Free Motion to Dismiss - Rule 12(b)(1) - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) U.S. FINANCIAL CORPORATION, ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) Defendant and ) Case No. 03-623C Third Party Plaintiff, ) (Senior Judge Margolis) ) v. ) ) THE W.I.N.N. GROUP, INC., ) Third Party Defendant. ) __________________________________________) THIRD PARTY DEFENDANT'S MOTION TO DISMISS Third Party Defendant The W.I.N.N. Group, Inc. ("WINN"), pursuant to RCFC Rules 12(b)(1) and 12(b)(6), respectfully moves to dismiss Plaintiff US Financial Corporation's ("USFC") Complaint in its entirety; and to dismiss Defendant / Third Party Plaintiff the United States' Complaint in its entirety as moot. In support of its Motion, and as detailed more fully in the accompanying Memorandum of Points and Authorities in support hereof, 1. USFC's Complaint fails to allege facts sufficient to support this Court's jurisdiction under the Tucker Act, the Contract Disputes Act, or the Assignment of Claims Act; 2. 3. USFC's Complaint fails to state a claim on which relief can be granted; Dismissal of USFC's Complaint will render Defendant / Third Party Plaintiff the United States' Complaint directed to WINN, which Complaint is entirely derivative in nature, moot.

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WHEREFORE, Third Party Defendant WINN respectfully requests that the Court grant this Motion. A proposed Order is attached. Respectfully submitted,

Date: August 20, 2004

/s/ Carol L. O'Riordan Carol O'Riordan THE O'RIORDAN BETHEL LAW FIRM , LLP 1314 19th Street, NW Washington, D.C. 20036-1602 Ph: (202) 822-1720 Fax: (202) 822-1721 Counsel for Third Party Defendant The W.I.N.N. Group, Inc.

Of Counsel: Pamela J. Bethel, Esq. THE O 'RIORDAN BETHEL LAW FIRM , LLP 1314 19th Street, NW Washington, D.C. 20036-1602 Ph: (202) 822-1720 Fax: (202) 822-1721 Brian T. Scher, Esq.
SCHUMACK RYALS PLLC

3900 Jermantown Road Fairfax, Virginia 22030 Ph: (703) 934-4656

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TABLE OF CONTENTS Section Third Party Defendant's Motion to Dismiss .............................................................. Table of Contents ........................................................................................................ Table of Authorities .................................................................................................... Third Party Defendant's Memorandum of Points and Authorities in Support of Its Motion to Dismiss ....................................................................................................... Statement of Issues Presented ............................................................................... Statement of the Case ........................................................................................... Argument .............................................................................................................. I. However USFC's Claim is Construed, This Court Lacks Jurisdiction to Adjudicate it, and the Complaint Fails to State a Claim on Which Relief May Be Granted; The Claim Must Be Dismissed ...................... A. B. Standard of Review ..................................................................... USFC Has Not and Cannot Establish Privity, a Necessary Prerequisite to Confer Jurisdiction on this Court Under the Contract Disputes Act, the Tucker Act and the Assignment of Claims Act .................................................................................. USFC's Complaint Fails to Assert a Claim for Relief Under the Contract Disputes Act or the Assignment of Claims Act, and Must Be Dismissed with Prejudice ............................................. USFC's Failure to Recite Jurisdictional Grounds Renders it Defective and Subject to Dismissal Pursuant to RCFC 12(b)(6) Page 1 3 5 7 7 8 13

13 13

13

C.

16 19 20

D.

Conclusion ............................................................................................................ Proposed Order Appendix (Separate Document) Table of Contents ................................................................................................... Exhibits Exhibit 1 - Affidavit of Marlon Phillips Submitted in Support of WINN Group, Inc.'s Motion to Dismiss, August 20, 2004 ..................... 3

App. 1

App. 2

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TABLE OF CONTENTS (Continued) Section Appendix (Continued) Exhibit 2 - Escrow Agreement executed by M.C. Dean, Inc., WINN Group, Inc. and U.S. Financial Corporation, February 8, 1999 .................. Exhibit 3 - Modification 13 to the United States Air Force Contract, Contract No. F49642-97-C-0030, Replace Electrical Distribution System & Main Substation, Building 18, at Bolling Air Force Base ................................................................................ Exhibit 4 - Agreed Terms of Separation of M.C. Dean, Inc. and WINN Group, Inc, with an effective date as of September 8, 2000 ........... Exhibit 5 - Termination Agreement, dated February 13, 2001 ......................... RCFC 5.2(a)(1)(D) Documents ............................................................................. General Accounting Office, Principles of Federal Appropriations Law Vol. III (2d Ed. 1994), pages 12-192, 12-193, and 12-197 ..................................... Federal Acquisition Regulations §§ 32.801-802 ............................................. Tucker Act, 28 U.S.C. § 1491(a)-(c) ............................................................... Rules 8(a), 12(b), 19, and 56 of the Rules of the United States Court of Federal Claims ................................................................................................. Assignment of Claims Act of 1940, 41 U.S.C. § 15(a)-(c) .............................. App. 12 Page

App. 16 App. 19 App. 26 App. 29 App. 30 App. 33 App. 34 App. 35 App. 38

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TABLE OF AUTHORITIES Cases Cited American Nat'l Bank & Trust Co. of Chicago v. U.S., 22 Cl.Ct. 7 (1990) ............. Cienega Gardens v. United States, 194 F.3d 1231 (Fed.Cir.1998), aff'd 281 F.3d 1376 (Fed.Cir.2002) ................................................................................................. Coleman v. U.S., 158 Cl.Ct. 490 (1962) .................................................................. Continental Bank & Trust Co. v. U.S., 416 F.2d 1296 (Cl.Ct.1969) ....................... Diamond Manft'g Co. v. U.S., 3 Cl.Ct. 424 (1983) ................................................ First Nat'l City Bank v. United States, 537 F.2d 426, 210 Cl.Ct. 375 (1976) ......... George W. Kane v. U.S., 26 Cl.Ct. 655 (Aug. 12, 1992) ........................................ Globex Corp. v. U.S., 54 Fed.Cl. 343 (2002) .......................................................... Hamlet v. United States, 873 F.2d 1414 (Fed.Cir.1989) ......................................... In the Matter of Envt'l Protection Agency - Priority of Payments - Assignment of Claims, B-231107, Feb. 3, 1989 .............................................................................. Manufacturers Hanover Trust Co. v. U.S., 590 F.2d 893, 218 Cl.Ct. 563 (1978) ... Martinez v. United States, 48 Fed.Cl. 851 (2001) ................................................... Mercantile Nat. Bank at Dallas v. U.S., 280 F.2d 832 (Cl.Ct.1960) ....................... Produce Factors Corp. v. U.S., 199 Cl.Ct. 572, 467 F.2d 1343 (1972) ................... Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746 (Fed.Cir.1988) ............ Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) ................ Thomas Funding Corp. v. U.S., 15 Cl. Ct. 495 (1988) ............................................ Page(s) 9, 17-18 15 17 19 9, 15, 19 17-18 8-9, 13, 18-19 14 13 17, 19 17, 19 15 17 15 13 13 8, 14-16

Statutes and Other Authorities Cited Assignment of Claims Act of 1940, 31 U.S.C. § 3727, 41 U.S.C. § 15 .................. Contract Disputes Act of 1978, 41 U.S.C. § 601 ..................................................... Federal Acquisition Regulation 32.801, 48 C.F.R. § 32.801 ...................................

Page(s) 9, 16 8, 14 18

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TABLE OF AUTHORITIES (Continued)

Statutes and Other Authorities Cited (Continued) Federal Acquisition Regulation 32.802, 48 C.F.R. § 32.802 ................................... General Accounting Office, Principles of Federal Appropriations Law Vol. III (2d Ed. 1994) ........................................................................................................... Rule 8(a) of the Rules of the United States Court of Federal Claims ...................... Rule 12(b) of the Rules of the United States Court of Federal Claims ................... Rule 19 of the Rules of the United States Court of Federal Claims ........................ Rule 56 of the Rules of the United States Court of Federal Claims ........................ Tucker Act, 28 U.S.C. § 1491 ..................................................................................

Page(s) 16 16, 18 8, 19 1, 8-9, 12, 15, 18-19 10 8 14-15

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) U.S. FINANCIAL CORPORATION, ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) Defendant and ) Case No. 03-623C Third Party Plaintiff, ) (Senior Judge Margolis) ) v. ) ) THE W.I.N.N. GROUP, INC., ) Third Party Defendant. ) __________________________________________) THIRD PARTY DEFENDANT'S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION TO DISMISS In support of its Motion to dismiss Plaintiff U.S. Financial Corp.'s ("USFC") Complaint, and to dismiss Defendant/Third Party Plaintiff's Complaint, Third Party Defendant The W.I.N.N. Group, Inc. ("WINN") respectfully avers as follows.1 STATEMENT OF THE ISSUES PRESENTED 1. Whether a purported assignee of proceeds under a government contract, that lacks privity of contract with the government, that does not assert that it is a financing institution and that does not assert that the assignment secured a loan in support of assignor's performance of that contract, fails to assert jurisdiction under the Tucker Act, the Contract Disputes Act of 1978, and The Assignment of Claims Act. Whether the Complaint filed by a purported assignee of proceeds under a government contract fails to state a claim under the Contract Disputes Act on which relief may be granted.

2.

1

In the interest of brevity, and absent further request by the court for additional argument, WINN will limit its statement regarding the basis for dismissal of the Third Party Complaint directed to WINN as follows: The Third Party Complaint is wholly derivative in nature, and asserts no independent, substantive legal claims. Accordingly, dismissal of USFC's Complaint will render the Government's Third Party Complaint moot and justify its dismissal.

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3.

Whether the Complaint filed by a purported assignee of proceeds under a government contract fails to state a claim under the Assignment of Claims Act on which relief may be granted where alleged assignment was not made to secure USFC's loan to the assignor in furtherance of the assignor's performance of that contract. Whether the Complaint's failure to assert any jurisdictional grounds as required by RCFC 8(a) merits its dismissal pursuant to RCFC 12(b)(6). STATEMENT OF THE CASE USFC, a purported assignee of proceeds under a government contract, brings before this

4.

Court a claim that USFC itself lacks standing to assert and over which, under any reading, the Court lacks subject matter jurisdiction. In addition, USFC's Complaint fails to assert any grounds upon which subject matter jurisdiction is based, as is required by Rule 8(a) of the Rules of the United States Court of Federal Claims ("RCFC"). See George W. Kane, Inc. v. U.S., 26 Cl.Ct. 655, 622 (Aug. 12, 1992) ("Kane"). While these defects alone merit dismissal of the Complaint pursuant to RCFC 12(b)(1) and 12(b)(6), WINN respectfully urges that additional grounds for dismissal with prejudice exist pursuant to RCFC 12(b)(6).2 Specifically, as is detailed below and as supported by the Affidavit of Marlon Phillips (Ex.1 hereto at Appendix ["App."] 2) and other exhibits submitted herewith, the Complaint fails to assert allegations necessary to establish USFC as "contractor" entitled to bring a claim against the government under the Contract Disputes Act of 1978, 41 U.S.C. § 601 et seq. See Thomas Funding Corp. v. U.S., 15 Cl.Ct. 495, 501 - 502 (1988) ("Thomas Funding"). Similarly, the Complaint is devoid of allegations necessary to establish USFC as "a bank, trust company, or other financing

2

WINN urges that this court consider the matters outside the pleadings submitted herewith and treat this Motion as one for summary judgment to be disposed of as provided in RCFC 56. RCFC 12(b). WINN further urges that this court has jurisdiction to assess the adequacy of plaintiff's complaint and thus, the court may not simply order dismissal of this suit without prejudice for lack of jurisdiction, but rather, such dismissal, by virtue of RCFC 12(b)(6) and 56, requires a determination on the merits of plaintiff's claim and therefore that determination is with prejudice.

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institution" and the assignee of contract proceeds under a valid assignment that secured a loan made by USFC "to the assignor to finance the assignor's performance." To the contrary, USFC nowhere alleges that it provided financing in support of WINN's performance of Contract No. F49642-97-C0030. Its failure to make any of these allegations, all of which are necessary to a claim upon which relief can be granted under the Assignment of Claims Act of 1940, 31 U.S.C. § 3727, 41 U.S.C. § 15, render the Complaint fatally defective and subject to dismissal under RCFC 12(b)(6). Diamond Manft'g Co. v. U.S., 3 Cl.Ct. 424, 427 (1983) (no valid assignment under the terms of the Assignment of Claims Act can exist where Plaintiff does not assert that it is a "bank", a "trust" or a "financing institution."); see also Kane, 26 Cl.Ct. at 661 (Where plaintiff is not in privity with the Government and does not allege that it was a bank, a trust company or "other financial institution," it cannot claim standing under either the CDA or the Assignment of Claims Act.). American Nat'l Bank & Trust Co. of Chicago v. U. S., 22 Cl. Ct. 7, 16 -17 (1990) ("American Nat'l") (In order to prove the existence of a valid statutory assignment of contract proceeds, plaintiff must show, inter alia, it loaned money or at least made money available for the performance of that contract; where facts show otherwise, no valid statutory assignment under the Assignment of Claims Act occurred.) These defects are incurable: USFC fails to allege what it must because it cannot do so. USFC did not advance WINN financing for performance of the Bolling Contract, and it did not serve as the agent or trustee for two or more persons who participated in such financing. Ex. 1 at App. 5, ¶¶ 3-4; Ex. 2 at App. 12, passim. USFC's sole connection to WINN and to the Bolling Contract arose from its role as escrow agent selected by WINN and one of WINN's subcontractors, M.C. Dean, Inc. ("Dean"). Even that limited role was terminated in February, 2001. Ex. 1 at App. 5 8, ¶¶ 5-11. Moreover, after investigating the circumstances surrounding USFC's assignment, the Government modified the Bolling Contract, voiding the assignment of proceeds to USFC and 9

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directing remaining payments to WINN. Ex.1 at App. 8 - 11, ¶¶ 12-19. USFC attempts though its Complaint to overturn the effect of this modification, to resurrect USFC's role as assignee and to re-insert USFC into the Bolling Contract. That it cannot do. When its allegations (and omissions) are considered in context, USFC stands before this Court as a private entity that seeks to recover from the government whatever claim it may have against WINN and/or Dean.3 This case arises from WINN's performance of Contract No. F49642-97-C-0030, Replace Electrical Distribution System & Main Substation, Building 18, at Bolling Air Force Base (the "Contract"). Dean, WINN's subcontractor for the Bolling Contract, and WINN had worked together in various ways over time (joint ventures, mentor-protégé program, prime contractor-subcontractor, etc.) and in connection with multiple contracts. At Dean's request, on February 8, 1999, WINN, Dean and USFC entered into an escrow agreement (the "Escrow Agreement", Ex. 2 at App. 12) whereby USFC acted as the parties' escrow agent, receiving the proceeds of five (5) of those contracts, including the proceed from the Bolling Contract, and distributing the funds based on the parties' instructions. Id. at ¶¶ 3-4. Pursuant to the Escrow Agreement, on or about February 17, 1999, WINN assigned the Bolling Contract proceeds to USFC. See Compl. Ex. A; Ex. 1 at App. 5, ¶ 4. The Government contracting officer accepted the assignment and issued a modification to the Bolling Contract (Modification 0001) acknowledging the same on or about March 8, 1999. WINN's relationship with Dean soured over time, however, and by the Fall of 2000 the two companies were actively negotiating an end to their association. WINN and Dean enlisted counsel's

Indeed, although WINN denies any liability ­ direct or indirect ­ to USFC, adjudication of USFC's claims requires scrutiny of the terms and administration of the Escrow Agreement. See Ex. 1 at App. 4 - 8, ¶¶ 2-6, 8-12. Accordingly, in the event that this Motion is denied, WINN will seek to have Dean added as a necessary party pursuant to RCFC 19. In addition, WINN will seek an audit and accounting of all monies received and distributed under the Escrow Agreement.

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assistance in drafting separation terms, but addressed how the parties would "even up" under various contracts,4 including the Bolling Contract (although they agreed that Dean was not due any money under the Bolling Contract). Ex. 1 at App. 5 - 7, ¶¶ 5-9; Ex. 4 at App. 19. On February 13, 2001, WINN and Dean executed a written agreement setting out the final steps to terminate their association; in that document, Dean acknowledged that Dean was indebted to WINN under yet another contract, and Dean issued two checks to WINN, one on February 13 ($20,000) and another on May 17, 2001 (in the amount of $27,000). Ex. 1 at App. 7, ¶ 10; Ex. 5 at App. 26. On February 14, WINN provided written notice of the termination of the Escrow Agreement to USFC (with copy to Dean). Neither USFC nor Dean voiced any objection to the termination. Ex. 1 at App. 8, ¶ 11. USFC never loaned money or even made money available for WINN's performance of the Bolling Contract; not one penny of its money went toward any part of WINN's performance. Ex. 1 at App. 5, ¶ 3. USFC's sole purpose was to act as a depository escrow agent, whose duties, set forth in the Escrow Agreement, were delimited in scope. See Ex. 2 at App. 13, Recitals ¶ 2d ("WHEREAS, Contractor and Subcontractor desire to establish this Escrow Agreement for the purpose of facilitating and regularizing the receipt of monies from the Contracts, and the distribution of those monies to contractor and Subcontractor."); id. at ¶ 3 (although USFC will not act as a financing institution but rather as a mere depository and disbursing agent [id. at App. 14, ¶¶ 6-9], USFC "by utilizing its rights as a financial institution . . . will prepare and forward to the [government] various documentation in order to have the funds under the Contracts directed to USFC."; id. at App. 13, ¶ 4 (distribution of contract proceeds will not be based on financing

4

WINN and Dean employed the services of Bell, Boyd & Lloyd, PLLC's Joel Rubenstein, Esquire. Mr. Rubenstein and his firm had represented both WINN and Dean in connection with various matters, including the companies various joint efforts and contract activities over the years.

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provided by USFC but rather as WINN and Dean "mutually agree".); and id. at App. 14, ¶ 8 (USFC's fee will be determined by the number and size of deposits made to it rather than for any financing supplied by it).5 USFC's duties ended when, after months of "wrap up", during which time WINN and Dean "settled out" their respective accounts for various contracts, including the Bolling Contract, WINN and Dean concluded the final piece of their business relationships on February 13, 2001. Ex. 1 at App. 5 - 8, ¶¶ 3, 8-11. WINN, with Dean, took steps to close out the Bolling Contract, which stretched into 2002. Id. at App. 8, ¶ 12. In the late Spring of 2002, the government brought to WINN's attention certain facts that suggested that Dean and USFC had conspired to covertly perform and bill the government for additional work under the Bolling Contract, all without notice to WINN. Specifically, in April, 2002, without notice to WINN, Dean and USFC submitted an invoice for the additional work that purported to have been issued by WINN, and directed that the payments for that work ($42,323.66, after retainage) be made to USFC. The government investigated the circumstances surrounding the April invoice. On July 3, 2002, after a detailed review of the facts concerning administration of the Escrow Agreement, the government issued payment for the invoiced amount plus interest to WINN. The Contracting Officer informed WINN that the Bolling Contract would be corrected to show WINN as the payee. On or about September 4, 2002, the government issued Contract Modification P00013 ("Mod.13"), changing the Bolling Contract payee back to WINN, revoking the acceptance of the assignment under Mod. 0001. Ex. 1 at App. 8 - 11, ¶¶ 12-19; Ex. 3 at App. 16. Mod. 13 also closed out the Bolling Contract. The government issued final payment of $10,000.00 to WINN on or about September 16, 2003.

5

WINN respectfully notes that this Court may consider this motion one for summary judgment, since it presents matters outside of the pleadings. RCFC 12(b).

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ARGUMENT I. However USFC's Claim is Construed, This Court Lacks Jurisdiction to Adjudicate it, and the Complaint Fails to State a Claim on which Relief May be Granted; The Claim Thus Must Be Dismissed. A. Standard of Review

In ruling on WINN's Motion to Dismiss, "whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader."Kane, 26 Cl.Ct. at 657, citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974), and Hamlet v. United States, 873 F.2d 1414, 1416 (Fed.Cir.1989). Nevertheless, where, as here, a motion to dismiss for lack of subject matter

jurisdiction challenges the truth of the jurisdictional facts alleged in the complaint, the trial court may also consider relevant evidence in order to resolve disputed facts. Kane, op. cit., citing Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed.Cir.1988). Moreover, although the court must accept as true any undisputed allegations of fact made by plaintiff. Kane, op. cit., citing Scheuer, 416 U.S. at 236, 94 S.Ct. at 1686; the court is required to decide those facts relevant to the issue of jurisdiction that WINN, as moving party, has disputed. Kane, op. cit., citing Reynolds, 846 F.2d at 747. B. USFC Has Not and Cannot Establish Privity, a Necessary Prerequisite to Confer Jurisdiction on This Court Under The Contract Disputes Act, The Tucker Act and the Assignment of Claims Act.

The burden is on the plaintiff to establish jurisdiction, Kane, op. cit..; and this is a burden, WINN urges, that USFC cannot meet under any possible construction of the claim6 because USFC's

6

The Complaint does not recite jurisdictional grounds, and instead references the CDA (Compl., ¶¶ 7, 9 and 10) and a "breach of the assignment of funds" (id., ¶¶ 4 and 5). Although USFC makes no explicit reference to it, the various references in the Complaint to an "assignment of funds" may be construed for (continued...)

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Complaint does not recite any facts that can establish privity between USFC and the government. To the contrary, both the Complaint and the exhibits to this Motion make clear that the government was not a party to USFC's assignment from WINN and USFC was not party to WINN's contract with the government. This court is a court of limited jurisdiction. Globex Corp. v. U.S., 54 Fed. Cl. 343, 347 (2002). Although its jurisdiction, governed by the Tucker Act, 28 U.S.C. § 1491, extends to claims by or against, or disputes with, a "contractor" arising under section 10(a)(1) of the CDA. 28 U.S.C. § 1491(a)(2); USFC's lack of privity with the government precludes it from establishing jurisdiction in this court under that statute. Thomas Funding, 15 Cl. Ct. at 501 (Assignment of Claims Act assignee is not in privity with government and thus is not a "contractor" entitled to maintain an action under the CDA.). In Thomas Funding, the Claims Court, Reginald W. Gibson, J., considered the plaintiff financing institution's claim for monies allegedly owed under the underlying government contract. The court granted the defendant's motion for summary judgement as to those claims premised on the CDA, holding, in relevant part:
Section 609 of Title 41 U.S.C. states that claims against the government can only be brought by a "contractor." See 41 U.S.C. § 609. A "contractor" is defined in section 601 as "a party to a government contract other than the government." 41 U.S.C. § 601(4). The defendant urges that because the plaintiff was not a "party" to the contract in question, and that only the prime contractor and the government were, the plaintiff is clearly not a "contractor" for purposes of the CDA. Thus, defendant argues no breach claim for damages, on these facts, may be maintained in this court. While this view somewhat oversimplifies the issue, it is essentially correct, for again the requirement of privity of contract must be shown for all parties attempting to maintain a suit as a contractor against the government under the Contract Disputes Act of 1978. See Erickson, 731 F.2d at 813; Johnson Controls, 713 F.2d at 1548-52. In short, the basic tenet of government contract law that the government consents to be sued only by those (i.e., a contractor) with whom it has privity of contract, although exceptions exist within very

(...continued) purposes of this Motion to Dismiss to implicate the Assignment of Claims Act.

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limited circumstances, is emphatically embodied in the Contract Disputes Act. See Erickson, 731 F.2d at 813. . . .[N]either the prime contract nor the contract of assignment was a tripartite agreement. To the contrary, both were separate and distinct subject matter contracts. That is to say, plaintiff was not a party to the former contract, and the government was not a party to the latter. Thus, under no hypothesis can it be said that plaintiff herein was in privity with the United States under either contract.

Id. USFC's Complaint fares no better if it is construed as asserting a contract claim under the Tucker Act or as a claim for wrongful payment under the Assignment of Claims Act, both of which would be cognizable under 28 U.S.C. § 1491(a), and both of which require, as prerequisite to jurisdiction, privity that USFC cannot establish as a mere assignee. Thomas Funding, 15 Cl. Ct. at 499 - 500. Produce Factors Corp. v. U.S., 199 Ct.Cl. 572, 467 F.2d 1343, 1348 (1972) (assignment "[cannot], and did not, create any contractual relationship between [the assignee] and the United States.") Since the requisite privity "is not found, this court simply lacks jurisdiction to entertain [the plaintiff's] claims," See Martinez v. United States, 48 Fed. Cl. 851, 860 (2001); citing Cienega Gardens v. United States, 194 F.3d 1231, 1239 (Fed.Cir.1998), aff'd, 281 F.3d 1376 (Fed. Cir.2002); and the Complaint should be dismissed pursuant to RCFC 12(b)(1).7

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To the extent that it is construed as a claim for wrongful payment under the Assignment of Claims Act, the Complaint suffers from additional defects which deprive this court of jurisdiction and merit dismissal pursuant to RCFC 12(b)(1). For example, as previously noted, USFC has not alleged that it is a "a bank, trust company, or other financing institution," and thus fails to establish even the minimal indicia of standing necessary for the court to find jurisdiction. Diamond Manft'g Co. v. U.S., 3 Cl.Ct.at 427. Since the other defects also support dismissal of the Complaint pursuant to Rule12(b)(6), WINN has detailed them in support of those grounds of its Motion and respectfully directs the court to § C of Winn's Argument, infra., which it incorporates by reference here.

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C.

USFC's Complaint Fails to Assert a Claim for Relief Under The Contract Disputes Act or the Assignment of Claims Act, and Must Be Dismissed With Prejudice.

For the same reasons as set forth in § B, supra (incorporated by reference herein) that the court lacks jurisdiction to adjudicate USFC's claim pursuant to the CDA, USFC's is fatally defective and fails to state a claim on which relief may be granted under that statute. Thomas Funding, 15 Cl. Ct. at 501. The Assignment of Claims Act, and subsection (a) thereof, generally precludes assignment of government contracts and payments thereunder, except to the extent that an assignee and the assignment fall within the exception created for financing institutions, which provides, in relevant part:
The provisions of subsection (a) of this section shall not apply in any case in which the moneys due or to become due from the United States or from any agency or department thereof, under a contract providing for payments aggregating $1,000 or more, are assigned to a bank, trust company, or other financing institution, including any Federal lending agency, provided: · · · (2) That, unless otherwise expressly permitted by such contract, any such assignment shall cover all amounts payable under such contract and not already paid, shall not be made to more than one party, and shall not be subject to further assignment, except that any such assignment may be made to one party as agent or trustee for two or more parties participating in such financing. . .

41 U.S.C. § 15(c). An assignment of the right to be paid by the government will be valid and enforceable against the government only provided that certain conditions are met. Id.; Federal Acquisition Regulation ("FAR") 32.802 (48 C.F.R. § 32.802); see also General Accounting Office, Principles of Federal Appropriations Law Vol. III (2d Ed. 1994) at 12-193 (hereinafter "Principles"). An assignment will be valid only if the assignee is a "bank, trust company, or other financing institution,

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including any Federal lending agency . . . ." 41 U.S.C. § 15(b). In addition, where appropriate, assignment must be alleged to have been made to "one party as agent or trustee for two or more parties participating in such financing," 41 U.S.C. § 15(b)(2); FAR 32.802(d)(2) (unless otherwise expressly permitted in the contract, assignment may be "made only to one party, except that any assignment may be made to one party as agent or trustee for two or more parties participating in the financing of the contract . . . ). Furthermore, it will be valid only to the extent that it is made to secure a loan by the purported assignee (here, USFC) to further the assignor's (WINN) performance of the contract. "The purpose of the Assignment of Claims Act of 1940, as amended, 54 Stat. 1029, 65 Stat. 41, was to induce financial institutions to loan money to contractors to finance them in supplying goods to the Government." Mercantile Nat Bank at Dallas v. U. S., 280 F.2d 832, 836 (Cl. Ct. 1960) (contract for purchase by government of Mexican ore; Assignment of Claims Act's purpose to encourage lending institutions to finance performance of government contracts, overrode government's right to enforce against assignee/lending institution express contract language requiring adjustment of unit price stated in US currency to reflect exchange rate fluctuation). Similarly, an assignee's "right to be paid" is only valid if the assignee renders financial assistance which facilitates performance of a government contract. See e.g., American Nat'l, op cit.; Manufacturers Hanover Trust Co. v. United States, 590 F.2d 893, 218 Ct. Cl. 563 (1978); First Nat'l City Bank v. United States, 537 F.2d 426, 210 Ct. Cl. 375 (1976); Envt'l Protection Agency ­ Priority of Payments ­ Assignment of Claims, B-231107, Feb. 3, 1989, 89-1 CPD ¶ 111 ("EPA"). Indeed, as the Comptroller General stated in EPA:
Although the financial assistance from the bank does not have to pass directly from the assignee to the assignor, courts have held that for an assignment to be effective against the government, financial assistance actually has to have been rendered that facilitates the contractor's performance of the government contract. First National City Bank v. United

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States, above; see also Coleman v. United States, 158 Ct. Cl. 490 (1962). We have interpreted this to mean that the assignee must have a financial interest in the contractor's operations under the contract in question. Generally, this means that an assignment is valid only if it secures a loan which the assignee has made to the assignor to finance the assignor's performance.

89-1 CPD ¶ 111.8 Thus, in order to state a claim under the Assignment of Claims Act, not only must USFC make allegations necessary to establish privity to confer jurisdiction, it must also allege that it satisfies the criteria established for financing institutions under the statute and that the assignment was made to secure a loan that USFC made to WINN to further WINN's performance of the Bolling Contract. It did neither, and thus the Complaint, on its face, fails under RCFC 12(b)(6). Diamond Manft'g Co. v. U.S., 3 Cl.Ct. at 427 (no valid assignment under the terms of the Assignment of Claims Act can exist where Plaintiff does not assert that it is a "bank", a "trust" or a "financing institution."); see also Kane, 26 Cl.Ct. at 661 (Where plaintiff is not in privity with the government and does not allege that it was a bank, a trust company or "other financial institution," it cannot

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In fact, the FAR goes so far as to define assignments as "security for a loan to the contractor." FAR 32.801. See also Principles at 12-192, citing Continental Bank & Trust Co. v. United States, 416 F.2d 1296, 1299 (Ct. Cl. 1969); 55 Comp. Gen. 155: . . . to aid defense production by inducing financing institutions to lend money to government contractors with which to finance the performance of their government contracts. This financing scheme was intended to broaden competition by better enabling small businesses to compete for defense contracts. Id.

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claim standing under the Assignment of Claims Act.). See also, Twin City Shipyard, Inc. et al. v. U.S., 21 Cl.Ct. 582, 589 (1990.)9 Review of the Phillips Affidavit and the Escrow Agreement makes clear that USFC did not allege these things because it cannot. As supra, USFC was not a proper assignee of payments because it did not render one iota of financial assistance to WINN under the Bolling Contract. USFC was merely a depository of the contract payments. Such actions do not a proper assignment make. See, e.g., American Nat'l, op cit.; Manufacturers Hanover, op cit; First Nat'l City Bank, op cit.; EPA, op cit. USFC's complaint thus fails utterly and irremediably to state a claim on which relief may be granted, and this action must be dismissed on its merits pursuant to RCFC 12(b)(6). D. USFC's Failure to Recite Jurisdictional Grounds Renders the Complaint Defective and Subject to Dismissal Pursuant to RCFC 12(b)(6).

USFC's Complaint fails to assert, anywhere, the grounds upon which subject matter jurisdiction is based, as is required by RCFC 8(a), renders it materially defective and subject to dismissal pursuant to RCFC 12(b)(6). Kane, 26 Cl.Ct. at 622.

Although the Claims Court did not reach the issue of validity of the assignment at issue in Twin Ciy Shipyard, it noted: . . . First, the court need not decide whether [the plaintiff] is a valid assignee. The court merely notes that it has serious doubts as to the validity of the assignment, due to the failure to execute the novation required by the assignment agreement. Moreover, the Assignment of Claims Act allows assignment of contract proceeds only to banks, trust companies, or other financing institutions, United California Discount Corp. v. United States, 19 Cl.Ct. 504, 507 (1990), and it is not clear from this record that [the plaintiff] meets these requirements. Id.

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CONCLUSION For the reasons set forth above, under any possible reading, USFC's complaint fails for want of jurisdiction; and, moreover, fails to state a claim on which relief may be granted. Party Defendant The W.I.N.N. Corporation thus respectfully moves the court: 1. To dismiss with prejudice USFC's complaint pursuant to RCFC 12(b)(6), and to dismiss Defendant / Third Party Plaintiff's derivative Third Party Complaint as moot; in the alternate, 2. To dismiss USFC's complaint pursuant to RCFC 12(b)(1) , and to dismiss Defendant / Third Party Plaintiff's derivative Third Party Complaint as moot. Respectfully submitted, Third

Date: August 20, 2004

/s/ Carol L. O'Riordan Carol O'Riordan THE O 'RIORDAN BETHEL LAW FIRM , LLP 1314 19th Street, NW Washington, D.C. 20036-1602 Ph: (202) 822-1720 Fax: (202) 822-1721 Counsel for Third Party Defendant The W.I.N.N. Group, Inc.

Of Counsel: Pamela J. Bethel, Esq. THE O 'RIORDAN BETHEL LAW FIRM , LLP 1314 19th Street, NW Washington, D.C. 20036-1602 Ph: (202) 822-1720 Fax: (202) 822-1721 Brian T. Scher, Esq.
SCHUMACK RYALS PLLC

3900 Jermantown Road Fairfax, Virginia 22030 Ph: (703) 934-4656 20

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ ) U.S. FINANCIAL CORPORATION, ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) Defendant and ) Case No. 03-623C Third Party Plaintiff, ) (Senior Judge Margolis) ) v. ) ) THE W.I.N.N. GROUP, INC., ) Third Party Defendant. ) __________________________________________) ORDER THIS MATTER came before the Court on Third Party Defendant's Motion to Dismiss. The Court, having considered the Motion, and it appearing that the Motion should be GRANTED, it is this _____ day of ________________, 2004 hereby ORDERED that the Motion be, and the same hereby is, GRANTED; and it is FURTHER ORDERED that Plaintiff US Financial Corporation's Complaint in this matter is dismissed with prejudice; and it is FURTHER ORDERED that Defendant / Third Party Plaintiff United States' Third Party Complaint in this matter is dismissed as moot.

Lawrence S. Margolis Senior Judge United States Court of Federal Claims