Avtel Services, Inc. v. United States

United States Court of Appeals for the Federal Circuit
2006-5060
AVTEL SERVICES, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
and
KING AEROSPACE, INC.,
Defendant-Appellee.
Howell Roger Riggs, Dick, Riggs, Miller & Stem, LLP, of Huntsville, Alabama,
argued for plaintiff-appellant. With him on the brief were David H. Stem, Jr., and Patrick O.
Miller. Of counsel was Timothy Paul Pittman.
Elizabeth A. Holt, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, argued for defendant-appellee,
United States. With her on the brief was Peter D. Keisler, Assistant Attorney General, and
Todd M. Hughes, Assistant Director.
Marshall J. Doke, Jr., Gardere Wynne Sewell LLP, of Dallas, Texas, argued for
defendant-appellee, King Aerospace, Inc. With him on the brief was Stacy R. Obenhaus.
Appealed from: United States Court of Federal Claims
Judge Marian Blank Horn
.

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United States Court of Appeals for the Federal Circuit
2006-5060
AVTEL SERVICES, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
and
KING AEROSPACE, INC.,
Defendant-Appellee.
Before NEWMAN, RADER, and PROST, Circuit Judges.
Dissenting opinion filed by Circuit Judge NEWMAN.
PER CURIAM.
ORDER
Avtel Services, Inc. (Avtel) seeks a resolicitation or reevaluation of a contract that
was awarded to King Aerospace, Inc. by the United States. This court only possesses
jurisdiction over Avtel's appeal if it can be awarded the relief it seeks. Avtel has made a
general assignment to another party to liquidate its assets and distribute the proceeds
to creditors and admits that it does not have the resources necessary to perform the
contract.
2006-5060

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Accordingly,
IT IS ORDERED THAT:
This appeal is dismissed for want of jurisdiction based on Avtel's bankruptcy
status.
FOR THE COURT
_August 21 2007________ _s/Jan Horbaly_________________
Date Jan Horbaly
Clerk

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United States Court of Appeals for the Federal Circuit
2006-5060
AVTEL SERVICES, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
and
KING AEROSPACE, INC.,
Defendant-Appellee.
NEWMAN, Circuit Judge, dissenting.
I respectfully dissent. Avtel's insolvency did not extinguish its existing claims upon
the Assignment for the Benefit of Creditors under California law. The claims of an insolvent
entity do not disappear, whether the insolvent entity is seeking to reorganize or to continue
or to dissolve. To the contrary, the claims survive for the benefit of the insolvent entity and
its successors and creditors. See, e.g., Segal v. Rochelle, 382 U.S. 375, 380 (1966) (the
bankruptcy filing did not extinguish any pre-petition cause of action). The "anti-assignment"
stricture of government contracting law does not apply to such assignments. See United
States v. Shannon, 342 U.S. 288, 292 (1952) ("In the ninety-nine-year history of the Anti-
Assignment Act, this Court has recognized as exceptions to the broad sweep of the statute

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2006-5060 2
two types of voluntary assignments (aside from voluntary assignments made after a claim
has been allowed): transfers by will, . . . and general assignments for the benefit of
creditors.") (citations omitted). From the panel majority's holding that this Assignment
"moots" the claim and this appeal, I must, respectfully, dissent.
This bid protest claim was filed by Avtel after it lost the bid for renewal of a contract
of which it was the incumbent contractor. Avtel asserts that this procurement was
accompanied by various violations of the Procurement Integrity Act, 41 U.S.C. '423(b)
("Prohibition on obtaining procurement information"). Exposure of violations, instituted by
persons with an interest in the procurement, serves a principle purpose of 31 U.S.C. '3551,
the Competition in Contracting Act (protest may be "based in whole or in part on
improprieties concerning the award of the contract"). While the case was pending in the
Court of Federal Claims Avtel entered into an Assignment for the Benefit of Creditors under
California law and suspended its activities, in accordance with California Revenue and Tax
Code '23301. Avtel has since obtained a Certificate of Revival restoring it to active
corporate status. The Assignment did not extinguish the claims that Avtel possessed; to
the contrary, the continuation and prosecution of existing claims is contemplated by the
California statute. With all respect to my colleagues on this panel, they are incorrect in
holding that the Assignment rendered "moot" Avtel's pending bid protest.
The Court of Federal Claims and the district courts have jurisdiction of objections by
an interested party "to a solicitation by a Federal agency for bids or proposals for a
proposed contract or to a proposed award or the award of a contract or any alleged
violation of statute or regulation in connection with a procurement or proposed
procurement." 28 U.S.C. '1491(b). An "interested party" includes an "actual or prospective

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2006-5060 3
bidder or offeror whose direct economic interest would be affected by the award of the
contract or by failure to award the contract." E.g., Am. Fed. of Gov't Employees v. United
States, 258 F.3d 1294, 1302 (Fed. Cir. 2001) (quoting 31 U.S.C. '3551(2)). Avtel was an
actual bidder, and the adverse effect on its direct economic interest is made crystal clear by
its ensuing insolvency.
The government does not dispute that Avtel was prejudiced by loss of the contract;
nor, however, does the government mention the alleged improprieties. Instead, the
government argues that "the case is moot" because "there is no reasonable expectation the
violations it alleged will recur, since Avtel [is going out of business]." Gov't Supplemental
Brief at 9 n.4. My colleagues agree, and deny Avtel the opportunity to press its claim on
the ground that Avtel could not now perform the contract. Thus the charges of wrongdoing
in the award of this contract are insulated from scrutiny, and access to remedy denied, on
the ground that the injury to Avtel rendered Avtel incapable of complaining about it. That is
not the law.
An entity with a claim against the United States does not lose the right to press that
claim if insolvency intervenes. When Avtel filed the bid protest, it requested that the
contract be awarded to it or reprocured, a remedy that would have been available had the
agency acted favorably. My colleagues' ruling that Avtel cannot now perform the contract,
a position that Avtel disputes, has no relation to whether Avtel could have performed the
contract at the time it lost the bid. Contrary to the statement in the Court's Order, Avtel
states that it can indeed perform the contract, as it did before its renewal bid was rejected.
Avtel's former Chief Executive Officer Telford Allen, III, states in his February 2007
declaration: "In the event that an award of the ARL contract is directed to Avtel, the

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2006-5060 4
stockholders and management plan to . . . have the assets of Avtel restored to the
corporate entity [and] Avtel, upon reassignment of assets . . . can meet all of the
responsibility criteria established by FAR 9.103, FAR 9.104, et. seq." Indeed, performance
capability is not disputed. The holding that no protest can be made is an incorrect
implementation of the bid protest statute, which is designed to expose improper bidding
practices in government procurement and to protect the victims of such improprieties. Nor
is it a correct implementation of the insolvency statutes, whose purpose is to protect both
the insolvent entity and its creditors.
Precedent illustrates that in successful bid protests the contract is often well into
performance by the wrongful awardee by the time the protest has been finally resolved in
court. The issue is not Avtel's ability to perform a contract whose time of performance has
past, but whether Avtel is entitled to relief if its bid protest arguments are correct. See 28
U.S.C. '1491(b)(2):
(2) To afford relief in such an action, the courts may award any relief that the
court considers proper, including declaratory and injunctive relief except that
any monetary relief shall be limited to bid preparation and proposal costs.
In filing its complaints starting in 2004, Avtel asked that the bid be awarded to it or
subjected to reprocurement. This does not moot any relief "that the court considers
proper," an issue not explored. It has not been explored whether "[t]he Government has
prematurely predicted that Avtel is without the ability to obtain the necessary resources to
accept an award of the contract in this case." Avtel's supplementary filing, February 20,
2007. In Bender Shipbuilding & Repair Co. v. United States, 297 F.3d 1358, 1362 (Fed.
Cir. 2002) the court sustained the award of a contract to a bidder that was in Chapter 11
Bankruptcy at the time of the award.

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2006-5060 5
"The burden of demonstrating mootness 'is a heavy one.'" County of Los Angeles v.
Davis, 440 U.S. 675, 631 (1978) (quoting United States v. W.T. Grant Co., 345 U.S. 629,
632-33 (1953)). To succeed in a bid protest, the protestor must establish that it was
prejudiced by erroneous or improper procedures. However, "[t]o establish prejudice, a
protestor is not required to show that but for the alleged error, the protestor would have
been awarded the contract." Data Gen. Corp. v. Johnson, 78 F.3d 1556, 1562 (Fed. Cir.
1986). See Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996) ("To
establish competitive prejudice, a protester must demonstrate that but for the alleged error,
there was a 'substantial chance that [it] would receive an award-that it was within the zone
of active consideration.'") (emphasis in original). These factual issues require review; the
presence of unresolved issues negates a ruling of "mootness":
[J]urisdiction, properly acquired, may abate if the case becomes moot
because (1) it can be said with assurance that "there is no reasonable
expectation . . ." that the alleged violation will recur, . . . and (2) interim relief
or events have completely and irrevocably eradicated the effects of the
alleged violation.
County of Los Angeles v. Davis, 440 U.S. at 631. Neither of these criteria has been met.
As to the first criterion, if there were indeed the alleged improprieties, concealing them is
the least likely way to prevent recurrence of the violation. As to the second criterion, the
interim events included Avtel's insolvency, whose effects surely have not been "completely
and irrevocably eradicated."
Further, Avtel's situation in the context of the California proceedings has not been
explored. Paragraph 1 of that "General Assignment" includes "all choses in action . . . in
which Assignor has an interest." Paragraph 5 states that: "Assignee in its own discretion,
may determine whether to continue all or a part of the business operations, or to liquidate

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2006-5060 6
assignor's assets." Paragraph 8 states that the Assignee has "the right and power to
institute and prosecute legal proceedings in the name of Assignor, the same as if the
Assignor itself had instituted and prosecuted such proceedings or actions." The panel
majority's ruling that "the settlement agreement does not provide for ISG [the Assignee] to
accept obligations for contracts not yet in existence" is of doubtful relevancy, for the
Assignment is all-inclusive and it is not known what remedy would ensue if the protest were
sustained. The protester is not required to affirmatively request only the minimal monetary
relief in order to avoid "mootness." The judicial fashioning of appropriate relief, should the
protest be sustained, is not before us. It is not correct to rule that the protest cannot be
made at all.
Today's ruling of mootness has potentially broad consequences for government
contracting, for it holds that if the losing bidder is pressed into insolvency while its protest is
pending, the right to protest a wrongful award disappears. This is not correct law, and it
subverts legislative policy. I respectfully dissent.

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