracts themselves [00:22:04] Speaker 02: did require that the individuals be answerable in terms of the performance of their work. [00:22:09] Speaker 02: The allegations didn't go into being supervised in terms of the specific performance or the manner of the work or any specific details. [00:22:16] Speaker 02: It just generally alleged that we're subject to supervision. [00:22:19] Speaker 02: In addition to make a plausible claim for a breach of the express contract, one of the elements of a breach of contract claim would be damages due to the breach. [00:22:30] Speaker 02: But as I think perhaps Judge Bryson's questions were getting to this, [00:22:33] Speaker 02: in a way, the prayer for relief here does not in any way tie damages to this alleged breach of excessive supervision. [00:22:44] Speaker 02: Rather, it seeks to be paid back pay, as if these individuals were government employees. [00:22:51] Speaker 02: And so in no way is that tied to the allegation, again, we would say not even a plausible allegation, of breach of this supervision, which is in the contract. [00:23:03] Speaker 02: So for that reason, the court found that there was not a plausible claim of breach of the express contract. [00:23:08] Speaker 02: The court also found that there was no jurisdiction of the implied in fact contract, because it's established law that you can't have an implied in fact contract when there is already an express contract covering the same subject matter. [00:23:22] Speaker 02: Here, the appellants, again, the only real allegation seems to be that they were subject to [00:23:30] Speaker 02: increase supervision over what the contract requires, that doesn't take the whole subject matter to an entirely different matter other than what's covered in the business plan. [00:23:38] Speaker 03: Let me return for a moment to the express contract issue. [00:23:43] Speaker 03: Suppose that you have an, I keep saying employee, which of course loads the dice, but suppose you have an individual who has been engaged by contract to do certain services. [00:23:57] Speaker 03: with provisions such as there are in the record in this case saying that the individual will be paid X amount, but will not be subject to direct supervision in that individual's conduct of the work. [00:24:10] Speaker 03: And it turns out that there is, in fact, something that everyone would agree is direct supervision. [00:24:15] Speaker 03: It's hovering type supervision. [00:24:19] Speaker 03: And what is the remedy? [00:24:20] Speaker 03: that the contractor has in that setting? [00:24:23] Speaker 03: None? [00:24:24] Speaker 03: Just to file a complaint? [00:24:25] Speaker 03: Or what? [00:24:27] Speaker 03: You're in that position, let's say. [00:24:29] Speaker 03: Where do you go to get relief? [00:24:33] Speaker 03: Is it just you claim breach and walk away? [00:24:35] Speaker 03: What do you do? [00:24:37] Speaker 02: Well, there would have to be some claim of money damages. [00:24:40] Speaker 02: I mean, the Court of Federal Claims only exists to entertain claims of money damages. [00:24:44] Speaker 02: Well, never mind. [00:24:44] Speaker 03: I'm asking the question more broadly than that. [00:24:47] Speaker 03: Where do you go? [00:24:47] Speaker 03: Is there a place that you could go with that complaint? [00:24:51] Speaker 03: on the basis of what looks like a breach of the contract. [00:24:57] Speaker 02: Well, I'm not aware of a court that they could go to to address that absent some money claim tied to that breach. [00:25:06] Speaker 02: So clearly the Court of Federal Claims exists to entertain contract damages. [00:25:09] Speaker 00: Assume for a minute there is money tied. [00:25:11] Speaker 00: Maybe it's travel costs or something like that. [00:25:13] Speaker 00: Having to travel to wherever it is that the government has required them to travel to. [00:25:18] Speaker 00: So then what is the answer? [00:25:20] Speaker 00: Does that change your answer? [00:25:21] Speaker 02: My answer changes if there is a plausible claim of breach of contract, which I think perhaps Judge Rice's hypothetical is assuming that there is a plausible claim of breach of contract and money damages tied, then yes, of course, the Court of Federal Claims is the place to bring a breach of contract claim with money, a plausible breach of contract claim with money damages tied. [00:25:40] Speaker 02: That's not what the trial court found in this case, and I think that ruling was correct. [00:25:45] Speaker 02: Because when you look at the complaint, [00:25:46] Speaker 02: The allegations, which again, they're very few because when you look, I know in the appellant's reply brief, I think it was a reply brief, they sort of set out a laundry list of places where they say that they allege that there was the success of supervision. [00:26:00] Speaker 02: But when each of those sites are checked, the vast majority of them, in fact, are sites to the Inspector General report, which was sort of making generalized findings based on a sampling of contracts at the board, not findings [00:26:15] Speaker 02: about the specific appellant's contract. [00:26:18] Speaker 02: So there end up being only maybe two or three very generalized allegations that say we were subject to supervision. [00:26:25] Speaker 02: And again, that does not seem to plausibly present a breach when the express contracts themselves say, you're going to be performing this work. [00:26:35] Speaker 02: You're going to be answerable to the government to make sure that it's performed correctly and in accordance with the government's requirements. [00:26:41] Speaker 02: And there's going to be a contracting officer or contracting officer's representative's checking. [00:26:45] Speaker 02: that work. [00:26:46] Speaker 01: Would retirement benefits translate into money damages of any kind here? [00:26:51] Speaker 01: I'm assuming that the person providing the personal services under the PSC contracts do get federal retirement benefits? [00:27:02] Speaker 02: They don't, Your Honor, and that was another criticism by the lower court. [00:27:06] Speaker 02: The lower court said even if we construe these, [00:27:08] Speaker 02: as personal services contracts and we construe appellant's claim to be a claim of a breach of an implied in fact contract meaning essential terms were omitted from the personal services contract [00:27:22] Speaker 02: The court went out to find that the appellant's complaint failed to state a claim in that regard, because they had in fact not identified any essential terms. [00:27:28] Speaker 01: Only employees are entitled to an employee of the federal government. [00:27:32] Speaker 02: Yes, Your Honor. [00:27:33] Speaker 02: And that's the reason why the laundry list in the complaint of benefits that the appellants are seeking. [00:27:38] Speaker 02: 90% of them have Title V in front of them. [00:27:40] Speaker 02: Title V are benefits that are entitled. [00:27:43] Speaker 01: When did this issue come to light, when the OIG issued its report? [00:27:49] Speaker 01: I'm sorry, when did this whole issue come to light? [00:27:52] Speaker 02: Yes, it appears that the Inspector General's report was basically the catalyst for this lawsuit. [00:28:02] Speaker 02: The OIG found, yes, that there were some contracting [00:28:05] Speaker 02: deficiencies and errors at the BBG, and they were addressing them, and there was a back and forth between the Inspector General's office and the board. [00:28:13] Speaker 02: The board agreed to change some practices, change the way they did business in other ways. [00:28:17] Speaker 01: Has there been a finding of any kind by any tribunal or agency proceeding that the board was acting illegally, that this was an illegal action? [00:28:31] Speaker 02: The inspector general opined that the board was going beyond the 60 personal services contracts. [00:28:38] Speaker 02: The board disagreed with that finding. [00:28:41] Speaker 02: The whole area of when something is or isn't a personal services contract is a fairly murky area, even under the FAR and even under some statements by GSA to that effect, that this is a really murky area. [00:28:55] Speaker 02: The board disagreed. [00:28:57] Speaker 02: There certainly was no finding that these particular individuals were operating under a personal services contract. [00:29:03] Speaker 02: But as the lower court says, even if they were, it still does not give rise to any breach of contract claim on the part of these individuals. [00:29:14] Speaker 02: Because as I was just saying, if it's a breach of a personal services contract, there are no essential terms that have been identified by these individuals. [00:29:24] Speaker 02: If they also made the claim that it's a breach [00:29:27] Speaker 02: of, well, they made a quantum Merrowick claim, which is basically a breach of an implied in law contract. [00:29:33] Speaker 02: The court said not only are those generally disfavored, but there's no evidence in this case that these contracts should be determined void. [00:29:42] Speaker 02: And that's where the AT&T case comes into play. [00:29:45] Speaker 02: And Judge Rainn, I believe you correctly stated that that case goes against the individuals in this, that have brought this case. [00:29:53] Speaker 02: AT&T says that even if a contract is against a statute that does not create a right of private action, it does not operate to void the contract. [00:30:06] Speaker 02: So even if these personal services were a personal services contract and were in excess of the 16 that the agency was then authorized to engage into, it still wouldn't lead to avoiding of the contract. [00:30:17] Speaker 02: In addition, these individuals were individuals who benefited by the agency [00:30:24] Speaker 02: perhaps hypothetically going beyond the 60s. [00:30:26] Speaker 02: So they would not be the ones to come forward and seek avoiding other contracts. [00:30:31] Speaker 03: They benefited in the sense that they had a form of employment that you hypothesize they wouldn't otherwise have had. [00:30:42] Speaker 03: I mean, because their hypothesis is the agency needed the folks. [00:30:46] Speaker 03: They needed the people. [00:30:47] Speaker 03: They needed the services. [00:30:49] Speaker 03: They just acquired them on the cheap and unlawfully. [00:30:53] Speaker 03: So you're not suggesting, are you, that the agency could easily have done without all these people, and they were lucky to have any kind of work at all? [00:31:02] Speaker 02: No. [00:31:03] Speaker 02: I wouldn't suggest that, Your Honor. [00:31:04] Speaker 03: But I mean, I didn't know where you were going by saying that they benefited from this. [00:31:08] Speaker 03: That seemed to be the run of your argument. [00:31:11] Speaker 02: They benefited by having a contract, by having work, by having a contract. [00:31:17] Speaker 03: But the point is that the agency thought it needed these people, and if it were told, [00:31:22] Speaker 03: conclusively that it could not have them on the basis that it got them. [00:31:27] Speaker 03: The hypothesis is that it would have then ponied up for more money and gotten their services at a rate and under conditions that were more favorable to them. [00:31:39] Speaker 02: And that will forever remain a hypothesis, Your Honor. [00:31:41] Speaker 02: There's certainly no evidence in the record [00:31:44] Speaker 02: The agency only gets funding for X number of actual civil service positions. [00:31:49] Speaker 02: So if they couldn't contract for the employment, they would have to go without the employees' work. [00:31:55] Speaker 02: So in that sense, these were the individuals who benefited by at least getting an employment contract. [00:32:01] Speaker 02: And we can call it employment, because there's employment by appointment most often, but sometimes also by contract. [00:32:12] Speaker 02: whether something is employment is not really that important to this case. [00:32:17] Speaker 02: And it may be an employee relationship for certain purposes, like some cases have held for Title VII purposes. [00:32:23] Speaker 02: Even a purchase order vendor may perhaps be an employee. [00:32:24] Speaker 03: You mean it's not like a wage and hour case. [00:32:27] Speaker 03: It's not like a wage and hour case. [00:32:29] Speaker 02: That's correct. [00:32:29] Speaker 03: Where we're talking about whether somebody is a contractor, a sharp line between employee and contractor. [00:32:35] Speaker 03: You're saying contractors can be employees, in effect, but they're not appointed under the civil service laws. [00:32:41] Speaker 01: I read inferences of unjust enrichment in the petition here, in the appeal. [00:32:49] Speaker 01: Did the employees provide services to the government that were beyond those required by their contracts? [00:32:57] Speaker 02: They did not, Your Honor, and there's no allegation to that effect. [00:33:00] Speaker 02: As I think came out perhaps during Judge Bryson's questioning of [00:33:04] Speaker 02: Appellant's Council, the only claim that they're making is regarding supervision. [00:33:09] Speaker 02: There is no claim that they provided services that were not covered by the contract or beyond the scope of the contract. [00:33:15] Speaker 01: Okay. [00:33:16] Speaker 01: Thank you. [00:33:16] Speaker 01: Thank you. [00:33:17] Speaker 01: Would you have a question? [00:33:22] Speaker 01: All right, Mr. Aguilera. [00:33:25] Speaker 01: We'll put you back to three minutes. [00:33:27] Speaker 04: Thank you, Your Honor. [00:33:29] Speaker 04: Let me start with one of the questions the court asked when I was last up here. [00:33:35] Speaker 04: Actually, I'm sorry. [00:33:35] Speaker 04: You asked counsel this. [00:33:37] Speaker 04: Where do they go? [00:33:40] Speaker 04: Under the Tuck Rat, you go where we went if you want relief for the damages we suffered. [00:33:46] Speaker 04: We were dismissed for lack of jurisdiction because the court did not find a non-frivolous claim, erroneously. [00:33:53] Speaker 04: But we were not dismissed because we went to the wrong forum. [00:33:56] Speaker 04: We belonged in the court of federal claims. [00:33:59] Speaker 04: And we belong there now. [00:34:00] Speaker 04: We were dismissed prematurely. [00:34:02] Speaker 04: Going to your honor's question about damages, [00:34:05] Speaker 04: I don't know the amount yet, but no matter what theory we proceed upon, all we need to prove today is that the claims are facially valid as pleaded and damages can be determined later. [00:34:23] Speaker 04: I believe that that is premature. [00:34:26] Speaker 04: I understand your concern and damages [00:34:28] Speaker 04: It may not be as much as we have demanded. [00:34:30] Speaker 04: It may not be as much as they estimated if they were to have hired these people. [00:34:33] Speaker 01: Well, the damages issued, it's not important in terms of quantity. [00:34:39] Speaker 01: It's important in order to determine whether your allegations are stating them, support a claim for relief. [00:34:47] Speaker 04: There has to be harm. [00:34:51] Speaker 01: If there's no damages that arise out of the supervision issue, have you actually prayed [00:34:58] Speaker 01: made a proper allegation for a claim of relief. [00:35:05] Speaker 04: We've pleaded damages in an amount to be determined. [00:35:08] Speaker 04: We've cited their estimates of what the contractor should have been earning in excess of what they did. [00:35:14] Speaker 01: Damages upon what theory? [00:35:15] Speaker 01: The supervision? [00:35:17] Speaker 01: Excess supervision? [00:35:18] Speaker 04: Supervision and providing service above and beyond what was required. [00:35:23] Speaker 04: They were not supposed to work as federal employees and they did. [00:35:27] Speaker 04: They were not supposed to be working on interval government missions, and they did. [00:35:35] Speaker 04: They would have charged more for that. [00:35:37] Speaker 04: If they had shown up to sweep the floor and were told to go into surgery, perform brain surgery, they'd be entitled to more money. [00:35:46] Speaker 00: Where is that pled? [00:35:48] Speaker 04: I'm just illustrating a point. [00:35:49] Speaker 04: They did something above and beyond, and that is pled everywhere. [00:35:53] Speaker 04: They did something above and beyond what they were hired to do. [00:35:58] Speaker 00: Besides the excessive supervision, where is it pled that there was something above and beyond what they were required to do, for example, in the amended complaint? [00:36:11] Speaker 00: We allege work. [00:36:12] Speaker 00: And can you give me a specific page and site? [00:36:17] Speaker 04: There are many. [00:36:21] Speaker 04: As I was going through the various breaches, [00:36:28] Speaker 00: And for example, I'm looking at the breach of express contract is at page A906. [00:36:33] Speaker 00: That's in the amended complaint. [00:36:36] Speaker 00: Or you could look at the original complaint. [00:36:37] Speaker 00: Yes. [00:36:39] Speaker 04: The list of breaches that I read out earlier comes with, and you're interested in the second amended complaint? [00:36:48] Speaker 04: Neither one. [00:36:50] Speaker 04: Working like employees, appendix 68 to 70, 79, 81 to 83, [00:36:58] Speaker 04: 90. [00:36:59] Speaker 04: Slow down a little. [00:37:00] Speaker 03: Yeah, I'm sorry. [00:37:01] Speaker 03: Go ahead. [00:37:02] Speaker 03: Give me those again. [00:37:03] Speaker 03: I'm sorry. [00:37:05] Speaker 03: You started at 68, I think. [00:37:07] Speaker 04: Yes, 68 to 70. [00:37:08] Speaker 04: 79. [00:37:08] Speaker 04: OK. [00:37:10] Speaker 04: 81 to 83. [00:37:13] Speaker 04: OK. [00:37:14] Speaker 04: 90. [00:37:14] Speaker 04: 98. [00:37:14] Speaker 04: 100. [00:37:26] Speaker 04: 875 to 877, 882 to 883. [00:37:31] Speaker 04: By the way, these are all in the briefs. [00:37:34] Speaker 04: 886 to 888, 896, and 897 to 898. [00:37:41] Speaker 04: I would also like to add that, and by the way, for each of the next several reaches that we discussed earlier, there's another list of page sites, often overlapping. [00:37:53] Speaker 04: I would also like to add that [00:37:56] Speaker 04: Other fact-finders, including the Inspector General, the IRS on an appeal brought by Appellant Peach who's here today, and the US District Court have found that individual contractors have worked in the manner of employees and were directly supervised. [00:38:12] Speaker 04: Each of our appellants alleged, as to him or her own self, every fact relied upon by those authorities [00:38:22] Speaker 04: to find the provision of personal services like an employee. [00:38:27] Speaker 04: Having gone through with them the prior findings, they affirmed to us, and we did plead that they served in the manner described by the inspector general upon finding it was an illegality. [00:38:38] Speaker 04: It was a violation of a prohibition. [00:38:41] Speaker 04: They affirmed to us, and we pleaded what the IRS relied upon in finding that Appellant Peach was here and was found by the IRS to have worked like an employee. [00:38:51] Speaker 04: They pleaded that for themselves. [00:38:53] Speaker 01: So let's assume that the board was allowed to enter into unlimited contracts of this nature. [00:39:00] Speaker 01: Would you still have a case? [00:39:04] Speaker 04: In that case, we'd have completely different contracts. [00:39:06] Speaker 04: They'd have different scopes. [00:39:08] Speaker 01: They would say... No, let's say you have the same contract, except there's no limit to which the board can condition. [00:39:16] Speaker 04: No, because the scope would still be what it is, and it would still be breached. [00:39:20] Speaker 04: The scope says, you shall not work like an employee. [00:39:23] Speaker 04: You shall not be supervised by a federal employee. [00:39:26] Speaker 04: You shall not do all the things we've been discussing. [00:39:28] Speaker 04: The contracts say that. [00:39:30] Speaker 04: Call them authorized or not. [00:39:31] Speaker 04: They still say it, and it's still a breach. [00:39:34] Speaker 01: If they were authorized... But you wouldn't have an argument as to supervision at that point. [00:39:38] Speaker 01: Pardon? [00:39:38] Speaker 01: You wouldn't have an argument on supervision. [00:39:41] Speaker 04: We would because the contracts say you won't be supervised. [00:39:44] Speaker 04: You can re-characterize them and say they were within the authorization, but they still say what they say. [00:39:50] Speaker 04: These contracts are not merely unauthorized. [00:39:53] Speaker 04: They are written completely differently, probably to mask the violation, which became known over time, the violation of the prohibition. [00:40:03] Speaker 04: They are written differently. [00:40:05] Speaker 04: These are not the same contracts by their terms, some of which were authorized and some of which were not. [00:40:11] Speaker 04: These are different contracts, and they've taken that position themselves. [00:40:15] Speaker 04: In fact, they have defended on the basis that the contracts say [00:40:19] Speaker 04: You won't do this, and you won't do that. [00:40:21] Speaker 01: Can you conclude, please? [00:40:24] Speaker 04: Yes. [00:40:25] Speaker 04: I just want to go briefly back to the question of avoiding the contracts, because their damages are not going to be a problem. [00:40:32] Speaker 04: The law is well-developed on implied remedies for fair market value or quantum narrow it, whatever the value to them must be. [00:40:39] Speaker 04: And I want to just touch upon, before stopping, something that my colleague said about [00:40:48] Speaker 04: needing these people to do the work. [00:40:53] Speaker 04: All throughout the Inspector General's report, they cited their need for the work and they cited their need to treat them the way they were treating them. [00:41:00] Speaker 04: The problem is the way they were treating them was unlawful because it converted them into personal service providers. [00:41:06] Speaker 04: When they state their need for the help, what they're really saying is, we needed personal service providers. [00:41:11] Speaker 04: We had to have them come to the building on a schedule, do what we tell them. [00:41:16] Speaker 04: That's illegal if it's done on a contract in excess. [00:41:19] Speaker 01: OK. [00:41:21] Speaker 01: I think we have your argument, sir. [00:41:22] Speaker 01: Thank you very much. [00:41:23] Speaker 04: Thank you.