Summary of a Recent
Judicial Development in
Finance & Credit

Tucker Act Grants U.S. Court of Federal Claims Jurisdiction
Over Governmental Contract Disputes

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Stovall v. United States, 71 Fed. Cl. 696 (Fed. Cl. 2006), the United States Court of Federal Claims held that it had jurisdiction to hear a case involving settlement of a discrimination claim against the government, because the government had entered into the settlement agreement in its proprietary, and not sovereign, capacity.

Background

The plaintiff, an African-American farmer, was denied even an application to obtain farm loans from Farm Service Agency (FSA) in 1993. Id. at 697. He received an application form and submitted requests for loans the following year, but was denied. Id. He then filed a complaint with the United States Department of Agriculture's (USDA) Office of Civil Rights (OCR), alleging racial discrimination. Id. The OCR ruled in his favor and a settlement agreed was entered into, pursuant to which the plaintiff waived any rights arising from his complaint in return for compensatory damages, discharge of his existing debts to the FSA, and priority consideration on future loan applications. Id. The plaintiff later obtained several loans from FSA to construct chicken houses, but once it became apparent that additional funds were necessary to finish the construction he was told he had reached his loan limit with the FSA. Id. FSA developed a "Farm and Home Plan" to assess the commercial viability of the chicken houses, but the plaintiff alleged that they purposely set up the plan so that he could not demonstrate adequate cash flow, causing his request for additional loans to be denied. Id. The plaintiff brought suit in district court, alleging breach of the settlement agreement. Id. Upon motion by the government, the case was transferred to the United States Court of Federal Claims. Id. at 698. The government then moved to dismiss the case for lack of jurisdiction. Id.

Arguments

The plaintiff argued that the United States Court of Federal Claims had jurisdiction over his case pursuant to the Tucker Act. Id.

The government argued that the claim did not involve a "contract" within the meaning of the Tucker Act because the United States was acting in its "sovereign" capacity when it entered into the settlement agreement, and that the Federal Claims Court only had jurisdiction over agreements entered into by the United States in its proprietary capacity. Id.

Analysis and Holdings

The court noted that the plain language of the Tucker Act applies to claims based upon "any express or implied contract with the United States," generally including settlement agreements. Id. The court stated that the "sovereign" capacity doctrine should be narrowly construed, while the concept of what falls within the "proprietary" realm, and thus within the Tucker Act jurisdiction, is relatively broad and includes not only the "principal class of contract" involving the procurement of goods, lands, and services, but any other agreement undertaken by the federal government of the sort that can be executed among private entities and individuals. Id. at 699. The court further reasoned that to restrict the Tucker Act's jurisdiction as narrowly as the government sought to do would mean that the court had usurped jurisdiction over hundreds of cases in the past decade, and called the government's position "wishful thinking." Id. The court concluded that because this case involved the settlement of a discrimination claim, a type of agreement that arises frequently in the private sector, the Tucker Act granted jurisdiction over the matter, and therefore denied the government's motion to dismiss. Id. at 701-702.

The case was decided on July 5, 2006.