Free Response to Cross Motion [Dispositive] - District Court of Federal Claims - federal

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No. 01-570C, No. 01-627C, No. 04-501C (Judge Williams) IN THE UNITED STATES COURT OF FEDERAL CLAIMS

BLUE LAKE FOREST PRODUCTS, INC.,Plaintiff, v. THE UNITED STATES, Defendant. TIMBER PRODUCTS COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. CLR TIMBER HOLDINGS, INC., Plaintiff, v. THE UNITED STATES, Defendant.

DEFENDANT'S RESPONSE TO PLAINTIFFS' CROSS-MOTION FOR SUMMARY JUDGMENT

JEFFREY S. BUCHOLTZ Acting Assistant Attorney General JEANNE E. DAVIDSON Director OF COUNSEL: Lori Polin Jones James L. Rosen Marcus R. Wah Ben Hartman Office of the General Counsel United States Department of Agriculture BRYANT G. SNEE Deputy Director ELLEN M. LYNCH Trial Attorney Commercial Litigation Branch Civil Division U.S. Department of Justice 1100 L Street, N.W., 8th Floor Washington, D.C. 20530 Tel: (202) 353-7994 Attorneys for Defendant

May 2, 2008

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TABLE OF CONTENTS STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 I. II. III. The "NEPA Decision Equals Implementation" Memorandum. . . . . . . . . . . . . . . . 2 The Red Tree Vole Memorandum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Forest Service's Mission And The Timber Industry's Role In Developing The Standard Timber Sale Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 I. Assuming Plaintiffs' Are Correct And The Forest Service Awarded These Contracts In Violation Of Law, The Contracts Are Void Ab Initio . . . . . . . . . . . 12 The Forest Service Cannot Be Liable To Plaintiffs For Actions Taken Prior To Contract Award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Summary Judgment Regarding Whether The Forest Service Acted Reasonably When It Entered Into These Timber Sale Contracts Is Inappropriate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 A. Plaintiffs' Reliance Upon Precision Pine and Superior Timber Is Misplaced.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 The Directions Given In The Forest Service's Policy Memoranda Were Reasonable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1. 2. C. The "NEPA Decision Equals Implementation" Memorandum. . . 22 The Red Tree Vole Memorandum. . . . . . . . . . . . . . . . . . . . . . . . . 25

II.

III.

B.

Plaintiffs' Evidence Regarding Whether The Forest Service Knew Or Should Have Known There Was A "Serious Legal Risk" In Proceeding With Award Is Disputed . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

IV.

Plaintiffs' Assertion that Timber Sale Contracts Are Contracts Of Adhesion Is Immaterial To The Interpretation Of C6.01 - An Unambiguous Contract Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 A. Contra Proferentum Only Applies In Cases Where The Contract Is Ambiguous, And C6.01 Unambiguously Provides For Suspension In Response To A Court Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

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B.

The Timber Industry Assisted In Drafting These Timber Sale Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

V.

These Contracts Do Not Contain An Implied Warranty Of Specifications. . . . . . 38 A. B. C. The Spearin Doctrine Does Not Apply To Timber Sale Contracts. . . . . . 39 Timber Sale Contracts Do Not Contain Design Specifications. . . . . . . . . 41 Contract Specifications Did Not Proximately Cause Plaintiffs' Alleged Harms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

VI.

Plaintiffs' Cannot Maintain a "Superior Knowledge" Claim. . . . . . . . . . . . . . . . 44 A. Plaintiffs Cannot Demonstrate That The Forest Service Violated The First Two Prongs Of The Superior Knowledge Test . . . . . . . . . . . . . 45 Plaintiffs' Reliance Upon The Forest Service Is Unfounded.. . . . . . . . . . 47 Plaintiffs' Factual Assertions Are Erroneous And Contested. . . . . . . . . . 48

B. C. VII.

Timber Products' Claim For Out Of Pocket Expenses Is Not Properly Before The Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

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TABLE OF AUTHORITIES CASES Al Johnson Constr. Co. v. United States, 854 F.2d 467 (Fed. Cir. 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234 (Fed. Cir. 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Appeal of Superior Timber Co., Inc., IBCA No. 3459, 97-1 BCA ¶ 28 (1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 19, 20, 43 Baker v. United States, 50 Fed. Cl. 483 (2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Boyer v. United States, __ Fed. Cl. __, 2008 WL 857452 (March 27, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Bradley v. Chiron Corp., 136 F.3d 1317 (Fed. Cir. 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 C.J. Betters Corp. v. United States, 25 Cl. Ct. 674 (1992). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 C. Sanches and Son, Inc. v. United States, 6 F.3d 1539 (Fed. Cir. 1993). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Cast Constr. Co., ASBCA No. 28509, 84-1 BCA ¶ 17,045 (1984).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15 David Nassif Assocs. v. United States, 664 F.2d 4 (Ct. Cl. 1981). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Essex Electro Engineers, Inc. v. Danzig, iii

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224 F.3d 1283 (Fed. Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40, 43

Everett Plywood Corp. v. United States, 651 F.2d 723 (Ct. Cl. 1981). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Federal Crop Ins. Corp. v. Merrill et al., 332 U.S. 380 (1947).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 GAF Corp. v. United States, 932 F.2d 947 (Fed. Cir. 1991), cert. denied, 502 U.S. 1071 (1992).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Gardner, Kamya & Assoc. v. United States, 467 F.3d 1348 (Fed. Cir. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 32, 33 H.N. Wood Products, Inc. v. United States, 59 Fed. Cl. 479 (2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 437, 312 F.2d 774 (1963).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Hercules Inc. v. United States, 24 F.3d 188 (Fed. Cir. 1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Hercules, Inc. v. United States, 516 U.S. 417 (1996).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39, 40 Huber, Hunt & Nichols, Inc., GSBCA No. GS-09B-C-7004-SF, 75-2 BCA ¶11,457 (1975). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 In re North Murphy Timber Sale, 146 IBLA 305, 1998 WL 951006 (Nov. 20, 1998).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Interior Board of Land Appeals ("IBLA") in In re North Murphy Timber Sale, 146 IBLA 305, 1998 WL 951006 (Nov. 20, 1998).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 J.L. Simmons Co. v. United States, 412 F.2d 1360 (Ct. Cl. 1969). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

iv

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Kalvar Corp. v. United States, 211 Ct. Cl. 192, 543 F.2d 1298 (1976).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Laburnum Constr. Co. v. United States, 325 F.2d 451 (Ct. Cl. 1963). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Luria Bros. & Co. v. United States, 369 F.2d 701 (Ct. Cl. 1966). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 M.A. Mortenson Co. v. Brownlee, 363 F.3d 1203 (Fed. Cir. 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 In re North Murphy, IBCA No. 3459, 97-1 BCA ¶ 28,736 (1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 In re North Murphy Timber Sale, 146 IBLA 305, 1998 WL 951006 (Nov. 20, 1998).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 24, 29 ONRC Action v. United States Forest Service, 59 F.Supp. 2d 1085 (W.D. Wash. 1999).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Ordnance Research, Inc. v. United States, 609 F.2d 462 (Ct. Cl. 1979). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Pacific Rivers Council v. Robertson, 30 F.3d 1050 (9th Cir. 1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35 (2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635 (2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Precision Pine & Timber, Inc. v. United States, __ Fed. Cl. __, 2007 WL 5030766 (Sept. 14, 2007).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 35, 49 R.E.D.M. Corp. v. United States, 428 F.2d 1304 (Ct. Cl. 1970). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 v

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Record Club of Am. v. United Artists Records, 890 F.2d 1264 (2d Cir. 1989).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Residential Mktg. Group v. Granite Inv. Group, 933 F.2d 546 (7th Cir. 1991). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Rick's Mushroom Service, Ins. v. United States, 2008 WL 861975 (Fed. Cir. Apr. 2, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Scott Timber Co. v. United States, 333 F.3d 1358 (Fed. Cir. 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Seaboard Lumber Co. v. United States, 903 F.2d 1560 (Fed. Cir. 1990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Spearin v. United States, 248 U.S. 132 (1918).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim Star Fruits S.N.C. v. United States, 393 F.3d 1277 (Fed. Cir. 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Stuyvesant Dredging Co. v. United States, 834 F.2d 1576 (Fed. Cir. 1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Total Medical Management, Inc. v. United States, 104 F.3d 1314 (Fed. Cir. 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Trinity River Lumber Co. v. United States, 66 Fed. Cl. 98 (2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 34 United States v. Amdahl Corp., 786 F.2d 387 (Fed. Cir. 1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13 Wetsel-Oviatt Lumber Co., Inc. v. United States, 38 Fed. Cl. 563 (1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

STATUTES Fed. R. Civ. P. 65.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 60 Fed. Reg. 25367 (May 6, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 vi

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68 Fed. Reg. 70758 (Dec. 19, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

vii

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS BLUE LAKE FOREST PRODUCTS, INC., ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) ) Defendant. ) TIMBER PRODUCTS COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. CLR TIMBER HOLDINGS, INC., Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. 01-570C (Judge Williams)

No. 01-627C (Judge Williams)

No. 04-501C (Judge Williams)

DEFENDANT'S RESPONSE TO PLAINTIFFS' CROSS-MOTION FOR SUMMARY JUDGMENT Pursuant to Rule 7 of the rules of this Court ("RCFC") and the Court's September 28, 2007 and April 14, 2008 orders, we respectfully submit this opposition to plaintiffs' cross-motion for summary judgment. Notwithstanding the considerable length of their cross-motion, plaintiffs fail to raise any genuine issues of material fact to counter our position that the Forest Service had the authority to suspend, and properly suspended, the timber sale contracts at issue pursuant to C6.01. Because the proper interpretation of a contract provision entitles defendant to judgment

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as a matter of law, we respectfully request the Court grant defendant's cross-motion for partial summary judgment and, deny plaintiffs' cross-motion. In the alternative, to the extent that plaintiffs' argument is based upon the premise that the Forest Service awarded these timber sale contracts when it should have known that its legal reasoning for not conducting Category 2 surveys was deficient, we are entitled to summary judgment because, if we accept plaintiffs' argument as true, the Forest Service did not have the authority to award a contract contrary to law. The remaining allegations in plaintiffs' cross-motion for summary judgment are erroneous as a matter of law, and include numerous disputed factual issues that are material as to whether the timber sale contracts at issue are contracts of adhesion, whether the Forest Service breached an implied warranty of specifications, and, finally, whether the Forest Service failed to disclose its superior knowledge.1 Plaintiffs cannot prevail upon summary judgment because their remaining arguments fail as a matter of law or are based upon disputed factual allegations. As outlined in defendant's cross-motion for partial summary judgment, proper interpretation of the applicable contract provisions entitles defendant to judgment as a matter of law, we respectfully request the Court to grant defendant's cross-motion for partial summary judgment and to deny plaintiffs' cross-motion. STATEMENT OF FACTS I. The "NEPA Decision Equals Implementation" Memorandum The Northwest Forest Plan ("NFP") Record of Decision ("ROD") instructed that Category 2 surveys should "precede the design of all ground-disturbing activities . . .

1

See Defendant's Responses to Plaintiffs' Proposed Findings of Uncontroverted Facts, dated March 7, 2008. 2

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implemented in [Fiscal Year] 1999 or later. Defendant's Proposed Findings of Uncontroverted Fact (DPFUF) ¶ 21. The Forest Service and Bureau of Land Management ("BLM") were faced with questions regarding implementation of the NFP, and established the NFP Issue Resolution Team ("IRT") to ensure consistent responses between agencies and between functional disciplines within each agency. DPFUF ¶ 22. The IRT was asked to interpret the transition period established by the NFP for phased-in survey requirements; specifically, they were asked to review a portion of the ROD's Standards and Guidelines, "Survey prior to ground-disturbing activities." DPFUF ¶ 23. To respond to these inquiries, Tom Hussey (Forest Service lead on the IRT) and Larry Larson (BLM lead on the IRT) sought assistance from Randy Hickenbottom, Chair of the Survey and Manage Workgroup, Cheryl McAfree, a botanist, Lyndon Werner, a BLM timber sale specialist, and Nancy Anderson, another BLM employee. DPFUF ¶ 22, 23. This group determined that there were three different ways to define "implement" within the context of the NFP ROD. Implementation could mean: (1) when there is physical activity on the ground; (2) when an agency signs a contract; or (3) when the National Environmental Policy Act ("NEPA") decision is signed. DPFUF ¶ 23. The IRT adopted the third definition, that a project is implemented when the NEPA decision is signed, because they determined it made sense for the responsible official to have the survey information before he or she signed off on a project's NEPA decision. DPFUF ¶ 24. The other definitions of "implement" would create a situation where surveys could require changes to the NEPA decision documents after those documents were signed, or after contract award. Id. Either case would lead to additional costs and possible contract modification or termination. Id. 3

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Furthermore, any other definition of "implement" would effectively read out the NFP's phased-in survey requirements, which were intended to provide time to develop and apply the survey protocols. DPFUF ¶ 25. The Regional Foresters for Regions 5 and 6, and the BLM State Directors for Oregon and California adopted the IRT's recommendation regarding the definition of "implement" within the context of the NFP ROD. DPFUF ¶ 26. They issued a memorandum on November 1, 1996, commonly referred to as the "NEPA Decision Equals Implementation" memorandum, which states that a project is implemented for purposes of the NFP when the NEPA decision is signed. DPFUF ¶ 26. When questioned during a deposition, Ms. Lois Schiffer, Assistant Attorney General for the Department of Justice's Environment and Natural Resources Division ("ENRD") at the time of the ONRC Action litigation, did not have any recollection regarding the statement attributed to her that "NEPA decision equals implementation is nonsense." DPFUF ¶ 35. Mr. Edward Boling, the lead trial counsel for the ONRC Action litigation, similarly did not recall any conversation in which Ms. Schiffer allegedly stated that "NEPA decision equals implementation is nonsense." DPFUF ¶ 36. Mr. Coppelman, the Deputy Assistant Attorney General for ENRD at the time of the ONRC Action litigation, also did not recall that conversation. Id. II. The Red Tree Vole Memorandum The Forest Ecosystem Management Assessment Team ("FEMAT") assembled after the 1993 "Forest Conference" in Portland, Oregon. DPFUF ¶ 27. The FEMAT was a group comprised of scientists and technical experts from the Forest Service, BLM, Environmental Protection Agency, Fish & Wildlife Service, National Marine Fisheries Services, and several 4

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universities. Id. The FEMAT was charged with preparing an assessment based upon an ecosystem approach to forest management. Id. The FEMAT analyzed ten options that encompassed a mixture of Late-Successional Reserves ("LSRs"), Riparian Reserves ("RRs"), and prescriptions for forest management both inside and outside of the reserves. DPFUF ¶ 28. Most of the management activities would occur in matrix lands, which is land outside the LSRs and RRs. Id. For each option, the FEMAT "evaluated the likelihood of maintaining welldistributed habitat conditions on the federal lands for threatened marbled murrelets and northern spotted owls." Id. The FEMAT also assessed over 1,000 plant and animal species that were "thought to be closely associated with late-successional forests." Id. For these species, the FEMAT suggested that if the species had an 80 percent or greater likelihood of stabilizing, welldistributed, across federal lands, then the species' viability could be assured. Id. Significantly, the FEMAT noted that "species with scores lower than 80 percent should not automatically be regarded as unviable." Id. A team from the Forest Service and BLM used the FEMAT Report to prepare a draft Supplemental Environmental Impact Statement ("SEIS"), which identified FEMAT's ten alternatives as options. DPFUF ¶ 29. The team decided upon alternative 9, and prepared a draft SEIS, which they sent out for public comment. Id. After receiving public comment, additional analysis was conducted on many of the species; this additional analysis was included as an appendix to the final SEIS, and is commonly referred to as "Appendix J2" or "Additional Species Analysis." Id. The Additional Species Analysis "identified species to be surveyed and a prescribed management of the species' habitat to increase the likelihood that the species' populations would stabilize, well-distributed, across federal lands. Id. 5

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The Additional Species Analysis identified the red tree vole. DPFUF ¶ 30. However, research in the FEMAT Report and in the Additional Species Analysis demonstrated that the tree vole was "thought to be in less dire circumstances." Id. The FEMAT Report determined that Alternative 9 resulted in a 73 percent likelihood of achieving habitat sufficient to allow the red tree vole to stabilize across federal lands; had the red tree vole received a 7 percent higher rating, it would not have been included in the Additional Species Analysis. Id. The final SEIS Species Analysis Team's Mammal Subgroup determined that it was unnecessary to protect every red tree vole site; therefore, the red tree vole was not included in the Category 1 Survey and Manage species. DPFUF ¶ 31. The subgroup further decided that the red tree vole sites should be assessed in relation to their value in adding to the connectivity between LSRs and RRs, many of which were not ecologically functional because of past management practices. Id. The group wanted to prevent isolation of major portions of the red tree vole population, and, therefore, determined that the red tree vole should be included in the Category 2 Survey and Manage Species. Id. As a result of this determination, the Survey and Manage Workgroup developed interim guidance for the Forest Service and BLM to implement the Category 2 Survey and Manage requirements for the red tree vole. DPFUF ¶ 32. The group determined that, because of concerns related to ensuring connectivity between LSRs, "those requirements should be designed to maximize the efficiency and efficacy in increasing the likelihood of providing for a welldistributed red tree vole population." Id. The group solicited input from FEMAT scientists, the Additional Species Analysis Team, and the final SEIS team, and, based upon that input, the group developed the recommendations that were ultimately adopted in the November 4, 1996, 6

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memorandum entitled: "Interim Guidance for Survey and Manage Component 2 Species: Red Tree Vole," which is informally known as the Red Tree Vole Memorandum. Id. Because the threat to the red tree vole's continued viability was minimal (as stated above, the red tree vole had a 73 percent chance of achieving habitat sufficient to allow it to stabilize across federal lands), the concern regarding the red tree vole related to past forest management practices that fragmented LSRs and resulted in the creation of young, even-aged forests. DPFUF ¶ 33. Therefore, the focus of the red tree vole mitigation measure was to improve LSR connectivity, rather than managing known sites that may be isolated due to a lack of LSR connectivity. Id. The group determined that if a stand of trees containing red tree voles was surrounded principally by older forests, that stand of trees would do little to add to the connectivity already provided by the older forests. Id. On the other hand, a stand containing red tree voles in an area with almost no older forest or suitable habitat would have a much higher value in maintaining connectivity between LSRs. Id. Finally, if a stand of trees containing a red tree vole population was located in an area isolated from federally managed lands, and, therefore, LSRs, that stand could not contribute to improving the species' viability. Id. The Red Tree Vole memorandum required that, before conducting surveys, geographic information system ("GIS") information was to be used to analyze federal lands to screen based upon their value in increasing LSR connectivity. DPFUF ¶ 34. The first screen would determine how much land was federally managed, and, if the area contained less than 10 percent federal land, surveys were not required for those areas. Id. The second screen would determine whether "at least 40 percent of the federal lands in the watershed area was forested with at least 60 percent crown closure, an average conifer tree diameter at breast height of at least 10 inches, and 7

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whether that closure and diameter could be maintained throughout the year 2000." Id. If federal lands met the requirements outlined in the second screen, there was no need to survey for the red tree vole because the habitat already provided sufficient LSR connectivity. Id. On July 18, 1998, ONRC Action filed a complaint challenging, among other things, the Forest Service's November 1, 1996 memo that defined the term "implement" as the time when the NEPA decision document is signed, and the November 4, 1996 memo that "excludes approximately 5.5 million acres . . . nearly 90% of the red tree vole habitat . . . from the survey requirement." DPFUF ¶ 58. III. The Forest Service's Mission And The Timber Industry's Role In Developing The Standard Timber Sale Contract The Forest Service must consider the competing interests of the environment and the timber industry, a fact that President Clinton recognized during the Forest Conference on April 2, 1993: "How can we achieve a balanced and comprehensive policy that recognizes the importance of the forest and timber to the economy and jobs in the region, and how can we preserve our precious old-growth forests, which are part of our national heritage and that, once destroyed, can never be replaced?" DPFUF ¶ 37. Further, the Forest Service must meet congressionallymandated timber-harvest levels. DPFUF ¶ 38. The timber industry played a role in developing the Forest Service's standard timber sale contract. The National Forest Products Association ("NFPA") acknowledged that the 2400-6 standard timber sale contract was developed in 1970 with "extended discussions between NFPA's Federal Timber Purchaser's Committee and the Forest Service." DPFUF ¶ 39. The Forest Service, NFPA, other timber industry groups, and individuals in the timber industry,

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communicated throughout 1971 and 1972 regarding possible revisions to the standard timber sale contract. DPFUF ¶ 40. After these communications, the contracts were revised in September 1973. Id. These timber sale contracts included terms that were favorable to the timber industry, including allowing purchasers to operate their sale with little Forest Service oversight, and the contract did not contain a clause that would allow the Forest Service to terminate the contract for its own convenience, or a liquidated damages provision. Id. These terms remained the same for about two decades. Id. Over the past thirty years, the Forest Service has continued to meet with and seek comment from the timber industry concerning revisions to the timber sale contract. DPFUF ¶ 42. In the late 1980s and early 1990s, the Forest Service decided to revise the standard timber sale contract to reflect changes in environmental laws, court decisions interpreting those environmental laws, and to protect the Forest Service's financial interests. DPFUF ¶ 43. The Forest Service sought, and received, input from the timber industry. Id. In particular, NFPA provided numerous comments on C/CT6.01. Id. The Forest Service has an on-going relationship with the timber industry. For example, the Forest Service met with members of the NFPA Federal Timber Purchaser's Committee ("FPTC") and its counsel, Alan Saltman, to consider revisions to the latest version of the timber sale contracts. DPFUF ¶ 47. Over the past thirty years, and within the bounds of laws governing the formation of regulation and policy, the Forest Service has engaged in discussions with members of the timber industry about the standard timber sale contracts and issues affecting the timber industry. DPFUF ¶ 48.

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IV.

The Timber Sale Contracts All three of plaintiffs' timber sale contracts include a clause that requires purchasers to

submit a plan of operations prior to commencing work each season. DPFUF ¶ 49. Other clauses in the contracts contain "objectives" or "methods" for harvesting timber. DPFUF ¶ 50. The Too Wild contract includes clause C6.41# - Special Felling Objectives, which states: "felling objectives shall be accompanied by the type of felling methods or equipment listed herein. Methods or equipment other than those specified may be approved." Id. The Too Wild contract also includes clause C6.42# - Special Yarding/Skidding Methods, which allows for the use of "[m]ethods or equipment other than those specified . . . ." Id. The Jack Heli contract similarly provides for the purchaser's discretion, and includes clause C6.411# - Directional Felling, which provides that: "[D]irectional felling shall not be required when in the faller's judgment it is unsafe to do so, and the tree shall be left standing." Id. The Jack Heli contract also includes clause C5.411 - Dust Abatement for Temporary Roads, which states: "Purchaser may choose the material used in dust abatement." Id. The Happy Thin contract includes the Directional Felling clause, and clause CT5.414 - Snow Removal, which states: "[i]f Purchaser removes snow from roads, such work shall be done in a manner that will protect roads and adjacent resources. Id. Prior to awarding these timber sale contracts, the plaintiffs all had knowledge of the ONRC Action lawsuit. The Northwest Forestry Association, a timber industry group, issued a newsletter, Forestry Forum, that tracked the ONRC Action litigation in detail - including making mention of "secret agreements" between the ONRC Action plaintiffs and the Government - and discussed the litigation's possible impact on timber sales in the region. DPFUF ¶ 51. The prospectus for the Jack Heli timber sale included the language: "This sale has been identified in a 10

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lawsuit in which plaintiffs contend that the Forest Service has violated the Northwest Forest Plan in preparing the sale. Language in this sale's contract has been included to limit the government's liability in case of cancellation to the holding cost." DPFUF ¶ 52. The award of all three sales was delayed; for the Jack Heli timber sale, the Forest Service requested and received permission to extend the purchaser's bid. DPFUF ¶ 53. The Contracting Officer for the Happy Thin and Jack Heli timber sales, Ed Matthews, communicated regularly with representatives from the timber industry, including Blue Lake Forest Products, Inc. and Timber Products, Co., and discussed the ONRC Action litigation and its potential impact on the Klamath's timber sale program. DPFUF ¶ 54. Tom Link, the Contracting Officer for the Too Wild timber sale, also provided information to CLR Holdings, Inc., regarding the ONRC Action litigation including general information about the case, how it affected the delay in award, and information regarding ongoing settlement negotiations. DPFUF ¶ 55. The plaintiffs in all three sales did not accept the Forest Service's estimate of timber available for harvest on a particular sale; therefore, the plaintiffs all cruised the sales themselves to obtain more accurate estimates of the amount of timber available for harvest. DPFUF ¶ 56. Finally, the Forest Service provided notice to the ONRC Action plaintiffs of its intent to award the three timber sales at issue, and the ONRC Action plaintiffs did not take action prior to award. DPFUF ¶ 57.

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ARGUMENT I. Assuming Plaintiffs' Are Correct And The Forest Service Awarded These Contracts In Violation Of Law, The Contracts Are Void Ab Initio Throughout their brief, plaintiffs go to great lengths to demonstrate that the Forest Service caused the suspensions by unreasonably awarding the contracts without conducting Category 2 surveys when it knew, or should have known, that its legal reasoning for awarding the contracts without conducting those surveys was deficient. Essentially, plaintiffs' argument rests upon the notion that the Forest Service awarded these contracts based upon an unlawful interpretation of the applicable regulations (in this case, the Northwest Forest Plan ("NFP") and the accompanying Record of Decision ("ROD")).2 If true, these contracts are not valid because no government official can enter into a contract that conflicts with statute or regulation. See United States v. Amdahl Corp., 786 F.2d 387, 392 (Fed. Cir. 1986). Such contracts are void ab initio. Id. Plaintiffs themselves have put at issue the question of whether these contracts are valid contracts. To establish a valid contract with the United States, plaintiffs must prove that the individual who entered into the contract on behalf of the government had the authority to bind the government in contract. Total Medical Management, Inc. v. United States, 104 F.3d 1314, 1319 (Fed. Cir. 1997). Furthermore, government contracts must comply with applicable statutes and regulations. Id. citing United States v. Amdahl Corp., 786 F.2d at 392 (finding that a contract awarded in violation of statute and regulation was void ab initio). A contract that is "plainly illegal" is one that is made contrary to statute or regulation and the contractor has
2

For purposes of this section, we have assumed that plaintiffs' allegations regarding the illegality of the Forest Service's decisions are correct. We believe that these contracts are valid. 12

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constructive or actual notice that the regulatory scheme would be used to enter into the contract. Id. at 1319, 1321. In a case involving a contract for crop insurance under the Federal Crop Insurance Act, the Supreme Court of the United States found that applicable regulations are "binding on all who sought to come within the Federal Crop Insurance Act, regardless of actual knowledge of what is in the Regulations or of the hardship resulting from innocent ignorance." Federal Crop Ins. Corp. v. Merrill et al., 332 U.S. 380, 385 (1947) (holding plaintiffs bound to a regulation that prohibited federal crop insurance for reseeded wheat despite the government's acceptance of their application for insurance). Here, plaintiffs call into question the Forest Service's authority to enter into these contracts by claiming that the Forest Service awarded the timber sale contracts without conducting Category 2 surveys, "despite having been put on notice repeatedly prior to contract award that its legal rationale for not conducting the surveys was deficient." Pls.' Cross-Motion at 51. As support for their arguments, plaintiffs cite extensively from the district court decision in ONRC Action, where the court noted that there was no "open legal question" related to when the Category 2 surveys must be conducted. Id. at 49. According to plaintiffs' own allegations, these contracts were awarded contrary to law. Furthermore, these contracts were also "plainly illegal," because, as plaintiffs themselves contend, "[t]he holding of ONRC Action establishes that upon reviewing the NFP, any rational person or agency, including the [Forest Service], could not have concluded that the `NEPA decision equals implementation' interpretation and RTV Directive were lawful." Id. at 51. Plaintiffs cannot even claim "innocent ignorance" of the applicable regulations. See Federal Crop Ins. Corp. v. Merrill, et al., 332 U.S. at 385. Plaintiffs in this case knew that the NFP 13

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supplied the regulatory scheme for awarding these timber sale contracts, and, prior to contract award, plaintiffs communicated with the contracting officers about the ONRC Action litigation.3 DPFUF ¶¶ 54, 55. Therefore, as rational people, plaintiffs must also be charged with responsibility for reviewing the NFP and concluding that the Forest Service's directives were unlawful. If plaintiffs are correct that these contracts were awarded contrary to law and the illegalities should have been apparent to any rational person reviewing the NFP (including plaintiffs), these contracts are void ab initio and plaintiffs cannot maintain a cause of action for breach. To be clear, the Government believes these contracts are valid, but were plaintiffs to establish that these contracts were entered into in violation of law, the necessary result of plaintiffs' effort would be to render the contracts void ab initio. II. The Forest Service Cannot Be Liable To Plaintiffs For Actions Taken Prior To Contract Award As explained in our opening brief, the Forest Service has the authority to suspend timber sale contracts to comply with court orders pursuant to C6.01. This authority, however, remains subject to the implied covenant of good faith and fair dealing. "The covenant of good faith and fair dealing is an implied duty that each party to a contract owes to its contracting partner." Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed. Cir. 2007). It imposes obligations upon both contracting parties that include the duty not to interfere with the other party's

The ONRC Action complaint challenged, among other things, the Forest Service's November 1, 1996 memo that defined the term "implement" as the time when the NEPA decision documents are signed, and the November 4, 1996 memo that "excludes approximately 5.5 million acres . . . nearly 90% of the red tree vole habitat . . . from the survey requirement." ONRC Action Compl., ¶¶ 31-34. 14

3

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performance and not to act so as to destroy the reasonable expectations of the other party regarding the fruits of the contract. Id. However, the covenant is limited to assuring compliance with the express terms of the contract and thus does not create obligations not contemplated in the contract itself. Bradley v. Chiron Corp., 136 F.3d 1317, 1326 (Fed. Cir. 1998). Consequently, "the assertion of a legitimate contract right cannot be considered violative of a duty of good faith and fair dealing." David Nassif Assocs. v. United States, 664 F.2d 4, 12 (Ct. Cl. 1981). Here, plaintiffs' contention that the Forest Service breached the implied covenant of good faith and fair dealing is based upon conduct occurring before contracts were awarded. The covenant of good faith and fair dealing is an implied contract term. Because no duty of good faith and fair dealing exists in the absence of a contract, it necessarily follows that pre-contract conduct cannot constitute a breach.4 Simply put, when no duty exists, there can be no breach of duty.5 In addition, because the timber sale contracts give the Forest Service the right to suspend performance to comply with the order of a court of competent jurisdiction, the suspension of plaintiffs' contracts cannot constitute a breach of the implied covenant of good faith and fair dealing. David Nassif Assocs. v. United States, 664 F.2d at 12. It is undisputed that a Federal

4

Another judge of this Court has found that an agency did not owe plaintiffs a fiduciary duty in accordance with the duty of good faith and fair dealing when "any conduct in violation of statutes and rules . . . occurred prior to the formation of a contract . . . ." Baker v. United States, 50 Fed. Cl. 483, 499 (2001). Where a contract contains an express warranty, actions taken before the execution of the contract might conceivably breach the warranty. For instance, a seller who warrants clear title breaches the warranty if a pre-sale loan has not been paid off. Here, however, plaintiffs allege no breach of warranty. 15
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district court entered an injunction in ONRC Action. App. __. The Forest Service was, therefore, entitled to suspend plaintiffs' contracts pursuant to C6.01. Plaintiffs respond that the Forest Service cannot invoke C6.01 because the ONRC Action injunction was caused by the Forest Service's allegedly unreasonable or illegal pre-award interpretation of its environmental responsibilities under the NFP. Such a limitation on the ability to suspend would render clause C6.01 nugatory and, thus, violate a basic canon of statutory construction. See Gardner, Kamya & Assoc. v. United States, 467 F.3d 1348, 1352 (Fed. Cir. 2006) ("We must interpret a contract as a whole and in a manner which gives reasonable meaning to all its parts and avoids conflict or surplusage of its provisions.") (brackets and internal quotes omitted). C6.01 authorizes a suspension in order to comply with an order from a court of competent jurisdiction. However, a district court will enter a preliminary injunction that prevents timber harvesting only if an environmental plaintiff has shown a "likelihood of success on the merits." Fed. R. Civ. P. 65. Consequently, the most probable situation in which the Forest Service would seek to invoke C6.01 is after a court has concluded that the Forest Service may have erred in some material respect. It would therefore effectively void C6.01 to hold that the clause cannot be invoked where some Forest Service action "caused" the court order upon which the suspension is based. Throughout their brief, plaintiffs rely upon the Court of Federal Claims' decision in Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35 (2001). Precision Pine, which was decided before the United States Court of Appeals for the Federal Circuit issued Scott Timber Co. v. United States, 333 F.3d 1358 (Fed. Cir. 2003), addressed the Forest Service's suspensions 16

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of 14 timber sale contracts pursuant to contract clause C[]6.01. The court found two distinct breaches: (1) the breach of a purported express warranty in clause C[]6.25; and (2) a breach occurring when otherwise valid contract suspensions continued for too long.6 Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. at 58. The claim that C[]6.25 contains an express warranty was rejected by Scott Timber, and, therefore, this aspect of the Precision Pine decision is no longer viable. Scott Timber v. United States, 333 F.3d at 1371. Moreover, the Precision Pine court - like the Federal Circuit in Scott Timber - found that C[]6.01 expressly authorizes the Forest Service to suspend contracts to comply with a district court injunction: C[]6.01 gives the Forest Service the contractual right to suspend the contracts. It is only after the statutory time frame [for consultation with the Fish and Wildlife Service] expires that the Forest Service can be found to have breached the implied duty not to hinder, and even then only after additional findings with respect to unreasonableness are made. Thus, defendant was not in breach of the implied duty not to hinder until, at the earliest, the time at which the 135-day statutory consultation period had elapsed. Precision Pine & Timber, Inc. v. United States, __ Fed. Cl. __, 2007 WL 5030766 at *30 (Sept. 14, 2007) (emphasis added). Thus, Precision Pine stands only for the unremarkable proposition that the duty of good faith and fair dealing might place an outer limit on the length of the suspension authorized by C6.01. See id. Furthermore, in Scott Timber, the Federal Circuit recognized that any reasonableness inquiry is only appropriate as it relates to the duration of the suspensions, not the mere fact that the contracts were suspended. Scott Timber Co. v. United States, 333 F.3d at 1368 (noting that
6

The Court sometimes described the breach of warranty as a breach of the "implied duty to cooperate" and discussed the other breach as the breach of the "implied duty not to hinder." These implied duties are characterized as subspecies of the well-known duty of good faith and fair dealing. See Precision Pine, 50 Fed. Cl. at 58-59. 17

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C6.01 does not authorize the indefinite or permanent suspension of the contracts, and that the court looks to the reasonableness of the suspension only to determine whether a prolonged suspension constitutes a breach). Therefore, for contracts that include clause C6.01, Scott Timber establishes that the only possible breach plaintiffs could prove is a breach that resulted from the duration of the suspension. Binding precedent establishes that the duty of good faith and fair dealing - and its subspecies, the duties to cooperate and not to hinder - does not apply to the Forest Service's precontract actions. Because plaintiffs focus solely on the Forest Service's pre-contract actions, and do not challenge the duration of the suspensions, this Court cannot find that the Forest Service breached these timber sale contracts. III. Summary Judgment Regarding Whether The Forest Service Acted Reasonably When It Entered Into These Timber Sale Contracts Is Inappropriate If this Court determines that it is necessary to review the Forest Service's pre-contract actions outside the context of the duration of a suspension, which plaintiffs do not challenge here, plaintiffs have failed to establish that there are no disputes over material facts that might affect the outcome of the case, and, therefore, summary judgment is inappropriate. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-78 (1986). Plaintiffs go to great lengths to argue that summary judgment in their favor is appropriate on the issue of whether the Forest Service acted reasonably when it entered into the timber sale contracts with plaintiffs. Pls.' Cross-Motion at 68-77. Plaintiffs assert the appropriateness of their position based upon a decision of this court, Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35 (2001), and a decision of the Interior Board of Contract Appeals ("IBCA"), Appeal of Superior Timber Co., Inc., IBCA No.

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3459, 97-1 BCA ¶ 28,736 (1996), and argue that the uncontroverted evidence establishes that the Forest Service breached the implied duties to cooperate and not to hinder plaintiffs contracts. Contrary to plaintiffs' assertions, there are genuine issues of material facts in dispute, which preclude the entry of summary judgment in plaintiffs' favor. A. Plaintiffs' Reliance Upon Precision Pine and Superior Timber Is Misplaced

The weight of authority dictates that any consideration of reasonableness, an issue that is "intensely factual," is not properly determined upon summary judgment. Scott Timber Co. v. United States, 333 F.3d at 1369, see also Trinity River Lumber Co. v. United States, 66 Fed. Cl. 98, 109-10 (2005) (noting that "[w]hile the facts in Precision Pine warranted summary judgment, the Federal Circuit, in Scott Timber, has indicated that summary judgment in such cases is rarely appropriate."); H.N. Wood Products, Inc. v. United States, 59 Fed. Cl. 479, 491 (2003) (finding that genuine issues of fact precluded summary judgment on the issue of whether the Forest Service knew or should have known that its environmental documents were inadequate when it awarded the contracts). Plaintiffs seek to distinguish this Court's more recent decisions denying summary judgment upon the issue of reasonableness and argue that the summary judgment is appropriate based upon Precision Pine and Superior Timber, by erroneously arguing that the Trinity River and H.N. Wood Products decisions adopted the incorrect legal standard for reasonableness and have incorrectly interpreted the Federal Circuit's Scott Timber decision. Plaintiffs' position is incorrect. Instead, we fairly read Precision Pine and Superior Timber cases - both of which were decided before the Federal Circuit's decision in Scott Timber - are clearly distinguishable and are contrary to the recent trend of decisions in this Court.

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The plaintiffs in Precision Pine and Superior Timber prevailed upon summary judgment because the Forest Service awarded the timber sale contracts in those cases despite being told that they had a legal obligation to do certain environmental assessments prior to award. In Precision Pine, a judge of this Court determined that the Forest Service breached the plaintiff's timber sale contracts when it ignored a decision from the United States Court of Appeals for the Ninth Circuit, Pacific Rivers Council v. Robertson, 30 F.3d 1050 (9th Cir. 1994), that found that the agency's land resource management plans ("LRMPs") must be submitted for consultation with the Fish and Wildlife Service ("FWS"). Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. at 68. However, the Precision Pine court noted that, prior to the Pacific Rivers Council decision, "the Forest Service had a genuine legal argument that it did not have to submit these [LRMPs] for consultation." Id. Similarly, in Superior Timber, the IBCA found that the Bureau of Land Management ("BLM") had been put on sufficient notice during litigation prior to the award of the contract that its environmental assessments were inadequate, such that it was unreasonable to award the contract without addressing the deficiencies. Appeal of Superior Timber Co., Inc., 97-1 BCA ¶ 28,736 at ¶ 143,442-43. As another judge of this Court noted in H.N. Wood Products, "the timing of the prior decision in Superior Timber was key to the board's conclusion that the BLM breached the implied duty to cooperate and not to hinder in that case." H.N. Wood Products, Inc. v. United States, 59 Fed. Cl. at 491. In the cases currently before the Court, the Forest Service did not ignore a prior decision that established a need to conduct Category 2 surveys prior to awarding these timber sale contracts. It is incontrovertible that the ONRC Action decision was issued after the award of the timber sale contracts at issue here. See ONRC Action v. United States Forest Service, 59 20

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F.Supp. 2d 1085 (W.D. Wash. 1999) (summary judgment decision issued on August 2, 1999). In fact, to borrow language from the Precision Pine decision, the Forest Service had a "genuine legal argument" that it did not have to conduct Category 2 surveys prior to award. Precision Pine & Timber Co., Inc. v. United States, 50 Fed. Cl. at 68. The existence of the Forest Service's "genuine legal argument" for not performing Category 2 surveys prior to awarding these timber sale contracts forms the basis for the material disputes before this Court. Plaintiffs argue that the Forest Service should not have awarded these timber sale contracts prior to conducting the "important" Category 2 surveys, and acknowledge that they must establish "[u]nreasonableness based on proof of a lack of prudence given the FS's knowledge at the time is sufficient" to establish breach. Pls.' Cross-Motion at 76. However, based upon the Forest Service's interpretation of the NFP Record of Decision ("ROD") and the associated Standards and Guidelines ("S&G"), an interpretation that was upheld by the Interior Board of Land Appeals ("IBLA") in In re North Murphy Timber Sale, 146 IBLA 305, 1998 WL 951006 (Nov. 20, 1998), at a minimum, it is a question of material fact as to whether the Forest Service acted reasonably when it awarded these timber sale contracts without conducting Category 2 surveys. Accordingly, summary judgment on plaintiffs' cross-motion is inappropriate. B. The Directions Given In The Forest Service's Policy Memoranda Were Reasonable

For Category 2 survey species, the NFP ROD instructed that the surveys should "precede the design of all ground-disturbing activities . . . implemented in [Fiscal Year] 1997 or later." DPFUF ¶ 21. The Forest Service issued a memorandum, commonly referred to as the "NEPA

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Decision Equals Implementation" memorandum, that interpreted this instruction. DPFUF ¶ 26. Plaintiffs' brief, in its exhaustive recitation of the conflicting viewpoints on the Issue Resolution Team ("IRT"), and in comments submitted to the Forest Service in public comments and lawsuits, merely demonstrates that the Forest Service (and BLM) were faced with a difficult decision. While it is easy to second-guess agency actions through the benefit of hindsight, Government officials are presumed to act in good faith. Kalvar Corp. v. United States, 211 Ct. Cl. 192, 543 F.2d 1298, 1301-02 (1976) (finding that Government officials are presumed to act in good faith, and "it requires `well-nigh irrefragable proof' to induce a court to abandon the presumption of good faith."); see also Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1239 (Fed. Cir. 2002) (noting that a "high burden must be carried to overcome this presumption . . . ."). 1. The "NEPA Decision Equals Implementation" Memorandum

As plaintiffs recognize, questions arose within the Forest Service with regard to how to the individual Forests could achieve the NFP survey and manage requirements. DPFUF ¶ 22. These questions were directed to a group established to ensure consistent responses, the NFP IRT. Id. One of the questions the IRT faced was defining when a project should be considered "implemented" for purposes of the survey and manage requirements. DPFUF ¶ 23. This question arose in part because of ambiguities within the NFP ROD and the NFP Standards and Guidelines ("S&G"). In re North Murphy Timber Sale, 146 IBLA 305, 1998 WL 951006 (Nov. 20, 1998). The ROD states that "surveys [must be] conducted prior to ground-disturbing activities." Id. The S&G states that "surveys [for component 2 species] must precede the design of all ground-disturbing activities that will be implemented in [FY] 1997 or later." Id. The IRT 22

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noted that there are three possible interpretations for when a project is implemented: (1) when there is physical activity on the ground; (2) when an agency signs a contract; or (3) when the responsible official signs the NEPA decision. DPFUF ¶ 23. The IRT settled on the third definition, that a project is implemented when the NEPA decision is signed, so that the surveys would be complete before the official could determine a project's design. DPFUF ¶ 24. The group determined that it made sense to have the survey information available for the responsible official to consider before he or she signed the NEPA decision. Id. To find otherwise would mean that the surveys could change the project's design after the NEPA decision was signed, or after contract award, which would lead to additional costs and possible contract modification or termination. Id. Furthermore, any other definition would effectively read out the NFP's phased-in survey requirements, which the NFP intended to provide time to develop and apply the survey protocols. DPFUF ¶ 25. The IRT's determination led to the issuance of a memorandum by the Forest Service Regional Foresters for Regions 5 and 6, and the BLM State Directors for Oregon and California, on November 1, 1996. DPFUF ¶ 26. This memorandum, the "NEPA Decision Equals Implementation" memorandum, states that a project is implemented for purposes of the NFP ROD when the NEPA decision is signed. Id. Furthermore, the Forest Service had received assurances from an administrative court that its "NEPA decision equals implementation" guidance was valid. The United States Department of the Interior, Interior Board of Land Appeals ("IBLA"), heard a challenge by environmental groups with respect to the North Murphy timber sale. In re North Murphy Timber Sale, 146 IBLA 305, 1998 WL 951006 (Nov. 20, 1998). In this case, environmental groups challenged the 23

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"NEPA Decision Equals Implementation" memorandum. While noting that "[a]s a general matter, we would be inclined to agree with appellants that ground-disturbing activities are `implemented' when they, in fact, occur . . . ," the IBLA recognized that there is an ambiguity in the NFP. Id. at 332. In its decision, the IBLA referenced the ambiguity ­ the fact that the term "implementation" is used differently in the Category 2 Survey & Manage Guidelines. Id. The NFP first directs that surveys "must precede the design of all ground-disturbing activities that will be implemented in 1997 or later." Id. As the IBLA noted, this reference "clearly differentiates between planning (design) and implementation." Id. The second reference, however, does not make that same distinction: "surveys must be completed prior to grounddisturbing activities that will be implemented in F.Y. 1999 or later." Id. The NFP ROD adds to the confusion, by first stating that "surveys must be completed prior to ground-disturbing activities that will be authorized or implemented in FY 1999," and then later stating that "[t]his will provide agencies a maximum of four full fiscal years (FYs 1995, 1996, 1997, and 1998) in which to develop and apply survey protocols for these species." Id. The IBLA recognized that "the only way that four full fiscal years would be available for development of protocols would be if `implemented' were interpreted to mean `designed' or `authorized.'" Id. Because of this ambiguity, the IBLA deferred to the agencies' interpretation7 ­ the IBLA upheld the "NEPA Decision Equals Implementation" memorandum. Id. While plaintiffs here naturally afford little weight to the In re North Murphy decision, it is clear that the Forest Service, prior to awarding these timber sale contracts, received independent validation for its interpretation of the NFP.
7

The IBLA's finding is consistent with the rule that an "agency's interpretation of its own regulations will be accepted unless it is plainly erroneous or inconsistent with the regulation." Star Fruits S.N.C. v. United States, 393 F.3d 1277, 1282 (Fed. Cir. 2005). 24

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Prior to the ONRC Action decision issued in August of 1999, the Forest Service had a "genuine legal argument" for awarding these timber sales without conducting Category 2 surveys. The existence of this "genuine legal argument" is a material fact in dispute that precludes summary judgment. 2. The Red Tree Vole Memorandum

Plaintiffs charge that the red tree vole decision was contrary to law, and the Forest Service unreasonably implemented the red tree vole directive. Pls.' Cross-Motion at 48. Whether the evidence shows that the Forest Service approached the red tree vole issue reasonably and in good faith, based upon scientific information, is a disputed question of fact that is not properly determined upon summary judgment. The Forest Ecosystem Management Assessment Team ("FEMAT") assembled after President Clinton's April 1993 "Forest Conference" in Portland, Oregon. DPFUF ¶ 27. The FEMAT, a group made up of scientists and technical experts from the Forest Service, BLM, Environmental Protection Agency, Fish & Wildlife Service, National Marine Fisheries Services, and several universities, was charged with preparing an assessment based upon an ecosystem approach to forest management. Id. The team analyzed ten different options that encompassed mixtures of Late-Successional Reserves ("LSRs"), Riparian Reserves ("RRs"), and prescriptions for forest management both inside and outside of the reserves. DPFUF ¶ 28. The vast majority of management activities would occur in Matrix lands, those lands outside of the LSRs and RRs. Id. For each of the ten options, the FEMAT "evaluated the likelihood of maintaining welldistributed habitat conditions on the federal lands for threatened marbled murrelets and northern spotted owls." Id. Furthermore, assessments were done for over 1,000 plant and animal species 25

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that were "thought to be closely associated with late-successional forests." Id. For these 1,000 species, the FEMAT suggested that if the species had an 80 percent or greater likelihood of stabilizing, well-distributed across federal lands, that was the point at which a species' viability could be assured. Id. Significantly, the FEMAT noted that "species with scores lower than 80 percent should not automatically be regarded as unviable." Id. The FEMAT put together a report commonly known as the FEMAT Report. Id. A team from the Forest Service and BLM used the FEMAT Report to prepare a draft Supplemental Environmental Impact Assessment ("SEIS"), identifying FEMAT's ten different alternatives as options. DPFUF ¶ 29. The team decided upon Alternative 9, and prepared the draft SEIS, which was sent out for public comment. Id. After receiving public comment, additional analysis was conducted on many of the species; this additional analysis was included as an appendix to the final SEIS, and is commonly referred to as "Appendix J2" or "Additional Species Analysis." Id. The Additional Species Analysis "identified species to be surveyed and a prescribed management of the species' habitat to increase the likelihood that the species' populations would stabilize, well distributed across federal lands." Id. The red tree vole was identified in the Additional Species Analysis. DPFUF ¶ 30. However, research in the FEMAT Report and the Additional Species Analysis demonstrates that the red tree vole was "thought to be in less dire circumstances." Id. The FEMAT Report determined that Alternative 9 resulted in a 73 percent likelihood of achieving habitat sufficient to allow the red tree vole to stabilize across federal lands; had the red tree vole received a 7 percent higher likelihood rating in the FEMAT Report, it would not have been included in the Additional Species Analysis. Id. 26

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The final SEIS Species Analysis Team's Mammal Subgroup determined that it was unnecessary to protect every red tree vole site; therefore, the red tree vole was not included in the Category 1 Survey and Manage species. DPFUF ¶ 31. The subgroup further decided that the red tree vole sites should be assessed in relation to their value in adding to connectivity between LSRs and RRs, many of which were not ecologically functional because of past management practices. Id. The group decided that it was important to prevent isolation of major portions of the red tree vole population. Id. Therefore, they determined that the red tree vole should be included in the Component 2 Survey and Manage species by managing the red tree vole population in the lands b