December 12, 2017

FIRST NATIONWIDE HOLDINGS LLC v. UNITED STATES POSTAL SERVICE

PSBCA Nos. 6672, 6685

APPEARANCE FOR APPELLANT:
Glenn L. Smith, Esq.
Wheeler Upham, P.C.

APPEARANCE FOR RESPONDENT:
Kate Gurrola, Esq.
Barbara H. Cioffi, Esq.
United States Postal Service Law Department  

OPINION OF THE BOARD
ON APPELLANT’S REQUEST FOR ORDER TO DEFER OFFSETS

First Nationwide Holdings, LLC requested that the Board order the United States Postal Service to defer collection by offset of a Postal Service claim for the return of rent overpayments.  We deny the request.
These disputes involve a post office in Norfolk, Nebraska, that the Postal Service leased from First Nationwide.  First Nationwide filed a monetary claim for damages.  In response, the contracting officer’s May 23, 2017 final decision denied First Nationwide’s claims and also asserted the Postal Service’s own affirmative $100,735.84 claim for alleged overpayments.  (Appeal File Tab 38).  The final decision then stated:
If you fail to comply with this request for reimbursement of the erroneously paid funds, this amount may be garnished from other amounts owed to you by the Postal Service under other contracts, or amounts owed to you by other government agencies.
(Id. at 112).
Although the record does not indicate whether the Postal Service has begun collection, it continues to assert the right to do so.  First Nationwide argues that the Postal Service should be prohibited from collecting its disputed claim by offset while the underlying entitlement is being adjudicated by the Board.
First Nationwide contends that the Postal Service must comply with the requirements of the Debt Collection Act, 31 U.S.C. § 3716, before it may collect offsets claimed in the final decision.  It argues that the Debt Collection Act prohibits collection by offset until a review has been completed, and that the final decision should be construed to have identified the Board as the authority within the Postal Service to conduct that review.  First Nationwide concludes that because the Board is sitting as the Debt Collection Act’s review authority, the Debt Collection Act empowers the Board to enjoin the Postal Service’s offsets until we decide the merits.  Additionally, First Nationwide argues that for reasons of judicial efficiency, the Board should utilize its inherent power to issue such an injunction.  The Postal Service contends that it is entitled to offsets during the pendency of this case, and that the Board lacks the authority to enjoin it from doing so. 
In JM Carranza Trucking Co., PSBCA No. 6354, 11-1 BCA ¶ 34,643, we recognized the Board’s lack of authority under the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109, to grant injunctive relief and concluded that we “cannot grant a stay of Respondent’s collection by offset against contract payments.”  Id., 11-1 BCA at 170,724; see also M.B.F. Corp. (Penner Fin. Grp.), PSBCA Nos. 1298, et al., 1985 WL 16418 (March 6, 1985); Dal Santo, PSBCA No. 1094, 83-1 BCA ¶ 16,292 at 80,959; accord Northrup Grumman Corp., ASBCA Nos. 52178, et al., 01-1 BCA ¶ 31,374 at 154,916 (ASBCA reaching the same conclusion); Applied Ordinance Tech., Inc., ASBCA Nos. 51297, 51543, 98-2 BCA ¶ 30,023 at 148,543 (same).  While First Nationwide acknowledges our decision in Carranza Trucking, it argues that the Board has been provided additional authority by the Debt Collection Act to enjoin the Postal Service’s ability to offset the claim.
However, the Federal Circuit has held that the government is not required to follow the procedures specified in the Debt Collection Act before implementing its common law offset rights because the Debt Collection Act does not apply to intra-contractual or inter-contractual offsets.  Cecile Industr., Inc. v. Cheney, 995 F.2d 1052, 1055-56 (Fed. Cir. 1993); see also California Inflatables, Co., Inc., ASBCA Nos. 45859, 45987, 94-2 BCA ¶ 26,877 at 133,768 (government is permitted to offset intra and inter-contractual proceeds while the substantive rights of the parties are being decided in pending Board appeals without violating contractor’s due process rights).  As the Debt Collection Act does not apply, it cannot provide the Board with authority to stay collection by offset. 
As to First Nationwide’s argument that judicial efficiency considerations empower the Board to utilize its inherent authority to achieve the same result, our inherent authority to control the behavior of parties appearing before us does not extend to injunctive relief which the CDA does not provide.¹
Accordingly, we lack injunctive authority to order the Postal Service to defer collection of its disputed affirmative claim until this case is decided.  First Nationwide’s request is denied.

Gary E. Shapiro
Administrative Judge
Chairman

I concur:
Alan R. Caramella
Administrative Judge
Vice Chairman

I concur:
Diane M. Mego
Administrative Judge
Board Member