Error: Bad annotation destination
 United States Court of Appeals for the Federal Circuit

                                        05-1085



                      RICHLIN SECURITY SERVICE COMPANY,

                                                      Appellant,

                                           v.


          MICHAEL CHERTOFF, SECRETARY OF HOMELAND SECURITY,

                                                      Appellee.



       Gilbert J. Ginsburg, Attorney & Counselor-at-Law, of Washington, DC, argued for
appellant.

       Reginald T. Blades, Jr., Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for appellee.
With him on the brief were Peter D. Keisler, Assistant Attorney General and David M.
Cohen, Director.

Appealed from: United States Department of Transportation Board of Contract Appeals
 United States Court of Appeals for the Federal Circuit

                                         05-1085

                      RICHLIN SECURITY SERVICE COMPANY,

                                                        Appellant,

                                            v.

           MICHAEL CHERTOFF, SECRETARY OF HOMELAND SECURITY,


                                                        Appellee.

                             ___________________________

                               DECIDED: January 31, 2006
                             ___________________________

Before MAYER, RADER, and DYK, Circuit Judges.

DYK, Circuit Judge.

       Richlin Security Service Company (“Richlin”) appeals from a decision of the

Department of Transportation Board of Contract Appeals (the “Board”) denying Richlin’s

claim for $284,193.85 in interest under the Contract Disputes Act, 41 U.S.C. §§ 601 et.

seq. (“CDA”).    In re Richlin Sec. Servs. Co., 04-2 BCA ¶ 32,670 (DOTBCA 2004)

(“Richlin IX”). We affirm.

                                     BACKGROUND

       In April 1990 and August 1991, Richlin and the Immigration and Naturalization

Service (“INS”) entered into two fixed-price contracts for private security guard services.

As a result of a mutual mistake, the contracts misclassified Richlin’s employees as

“Guard I” rather than “Guard II” under the wage classification scheme of the Service

Contract Act, 41 U.S.C. §§ 351, et seq. (“SCA”), resulting in underpayment of Richlin’s
employees. In February 1995, the Labor Department determined that the employees

were entitled to back wages under the SCA. In March 1996, Richlin filed a claim for the

back wages (and associated taxes) with the contracting officer. The contracting officer

denied Richlin’s claim, and Richlin appealed to the Board. In March 1997, the Board

granted in part and denied in part Richlin’s request for reformation of the contracts,

holding that while reformation was the appropriate remedy, the Board would not specify

the terms of the reformation until Richlin’s back wage liability was “formalized by

appropriate action of the Labor Department.” In re Richlin Sec. Serv. Co., 98-1 BCA ¶

29,651 (DOTBCA 1997) (“Richlin I”).       The Board was concerned that prematurely

awarding Richlin the underpaid wages could result in a windfall to Richlin, as the

passage of years since Richlin performed the contracts might prevent Richlin from

locating and paying all its former employees. The Board thus invited Richlin to petition

for completion of the reformation “at such time as any liability of Richlin for back wages

becomes liquidated and satisfied.” Id. We affirmed. Meissner v. Richlin Sec. Serv. Co.,

155 F.3d 566, 1998 WL 228175 (Fed. Cir. 1998) (“Richlin II”) (unpublished table

decision).

       On September 22, 1998, after a Labor Department audit, Richlin and the Labor

Department executed an agreement specifying: (1) that Richlin’s employees were owed

$636,818.72 in back wages; (2) that the back wages were to be paid into an escrow

account administered by Richlin’s counsel; (3) that any excess funds were to be

remitted to the Labor Department; and (4) that the Labor Department “agrees that, by

virtue of the obligations undertaken in this Agreement, the obligations to the former

employees of Richlin have been liquidated and satisfied.” J.A. at 123. The Board




05-1085                                     2
denied Richlin’s request to complete the reformation based on this agreement, holding

that the agreement was not “the equivalent of Richlin actually discharging its back wage

liability to some or all of its former employees prior to seeking reimbursement . . . .” In

re Richlin Sec. Serv. Co., 99-1 BCA ¶ 30,219 (DOTBCA 1999) (“Richlin III”). The Board

then denied Richlin’s motion for reconsideration. In re Richlin Sec. Serv. Co., 99-2 BCA

¶ 30,562 (DOTBCA 1999) (“Richlin IV”).

       We reversed and remanded, noting that “[i]t is not disputed that INS owes

Richlin’s employees the underpaid wages,” and that “Richlin pointed out that its financial

condition [was] such that it ha[d] no funds to pay the former employees prior to

reimbursement, and thus that the employees will not be paid absent a modification of

the decision.” Richlin Sec. Serv. Co. v. Rooney, 18 Fed. Appx. 843, 844-45, 2001 WL

744463 (Fed. Cir. 2001) (“Richlin V”) (unpublished decision). We concluded, in the light

of Richlin’s financial troubles, that it was unnecessary to make Richlin pay its

employees before receiving funds from the INS because the terms of the Richlin-Labor

agreement “assure[d] that Richlin will receive no benefit from these payments.” Id.

       On remand, the Board awarded Richlin the amount of back wages specified in

the Richlin-Labor agreement.      In re Richlin Sec. Serv. Co., 02-2 BCA ¶ 31,876

(DOTBCA 2002) (“Richlin VI”). The Board then rejected Richlin’s claim for additional

labor costs because Richlin presented no evidence that it incurred any additional labor

costs that were not fully compensated by the unreformed contract price, and because

the Labor Department had determined that the amount specified in the Richlin-Labor

agreement was the full extent of Richlin’s back-wage liability. The Board also held that

Richlin was entitled to payroll taxes incurred as a result of distributing the back wages.




05-1085                                     3
In re Richlin Sec. Serv. Co., 03-1 BCA ¶ 32,301 (DOTBCA 2002) (“Richlin VII”). We

affirmed. Richlin Sec. Serv. Co. v. Ridge, 99 Fed. Appx. 906 (Fed. Cir. 2004) (“Richlin

VIII”) (unpublished decision). The escrow agent distributed the back wages, and Richlin

subsequently submitted proof of its associated tax liability to the Board. The majority of

the taxes incurred as a result of distributing the back wages were paid from the escrow

account, and the Board found INS liable for Richlin’s remaining tax liability. Richlin IX,

04-2 BCA ¶ 32,670. Presumably, INS will deposit the taxes into the escrow account for

disbursement to the taxing authorities by the escrow agent.

      Richlin requested interest pursuant to the CDA’s interest provision, 41 U.S.C. §

611. The Board denied Richlin’s request, concluding that “there is nothing upon which

interest could accrue” because “[t]he Board’s award [in Richlin VI & VII] was not an

amount found due [Richlin] but was an amount found due [Richlin’s] former employees

and the taxing authorities,” and Richlin “did not advance its own funds to pay” the back

wages. Richlin IX, 04-2 BCA ¶ 32,670. This appeal followed. We have jurisdiction

pursuant to 28 U.S.C. § 1295(a)(10) and 41 U.S.C. § 607(g)(1)(A).

                                     DISCUSSION

                                            I

      The only issue here is whether interest on the award to Richlin is allowable under

section 611. We review the Board’s conclusions of law without deference. 41 U.S.C. §

609(b) (2000); West v. All State Boiler, Inc., 146 F.3d 1368, 1371 (Fed. Cir. 1998); E.L.

Hamm & Assocs., Inc. v. England, 379 F.3d 1334, 1338 (Fed. Cir. 2004).

      The Supreme Court has long held that “interest cannot be recovered in a suit

against the government in the absence of an express waiver of sovereign immunity from




05-1085                                     4
an award of interest.” Library of Congress v. Shaw, 478 U.S. 310, 311 (1986); see, e.g.,

United States ex rel. Angarica v. Bayard, 127 U.S. 251, 260 (1888) (applying the “well-

settled principle, that the United States are not liable to pay interest on claims . . . in the

absence of express statutory provision”).

       This principle is equally applicable to the sovereign immunity waiver in section

611. That section provides

       Interest on amounts found due contractors on claims shall be paid to the
       contractor from the date the contracting officer receives the claim pursuant
       to section 605(a) of this title from the contractor until payment thereof.
       The interest provided for in this section shall be paid at the rate
       established by the Secretary of the Treasury pursuant to Public Law 92-41
       (85 Stat. 97) for the Renegotiation Board.

41 U.S.C. § 611 (2000). We have recognized that “[a]n allowance of interest on a claim

against the United States, absent constitutional requirements, requires an explicit

waiver of sovereign immunity by Congress.” Fidelity Constr. Co. v. United States, 700

F.2d 1379, 1383 (Fed. Cir. 1983), cert. denied 464 U.S. 826 (1983), (citing United

States v. N.Y. Rayon Co., 329 U.S. 654, 658-59 (1947)). Such an explicit waiver, where

found, must be strictly construed. Id. (citing N.Y. Rayon Co., 329 U.S. at 659). We

have also recognized that, with respect to section 611, “even a seemingly explicit

[waiver] will not be effective if the language used appears too sweeping and contrary to

the overall statutory scheme . . . .” Id.

       We have previously considered the types of awards that may accrue interest

under section 611 as “amounts found due contractors.”            In Servidone Construction

Corp. v. United States, 931 F.2d 860 (Fed. Cir. 1991), we addressed the question

whether section 611 allowed a contractor to collect interest on an award of an equitable

increase in the total contract price when the contractor, at the time the initial claim was



05-1085                                       5
filed, had not yet incurred all the claimed costs, though all costs were subsequently paid

by the contractor. Relying on the plain language and legislative history of the statute,

we concluded that section 611 “sets a single, red-letter date for interest on all amounts

found due by a court without regard to when the contractor incurred the costs.”

Servidone, 931 F.2d at 862 (emphasis added). Put simply, we held that interest was

available for costs “found due” the contractor, even though payment had not been made

by the contractor on the claim date, because the contractor would ultimately be out of

pocket for some period of time. See also Caldera v. J.S. Alberici Constr. Co., 153 F.3d

1381, 1383 (Fed. Cir. 1998) (relying on Servidone to affirm an award of interest on the

full amount of an award of increase in the contract price made before the contractor

incurred all additional costs necessitating the increase).

       We next addressed the issue in Raytheon Co. v. White, 305 F.3d 1354 (Fed. Cir.

2002), where a contract to produce missile guidance systems for the Army was

terminated for convenience by the government. The contractor filed a convenience

termination claim, and the Board awarded the contractor an equitable adjustment to the

total contract price plus interest on costs incurred. The Board denied interest on the

percentage of the award representing estimated costs to complete. Raytheon, 305 F.3d

at 1359, 1365. The contractor appealed to this court, challenging the Board’s decision

not to award interest under section 611 on the award of costs that the contractor would

have incurred but for termination of the contract.

       While we recognized the principle, established in Servidone, that “interest may

not be denied merely because costs later found due had not been incurred at the time

the claim was filed,” id. at 1365, we distinguished Raytheon’s claim because termination




05-1085                                      6
of the contract meant that the contractor would never actually incur the prospective

costs.    Observing that “[i]n both Servidone and J.S. Alberici . . . the contractors

completed their contracts and thus actually incurred the costs upon which interest was

later awarded,” id. (emphasis added), we affirmed the Board’s denial of interest on the

prospective costs because “[w]e have never held that section 611 permits interest to

accrue on costs that . . . were never actually incurred by the contractor.” Id.

                                              II

         Richlin nevertheless insists that it is entitled to interest. Richlin argues that we

must apply the plain-meaning rule in construing section 611, and that the plain meaning

of “amounts found due contractors” in section 611 includes any amount (1) for which the

contractor was liable and (2) that was “awarded” to a contractor on a CDA claim.1 We

agree that Richlin was obligated by the contract to pay employees the amount required

by the Service Contracts Act, and to pay related tax amounts to the appropriate tax

authorities.2 If Richlin had advanced those amounts to the employees and the tax




1
  In this connection, Richlin relies on a provision of the Federal Acquisition Regulation
(“FAR”) that defines “compensation for personal services” to include “all remuneration
paid currently or accrued, in whatever form and whether paid immediately or deferred,
for services rendered by employees to the contractor.” 48 C.F.R. § 31.001 (2003).
Richlin asserts that its liability for the back wages under the SCA constituted “accrued”
or “deferred” remuneration, and thus “compensation for personal services” that
constitutes a cost of the contracts under the FAR. See 48 C.F.R. § 31.103(b) (2003)
(“the contracting officer shall incorporate the cost principles and procedures in subpart
31.2 . . . in contracts with commercial organizations as the basis for . . . (4) Price
revision of fixed-price incentive contracts”); 48 C.F.R. § 31.205-6(h)(1) (2003) (backpay
is a form of “compensation for personal services” constituting “a retroactive adjustment
of prior years’ salaries or wages,” and is “unallowable except [that] [p]ayments to
employees resulting from underpaid work actually performed are allowable, if required
by a negotiated settlement, order, or court decree”).
2
   See Richlin I, 98-1 BCA ¶ 29,651 (discussing provisions in the contract that
incorporate SCA requirements); 48 C.F.R. § 52.222-41(c)(1) (obligating contractors


05-1085                                       7
authorities pursuant to the contract, Richlin might have been entitled to interest. But

that is not what occurred. Richlin did not advance a penny of its own money, and

indeed claimed that it lacked the resources to make such advances.           Rather, the

government paid the amounts awarded into an escrow account, and those funds were

used to pay the employees and the tax authorities. On the basis of these facts, the

Board denied Richlin’s request for interest on the award because Richlin did not actually

pay any of the back wages out of pocket. Richlin IX, 04-2 BCA ¶ 32,670.

      We agree with the Board’s conclusion. As we have previously recognized, the

legislative history of section 611 establishes that in providing for interest on CDA

awards, “Congress was concerned with fully compensating contractors for additional

costs incurred in a continuing performance under a contract.” Fidelity Constr. Co., 700

F.2d at 1384.   The Senate Report accompanying the bill that enacted section 611

explains

      The rights of Government contractors who prevail upon claims against the
      Government are unique since they have been required by language of the
      contract . . . to perform the work directed by the Government without
      stopping to litigate. . . . Since the contractor has been compelled to
      perform the work with its own money -- in the total absence of contract
      payments or progress payments -- there can be no equitable adjustment
      to the contractor until the contractor recovers the entire cost of the
      additional work. The cost of money to finance this additional work while
      pursuing the administrative remedy, normally called interest, is a
      legitimate cost of performing the additional work.




subject to the SCA to pay wages in accordance with SCA regulations); Richlin IX, 04-2
BCA ¶ 32,670 (discussing Richlin’s payroll tax liability in detail).


05-1085                                    8
S. Rep. No. 118, 95th Cong., 2d Sess. 32 (1978) (emphasis added).3 As the Board

recognized, this legislative history supports the view that interest is allowable only when

the contractor has incurred a “cost of money to finance [the] additional work.”

       In keeping with the purpose of the statute, our prior decisions are clear that the

contractor can recover interest only on amounts it actually paid. In Servidone, we held

that interest accrued to all awards representing compensation for costs actually incurred

by the contractor, even if not incurred until after the claim was filed, because Congress

had adopted a bright-line rule for the computation of interest. Servidone, 931 F.2d at

862. But in Raytheon, we concluded section 611 did not authorize interest on costs

never actually paid by the contractor. Raytheon, 305 F.3d at 1365.

       The reasoning of Raytheon is directly applicable to this case. The award of back

wages did not compensate Richlin for any past, present or future out-of-pocket

expense. Indeed, Richlin conceded at oral argument that it “was never out any money.”

The back wages and associated taxes were paid not by Richlin but by the government

through the escrow mechanism. Richlin acted merely as a conduit, and serving as a

conduit did not entitle Richlin to receive interest.



                                       CONCLUSION

       For these reasons, the decision of the Board is

3
  Contrary to Richlin’s contention, the portion of the Senate Report relating to the
general purposes of section 611 is not made irrelevant by the fact that the text of the
statute was later altered to require that interest accrue from the date the claim is filed
with the contracting officer. See Servidone, 931 F.2d at 862-63 (describing the
alteration). The textual change did not alter the purposes of section 611, and
statements of legislative intent related to those purposes remain relevant to interpreting
the statute. Cf. Fidelity Constr. Co., 700 F.2d at 1385 (holding irrelevant legislative
history specifically related to effect previous version of the altered text).


05-1085                                        9
                 AFFIRMED.

                  COSTS

     No costs.




05-1085             10
