B-174588, SEP 6, 1972

B-174588, SEP 6, 1972

CONTRACTS - CONFLICTS OF LAW - LEASEHOLD AGREEMENTS IN SUSTAINING PRIOR DECISION OF MAY 17, 1972, WHICH DENIED THE CLAIM OF KEYDATA CORPORATION AGAINST GSA, GAO REJECTS THE ARGUMENT THAT IT HAD ERRED IN THE EARLIER DECISION IN APPLYING A RULE OF LAW OTHER THAN THAT OF MASSACHUSETTS. WHILE GAO AGREES THAT IN CERTAIN CIRCUMSTANCES THE GOVERNMENT MAY ENTER THE MARKET PLACE IN THE SAME MANNER AND SUBJECT TO THE SAME RULES AS ANY OTHER CONTRACTING PARTY, THERE ARE, NEVERTHELESS, CIRCUMSTANCES IN WHICH THE APPLICATION OF STATE LAW IN EACH INDIVIDUAL CASE WOULD SUBJECT THE RIGHTS AND DUTIES OF THE UNITED STATES TO EXCEPTIONAL UNCERTAINTY. WHERE, AS IN THE INSTANT CASE, THE UNITED STATES ENTERS INTO A LEASEHOLD AGREEMENT, THE VALIDITY AND CONSTRUCTION OF THE LEASEHOLD CONTRACT AND ITS CONSEQUENCES ON THE RIGHTS AND OBLIGATIONS OF THE PARTIES PRESENT QUESTIONS OF FEDERAL LAW WHICH SHOULD NOT BE CONTROLLED BY THE LAW OF ANY STATE.

TO MR. HAROLD BAER, JR.,:

YOUR LETTER OF JUNE 8, 1972, REQUESTS, IN EFFECT, RECONSIDERATION OF OUR DECISION TO YOU OF MAY 17, 1972, B-174588, IN WHICH THIS OFFICE REVIEWED AND SETTLED THE CLAIM OF YOUR CLIENT, THE KEYDATA CORPORATION (KEYDATA), AGAINST THE GENERAL SERVICES ADMINISTRATION (GSA).

ESSENTIALLY, IT IS YOUR POSITION THAT THIS OFFICE ERRED IN ITS EARLIER DECISION IN APPLYING A RULE OF LAW OTHER THAN THAT OF MASSACHUSETTS. CITING UNITED STATES V. CERTAIN PROPERTY, ETC., 344 F.2D 142 (1965), YOU STATE THAT SINCE YOUR CLIENT IS A MASSACHUSETTS RESIDENT, IT HAD A RIGHT TO RELY ON A MASSACHUSETTS RULE ENUNCIATED IN SNIDER V. DEBAN, 144 N.E. 69 (1924). IT IS APPARENTLY YOUR POSITION THAT TO HOLD OTHERWISE IS "TO CONCLUDE THAT THE UNITED STATES GOVERNMENT CAN WANDER ABOUT THIS COUNTRY MAKING CONTRACTS AND CHOOSING THE APPLICABLE LAW AS IT GOES." RATHER, YOU CONTEND THAT THE UNITED STATES V. CERTAIN PROPERTY, ETC., SUPRA, REQUIRES THAT APPLICABLE STATE LAW APPLY.

THE ISSUE IN THE LAST CITED COURT CASE WENT TO DETERMINING WHAT THE UNITED STATES TAKES (I.E., CONDEMNS BY EMINENT DOMAIN) WHEN IT TAKES "REAL ESTATE." THE COURT STATED THAT THE QUESTION AS TO WHAT THE UNITED STATES TAKES WHEN IT FILES A DECLARATION OF TAKING OF REAL ESTATE IS A QUESTION AS TO WHICH FEDERAL COURTS MAY MAKE AN INDEPENDENT DETERMINATION, FREE FROM ANY REQUIREMENTS TO FOLLOW STATE LAW, BUT DETERMINED THAT THE CONVENIENCE TO THE FEDERAL GOVERNMENT OF HAVING A UNIFORM FEDERAL LAW APPLY IS OF SLIGHT SIGNIFICANCE AS COMPARED TO THE NEED FOR NEW YORK BUSINESSMEN PLANNING TO INVEST IN TRADE FIXTURES TO KNOW THAT WHAT IS REAL PROPERTY ON BROADWAY IF THE CITY OR STATE CONDEMNS IT WILL BE NO LESS REAL PROPERTY IF TAKEN INSTEAD BY THE FEDERAL GOVERNMENT HOWEVER, IT IS CLEAR THAT THAT COURT AND OTHER COURTS HAVE RECOGNIZED THAT THE GOVERNMENT'S INTEREST IN NATIONWIDE UNIFORMITY SOMETIMES MUST BE GIVEN PARAMOUNT IMPORTANCE. SEE CLEAR FIELD TRUST COMPANY V. UNITED STATES, 318 U.S. 363 AT 367, 87 L ED. 838 AT 642 (1943) AND SANDS V. UNITED STATES, 198 F. SUPP. 880 AT 882 (1960), AFFIRMED 295 F.2D 481. THUS, AS WE STATED IN OUR EARLIER OPINION TO YOU, WHERE THE UNITED STATES IS PERFORMING ESSENTIAL GOVERNMENTAL FUNCTIONS EMPOWERED BY THE CONSTITUTION, AND WHERE IT IS DETRIMENTAL TO THE GOVERNMENT'S INTEREST TO BE SUBJECT TO THE VAGARIES OF THE LAWS OF THE SEVERAL STATES, FEDERAL LAW, AND NOT STATE LAW, MUST GOVERN. THEREFORE, THE UNITED STATES SUPREME COURT SAID IN UNITED STATES V. COUNTY OF ALLEGHENY, 322 U.S. 174 AT 182, 88 L. ED. 1209 AT 1217 (1943):

EVERY ACQUISITION, HOLDING OR DISPOSITION OF PROPERTY BY THE FEDERAL GOVERNMENT DEPENDS UPON THE PROPER EXERCISE OF A CONSTITUTIONAL GRANT OF POWER. ***

"PROCUREMENT POLICIES SO SETTLED UNDER FEDERAL AUTHORITY MAY NOT BE DEFEATED OR LIMITED BY STATE LAW. THE PURPOSE OF THE SUPREMACY CLAUSE WAS TO AVOID THE INTRODUCTION OF DISPARITIES, CONFUSIONS AND CONFLICTS WHICH WOULD FOLLOW IF THE GOVERNMENT'S GENERAL AUTHORITY WERE SUBJECT TO LOCAL CONTROLS. THE VALIDITY AND CONSTRUCTION OF CONTRACTS THROUGH WHICH THE UNITED STATES IS EXERCISING ITS CONSTITUTIONAL FUNCTIONS, THE CONSEQUENCES ON THE RIGHTS AND OBLIGATIONS OF THE PARTIES, THE TITLES OR LIENS WHICH THEY CREATE OR PERMIT, ALL PRESENT QUESTIONS OF FEDERAL LAW NOT CONTROLLED BY THE LAW OF ANY STATES."

MOREOVER, WE MIGHT POINT OUT THAT THE COURT IN THE CERTAIN PROPERTY CASE STATED AT PAGE 146 THAT IT WAS NOT AT ALL SURE THAT THE ISSUE INVOLVED IN THE CASE BEFORE IT HAD NOT BEEN SETTLED AGAINST THE GOVERNMENT ON A CONSTITUTIONAL BASIS BY THE SUPREME COURT'S DECISION IN UNITED STATES V. GENERAL MOTORS CORPORATION, 323 U.S. 373, 89 L. ED 311 (1945).

HENCE, WHILE WE AGREE THAT IN CERTAIN CIRCUMSTANCES THE GOVERNMENT MAY ENTER THE MARKET PLACE IN THE SAME MANNER AND SUBJECT TO THE SAME RULES AS ANY OTHER CONTRACTING PARTY, THERE ARE OTHER CIRCUMSTANCES IN WHICH THE APPLICATION OF STATE LAW IN EACH INDIVIDUAL CASE WOULD SUBJECT THE RIGHTS AND DUTIES OF THE UNITED STATES TO EXCEPTIONAL UNCERTAINTY AND A UNIFORM FEDERAL RULE IS DESIRABLE. WE FEEL THAT THE RIGHTS AND OBLIGATIONS OF THE GOVERNMENT UNDER LEASE AGREEMENTS - WHICH ARE ENTERED INTO WITH GREAT FREQUENCY THROUGHOUT THE COUNTRY - SHOULD BE GOVERNED BY UNIFORM RULES. WE MIGHT POINT OUT THAT WHERE THERE IS A FEDERAL RULE, THE GOVERNMENT IS BOUND THEREBY AND MAY NOT, AS YOU SUGGEST, PICK AND CHOOSE THE LAW IT WISHES TO APPLY IN EACH INDIVIDUAL CASE. THUS, WHERE, AS IN THE INSTANT CASE, THE UNITED STATES ENTERS INTO A LEASEHOLD AGREEMENT, THE VALIDITY AND CONSTRUCTION OF THE LEASEHOLD CONTRACT, AND ITS CONSEQUENCES ON THE RIGHTS AND OBLIGATIONS OF THE PARTIES, PRESENT, IN OUR OPINION, QUESTIONS OF FEDERAL LAW WHICH SHOULD NOT BE CONTROLLED BY THE LAW OF ANY STATE. ACCORDINGLY, WE MUST AFFIRM OUR DECISION OF MAY 17, 1972, B-174588, DENYING THE CLAIM OF YOUR CLIENT.

IN ADDITION TO REQUESTING RECONSIDERATION OF THE AFOREMENTIONED DECISION, YOU REQUEST THAT WE SEND YOU "SOME INFORMATION ABOUT YOUR STATISTICS, SPECIFICALLY THE NUMBER OF MATTERS ON WHICH YOUR OFFICE HAS PASSED DURING THE LAST FISCAL YEAR AND THE NUMBER OF DECISIONS RENDERED FOR AND AGAINST THE UNITED STATES." THE INFORMATION HEREINAFTER SET FORTH WAS OBTAINED FROM THE COMPTROLLER GENERAL'S ANNUAL REPORT TO THE CONGRESS DATED JANUARY 18, 1972, FOR THE FISCAL YEAR ENDED JUNE 30, 1971.

SECTION 305 OF THE BUDGET AND ACCOUNTING ACT OF 1921, PROVIDES THAT ALL CLAIMS AND DEMANDS WHATEVER BY THE GOVERNMENT OF THE UNITED STATES OR AGAINST IT SHALL BE SETTLED AND ADJUSTED IN THE GENERAL ACCOUNTING OFFICE. DURING FISCAL YEAR 1971 OUR CLAIMS DIVISION (NOW TRANSPORTATION AND CLAIMS DIVISION) WAS ASSIGNED THE RESPONSIBILITY FOR THE ADJUDICATION AND SETTLEMENT OF ALL CLAIMS BY AND AGAINST THE UNITED STATES THAT ARE COGNIZABLE BY THE GENERAL ACCOUNTING OFFICE WITH THE EXCEPTION OF CLAIMS BY AND AGAINST COMMON CARRIERS FOR TRANSPORTATION ITEMS. ON JULY 1, 1970, THE CLAIMS DIVISION HAD ON HAND 1,400 CLAIMS AGAINST THE UNITED STATES AND RECEIVED 9,681 DURING FISCAL YEAR 1971. DURING THE SAME PERIOD, 8,686 WERE CERTIFIED FOR PAYMENT IN THE AMOUNT OF $1,782,204. AS OF JUNE 30, 1971, THERE WAS ON HAND A CLOSING BALANCE OF 2,395 CLAIMS. IN ADDITION, SINCE SEPTEMBER 1970, FINAL ACTION WAS TAKEN ON 5,234 CLAIMS WHICH WERE BARRED BECAUSE OF THE 10 YEAR STATUTE OF LIMITATION ON THE FILING OF CLAIMS IN THE GENERAL ACCOUNTING OFFICE, 31 U.S.C. 71A. WITH RESPECT TO TRANSPORTATION CLAIMS, OUR TRANSPORTATION DIVISION HAD ON HAND 9,045 CASES AS OF JULY 1, 1970, AND RECEIVED DURING FISCAL YEAR 1971 ANOTHER 18,873 CLAIMS. TRANSPORTATION DIVISION SETTLED 15,957 CLAIMS DURING THE YEAR, ALLOWING $18,865,840 OUT OF THE $20,723,867 CLAIMED.

PROBABLY OF MORE INTEREST TO YOU IS THE WORK OF OUR OFFICE OF THE GENERAL COUNSEL, WHICH HANDLED THE CLAIM PRESENTED BY YOU ON BEHALF OF KEYDATA. THE COMPTROLLER GENERAL OF THE UNITED STATES IS RESPONSIBLE ON BEHALF OF THE CONGRESS FOR DETERMINING, WITH CERTAIN EXCEPTIONS, THE LEGAL PROPRIETY OF THE EXECUTIVE BRANCH EXPENDITURES. A MAJOR FUNCTION OF THE OFFICE OF THE GENERAL COUNSEL IS TO DRAFT LEGAL RULINGS FOR THE COMPTROLLER GENERAL CONCERNING ANY PUBLIC EXPENDITURE UPON WHICH HE MAY BE CALLED TO RULE. ADDITION TO MATTERS COVERING THE LEGALITY OF GOVERNMENT PAYMENTS, THE OFFICE OF THE GENERAL COUNSEL DRAFTS REPORTS TO CONGRESS ON PROPOSED LEGISLATION, AND REVIEWS ALL GAO AUDIT REPORTS TO ASSURE THAT LEGAL IMPLICATIONS HAVE BEEN APPROPRIATELY CONSIDERED. DURING FISCAL YEAR 1971 THE OFFICE OF THE GENERAL COUNSEL HANDLED 5,612 MATTERS AND DRAFTED LEGISLATIVE AND ADVISORY LEGAL OPINIONS FOR THE COMMITTEES AND MEMBERS OF CONGRESS IN AN ADDITIONAL 1,070 CASES. IT ALSO DRAFTED 77 REPORTS FOR THE OFFICE OF MANAGEMENT AND BUDGET. WE DO NOT OTHERWISE KEEP RECORDS AS TO THE NUMBER OF DECISIONS RENDERED FOR AND AGAINST THE UNITED STATES, ESPECIALLY SINCE MANY OF OUR CASES DO NOT INVOLVE MATTERS WHICH MAY BE SO CATEGORIZED.

PURSUANT TO YOUR REQUEST FOR INFORMATION, WE ARE ENCLOSING HEREWITH A COPY OF OUR 1971 ANNUAL REPORT AND THE APPENDIX THERETO. WE TRUST THE ABOVE WILL BE OF ASSISTANCE TO YOU.