Merritt v. United States
45 S. Ct. 278, 1925 U.S. LEXIS 743, 267 U.S. 338 (1925)
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Rule of Law:
The Tucker Act waives sovereign immunity for claims against the United States based on express or implied-in-fact contracts, but it does not create a right of action for claims based on contracts implied in law (quasi-contracts), such as a claim for money had and received.
Facts:
- The United States government contracted with Panama Knitting Mills (Mills) to purchase khaki at a set price.
- Mills, the prime contractor, entered into a subcontract with Merritt to supply the khaki.
- The main contract was later cancelled, and the government settled with Mills, paying an agreed-upon rate for half the original quantity.
- Mills falsely represented to Merritt that the government's settlement price was significantly lower than it actually was.
- Relying on this misrepresentation, Merritt agreed to release Mills from the subcontract for a substantially reduced payment.
- Upon discovering that Mills had defrauded Merritt, the U.S. government compelled Mills to repay the difference between the actual settlement price and the fraudulent price Merritt was told.
- Merritt sought to recover this specific amount of repaid money from the U.S. government.
Procedural Posture:
- Merritt (plaintiff) filed a petition against the United States (defendant) in the Court of Claims, the court of first instance for this type of claim.
- The Court of Claims dismissed Merritt's petition on demurrer for failure to state a cause of action.
- Merritt appealed the dismissal directly to the Supreme Court of the United States.
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Issue:
Does the Tucker Act permit a subcontractor to sue the United States for money had and received when the government recovers funds from a prime contractor who defrauded that subcontractor?
Opinions:
Majority - Justice Brandeis
No. The Tucker Act does not give a right of action against the United States in those cases where, if the transaction were between private parties, recovery could be had upon a contract implied in law. A suit against the government under the Tucker Act must be founded upon a contract, express or implied in fact, not a quasi-contractual theory like unjust enrichment or money had and received. The plaintiff's petition does not allege any contract, express or implied in fact, with the government. Furthermore, no facts are alleged to support a claim that the government exacted the repayment from the prime contractor for the benefit of the plaintiff; the repayment was compelled solely for the benefit of the government, which had been defrauded.
Analysis:
This case establishes a crucial limitation on the waiver of sovereign immunity under the Tucker Act, cementing the distinction between contracts implied-in-fact (actionable against the U.S.) and contracts implied-in-law (not actionable). The decision prevents the federal government from being treated as a de facto stakeholder or guarantor in disputes between its prime contractors and their subcontractors. This precedent forces plaintiffs suing the U.S. to ground their claims in an actual agreement, rather than on equitable principles, significantly narrowing the scope of potential government liability for quasi-contractual claims.
