Ruth G. Tiger of Saltman & Stevens, P.C., Washington, DC, counsel for Appellant.
Michael E. Trow, Office of the General Counsel, Department of Agriculture, Portland, OR, counsel for Respondent.
Before Board Judges POLLACK, STEEL, and DRUMMOND.
POLLACK, Board Judge.
This appeal was filed at the Department of Agriculture Board of Contract Appeals (AGBCA) in 1997, from a final decision of the contracting officer (CO) dated December 11, 1996. The appeal arises out of the Sawyer Timber sale contract awarded to appellant, Roesler Industrial Distributing Company (Roesler), on January 31, 1991. The Board dismissed the appeal without prejudice in December 1999, subject to reinstatement within three years. The dismissal was to accommodate the request of the parties that the case not move forward, pending a decision in the appeal of Scott Timber v. United States (1) to the Court of Appeals for the Federal Circuit. The parties each represented to the Board that a decision in Scott might lead to settlement or alternatively eliminate issues in the Roesler appeal. In December 2002, with Scott still not decided by the appellate court, appellant asked for reinstatement.
On January 13, 2003, soon after reinstatement, the Forest Service (FS) filed a motion for summary judgment in which it asked the AGBCA (1) to enforce the parties' signed modification of March 12, 1992, which dealt with the deletion of cutting units 1 and 2 from the contract and (2) to rule that appellant was limited to compensation associated with that deletion to out-of-pocket expenses, as provided in clause C9.52 of the sales contract and as interpreted by the FS. The motion also initially addressed the reasonableness of suspensions regarding spotted owls and marbled murrelets.
Matters, however, again came to a halt. By letter of January 23, 2003, and prior to appellant filing a response to the FS motion, the parties again requested that the appeal be stayed, pending a soon expected decision in Scott. The Board agreed to hold the matter in abeyance, but due to the earlier stay in 1999 and because of concerns with the age of the appeal, the Board was unwilling to set a definite duration for a stay. Rather, the Board agreed to follow the progress of Scott before moving forward. Little thereafter occurred, as the Board and parties awaited a decision in Scott, although some processing continued, including the issuing of a protective order. On June 28, 2003, the Circuit issued a decision on Scott; however, that decision remanded the case to the Court of Federal Claims. The awaited resolution of that case then continued to stretch out. Finally, with Scott still not fully resolved, the Board and parties agreed that the Roesler appeal needed to move forward. Accordingly, after additional correspondence and discussion, appellant filed its opposition and cross-motion in February 2006. The parties and Board continued to agree that the issues regarding suspension, the primary focus in Scott, would continue to await the court's decision in that case.
The FS then replied to appellant's opposition and cross-motion. Appellant responded to the FS filing. The record was then closed. Appellant's opposition and cross-motion not only addressed the matters raised by the FS in the 2003 motion, but also added issues. That said, the principal focus of appellant's cross-motion was to ask the Board to rule that the modification was not enforceable, citing as the basis the charge that the CO did not have authority to enter into the modification, as deletion of cutting units could only be done by the Chief of the FS. Additionally, appellant asked the board to rule that in the event the modification was found to be valid, the board should define the compensation due under clause C9.52 of the contract in a considerably more expansive manner than that put forth by the FS.
In January 2007, the AGBCA was terminated and all of its cases, judges, and other resources were transferred to the newly-established Civilian Board of Contract Appeals. Pub. L. No. 109-163, § 847, 119 Stat. 3136 (2006). This case is consequently being resolved by the Civilian Board.
The central issue before us is whether the CO had authority to delete units 1 and 2 from the contract through a modification. Appellant asserts that under regulation and contract clauses, only the Chief of the FS could delete units. Appellant charges that even if it voluntarily consented to the modification, that does not change the fact as to lack of authority. It asserts that consent cannot provide authority where authority does not exist. As to compensation (assuming the CO had authority or the modification was otherwise valid), the central issue is whether clause C9.52 allows for a broader range of compensation than simply bonding and cash deposit costs, the limitations claimed by the FS. Appellant asserts that the clause allows for compensation for items such as idle equipment, bidding costs, helicopter-related expenses, and unabsorbed overhead, all costs which the FS claims are not allowable under the clause.
As noted above, the parties also raise a number of other issues of varying significance. Among those are accord and satisfaction, duress, waiver, and ratification. As to these, we discuss what we consider the primary issues.
Between the two parties, they have filed with these motions approximately 150 pages of facts and argument as well as attachments in excess of that number. As will be evident from the decision, this appeal is replete with disagreements and contradictions. But for a few limited items, the obvious disagreements have made the filing for summary judgment premature and not warranted by either party.
This appeal arises out of the Sawyer Timber sale contract, awarded to appellant on January 31, 1991. In general the contract called for harvesting four units in the Mt. Baker-Snoqualmie National Forest. The contract required helicopter yarding of units 1 and 2 and a skyline operation for units 3 and 4. In addition, there was road work associated with units 3 and 4. By separate modification (in 1994), the harvesting of units 3 and 4 was changed to a helicopter operation. That change, however, is not material to the instant motions.
In July 1991, the FS located a spotted owl pair and two fledglings in unit 1of the sale area. The FS promptly suspended appellant's operations in units 1 and 2 on July 26, 1991. The FS then consulted with the Fish and Wildlife Service (FWS) as to whether to continue the sale in units 1 and 2. FWS thereafter issued a biological opinion mandating that units 1 and 2 not be harvested due to the presence of the spotted owl.
After the suspension and continuing into 1992, the FS and appellant held discussions regarding the fate of units 1 and 2. Because of the FWS opinion, it was clear that timber would have to be deleted from units 1 and 2. During those discussions and in an attempt to find substitute timber for the units, the FS informed appellant that no replacement timber was available within the sale area to replace the timber that would need to be deleted from units 1 and 2. Appellant charges that during those discussions, the FS made a number of representations, some of which indicated that if appellant did not agree to a modification, then the process (resolving the sale) could take a long time, and appellant would not be allowed to harvest any Sawyer timber until the process was complete. That would have meant the appellant could conduct no timber operations in 1992, which would have included precluding cutting on units 3 and 4, which at that point were still intact and part of the contract. According to appellant, the FS said that proceeding by means of a modification would not adversely affect appellant's contract rights and the FS would compensate appellant for appellant's costs, as provided in the contract, including reimbursement for out-of-pocket costs. During those discussions, the FS also advised that it would make modifications in cutting as to units 3 and 4 but reiterated that, without a signed modification, there would be no cutting in any of the units in 1992.
According to appellant, it needed timber in 1992 for customers. Accordingly, when the FS, through the Forest Supervisor, acting in his capacity as CO, ultimately presented the modification to appellant, the appellant signed it. Appellant has charged that it signed the modification, understanding from the FS that it was the only way to authorize operations in 1992; would simplify the process; would avoid the CO jumping through bureaucratic hoops; and would not adversely affect any of appellant's contract rights. Appellant says that it felt it had no choice in light of the serious log shortage in the Pacific Northwest and its need for logs from the sale for customers.
In the signed modification, dated March 12, 1992, the parties deleted units 1 and 2 from the timber sale and changed units 3 and 4 from complete cut to partial cut. The agreement also added nine acres to, and deleted ten acres from, unit 3. The modification referenced as authority, clauses C8.3, titled Contract Modification, and C9.52, titled Settlement for T & E Species. The latter deals with termination of the contract in whole or part, and sets out the compensation plan in that event. T & E stands for threatened and endangered. Clause C8.3 does not directly address termination or deletion of units for environmental reasons in its text. Clause C8.2, titled Termination, but not cited in the modification, does address deletion and termination on the basis of environmental matters. That clause however, was not used. Clause C9.52, cited in the modification, deals with payment due to partial or full termination and sets damage parameters, when a modification is issued for identified environmental reasons.
The FS initially contended that the deletion of the timber was a modification, not a termination. It now appears that the FS acknowledges that the action taken in the modification constitutes a partial termination of the contract as to units 1 and 2. Even if it did not, various documents in the record indicate that at least some FS officials see an action such as the one taken here as constituting deletion and termination. Moreover, the clause cited in the modification, C9.52, provides that the Chief of the FS may terminate the contract in whole or part, "in the event the Regional Forester determines that the contract may jeopardize the continued existence of a species, presently or subsequently listed as threatened and endangered pursuant to the Endangered Species Act."
Neither the Chief of the FS nor the Regional Forester signed the modification. The official acting for the FS was the Forest Supervisor in his capacity as CO. For purposes of this motion, neither the Chief nor the Regional Forester provided any contemporary authorization to the CO, who executed the modification on behalf of the FS.
The following clauses and regulations have been cited in the parties' motions and are relevant to the appeal.
36 CFR 223.116 (2005) provides as follows:
(a) Timber sale contracts and permits may be canceled:
(1) For serious or continued violation of their terms.
(2) Upon application, or with the consent of the purchaser, when such action is of advantage to the United States or not prejudicial to its interests.
(3) Upon application of the purchaser if the value of the timber remaining to be cut is diminished materially because of catastrophic damage caused by forces beyond the control of the purchaser relating in (i) physical change in the sale area or access to it, or (ii) damage to timber remaining to be cut.
(4) For conviction of violation of criminal statutes or, following final agency or judicial determination, of violation of civil standards, orders, permits, or others [sic] regulations for the protection of environmental quality issued by a Federal agency, State agency, or political subdivision thereof, in the conduct of operations thereunder, on National Forest System land, unless compliance with such laws or regulations would preclude performance of other contractual requirements.
(5) Upon determination by the Chief, Forest Service, that operations thereunder would result in serious environmental degradation or resource damage and with reasonable compensation to the purchaser for unrecovered costs incurred under the contract and the difference between the current contract value and the average value of comparable National Forest timber sold during the preceding 6-month period.
(b) Cancellation will be by the Chief, Forest Service. Authority to cancel contracts under paragraph (a)(1) through (4) of this section may be delegated to Regional Foresters for sales within their authorization. All contract cancellations under paragraph (5) of this section shall be by the Chief, Forest Service, whose decision shall be the final agency decision.
7 CFR 223.12 provides:
Timber sale contracts may be modified only when the modification will apply to the unexecuted portions of the contract and will not be injurious to the United States. Modifications may be made by the officer approving the sale, his successor, or by his superior, except as provided in Sec. 223.110.
Clause B8.3, Contract Modification, provides:
The conditions of this sale are completely set forth in this contract. This contract can be modified only by written agreement of the parties, except as provided under B8.31.
By agreement and with compensating adjustments where appropriate, this contract shall be modified to provide for (a) the exercise of any authority hereafter granted by law or Regulation of the Secretary of Agriculture if such authority is then generally being applied to Forest Service timber sale contracts and (b) any other contractual provision then in general use by the FS Contract modifications, redetermination of rates, and termination shall be in writing and may be made on behalf of Forest Service only by the Forest Service officer signing this contract, his successor or superior officer.
Clause C8.2, Termination (12/89), reads:
The Chief, Forest Service, by written notice may terminate this contract, in whole or part, (1) to comply with a court order, regardless of whether this sale is named in such an order, upon determination that the order would be applicable to the conditions existing on this sale; or (2) upon a determination that the continuation of all or part of this contract would:
(a) Cause serious environmental degradation or resource damage.
(b) Be significantly inconsistent with land management plans adopted or revised in accordance with Section 6 of the Forest and Rangeland Renewable Resources Planning Act of 1974, as amended.
(c) Cause serious damage to cultural resources pursuant to C6.24#.
(d) Jeopardize the continued existence of Federally listed threatened and endangered species or cause unacceptable adverse impacts on sensitive species, identified by the appropriate Regional Forester.
Compensation for termination under this provision shall be calculated pursuant to C9.5, except compensation for termination under (1) shall be calculated pursuant to C9.51 when included in this contract and compensation for termination under (2) (d) shall be calculated pursuant to C9.52 when included in this contract.
Clause C8.3, Contract Modification, reads:
Upon written agreement, this contract may be modified to revise A9 and A10 to add roads not listed in A9 as necessary to facilitate reconstruction of existing Forest Service roads or accepted specified roads including appurtenances thereto.
* * * *
Forest Service may make modifications in Timber Specifications in B2.0, Transportation Facilities, in B5.0, or Operations in B6.0, or in related Special Provisions, if and to the extent that such changes are reasonably necessary to make the contract consistent with guidelines and standards developed to implement Section 6 of the Forest and Rangeland Renewable Resources Planning Act of`1974, as amended and with land management plans, developed or revised thereunder. Such modifications shall be limited to requirements with which Purchaser can reasonably comply. Resulting changes in the value of remaining Included Timber shall be reflected in a rate redetermination conducted in accordance with C3.312. Rates so redetermined shall apply to timber removed from Sale Area after the effective date of the modification.
Clause C9.5, Settlement (10/77), reads as follows:
If this contract is terminated by Forest Service under C8.2, Purchaser agrees that the liability of the United States shall be limited to the sum of (1) the value of unused Purchaser Credit; (2) the estimated expenditure for felling, bucking, lopping, skidding, and decking any products so processed, but not removed from the Sale Area because of the termination action; (3) out-of-pocket expenses involved in acquiring and holding the contract, such as maintaining performance bonds and cash deposits, and (4) the difference between (a) Current Contract Rates for the remaining uncut volume, and (b) the rates paid for comparable timber on the same National Forest during the preceding 6-month period multiplied times the remaining uncut volume. Comparable timber is timber of similar size and quality with similar topography and access. Cost estimates for items listed in (2) shall be based upon Forest Service appraisal methods in use on the date the contract is terminated.
Clause C9.52, Settlement for T & E Species (12/89), reads:
In the event the Regional Forester determines that this contract may jeopardize the continued existence of a species presently, or subsequently, listed as threatened or endangered pursuant to the Endangered Species Act of 1972, as amended (16 USC 1531-1536, 1538-1540), the Chief, Forest Service, may terminate this contract in whole or part.
In the event of termination or partial termination, Purchaser agrees that its sole and exclusive remedy shall be the sum of (1) the value of unused Effective Purchaser Credit earned on this sale; (2) the estimated expenditure for felling, bucking, lopping, skidding, and decking any products so processed, but not removed from the Sale Area; and (3) the out-of-pocket expenses involved in acquiring and holding this contract. Cost estimates for items listed in (2) shall be based upon Forest Service appraisal methods in use on the date the contract is terminated. Out-of-pocket expenses in (3) do not include lost profits, replacement costs of timber, or any other anticipatory losses suffered by Purchaser. Purchaser agrees to provide receipts or other documentation to the Contracting Officer which clearly identify and verify actual expenditures. In the event of termination of this contract, in whole or in part, by the Forest Service, Purchaser agrees that the liability of the United States shall be limited to the express remedies contained within this provision.
Before proceeding further, several clarifications as to C8.3 are in order. First, the referenced rate determination was applied to the timber in units 3 and 4. Second, Section 6 of the referenced 1974 Act, as amended, required the Secretary of Agriculture to develop a land management plan for each national forest in accordance with guidelines published in the Federal Register.
While the motions involve the issue of partial termination of units 1 and 2, we point out for purposes of context that units 3 and 4 also became subject to further modification. In September 1992, the United States District Court in the Western District of Washington issued a temporary restraining order for work on those units, due to the discovery in those units of the marbled murrelet. Accordingly, work at units 3 and 4 was suspended and that remained the case until some time in 1994. Suspension of work in units 3 and 4, however, is not the subject of this ruling or the motions being addressed, although the suspension for those units is a separate issue in the overall appeal and is related to the Scott litigation.
As one of its defenses to appellant's motion, the FS argues that it entered into the modification affecting units 1 and 2 following legal advice. The FS also asserts that in June 1992, albeit after the Roesler modification was issued, the Deputy Regional Forester issued a direction to the Region 6 Forest Supervisors with regard to handling timber sales in areas where owls were discovered. The FS explained that first, the direction called for the CO to attempt to enter into a mutual modification deleting units pursuant to clause B8.3 of the contract; second, the CO was to attempt to enter into a mutual modification deletion pursuant to clause C8.3; and third, as a last resort, the CO was to refer the contract for cancellation under clause C8.2. Appellant answers the FS by identifying alleged facts which indicate that the FS was making decisions and policies in other regions that show a different approach. Those decisions determined that only the Chief of the FS or his specific delegate could enter into a modification deleting a unit, and that authority did not trickle down to the CO.
Further, appellant charges that the FS did not rely on the legal advice claimed. Appellant asserts that the attorney identified by the FS as participating in the modification was instead involved in preparation of the CO's final decision of December 11, 1996 (which was a review of the 1992 modification). Further, appellant notes that even if CO secured legal advice, if that advice was wrong, reliance by the CO could not authorize the CO to take action for which the CO was not authorized. As to that last point, we fully agree.
As an alternative argument, the FS has claimed that appellant should have sought an exemption from the Secretary of the Interior (Secretary) which if granted would have allowed the appellant to harvest units 1 and 2. The parties agree that at the time the appellant signed the modification in March 1992, it had not asked the FS to delay issuing the modification so that appellant could seek such an exemption from the Secretary. We will not go into this matter in any depth, other than to note that appellant claims to have been operating under time constraints; that representations as to reimbursement were being made to it by the FS; that any request for exemption would have been futile; and in any case, the FS had no legal obligation to ask for an exemption.
Appellant asserts that at the time it signed the modification, it did not believe that it was waiving any contract rights or was somehow authorizing the CO to take an action the CO was not authorized to take. Appellant expected to be compensated and claims that when it bid the contract, it interpreted the contract to mean that if the FS invoked clauses C8.2 or C9.52 to partially cancel the Sawyer contract to protect an endangered or threatened species, appellant would be entitled to compensation for costs it incurred, which would include overhead and profit factors for preparing to operate and for felling and bucking any timber that it would be prevented from removing from the sale area. Appellant claims that it also interpreted the contract to provide that it would be entitled to compensation for its costs of acquiring and holding the Sawyer contract, including the time expended in analyzing and bidding the sale, be paid for falling and bucking, be paid for maintaining the performance bond, and be paid for expenses incurred in logging and hauling equipment that was idled as a result of the suspension. Additionally, appellant has claimed entitlement for helicopter- related costs, noting that consistent with its contract, it made arrangements for and incurred costs for helicopter landing so as to log units 1 and 2. Finally, appellant sought compensation for incurred (or unabsorbed) overhead costs for which it was unable to apply as planned.
The FS has taken a dramatically different view of costs. While it acknowledges that C9.52 entitles appellant to compensation for out-of-pocket expenses involved in acquiring and holding the contract, the FS defines out-of-pocket costs as covering only costs such as maintaining performance bonds and cash deposits. To reach that interpretation, the FS cross-references various clauses in the contract, clauses which are not directly applicable but which do contain wording as to out-of-pocket compensation. The FS also cites a dictionary definition for out-of-pocket. However, there is no specific language in C9.52, which limits out-of-pocket in the manner claimed by the FS. Rather, the FS position rests on convincing the Board, through outside sources, as to the reasonableness of its reading.
Summary Judgment Standard
Summary judgment is appropriate in instances where material facts are not in dispute and the moving party is entitled to a judgment as a matter of law. Mingus Constructors, Inc. v. United States, 812 F. 2d 1387, 1390 (Fed. Cir. 1987). In resolving summary judgment, the tribunal is not to resolve factual disputes but instead to determine if there are material facts in dispute. In the latter case, summary judgment is not appropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). "All reasonable inferences and presumptions are resolved in favor of the non-moving party. " Id. at 255.
Enforceability of Modification
Appellant says the language of the regulation and contract clauses makes it clear that only the Chief of the FS can delete cutting units and, therefore, the CO exceeded his authority when he entered into the modification. Due to the alleged lack of authority, appellant asks the Board to rule that there is no binding modification.
The FS claims the CO had authority and relies on what it characterizes as the inherent contracting authority of a CO. It also points out that nothing in the regulation or clauses cited by appellant specifically prohibits the CO from issuing a modification, such as that here, in cases where the modification is jointly agreed to by the parties. The FS does accept as a fact that only the Chief of the FS can delete work units unilaterally.
The FS cites LDG Timber Enterprises, Inc. v. Glickman, 114 F.3d 1140, 1143 (Fed. Cir. 1997), for the unremarkable proposition that "[w]hen the contracting officer administers a contract with which the officer is charged, the promises and representations made by the officer, when within the scope of the subject matter of the contract can not be avoided by simply disclaiming the contracting officer's authority when the contract reaches litigation." The FS argues that applying that premise here, appellant cannot undercut the CO's authority, since the CO is the individual who has a right to make modifications. It points out that regardless of the fact that this modification deleted units, it still was a modification action. As the FS sees it, when it comes to mutual modifications, the authority in the regulations and clause are in addition to the authority already vested in the CO. The FS says that the deletion was effective, be it carried out by the Chief of the FS or the CO.
The FS's reliance on LDG is not particularly helpful. Nothing in LDG indicates that a CO is authorized to do what is not permitted or not within his authority. Here, the central issue is whether the regulation and contract clause, dealing with deleting cutting units for species protection, specifically limit the authority to delete cutting units to the Chief of the FS and as such do not allow the CO to take that action. In LDG, the CO action was upheld, but it was upheld because the Court found that the CO acted within his authority.
Central to the validity of the disputed modification are 36 CFR 223.116 and clause C9.52 of the contract. The regulation provides at subparagraph (a)(5) that timber sale contracts and permits may be canceled upon determination by the Chief of the FS that operations thereunder would result in serious environmental degradation or resource damage. The regulation continues and states the following at paragraph (b):
Cancellation will be by the Chief, Forest Service. Authority to cancel contracts under paragraph (a)(1) through (4) of this section may be delegated to Regional Foresters for sales within their authorization. All contract cancellations under paragraph (a)(5) of this section shall be by the Chief, Forest Service, whose decision shall be the final agency decision.
As to the contract, two clauses were cited in the disputed modification. The first was C8.3, Contract Modification. Nothing in that clause addresses termination or cancellation of work units for environmental reasons. The other clause cited, C9.52, does directly deal with deletion of cutting units. C9.52 specifically addresses termination of cutting units for environmental reasons, by the Chief of the Forest Service. The modification did not cite clause C8.2, Termination, another clause, which specifically deals with cancellation and deletions due to environmental reasons, such as jeopardy to an endangered species. That clause, as with C9.52, provides authorization to the Chief.
From the record before us, it appears that at the time of the modification only the CO was actively involved in the deletion of the units; the officials named in the regulation or in clause C9.52 were not. In supporting its position as to lack of authority, appellant has cited parallel situations in which it contends the FS's actions showed that the FS agreed that the Chief was the necessary party for a cancellation under clause C9.52. In a case involving deletion of cutting units (during 1987), appellant references a claim made by Janicki Logging Company which involved deleting a cutting unit. There, the court referenced an opinion of the Department of Agriculture's Office of General Counsel, which stated that if there was a partial termination and not a modification, then removal of a unit was a case of a CO over-reaching his authority. Janicki Logging Co. v. Mateer, 42 F.3d 561, 562 (9th Cir. 1994). Appellant also cited other correspondence and memoranda from the FS which support appellant's contentions as to the lack of CO authority. While Janicki and the other support cited by appellant arise out of different FS regions, they still provide evidence of how the Chief and Department of Agriculture operated, applied, and understood the authority question.
In Davidson Industries, Inc., AGBCA 95-166-1, 96-2 BCA ¶ 28,299, the majority opinion and that of the concurring judge found for the appellant in a case seeking compensation for a suspension involving the spotted owl and marbled murrelet. We recognize that Davidson did not deal with a mutually agreed-to modification. However, as to the general scope of authority, it appears that the FS in Davidson argued that the Chief was a necessary party to environmental deletions.
Appellant raises other arguments to support its position in defense of the motion. We need not address each of those points, for to do so would be cumulative. Dealing solely with the defense against the FS motion, we find that appellant has raised legitimate issues as to whether the CO exceeded his authority in issuing the modification. We find those issues sufficient to defeat the FS's motion.
This matter, however, is before us on cross-motions. Appellant also seeks a ruling from the Board that the modification cannot be enforced. Turning to appellant's affirmative motion and the FS defense, the FS points out that nothing in the clause specifically addresses or prohibits a CO from deleting units through a modification. The FS points out that the regulation and clause can be read to apply to unilateral FS actions, but that mutual actions are not prohibited. The FS cites a June 1992 direction from the Regional Forester in Region 6, providing guidance, which called for a CO to attempt to come to a mutual agreement on deletion before coming to the Chief for a termination action.
The FS also points out that clause C8.3, which it cited in conjunction with clause C9.52 in the modification, provides that the FS may make modifications necessary to implement land management plans set out in legislation. The FS reasons that these clauses, along with a CO's inherent contracting authority, allow for broad modifications, particularly where the other party agrees to the modification. The FS reasons that such modifications can cover deletion of units. The FS also makes the point that deletion of units by mutual modification, where the presence of the listed species makes logging unlawful, is consistent with and not in derogation of the Chief's authority to unilaterally cancel the units, and should serve as an additional basis for enforcing the modification. The FS's position is that deletion by the Chief and deletion by the CO are both available options, as long as the deletion is not imposed on a unilateral basis.
The test at this juncture is not who has the stronger case. Rather, to defeat the appellant's motion, all the FS has to do is show that a tribunal, after taking all reasonable inferences in the FS's favor, could find that the CO did not act beyond his authority. Using that standard, we find that the FS has met that requirement. Accordingly, we also deny appellant's motion as to the enforceability of the modification.
It is clear that to find for either party, we need to consider more than simply the plain meaning of the cited clauses and regulations. We will likely need to examine the context in which the modification arose, the intent of the drafters, how the FS treated the clauses and regulation in the past (as well as during the disputed period), the appellant's experience with the clauses and regulation, and finally, the role, if any, of the Chief and Regional Forester, here and in other similar situations.
The FS asserts that the we should uphold the modification because the modification could have and would have been ratified by the Chief. However, this assertion requires us to resolve disputed material facts and weigh competing inferences. Ratification occurs when a government agency affirms rather than disavows an unauthorized promise by its agent or agents. See Perri v. United States, 53 Fed. Cl. 381 (2002); Janowsky v. United States, 23 Cl. Ct. 706, 715 (1991). Here, no ratification has occurred, and we are asked to speculate as to what might have happened. Appellant in its challenge points to a December 1991 memorandum from the Region 3 Director of Timber Management in which that official appeared to recognize that 36 CFR 223.113 and clause C8.3 authorize mutually agreed- to environmental modifications that do not involve deletion of cutting units, but do not authorize mutually agreed to environmental modifications that involve deletion of cutting units. That memo concluded that deletions still have to be authorized by the Chief of the FS.
More pertinent, appellant points out that, at one time, contracting officers in Region 3 had entered into modifications with purchasers deleting units in order to protect species. None of those modifications had been initially submitted to the Chief for ratification. However, after being informed that only the Chief had authority for partial terminations, the COs in Region 3 negotiated new compensatory modifications with the purchasers. Those new modifications were then submitted to the Chief for approval.
The above-reported sequence of actions indicates that in those instances, there was a problem in ratifying the initial modification. It was only after those modifications were renegotiated that ratification occurred. Those facts, taking all inferences in favor of appellant, support the argument that the modification here would not have been ratified, as is. Rather, the modification might well have had to be renegotiated before it could be submitted for ratification.
In another argument, the FS points out that the only alternative to a mutual modification would have been a unilateral cancellation by the Chief, which the FS contends would have been forthcoming, because it was a violation of the Endangered Species Act for anyone to "take" a threatened species. The FS says that, at best, what is in issue here is a procedural defect in the deletion of the units and that every procedural defect does not necessarily translate into a material breach (citing Poston Logging, AGBCA 97-168-1, 99-1 BCA ¶ 30,188). Appellant is correct that not every procedural defect will invalidate an action or instrument. Whether an action can be upheld is very fact specific. On this matter, we have disputed material facts. We need more detail and further amplification of the record, before we can sustain the FS's argument.
Void and Voidable
While neither party focused on the issue of void or voidable actions, we point out that we may have to deal with the issue in order to resolve whether the modification is enforceable. If we conclude that the CO acted beyond his authority, that still may not invalidate the modification. As a threshold matter, case law demonstrates that some actions and situations create a void instrument. Others create only a voidable one. A void instrument is generally found to be a nullity; a voidable one may well survive and be correctable. In American Telephone & Telegraph Co. v. United States, 177 F.3d 1368, 1375 (Fed. Cir. 1999), the court stated:
Invalidation of the contract is not a necessary consequence when a statute or regulation has been contravened, but must be considered in light of the statutory or regulatory purpose, with recognition of the strong policy of supporting the integrity of contracts made by and with the United States. In United States v. Mississippi Valley Generating Co., 364 U.S. 520, 81 S.Ct. 294, 5 L.Ed. 2d 268 (1961), the Court explained that when a statute "does not specifically provide for the invalidation of contracts which are made in violation [of its provisions]" the court shall inquire "whether the sanction of non-enforcement is consistent with and essential to effectuating the public policy embodied in [the statute]" Id. at 1374.
The court in American Telephone & Telegraph was discussing invalidation of an entire contract or award. Here, we deal with a contract modification. However, the court's reasoning may well be applicable to a modification.
In this appeal, appellant's arguments present what we label as a reverse Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947). That decision is the leading case holding that a party cannot bind the Government to an agreement, where the acts creating the instrument of agreement were done by or through a government agent lacking authority. The case law is generally clear, as set out in numerous cases citing Merrill, that if a contractor makes an agreement with someone purporting to represent the Government who lacks authority, the Government is not bound by that agreement.
However, in our preliminary review of case law, matters are not as clear when a contractor is attempting to invalidate an agreement, but the Government wishes for it to stand, notwithstanding a defect in authority. On the one hand, there are cases such as United States v. Amdahl Corp., 786 F.2d 387, 395 (Fed. Cir. 1986), which indicate that a non-authorized contract cannot be sustained. On the other hand, there is language in Cubic Applications, Inc. v. United States, 37 Fed. Cl. 345, 356 (1997), where that court cites United States v. New York & Porto Rico S.S. Co., 239 U.S. 88, 93 (1915), quoting Justice Holmes for the following:
Even when a statute in so many words declares a transaction void for want of certain forms, the party for whose protection the requirement is made often may waive it, "void" being held to mean only voidable at the party's choice.
The Cubic court then went on to make conclusions based on legislative history, potential harm to various parties, and what the parties knew.
In harmony with the above is the legal concept of harmless error. In Reservation Ranch v. United States, 39 Fed. Cl. 696 (1997), the court provided that there is a basic proposition called the harmless error rule in administrative law which permits a court to uphold an agency determination upon a ground different from that relied upon by the agency. The court explained that the rule would apply where "it is clear that . . . the agency would have reached the same ultimate result . . . Ward v. Merit Systems Protection Bd., 981 F.2d 521, 528 (Fed. Cir. 1992) (quoting Salt River Project Agric. Improvement & Power Dist. v. United States, 762 F.2d 1053, 1060 n. 8 (D.C. Cir. 1995)." Whether the concept addressed in Reservation Ranch is applicable here is not clear at this time. Reservation Ranch dealt with a regulation. Here we must consider both a regulation and a contract clause.
On the record before us, we cannot resolve the issues noted above. For us to make the determination as to whether we might have a void rather than voidable instrument, we will have to interpret the meaning of the language in the clause and regulation. That may likely require us to determine whether the references to the Chief of the FS in the regulation (and in C9.52, which is based on the regulation) were intended by the Department to be mandatory and require us to determine whose interests were being protected by the provision. We may also have to look at what the parties knew and expected. This is another reason why there is no basis to make a conclusion at this time for purposes of summary judgment on the issue of authority and enforceability.
Accord and Waiver
The FS charges that the claim should be barred by accord and satisfaction. Appellant disagrees. Appellant claims it was misled into entering into the modification, because it thought the CO had authority and because that is what the CO represented to it. Appellant also raises possible duress, but fails to adequately flesh that out. The FS points to the fact that there is a signed agreement. However, we note that there is no exculpatory accord and satisfaction language with the modification. With that backdrop, we find that there are too
many issues outstanding for us to be able to resolve this matter now. Moreover, as we discuss in relation to the argument over dollars, the parties clearly had different views as to what was covered.
The FS has also argued that we should find that the appellant waived compensation, because the appellant did not submit a claim for compensation until four years after the modification was signed. Appellant asserts that it signed the 1992 modification with the understanding that the FS would later pay it for out-of-pocket costs and that FS personnel with whom it was dealing knew that. Appellant further points out that prior to the 1996 CO decision no one from FS had indicated to appellant that the FS believed that appellant had somehow waived its entitlement to compensation under the contract by signing that instrument. In addition, in order for the FS to prevail as to waiver, it would have to show prejudice to it by alleged delay. We do not have sufficient evidence to come to the conclusions sought by the FS.
The FS raises several issues as to estoppel. First, appellant should be estopped because once it became known that the spotted owl, a listed species with administrative, if not judicial, habitat preservation standards in place (which precluded logging of units) was in the sale area, the only alternative to mutual modification was a unilateral cancellation/termination by the Chief, which the FS says "surely" would have been forthcoming. As the FS sees it, if appellant had not accepted the modification, then the FS would have gone to the Chief, and the Chief would have provided the same remedy as did the CO. The FS charges that appellant knew of the regulations, but choose to remain silent. It opposes appellant benefitting from that silence.
Appellant also raises estoppel. It points out that in 1991 and 1992, the Chief did not always limit compensation provided in C9.52 when partially terminating a contract for environmental reasons, such as the presence of an endangered species. Instead, the Chief sometimes chose to provide compensation consistent with that in C9.5 rather than that in C9.52. The former is more expansive in relief. According to appellant, if the CO had presented the Sawyer contract to the Chief for authorization to partially terminate in accordance with clause C8.2, the Chief may have treated appellant in the same manner as he treated other purchasers in Region 3 and as the Chief treated at least one purchaser in Region 5. Appellant asserts that it may have been compensated under the more expansive C9.5, notwithstanding inclusion of clause C9.52.
Resolution of estoppel is not appropriate for summary relief in this case. To find estoppel requires us to draw resolve various factual disputes, the basis of which we do not find to be sufficiently developed.
The FS says that cutting in units 1 and 2 would have been rendered unlawful under the Endangered Species Act because of the discovery of the spotted owl. The FS appears to say that if cutting would have been unlawful, then that should excuse the FS from liability for deleting the units from the sale area. As appellant correctly notes, that argument ignores the fact that the contract anticipated the need for a possible partial termination and provided clauses dealing with when and how that was to be done. It further provided for compensation, under clauses C9.5 and C9.52. The FS assumed liability for suspensions and for terminations due to environmental issues involving protection of species. The unexpected arrival of the owl and termination for that reason qualifies under the clauses. How the above will interplay with breach is a matter that needs more development.
Scope of Clause C9.52
We now turn to the dispute over the scope of clause C9.52. The FS asks the Board to rule that to the extent appellant is entitled to out-of-pocket expenses, as set out in clause C9.52, its recovery should be limited to bond costs and cash deposits. The FS makes an ejusdem generis argument, although it fails to cite that concept in its briefing of the matter. Ejusdem generis is a rule of construction that provides that one can confine the meaning of subsequent general words in a listing by the examples which proceed it. See Kato Corp., ASBCA 51513, 02-1 BCA ¶ 31,669 (2001). The FS argues that the term "out-of-pocket" is limited by the wording in clauses C9.5 and C6.01, neither of which were cited in the modification. Clause C9.5 says the purchaser will be entitled to out-of-pocket expenses involved in acquiring and holding the contract, such as maintaining performance bonds and cash deposits. The FS also points out that clause C6.01 limits out-of-pocket reimbursement to costs incurred as a direct result of an interruption.
Of course, neither of these clauses was used in the Roesler modification. Instead, the payment clause here is clause C9.52, which carries different wording than either C9.5 or C6.01. Nevertheless, according to the FS, since the contract has several instances where it deals with out-of-pocket expenses, all references need to conform. The FS then chooses to focus on the most narrow reading available.
Alternatively the FS argues that if there is an ambiguity in the meaning of out-of-pocket, then the FS reading is the only reasonable conclusion. The FS cites Webster's dictionary to argue that a definition of "out-of-pocket" is "incidental expenses usually entailing the outlay of ready cash." Resolving the meaning under either ejusdem generis or by resolving an ambiguity clearly requires using outside evidence. For ejusdem generis, we would at a minimum need to consider evidence as to what would constitute a like item and how the parties have understood and applied the clause in the past. Similar considerations would go into resolving an ambiguity. There is clearly no agreement on key facts and we come to different conclusions, depending on how we treat inferences. This was a situation where it should have been clear to the FS that the parties would not agree on the limitations claimed for out-of-pocket and that each would provide different support and examples for us to weigh and resolve. See Bighorn Lumber Company, Inc. v. United States, 49 Fed. Cl. 768, 771(2001).
Moreover, the language in clause C9.52 does not on its face readily read as claimed by the FS. The clause says purchaser shall get out-of-pocket expenses incurred in acquiring and holding this contract. Nothing in that wording says only bonding and cash deposits. We agree that there are limits as to the expanse of the covered compensation; however, to arrive at the same conclusions as the FS, we have to go outside the language and that involves fact-finding over materially disputed matters.
Turning to appellant's arguments on the meaning of out-of-pocket and scope of damages, we find its arguments also raise factual issues and clearly should have signaled that this matter was not appropriate for summary judgment resolution. There are, however, some points made by appellant with which we agree. We state as a conclusion that the FS reading of clause C9.52 is too restrictive. The clause is not limited to bond costs and cash deposits. That being said, however, does not mean that all items claimed by appellant are compensable. Payment to appellant will depend on specific circumstances which have yet to be developed. Appellant will have to show costs incurred and respond to any reasonable FS defenses, such as reasonableness of the cost and category in this contract. While appellant asks us to rule in its favor on specific dollars, that is not a reasonable request. The Board stated in an earlier letter to the parties that the dollar claim would be replete with factual issues and a motion asking for a specific award was not likely to succeed.
What we do say here, however, is that the wording of the clause does not eliminate as a class items such as costs for a helicopter landing, equipment, and various other categories, if reasonably necessary. Those are items that, depending on the circumstances, could fit into acquiring and holding the contract. Further, the FS is wrong in attempting to construe claims for equipment, helicopter costs, and other job expenses as lost profits. They are costs. Yes, anticipatory losses are precluded by C9.52; however, the FS attempt to transform costs into anticipatory losses is lacking both a legal or factual basis.
The FS position runs counter to prior guidance in AGBCA decisions in Reidhead Brothers Lumber Mill, AGBCA 2000-126-1, 00-2 BCA ¶ 31,144, 01-2 BCA ¶ 31,486, aff'd, 36 Fed. Appx. 426 (Fed. Cir. 2002), and Poston Logging, AGBCA 97-168-1, 99-1 BCA ¶ 30,188, as to idle equipment. Those cases did not involve C9.52, but rather, C6.0. However, while there is a difference, the cited cases describe "out-of-pocket" in a considerably broader manner than the FS is contending. The FS has not cited us to any case law which reads the wording "out-of-pocket to acquire and hold" to mean only bond and cash deposit costs. We find the reasoning in the FS motion on these issues to be unconvincing.
Remaining with the scope of out-of-pocket costs, we also reject as unreasonable the FS contention that items such as idle equipment costs are not foreseeable costs as a result of a suspension or termination. Recovery of equipment costs will depend on individual circumstances of the contractor and will reflect the particular project in issue. In some instances, depending on the facts, the recovery of equipment costs may fall outside of what is foreseeable. That does not, at least for now, appear to be the case here. In this appeal, if the equipment was used on the project and the reason for its non-release is reasonable, the FS will likely have a difficult time in convincing us on the matter of foreseeability.
Two other items specifically addressed by the FS, increased hauling costs and attorney fees, are not claimed here as out-of-pocket expenses. Accordingly, we need not address those matters.
We now turn to unamortized bid costs. In Reidhead the costs were rejected because they were not the direct result of the suspension and because they appeared to be included elsewhere. We make no definite conclusion on this item in this case. The clause talks of acquiring and holding. The bid costs might well fall under acquiring. We simply need more explanation. As to the FS's argument that costs claimed are not allowable because they are a form of anticipatory loss suffered by all unsuccessful bidders, we find that contention unconvincing.
Similarly, we will need more explanation as to the unabsorbed overhead costs before we decide whether or not they fall into the out-of-pocket costs. We note that this is not a construction contract and thus the Eichleay formula may not necessarily be the model. However, the matter of unabsorbed overhead will require additional development before we make any further conclusions.
The FS has asked us to find against appellant on the basis that appellant failed to mitigate its costs and damages. The basis appears to be use of a process that allows an exemption by the Department of Interior.
Again, the FS presents a motion on facts that it should have known we would find contested. Additionally, the FS position is founded on speculation as to what might have happened. There is no hard evidence or evidence even approaching enough to support the finding asked for. Appellant, in responding, says that the claimed relief was not available, and even if it was, it would not have been effective. Appellant points out that no clause calls for it to have to make such an application. This issue is clearly not ripe for resolution.
The FS takes the position that appellant is entitled to be compensated only for costs for which it can show receipts. The FS position is wrong as a matter of law. Costs can be proven through a variety of methods, including where appropriate, testimony and estimates.
Appellant asserts that if the Board finds that the CO lacked authority to delete units 1 and 2 through a mutual modification and then finds that the modification is not valid, the situation should then revert back to no agreement at the time of the modification and the deleted timber would remain part of the sale. According to appellant, under those circumstances, appellant is entitled to harvest that timber in accord with the Rescissions Act, Pub. L. No. 104-19, § 2001(k), 109 Stat. 194, 240-47 (1995). The Act provided that if threatened or endangered bird species were known to be nesting in timber sale units subject to Section 318 of Public Law 101-121 (this was a Section 318 sale), or if for any reason the sale could not be completed as originally sold, the FS was required to provide the purchaser with replacement timber. Appellant asks that we rule that since deletion was unauthorized, the units should still be considered part of the sale and it should be entitled to take advantage of the Rescissions Act remedy.
Before the Rescissions Act issues even become relevant, we need first to establish whether the modification is enforceable. Accordingly, we will not go into an analysis of the Act or its applications. Moreover, even assuming for purposes of the motion that we find the entire modification invalid and find that the termination by the CO could not have legally taken place, then we would still be faced with a myriad of issues both factual and legal, among which would be questions as to the operation of the Rescissions Act and whether it could be applied retroactively in this case. Any conclusions as to the Rescissions Act would be premature.
Award of Costs Claimed by Appellant
Appellant argues that the Board could properly rule on summary judgment as to some of the dollar amounts claimed by appellant. In discussions and correspondence between the Board and the parties, the Board clearly indicated to appellant that it considered highly unlikely that the Board would resolve specific dollar amounts on summary judgment. What has been clear to the Board and should have been clear to appellant is that the FS does not agree as to the costs and has stated that the costs were unsupported. The FS does not have to prove a negative. For appellant to argue that the FS has not challenged a specific number simply ignores the obvious fact that all dollars amounts appear to be currently contested. Accordingly, no summary judgment on costs is warranted.
Summary judgment can be a useful vehicle, when it is sought in matters where the issues are generally narrow and the facts and context generally agreed upon. However, the summary judgment process is not useful when the briefing puts before the Board various factual arguments, asks the Board to draw inferences, and essentially requires the Board to weigh evidence. The Board here understands the desire of the parties to attempt to shorten proceedings by using summary judgment. That is a valid goal and clearly if the Board ruled here that the modification was either valid or unenforceable, that may have ended the appeal or at a minimum would have limited the litigation to follow. However, where as here, the briefing goes into exhaustive factual detail and extensive argument; when multiple attachments are submitted; where requested interpretations of language involve consideration of extrinsic evidence; where arguments are made asking the Board to render its decision on the basis of weighing competing evidence; and finally, where numerous key facts are clearly disputed, we find that the time both of the Board and the parties is not well served.
In regard to the scope of the briefing, the Board recognizes that the initial motion was filed by the FS. In defending a motion, the non-moving party often chooses to err on the side of providing more rather than less argument. However, while that applies to much of what is before us, appellant, when it filed its cross-motion, further added to the scope.
Summary judgment, unfortunately, has evolved in many instances into a vehicle where parties are essentially using the process to have the Board pre-review their positions and evidence, with little likelihood that the Board will decide the case on the motion. At one point here, we were tempted to limit our response and ruling significantly, as much of what is addressed is not susceptible to a ruling in favor of summary judgment and could have been summarily denied. However, in going through a thorough analysis of the record and briefs, we have developed some preliminary views on the facts, evidence and applicable law. Having done that, we have chosen to comment on a number of points raised by the parties. We have done so, with the hope that our comments may narrow issues. That said, however, the effort required by the parties and the Board in dealing with the motions, is in our view disproportionate to the clarifications that we are providing. The parties and Board would have been better served, had the parties put their efforts into proceeding to trial or proceeding to an on-the-record submission.
The motions are DENIED.
_____________________________ HOWARD A. POLLACK
CANDIDA S. STEEL JEROME M. DRUMMOND
Board Judge Board Judge
1. Scott Timber v. United States, 40 Fed. Cl. 492 (1998), vacated on reconsideration, 44 Fed. Cl. 170 (1999), aff'd in part, rev'd in part, 333 F.3d 1358 (Fed. Cir. 2003), aff'd, Nos. 94-CV-784, 96-CV-204, 2007 WL 1426728 (Fed. Cir. May 10, 2007).