     In the United States Court of Federal Claims
                                          No. 14-899 C
                                      Filed: May 19, 2015

*****************************
                            *                             Assignment of Claims Act,
                            *                                31 U.S.C. § 3727;
                            *                             Breach of Contract;
HSH NORDBANK AG,            *                             Debt Collection Improvement Act,
                            *                                31 U.S.C. § 3701;
                Plaintiff,  *                             Equal Access to Justice Act,
v.                          *                                28 U.S.C. § 2412;
                            *                             Implied Duty of Good Faith and Fair
THE UNITED STATES,          *                             Dealing;
                            *                             Motion to Dismiss,
                Defendant.  *                                RCFC 12(b)(1),
                            *                                RCFC 12(b)(6);
                            *                             Summary Judgment,
                            *                                RCFC 56(c).
*****************************

David C. Smith, Kilpatrick Townsend and Stockton, LLP, Washington, D.C., Counsel for
Plaintiff.

David Alan Levitt, United States Department of Justice, Civil Division, Washington, D.C.,
Counsel for the Government.

BRADEN, Judge.

                     MEMORANDUM OPINION AND FINAL ORDER


I.     RELEVANT FACTUAL BACKGROUND.1

        CEP Funding, LLC and Columbia Energy Partners, LLC (collectively “CEP”) were
created to develop energy projects in the Pacific Northwest, including a wind-energy project in
Oregon, known as the Echanis Wind Project (“the Project”). Compl. ¶ 6. HSH Nordbank AG
(“Plaintiff”) loaned CEP $25 million for the Project, secured by all of CEP’s assets. Pl. App’x at
85–90 (February 26, 2010 Amendment No. 3 to Secured Promissory Note).

       1
           The facts herein were derived from: Plaintiff’s September 23, 2014 Complaint
(“Compl.”) and exhibits attached thereto (“Pl. Exs. A–B”); the Government’s Appendix to the
November 24, 2014 Motion To Dismiss (“Gov’t App’x at 1–112”); and the Appendix to
Plaintiff’s January 12, 2015 Response (“Pl. App’x at 1–166”). A chronology is also set out in
the Court Appendix: Chronology Of Factual Events, attached hereto.
        On January 9, 2008, CEP submitted a Large Generator Interconnection Request to the
Bonneville Power Administration (“BPA”) to connect the Project to BPA’s power transmission
grid via the Harney County, Oregon substation. Compl. ¶ 8. To accommodate this request, BPA
needed to upgrade its local power infrastructure, requiring substantial study, engineering, and
construction work. Compl. ¶ 9.
        On September 17, 2008, CEP and BPA entered into Engineering and Procurement
Agreement No. 08TX-13748 (“E&P Agreement”). Compl. ¶ 11. Pursuant to the E&P
Agreement, BPA agreed to conduct engineering studies and design facilities for the
interconnection at CEP’s expense. Compl. ¶ 11. Pursuant to the E&P Agreement and
subsequent modifications, CEP paid BPA: $250,000 on September 25, 2008; $100,000 on
December 2, 2008; $500,000 on October 20, 2010; $300,000 on March 6, 2012; and $475,000 on
March 20, 2012. Compl. ¶ 11. The E&P Agreement required BPA, within a reasonable time
after completion or termination of the interconnection, to provide CEP with an accounting of all
expenses charged against CEP’s deposits and to refund any residual payments not spent. Compl.
¶ 13.
        On October 21, 2008, CEP and BPA entered into Point-to-Point Transmission Service
Agreement No. 08TX-13707 (“TSA”). Gov’t App’x at 5–14. The TSA allowed CEP to
purchase and manage transmission service from BPA, pursuant to Transmission Service
Requests (“TSRs”). Compl. ¶ 16. BPA approved four TSRs, referred to as Tables 1A, 1B, 1C,
and 1D. Compl. ¶ 17. Each TSR reserved a specific quantity of transmission service for CEP on
a monthly basis for a specific term.2 Compl. ¶ 17. After service commenced, CEP was obligated
to make monthly payments in advance. Compl. ¶ 18. If CEP failed to pay, BPA had the
unilateral right to suspend service or terminate the TSA. Compl. ¶ 18.
        In or around December 2008, the Project’s proponents applied for a right-of-way
(“ROW”) from the Bureau of Land Management (“BLM”). Compl. ¶ 25. A ROW was
necessary, because the Project required construction of a power transmission line across
federally owned land. Compl. ¶ 24. Before the ROW was approved, however, the BLM was
required to prepare an environmental impact study, pursuant to the National Environmental
Policy Act, 42 U.S.C. § 4321 et seq. Compl. ¶ 24.
       On July 30, 2010, CEP and BPA entered into Environmental Study Agreement No.
10TX-10511 (“ES Agreement”). Compl. ¶ 12. Under the ES Agreement, BPA would conduct
the environmental study at CEP’s expense. Compl. ¶ 12. Pursuant to the ES Agreement, CEP
made a deposit of at least $50,000. Pl. Ex. B at 6. The ES Agreement also required BPA, within
a reasonable time after completion or termination of the interconnection, to provide CEP with an
accounting of all expenses charged against CEP’s deposits and to refund any unused funds.
Compl. ¶ 13.



       2
        Each of the four TSRs required service to begin in December 2009, but CEP could defer
commencement of service by paying a non-refundable annual reservation fee equal to one
month’s charge for transmission service. Compl. ¶ 19. From December 2009 to December
2011, CEP deferred commencement of service under all four TSRs. Compl. ¶ 20.

                                               2
       On October 21, 2011, BLM issued a Final Environmental Impact Statement regarding the
proposed transmission line. Compl. ¶ 27.
         BPA required CEP to take transmission services pursuant to Tables 1B and 1C
beginning in December 2011 at a cost of $52,535 per month,3 as required by Tables 1B and 1C.
Compl. ¶ 21. In December 2011, however, CEP was late in submitting a request to defer
transmission service for 2012, pursuant to Tables 1B and 1C. Compl. ¶ 21. Moreover, instead
of using BPA’s service itself, CEP sold the service to third parties. Compl. ¶ 22.
       On December 28, 2011, BLM approved the ROW request. Compl. ¶ 27.
        On February 29, 2012, CEP and BPA executed Modification No. 4 to the September 17,
2008 E&P Agreement, under which BPA agreed to continue the work necessary to complete the
interconnection at project capacity. Gov’t App’x at 1–2. CEP also increased its funding
obligation from $850,000 to approximately $1.625 million. Compl. ¶ 28. CEP made two
additional deposits to BPA: $300,000 on March 6, 2012; and $475,000 on March 20, 2012.
Compl. ¶ 30.
        On April 5, 2012, the Oregon Natural Desert Association filed a lawsuit challenging
BLM’s environmental review of the ROW. Compl. ¶ 31 (citing Or. Natural Desert
Ass’n v. Salazar, No. 12-cv-596 (D. Or. filed April 5, 2012)). In response, BPA informed CEP
that it would suspend work on the interconnection while the lawsuit was pending. Compl.
¶¶ 32–33. On September 16, 2013, the United States District Court for the District of Oregon
granted the Government’s motion for summary judgment. Compl. ¶ 31; see also Op. & Order,
Dkt. No. 80, Or. Natural Desert Ass’n.
       In mid-2012, CEP began to experience liquidity problems. Compl. ¶ 34. In early Fall
2012, CEP notified BPA that it was withdrawing its interconnection request. Compl. ¶ 36. On
October 11, 2012, BPA informed CEP by email that it would refund CEP any unused funds.
Compl. ¶ 37.
        In November 2012, CEP requested to defer transmission service, pursuant to Tables 1A
and 1D. Compl. ¶ 39. BPA agreed to revise the TSA to effectuate the deferral, but CEP failed to
pay the reservation fee. Compl. ¶ 39. Consequently, in December 2012, BPA required CEP to
take transmission service, pursuant to Tables 1A and 1D. Compl. ¶ 39. This brought CEP’s total
monthly transmission fees to approximately $112,575 per month. Compl. ¶ 39. CEP, however,
was unable to pay the entire monthly fee. Compl. ¶ 41.
        On January 30, 2013, CEP requested that BPA provide an accounting of all
interconnection deposits and return any unused funds. Gov’t App’x at 77–78. On March 28,
2013, BPA advised CEP that it owed BPA approximately $450,300 in transmission service fees.
Gov’t App’x at 79–82. BPA also refused to pay CEP any refund until the outstanding
transmission service fees were paid. Compl. ¶¶ 43–44. BPA responded that the Debt Collection
Improvement Act, 31 U.S.C. § 3716 (“DCIA”), authorized BPA to offset CEP’s outstanding
obligations against CEP’s deposits. Compl. ¶ 45. BPA replied that, “[i]f CEP funding does not

       3
          From December 2011 to December 2012, CEP continued to defer commencement of
service, pursuant Tables 1A and 1D. Compl. ¶ 23.
                                              3
pay [for transmission service], [BPA] may, at its discretion and without notice, offset CEP
Funding’s funds associated with the CEP funding Agreements[.]” Gov’t App’x at 81 (March 28,
2013 letter from BPA to CEP).
       On April 15, 2013, CEP sent BPA a formal notice of dispute about BPA’s failure to
provide an accounting or pay any refunds. Gov’t App’x at 84–86. On May 9, 2013, CEP and
BPA engaged in informal dispute resolution, but a settlement was not reached. Gov’t App’x at
87.
        On June 28, 2013, BPA informed CEP that it owed approximately $960,040 for
transmission service fees and declined to pay CEP any refund. Gov’t App’x at 87–88. But, BPA
did not advise CEP that it was exercising its right of offset pursuant to the DCIA. Compl. ¶ 47.
Nor did BPA explain why it continued to decline to refund CEP approximately $230,000, i.e.,
the amount of CEP deposits that exceeded BPA’s transmission service fees. Compl. ¶ 47. On
June 28, 2013, BPA also informed CEP that it would exercise its right to terminate the TSA,
effective August 1, 2013, if CEP did not pay all outstanding transmission fees by July 31, 2013.
Compl. ¶ 48.
        In a July 23, 2013 Bill of Sale, CEP assigned all rights to the interconnection deposits to
Plaintiff to satisfy CEP’s obligations to Plaintiff. Gov’t App’x at 96–108.
       On August 1, 2013, BPA terminated the TSA, because of CEP’s failure to pay the
outstanding transmission fees by July 31, 2013. Compl. ¶ 49. At this time, CEP incurred
approximately $960,000 in transmission fees that it could not use or was unable to re-sell.
Compl. ¶ 49. Consequently, BPA declined to refund any unused funds, but never instituted any
formal offset proceedings against CEP. Compl. ¶ 50.
        On August 6, 2014, Plaintiff provided BPA written notice of CEP’s assignment of
interest in the interconnection deposits. Gov’t App’x at 93–95.

II.    RELEVANT PROCEDURAL HISTORY.

       On September 23, 2014, Plaintiff filed a Complaint in the United States Court of Federal
Claims. On November 24, 2014, the Government filed a Motion To Dismiss (“Gov’t Mot.”),
together with an appendix. On January 12, 2015, Plaintiff filed a Response (“Pl. Resp.”),
together with an appendix. On January 28, 2015, the Government filed a Reply (“Gov’t Reply”).
        On April 6, 2015, the court convened an oral argument. At oral argument, the court
directed the parties to file supplemental briefs.
       On April 22, 2015, Plaintiff filed a supplemental brief (“Pl. Supp. Br.”). On April 24,
2015, the Government filed a supplemental brief (“Gov’t Supp. Br.”).

III.   DISCUSSION.

       A.      Jurisdiction.

       The United States Court of Federal Claims has jurisdiction under the Tucker Act, 28
U.S.C. § 1491, “to render judgment upon any claim against the United States founded either

                                                4
upon the Constitution, or any Act of Congress or any regulation of an executive department, or
upon any express or implied contract with the United States, or for liquidated or unliquidated
damages in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1). The Tucker Act, however, is “a
jurisdictional statute; it does not create any substantive right enforceable against the United
States for money damages . . . . [T]he Act merely confers jurisdiction upon [the United States
Court of Federal Claims] whenever the substantive right exists.” United States v. Testan, 424
U.S. 392, 398 (1976).

         To pursue a substantive right under the Tucker Act, a plaintiff must identify and plead an
independent contractual relationship, Constitutional provision, federal statute, and/or executive
agency regulation that provides a substantive right to money damages. See Todd v. United
States, 386 F.3d 1091, 1094 (Fed. Cir. 2004) (“[J]urisdiction under the Tucker Act requires the
litigant to identify a substantive right for money damages against the United States separate from
the Tucker Act[.]”); see also Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (en
banc) (“The Tucker Act . . . does not create a substantive cause of action; . . . a plaintiff must
identify a separate source of substantive law that creates the right to money damages. . . . [T]hat
source must be ‘money-mandating.’”). Specifically, a plaintiff must demonstrate that the source
of substantive law upon which he relies “can fairly be interpreted as mandating compensation by
the Federal Government[.]” Testan, 424 U.S. at 400. And, the plaintiff bears the burden of
establishing jurisdiction by a preponderance of the evidence. See Reynolds v. Army & Air Force
Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988) (“[O]nce the [trial] court’s subject matter
jurisdiction [is] put in question . . . . [the plaintiff] bears the burden of establishing subject matter
jurisdiction by a preponderance of the evidence.”).

        B.      Standard of Review Under RCFC 12(b)(1).

        A challenge to the United States Court of Federal Claims’ “general power to adjudicate in
specific areas of substantive law . . . is properly raised by a [Rules of the United States Court of
Federal Claims (“RCFC”)] 12(b)(1) motion[.]” Palmer v. United States, 168 F.3d 1310, 1313
(Fed. Cir. 1999); see also RCFC 12(b)(1) (“Every defense to a claim for relief in any pleading
must be asserted in the responsive pleading . . . . But a party may assert the following defenses
by motion: (1) lack of jurisdiction over the subject matter[.]”). When considering whether to
dismiss an action for lack of subject matter jurisdiction, the court is “obligated to assume all
factual allegations of the complaint to be true and to draw all reasonable inferences in plaintiff’s
favor.” Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995).

        C.      Standard of Review Under RCFC 12(b)(6).

        A challenge to the United States Court of Federal Claims’ “[ability] to exercise its
general power with regard to the facts peculiar to the specific claim . . . is raised by a [Rule]
12(b)(6) motion[.]” Palmer, 168 F.3d at 1313; see also RCFC 12(b)(6) (“Every defense to a
claim for relief in any pleading must be asserted in the responsive pleading . . . . But a party may
assert the following defenses by motion: . . . (6) failure to state a claim upon which relief can be
granted[.]”).

       When considering whether to dismiss an action for failure to state a claim, the court must
assess whether “a claim has been stated adequately” and then whether “it may be supported by

                                                   5
[a] showing [of] any set of facts consistent with the allegations in the complaint.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 563 (2007). The plaintiff’s factual allegations must be
substantial enough to raise the right to relief “above the speculative level.” Id. at 555. The court
must accept all factual allegations in the complaint as true and make all reasonable inferences in
favor of the plaintiff. Id.

       D.      Standard Of Review For Summary Judgment Under RCFC 56(c).

        On a motion for summary judgment, the moving party must establish that there is no
genuine issue of material fact and that the moving party is entitled to judgment as a matter of
law. See Duramed Pharms., Inc. v. Paddock Labs., Inc., 644 F.3d 1376, 1380 (Fed. Cir. 2011);
see also RCFC 56(c). Only genuine disputes of material fact that might affect the outcome of the
suit preclude entry of summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986) (“As to materiality, the substantive law will identify which facts are material. Only
disputes over facts that might affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment. Factual disputes that are irrelevant or
unnecessary will not be counted.”). The “existence of some alleged factual dispute between the
parties will not defeat an otherwise properly supported motion for summary judgment.” Id. at
247–48 (emphasis in original). “Courts are required to view the facts and draw reasonable
inferences ‘in the light most favorable to the party opposing the [summary judgment] motion.’”
Scott v. Harris, 550 U.S. 372, 378 (2007) (quoting Saucier v. Katz, 533 U.S. 194, 201 (2001)).

       E.      Counts I And II: Breach Of Contract And Breach Of Implied Covenant Of
               Good Faith And Fair Dealing.

               1.      Whether The Court Has Jurisdiction Over Counts I And II.

                       a.      The Government’s Argument.

        The Government argues that, as a matter of law, the court does not have jurisdiction to
adjudicate Counts I and II of the September 23, 2014 Complaint, because Plaintiff’s assignment
of contractual rights does not establish privity between a private party assignee and the
Government. See Thomas Funding Corp. v. United States, 15 Cl. Ct. 495, 500 (1988) (“[T]he
plaintiff herein simply does not acquire privity of contract with the [G]overnment in a separate
contract with its assignor[.]”); see also Twin City Shipyard, Inc. v. United States, 21 Cl. Ct. 582,
587–88 (1990) (“A valid assignment of contract proceeds, standing alone, does not create privity
of contract between the assignee and the United States.”); see also Produce Factors
Corp. v. United States, 199 Ct. Cl. 572, 580 (1972) (“[T]he only effect of the Assignment of
Claims Act of 1940 [“Claims Act”] was to remove the anti-assignment bar so as to permit
contractors to finance their Federal contracts upon the security of assignments of the contract
proceeds to be earned thereunder. While the assignee-lending institution indirectly benefits the
Government through financing the contractor’s performance, indirect benefits do not establish
privity of contract with the United States.”) (internal citations omitted). Nor is Plaintiff entitled
to equitable subrogation, because “under the majority view, the issuer of an irrevocable letter of
credit does not hold the position of surety even though it assumes obligations to the beneficiary
of the letter of credit.” Gov’t Supp. Br. at 3.


                                                 6
        Therefore, even if CEP’s assignment to Plaintiff is valid, the court does not have
jurisdiction to adjudicate the claims alleged in Counts I and II.

                       b.      Plaintiff’s Response.

       Plaintiff acknowledges that the Tucker Act requires privity between a plaintiff and the
Government before the court can adjudicate breach of contract claims. Pl. Resp. at 22 (citing
Erickson Air Crane Co. v. United States, 731 F.2d 810, 813 (Fed. Cir. 1984) (“The
[G]overnment consents to be sued only by those with whom it has privity of contract[.]”)). But,
this case fits within the subrogation exception. Pl. Resp. at 22–23. “As a general rule,
subrogation applies where a party not acting voluntarily, but under some compulsion pays a debt
or discharges an obligation for which another is primarily liable and which in equity and good
conscience ought to be discharged by the latter.” First Nat’l City Bank v. United States, 212 Ct.
Cl. 357, 369 (1977). “But subrogation will be applied in favor of parties who act to protect their
own interests.” Id.

        Here, Plaintiff “provided sole financing for CEP’s obligations to BPA[.]” Pl. Resp. at 23.
Plaintiff’s “continued funding of CEP included payment (through CEP) of CEP’s obligations, in
the interest of protecting [Plaintiff’s] own security interest[.]” Pl. Resp. at 23. As such,
“[r]ecovery of the Interconnection Deposits is the only avenue by which [Plaintiff] may recover
the amounts it paid to protect its interests.” Pl. Resp. at 24. Therefore,
       [u]nder these circumstances[,] the [c]ourt should exercise its equitable power to
       subrogate [Plaintiff] to CEP’s rights under the Interconnection Agreements and
       allow it to proceed on these claims against BPA. Because [Plaintiff] may be
       equitably subrogated to CEP’s contracts with the [G]overnment, privity is not
       required[,] and Tucker Act jurisdiction exists with respect to Counts [I] and [II].
Pl. Resp. at 24; see also Pl. Supp. Br. at 4–5.

                       c.      The Court’s Resolution.

        The Tucker Act requires privity of contract for a plaintiff to prevail on a breach of
contract claim in the United States Court of Federal Claims. See Erickson Air Crane Co., 731
F.2d at 813 (“The [G]overnment consents to be sued only by those with whom it has privity of
contract[.]”). Subrogation is an exception to this rule. See Ins. Co. of the W. v. United States,
243 F.3d 1367, 1370 (Fed. Cir. 2001) (“Rather than relying on privity of contract, sureties
traditionally have asserted claims against the [G]overnment under the equitable doctrine of
subrogation.”).
         In First National City Bank, on which Plaintiff relies, multiple lenders provided loans to a
Government contractor, and the plaintiff refinanced some third-party loans to protect its interest
on loans it made to the contractor. See 212 Ct. Cl. at 36163; see also id. at 370 (“Clearly, under
this principle [of subrogation,] plaintiff was no volunteer. It did not pay [the contractor’s] debt
as a volunteer[,] but did so to protect its own interests in the prior loans[.]”). Importantly, prior
to that lawsuit, the Government



                                                  7
       had already elected to deal with plaintiff with respect to the [relevant] contract.
       [The Government] sent a copy of the agreement resolving the dispute . . . not to
       [the original financing institution] or the [Government] but to plaintiff; the
       [Government] also haggled with plaintiff over whether the [plaintiff] should have
       priority before any setoff; and the [Government] appears in effect to have
       determined that [plaintiff] was at least entitled to $7,812 without any setoff.
       Thus, by its own choice [the Government] treated [plaintiff] as an interested party.
       Where that has happened it seems an unwholesome technical rigidity to apply the
       principles underlying the pre-1940 anti-assignment statute to lock the barn after
       the horse has deliberately been let out by the Government’s own officials.
Id. at 370–71.
        This case is distinguishable from First National City Bank on two grounds. First,
Plaintiff did not refinance any third-party debt with CPE. Instead, Plaintiff made repeated loans
to cover CEP’s deposits with BPA. Pl. Resp. at 23 (“[Plaintiff] provided sole financing for
CEP’s obligations to BPA under both the Transmission Service Agreement (and TSRs) and the
Interconnection Agreements. This included payment to BPA of the $1.6 million in
Interconnection Deposits, as well as payment of transmission fees of approximately $52,000 per
month for all of 2012.”); see also Gov’t App’x at 45–46 (Jan. 17, 2013 demand letter from BPA
to CEP for $52,535 for one month of service); Gov’t App’x at 79 (Mar. 28, 2013 letter from
BPA to CEP explaining that CEP advanced $1,675,000 to BPA). As such, Plaintiff did not “pay
another’s debts to protect [its] own rights and interests.” First Nat’l City Bank, 212 Cl. Ct. at
369. Instead, it functioned as CEP’s primary lender.
        Second, the Government had no dealings with Plaintiff prior to this lawsuit. Unlike First
National City Bank, the Government did not provide contract documents or negotiate setoff
priority with Plaintiff. Instead, the evidence demonstrated that the Government communicated
only with CEP until it received formal notice of the assignment on August 6, 2014.
        In addition, there is no indication that Plaintiff acted as a surety for CEP, such that
Plaintiff had standing to bring a breach of contract claim against the Government. According to
the RESTATEMENT (THIRD) OF SURETYSHIP & GUARANTY (1996) (“RESTATEMENT”),

       An obligee has recourse against a secondary obligor or its property with respect to
       an underlying obligation whenever:
       (a) the principal obligor owes performance of the underlying obligation; and
       (b) pursuant to the secondary obligation, either:
               (i) the secondary obligor has a duty to effect, in whole or in part, the
                     performance that is the subject of the underlying obligation; or
               (ii) the obligee has recourse against the secondary obligor or its property
                     in the event of the failure of the principal obligor to perform the
                     underlying obligation; or
               (iii) the obligee may subsequently require the secondary obligor to either
                     purchase the underlying obligation from the obligee or incur the
                     duties described in subparagraph (i) or (ii).

RESTATEMENT § 1(2).
                                                8
       In this case, § 1(2)(a) of the RESTATEMENT’s two-element test is satisfied, because CEP
as the principal obligor owed performance of the underlying obligation, i.e., payment, to the
Government. But, Plaintiff did not satisfy § 1(2)(b), because none of the three disjunctive
subparts is met. First, the secondary Plaintiff had no “duty to effect, in whole or in part,” CEP’s
payment to the Government. See RESTATEMENT § 1(2)(b)(i). Second, the Government did not
have “recourse against [Plaintiff] in the event of the failure of the [CEP] to perform the
underlying obligation.” RESTATEMENT § 1(2)(b)(ii). Third, the Government had no right to
“subsequently require [Plaintiff] to either purchase the underlying obligation from the
[Government]” or otherwise perform. RESTATEMENT § 1(2)(b)(iii). Moreover, the “requisites
of contract formation”—mutual assent and consideration—are not present between Plaintiff and
the Government. See RESTATEMENT § 7 (“The requisites of contract formation apply generally
to formation of a contract creating a secondary obligation.”).
         Even if Plaintiff were a surety, the United States Court of Appeals for the Federal Circuit
has “specified two circumstances in which a surety may succeed to the contractual rights of a
contractor against the [G]overnment: when the surety takes over contract performance or when it
finances completion of the defaulted contract.” Ins. Co. of the W., 243 F.3d at 1370. Plaintiff,
however, never assumed CEP’s performance obligations; nor did Plaintiff assume CEP’s debts.
See Pl. App’x at 40–84 (Dec. 14, 2007 Secured Promissory Note); Pl. App’x at 85–90 (Feb. 26,
2010 Amendment No. 3 to Secured Promissory Note); Pl. App’x at 91–95 (Dec. 3, 2012
Amendment No. 8 to Secured Promissory Note); Pl. App’x at 1–39 (Oct. 5, 2010 Pledge and
Security Agreement). In addition, since Plaintiff failed to establish either an express or implied
contract with BPA, its dependent claim for a breach of implied covenant of good faith and fair
dealing also must be dismissed. See Metcalf Constr. Co. v. United States, 742 F.3d 984, 990
(Fed. Cir. 2014) (“Every contract imposes upon each party a duty of good faith and fair dealing
in its performance and enforcement.”) (emphasis added).
        For these reasons, the court has determined that, as a matter of law, it does not have
jurisdiction to adjudicate Counts I and II of the September 23, 2014 Complaint. See RCFC
12(b)(1).

               2.      Whether The September 23, 2014 Complaint Stated A Claim Upon
                       Which Relief Can Be Granted.

                       a.     The Government’s Argument.

        The Government also argues that Counts I and II of Plaintiff’s September 23, 2014
Complaint should be dismissed, because Plaintiff “does not assert the existence of an express or
implied-in-fact contract between [Plaintiff] and BPA in its [C]omplaint or a breach of that
contract.” Gov’t Mot. at 17. In fact, Plaintiff “acknowledges that the contracts it alleges were
breached were between CEP Funding and BPA, not between [Plaintiff] and BPA.” Gov’t Mot.
at 17 (citing Compl. ¶¶ 55–69). Instead, Plaintiff “merely provided CEP with monies needed to
fund CEP’s operations. Therefore, [Plaintiff] had no third party obligation to ensure CEP’s
performance to BPA and is simply a financing company, not a surety.” Gov’t Reply at 12–13.
Unlike First National City Bank, Plaintiff did not refinance third-party debt. See 212 Ct. Cl. at
362–63.

                                                 9
                       b.    Plaintiff’s Response.

       Plaintiff’s response repeats previous arguments that equitable subrogation should apply.

                       c.    The Court’s Resolution.

        “To state a claim upon which relief can be granted, [a plaintiff] must allege either an
express or an implied-in-fact contract, and the breach of that contract.” Trauma Serv.
Grp. v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997). Plaintiff’s September 23, 2014
Complaint does not allege that Plaintiff had an express or implied-in-fact contract with the
Government.
       For this reason, the court has determined that Plaintiff also failed to state a claim upon
which relief can be granted as to Counts I and II. See RCFC 12(b)(6).

       F.       Count III: Return Of Deposits Under The Assignment Of Claims Act.

                1.     Whether To Convert The Government’s November 24, 2014 Motion
                       To Dismiss Into A Motion For Summary Judgment.

        Plaintiff argues that the Government’s November 24, 2014 Motion To Dismiss relies on
facts in a 112-page appendix, outside the pleadings, and thus should be converted into a Motion
For Summary Judgment. Pl. Resp. at 10–11 (citing Gov’t App’x at 1–112). Therefore, the court
should disregard the evidence, or in the alternative, convert the motion to one for summary
judgment and allow full presentation of evidence. Pl. Resp. at 12 (citing RCFC 12(d) 4; see also
G4S Tech. LLC v. United States, 114 Fed. Cl. 662, 669 (2014) (“[W]hen the court considers—
and does not exclude—materials outside of the pleadings, dismissal under RCFC 12(b)(6) or
12(c) is not appropriate. Rather, such a motion must be converted into one for summary
judgment under RCFC 56(c).”) (internal citations omitted).



       4
           RCFC 12(d) provides:

       If, on a motion under RCFC 12(b)(6) or 12(c), matters outside the pleadings are
       presented to and not excluded by the court, the motion must be treated as one for
       summary judgment under RCFC 56. All parties must be given a reasonable
       opportunity to present all material that is pertinent to the motion.

RCFC 12(d).

       “The question whether a party has had a ‘reasonable opportunity’ to present pertinent
summary judgment materials when a trial court converts a motion to dismiss into a motion for
summary judgment necessarily turns on the way in which the particular case under consideration
has unfolded.” Easter v. United States, 575 F.3d 1332, 1336 (Fed. Cir. 2009) (internal quotation
marks and citation omitted).


                                               10
        The Government does not dispute that RCFC 12(d) requires the court to consider this
issue on summary judgment. Gov’t Reply at 3. And, Plaintiff presented a 166-page Appendix
with its January 12, 2015 Response. Gov’t Reply at 3.

      For these reasons, the court will adjudicate the Government’s November 24, 2014 Motion
To Dismiss regarding Count III as a Motion For Summary Judgment.

                2.      The Merits.

                        a.     The Government’s Argument.

        The Government posits three reasons why Count III should be dismissed. First, Plaintiff
failed to notify the Government of the alleged assignment until it was too late. Gov’t Mot. 18–
19 (citing United Cal. Discount Corp. v. United States, 19 Cl. Ct. 504, 507–08 (1990) (holding
that failure to comply with formal notice requirements prior to the termination of a contract
“come[s] too late to perfect an assignment” on behalf of the assignee”)). Therefore, Plaintiff
forfeited any right to unspent deposits under the Claims Act on August 1, 2013, the date that
BPA terminated the TSA. Gov’t Mot. at 19.
        Second, Plaintiff’s claim also does not comply with the financing institution exemption to
the Claims Act. Gov’t Mot. at 19 (citing 41 U.S.C. § 6306(b)(2); 31 U.S.C. § 3727(c)
(exempting an assignment to a financial institution “to secure funding for carrying out
obligations to the Government”)). CEP, however, did not “secure financing to carry out
obligations to the Government,” but only assigned the claims to Plaintiff as payment on the loan.
Gov’t Mot. at 20. Notably, the Complaint confirms that Plaintiff accepted the assignment “[i]n
lieu of foreclosure, and in satisfaction of [CEP Funding’s] obligations to [Plaintiff.]” Compl.
¶ 52. As such, CEP’s assignment does not qualify under this limited exemption.
        Third, “it is well-established that the Claims Act only accords standing to the assignee to
recover improper payments the Government may have made to third parties but not funds the
Government allegedly improperly withheld from the assignor.” Gov’t Mot. at 21 (citing Twin
City Shipyard, Inc., 21 Cl. Ct. at 588 (“A party to whom a [G]overnment contract has been
validly assigned under the Assignment of Claims Act . . . . cannot maintain an action for breach
of contract, but only to recover money wrongfully paid to a third party.”); see also Thomas
Funding Corp., 15 Cl. Ct. at 502 (“[A]n assignee to the proceeds of a [G]overnment contract
under the Assignment of Claims Act . . . . may only bring a suit against the [G]overnment for
wrongful payment to a third party, and may not maintain an action for breach of contract in this
court.”). Count III “does not allege an improper transfer of funds to a third party”; thus, it is
“actually an impermissible breach of contract claim[.]” Gov’t Mot. at 22.

                        b.     Plaintiff’s Response.

        Plaintiff responds that the Government’s assignment analysis is wrong, because BPA’s
offset did not comply with the DCIA.5 Pl. Resp. at 11–13. As such, “the administrative offset


       5
           The DCIA requires an agency asserting an offset to provide:


                                                11
was not effective and the Interconnection Deposits were still in existence when the
[G]overnment was notified of the assignment.” Pl. Resp. at 13.
       The Government also failed to meet its common law obligation to establish entitlement to
contract damages. Pl. Resp. at 13–14 (citing Rumley v. United States, 152 Ct. Cl. 166, 171–72
(1961) (holding that the Government must “satisfy its burden of proving [contract] damages”)).
Here, “CEP assigned the Interconnection Deposits to [Plaintiff] prior to any alleged set-off.” Pl.
Resp. at 14. Therefore, although CEP’s Board did not ratify the assignment until July 2014, “the
corporate officers who executed the assignment in July 2013 were fully authorized to do so and
the assignment was effective at that time.” Pl. Resp. at 14. Moreover, there are several
substantive problems with the amount of BPA’s purported offset.6 Pl. Resp. at 14–15.
        Plaintiff also contends that the Claims Act is not limited to securing financing to carry
out obligations to the Government. Pl. Resp. at 15–16. The intent of the Claims Act was to
“help contractors ‘secure financing for carrying out obligations to the Government.’” Pl. Resp.
at 16 (quoting Gov’t Mot. at 19). But, the text of the statute indicates that it applies “to any
‘contract providing for payments totaling at least $1,000’ if the contract does not forbid the
assignment, notice is provided to the agency, and certain other requirements (not at issue here)
are met.” Pl. Resp. at 16 (quoting 31 U.S.C. § 3727(c)). Therefore, all of the requirements of
the Claims Act are met in this case. Pl. Resp. at 16–17.
        Finally, this case fits into an exception to the general rule that the Claims Act allows an
assignee to pursue a claim, only if the Government improperly paid a third party. Pl. Resp. at 18.
This case is analogous to Goodman v. Niblack, 102 U.S. 556 (1880), where an insolvent party
voluntarily assigned “all [its] effects” for the benefit of its secured creditor, without implicating
the “mischiefs” the Anti-Assignment Acts were designed to remedy. Id. at 560–61.
Accordingly, “this case falls within the judicially-recognized exceptions to the general rule,”
because CEP’s voluntary transfer is similar to “a transfer in bankruptcy or an assignment for the
benefit of creditors, both of which have been held not to be restricted by [the Claims Act].” Pl.
Resp. at 21. Moreover, even if the Claims Act did bar Plaintiff’s claim, the Government’s



       1. [W]ritten notice of the type and amount of the claim, the [agency’s intention]
          to collect the claim by administrative offset, and an explanation of the rights
          of the debtor under [the DCIA];
       2. [A]n opportunity to inspect and copy the records of the agency related to the
          claim;
       3. [A]n opportunity for a review within the agency of the decision of the agency
          related to the claim; and
       4. [A]n opportunity to make a written agreement with the head of the agency to
          repay the amount of the claim.

31 U.S.C. § 3716(a).
       6
         For example, the Government did “not support its calculation [of approximately $34
million in contract damages] or indicate why it could not have mitigated its damages by selling
transmission service to other customers.” Pl. Resp. at 15.
                                                 12
refusal to refund deposits to Plaintiff would constitute a taking under the Fifth Amendment of the
United States Constitution. Pl. Resp. at 21–22.7

                       c.      The Government’s Reply.

         The Government replies that even if the assignment were executed in July 2013 (prior to
the August 2013 offset), “the assignment only was valid after [Plaintiff] provided notice and a
copy of the deed to BPA.” Gov’t Reply at 4 (citing United Cal. Discount Grp., 19 Cl. Ct. at 508
(“The notice provisions of the [Claims Act] require the assignee to file a written notice of the
assignment and a copy of the assignment with the contracting official and the disbursing
official.”) (emphasis in original); Reliance Ins. Co. v. United States, 15 Cl. Ct. 62, 66 (1988) (“It
is settled that the third-party plaintiff’s rights, as assignee, attach from the date the assignee filed
a proper Notice of Assignment together with a properly executed assignment, in conformance
with the [Claims Act.]”)). Plaintiff, however, did not provide notice until August 6, 2014. Gov’t
Reply at 4. In other words, the August 1, 2013 offset preceded the assignment. Gov’t Reply at
4.
        Plaintiff’s understanding of an administrative offset is also “fundamentally flawed.”
Gov’t Reply at 5. An administrative offset is “the power an agency has to unilaterally offset the
money the agency estimates a person owes to the agency against the amount the agency owes
that person.” Gov’t Reply at 5 (emphasis in original). Agencies have a “long-standing common
law right to offset contract debts against contract payments.” Cecile Indus., Inc. v. Cheney, 995
F.2d 1052, 1054 (Fed. Cir. 1993). “In situations where debts and credits arise within a single
agency, the [Debt Collection Act of 1982, 31 U.S.C. § 3716 (“DCA”)] authorizes the agency to
act without Treasury intervention. The DCA explicitly provides that this can be done ‘under
statute or common law.’” Gov’t Reply at 6 (quoting 31 U.S.C. § 3716(d)). Moreover, Cecile
Industries interpreted the Debt Collection Act of 1982 (“DCA”), not the later Debt Collection
Improvement Act of 1996 (“DCIA”). See Cecile Indus., 995 F.2d at 1053. But, the relevant
statutory provision—31 U.S.C. § 3716(a)—is identical under both Acts.
     Therefore, Government complied both with the DCA’s statutory requirements and
common law principles. Gov’t Reply at 7.

                       d.      The Court’s Resolution.

        The Claims Act was “enacted so that the [G]overnment would always be able to ‘deal
exclusively with the original claimant’ and would always be aware of its obligations.” United
Cal. Discount Corp., 19 Cl. Ct. at 507 (quoting Patterson v. United States, 173 Ct. Cl. 819, 823
(1965)). Later, “Congress amended the [Claims Act] to include a financing institution exception
to the bar on assignments.” Id. But, the Claims Act’s “notice provisions are clear; they require
the contractor to give written notification of the assignment, together with a true copy of the
instrument of assignment, to the contracting officer or official and to the disbursing officer or
       7
          But, this claim is not in Plaintiff’s September 23, 2014 Complaint. Even if this claim
were in Plaintiff’s Complaint, “the Federal Rules do not require the court to credit a complaint’s
conclusory statements without reference to its factual content.” Ashcroft, 556 U.S. at 686.
Plaintiff provided no factual content to establish a taking under the Fifth Amendment.


                                                  13
official.” Id. (citing 41 U.S.C. § 158). “The language of the [financing institution] exception
indicates that Congress still sought to protect the [G]overnment from the uncertainties devolving
from secret assignments. To that end, the financing institution exception is strictly construed,
and the contractor must meet the requirements of that section to gain the benefit of the
exception.” Id. (emphasis added). “[F]ailure of the contractor to abide by the notice provisions
of the financing institution exception will invalidate the assignment.” Id. at 507–08. “The notice
provisions of the [Claims Act] require the assignee to file a written notice of the assignment and
a copy of the assignment with the contracting official and the disbursing official.” Id. at 508
(citing 41 U.S.C. § 15) (emphasis in original). “An assignment against the [G]overnment will be
effective, if at all, only after proper notification.” Id. (citing Reliance Ins. Co., 15 Cl. Ct. at 66)
(emphasis in original).
        Plaintiff insists that the Government’s offset did not comply with the DCIA, rendering
the timing of notification irrelevant. Pl. Resp. at 11–13 (citing 31 U.S.C. § 3716(a)). But, the
Government was not required to comply with the DCIA, because the DCIA does not displace
“the Government’s long-standing common law right to offset contract debts to the United States
against contract payments due to the debtor.” Cecile Indus., 995 F.2d at 1054. As the United
States Supreme Court has held, “The [G]overnment has the same right which belongs to every
creditor, to apply the unappropriated moneys of his debtor, in his hands, in extinguishment of the
debts due to him.” United States v. Munsey Trust Co., 332 U.S. 234, 239 (1947) (internal
quotation marks and citation omitted). The right of offset “allows entities that owe each other
money to apply their mutual debts against each other, thereby avoiding ‘the absurdity of making
A pay B when B owes A.’” Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 18 (1995) (quoting
Studley v. Boylston Nat’l Bank, 229 U.S. 523, 528 (1913)). “[T]he right to offset applies to inter-
contractual debts as well as intra-contractual debts.” Cecile Indus., 995 F.2d at 1054. As such,
an offset requires the Government to complete three steps: “(i) a decision to effectuate a[n
offset], (ii) some action accomplishing the [offset], and (iii) a recording of the [offset].”9
Citizens Bank, 516 U.S. at 19; see also Johnson v. All-State Constr., Inc., 329 F.3d 848, 854
(Fed. Cir. 2003) (same).
       In this case, the Government performed an inter-contractual offset of Plaintiff’s
arrearages and estimated damages against Plaintiff’s deposits, because the arrearages and
deposits stemmed from the same contract. Like Cecile Industries, the Government “did not need

       8
         As of January 4, 2011, 41 U.S.C. § 15 now is cited as 41 U.S.C. § 6305. Section 6305
provides:

       The assignee of an assignment under this subsection shall file written notice of the
       assignment and a true copy of the instrument of assignment with—
           (A) the contracting officer or head of the officer’s department or agency;
           (B) the surety on any bond connected with the contract; and
           (C) the disbursing officer, if any, designated in the contract to make payment.

41 U.S.C. § 6305(b)(6).
       9
          Citizens Bank used the term “setoff,” but acknowledged that “[t]he right of setoff” is
“also called [an] ‘offset.’” Citizens Bank, 516 U.S. at 18.
                                                  14
to avail itself of section 3716 for any of the offsets,” because “[n]owhere does the language,
context, or enactment history of the [DCIA] suggest restriction or replacement of doctrines
permitting contractual offsets.” 995 F.2d at 1056. The Government only had to comply with the
common law obligations, discussed in Citizens Bank. Namely, the Government first made “a
decision to effectuate” the offset. Gov’t App’x at 81 (Mar. 28, 2013 letter from BPA to CEP,
explaining that “[i]f CEP Funding does not pay, [BPA] may, at is discretion and without notice,
offset CEP Funding’s funds”); Gov’t App’x at 90 (Aug. 23, 2013 letter from BPA to CEP,
explaining that BPA “is exercising its right to an administrative offset and setoff and applying
the entire amount owed to CEP Funding against the amount owed by CEP Funding”). In
addition, the Government took “some action accomplishing the [offset]” by declining to return
CEP’s deposits and applied them against the amount that CEP owed BPA. Gov’t App’x at 90.
Moreover, the Government made “a recording of the [offset]” by explaining its actions, in
writing, to CEP. Gov’t App’x at 81 (Mar. 28, 2013 letter); Gov’t App’x at 89–90 (Aug. 23, 2013
letter). Therefore, the Government was within its rights to effect a common law offset, not
subject to the DCIA.
        In the alternative, Plaintiff argues that the July, 23 2013 ratification of its assignment was
effective prior to the Government’s August 1, 2013 offset. Pl. Resp. at 14. But, Plaintiff did not
provide notice of the assignment to the Government until August 6, 2014. Compl. ¶ 54 (“The
Bank provided BPA written notice of the assignment of CEP’s interest in the Interconnection
Deposits to the Bank on August 6, 2014.”). The Claims Act authorizes assignments only
“when . . . the assignee files a written notice of assignment . . . with the contracting official or the
head of the agency[.]” 31 U.S.C. § 3727(c)(3). Therefore, the July 23, 2013 ratification was not
sufficient, because it was not a written notice filed with the contracting official or the head of
BPA. As the record reflects, the Government did not receive “a written notice of the
assignment” prior to August 6, 2014. Compare Compl. ¶ 53 (“CEP assigned to the Bank all of
CEP’s rights to the Interconnection Deposits in a Bill of Sale executed on July 23, 2013.”), with
Compl. ¶ 54 (“The Bank provided BPA written notice of the assignment of CEP’s interest in the
Interconnection Deposits to the Bank on August 6, 2014.”). Therefore, Plaintiff failed to provide
proper notice of the assignment to the Government prior to the August 1, 2013 offset.
        For these reasons, the court has determined that there is no genuine issue of material fact
at issue and that the Government is entitled to judgment as a matter of law as to Count III of
Plaintiff’s September 23, 2014 Complaint. See RCFC 56(c).

       G.      Count IV: Attorneys’ Fees Pursuant To The Equal Access To Justice Act.

        Plaintiff argues it “is entitled to an award of attorneys’ fees in this action under the Equal
Access to Justice Act, 28 U.S.C. § 2412” (“EAJA”). Compl. ¶ 76. The EAJA provides that “a
[federal trial] court shall award to a prevailing party other than the United States fees and
expenses . . . in any civil action . . . brought by or against the United States in any court having
jurisdiction of that action[.]” 28 U.S.C. § 2412(d)(1)(A) (emphasis added). To adjudicate a
claim under the EAJA, the court must have an independent basis of jurisdiction for the
underlying claim. See Burkhardt v. Gober, 232 F.3d 1363, 1368 (Fed. Cir. 2000) (“The Court of
Appeals for Veterans Claims . . . determined that it did not have jurisdiction over the claim that
gave rise to the contested fees and expenses. . . . [T]he Court of Appeals for Veterans Claims
was correct in interpreting the language of the EAJA to preclude [it] from awarding [the

                                                  15
plaintiff] the fees incurred in that claim.”); see also Melkonyan v. Sullivan, 501 U.S. 89, 91
(1991) (“A party that prevails against the United States in a civil action is entitled, in certain
circumstances, to an award of attorney’s fees, court costs, and other expenses.”) (emphasis
added).
       Because Plaintiff is not a prevailing party, Plaintiff is not entitled to attorneys’ fees under
the EAJA. Therefore, Count IV of the September 23, 2014 Complaint is dismissed. See 28
U.S.C. § 2412(d)(1)(A).

IV.    CONCLUSION.

        For the reasons discussed herein, pursuant to RCFC 12(b)(1), RCFC 12(b)(6), and RCFC
56(c), Plaintiff’s September 23, 2014 Complaint must be dismissed. The Clerk of Court is
directed to dismiss Plaintiff’s September 23, 2014 Complaint.

       IT IS SO ORDERED.


                                                              /s/ Susan G. Braden
                                                              Susan G. Braden,
                                                              Judge




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