书城英文图书The Government Manager's Guide to Contract Law

第4章

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LIABILITY FOR THE GOVERNMENT MANAGER AND THE GOVERNMENT

Like the rest of us, government managers always run the risk of being sued by someone for something. Because government managers may work for the government administering contracts with contractors or may make mistakes in dealing with the general public, they face the threat of potential lawsuits from the government as well as from contractors and their employees.

We first discuss a government manager's personal liability to the government for mistakes, particularly mistakes in handling government contract payments. We then address the government's liability to third parties (like the contractor or the contractor's employees) for mistakes made by the government manager, including the government manager's liability under the Federal Tort Claims Act (FTCA). Finally, we discuss the government manager's personal liability to the general public for mistakes made in the role of government manager.

THE GOVERNMENT MANAGER'S FINANCIAL LIABILITY TO THE GOVERNMENT

A government manager's liability to the government typically involves two situations: making unauthorized commitments to a government contractor and making mistakes in the contract payment process.

The government manager's liability for making unauthorized commitments is clear: The government has the right to make a government manager pay for committing the government to a course of action that is not properly authorized by agency regulations.

On the issue of liability for mistakes in the contract payment process, there's good news for government managers. Even though a government manager may get heavily involved in the contract payment process, there's not much personal, pecuniary liability for the government manager.

This conclusion comes from the GAO's Principles of Federal Appropriations Law (commonly known as the Red Book), which discusses at length how federal law imposes personal liability on "an accountable officer." The Red Book specifies who actually is an accountable officer—personnel like "certifying officers, civilian and military disbursing officers, collecting officers, and other employees who by virtue of their employment have custody of government funds." The Red Book's list does not include other agency employees like a government manager or a contracting officer. This is surprising, because a government manager can get heavily involved in contract payments—-legal and otherwise.

Better yet, from a government manager's perspective, the Red Book describes how rare it would be for, say, a contracting officer to be an accountable officer:

With rare exceptions, other officials who may have a role in authorizing expenditures (contracting officers, for example) are not accountable officers for purposes of the laws discussed in this chapter…."[1]

The Red Book cites a 1992 GAO opinion as authority. In this decision, a contracting officer and a contract specialist messed up spectacularly. Both approved a progress payment being made directly to a contractor even though the contract's payments should have gone to a bank first because payments had been assigned to that bank and even though the contract did not allow progress payments. Trying to turn the law on its head, the Air Force wanted to hold these procurement people liable instead of making the accounting and finance officer and the certifying officer liable, as federal law requires. GAO concluded that the Air Force could not make the contracting officer and the contracting specialist liable:

There is no authority to assess pecuniary liability against the government employee for losses resulting from an error in judgment or neglect of duty….[2]

In another case, the Department of Veterans Affairs (VA) improperly used VA money for three gift certificates to local restaurants and a silk plant in connection with a contest advancing VA's celebration of Women's Equality Week. GAO refused to hold any procurement employees financially liable:

VA's certifying officers necessarily rely on various participants in the procurement and payment process to ensure that only legal and accurate payments are made. However, these officials, including contracting officers and voucher auditors, do not become certifying officers subject to liability for improper payments merely because certifying officers rely on their review or approval of purchases or payments. Therefore, while officials other than certifying officers may be subject to administrative sanctions, our Office has never looked to them for reimbursement in cases of illegal or improper payments.[3]

The Red Book goes on to add that government managers like contracting officers "may be made accountable in varying degrees by agency regulation." Whether this remains good law is in question, however. As stated in an important 2000 GAO decision:

Over the years our Office has taken the position in a number of different contexts that agencies may not hold employees liable for losses caused the government as a result of errors in judgment or neglect of duty in the absence of administrative regulations…. On one occasion, we concluded that an agency solely by regulation may establish pecuniary liability for employees supervising a certifying and disbursing process. This conclusion was repeated in passing or in dicta in some other decisions…. Regardless of [these decisions], in light of the Supreme Court decisions … we believe that an agency may impose pecuniary liability only with a statutory basis. Accordingly, we will no longer accept our earlier case law in this regard as precedent and any decision inconsistent herewith is overruled.[4]

Manager Alert

It is rare for a government manager to be considered an "accountable officer" and therefore be personally liable.

Other government employees, like certifying officials, are not so lucky.

In September 2001 a forest fire in the Gifford Pinchot National Forest (GPNF) led to the Forest Service's contracting with Evergreen Bus Service for buses to carry firefighters. To get paid, Evergreen sent the Forest Service four invoices on Department of Agriculture forms. These invoices, totaling $5,631.85, were paid after the government's certifying officer signed them on September 25. The next day, the government got four more invoices for the same work, in the same amount, but this time on Evergreen stationery, not on USDA forms. Two of these Evergreen invoices even had copies of the USDA forms signed earlier attached to them. The same certifying officer certified them, one two days later and the others eight days later. When the Forest Service realized a mistake had been made, it tried to get the money back from Evergreen, but Evergreen's bankruptcy proceedings prevented that. The Forest Service asked GAO if the employee could not be held liable for the mistake because she paid the invoices in good faith and with reasonable diligence.

GAO said she had to pay the government back. Federal law makes certifying officers repay the government for any "illegal, improper, or incorrect" payments they make. Because the contractor had already been paid once, paying the contractor again was improper, so the certifying officer had to pay the government back unless the employee could come within one of the two exceptions to personal liability.

The first exception to personal liability was that the employee used "reasonable diligence." Not here: "We cannot find that the certifying officer, in certifying the September 27 and October 5 payments, acted with reasonable 'diligence and inquiry.' If she had done so, she would have learned that, just days before, she had certified payments to Evergreen for the same services and in the same amounts. The standard of reasonable diligence and inquiry requires an examination of the 'practical conditions prevailing at the time of certification, the sufficiency of the administrative procedures protecting the interest of the Government, and the apparency of the error.' Here, the error was clearly apparent on the face of the invoices that the certifying officer was asked to certify."

The second exception to personal liability was "good faith." That was not the case either: "Our office may relieve liability if the following three conditions are met: (1) the obligation was incurred in good faith; (2) no law specifically prohibited the payment; and (3) the United States Government received value for the payments." GAO found that the certifying official met only two of the necessary three criteria. She was certainly acting in good faith when she certified payments. And it is legal to pay for bus services during afire. "However, in order to grant relief, we must find that the government received some value for the payments. Clearly, Evergreen had provided no additional bus services beyond those that GPNF had already paid for on September 25, 2001. Accordingly, we are unable to grant relief…."[5]

THE GOVERNMENT'S LIABILITY FOR THE GOVERNMENT MANAGER'S MISTAKES

As noted, the government may be liable for a government employee's mistakes. Here, we will discuss the government's liability for these mistakes. In the last part of this chapter, we will discuss the government employee's liability to the government.

"Mistakes were made," the classic quote from the Clinton White House, is one reason for the FTCA. The government makes mistakes. More accurately, government employees make mistakes.

If an employee of a company makes a mistake, the company can be sued. So can the employee.

The same is true, but only to some extent, for government employees like the government manager. Two issues are involved: the government's liability for the government manager's mistakes and the government manager's personal liability for mistakes he or she makes.

Whether the government can be sued for the mistakes its employees make depends on whether there has been a waiver of "sovereign immunity." Because the government is generally immune from lawsuits, Congress would have to consent to the government's being sued.

The FTCA gave this consent to sue the government, but only to a very limited extent. As a result, many of the government manager's actions remain immune from lawsuit. As we will see, a government manager acting professionally is immune from lawsuit.

Manager Alert

A government manager acting professionally is immune from lawsuit.

Because the FTCA waived the government's sovereign immunity, the government may be liable for money damages when government employees commit certain "wrongful acts" or torts.

This complex law can be generally summarized like this: If a government employee has a job that must be done—-a mandatory duty—-and the employee does that job negligently, the government can be sued. But the government cannot be sued if the negligent act of the government employee was a discretionary act.

This summary raises four critical issues that are typically litigated. Was the government manager's action:

? Taken by a government employee (and not an independent contractor)

? Negligent or one of the "non-enumerated" intentional torts

? "Within the scope of employment of the government employee"

? In the performance of a mandatory or discretionary duty?

Government Employee or Independent Contractor

The FTCA is a limited waiver of the government's sovereign immunity. This immunity covers only the employees of a federal agency. If an injury was caused by an independent contractor, the government employee cannot be liable under the FTCA.

However, it's possible that an "independent contractor" is not really independent. The government can be liable for the mistakes of an independent contractor if that contractor is an "agent" of the government, that is, if the government has the power to control the detailed physical performance of the contractor or if the government supervises the day-to-day operations of the contractor.

However, simply because the government can inspect or can supervise a contractor's compliance with the contract specifications does not establish the agency relationship necessary to bring the case within the FTCA.

Another indicator of an independent contractor relationship is the contractor's having liability insurance. Courts interpret the requirement to have liability insurance as some evidence that the insured is acting as an independent contractor.

In one case, two people were hurt while walking in front of a U.S. Customs Service building. They sued the government. In wonderful legal hyperbole, they claimed that they had been "violently propelled to the ground." They argued that they were hurt because the government didn't properly inspect or repair the sidewalk and didn't provide a safe environment for both of them.

The government had a contract with Eastco Building Services. The company was to maintain and repair the sidewalks in front of the building. No government employee supervised the day-to-day operations of the company. The Federal District Court threw the case out, concluding that Eastco was an independent contractor that was itself responsible for problems with the sidewalks. In this case, the government "did not exercise control over the detailed physical performance or supervise the day-to-day activities of Eastco but reserved the right to inspect performance to ensure compliance with the terms of the contract. These factors established that the government was acting 'generally as an overseer' and that no agency relationship existed with Eastco." The court noted, "in addition, Eastco maintained liability insurance to cover its operations under the Eastco contract." In fact, the government contract required Eastco to do so.[6]

Negligence or One of the "Non-Enumerated" Intentional Torts

The Federal Tort Claims Act is not all that accurate a name for the law because the law does not let people sue the government for all torts. Technically, the FTCA deals with the "negligent or wrongful act or omission" of a federal employee. So negligence, the most common type of tort, is included.

Some "intentional" torts are purposely put beyond the reach of an alleged victim. Specifically, the government cannot be sued for a government manager's libel, slander, misrepresentation, deceit, interference with contract rights, assault, battery, or false arrest or imprisonment, except with respect to investigative or law enforcement officers (28 U.S.C. § 2680(h)).

But the government may be sued for any other intentional torts not expressly excluded by the FTCA. For example, in one case, the Food and Drug Administration (FDA) posted a company's trade secrets on the agency's website, without telling the company it was doing so. The company sued the government under the FTCA for misappropriating the company's trade secrets and breaching FDA's confidential relationship with the company. A federal district court threw the case out, holding that it involved interference with contract rights, which was a tort the government could not be sued on. The appeals court ordered the lawsuit reinstated. To the appeals court, the lawsuit was not one of the expressly excluded intentional torts, like interference with contract rights. Rather, the lawsuit was over misappropriation of trade secrets or breach of confidentiality.[7]

Within the Scope of the Employee's Duties

Because a government employee is immune from lawsuit only when acting as a federal employee, one element of proof is that the employee was actually doing his or her government job when the tort occurred.

A government employee spent four hours at his office on Sunday working to get ready for government business on Monday. On his way home from the base, he was involved in an auto accident with a motorcycle. When the motorcyclist sued him, he claimed that the lawsuit really should be against the federal government because he was acting within the scope of his employment on his ride home.

This issue is one decided by state law. Under some state laws (Ohio's, for example), an employee acting within the scope of employment has to at least meet the "employer direction and control test": "[T]he employee was subject to the direction and control of the employer as to the operation of the employee's automobile while using it in doing the work he was employed to do (so that the relation between the employer and the employee and the driving of the automobile will be the relationship of principal and agent or master and servant as distinguished from the relationship of employer and independent contractor)."[8]

Based on Ohio law, the government employee was not acting within the scope of his employment because he was not subject to the direction and control of the employer while operating his car on his way home. He had chosen the day and time to make the trip, as well as his route to the office. At the time of the accident, the federal government was exercising no "constraints on [the employee's] time or activities with respect to his employment. No one called [the employee] at home and directed him to go to his office … to collect the items which he would need to take to Los Angeles the next day. In addition [the employee] was accommodating his own schedule when he went to his office…. [He] was not required to gather the materials when he did."[9]

The appeals court concluded that the employee's "Sunday drive was on a day of the week when he was not required to go to the Air Force base at all. He had the option of picking up the documents at any time he chose, including the Friday before his trip or the Monday morning just before he left for Los Angeles." The appeals court also considered that he never asked to be reimbursed for the distance he drove between his home and the base. "Although he called his work supervisor shortly after the accident, he did so only because the accident prevented him from traveling to Los Angeles the following day. [The employee] simply was not 'subject to the direction and control' of his employer at the time of the accident."[10]

Some victims can't sue either the government or the government's employee. In United States v. Smith, 499 U.S. 160, 111 S.Ct. 1180, 113 L.Ed.2d 134 (1991), a government doctor was sued for medical malpractice. The Supreme Court held that the government employee was protected from liability, even where the government had no liability. "The Court expressly recognized that the effect of its ruling was to leave certain tort victims without any remedy—-either against the Government or against the employee-tortfeasor. The Court found that this was the intention of Congress."[11]

Discretionary Function

Discretion demands immunity. If, for example, the FAR gives a contracting officer wide latitude or discretion to decide which offer is the "best value" to the government, is it fair to make the contracting officer liable for negligence if he makes a bad decision? Would making a contracting officer and the government financially liable for bad judgment lead to better decisions? Or would doing so make a contracting officer reluctant to make any decision? Aren't discretionary decisions best made if the contracting officer is not afraid of financial liability or even the threat of a financial liability lawsuit?

Congress concluded that the best way to let a contracting officer make a discretionary decision is to make the contracting officer and the government immune from lawsuits over the many discretionary actions government employees like contracting officers take as part of their jobs.

Manager Alert

The government is immune from lawsuits over the many discretionary actions that government employees like government managers take as part of their jobs.

What is a discretionary action? It is one that meets two tests, one that is easy to see and one that is very difficult to see.

First, if the government has to take the action (or is forbidden to take the action), the action is not discretionary. Mandatory actions are not discretionary. Because letting the government carry out policy is the basis for immunity, no policy is being violated when the government violates a mandatory regulation.

When the FDA posted a company's trade secrets on its website without telling the company it was doing so, the company sued the government under the Federal Tort Claims Act for misappropriating its trade secrets and breaching its confidential relationship with FDA. An appeals court said the action was not discretionary: "Disclosure of trade secrets is not a discretionary function because federal laws prohibit it."[12]

So if a federal statute, policy, or regulation makes an action mandatory—or forbids it—mistakes in taking the action can lead to government liability. These mistakes are not immune from lawsuit as "discretionary" acts.

The second part of the discretionary job test is more difficult: Was the challenged action, in the words of the appeals court, "the type Congress meant to protect; i.e., whether the action involves a decision susceptible to social, economic, or political policy analysis?"[13]The theory here is that courts shouldn't let a tort lawsuit be used to let someone second-guess legislative or agency decisions grounded in policy.

This is not an easy call. This same court put it well, addressing:

… the difficulty of charting a clear path through the weaving lines of precedent regarding what decisions are susceptible to social, economic, or political policy analysis. Government actions can be classified along a spectrum, ranging from those "totally divorced from the sphere of policy analysis," such as driving a car, to those "fully grounded in regulatory policy," such as the regulation and oversight of a bank…. But determining the appropriate place on the spectrum for any given government action can be a challenge.[14]

The court gave some helpful guidelines. One is the distinction between design and implementation. "We have generally held that the design of a course of governmental action is shielded by the discretionary function exception, whereas the implementation of that course of action is not." Another guideline is that "matters of scientific and professional judgment—-particularly judgments concerning safety—-are rarely considered to be susceptible to social, economic, or political policy."[15]

The court then gave two clear examples:

In a suit alleging government negligence in the design and maintenance of a national park road, we held that designing the road without guardrails was a choice grounded in policy considerations and was therefore shielded under the discretionary function exception, but maintaining the road was a safety responsibility not susceptible to policy analysis…. Similarly, in a suit alleging government negligence in the design and construction of an irrigation canal, we held that the decision not to line the canal with concrete was susceptible to policy analysis, but the failure to remove unsuitable materials during construction was not. In three cases concerning injuries resulting from the government's failure to post warnings concerning hazards present in national parks, we held that the government's decision not to post signs warning of obvious dangers such as venturing off marked trails to walk next to the face of a waterfall, and the government's decision to use brochures rather than posted signs to warn hikers of the dangers of unmaintained trails, involved the exercise of policy judgment of the type Congress meant to shield from liability, but that such policy judgment was absent when the government simply failed to warn of the danger to barefoot visitors of hot coals on a park beach … and in an action for the death of a prospective logger "trying out" for a job with a government contractor at a logging site under the management of a government agency, we held that while the government's authorization of the contract was protected under the discretionary function exception, the government's failure to monitor and ensure safety at the work site was not.[16]

Going back to an earlier example, two people were hurt while walking in front of a U.S. Customs Service building. They sued the government, claiming in their lawsuit that they were "violently propelled to the ground." They argued that they were hurt because the government, among other things, didn't wisely select or properly monitor the company it used to maintain and repair the sidewalks in front of the building. No government employee supervised these day-to-day operations of the company. The court threw out the case because the government involvement, if any, was discretionary. "GSA was not required to hire a particular contractor or to engage in a particular degree of oversight over the independent contractor it chose…. [T]he selection and supervision of contractors is a discretionary function and cannot form the basis for liability under the FTCA."[17]

THE GOVERNMENT MANAGER'S PERSONAL LIABILITY

The government manager's personal liability for mistakes is relatively straightforward: If the situation does not meet all four of the FTCA requirements, the government manager can be personally liable to the general public for mistakes he or she makes. That is, there can be personal liability if the government manager's mistake (1) involved a contractor acting as an agent of the government, (2) was not negligence but rather gross negligence or a "constitutional" tort, (3) was not "within the scope of employment of the government employee" or (4) involved a mandatory duty.

Manager Alert

Government managers doing their job professionally are immune from lawsuit.

Although the FTCA protects government managers from common-law tort actions like negligence, another threat can be a lawsuit that involves so-called "constitutional torts" in which a federal employee allegedly violates someone's constitutional rights. The classic example is a federal law enforcement person like an FBI agent allegedly violating a homeowner's Fourth Amendment right to be safe in his or her home by executing a search warrant that turns out to be improper.

In the classic 1971 decision Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, the U.S. Supreme Court acknowledged a limited right of taxpayers to sue federal employees personally on the basis of alleged constitutional torts.

One protection government managers have is that they cannot be sued personally if Congress has provided an alternative. The Bivens Supreme Court precedent establishing the ability to file constitutional tort lawsuits against federal employees also excluded situations in which Congress had already set up "meaningful and exclusive remedies against the United States." The theory was that because these lawsuits have been created by the Supreme Court, they should not apply where Congress has already set up a process for dealing with those issues. It's a basic separation-of-powers argument, with the judiciary not wanting to unduly interfere with the legislative process.

For example, a federal employee who claimed he had been demoted for publicly criticizing his agency successfully used the federal civil service review system to get reinstated with back pay. He then filed a Bivens action trying to sue his supervisor personally. The Supreme Court refused to hear the case on the basis that Congress had set up the civil service review system and the Supreme Court did not want to supplement it. The court was concerned that "if management personnel face the added risk of personal liability for decisions that they believe to be a correct response to improper criticism of the agency, they would be deterred from imposing discipline in future cases."[18]

The Supreme Court also dismissed a lawsuit against a Social Security employee who denied disability benefits. Congress had set up a legislative complaint process protecting Social Security disability claims which, according to the Supreme Court, was "considerably more elaborate than the civil service system." In the disability case, the Supreme Court again focused on the chilling impact that Bivens-type lawsuits could have on federal employees, noting that "the prospect of personal liability for official acts would undoubtedly lead to new difficulties and expense in recruiting administrators for the programs Congress has established."[19]

Government managers are also protected by the Contract Disputes Act (CDA). In one case, a contracting officer with the Army Corps of Engineers terminated construction contracts after none of the contracts was performed according to the contract. The termination notice was issued under the CDA and advised the contractor that it could appeal the decision to the Armed Services Board of Contract Appeals or the U.S. Court of Federal Claims.

The contractor instead sued the contracting officer, the Corps' chief of contracting for the North Atlantic division, the administrative contracting officer, and the program manager in federal court. The contractor claimed that these individuals had terminated the contracts in retaliation for the contractor's criticism of the Corps' mismanagement of the terminated projects and that the terminations deprived the contractor of its constitutionally protected rights to due process under the Fifth Amendment and free speech under the First Amendment.

A federal appeals court dismissed the cases against these government employees, concluding that the CDA protects procurement professionals from being sued personally for constitutional torts. The CDA was "the subject of an existing comprehensive remedial scheme. Indeed, for example, because the only retaliation alleged is termination of government contracts … the injury underlying the contractor's First Amendment claim is certainly cognizable—if not fully compensable—under the CDA." The same was true of the contractor's claim of due process violations under the Fifth Amendment. The appeals court concluded that it would not be appropriate "to supplement the CDA's remedial scheme with a new judicial remedy for alleged constitutional violations relating to the termination of federal government contracts. Rather, we defer to Congress, mindful that it is in a better position than are the courts to decide whether the public interest would best be served by the creation" of new rights against federal employees.[20]

NOTES

[1]Principles of Federal Appropriations Law, Vol. II, p. 9-8, (3rd Ed. January 2004).

[2]65 Comp. Gen. 177 (1986) B-241856.2, Sept. 23, 1992.

[3]Expenditures by The Department of Veterans Affairs Medical Center, Oklahoma City, Oklahoma, B-247,563, B-247563.3, Apr. 5, 1996, 96-1 CPD ? 190.

[4]Department of Defense—Authority to Impose Pecuniary Liability by Regulation, B-280,764, May 4, 2000.

[5]Forest Service Request for Relief of Liability, B-303177, October 20, 2004.

[6]Fisko v. United States, 395 F.Supp.2d. 57 (S.D.N.Y.2005).

[7]Jerome Stevens Pharmaceuticals Inc. v. The Food and Drug Administration, 402 F.3d 1249 (D.C. Cir. 2005).

[8]Sullivan et al. v. Tedd Shimp, 324 F.3d 397, 399 (6th Cir. 2003).

[9]Id. at 400.

[10]Id. at 401.

[11]B & A Marine Co., Inc. v. American Foreign Shipping Co., Inc. 23 F.3d 709, 715 (2d Cir. 1994).