July 16, 2020 Public Contract Law Journal

The Sovereign Acts Defense & Agency Deference: The 2019 Dentons “Gilbert A. Cuneo” Government Contracts Moot Court Competition - Government Brief

by Raymond Richards & Justin Terry

The Honorable Jeri Somers, Chief Judge of the U.S. Civilian Board of Contract Appeals, drafted the problem for the Arnold & Porter LLP Government Contracts Moot Court Competition. Awards for Best Brief went to the government. At the time of the competition, Mr. Hebdon, Mr. Richards, Mr. Terry, and Ms. Villalta were J.D. candidates at The George Washington Law School (GW Law). The Moot Court Experiential course was co-taught by Judge Somers and Karen D. Thornton, Director of GW Law’s Government Procurement Law Program. GW Law thanks its distinguished and outstanding volunteer judges for challenging and mentoring the competitors.

United States Court of Appeals for the Federal Circuit

THE UNITED STATES OF AMERICA, Appellant
v.
ACB CONSTRUCTION, INC., Appellee

APPEAL FROM THE UNITED STATES COURT OF FEDERAL CLAIMS IN NO.18-2994C, SENIOR JUDGE CHAMBERLAIN HALLER

BRIEF FOR THE DEFENDANT-APPELLANT

RAYMOND RICHARDS
JUSTIN TERRY
COMMERCIAL LITIGATION BRANCH
CIVIL DIVISION
U.S. DEPARTMENT OF JUSTICE
950 Pennsylvania Ave. NW
Washington, D.C. 20530
(202) 514-2000

Attorneys for Defendant-Appellant
United States of America

March 17, 2019

Statement of Jurisdiction

On September 18, 2012, ACB Construction, Inc. (ACB) appealed from the final decision of a Contracting Officer (CO) in the United States Court of Federal Claims (COFC). Pursuant to 28 U.S.C. § 1491(a)(2) (2012) (the Tucker Act), the COFC has jurisdiction over all issues arising under the Contracts Disputes Act (CDA), codified at 41 U.S.C. §§ 7101–7109. See 41 U.S.C. § 7104(b)(1) (2012). As a claim arising under the CDA, ACB’s appeal of the CO’s final decision was properly filed in the COFC. See id. That court reviews such claims de novo. See id. § 7104(b)(4).

After reviewing ACB’s claim, the COFC held that ACB was entitled to payment for additional costs incurred during its performance of the relevant contract. Specifically, while setting base access policy was held to be a sovereign act, the COFC rejected the base commander’s interpretation of that policy. R. at 1. The United States of America (the Government) appeals the COFC decision. Since this Court has exclusive jurisdiction over appeals from a final decision of the COFC, the Government seeks relief from this Court. See 28 U.S.C. § 1295(a) (3); see also Karuk Tribe of Cal. v. Ammon, 209 F.3d 1366, 1373 (Fed. Cir. 2000).

Statement of Related Cases

We know of no other appeal in or from this action that previously was before this Court or another appellate court under the same or similar title, and we know of no appeals before this Court that may directly affect or be affected by the decision in this appeal.

Statement of the Issues

I. Sovereign Acts Doctrine. Did the COFC correctly hold that the base commander’s change to base access policy was a permissible sovereign act?

II. Administrative Procedure Act. Did the COFC err by rejecting the base commander’s interpretation of her own base’s access policy?

Statement of the Case

I. Nature of the Case

The Government appeals from a final decision of the COFC. The COFC held that ACB is entitled to $575,122.33 for additional costs incurred by its subcontractor because of the base commander’s interpretation of the Air Force base access regulation. R. at 1. The COFC found that the policy change was permissible as a sovereign act, but that the base commander’s interpretation of the base access policy was not entitled to judicial deference. R. at 1. The Government argues that the COFC was correct in holding that the update to base access policy was permissible as a sovereign act, but that the COFC applied an erroneous legal analysis to the issue of regulatory interpretation. Consequently, we urge this Court to reverse the COFC on the second issue presented.

II. Course of the Proceedings

On October 29, 2008, ACB’s subcontractor, SOS Construction, Inc. (SOS), filed a request for equitable adjustment (REA), seeking $575,122.23 for additional costs incurred during its performance of the contract at issue. R. at 10. Acting on behalf of SOS, on June 25, 2009, ACB requested a final decision on its October 2008 REA. R. at 11. Ultimately, the CO’s final decision on the claim was deemed denied, and on September 18, 2012, ACB filed an appeal from the CO’s final decision in the COFC. R. at 11. Reviewing the claim de novo, the COFC held that ACB was entitled to payment for SOS’s additional costs incurred because the base commander’s interpretation of the base access policy was flawed in light of the convict labor clause incorporated into the relevant contract. R. at 15. The Government timely appeals the decision of the COFC and asks this Court to reverse the COFC on the latter of the issues presented.

Statement of Facts

The record from the COFC presents a series of competing assertions that arise from a government contract to construct seven dormitories on F.E. Warren AFB, just outside of Cheyenne, Wyoming. Even so, the facts may be objectively viewed as presented below to facilitate a final disposition on this appeal.

  1. To begin, the record indicates that the CO, Stanley Rothenstein, responded to a $575,122.23 REA submitted by SOS in late October 2008. R. at 10. In his response, the CO challenged SOS’s assertion that it had reasonably assumed it could employ convict laborers on the base since it was conceivable, even if unforeseen, that the base access policy, prior to contract award, would be interpreted to prohibit convict laborers from accessing the base. An October 2008 policy memo from Base Commander Brigadier General Mona Lisa Vito (General Vito), however, clarified the base access policy to prohibit convict laborers from accessing the base, consistent with the written policy prior to contract award and guidance given at the pre-construction conference. R. at 5, 10. This dispute over the October 2008 policy memo continues on appeal.
  2. The record delineates key factual findings surrounding the October 22, 2008, memo from General Vito; specifically, this 2008 memo was “an updated policy memorandum on contractor personnel access to F.E. Warren AFB.” R. at 9 (internal quotes omitted). Of note here, the base commander had already issued similar directives establishing procedures for contractors to access the base through the November 15, 2003, Directive 31-101: Local Security Policy and Security Procedures for Contractors and the July 1, 2006, Installation Security Supplemental Installation 31-101. R. at 3–4.
  3. These local policy directives were issued in accordance with § 21 of the Internal Security Act of 1950, 50 U.S.C. § 797, providing a designated military commander with authority to issue defense property security regulations, which include regulations concerning “the ingress … or egress or removal of persons” from military property. See 50 U.S.C. § 797 (a)(3)(A) (2012). Department of Defense (DoD) regulations controlling base entry, 32 C.F.R. §§ 809a.0–809a.5, provide commanders additional guidance for their local policy directives; as the COFC noted, the DoD regulations require that a commander not act in an arbitrary or capricious manner when excluding or removing people from military property and that the decision to do so must be reasonable in relation to the commander’s responsibility to protect and preserve order and to safeguard persons and property on a military installation. R. at 3. Accordingly, to the extent practicable, commanders should prescribe the rules and conditions governing base access by regulation. R. at 3.

    Consistent with this regulatory scheme, in 2006, the base commander issued Supplemental Instruction 31-101, further specifying procedures for registering contractors on the Entry Authority List (EAL). R. at 4. EAL registration is a prerequisite for contractor base access, as referenced in the 2003 and 2006 directives and by Federal Acquisition Regulation (FAR) contract clause 52.204-9, incorporated into ACB’s contract. R. at 2–5. Supplemental Instruction 31-101 requires trained personnel to “run contractor names through” the National Criminal Information Center (NCIC) system for wants and warrants and specifies that an “NCIC check” eliciting “[u]nfavorable results will be scrutinized and eligibility will be determined on a case-by-case basis by the Security Force Coordinator.” R. at 4.
  4. Based on miscellaneous understandings and applications of this local directive, contractor personnel were granted access to F.E. Warren AFB. For example, the COFC notes that “[r]ecords indicate that the security office at F.E. Warren had allowed SOS employees with criminal records or in pre-release status access to F.E. Warren previously,” as seemingly substantiated by testimony from Sam Tipton, SOS general superintendent with 25 years of construction experience, and John Gibbons, SOS President with a 20-year plus history at F.E. Warren AFB. R. at 5. Accordingly, the COFC found that “[w]hen SOS bid on this project it assumed that it would have access to the same labor pool that it had in the past.” R. at 5. However, minutes from a September 30, 2007, pre-construction conference show that while reviewing base access and security procedures for the contract, CO Rothenstein specified that “[n]o one will be allowed on the installation if not on the EAL list[,]” and furthermore that “[n]o one with outstanding warrants, felony convictions, or on probation will be allowed on the installation.” R. at 4–5.
  5. Despite the CO’s recorded statement of the policy, ACB’s project manager testified to his belief that the CO would interpret the regulations as previously done, allowing employees with criminal backgrounds access to F.E. Warren. R. at 5. True enough, prior interpretation of the base access regulation allowed ACB workers from the Avalon-Cheyenne Transition Center access to other F.E. Warren jobsites. R. at 5, 10–11. However, this policy was not frozen in time simply because ACB was awarded a contract. In fact, ACB provides apt illustration as to why commanders wield authority to adapt their base access policies: on another ACB jobsite, a transition center worker with a violent background attacked his manager with a welding tool. R. at 5.
  6. Using the prior interpretation, ACB’s subcontractor, SOS, had managed to register its workers on the contractor EAL despite their criminal histories. R. at 5. After the violent attack, ACB was unable to register any subcontractor employees whose NCIC check elicited unfavorable results such as felonies, sexual offenses, or those still in the penal system. R. at 4, 6. Consistent with his statement at the September 2007 pre-construction conference, CO Rothenstein told Mr. Gibbons at a May 2008 partnering meeting that, at that time, “no one with a prior felony conviction is being permitted on installation,” and a September 11, 2008, email to Mr. Gibbons further clarified that “any persons in the correctional system, paroled or under the supervision of a probation officer are not authorized on F.E. Warren AFB.” R. at 7, 9. To mitigate resulting construction delays, SOS contracted with MCV Construction, Inc. (MCV) because MCV employees had demonstrated ability to access to F.E. Warren AFB. R. at 6.
  7. During this time, a written update to the base access directive was underway. To keep the mission and the people of F.E. Warren safe and secure, General Vito — in coordination with the CO, security representatives, and the legal office — issued the October 22, 2008, update to base access policies. R. at 7, 9.
  8. Consistent with Supplemental Instruction 31-101 and the regulatory scheme, this policy instructed personnel to scrutinize “unfavorable results” elicited from an NCIC check, and clarified that “unfavorable results” would include “outstanding wants or warrants, sex offenders, violent offenders, those who are on probation, and those who are in a pre-release program.” R. at 9. General Vito described this update as a “large change,” given its clarifying effect on the application of Supplemental Instruction 31-101 and because it ensured the base access policy would be “fair and equally applied to everybody.” R. at 10.
  9. Nevertheless, just one week after General Vito issued the October 22, 2008, memo, SOS submitted its $575,122.23 REA, claiming that this policy, issued pursuant to FAR 52.204-9 of ACB’s contract, incidentally affected its ability to hire under FAR contract clause 52.222-3 (Convict Labor). R. at 10. ACB advances this claim despite assurances given to Mr. Gibbons that ACB could still use convict labor, presumably in other capacities related to the overhead and other costs it accounted for in preparing its bid, since there was no guarantee that convict laborers could ever access the base. R. at 2, 8.

Summary of the Argument

I. THE COFC CORRECTLY HELD THAT THE BASE COMMANDER’S CHANGE TO THE BASE ACCESS POLICY WAS A PERMISSIBLE SOVEREIGN ACT.

The COFC was correct in holding that an update to the base access policy by the duly authorized base commander, out of concern for the mission and people of the base, was a public and general act given the impetus and rational basis for her action. Specifically, the written policy was updated to clarify an ambiguity that permitted a convict laborer base access after a wants and warrants check, which proved insufficient for ensuring the security and safety of the mission and people on the base since that same laborer attacked his manager while on base at an ACB jobsite. In short, the update to base access policy satisfies the requirement that for an act to be a sovereign act, it must be public and general.

Despite the incidental impact of this sovereign act on all applicable contractors, the Government should be excused from liability. Notably, the courts have excused liability under similar circumstances where access to military-controlled property has been restricted. Even without these cases, the Government should be excused from liability since the sovereign act at issue here was precipitated by unforeseen events resulting in a prohibition on convict labor access, which was always a possibility as indicated by the CO’s guidance at the pre-construction conference that took place after contract award. These unforeseen events made it impossible to continue to perform without updating the base access policy procedures, under which a convict laborer was granted access and attacked his manager with a welding tool. In brief, the necessary and rational sovereign act of updating the written base access policy to explicitly exclude convict laborers from accessing the base made it impossible for any contractor, to include plaintiff-appellee (ACB) and its subcontractor (SOS), to avail itself of contract clause 52.222-3 (Convict Labor), at least insofar as base access was required.

II. THE COFC ERRED BY REJECTING THE BASE COMMANDER’S INTERPRETATION OF HER OWN BASE ACCESS POLICY.

This issue arises out of both complacency and a flawed business model finally catching up with the Wyoming construction industry. After being informed of the base access policy prior to breaking ground, the contractors paid no heed. And following a violent attack involving an ACB employee with a violent criminal record, the subcontractor’s zeal for cost-savings was exposed. Unable to fill the base with felons and parolees any longer, the subcontractor’s business model broke down, requiring them to outsource most of the work they were responsible for performing. They now ask the American taxpayer to subsidize this business blunder by presenting an outlandish take on the well-established Auer doctrine.

This is why this Court should reverse the COFC on the second issue presented and hold that the COFC erred when it rejected the base commander’s interpretation of her own base access policy. Because the update to base access policy was permissible as a sovereign act and the base commander’s interpretation of that policy commands controlling weight under the Auer doctrine, ACB is not entitled to recover the additional costs incurred during the performance of the contract.

Argument

I. STANDARD OF REVIEW

The instant appeal presents two issues, each carrying an independent standard of review. As to the first issue, this Court’s scope of review is limited to examining final decisions of the COFC for “errors of law and clearly erroneous findings of fact.” See John C. Grimberg Co., Inc. v. United States, 185 F.3d 1297, 1300 (Fed. Cir. 1999). The second issue presents a question of regulatory interpretation that this Court reviews without deference to the COFC. See Barnes v. United States, 473 F.3d 1356, 1361 (Fed. Cir. 2007).

II. THE COFC CORRECTLY DECIDED THAT THE AIR FORCE’S CHANGE TO BASE ACCESS POLICY WAS A PERMISSIBLE SOVEREIGN ACT.

The COFC correctly held that the change to base access policy was a permissible sovereign act. It was a genuinely public and general act that would release the Government of liability under ordinary principles of contract law. In reaching this holding, the COFC heeded the core principles of the sovereign acts doctrine set forth in Winstar v. United States, 518 U.S. 839 (1996). See Conner Bros. Constr. Co. v. Geren, 550 F.3d 1368, 1370–79 (Fed. Cir. 2008) (treating the Winstar opinion as setting forth the core principles of the sovereign acts doctrine). A review of the policy update affirms the COFC’s reasoning that the update was a public and general act, which would otherwise release the Government from liability, as where contract principles are applied — i.e., the impossibility of performance doctrine. See Klamath Irrigation Dist. v. United States, 635 F.3d 505, 521 (Fed. Cir. 2011); see also Stockton E. Water Dist. v. United States, 583 F.3d 1344, 1366 (Fed. Cir. 2009) (stating the two-part test for applying the sovereign acts doctrine).

A. The COFC Correctly Held That the Change in Base Access Policy Was a Sovereign Act Since It Was A Genuinely Public and General Act Incidentally Falling upon the Contract.

The COFC correctly held that the update to base access policy was a sovereign act insofar as a duly authorized and disinterested official (i.e., General Vito) affected a genuinely public and general act that only had an incidental impact on the contract at issue. Specifically, after a contract employee who presumably passed a wants and warrants check attacked his manager while on the base, General Vito undertook a sovereign act by updating the base access policy as applied to all contractors as a reasonable means of keeping the mission and the people on the base safe and secure. R. at 9. The COFC’s holding under these facts is based on a proper understanding of the seminal decisions distinguishing sovereign acts from other government acts affecting contracts.

The COFC rightly recognized the distinct character and effect of sovereign acts; it acknowledged the consistent holding of the Supreme Court that, when sued as a contractor, the Government “cannot be held liable for an obstruction to performance of the particular contract resulting from its public and general acts as a sovereign,” Horowitz v. United States, 267 U.S. 458, 461 (1925), whether undertaken through legislation, Deming v. United States, 1 Ct. Cl. 190, 190–91 (1865), or by executive action, Jones v. United States, 1 Ct. Cl. 383, 384–85 (1865). As such, the COFC recognized that the parameters are set for releasing the Government as sovereign from contract liability where its action is public and general, even if there is an incidental impact on a particular contract.

Accordingly, in this case, the COFC properly recognized that the change to base access policy under these facts is akin to other public and general acts — i.e., sovereign acts. At times, the finding of a public purpose (e.g., national security) has been sufficient to find a sovereign act. See Gerard Wimberly & Kristin Amerling, The Sovereign Acts Doctrine After Winstar, 6 Fed. Cir. B.J. 127, 132 (1996). But as here, before finding a sovereign act, courts may assess the intent and effect of an act to ensure (1) it is not aimed at nullifying contract rights; (2) it does not substantially relieve the Government of its obligations; and (3) it only incidentally affects the contract, as where parties with no connection to the contract are affected. See Conner Bros., 550 F.3d at 1374–76; see also Winstar, 518 U.S. at 898 (holding that the sovereign acts defense is unavailable where the Government is relieved of its contractual obligations); Casitas Mun. Water Dist. v. United States, 543 F.3d 1276, 1287–88 (Fed. Cir. 2008) (finding that it was impossible for the Government to perform its obligations); Cienega Gardens v. United States, 331 F.3d 1319, 1335 (Fed. Cir. 2003) (discussing nullification of apartment owners’ contract rights); Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569, 1581 (Fed. Cir. 1997) (discussing mere incidental effects on parties with no connection to the energy contract at issue). For executive acts, further inquiry may center on an order’s development to ensure it is not arbitrary, or whether the interfering and contracting agency are the same. See Wimberly & Amerling, supra, at 146, 149–50. Considering all these factors, the COFC’s holding is firmly established under these facts.

The COFC correctly held that the update to the base access policy was a sovereign act since it served the public purpose of keeping the mission and people of the base safe and secure. R. at 12. As such, this policy update was neither aimed at nullifying specific contract rights, nor did it substantially relieve the contracting agency of its obligations since the update only affected application of the Convict Labor clause. This incidental impact is further established by the equal application to MCV, another contractor, who was able to perform services under the contract despite the policy update. Moreover, as an authorized official independent of the contracting agency, General Vito did not act arbitrarily. Changing the policy to deny access to those whose background check elicited unfavorable results was a reasonable safety and security measure in response to a contractor with a violent criminal background — who presumably passed a perfunctory wants and warrants check — attacking his manager while on the base.

Based on these facts as applied to factors distinguishing sovereign acts from other government acts affecting contracts, the COFC correctly held that the change in base access policy was a permissible sovereign act. In so doing, the COFC upheld the principle that the Government must be free to govern while “honor[ing] its contracts,” and a contractor should not enjoy an advantage over other affected contractors where it can sue the Government as contractor for acts undertaken by the Government as a sovereign. See Winstar, 518 U.S. at 896. In holding that the change in base policy was a permissible sovereign act, this Court will affirm this longstanding principle.

B. The COFC Correctly Held That the Imposition of Regulatory Changes Governing Base Access Policy Was a Sovereign Act That Would Otherwise Release the Government from Liability.

The COFC had sufficient grounds for holding that updates to the base access policy applied to contractors was a sovereign act that would otherwise release the Government from liability. Generally, as here, courts find that sovereign acts are sufficient to release the Government from liability only after applying ordinary principles of contract law — namely, the impossibility of performance doctrine. See Klamath, 635 F.3d at 522 (holding as error the lower court’s dismissal of the impossibility of performance as a factor when considering the sovereign acts doctrine). Even so, on facts like those here, this Court has not considered impossibility of performance as a factor when holding that a commander may limit access to an area under military control as a permissible sovereign act that releases the Government from liability. See Conner Bros., 550 F.3d at 1370, 1379–80 (declining to address the merits of an impossibility argument for failure of one party to raise it earlier); see also Wilson v. United States, 11 Ct. Cl. 513, 513, 518 (1875). On these bases, the COFC correctly held that the sovereign act here should release the Government from liability.

The COFC’s holding that the sovereign act would release the Government from liability under ordinary principles of contract law is well established on application of the impossibility of performance doctrine. Under this doctrine, (1) the nonoccurrence of the sovereign act had to be a basic assumption on which the parties contracted, as demonstrated where the parties do not allocate the associated risks in advance; and (2) performance must be made impracticable by the sovereign’s act, not by the parties’ actions. See Winstar, 518 U.S. at 904–05 (citing Restatement (Second) of Contracts § 261 (Am. Law. Inst. 1981)). Even so, the Court will ultimately look to the language and circumstances to determine if the Government should be held liable in any case. See id. at 904 (citing Restatement (Second) of Contracts § 261).

Here, the facts show that the parties entered the contract assuming that the base access policy would permit the use of convict labor where such contractors passed a wants and warrants check. Several contractor personnel preceded under this assumption based on over twenty years of work experience at the base; as SOS President Mr. Gibbons stated, “[SOS] assumed that it would have access to the same labor pool that it had in the past.” R. at 5. Similarly, General Vito considered the policy clarification to be a large change to ensure base safety and security in response to an attack that occurred after performance began. R. at 9. Moreover, as a result of the update to base policy, performance under the Convict Labor clause was impracticable and even impossible, which would release the Government from liability on contract claims of nonperformance.

Even so, the COFC’s holding is well founded insofar as the circumstances demonstrate that the Government should not be held liable in any case. The facts in this case are akin to other instances where this Court did not find the government liable on contract claims related to a commander limiting a contractor’s access to an area under military control. See Conner Bros., 550 F.3d at 1370, 1376, 1380 (releasing the Government from liability where the regimental commander barred access to secure an area of the base after an attack on national interests elsewhere, even though only one contractor was affected and limited exceptions were made for other contractors); see also Wilson, 11 Ct. Cl. at 513, 522 (releasing the Government from liability where contractor suffered loss after attempting to make contract deliveries only to be denied access because the city’s military governor limited access to military personnel only). Accordingly, the circumstances here support the COFC’s decision that the imposition of regulatory changes governing base access policy was a sovereign act that would otherwise release the Government from liability.

Based on the foregoing, this Court should find that given the incidental impact of the sovereign act at issue, the Government should be released from liability based on ordinary principles of contract law and because the Government would otherwise be released from liability under similar circumstances.

III. THE COFC ERRED WHEN IT HELD THAT THE AIR FORCE IMPROPERLY INTERPRETED ITS OWN BASE ACCESS POLICY.

The COFC erroneously held that General Vito’s interpretation of the base access policy was improper, in effect allowing a private company to dictate the security policy of a nuclear missile facility. If left uncorrected, that decision will not only threaten national security but will muddy this Court’s regulatory interpretation jurisprudence for years to come. Because the COFC’s legal analysis of this issue is erroneous, this Court must reverse its holding and conclude that General Vito’s interpretation commands controlling weight.

In cases like this, the reviewing court looks to the language of the regulation in question and asks: “Is there more than one reasonable interpretation?” If the answer is “no,” the court applies the plain language of the regulation. However, if two or more reasonable interpretations exist, the court must defer to the administering agency’s interpretation of the regulation, so long as that interpretation is not “plainly erroneous or inconsistent with the regulation.” See Auer v. Robbins, 519 U.S. 452, 453, 461 (1997) (quoting Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945)). Critics contend that this level of deference leaves agency rulemaking powers unchecked and raises separation of powers concerns. See Procopio v. Wilkie, 913 F.3d 1371, 1385 (Fed. Cir. 2019) (O’Malley, J., concurring) (citing Michigan v. E.P.A., 135 S. Ct. 2699, 2712 (2015) (Thomas, J., concurring)). However, these concerns make mountains out of molehills by failing to recognize the doctrinal guardrails and practical realities constraining the application of Auer deference. The bottom line is that the administering agency may give reasonable meaning to an ambiguous regulation, and, when the interpretation is not plainly erroneous or inconsistent with the regulation, it “cannot be second-guessed by this [C]ourt and must be affirmed.” See Eli Lilly & Co. v. Bd. of Regents of the Univ. of Wash., 334 F.3d 1264, 1272 (Fed. Cir. 2003) (upholding agency interpretation).

A. The USAF Base Access Policy Is Ambiguous.

Because there is more than one interpretation of the Air Force base access policy, Supplementary Instruction 31-101, the policy is ambiguous, and this Court must defer to General Vito’s interpretation unless it finds her interpretation “plainly erroneous or inconsistent with the regulation.” See Auer, 519 U.S. at 461 (quoting Seminole Rock, 325 U.S. at 414).

1. What is ambiguity?

The late Justice Scalia defined ambiguity as “when two or more reasonable, though not necessarily equally valid, interpretations exist.” Antonin Scalia, Judicial Deference to Administrative Interpretations of Law, 1989 Duke L.J. 511, 520 (1989). What is more, the Supreme Court has said “the meaning — or ambiguity — of certain words or phrases may only become evident when placed in context” and must be construed “with a view to their place in the overall statutory [or regulatory] scheme.” Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 666 (2007) (quoting Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132–33 (2000)); see also Aqua Prods. Inc., v. Matal, 872 F.3d 1290, 1316 (Fed. Cir. 2017) (en banc) (“We use the same interpretive rules to construe regulations as we do statutes … .”). Looking at Supplemental Instruction 31-101 in the context of the overall scheme, the ambiguity of the language “wants and warrants” becomes clear. Here, even Justice Scalia would be compelled to agree that two or more reasonable, though perhaps in his opinion not equally valid, interpretations exist. R. at 3–4 (laying out the base access regulation). This is textbook ambiguity.

2. The competing interpretations of Supplemental Instruction 31-101.

The COFC’s interpretation of Supplemental Instruction 31-101. The COFC erroneously concluded that Supplementary Instruction 31-101 can mean only one thing: that contractors can be excluded from base access only if they have an outstanding want or warrant. R. at 14–15. This is wrong. To accept this as the only possible reading of the regulation forsakes the well-established “canon of statutory construction that terms … should not be construed to render any provision of the statute meaningless or superfluous.” Beck v. Prupis, 529 U.S. 494, 506 (2000). Furthermore, it is widely accepted that words should not be read in a vacuum and must be viewed in relation to their place in the overall scheme. See Davis v. Mich. Dep’t of Treasury, 489 U.S. 803, 809 (1989). The COFC’s reading of Supplemental Instruction 31-101 renders the entire fourth sentence of paragraph 4.1.5.1.1 meaningless by reading the words “wants and warrants” in a vacuum, thereby nullifying the discretionary authority of the Security Force Coordinator. See Supplemental Regulation 31-101. This is erroneous.

The Air Force’s interpretation of Supplemental Instruction 31-101 via General Vito. A holistic reading of the regulatory scheme compels a different interpretation than the one proffered by the COFC, and, because a second interpretation exists, ambiguity must be found by even the staunchest critics. The Government urges this Court to accept the interpretation of Supplementary Instruction 31-101 compelled by a holistic reading of the regulation — that contract personnel can be excluded from base access for more than mere wants and warrants — because only this interpretation comports with traditional canons of construction and allows military commanders to retain their discretionary authority. This is General Vito’s reading of the regulation.

3. The regulatory scheme at issue.

Starting with the relevant statute, the DoD is directed to establish base access regulations. See 50 U.S.C. § 797 (2012). The DoD regulations give Air Force commanders discretionary authority to grant or deny base access in order to protect “personnel and property under their jurisdiction….” See 32 C.F.R. § 809a.2 (2019). Throughout the DoD regulations, discretionary language is abundant while restrictive verbiage is sparse. See id. § 809a.1 (“[The] commander determines when, where, and how to implement random checks of vehicles [and personnel].”); id. § 809a.2(b) (stating that a commander’s actions regarding granting or denying access to property “must be reasonable”); id. § 809a.3 (stating that orders of a commander are “enforceable against all persons”); id. § 809a.5 (“[I]nstallation commanders may deny access to the installation through the use of a barment order.”). In fact, the only thing these regulations expressly restrict is authorization of political demonstrations on the base. See id. § 809a.4. Indeed, this lone instance of restrictive prose exposes the rule — i.e., that the DoD did not intend to restrict discretion based on static regulatory language.

The local base access policy continues this theme of discretion by providing the Security Force Coordinator authority to review applications for base access on a case-by-case basis and to grant or deny access after individual review. See Supplemental Instruction 31-101 ¶ 4.1.5.1.1. The entire regulatory scheme is built around the exercise of reasonable discretion, because, after all, that is what is demanded of our military leaders.

4. Conflicting interpretations of the same language prove ambiguity.

The COFC and General Vito have provided conflicting interpretations of Supplemental Instruction 31-101. And where “two or more reasonable, though [perhaps not] equally valid, interpretations exist[,]” the language must be regarded as ambiguous. Scalia, supra, at 520; see also Cherokee Nation of Okla. v. United States, 73 Fed. Cl. 467, 476 (2006) (quoting Wash. State Dep’t of Servs. for the Blind v. United States, 58 Fed. Cl. 781, 792 (2003)) (“[L]anguage is also considered to be ambiguous if it is ‘capable of being understood by reasonably well-informed persons in either of two or more senses.'"); Hart v. United States, 585 F.2d 1025, 1028 (Cl. Ct. 1978) (stating that ambiguity normally means two or more readings of the same language).

B. General Vito’s Interpretation Is Not Plainly Erroneous or Inconsistent with the Regulation and Must Be Upheld.

Because Supplemental Instruction 31-101 is ambiguous, controlling weight must be given to General Vito’s interpretation because it is not “plainly erroneous or inconsistent with the regulation.” See Auer, 519 U.S. at 461 (quoting Seminole Rock, 325 U.S. at 414); see also Cathedral Candle Co. v. U.S. Int’l Trade Comm’n, 400 F.3d 1352, 1363 (Fed. Cir. 2005) (citing Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)) (“[I]t is well settled that an agency’s interpretation of its own regulations is entitled to broad deference from the courts.”); Holland v. Office of Pers. Mgmt., 113 F. App’x. 384, 386 (Fed. Cir. 2004) (“[A]n agency’s interpretation of its own regulations receives substantial deference.”).1

Because commanders must have the ability to exclude dangerous individuals from their installations, General Vito’s interpretation is the only interpretation offered aligning with the goals of the regulatory scheme while also comporting with traditional canons of statutory and regulatory construction. See Beck, 529 U.S. at 506; Davis, 489 U.S. at 809; 32 C.F.R. § 809a.2. Affirming the COFC would flip the regulatory construct on its head by allowing an erroneous reading of a local directive to overrule an agency-wide regulation and frustrate the purpose of the governing statute. This Court is urged not to isolate the phrase “wants and warrants”; rather, it should read those words in the context of the whole directive and the overall goals of the regulatory scheme. After considering the factors below, this Court must find that General Vito’s interpretation is not plainly erroneous or inconsistent with the regulation and must afford her interpretation controlling weight.

1. How do courts asses a question of Auer deference?

When courts assess whether or not to defer to an agency’s interpretation of its ambiguous regulation, the following factors have been used: (1) does the interpretation reflect “fair and considered judgment” on the matter in question, Auer, 519 U.S. at 462; (2) does the interpretation amount to a mere “convenient litigati[on] position” or “post hoc rationalization” of past action, Christopher v. Smithkline Beecham Corp., 567 U.S. 142, 155 (2012) (quoting Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 212–13 (1988)); (3) is the interpretation consistent with the express terms of the regulation, Cathedral Candle, 400 F.3d at 1364; (4) is the interpretation “at odds with the purposes served by the regulation,” id.; (5) does the interpretation produce an “unfair surprise,” Christopher, 567 U.S. at 156 (quoting Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 170–71 (2007)); (6) is the interpretation a mere parrot of the statute, Gonzales v. Oregon, 546 U.S. 243, 257 (2006); and (7) is the regulation in question unambiguous, therefore leaving no room for contrary interpretations, Christensen v. Harris Cty., 529 U.S. 567, 588 (2000).

2. Application of the assessment factors to the instant case.

Looking at the facts of the instant case, there is no reason to suspect that General Vito’s position reflects anything other than fair and considered judgment produced by the exercise of experience and expertise. Here, we have an established track record of the interpretation urged by General Vito, shown in the record as early as the pre-construction conference in September of 2007 and continuing through much discussion over the entirety of this dispute. R. at 4–11. Nothing in the record suggests a situation akin to Christopher, where the agency interpretation was simply a convenient litigation position designed as a post-hoc rationalization to defend past action. See 567 U.S. at 155–56, 159. The strong evidence catalogued in the record shows careful agency decision-making exercised pursuant to experience and expertise to ensure the safety and security of personnel and property on F.E. Warren. R. at 4–5 (explaining that no one with outstanding warrants, felony convictions, or on probation will be allowed on the base); R. at 5 (describing the incident where the ACB worker in pre-release status attacked a manager with a welding tool); R. at 7 (recounting F.E. Warren’s contracting, legal, and security staff meeting to discuss base access policy); R. at 7–8 (describing General Vito and Major Riley discussing base access policy); R. at 9 (reporting the release of the updated base access policy); R. at 9–10 (detailing General Vito’s explanation for the reasoning behind her interpretation).

Furthermore, General Vito’s interpretation is consistent with the express terms of the directive because only her reading allows the exercise of discretion in granting or denying base access. The result of the COFC’s reading is to restrict discretion to an impermissibly pitiful level and would allow a violent felon access to a nuclear missile base so long as he does not have an outstanding warrant for unpaid parking tickets. Just like Cathedral Candle, General Vito’s interpretation is in no way inconsistent with the express terms, nor is it at odds with the policies served by the directive. See 400 F.3d at 1364 (upholding agency interpretation). The Internal Security Act requires promulgation of base access regulations, and the DoD regulations charge commanders with protecting personnel and property under their jurisdiction by controlling access to their respective installations. This is precisely what General Vito has done for F.E. Warren.

Also, the COFC’s assertion that General Vito’s interpretation left ACB without fair notice of the relevant law is simply not true. The minutes from the pre-construction conference on September 30, 2007 memorialize the CO’s declaration of the very policy of which the contractors now claim ignorance, and ACB’s own project manager testified that he heard and understood the CO’s recitation. This is an example of complacent business executives failing to perform due diligence and has nothing to do with lack of fair notice.2

In any case, our facts are readily distinguishable from the “unfair surprise” jurisp pudence where courts have withheld Auer deference. See e.g., Christopher, 567 U.S. at 153–56, 159 (finding that agency’s policy was consistent for three years but the reasoning for the policy was inconsistent); Gates & Fox Co., Inc. v. Occupational Safety & Health Review Comm’n, 790 F.2d 154, 156 (D.C. Cir. 1986) (holding that where criminal penalties or civil sanctions are at issue, constitutional due process requirements come into play when considering the level of deference afforded to an agency). Here, the reasoning for the interpretation has always been the same — safeguarding persons and property on F.E. Warren. Plus, General Vito’s interpretation does not impose criminal penalties or civil fines; it simply keeps dangerous people off of the base.

For the reasons stated above, General Vito’s interpretation is not plainly erroneous or inconsistent with the regulation, and therefore, it is not for this Court to second-guess. See Eli Lilly & Co., 334 F.3d at 1272.

C. Even if the Court Does Not Afford the Air Force Deference Under Auer, It Must Defer to the Air Force’s Interpretation Because It Has the Power to Persuade Under Skidmore.

If this Court determines that General Vito’s interpretation does not warrant Auer deference, it must still determine the best available construction of the regulation. In doing so, this Court must consider the persuasiveness of General Vito’s position and assess its “power to persuade.” See Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944); see also Christopher, 567 U.S. at 159 (applying Skidmore deference to regulatory interpretation). Factors such as thoroughness of consideration, “validity of . . . reasoning,” consistency, and “all of those factors which [provide the] power to persuade” aid the Court in this endeavor. See Skidmore, 323 U.S. at 140. Courts must take a hard look at agency reasoning because the agency’s experience, expertise, and special knowledge puts it in the best position to say what the regulation means. See Peter L. Strauss, “Deference” Is Too Confusing—Let’s Call Them “Chevron Space” and “Skidmore Weight,” 112 Colum. L. Rev. 1143, 1147 (2012) (stating that a Skidmore analysis relies on the fact that the agency is an expert possessing “special knowledge” in certain areas, and the courts should heed that expertise). Because application of the Skidmore factors leads to only one logical conclusion — that General Vito’s interpretation has the power to persuade — this Court must reverse the COFC and defer to General Vito’s interpretation.

Conclusion

Because the language “wants and warrants” in Supplemental Instruction 31-101 has produced more than one interpretation, the directive is ambiguous. Therefore, this Court must afford General Vito’s interpretation controlling weight because it has been demonstrated not to be plainly erroneous or inconsistent with the regulation. The COFC’s method of interpretation is improper, has been rejected by federal courts at all levels, and must be rejected by this Court. See King v. Burwell, 135 S. Ct. 2480, 2489 (2015) (quoting Graham Cty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 290 (2010)) (“Our duty, after all, is ‘to construe statutes, not isolated provisions.’”); Aqua Prods., 872 F.3d at 1304 (quoting United States v. Morton, 467 U.S. 822, 828 (1984)) (“We do not, however, construe statutory phrases in isolation….”); Kentucky v. United States, 62 Fed. Cl. 445, 453 (2004) (citing Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997)) (stating that a statute should be read in context). Because the COFC applied an incorrect legal analysis to this issue, this Court must reverse and hold that General Vito’s interpretation is controlling.

Conclusion

Based on the foregoing, the Government implores that this Court sustain COFC’s holding that the change to the base access policy was a permissible sovereign act and reverse the COFC’s holding that the Air Force base commander improperly interpreted the base access policy. In turn, the Government requests that this Court defer to the base commander’s interpretative clarification of the ambiguous base policy.

Respectfully submitted,

Raymond Richards
Justin Terry

March 17, 2019
Attorneys for Defendant-Appellant

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  1. Agencies are afforded broad discretion when interpreting their own regulations because they are explaining their own intentions. See Cathedral Candle, 400 F.3d at 1363–64.
  2. To support its holding, the COFC cites to Fed. Commc’ns Comm’n v. Fox Television Stations Inc., 567 U.S. 239, 253–54 (2012) (citing United States v. Williams, 553 U.S. 285, 304 (2008)), which frames its “fair notice” argument around a criminal law case where the defendant claimed a statute did not put him on notice that his conduct was forbidden, thus violating his Fifth Amendment due process rights. The case at hand has nothing to do with the issues presented in Fox Television or in Williams; therefore, to compare the instant case with them would be to compare apples to oranges.