Cardiosom, L.l.c. v. United States

United States Court of Appeals
for the Federal Circuit
__________________________
CARDIOSOM, L.L.C.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
2010-5109
__________________________
Appeal from the United States Court of Federal
Claims in case no. 08-CV-533, Judge Lawrence M. Baskir.
__________________________
Decided: August 31, 2011
__________________________
JERRY STOUCK , Greenberg Traurig, LLP, of Washing-
ton, DC, argued for plaintiff-appellant. With him on the
brief were GREGORY J. M ORICAL, Dormir, Inc., of Carmel,
Indiana, and ELENA B. G OBEYN , of Zionsville, Indiana.
ANUJ VOHRA , Trial Attorney, Commercial Litigation
Branch, Civil Division, United States Department of
Justice, of Washington, DC, argued for defendant-
appellee. With him on the brief were TONY WEST, Assis-
tant Attorney General, JEANNE E. D AVIDSON , Director,
and M ARK A. M ELNICK , Assistant Director.
__________________________
Before LINN , PLAGER, and DYK , Circuit Judges.

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CARDIOSOM v. US 2
PLAGER, Circuit Judge.
This case calls on us to determine whether, as Plain-
tiff-Appellant argues, the United States Court of Federal
Claims (“Court of Federal Claims”) has subject matter
jurisdiction under the Tucker Act, 28 U.S.C. § 1491(a)(1),
over a breach of contract claim, when a statute related to
the claim was read by that court to bar judicial review.
Congress, in 2008, enacted a revision to part of the
Medicare statutes, known as the Medicare Improvements
for Patients and Providers Act of 2008, Pub. L. 110-275,
codified at 42 U.S.C. § 1395w-3 (the “2008 Amendment”).
The 2008 Amendment unilaterally terminated a number
of medical equipment and supplies contracts that had
been made previously with individual providers by the
United States (the “Government”) under an earlier ver-
sion of the statutes. The same amendment purported to
deny “an independent cause of action or right to adminis-
trative or judicial review with regard to the termina-
tion[s] . . . .” 42 U.S.C. § 1395w-3(a)(1)(D)(i). Plaintiff,
whose contracts were terminated as a consequence of the
2008 Amendment, sued the Government in the Court of
Federal Claims on the grounds that the termination
unlawfully breached its contract, entitling plaintiff to
damages for the breach. The Court of Federal Claims, at
the behest of the Government, dismissed the suit, holding
that Congress in the above-noted language had effectively
withdrawn the court’s subject matter jurisdiction over
such a claim. Cardiosom v. United States, 91 Fed. Cl.
659, 662-63 (2010).
For the reasons we shall explain, we hold that the
2008 Amendment did not withdraw traditional contract
jurisdiction under the Tucker Act; plaintiff states a claim
over which the Court of Federal Claims has jurisdiction.
The judgment of the Court of Federal Claims is reversed,
and the matter is remanded for further proceedings
consistent with this opinion.

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CARDIOSOM v. US 3
BACKGROUND
Title XVIII of the Social Security Act, commonly
known as Medicare, establishes a federally funded health
insurance program for the elderly and disabled.
42 U.S.C. § 1395. The Medicare program is divided into
Part A, which provides insurance coverage for inpatient
hospital treatment and related post-hospital expenses,
and Part B, which is a voluntary program that provides
beneficiaries with supplemental medical insurance bene-
fits. In December 2003, Congress modified Medicare Part
B through the Medicare and Prescription Drug, Improve-
ment, and Modernization Act of 2003 (“2003 MMA”), Pub.
L. No. 108-173. The 2003 MMA, in part, created a com-
petitive acquisition program (“CAP”) for items such as
durable medical equipment and medical supplies. See 42
U.S.C. § 1395w-3(a)(2).
Plaintiff Cardiosom, L.L.C. (“Cardiosom”) supplies
oxygen and respiratory equipment and supplies for the
treatment of sleep disorders. In July 2007, Cardiosom
submitted a bid for the first round of the CAP to supply
its equipment and supplies in nine of the ten areas desig-
nated by the Government. Cardiosom won its bid in all
nine designated areas and was awarded a supplier con-
tract for a three-year term beginning on July 1, 2008.
Cardiosom, 91 Fed. Cl. at 661. Congress, however, modi-
fied the acquisition program by enacting the 2008
Amendment on July 15, 2008. The 2008 Amendment
terminated all existing contracts, including Cardiosom’s,
which were in effect prior to the date of the enactment.
See 42 U.S.C. § 1395w-3(a)(1)(D)(i)(I).
In a letter dated July 21, 2008, the Government noti-
fied Cardiosom that its contract was terminated effective
June 30, 2008. Cardiosom promptly filed a complaint in
the Court of Federal Claims alleging that the contract
termination resulted in a breach of contract, or alterna-
tively, that it resulted in an uncompensated taking of

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CARDIOSOM v. US 4
property prohibited by the Fifth Amendment. Cardiosom,
91 Fed. Cl. at 661-62. The trial court dismissed the
complaint for lack of subject matter jurisdiction, relying
upon the last sentence in 42 U.S.C. § 1395w-3(a)(1)(D)(i),
which states that “[n]othing in subclause (I) [the clause
stating that the contracts were terminated] shall be
construed to provide an independent cause of action or
right to administrative or judicial review with regard to
the termination provided under such subclause.” Id. The
trial judge concluded that the plain words of the statute
“prohibit contractors from bringing any suit arising from
the contract termination, such as claims for damages
resulting from the termination.” Id. at 662.
Cardiosom timely appealed the decision of the Court
of Federal Claims; we have jurisdiction pursuant to 28
U.S.C. § 1295(a)(3).
D ISCUSSION
1.
The Tucker Act, 28 U.S.C. § 1491, provides the Court
of Federal Claims with subject matter jurisdiction over a
large body of causes that can be brought against the
Government, and provides a comparably broad waiver of
that remnant of unlimited privilege the English Kings
exercised over subjects known as “sovereign immunity.”
United States v. Mitchell, 463 U.S. 206, 217-19 (1983).
Included in the jurisdictional grant and waiver under the
Tucker Act are claims for breach of contract, such as the
one at issue in this case.
Sovereign immunity was thought to be a part of the
common law that was incorporated into the United States
when we became a nation, though the respect given that
doctrine, a continuing source of dispute and litigation, has
varied with time and circumstance. See Vicki C. Jackson,
Suing the Federal Government: Sovereignty, Immunity,

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CARDIOSOM v. US 5
and Judicial Independence, 35 Geo. Wash. Int’l L. Rev.
521 (2003). With regard to Congress’s withholding sub-
ject matter jurisdiction from a court that already has had
it established, our law is clear—such a re-invocation of
sovereign immunity by Congress must be done unambi-
guously. Presault v. Interstate Commerce Comm’n, 494
U.S. 1, 12 (1990) (“The proper inquiry is not whether the
statute expresses an affirmative showing of congressional
intent to permit recourse to a Tucker Act remedy, but
rather whether Congress has in the statute withdrawn
the Tucker Act grant of jurisdiction to the Claims Court to
hear a suit involving the statute.”) (internal citations
omitted); Slattery v. United States, 635 F.3d 1298, 1301
(Fed. Cir. 2011) (en banc) (“[A] claim that is within the
subject matter of the Tucker Act is not excluded from the
jurisdiction of the Court of Federal Claims, or jurisdiction
of the district courts under the ‘Little’ Tucker Act, unless
such jurisdiction has been unambiguously withdrawn or
withheld by a statute specifying such exclusion.”).
When in 2003 Congress enacted the 2003 MMA, it in-
cluded an explicit provision prohibiting the administra-
tive or judicial review of specified steps and procedures in
the competitive acquisition process:
There shall be no administrative or judicial re-
view under section 1395ff of this title, section
1395oo of this title, or otherwise, of—
(A) the establishment of payment amounts under
paragraph (5);
(B) the awarding of contracts under this section;
(C) the designation of competitive acquisition ar-
eas under subsection (a)(1)(A) of this section and
the identification of areas under subsection
(a)(1)(D)(iii) of this section; . . .

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CARDIOSOM v. US 6
(E) the selection of items and services for competi-
tive acquisition under subsection (a)(2) of this sec-
tion;
(F) the bidding structure and number of contrac-
tors selected under this section . . . .
42 U.S.C. § 1395w-3(b)(11).
Congress clearly intended that Medicare could pro-
ceed with these initial administrative processes without
risk of litigation blocking the execution of the program.
When Congress clearly expresses its intent, as it did here,
courts honor Congress’s wishes. See, e.g., Painter v.
Shalala, 97 F.3d 1351, 1356 (10th Cir. 1996) (finding that
the district court did not have jurisdiction when Congress
clearly indicated its intent to preclude administrative and
judicial review of the conversion factors specified for
Medicare Part B claims); All Fla. Network Corp. v. United
States, 82 Fed. Cl. 468, 474 (2008) (concluding that the
Medicare statute specifically precluded judicial review of
the eligibility determinations and qualifying mechanisms
used by the Government to award competitive acquisition
contracts); Carolina Med. Sales, Inc. v. Leavitt, 559 F.
Supp. 2d 69, 78-79 (D.D.C. 2008) (granting the Govern-
ment’s motion to dismiss because the decision to include
mail-order diabetic supplies constituted a selection of
items and services for which judicial review is not avail-
able).
The purpose of withholding judicial review in these
instances is to insulate these management decisions by
the Medicare Administration from the potential of inordi-
nate delays that would transpire if every such manage-
ment decision were open to an upfront challenge by some
disappointed group. If there were to be legal challenges,
they would have to be made after the fact. See, e.g., H.R.
Rep. No. 108-391, at 576-77 (2003) (Conf. Rep.) (explain-
ing that the CAP in the 2003 MMA provides for flexibility

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CARDIOSOM v. US 7
on the part of the Department of Health and Human
Services Secretary (the “Secretary”) “to waive certain
provisions of the Federal Acquisition Regulation that are
necessary for the efficient implementation of this pro-
gram” and that such decisions are not subject to adminis-
trative or judicial review).
2.
In the case before us, Congress wanted to change the
way the Secretary awarded these supply and service
contracts. Congress could have simply mandated a new
way for awarding future contracts, leaving the old ones to
play out in the normal course. Instead, Congress chose to
order a blanket termination of the existing contracts so
that they could be replaced with an entirely new set of
contractual arrangements. To accomplish this, Congress
provided:
(I) the contracts awarded under this section
before July 15, 2008, are terminated, no
payment shall be made under this sub-
chapter on or after July 15, 2008, based
on such a contract, and, to the extent that
any damages may be applicable as a re-
sult of the termination of such contracts,
such damages shall be payable from the
Federal Supplementary Medical Insur-
ance Trust Fund under section 1395t of
this title;
(II) the Secretary shall conduct the competi-
tion for such round in a manner so that it
occurs in 2009 with respect to the same
items and services and the same areas,
except as provided in subclauses (III) and
(IV);

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CARDIOSOM v. US 8
(III) the Secretary shall exclude Puerto Rico so
that such round of competition covers 9,
instead of 10, of the largest metropolitan
statistical areas; and
(IV) there shall be excluded negative pressure
wound therapy items and services.
Nothing in subclause (I) shall be construed to pro-
vide an independent cause of action or right to
administrative or judicial review with regard to
the termination provided under such subclause.
42 U.S.C. § 1395w-3(a)(1)(D)(i)(I-IV).
There are several things to be noted about this provi-
sion. In subclause (I) Congress recognized that its action
terminating the existing contracts might well have ad-
verse consequences in terms of damages for breach.
Perhaps remembering its experience with the Savings
and Loan imbroglio, see United States v. Winstar Corp.,
518 U.S. 839 (1996), the termination provision was ac-
companied by an express recognition that payment of
damages might be needed. A particular fund from which
such damages were to be paid was specified. Presumably
concerned about the inevitability of lawsuits of one kind
or another, Congress also specified that there shall be no
“independent cause of action or right to administrative or
judicial review with regard to the termination” provided
under that subclause. 42 U.S.C. § 1395w-3(a)(1)(D)(i).
The phrasing of this particular withholding provi-
sion—barring review of an “independent cause of ac-
tion”—is a phrase most curious. Independent of what?
There appears to be no exact counterpart in other Medi-
care withholding provisions. When asked at oral argu-
ment, Government counsel acknowledged that he knew of
no other jurisdictional withholding provision quite like
that. Oral Argument (May 5, 2011) at 14:53-16:24, avail-

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CARDIOSOM v. US 9
able at http://www.cafc.uscourts.gov/oral-argument-
recordings/2010-5109/all. Moreover, nothing in the legis-
lative history, such as it is, casts light on the possible
meanings of the phrase.
Cardiosom, combining the peculiarity of the language
with the requirement that a withholding provision, in
order to be effective, must be unambiguous, argues that
that principle alone is sufficient to defeat the Govern-
ment’s position that his client is without a judicial rem-
edy. Absent an unambiguous withdrawal of jurisdiction,
argues Cardiosom, the Tucker Act forum remains avail-
able.
The Government response is to repeat its basic posi-
tion that the provision is clear, needs no interpretation,
and unambiguously withdraws jurisdiction over these
damage claims. Given the phraseology in question, we
find that unpersuasive. Indeed, when pressed, Govern-
ment counsel conceded at argument that the language of
“independent cause of action” was a bit odd. Id. at 20:38-
20:55. Neither Cardiosom’s negative conclusion that this
provision has no understandable meaning, nor the Gov-
ernment’s recitation that this facially ambiguous provi-
sion is clear on its face, carries the day. With only a little
effort, the court can identify several alternative interpre-
tations for this phraseology in the particular context of
the 2008 Amendment, any one of which would be consis-
tent with Congress’s apparent purpose.
3.
First, there is a straightforward reading of the provi-
sion. Paragraph (I) of the provision recognizes that
damages may need to be paid as a result of the contract
breaches caused by the unilateral terminations, and
authorizes payment from a specific insurance trust fund—
the Federal Supplementary Medical Insurance Trust
Fund, a part of the Centers for Medicare & Medicaid

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CARDIOSOM v. US 10
Services (“CMS”)—from which money judgments resulting
from the contract terminations may be paid. 42 U.S.C.
§ 1395w-3(a)(1)(D)(i)(I). Ordinarily, when damage awards
are made against the Government for breach of contract,
say by the Court of Federal Claims, they are paid out of a
general Judgment Fund. See 31 U.S.C. § 1304, 28 U.S.C.
§ 2517; see also, e.g., Lee by Lee v. United States, 124 F.3d
1291, 1295 (Fed. Cir. 1997) (finding that a reimbursement
provision within the Military Child Care Act of 1989
required that damages resulting from a breach of contract
claim be paid from appropriated funds of the Department
of Defense rather than the Judgment Fund).
This suggests that the Secretary might establish,
within the Medicare program, some sort of administrative
forum charged with paying reasonable compensation from
that fund to the parties whose contracts were unilaterally
terminated. Consistent with this interpretation, Con-
gress could have intended that the statute not be read to
provide an “independent cause of action or right to admin-
istrative or judicial review with regard to the termina-
tion,” with respect to the structure of the administrative
compensation mechanism established by the Secretary, or
perhaps even to the rewards from the special fund created
by the statute.
In fact, the Secretary has created just such an admin-
istrative mechanism. Under the authority of the 2008
Amendment, the Secretary, by regulation, established a
process for compensating contractors whose contracts
were terminated by the Act. See 42 C.F.R. § 414.425.
Under this process, any aggrieved supplier that believes it
has been damaged by the termination of its competitive
bid contract may file a claim. Id. at § (a)(1). Claims must
be filed within 90 days of January 1, 2010. The regula-
tion specifies in detail the types of injuries that are com-
pensable, and those that are non-compensable. For
example, damages documented through receipts are

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CARDIOSOM v. US 11
compensable but any profits the supplier may have ex-
pected from the contract are not. Id. at §§ (c)(3)(i), (d)(6).
The claims are reviewed by the Center for Medicare &
Medicaid Services Competitive Bidding Implementation
Contractor (“CBIC”), who makes a recommendation to the
Center, which is designated as the “Determining Author-
ity.” Id. at § (f)(1)-(2). The Determining Authority is
supposed to make a determination within 120 days of
receipt of the claim by the CBIC, subject to limited excep-
tions for applicant delays, complexity, or large workload.
Id. at § (g). The Determining Authority’s determination
“is final and not subject to administrative or judicial
review.” Id. at § (f)(2)(vi).
Shortly after the Court of Federal Claims dismissed
its complaint, Cardiosom, on March 29, 2010, submitted a
claim to the CBIC pursuant to the regulation. At the time
of oral argument before this court (May 5, 2011) Cardio-
som was still awaiting a response from CMS on its claim.
Both the 2008 Amendment that authorized payment
of damages resulting from the contract terminations, and
the administrative process established specifically for the
purpose of paying such damages, see 74 Fed. Reg. 33,644
(July 13, 2009), leave a number of questions unanswered.
In particular, there are questions with regard to the
interaction of this administrative process with the estab-
lished judicial process for resolving Government contract
disputes under the Tucker Act.
It is without question that an aggrieved supplier can-
not obtain a double recovery, that is, be compensated
twice, once by the administrative process and once by a
court, for the same injuries resulting from the termina-
tion of its contract. Less clear is whether an aggrieved
supplier who obtains only a partial recovery of damages
through the administrative process—i.e., for those ele-
ments of damage recoverable through that process—could

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CARDIOSOM v. US 12
thereafter maintain a court suit for other damage ele-
ments, such as loss of profits (assuming the terms of the
original contract do not preclude such additional elements
of damage). Even less clear is whether there is any
obligation on the part of the aggrieved supplier to exhaust
its administrative remedies by first filing its claim under
the administrative process before exercising its right to a
suit in the Court of Federal Claims.
It is tempting to explore these unanswered questions,
both because they are interesting and because the parties
and the trial court might benefit from early answers.
But, that is a temptation to be resisted. None are ques-
tions directly raised in this appeal, and the parties have
not briefed or argued them. We thus leave to the trial
court in the first instance the responsibility to address
such questions if, on the remand, any of them become
relevant and are brought properly before the court.
A second, somewhat different but equally plausible,
interpretation of the judicial review withholding provision
is that there is to be no independent judicial review of
Congress’s decision to terminate the existing contracts.
That is, no challenge with regard to whether a particular
contract was terminated nunc pro tunc is to be heard,
either in administrative or judicial proceedings. Congress
has chosen the unilateral termination route, and the
contracts are to be taken conclusively as terminated.
Absent some Constitutional transgression, Congress has
invoked its sovereign right to make its termination deci-
sion final and unreviewable.
A third possible reading of the statutory language is
that it is intended to prevent judicial or administrative
review by third parties. That is, “independent” in the
statute could be interpreted to mean “independent of the
contracting parties,” precluding litigation over collateral
damages arising out of the terminations. And of course
the Government’s reading—that the statute is unambigu-

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CARDIOSOM v. US 13
ous—is yet another reading, though we find it unconvinc-
ing and inconsistent with the obvious ambiguity of the
clause.
4.
As noted above, the Tucker Act broadly waives the
government’s sovereign immunity for claims asserting
breach of contract. 28 U.S.C. § 1491; United States v.
Mitchell, 463 U.S. 206, 216 (1983) (“[I]f a claim falls
within the terms of the Tucker Act, the United States has
presumptively consented to suit.”). For a statute to
reinstate the government’s sovereign immunity, Congress
must manifest an “unambiguous intention to withdraw
the Tucker Act remedy.” Ruckelshaus v. Monsanto Co.,
467 U.S. 968, 1019 (1984); Slattery, 635 F.3d at 1301. To
do so, “the legislative intent to repeal must be manifest in
the positive repugnancy between the provisions” of the
statute and the Tucker Act. California v. United States,
271 F.3d 1377, 1382 (Fed. Cir. 2001) (citing United States
v. Borden Co., 308 U.S. 188, 199 (1939)). “Positive repug-
nancy means that the statute [is] incapable of co-
existence” with the Tucker Act. Id. (citing Ruckelshaus,
467 U.S. at 1018).
In California v. United States, 271 F.3d 1377, we ad-
dressed whether the Flood Control Act of 1928 repealed
the Tucker Act’s waiver of sovereign immunity for breach
of contract claims. The immunity provision there stated:
“No liability of any kind shall attach to or rest upon the
United States for any damage from or by floods or flood
waters at any place.” Id. at 1380-81 (citing 33 U.S.C.
§ 702c (1994)). We held that this “broad” immunity
provision did not manifest an unambiguous intent to
withdraw the Tucker Act’s waiver of sovereign immunity.
Id. at 1380, 1388. We noted that the Flood Control Act
failed to mention the Tucker Act, “of which Congress was
surely aware,” and that even if “Congress intended to
expressly partially repeal the Tucker Act, but somehow

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CARDIOSOM v. US 14
failed to do so, . . . our task in construing a statute is
limited to a review of what Congress did, and not what it
later thought it did or what in hindsight it ought to have
done.” Id. at 1383.
This case is even more compelling than California v.
United States because the immunity provision here is not
nearly as broad. Moreover, all the reasonable interpreta-
tions of the immunity provision discussed above are
wholly capable of co-existence with the Tucker Act, in
that they maintain a role for the Tucker Act (i.e., the
allowance of breach of contract claims by contractors
resulting from the terminations compelled by the Act),
and a role for the immunity provision (i.e., as preventing
judicial or administrative review of the compensation
mechanism established by the secretary, or as to whether
the contracts were properly terminated nunc pro tunc).
The existence of reasonable interpretations that are
consistent with the Tucker Act’s waiver of sovereign
immunity compel a finding that the 2008 Amendment did
not manifest the necessary “unambiguous intention to
withdraw the Tucker Act remedy.” Ruckelshaus, 467 U.S.
at 1019.
As we read it, the 2008 Amendment left open the
question of the consequences of Congress’s chosen route,
and any private remedies arising therefrom. More spe-
cifically, the amendment left untrammeled the subject
matter jurisdiction of the Court of Federal Claims to hear
and decide breach of contract claims resulting from these
terminations. Whatever may be the rule regarding non-
reviewability of the act of termination, or the absence of
challenge to the administrative remedy authorized, the
legal consequences of the terminations can still be deter-
mined under existing federal law governing contract
disputes with the Government
For purposes of deciding the jurisdictional question,
given our reading of the 2008 Amendment, we need not

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CARDIOSOM v. US 15
here address any Constitutional questions that might
arise when there is legislative intervention into estab-
lished contract rights. See, e.g., Winstar, 518 U.S. at 897
(specifying that the Government cannot repudiate its
contracts through its exercise of sovereign capacity when
the regulatory and contractual characteristics of the
Government are fused together). Our reading of the
statute has the further virtue of being consistent with
Congress’s pattern of preventing administrative decision
making in the Medicare program from being hindered at
the inception by the potential delays of multiple litiga-
tions. See, e.g. Amgen, Inc. v. Smith, 357 F.3d 103 (D.C.
Cir. 2004); Am. Soc. of Cataract and Refractive Surgery v.
Thompson, 279 F.3d 447 (7th Cir. 2002); Carolina Med.
Sales, Inc. v. Leavitt, 559 F. Supp. 2d at 69; All Fla.
Network, Corp. v. United States, 82 Fed. Cl. at 468. The
statute in effect clears away the prior administrative
actions in awarding contracts under the old law and
leaves the Secretary free to undertake further adminis-
trative contract actions without the hinderance of the
prior arrangements, but leaves unaffected the rights and
remedies created by the Government’s prior contractual
obligations.
In summary, the Government’s attempt to use this
provision to totally block judicial review of plaintiff’s
breach of contract claim is inconsistent with our estab-
lished law, and contrary to the apparent purpose of Con-
gress in enacting such a provision. Absent the clear and
unequivocal language necessary to establish Congres-
sional intention to withdraw jurisdiction from the Court
of Federal Claims, we cannot find that the statute is
effective to withdraw jurisdiction over the contract dis-
pute alleged here. Plaintiff is entitled under the Tucker
Act to its day in court.

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CARDIOSOM v. US 16
CONCLUSION
The judgment of the Court of Federal Claims that the
court lacks subject matter jurisdiction over this contract
claim is reversed, and the matter is remanded for further
proceedings consistent with this opinion. For the same
reasons, the Court of Federal Claims’ Tucker Act subject
matter jurisdiction over plaintiff’s Fifth Amendment
takings claim is also unaffected by the 2008 Amendment;
the court’s judgment in that regard is also reversed.
Depending on the outcome of the contract dispute, it may
or may not be necessary for the court to reach the takings
claim. We leave to the sound discretion of the trial court
when, if at all, it will be appropriate to do so.1
REVERSED AND REMANDED
1 At this stage of the proceedings we offer no opin-
ion on what, if any, merits defenses the Government may
have available to either the contract or takings claims.

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