Free Response - District Court of Federal Claims - federal

Case 1:03-cv-00623-LSM

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

u. S. FINANCIAL CORPORATION

Plaintiff

. No. 03- 623C

(Senior Judge Margolis)

UNITED STATES,
Defendant.

PLAINTIFF' S OPPOSITION TO THIRD PARTY DEFENDANT' MOTION TO DISMISS AND CROSS- MOTION FOR SUMMARY JUDGMENT
COMES NOW U. S. Financial Corporation ("US. Financial"), through counsel , to

respectfully submit its Opposition to the Third Party Defendant The W.I.

N. Group, Inc.

WINN" ) Motion to Dismiss and Cross- Motion for Summary Judgment against the United
States and as grounds , therefore , states as follows:

Statement of Undisputed Facts
On or about September 29 , 1997 , the United States Air Force (the " Government"

entered into a contract with WINN to Replace Electrical Distribution System and Main
Substation , Building 18 , at Bolling Air Force Base , Contract No. F49642- 97the " Contract" ).
Plaintiffs

OO30 (hereinafter

Proposed Findings of Uncontroverted Fact (" PPF"), Paragraph 1.

On or about February 17 , 1999 , WINN assigned all proceeds from the Contract to

S. Financial. PPF Paragraph 2.
On or about March 8 , 1999 , the Government issued Modification POOOOI to the

Contract , which incorporated the assignment of funds between WINN , as assignor, and U.

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Financial , as assignee , and assigned all funds for future payments under the Contract to US.

Financial. PPF Paragraph 3.
From March 1999 through June 2002 , the Government made payments under the
Contract to U. S. Financial in accordance with the assignment of funds. PPF Paragraph 4.

On July 3 , 2002 , the Government erroneously paid WINN $42 686. 53. PPF
Paragraph 5.

On September 30 2002 , the Government erroneously paid WINN $10 000. 00.
PPF Paragraph 6.

Despite repeated demands , the Government has failed and refused to pay U.

Financial the $52 686. 53 pursuant to the assignment of funds. PPF Paragraph 7.
u.S. Financial is a financing institution pursuant to the Assignment of Claims
Act. PPF Paragraph

A copy ofthe Assignment Agreement between

WINN and u.S. Financial

whereby WINN assigned all moneys due and to become due under the Contract to U. S. Financial

is attached as Exhibit A to the Dixon Affidavit. PPF Paragraph 9.
10.

WINN' s assignment of the moneys due and to become due under the Contract to

u.S. Financial was made "FOR VALUABLE CONSIDERATION, " the receipt of which was

acknowledged by WINN. PPF Paragraph 10.
11.

The consideration given by u.S. Financial to WINN was the ability to borrow

funds for the performance of the Contract. PPF Paragraph 11.
12.

A copy of the Notice of Assignment to the Government whereby U. S. Financial

provided notice of the assignment from WINN to u.S. Financial of the moneys due or to become
due under the Contract is attached as Exhibit B to the Dixon Affidavit. PPF Paragraph 12.

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13.

The Notice of Assignment was made "pursuant to the provisions of the
PPF Paragraph 13.

Assignment of Claims Act of 1940 as amended. "
14.

A copy of Modification No. POOOOI that the Government issued to incorporate

the assignment of funds from WINN to US. Financial into the Contract is attached as Exhibit C

to the Dixon Affidavit. PPF Paragraph 14.
15.

The assignment of funds from WINN to US. Financial has not been rescinded by

S. Financial and is still in full force and effect. PPF Paragraph 15.

An!ument
The Government Waived Any Noncompliance With The Provisions Of The

Anti-

Assignment Act By Expressly Agreeing To The Assignment And Incorporating It
Into The Contract In Modification POOOOI
The Government incorporated the assignment of funds between WINN and U.

Financial into the Contract in Modification POOOOL Statement of Undisputed Facts (" SOF"
Paragraph 3. Modification POOOOI provided:

The purpose of this modification is to change the assignment of funds for future payments under subject contract. Notice of assignment to contract proceeds underwent legal review on 5 Mar 99 and was found to be legally sufficient.
The remittance address is hereby changed to:
u.S. Financial Corporation
1951 Kidwell Drive

Suite 205 Vienna , VA 22182

All other terms and conditions remain unchanged.
SOF , Paragraph 14.

The Anti- Assignment Acts generally prohibit the assignment of government contracts
unless: (1) the assignee

is a qualified financial institution; (2) funds were lent or made available

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for performance of the contract; and (3) true and correct copies of the assignment documents are
provided to the contracting officer and the disbursing officer.

See American Nat

l Bank

Trust

Co. of Chicago

v.

United States 22 Cl. Ct. 7 , 16 (1990).

Modification POOOOI obligated the Government to pay U. S. Financial. It is not necessary to determine whether the assignment from WINN to u.S. Financial complied with the
requirements of the Anti- Assignment Acts. Any defects were waived when the Government
expressly agreed to pay U. S. Financial.
In

Norwest Bank Arizona ,

NA.

v.

United States 37 Fed. Cl. 605 (1997), the Government

contended that an assignment from the prime contractor to the subcontractor s bank was defective because it failed to satisfy the second and third requirements ofthe Anti- Assignment Acts that funds were lent or made available for performance of the contract and that true and correct copies of the assignment documents were provided to the contracting officer and
disbursing officer.

!d. at p. 609.
D&H Distributing Co. v.

This Court cited

United States 102 F.2d 542 546- 547 (Fed.

Cir. 1996) for the rule:

. . . It is well established. . . that the government can waive the statutory prohibitions against the assignment of contract rights if the contracting officer gives clear assent to the assignment.
A complete or partial assignment of the right to be paid proceeds of the contract imposes an obligation on the promisor , once it has received notice of the assignment , to make payments under the contract in accordance with that
assignment. The promisor can be held liable on that obligation to the assignee
if

the promisor makes payments to the assignor, rather than to the assignee in accordance with the terms of the assignment.
Norwest Bank 37 Fed. Cl. 605 , 609- 610.

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In

Norwest Bank the Government issued a modification to the contract naming the bank

as payee under the contract. This Court entered judgment for the bank , holding:
Whether the proper personnel at the Naval Control and Command Center received proper notice ofthe assignment , and whether the assignee bank financed contract performance is immaterial in the circumstances of this case. The Government expressly agreed to the assignment directing payments to the Bank . . . The Government was obligated to pay the Bank under the contract and it did not do so. The contract required the Government to pay one entity and it paid another.
Id. at 610.

Here , the Government issued Modification POOOOI to incorporate the assignment of

funds to u.S. Financial into the Contract. The Government waived any possible defects with the
assignment when it modified the Contract to name US. Financial as the payee. The Government
was obligated to pay U. S. Financial the $52 686. 53 and it did not do so. Therefore , the

Government is liable to u.S. Financial in the amount of$52 686.53.

II.

S. Financial complied with the Requirements of the Anti-Assienment Acts
Assuming arguendo that the Government had not issued Modification POOOO 1 to name

u.s. Financial as the

payee under the Contract , the Government would still be liable because

S. Financial complied with the requirements of the Anti- Assignment Acts.
u.s. Financial is a financing institution pursuant to the Assignment of Claims Act. SOF

8. WINN' s assignment of funds to u.S. Financial was made for valuable consideration, the
receipt of which was acknowledged by WINN. SOF 9 , 10. The consideration given by U.
Financial to WINN was the ability to borrow funds for the performance of the Contract. SOF 11.
u.s. Financial

provided notice of the assignment to the Government pursuant to the provisions of

the Assignment of Claims Act. SOF 12 , 13. The Government received and reviewed the notice
of assignment of the contract proceeds and found it to be legally sufficient. SOF 14. The

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assignment of funds from WINN to US. Financial has not been rescinded by US. Financial and

is still in full force and effect. SOF 15.
u.s. Financial

complied with the requirements of the Anti-Assignment Acts.
Trust Co. of Chicago v.

See

American Nat

l Bank

United States 22 Cl. Ct. 7 , 16 (1990) (the three

criteria are (1) the assignee is a qualified financial institution; (2) funds were lent or made

available for the performance of the contract; and (3) true and correct copies of the assignment
documents were provided to the contracting officer and disbursing officer).

From March 1999 through June 2002 , the Government made payments under the

Contract to u.S. Financial in accordance with the assignment of funds. SOF 4. The Government
erroneously paid WINN $52 686. 53 in July and September 2002. SOF 5 , 6.
Having complied with the requirements of the Anti- Assignment
entitled to the protection given an innocent assignee.

Acts ,

U. S. Financial is
v.

Florida National Bank of Miami

United

States

5 Cl. Ct. 396 (1984);

Central Nat. Bank of Richmond, Va.

v.

United States 91 F. Supp.

738 (1950). The Government paid WINN $52 686. 53 in violation of the assignment of funds.

Therefore , the Government is liable to US. Financial in the amount of$52 686. 53.

III.

The Court has Jurisdiction over this Dispute

The Court has jurisdiction over this dispute pursuant to the Assignment of Claims Act, 41

u.S. c.
(1997);

~ 15 ,

for the reasons set forth in Sections I and II above.

Norwest Bank 37 Fed. Cl. 605

American Nat

l Bank

Trust 22 Cl. Ct. 7 (1990). In addition , U. S. Financial is a third

party beneficiary of the Contract between the Government and WINN.

Norwest Bank 37 Fed.

Cl. 605 , 607- 609 (1997). As a third party beneficiary, u.s. Financial is accorded full rights to
sue under the Contract.

!d.

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Therefore , the Court has jurisdiction over this dispute.

Conclusion
WHEREFORE , U. S. Financial respectfully requests the Court to deny WINN' s Motion to

Dismiss and to grant U. S. Financial' s Cross- Motion for Summary Judgment against the United

States in the amount of$52 686.

, together with interest and the costs ofthis

action.

Respectfully submitted

Dated: September 16 , 2004

Isl Paul V. Waters SPRIGGS & HOLLINGSWORTH 1350 I Street , N. Washington , D. c. 20005 (202) 898- 5800 (202) 682- 1639 (Fax)
Attorneys for
S.

Financial Corporation

! WINN' s various allegations regarding its relationship with M. C. Dean , Inc. are not relevant to this dispute. In addition , the Government has acknowledged that the purported modification to See the Contract attempting to change the payee from u.S. Financial to WINN was invalid. Defendant' s Third Party Complaint , Paragraph 9.

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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on September 16 2004 , a copy of the foregoing Plaintiffs Opposition to Third Party Defendant's Motion to Dismiss and Cross- Motion for Summary Judgment was filed electronically. I understand that notice of this filing will be sent to all parties by operation ofthe Court' s electronic filing system. Parties may access this filing through the Court' s electronic filing system.
Isl Paul V. Waters