United States District Court, District of Columbia
MEMORANDUM OPINION AND ORDER TO SHOW CAUSE
Randolph D. Moss United States District Judge
State of California brings this breach-of-contract suit
against the United States Department of the Interior. The
complaint identifies two bases for this Court's
jurisdiction: the Declaratory Judgment Act, 28 U.S.C. §
2201, and the Mandamus Act, 28 U.S.C. § 1361.
See Dkt. 1 at 1 (Compl. ¶ 2). The Department
has moved to dismiss the complaint on the grounds that
neither statute confers subject-matter jurisdiction here.
Dkt. 7. California has also cross-moved for summary judgment.
Department is correct that the Declaratory Judgment Act is
not jurisdiction-conferring, and, although the Mandamus Act
can supply subject-matter jurisdiction in exceptional
circumstances, the Court is not persuaded (at least on the
present record) that this is such an occasion. But, because
California's claim arises under federal law, the Court
concludes that it has subject-matter jurisdiction under 28
U.S.C. § 1331. The Court will, accordingly, deny the
Department's motion to dismiss.
more pertinent question-and the question that neither party
has raised-is whether Congress has waived the sovereign
immunity of the United States for present purposes.
“Sovereign immunity is jurisdictional in nature,
” FDIC v. Meyer, 510 U.S. 471, 475 (1994), and
this Court “ha[s] an obligation to address
jurisdictional questions sua sponte, ”
United States v. Baucum, 80 F.3d 539, 541 (D.C. Cir.
1996). As explained below, there is a significant question
whether Congress has consented to government contract suits
like this one in federal district court and whether this case
should be transferred to the United States Court of Federal
Claims as a result. The Court, accordingly, will deny
California's summary judgment motion without prejudice as
premature, and will order the parties to show cause why the
case should not be transferred to the Court of Federal Claims
or dismissed on grounds of sovereign immunity.
Department of the Interior may lease federal lands to private
parties for the production of oil and gas. 30 U.S.C. §
226. Lessees must then pay the Department royalties for any
oil or gas produced. Id. § 226(b)(1)(A). And,
to “accurately determine” the amount of those
royalties, the Department must “establish a
comprehensive inspection, collection, and fiscal and
production accounting and auditing system.”
Id. § 1711(a).
the Federal Oil and Gas Royalty Management Act
(“FOGRMA”), the Department may then delegate its
royalty-auditing duties to the leased lands' host state,
id. § 1735(a), by means of a “cooperative
agreement, ” id. § 1732(a).
“Cooperative agreements” are legal instruments
defined by statute. See 31 U.S.C. § 6305. They
memorialize “relationship[s] between the United States
Government and a State, ” where “the principal
purpose of the relationship is to transfer a thing of value
to the State . . . to carry out a public purpose, ” and
“substantial involvement is expected” between
the Department's FOGRMA regulations, such cooperative
agreements may obligate the Department to reimburse the state
“for up to 100 percent of the [eligible] costs of
eligible activities, ” 30 C.F.R. § 1228.105(a)(1),
where “eligible activities” are those activities
agreed upon each year by the parties, id., and
“eligible costs” are the costs “directly
associated” with those activities, id. §
1228.107. Eligible costs include payment of salaries and
benefits, travel and training costs, administrative expenses,
and other costs “which can be shown to be in direct
support of the activities covered by the agreement.”
Id. That reimbursement, however, “may not
exceed the reasonably anticipated expenditures that [the
Department] would incur to perform the same function, ”
id. § 1227.112(b), and must be “necessary
for” and “directly related to [the state's]
performance of a delegated function, ” id.
cooperative agreement provides for reimbursement, it must
“contain detailed schedules identifying those
activities and costs which qualify.” Id.
§ 1228.107. Each calendar quarter, the state must submit
to the Department a “voucher for reimbursement of
eligible costs incurred, ” id. §
1228.105(c), which the Department then pays using
“appropriations specifically designated for th[at]
purpose, ” id. § 1228.105(b).
September 2010, the Department and California entered into a
FOGRMA cooperative agreement (“the Agreement”).
Dkt. 7-2 at 2. The Agreement delegated certain
royalty-auditing duties to California for the period from
October 1, 2010, to June 30, 2016, Dkt. 7-2 at 2, and as such
the Agreement has now expired. The Agreement also provided
that the Department would “reimburse the State up to
100 percent of allowable costs . . . not to exceed the amount
approved for each fiscal year of this Agreement . . . and
contingent upon appropriation of funds by Congress.”
Id. at 6.
issue here is Agreement Paragraph 6.5.C, which provided for
reimbursement of the costs of California's employees'
fringe benefits. See Dkt. 1 at 2 (Compl. ¶ 7);
Dkt. 7-2 at 16. “Fringe benefits” are
“allowances and services provided by employers to their
employees as compensation in addition to regular salaries and
wages.” Cost Principles for State, Local, and
Indian Tribal Governments (OMB Circular A-87), 70 Fed.
Reg. 51, 910, 51, 914-15 (Aug. 31, 2005). Paragraph 6.5.C of
the Agreement stated that “[f]ringe benefits shall be
allowed in accordance with the State's established
accounting system.” Dkt. 7-2 at 16 (Agreement ¶
2015, the Department took issue with California's method
of calculating its salaries, fringe benefits, and other
indirect costs. Dkt. 1 at 2-3 (Compl. ¶ 8). It sent
California a draft “Attestation Report, ” Dkt.
9-4, which took the view that, broadly speaking, California
had sought and obtained reimbursement based on its
employees' “theoretical or
estimated working hours, ” rather than their
“[a]ctual working hours, ”
id. at 4. The Report concluded that, between October
2010 and September 2014, California had overcharged the
Department by $296, 459.94. Id. at 8. California
objected, see Dkt. 9-5, but the Department issued a
final report declining to change its position, see
Dkt. 7-4 at 11-12.
final report, the Department stated that it would recover the
missing $296, 459.94 by withholding monies from
California's future FOGRMA vouchers. Id. at 12.
That is, for each of the twelve monthly vouchers covering the
period from July 2015 to June 2016, the Department would
subtract $24, 705 from the amount California would otherwise
have received, thereby recuperating the missing amount.
Id. In addition, the Department stated that it would
“make a one-time adjustment to recover overstated
costs” for fiscal year 2015 by withholding an
additional $1, 845.71 from the July 2015 voucher.
Id. at 12-13. Finally, the Department requested that
California adopt the Department's preferred method for
calculating costs for the remaining months on the contract,
id. at 10, although it is unclear whether California