Free Response to Motion - District Court of Federal Claims - federal

Case 1:03-cv-00623-LSM

Document 37

Filed 09/16/2004

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) ) Defendant and Third Party Plaintiff, ) ) v. ) ) THE W.I.N.N. GROUP, INC., ) ) Third Party Defendant. U.S. FINANCIAL CORPORATION,

No. 03-623C (Senior Judge Margolis)

)

DEFENDANT'S RESPONSE TO THIRD PARTY DEFENDANT'S MOTION TO DISMISS On August 20, 2004, the Third Party Defendant The W.I.N.N. Group, Inc. ("WINN"), filed a motion pursuant to RCFC Rules 12(b)(1) and 12(b)(6), to dismiss the complaint filed by U.S. Financial Corporation ("USFC") against the United States in its entirety; and to dismiss Defendant / Third Party Plaintiff the United States' Complaint in its entirety as moot. WINN's motion is premised, in part, on WINN's contention that USFC's Complaint fails to allege facts sufficient to support this Court's jurisdiction under the Assignment of Claims Act. As WINN correctly noted, the Assignment of Claims Act of 1940, 31 U.S.C. § 3727, 41 U.S.C. § 15, generally precludes assignment of Government contracts and payments thereunder. An assignment of the right to be paid by the Government will be valid and enforceable against the Government only if the assignee is a "bank, trust company, or other financing institution." 41 U.S.C.

Case 1:03-cv-00623-LSM

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§ 15(b). USFC fails to allege in its complaint that it is a "bank, trust company, or other financing institution."1 Moreover, an assignment of the right to be paid by the Government will be valid and enforceable against the Government only if the assignment is made to secure a loan by the assignee to further the assignor's performance of the Government contract. Applied Companies v. United States, 144 F.3d 1470, 1476 (Fed. Cir. 1998) (Assignment of Claims Act seeks to encourage the private financing of government contracts by creating specific exceptions to the general rule that forbids the assignment of claims against the Government); American National Bank & Trust Company of Chicago v. United States, 22 Cl. Ct. 7 (1990) (to prove existence of valid assignment under Assignment of Claims Act, plaintiff must show that it loaned money or at least made money available for performance of Government contract). USFC fails to allege in its complaint that the purported "assignment" was made to secure a loan by USFC to further WINN's performance of the Government contract. USFC's complaint, therefore, is defective and should be dismissed. WINN also alleges that the purported "assignment" from WINN to USFC was nothing more than an escrow agreement, and as such does not constitute a valid assignment under the Assignment of Claims Act. If this Court finds WINN's factual allegations regarding its relationship to USFC to be true, and the United States has no reason believe that they are not, the United States also joins in WINN's motion to dismiss on that ground. Finally, WINN alleges that it owes USFC no money. If this Court finds WINN's factual allegations regarding its lack of indebtedness to USFC to be true, and the United States has no reason believe that they are not, the United States also joins in WINN's motion to dismiss on that

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USFC also fails to allege in its complaint that this Court has jurisdiction in this matter and what the statutory basis for that jurisdiction might be.

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ground because an assignee's recovery from the United States is limited to the extent of the assignor's outstanding debt to the assignee. Applied Companies, 144 F.3d at 1476 (assignee's interest in the proceeds of Government contract cease when assignor repays loans); American National Bank & Trust Company of Chicago, 22 Cl. Ct. at 12. For the foregoing reasons, the defendant United States joins in WINN's motion to dismiss USFC's complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted. If the Court concludes that it does have jurisdiction over USFC's complaint, then the Government's compliant is not moot and should not be dismissed. Respectfully submitted, PETER D. KIESLER Assistant Attorney General DAVID M. COHEN Director s/ Donald E. Kinner DONALD E. KINNER Assistant Director s/ Richard Ewing RICHARD EWING Trial Attorney Commercial Litigation Branch Civil Division Department of Justice 1100 L Street NW Attn: Classification Unit 8th Floor Washington, D.C. 20530 September 17, 2004 Attorneys for Defendant

Case 1:03-cv-00623-LSM

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CERTIFICATE OF SERVICE I hereby certify that on this 17th day of September, 2004, a copy of the foregoing Defendant's Response to Third Party Defendant's Motion To Dismiss was filed electronically. I understand that notice of this filing will be sent to all parties of record by operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

s/ Richard Ewing ___________________________________________