The opinion of the court was delivered by: LASKER
The Agency for International Development (A.I.D.) brought this suit to recover $94,031.99, which it paid to Emons Industries, Inc. and E. Tosse & Co., Inc., (colloquially Emons) on various dates in 1966. Count one alleges that the defendants, exporters of medicinal drugs, breached sales contracts with Vietnamese importers by failing to comply with contract provisions regarding compliance with the Federal Food, Drug and Cosmetic Act (the Act). Count two alleges that shipment of the drugs was illegal under the Act,
thereby entitling A.I.D. to recover the full sum paid for the drug shipments.
Emons moves for summary judgment. It argues that A.I.D. lacks standing to sue for compensatory damages; that the action is time barred; and that A.I.D. is not entitled to a recovery unless it returns the allegedly illegal drugs to the defendants or allows the defendants to retain the drugs quantum valebat as a set-off.
The mechanism by which A.I.D. financed the defendants' transactions with the Vietnamese importers is circuitous. A.I.D. first reached an agreement with the Government of South Vietnam to finance the cost of pharmaceuticals purchased by Vietnamese importers from American companies. A.I.D. then issued Letters of Commitment to American banks, notifying the banks that A.I.D. would provide reimbursement for payments made to American exporters. After the defendants fulfilled the terms of their contracts with the Vietnamese importer by shipping the drugs to Vietnam, the defendants presented to the banks holding the Letter of Commitment a copy of the invoice, a copy of the air or ocean bill of lading and a Supplier's Certificate. In the latter document, the defendants certified to A.I.D. that they had met various A.I.D. requirements, including compliance with letters of credit issued by the banks. The banks then paid the supplier, sent the documentation to A.I.D. and were reimbursed.
Emons argues that, in the contract at issue, A.I.D. is only a promisee in a three-party arrangement in which the Vietnamese are donee third-party beneficiaries. As the promisee, defendants contend, A.I.D. has suffered no pecuniary damages for any breach by the defendants of the sales contract and at most A.I.D. can recover nominal damages. In support of its position, Emons relies heavily on United States v. Thomas B. Bourne Associates, 367 F. Supp. 919 (E.D.Pa., Memorandum and Order dated December 7, 1973). In that case, A.I.D. had contracted with the defendants to furnish engineering services to the Republic of Guyana. The defendants were to have received compensation from a $1,500,000 A.I.D. grant to Guyana. A.I.D. sued to recover damages for the defendants' alleged breach of the contract. The District Court granted the defendants' motion for summary judgment on the ground that A.I.D. was only the promisee in a three-party contract under which Guyana was a third-party donee beneficiary; as the promisee, A.I.D. was not entitled to recover compensatory damages.
The Bourne decision is not dispositive, close as it may be, because unlike Bourne the defendants here were required to execute a Supplier's Certificate, which obligated the defendants to make "appropriate refund" to A.I.D. in the event they breached any of their undertakings in the Certificate or made any "false certification or representation" in that document. Paragraph 12
of the Certificate required compliance with certain A.I.D. regulations
which, in turn, required the defendant to meet the terms of the Letter of Credit under which they secured payment from the financing banks. Finally, the Letter of Credit bound the defendants to comply with the Food, Drug and Cosmetic Act and to certify that the drugs shipped to Vietnam were safe and efficacious for use as directed.
The Government contends that the defendants breached the representations and certifications made under these documents.
In the circumstances we agree with A.I.D. that it has standing to sue for compensatory damages. In United States v. Waterman Steamship Corp., 471 F.2d 186 (5th Cir. 1973), the United States Court of Appeals for the Fifth Circuit held that breach of an A.I.D. Supplier's Certificate creates an independent cause of action in favor of the government. In that case, the defendant had shipped goods overseas for the Cooperative for American Relief Everywhere, Inc. (CARE). A.I.D. had agreed to reimburse CARE for the shipping costs. The defendant had applied to A.I.D., for shipping costs reimbursement, presenting with its application a certificate that these costs did not exceed prevailing rates. A.I.D. alleged the defendant had breached this certification. The court found that:
"There was privity between Waterman and the government with respect to the certification contract, pursuant to which Waterman warranted that charges were at the prevailing rates . . . The certification contract gives the government a cause of action for overcharges . . . and it is for breach of the certification contract that the government now sues. That the government and Waterman recognized an independent cause of action for overcharges is made clear by Waterman's promise, in the certification form, to 'make refund to AID  in the event of nonperformance of any of the terms of the contract of carriage or  for breach of any of the terms of this certificate.'" 471 F.2d at 188-189 (emphasis supplied).
The Supplier's Certificate involved in this case required, among other things, that the defendants comply with requirements contained in A.I.D. regulations that related to the letters of credit under which the defendants secured payment. In effect, the terms of the letters of credit, subscribed to by the defendants, were incorporated into the Supplier's Certificate. The Certificate, also subscribed by the defendants, gives the Government an independent cause of action for breach of any of its terms. Without determining what its damages may be, if any, it is clear that the Government has standing to sue on account of the alleged breach of representations made by Emons in the Supplier's Certificate. United States v. Bloomfield Steamship Co., 359 F.2d 506, 509 (5th Cir. 1966), cert. denied, 385 U.S. 1004, 87 S. Ct. 709, 17 L. Ed. 2d 543 (1967); United States v. Lykes Brothers Steamship Co., 353 F. Supp. 1151, 1153 (E.D.La. 1973).
The Statute of Limitations
Paragraph 14 of the Supplier's Certificate stipulates that the contract shall be governed and interpreted in accordance with the law of the District of Columbia. Two sections of the District of Columbia Code are relevant. 12 D.C.Code § 301(7) (1967) specifies a three-year statute of limitations in contract actions. Standing alone, this section would bar the present action. However, 12 D.C.Code § 308 (1967) specifies that the three-year provision of § 301 does not apply "to an action in which the United States is the real and not merely the nominal plaintiff."
Emons contends that the United States is not the real party in interest in this action and that the three-year statute of limitations therefore applies. It argues that the United States is pursuing a claim in a nominal capacity on behalf of the Government of South Vietnam. To support its position, Emons relies on an internal A.I.D. directive which indicates that A.I.D. has a policy of making refunds from its suppliers available to the concerned foreign country. It is claimed that A.I.D. is merely a conduit for funds belonging to the ...