Free Post Trial Brief - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

__________________________________________ SCOTT TIMBER COMPANY, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) )

No. 05-708C (Judge Lettow)

PLAINTIFF'S POST-TRIAL BRIEF

Gary G. Stevens SALTMAN & STEVENS, P.C. 1801 K Street, N.W. Suite M-110 Washington, D.C. 20006 (202) 452-2140 Counsel for Plaintiff OF COUNSEL: Ruth G. Tiger Eric J. Pohlner SALTMAN & STEVENS, P.C. 1801 K Street, N.W. Suite M-110 Washington, D.C. 20006 (202) 452-2140 Dated: August 29, 2008

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TABLE OF CONTENTS PAGE Table of Authorities ........................................................................................................................ ii Table of Acronyms ..........................................................................................................................v INTRODUCTION ...........................................................................................................................1 QUESTIONS PRESENTED............................................................................................................1 STATEMENT OF THE CASE........................................................................................................2 ARGUMENT...................................................................................................................................4 I. The FS Failed To Include An Adequate Exculpatory Provision Or Disclaimer In The Contracts Or Require Scott To Execute A Release Of Liability .................................................................................................4 The FS Breached Its Implied Warranty Of Specifications ......................................9 The FS Breached The Contracts Because It Failed To Disclose To Scott That Its Sales Were On ONRC Action's "At-Risk" Lists And That The FS Had Secret Agreements With ONRC Action And Because The FS Misled Scott Into Believing That The Sales Were Not Threatened By ONRC Action.........................................................................16 The FS Breached Its Duties To Cooperate And Not To Hinder Scott's Operations..................................................................................................19 A. "NEPA Decision Equals Implementation" And The Red Tree Vole Directive Are Unreasonable Interpretations of the ROD..................19 The FS Rushed To Award The Contracts Before The Final Decision In ONRC Action Despite Being On Notice That Its Legal Rationale For Not Conducting Surveys Was Deficient ...................27

II. III.

IV.

B.

C. The Forest Service Unreasonably Prolonged The Suspensions.......................36 CONCLUSION..............................................................................................................................40

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TABLE OF AUTHORITIES CASES PAGE

Beauchamp Construction Co., Inc. v. United States, 14 Cl. Ct. 430 (1988) .........................................................................................................14 Blake Construction Co. v. United States, 987 F.2d 743 (Fed. Cir. 1993)............................................................................................12 Bloedel Donovan Lumber Mills v. United States, 74 F. Supp. 470 (Ct. Cl. 1947)...........................................................................................15 Cedar Lumber, Inc. v. United States, 5 Cl. Ct. 539 (1984) .............................................................................................................5 Chaney and James Construction Co. v. United States, 421 F.2d 728 (Ct. Cl. 1970) ...............................................................................................14 C.J. Betters Corp. v. United States, 25 Cl. Ct. 674 (1992) ...........................................................................................................5 Department of Natural Resources and Conservation of Montana v. United States, 1 Cl. Ct. 727 (1983) .............................................................................................................5 Everett Plywood Corp. v. United States, 651 F.2d 723 (Ct. Cl. 1981) .......................................................................................5, 9, 14 GAF Corp. v. United States, 932 F.2d 947 (Fed. Cir. 1991), cert. denied, 502 U.S. 1071 (1992) ..................................18 Heartwood, Inc. v. United States Forest Service, 73 F. Supp. 2d 962 (S.D. Ill. 1999)....................................................................................39 Helene Curtis Industries, Inc. v. United States, 312 F.2d 774 (Ct. Cl. 1963) .........................................................................................16, 19 Hercules, Inc. v. United States, 516 U.S. 417 (1996)...........................................................................................................12 H.N. Wood Prods., Inc. v. United States, 59 Fed. Cl. 479 (2003) ...................................................................................................8, 27

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In re Gartside, 203 F.3d 1305 (Fed. Cir. 2000)..........................................................................................19 J.A. Jones Construction C. v. United States, 390 F.2d 886 (Ct. Cl. 1968) ...............................................................................................19 J.L. Simmons Co. v. United States, 412 F.2d 1360 (Ct. Cl. 1969) .............................................................................................13 Laburnum Construction Co. v. United States, 325 F.2d 451 (Ct. Cl. 1963) ...............................................................................................14 Luria Bros. & Co., Inc. v. United States, 369 F.2d 701 (Ct. Cl. 1966) ...............................................................................................14 Miller Elevator Co. v. United States, 30 Fed. Cl. 662 (1994) .......................................................................................................18 Munn v. Secretary of Department of Health and Human Services., 970 F.2d 863 (Fed. Cir. 1992)............................................................................................19 Northcoast Environmental Center v. Glickman, 136 F.3d 660 (9th Cir. 1998) ..............................................................................................19 Oregon Natural Resources Council Action v. United States Forest Service, 59 F. Supp. 2d 1085 (W.D. Wash. 1999).............................................................................3 Ozark Dam Constructors v. United States, 127 F. Supp. 187 (Ct. Cl. 1955)...........................................................................................5 Pacific Rivers Council v. Thomas, 30 F.3d 1050 (9th Cir. 1994) ........................................................................................25, 26 Petrochem Services, Inc. v. United States, 837 F.2d 1076 (Fed. Cir. 1988)..........................................................................................18 Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35 (2001) ................................................................................................. passim Pyramid Lake Paiute Tribe of Indians v. U.S. Department of Navy, 898 F.2d 1410 (9th Cir. 1990) ............................................................................................19 Seaboard Lumber Co. v. United States, 41 Fed. Cl. 401 (1998) ...................................................................................................5, 10 iii

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Seaboard Lumber Co. v. United States, 48 Fed. Cl. 814 (2001) .........................................................................................................9 Sergent Mechanical Systems, Inc. v. United States, 34 Fed. Cl. 505 (1995) .......................................................................................................14 Shawn Montee, Inc., AGBCA Nos. 2003-132-1 through 2003-136-1, 04-1 BCA ¶ 32,564 (2004) ...............9, 27 Silver v. Babbitt, 924 F. Supp. 976 (D. Ariz. 1995) ......................................................................................26 S. California Edison v. United States, 58 Fed. Cl. 313 (2003) .......................................................................................................16 Southwest Forest Industries, AGBCA No. 79-178-3, 81-1 BCA ¶ 14,877 (1981) ..........................................................14 Spearin v. United States, 248 U.S. 132 (1918).....................................................................................................13, 15 Tamarack Mills, LLC, AGBCA Nos. 2003-151-1 and 2003-116-1, 04-1 BCA ¶ 32,591 (2004) ......................8, 27 Trinity River Lumber Co. v. United States, 66 Fed. Cl. 98 (2005) .....................................................................................................8, 27 United States v. Seckinger, 397 U.S. 203 (1970).............................................................................................................5

STATUTES AND REGULATIONS 16 U.S.C. § 4321 et seq....................................................................................................................2 16 U.S.C. § 472a ............................................................................................................................14 36 C.F.R. Part 223..........................................................................................................................14

MISCELLANEOUS 2 Childress and Davis, STANDARDS OF REVIEW (1986).................................................................19

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TABLE OF ACRONYMS BLM CCF CE CO ESA FS or USFS F&WS FY IRT LRMP MMBF NEPA NFP ROD RTV RTV Directive S&G S&M Bureau of Land Management Hundred Cubic Feet Categorical Exclusion Contracting Officer Endangered Species Act Forest Service Fish & Wildlife Service Fiscal Year Issue Resolution Team Land and Resource Management Plan Million Board Feet National Environmental Policy Act Northwest Forest Plan Record of Decision Red Tree Vole Red Tree Vole Directive Standards and Guidelines Survey and Manage

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INTRODUCTION Plaintiff Scott Timber Company ("Scott") alleges that the Forest Service ("FS") breached the Pigout, Whitebird and Jigsaw timber sale contracts ("Scott's sales"). Sections I-III of this brief are premised on legal theories that require proof of the FS's erroneous acts or omissions but do not require inquiry into whether these acts or omissions were unreasonable. In Section IV Scott contends that the FS breached the contracts by violating its implied duties to cooperate and not to hinder. QUESTIONS PRESENTED 1. Did the FS assume the risk of liability by awarding the contracts without Category 2

surveys and then having to suspend operations to perform those surveys without having included valid exculpatory provisions or disclaimers or requiring Scott to execute waivers of liability excusing FS fault? 2. Did the FS breach its implied warranty of specifications when it had to suspend

operations in order to reevaluate whether the specifications governing ground-disturbing activities were adequate to protect Category 2 species? 3. Did the FS breach its obligation to disclose its superior knowledge that (a) the sales were

on ONRC Action's "at-risk" lists and (b) the FS had secret agreements with ONRC Action, and because the FS misrepresented to Scott that the sales were not threatened by ONRC Action? 4. Did the FS breach its duties to cooperate and not to hinder by suspending operations

because it failed to conduct Category 2 surveys prior to contract award and by unreasonably prolonging the suspensions?

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STATEMENT OF THE CASE In April 1994, the Secretaries of the Department of Agriculture and Department of the Interior issued the Record of Decision ("ROD") for what is commonly known as the Northwest Forest Plan ("NFP"). JX 14. The NFP amended Land and Resource Management Plans ("LRMPs") governing the operation of the National Forests and Bureau of Land Management ("BLM") lands in Washington, Oregon and northern California, including the Umpqua National Forest where Scott's sales are located. JX 14 at 11-12; Stip. 1. Under the NFP various surveys were promulgated as mitigation measures for certain old-growth-related species for which there was concern about continued persistence but for which little knowledge existed. JX 14 at C-5; Tr. 343:11-34:8. At issue in this case are Category 2 surveys which were required for 77 species on projects such as timber sales. Id. at C-5. The first group of Category 2 species included the Red Tree Vole ("RTV") and five species of salamanders for which surveys were required on projects on which ground-disturbing activities were to be implemented in fiscal year ("FY") 1997 or later (after October 1, 1996). Id. The second group of Category 2 surveys included 71 species for which surveys were required for projects on which ground-disturbing activities were to be implemented in FY 1999 or later (after October 1, 1998). Id.; Tr. 1592:10-1593:2. In a November 1, 1996 memorandum, which did not comply with National Environmental Policy Act ("NEPA"), 16 U.S.C. § 4321 et seq., or land management plan amendment procedures, PX 154 at 4), the FS and BLM adopted a joint interpretation of "implemented" for purposes of determining when Category 2 surveys were required. PX 41. Under this interpretation timber sales were exempted from the surveys if the NEPA decision

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document signifying approval of the environmental analyses preparatory to offering the sales to the public was signed before October 1, 1996. PX 41; Tr. 47:20-25. This interpretation became known as "NEPA decision equals implementation." The memorandum was to expire on September 30, 1998 (PX 41) but was extended and readopted by the FS and BLM for application to the FY 1999 species. PX 60; Tr. 1054:2-25. The FS relied upon "NEPA decision equals implementation" in deciding not to conduct any Category 2 species on Scott's sales prior to the award of those sales. Tr. 1452:16-1453:5; see DX 49. On November 4, 1996, the FS and BLM also issued "Interim Guidance for Survey and Manage Component 2 Species; Red Tree Vole" (the "RTV Directive"). DX 109. The RTV Directive employed various parameters (screens) exempting much RTV habitat, including all of the RTV habitat on Scott's sales, from the Category 2 surveys. PX 154 at 4, PX 172 (Interrog. 6). The FS relied upon the RTV Directive in deciding not to conduct RTV surveys on Scott's sales. PX 172 (Interrog. 6). On July 8, 1998, several environmental organizations filed suit challenging "NEPA decision equals implementation" and the RTV Directive. PX 143; Stip. 5; Oregon Natural Res. Council Action v. United States Forest Serv. ("ONRC Action"), 59 F. Supp. 2d 1085 (W.D. Wash. 1999). At the same time, they began providing the FS with lists of "at-risk" or "problem" sales that were targeted but not named in the complaint. PX 55, 128; Tr. 1340:8-24. The FS secretly agreed to hold off awarding the targeted sales, including Scott's sales, in conjunction with efforts to resolve the suit. On July 8, 1999, when Scott's sales were awarded, Scott did not know that its sales were specific targets of the lawsuit. Settlement efforts were unsuccessful and, on August 2, 1999, the district court held that "NEPA decision equals implementation" and the

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RTV Directive were arbitrary, capricious and contrary to law and enjoined the FS from approving operations on nine named sales until the appropriate Category 2 surveys had been performed. PX 143. On August 26, 1999, the district court expanded the injunction to preclude the FS from approving operations on Scott's sales and others until the surveys had been performed. Stip. 6. The FS suspended Scott's sales on or about August 31, 1999 in order to perform the required surveys. Stip. 7. The suspension of Pigout lasted until June 11, 2002 and the suspensions of Whitebird and Jigsaw lasted until June 9, 2003. PX 41, 74, 93; Stip. 8-10. As a result of the suspensions Scott incurred substantial damages and on November 9, 2004, Scott timely submitted certified Contract Disputes Act claims. Stip. 11. Except for minor amounts such as interest on deposits and the cost of maintaining performance bonds, the contracting officer denied all of Scott's claims. JX 11, 12, 13. Scott timely filed suit in this Court. ARGUMENT I. The FS Failed To Include An Adequate Exculpatory Provision Or Disclaimer In The Contracts Or Require Scott To Execute A Release Of Liability

The FS breached each of the contracts because it failed to fulfill its fundamental obligation to make the timber available to Scott to harvest in a timely manner, and the FS was not excused from doing so by any valid exculpatory clause or waiver. See JX 4, 5, 15. Before auctioning Scott's sales the FS knew that these sales were explicit targets of the ONRC Action litigation. PX 172 (Interrog. 12); Tr. 869:18-24. The FS could have included any exculpatory provision it wished or required Scott to execute a waiver of liability to protect itself should it have to suspend the sales to conduct Category 2 surveys. See PX 176A, 176B; Tr. 406:13-408:2, 409:20-410:23, 601:21-603:3. Instead, the FS chose to rely exclusively on clause CT6.01, which

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both this Court and the Board of Contract Appeals have found does not excuse FS fault for causing a contract to be suspended. "`[W]here the government intends to exculpate itself from liability for its breach of contract, it must manifest that intent in direct and express language.'" Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35, 58 (2001) (quoting Dep't of Natural Res. and Conservation of Mont. v. United States, 1 Cl. Ct. 727, 734 (1983)); accord United States v. Seckinger, 397 U.S. 203, 212 (1970) ("[I]f the United States expects to shift the ultimate responsibility for its negligence to its various contractors, the mutual intentions of the parties to this effect should appear with clarity from the face of the contract"); Cedar Lumber, Inc. v. United States, 5 Cl. Ct. 539, 552 (1984) ("when the government intends to disclaim liability for breach of contract, it must employ clear and express language to effectuate its intent"). Even then, "the efficacy of a limitation of liability clause does not extend to those situations where the breach arises out of events within the Government's control." C.J. Betters Corp. v. United States, 25 Cl. Ct. 674, 677 (1992) (citing Ozark Dam Constructors v. United States, 127 F. Supp. 187 (Ct. Cl. 1955)). Timber sale contracts are take-it-or-leave-it contracts of adhesion. E.g., Everett Plywood Corp. v. United States, 651 F.2d 723, 726 (Ct. Cl. 1981); Precision Pine, 50 Fed. Cl. at 66; Seaboard Lumber Co. v. United States, 41 Fed. Cl. 401, 408 (1998). The FS is liable to the purchaser when it fails to include explicit language necessary to insulate itself from liability for an event which it clearly foresaw and which it caused, e.g., the failure to survey. See Ozark Dam, 127 F. Supp. at 191. On July 29, 1998, Regional Attorney Robert Simmons advised the FS that if timber sales threatened by ONRC Action were to be offered to the public, the FS should include language in

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the contracts limiting the government's liability for cancellation to holding costs. PX 53. Although Mr. Simmons only advised the FS to include language limiting the government's liability for cancellation and not for suspension, his advice demonstrates that the FS was well aware of its potential liability and the need to include appropriate language in the contracts. Nevertheless, the FS did not do so. Other evidence in the record demonstrates that the FS was not only aware of its potential liability but also that the language in its standard contract was insufficient. In a memorandum signed by FS Associate Deputy Chief Paul Brouha which was provided to Department of Agriculture Deputy Under Secretary for Natural Resources and Environment Anne Kennedy, FS Associate Deputy Chief for Research and Development Barbara Weber, and Counsel to the FS Chief Al Ferlo, and produced at the request of the Acting Chair of the President's Council on Environmental Quality ("CEQ"), the FS and CEQ were advised that the FS "would argue vigorously against surveying sales that have been awarded" and that "[t]he Forest Service has no provisions in its timber sale contracts that specifically allow for suspension for survey and/or discovery of survey and manage species." PX 109 at 1798, 188; Tr. 316:16-317:3. In addition, just before December 3, 1998, when settlement did not appear likely, FS ONRC Action Litigation Coordinator Sue Zike emailed her distribution list (which included a litigation coordinator on the Umpqua National Forest, and high level FS officials such as Region 6 Director of Natural Resources Robert Devlin), the following warning: "Please keep in mind (as CO's always do) the liability that may come to the USFS if the sales are awarded and then enjoined." PX 95; Tr. 473:19-474:20, 1309:7-14.

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As early as August 26, 1998, the FS knew that Scott's sales were explicit targets of ONRC Action because they were named on one of ONRC Action's earliest lists of "at-risk" sales provided to the government. PX 172 (Interrog. 12). Just two days before the award of Scott's sales on July 8, 1999, ONRC Action sent the FS a list of "at-risk" sales that continued to include Scott's sales. PX 128, 129; Tr. 915:3-923:15. The FS understood when it awarded these contracts that harvesting or ground-disturbing operations would likely prompt a motion for injunctive relief. PX 141; Tr. 99:7-100:1, 1370:7-1371:1. Nevertheless, the FS did not include adequate language in Scott's contracts to shield the FS from liability for suspensions which it caused by failing to perform Category 2 surveys. The FS certainly knew how to draft language advising purchasers that it was disclaiming liability. For example, in its instructions to bidders, the FS included a provision that "expressly disclaims any warranty as to the quantity or quality of timber sold." This provision requires that the purchaser hold the FS "harmless for any error, mistake, or negligence regarding estimates except as expressly warranted" and directs the purchaser to rely only on its own estimates. JX 1 at SCOTTII 03846; JX 2 at SCOTTII 09306; JX 3 at SCOTTII 11153. Scott was aware of this disclaimer language, understood its clear meaning, and relied only on its own cruise estimates. Tr. 627:4-630:7. In contrast, there is no explicit disclaimer for error, mistake or negligence much less for arbitrary and capricious behavior set forth in clause CT6.01 which is relied on by defendant as a purportedly valid exculpatory clause. See JX 4 at SCOTTII 10011; JX 5 at SCOTTII 03935-36; JX 15 at SCOTTII 09488. In bidding on these sales Scott was reasonable in not interpreting CT6.01 as a provision exculpating the FS from any significant damages caused

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by the FS's own error, mistake, negligence or arbitrary and capricious conduct. Tr. 652:16656:16. The FS could have required Scott to execute an explicit release and waiver of all claims as a condition of receiving contract award. For example, the FS has required purchasers in Region 5 and elsewhere to execute a pre-award waiver, release, and limitation of liability as a condition to being awarded a timber sale contract. PX 176A, 176B; Tr. 407:12-408:2, 409:20411:4, 417:13-15, 601:21-603:3. This waiver explicitly states that the purchaser waives and releases all claims arising from the FS's failure to comply with environmental laws or its breach of the duties to cooperate and not to hinder. PX 176A. Moreover, use of this release and waiver shows that the FS regards CT6.01 as insufficient to protect itself from interruptions and delays caused by its own fault. Yet language equivalent to that found in the release and waiver was neither included in Scott's contracts nor in any pre-award waiver that Scott was asked to sign. This Court has previously considered whether clause CT6.01 directly and expressly exculpates the FS from liability and found that it does not: "If the Forest Service sought to exculpate itself from delays . . . caused by conduct within the Government's own control, there would need to be a clear expression of that intent in [clause CT6.01]. . . . However, nowhere in [clause CT6.01] is such language to be found." 50 Fed. Cl. at 58. Precision Pine and all the cases subsequently dealing with allegations that the FS breached a timber sale contract by suspending operations under clause CT6.01 to satisfy pre-award environmental obligations have held that this clause is not a valid exculpatory clause. Trinity River Lumber Co. v. United States, 66 Fed. Cl. 98, 108 (2005); H.N. Wood Prods., Inc. v. United States, 59 Fed. Cl. 479, 487 (2003); Precision Pine, 50 Fed. Cl. at 59, 64; Tamarack Mills, LLC, AGBCA Nos. 2003-115-1

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and 2003-116-1, 04-1 BCA ¶ 32,591 (2004), at 161,228; Shawn Montee, Inc., AGBCA Nos. 2003-132-1 through 2003-136-1, 04-1 BCA ¶ 32,564 (2004), at 161,073-74. The FS had a fundamental obligation under the contracts to make timber available to Scott for harvesting within the normal operating season as set forth in each contract. JX 4 at SCOTTII 09949; JX 5 at SCOTTII 03877; JX 15 at SCOTTII 04927. When it failed to do so due to its own fault, regardless of whether it acted unreasonably, the FS breached the contracts and is liable to Scott unless it included a clear and explicit exculpatory provision. Clause CT6.01 is not such a provision. II. The FS Breached Its Implied Warranty Of Specifications

Using its standard 2400-6T form as the template, the FS prepared the requirements applicable to Pigout, Whitebird and Jigsaw and specified in detail the manner in which each contract was to be performed. E.g., Tr. 559:4-560:20, 562:4-18, 582:23-590:20, 1422:221426:22; see JX 4, 5, 15. The particular terms included by the FS in each contract were not open to negotiation. Tr. 585:7-588:16, 1425:8-22. Bidders had to accept all of the terms included in the contracts or their bids would have been rejected as nonresponsive. Tr. 591:4-22, 592:12-15. Scott submitted the highest responsive bids and was awarded each contract. JX 6, 7, 8; Stip. 2-4. Like all FS timber sale contracts, Scott's sales were take-it-or-leave-it contracts of adhesion drafted by the government. E.g., Everett Plywood, 651 F.2d at 730 ("bidders had to accept the contract terms the government wrote into the invitation [for bids], only the price being open for the bidder to specify"); Seaboard Lumber Co. v. United States, 48 Fed. Cl. 814, 816 (2001) ("Interested parties are invited to bid based on the information provided in the prospectus and the bidder's own examination of the site. The terms laid out in the prospectus are not open

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to negotiations"); Seaboard Lumber, 41 Fed. Cl. at 408 ("contract terms laid out in the prospectus and those in the final contract are not open to negotiation"); Precision Pine, 50 Fed. Cl. at 66.1 The specifications drafted by the FS detailed exactly where and how ground-disturbing activities authorized by the contracts could be performed, such as identifying which particular trees could be harvested; specifying methods of logging in each unit; designating the precise manner in which timber could be harvested, and the time of year during which operations could be conducted; restricting the timing and locations where logging could take place; specifying the locations where roads and landings necessary for operations could be built; and specifying the timing and manner of road construction and the time of year during which logging operations could be conducted. E.g., JX 4 at SCOTTII 09951, 09964, 09970, 09974-75, 09981, 09983-84, 09995-10003, 10020-27; JX 5 at SCOTTII 03879, 03891, 03897, 03901, 03908, 03910, 0392024, 03945-47; JX15 at SCOTTII 09429, 09442, 09448, 09452, 09459, 09461, 09473-76, 0949698. A visible representation of some of the specifications detailed in the contracts is found in the sale area and slash (logging debris) disposal maps. E.g., JX 4 at SCOTTII 09981-82; JX 5 at SCOTTII 03908-09; JX 15 at SCOTTII 09459-60. Scott was not free to ignore the specifications or to perform contract operations in a manner that was not in complete accord with them. Tr. 591:9-592:15. For example, in the standard "BT" clauses in each contract (BT6.1-BT6.9), the FS dictates many fundamental aspects of when and how the contractor must conduct its harvesting
1

Although the FS periodically accepted comment on its standard form contracts and contract clauses from members of the timber industry, generally to provide notice to the industry that it was making changes to the contracts, it was within the FS's sole discretion to accept or reject any comments it received. Tr. 577:2-578:13, 1150:25-1151:10. 10

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operations. This includes specifying the equipment that can be used to fell timber, JX 4 at SCOTTII 09974; JX 5 at SCOTTII 03901; JX 15 at SCOTTII 09452 (BT6.41); the manner in which the fallen timber is "bucked" or cut to size, id.; the height of the stumps remaining after the timber has been felled, id. (BT6.412); the methods of skidding and yarding the felled timber to the landing and the equipment that may be used for skidding and yarding, id. (BT6.42); and the size and location of landings, id. (BT6.422). Corresponding "CT" clauses (CT6.0-CT6.84) contain even more detailed requirements with which harvesting and other operations under the contract must comply. E.g., JX 4 at SCOTTII 10010-28; JX 5 at SCOTTII 03935-54; JX 15 at SCOTTII 09458-09504 (CT6.315#) (specifying additional restrictions on the timing of certain contract operations and the equipment that can be used); (CT6.41#) (specifying, unit-by-unit, the methods and equipment the contractor can use when felling timber; FS approval required for any deviation from the methods and equipment specified); see (CT6.42#) (specifying the methods and equipment the contractor can use when yarding and skidding timber in the various units of the sale area; FS approval required for any deviation from the yarding and skidding equipment and methods specified). The FS also controls restoration of the sale area following harvest. In clause CT6.6# the FS specifies the means by which the contractor is to prevent erosion and restore the sale area, identifies the areas where mechanized equipment may be used for these tasks, and even provides a detailed description of the type and quality of grass seed, fertilizer, mulch and straw to be used. JX 4 at SCOTTII 10020-22; JX 5 at SCOTTII 03945-47; JX 15 at SCOTTII 09497-98. In the same way the FS controls the disposal of "slash," i.e., "cull logs, blasted or pushed out stumps, chunks, broken tops, limbs, branches, rotten wood, damaged brush, damaged or destroyed

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reproduction, saplings or poles," remaining upon the completion of harvesting in a given area of the sale. JX 4 at SCOTTII 10022-27; JX 5 at SCOTTII 03947-53; JX 15 at SCOTTII 0949809503 (CT6.7 and CT6.74). Additional specifications included in the contracts (BT5.1-BT5.5 and CT5.1-CT5.254) dictate the manner in which ground-disturbing road construction activities are to be conducted on the timber sale area. JX 4 at SCOTTII 09970-72, 09991-98; JX 5 at SCOTTII 03897-99, 0391820; JX 15 at SCOTTII 09448-50, 09469-76. Among other things, these include specifications dictating in detail exactly where and what kind of road is to be constructed as part of the timber sale contract. Finally, two of Scott's contracts contain Limited Operating Periods specifically to restrict the times during which Scott could operate on the sales. See JX 5 at SCOTTII 03939; JX 15 at SCOTTII 09490 (CT6.313#). These specifications are for the protection of various species of wildlife and plants for whom active operations during certain times of the year (typically breeding seasons) may be harmful. All of these contract specifications governing ground-disturbing activities are design specifications not performance specifications. Performance specifications "set forth an objective or standard to be achieved, and the successful bidder is expected to exercise his ingenuity in achieving that objective or standard of performance, selecting the means and assuming a corresponding responsibility for that selection." Design specifications, on the other hand, describe in precise detail the materials to be employed and the manner in which the work is to be performed. The contractor has no discretion to deviate from the specifications, but is "required to follow them as one would a road map." "Detailed design specifications contain an implied warranty that if they are followed, an acceptable result will be produced." Blake Constr. Co. v. United States, 987 F.2d 743, 745 (Fed. Cir. 1993) (citations omitted); accord Hercules, Inc. v. United States, 516 U.S. 417, 425 (1996) ("When the Government

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provides specifications directing how a contract is to be performed, the Government warrants that the contractor will be able to perform the contract satisfactorily if it follows the specifications"); Spearin v. United States, 248 U.S. 132 (1918). The FS impliedly warranted that Scott would be able to complete each contract satisfactorily by following the specifications it drafted.2 The FS provided Scott with design specifications that could not be followed because the FS failed to conduct Category 2 surveys before contract award and was forced to re-examine the specifications after award to determine whether they provided adequate protection for Category 2 species. The FS suspended sale operations for substantial periods of time in order to perform the Category 2 surveys so that if Category 2 species were discovered, it could revise the specifications governing ground-disturbing activities, if necessary.3 By failing to conduct the surveys before preparing the specifications, the FS breached its implied warranty that Scott's compliance with the specifications would produce an acceptable result. The Court need not find that the FS was at fault or negligent in order to conclude that the FS is liable for failing to prepare adequate specifications. E.g., J.L. Simmons Co. v. United States, 412 F.2d 1360, 1383 (Ct. Cl. 1969). Where the government's defective specifications cause delay in performance, the contractor is entitled to recover the costs it has incurred as a

That Scott was required to submit plans of operations which specified when it planned to conduct operations in accordance with the parameters set forth in the contracts does not convert the design specifications into performance specifications. See JX 4 at SCOTTII 10014; JX 5 at SCOTTII 03939; JX 15 at SCOTTII 09489-90. As a result of conducting surveys, the FS discovered an active RTV nest in Unit 40 on Whitebird. Before it would allow operations in that unit the FS modified the sale to preclude the harvest of trees within an approximate five-acre area around the nest. DX 93; Tr. 982:5-14, 1572:12-25. 13
3

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result of that delay. E.g., Laburnum Constr. Co. v. United States, 325 F.2d 451, 457 (Ct. Cl. 1963); Luria Bros. & Co., Inc. v. United States, 369 F.2d 701, 707-08 (Ct. Cl. 1966). Delay caused by deficient specifications is per se unreasonable for purposes of the standard suspension of work clause.4 Sergent Mech. Sys., Inc. v. United States, 34 Fed. Cl. 505, 526 (1995) (citing Chaney and James Constr. Co. v. United States, 421 F.2d 728, 731 (Ct. Cl. 1970)); see Luria Bros., 369 F.2d at 707-08; Laburnum Constr., 325 F.2d at 453-54; Beauchamp Constr. Co., Inc. v. United States, 14 Cl. Ct. 430, 438 (1988). The FS prepared the specifications pertaining to ground-disturbing activities, and was not only in the best position to determine whether or not those specifications conformed with its obligations under the NFP so that they could be carried out as written but it was the only one that could make such a determination. See Everett Plywood, 651 F.3d at 731. Nevertheless, at the time of award the FS had no idea whether or not the contracts could be performed as written because it had not conducted the requisite Category 2 surveys. As in Everett Plywood, the risk is on the government that its specifications governing ground-disturbing activities cannot be followed. See id. A Spearin-type warranty analysis was applied to FS timber sale road specifications in Southwest Forest Industries, AGBCA No. 79-178-3, 81-1 BCA ¶ 14,877 (1981). A specification required the contractor to use "grid rolling" to remove rock from a designated pit. The contractor believed this specification was defective and the FS permitted the contractor to use crushed rock in lieu of grid-rolled rock, a more expensive manner of performance, but declined
4

General principles of federal government contract law are routinely applied to timber sale contract disputes even though the FS enters into timber sale contracts pursuant to 16 U.S.C. § 472a and its implementing regulations, 36 C.F.R. Part 223, rather than pursuant to the federal procurement statutes and regulations. 14

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to agree to a design change to increase the rock cost as requested by the contractor. In examining the question, the Board used a Spearin analysis and stated: "Where the Government dictates a particular method of contractor performance, it implies the method will produce satisfactory results." Id. at 73,568. The Board, however, was not persuaded that grid-rolling would produce unsatisfactory results and concluded that the contractor had not proved that the specification was defective. That the logic and reasoning of Spearin applies to design specifications included in FS timber sale contracts in the same manner that it applies to design specifications included in all government contracts can be seen in other cases. See Bloedel Donovan Lumber Mills v. United States, 74 F. Supp. 470 (Ct. Cl. 1947) (timber sale contract gave FS the right to specify the time and manner for burning slash; FS liable because compliance by contractor with specified time and manner resulted in wildfire that destroyed logs and equipment of contractor); Precision Pine, 50 Fed. Cl. at 67 ("The Defendant's contention that its interpretation of the contract should prevail because courts generally uphold the autonomous rights of parties to contract rings hollow in the face of precedent in which the Government is liable for cases where a contractor cannot perform according to government-drafted specifications because the specifications themselves are defective"). The Spearin doctrine applies to FS timber sale contracts. By preparing defective design specifications governing the ground-disturbing activities authorized by the contracts, the FS breached its implied warranty that Scott's sales could be operated in accordance with those specifications.

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III.

The FS Breached The Contracts Because It Failed To Disclose To Scott That Its Sales Were On ONRC Action's "At-Risk" Lists And That The FS Had Secret Agreements With ONRC Action And Because The FS Misled Scott Into Believing That The Sales Were Not Threatened By ONRC Action

The facts established at trial demonstrate that the FS breached its implied affirmative duty "to disclose superior knowledge that is required for the performance of a contract to which it is a party" by failing to disclose to Scott the vital knowledge it possessed that the sales were explicit targets of the pending ONRC Action litigation and misleading Scott to the contrary. S. California Edison v. United States, 58 Fed. Cl. 313, 325 (2003). A government agency cannot remain silent where, as here, it has a duty to share information. See Helene Curtis Indus., Inc. v. United States, 312 F.2d 774, 778 (Ct. Cl. 1963). The FS never disclosed to Scott the FS's secret internal communications, assessments of the risk of going forward with contract award, and secret agreements with ONRC Action about Scott's sales. When it awarded the contracts on July 8, 1999, the FS knew that Scott's sales were explicitly at risk of being suspended after award due to the ONRC Action litigation. PX 121A, 128, 129 at A-993 to -994; Tr. 880:23-25, 911:14-912:11, 1361:18-1364:17, 1365:21-1366:11. Scott did not. Tr. 656:17-657:2, 658:1-10, 881:20-23, 935:12-937:12, 1516:2-16. The lengthy suspensions affected Scott's performance of the contracts by delaying the time during which Scott could harvest the timber and remove it from the sale areas.5 The FS knew that Scott was unaware of the explicit risk of the sales being suspended due to the ONRC Action litigation because the FS intentionally kept secret from Scott that the sales were on the "at-risk" lists exchanged between the FS and ONRC Action. PX 59, 65; Tr. 102:2-105:19, 177:3-7, 874:155

The delay resulted in significant increased costs and substantial lost profits. JX 9, 10, 16; Tr. 662:13-23. 16

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880:25, 1207:15-1208:14. The FS also kept secret from Scott that it had agreed with ONRC Action that Scott's sales could be awarded without provoking requests for injunctive relief so long as the FS gave ONRC Action advance notice of any ground-disturbing activities on the sales. PX 59, 115, 119, 128, 154; Tr. 229:21-231:25, 456:24-458:15, 886:6-18. The FS also failed to inform Scott that before deciding to make contract award it had weighed the risk of likely injunctive action against these sales by ONRC Action and evaluated the strength of the government's case on the merits as to each. PX 92, 96, 101, 116, 125; Tr. 107:2-112:21, 1010:81012:1, 1021:5-1022:19, 1318:13-1320:23.6 Scott did not know and could not have known that the sales were subject to the secret agreements between the FS and ONRC Action based on the FS's generic pre-bid announcement that award (as opposed to performance after award) of the contracts might be delayed by litigation.7 JX 1, 2, 3; PX 71; Tr. 650:16-651:19, 870:14-872:18, 1082:1-17, 1083:22-1084:12. Subsequently, Scott repeatedly asked the contracting officer if the sales were on any secret lists or for any information that might reveal that the sales were threatened by ONRC Action. Believing that the information was confidential, the contracting officer refused to provide the requested information to Scott. Tr. 877:15-880:22. Of course, as the FS knew and Scott did not, the sales remained directly at risk, and that risk became a virtual certainty once the FS decided to make contract award.

The FS actively hid the secret information it possessed for its own purposes so that Scott would be placed "squarely at the table" to Scott's detriment and the government's assumed benefit. PX 99 at A-1754; Tr. 495:2-498:12. Had Scott known the true facts, Scott could have avoided or mitigated its damages. Tr. 650:16-651:19. 17
7

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In the award letters, the FS represented to Scott that the sales were no longer at risk. After Scott had bid on the sales and prior to award, the contracting officer informed Scott that the sales had been appealed and that "[a]ward will be delayed or denied pending outcome of such appeal." PX 84; Tr. 874:13-877:14. Then in the award letters the contracting officer explained that award had been delayed pending resolution of a lawsuit. JX 6, 7, 8; Tr. 938:22-941:24. The clear implication of the award letters was that Scott's sales were no longer involved in the lawsuit or appeal that had delayed award. Tr. 1517:15-1519:12. Additionally, based on its past dealings with the FS and because the FS was the most accurate source of information about its sales, Scott reasonably expected that the FS would inform it if there were specific threats to the sales. Tr. 658:25-659:10, 1545:8-1546:6. Scott relied on the FS's conduct in making contract award without indicating that the sales were still at risk of being delayed as a result of ONRC Action, and by its silence on the subject effectively representing to Scott that the sales were not at risk. Scott relied on the FS's silence and its letters and suffered injury as a result of the FS's failure to disclose. Scott accepted contract award at the prices it bid with the expectation that its operations would not be suspended based on ONRC Action. Cf. DX 55 (extending bid only for a limited time); Tr. 651:8-19, 1535:1-20 (stating Scott would not have waited indefinitely for award). Because the suspension caused Scott to incur significant damages, the nondisclosure by the FS resulted in direct injury to Scott. See Miller Elevator Co. v. United States, 30 Fed. Cl. 662, 674-75 (1994). Scott has proven that the FS breached the contracts by failing to disclose its superior knowledge. See GAF Corp. v. United States, 932 F.2d 947, 949 (Fed. Cir. 1991), cert. denied, 502 U.S. 1071 (1992); Petrochem Servs., Inc. v. United States, 837 F.2d 1076, 1078-79

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(Fed. Cir. 1988); J.A. Jones Constr. Co. v. United States, 390 F.2d 886 (Ct. Cl. 1968); Helene Curtis, 312 F.2d at 774. IV. The FS Breached Its Duties To Cooperate And Not To Hinder Scott's Operations A. "NEPA Decision Equals Implementation" And The Red Tree Vole Directive Are Unreasonable Interpretations of the ROD

"NEPA decision equals implementation" and the RTV Directive are unreasonable interpretations of the ROD. The FS knew or should have known that its environmental analyses were inadequate when it awarded Scott's sales because of its decision not to perform Category 2 surveys. As the ONRC Action district court found, "NEPA decision equals implementation" and the RTV Directive were "arbitrary and contrary to the plain language of the ROD." PX 143 at 1093.8 Because these interpretations do not comport with the plain language of the Category 2 survey requirements or the purpose of the Category 2 surveys,9 see PX 143 at 1093; Tr. 357:4-

The arbitrary and capricious test "is a standard well understood to be the most deferential possible" to the government. Munn v. Sec'y of Dep't of Health and Human Servs., 970 F.2d 863 (Fed. Cir. 1992); 2 Childress and Davis, STANDARDS OF REVIEW § 15.7 (1986)); accord In re Gartside, 203 F.3d 1305, 1312 (Fed. Cir. 2000). Agency action can be overturned under this standard only if that action is not just unreasonable but irrational. This rule is the same in the Ninth Circuit, under whose law ONRC Action was decided. E.g., Northcoast Envtl. Ctr. v. Glickman, 136 F.3d 660, 666 (9th Cir. 1998); Pyramid Lake Paiute Tribe of Indians v. U.S. Dep't of Navy, 898 F.2d 1410, 1414 (9th Cir. 1990). The Ninth Circuit recognizes that when a court reviews agency action for reasonableness, the court is less deferential than when it applies the arbitrary and capricious test. Northcoast Envtl. Ctr., 136 F.3d at 666-67. When the district court held that the FS was arbitrary and capricious for adopting "NEPA decision equals implementation" and the RTV Directive, that court ipso jure concluded that the FS had no reasonable basis for its actions. This Court should reach the same conclusion. The clear intent of the Category 2 surveys was to gather vital data on species for which there was little information and a serious concern about their persistence before timber harvesting and other ground-disturbing activities took place. JX 14; Tr. 346:4-21, 383:3-384:7. 19
9

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358:2, the interpretations were unreasonable and the FS's reliance on them as justification for not performing Category 2 surveys resulted in the suspensions. The FS and BLM initially developed "NEPA decision equals implementation" purportedly because they believed that page C-5 of the S&G ("Surveys must precede the design of all ground-disturbing activities that will be implemented in [FY] 1997 or later") was in conflict with page 37 of the ROD itself ("surveys [must be] conducted prior to ground-disturbing activities"). See PX 41 at A-279. Both the S&G and the ROD obviously require that Category 2 surveys be conducted prior to "ground-disturbing activities." Nonetheless, the FS and BLM chose to adopt what they described as the "specific direction" on page C-5 of the S&G, which they construed as directing that Category 2 surveys were not required on projects for which NEPA decision documents approving the "design" of the project had been signed (PX 26, PX 41 at A-279), even though no ground-disturbing activities were anticipated for months or even years later on those sales. See PX 41; Tr. 47:20-25. "NEPA decision equals implementation" was arbitrary and irrational because in both the ROD and the S&G "implemented" clearly refers to ground-disturbing activities and not to NEPA documents. Even the title of the Category 2 survey requirements is "Survey prior to grounddisturbing activities." JX 14 at C-5. Also, there is no mention of NEPA decisions in either the S&G or the ROD itself. JX 14. Further, as the FS well knew, NEPA decision documents often precede ground-disturbing activities by a number of years. Tr. 166:21-167:15, 171:18-23, 1065:8-1066:6, 1492:13-15, 1592:5-7. "To equate a NEPA decision with the implementation of ground-disturbing activities would arbitrarily exempt a large number of timber sales from the [NFP's] survey requirements" and "create an incentive to rush NEPA decisions to avoid

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conducting surveys." PX 143 at 1093. And that is precisely what occurred. PX 86, 182; Tr. 1071:12-1074:21. Assuming arguendo that the intent of the ROD was to require Category 2 surveys prior to the signing of a NEPA decision document, because "the presence or absence of [S&M] species is a significant piece of information and should be available prior to the signing" of the NEPA decision document (PX 41 at A-279), the obviously correct approach, which the FS intentionally did not follow, would have been to postpone execution of NEPA decision documents for sales on which ground-disturbing activities were anticipated to begin in FY 1997 or FY 1999 or later, so that the appropriate Category 2 surveys could be performed and included in the pre-award environmental analyses. Only then would it have been appropriate to sign decision documents and thereafter offer and award the contracts.10 Indeed, the original intent of "NEPA equals implementation" was to require surveys for the greatest number of sales, not to exclude the greatest number of sales from the survey requirements. Tr. 799:24-800:14. By applying this interpretation to exclude rather than to include planned sales in the survey requirements, the FS relied on an interpretation ostensibly developed for the purpose of being the most conservative

Apparently out of a concern that too many sales would be exempted from surveys, the November 1, 1996 guidance memorandum provided for a "`transition period' (October 1, 1996 to May 31, 1997)" during which Category 2 surveys would be required even though no surveys had been performed and decision notices had been signed. PX 35 at 2-3, PX 41 at A-279 to -80; Tr. 774:6-776:18. There is no basis in the language of the ROD for such a "transition period." Tr. 776:19-777:14. This blatant inconsistency underscores the arbitrary, capricious and unreasonable application of "NEPA decision equals implementation." It also demonstrates the obvious concern the FS and BLM had about exempting sales from surveys when grounddisturbing activities were anticipated to occur after the survey trigger date. When "NEPA decision equals implementation" was extended to apply to the FY 1999 surveys, the "transition period" was dropped from the guidance memorandum without explanation even though 221 awarded timber sales (574 MMBF) were exempted from surveys. PX 60, PX 154 at 6. 21

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(i.e., protective of habitat) in a manner that had completely the opposite effect with respect to sales in the pipeline. Tr. 800:15-801:10. The November 1, 1996 guidance memorandum which formally adopted "NEPA decision equals implementation" was scheduled to expire on September 30, 1998. PX 41; Tr. 850:25851:10. The FS and BLM chose to extend this interpretation to cover the Category 2 surveys required to commence as of October 1, 1998. PX 60. It is this extension of "NEPA decision equals implementation" and the RTV Directive (DX 109) which are directly at issue in this action because the NEPA decision documents for Scott's sales were signed after October 1, 1996 but before October 1, 1998. PX 46, PX 129 at A-993 to -94, PX 172 (Interrog. 4). The FS and BLM engaged in no new analysis of the ROD to justify this extension and instead relied only upon the earlier analysis used to justify adoption of "NEPA decision equals implementation" with respect to the October 1, 1996 trigger date. PX 41, 60. With regard to the Category 2 surveys required after October 1, 1998, the ROD states, "In all cases, these surveys must be completed prior to ground-disturbing activities that will be authorized or implemented in FY 1999 or later," and the S&G states, "these surveys must be completed prior to grounddisturbing activities that will be implemented in FY 1999 or later." JX 14 at 37, C-5. There is no reference in either the ROD or the S&G to any alleged requirement that surveys must precede the "design of all ground-disturbing activities." In short, with respect to the FY 1999 surveys which are at issue in this case, any argument based upon use of the term "design" on page C-5 of the S&G has no application and there is no purported ambiguity.11

Use of the term "authorized" in the ROD at 37 does not introduce ambiguity. Grounddisturbing activities are authorized only after the purchaser has submitted and the FS has approved a plan of operations that complies with all contract requirements. JX 4 at SCOTTII 22

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The record is replete with instances in which knowledgeable government personnel, including Edward (Ted) Boling, the government's chief trial lawyer in ONRC Action, and Assistant Attorney General for the Environment and Natural Resources Lois Schiffer advised the FS that "NEPA decision equals implementation" did not comport with the ordinary understanding of the term "implement," was not consistent with the intent and direction in the ROD and was nothing more than nonsense. For example, in a fax message dated November 25, 1998, Mr. Boling sent an email to CEQ General Counsel Dinah Bear which analyzed the "implementation" issue in ONRC Action entitled "Failure to Survey Projects Authorized in FY 98 for Invertebrates ­ High Litigation Risk, Major Program Impact." PX 90. The analysis states, "The agency's interpretation of the ROD is difficult to square with the common meaning of the term `implemented.'" Id. at 501; Tr. 127:10-129:13. On the same day Mr. Boling sent this fax, he advised Ms. Schiffer and her immediate subordinate Peter Coppleman about "NEPA decision equals implementation." PX 89; Tr. 1269:10-1271:17. During that briefing Ms. Schiffer said that the interpretation was nonsense. PX 91; Tr. 134:23-135:20, 474:23-475:21, 1276:21-25. Mr. Coppleman shared Ms. Schiffer's concerns. Tr. 117:15-118:8. Later, in his memorandum to Ms. Schiffer recommending settlement and no appeal of the ONRC Action decision, Mr. Boling advised, "our likelihood of

10014; JX 5 at SCOTTII 03939; JX 15 at SCOTTII 09489-90; Tr. 959:7-22. Moreover, having relied on the "specific direction" on page C-5 of the S&G for the FY 1997 species because the ROD states that its directions are "spelled out" and are to be "applied" as contained in the S&G, JX 14 at 4, logic dictates that the FS should also have relied on the S&G direction for FY 1999 species. There is no reference in this S&G direction to "design" or "authorized." Finally, the S&G at C-5 refers to ground-disturbing activities that will be authorized or "implemented" in FY 1999. Ground-disturbing activities were not implemented on Scott's sales until after October 1, 1998; therefore, surveys were required. These logical inconsistencies underscore the unreasonableness of the FS's interpretation for the FY 1999 species. 23

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success on appeal is not great because the agencies' interpretations are clearly in tension with the text of the ROD and the common meaning of the words `implement' and `survey.'" PX 154 at 7.12 Earlier, a draft guidance memorandum dated August 28, 1996 stated that "NEPA decision equals implementation" will also result in projects being operated on in fiscal years 1997, 1998 and possibly even 1999 without surveys having been done. We have been unable to determine how many projects this might be, nor have we been able to get an estimate of the possible resource damage that could occur. However, there is strong concern on the part of FS, BLM and USF&WS biologists that allowing any operations to proceed after 9/30/96 without surveys is unacceptable because it does not meet the intent of the ROD. PX 27 at 2; Tr. 1621:14-1623:16; see PX 25 at A-209. Ultimately, the government agreed to settle ONRC Action and pay attorneys' fees and expenses in accordance with the Equal Access to Justice Act, effectively conceding that the government's position was not substantially justified. PX 155; Tr. 250:19-251:22, 254:8-255:25. The RTV Directive was also arbitrary, capricious and contrary to law. It unreasonably and without any amendment of the ROD reversed the explicit direction for Category 2 surveys for the RTV. PX 143 at 1094-95. Under the RTV Directive no surveys were required where it was believed that there was a substantial amount of RTV habitat. DX 109. This interpretation was ostensibly based upon the agencies' belief developed after the ROD issued that field surveys were not needed in these areas. Cf. DX 109 at SCOTTII 03291 ("Attachment 1 provides . . . rationale for this guidance"), id. at SCOTTII 03293, 03294 (Attachment 1 dated 09/05/96).

Mr. Boling had concerns about the defensibility of "NEPA decision equals implementation" (Tr. 247:17-248:20), and Owen Schmidt, chief FS lawyer for ONRC Action, understood that Mr. Boling was leery of this interpretation. Tr. 1014:13-1017:21. 24

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The clear direction in the ROD was that surveys must be conducted for the RTV within its "known or suspected ranges and within the habitat types or vegetation communities associated with" it. JX 14 at C-5 (emphasis added). "The [NFP's] requirement that surveys be conducted cannot be dropped simply by the issuance of memoranda concluding that `field surveys were not needed.'" PX 143 at 1095. Any such change in the requirements for RTV surveys would have required an amendment to the ROD and could not be based solely on agency interpretation of the ROD. See id. at 1088, 1094. However, the FS did not attempt to amend the ROD even though the RTV Directive exempted "about ninety percent of the red tree voles' habitat." Id. at 1094.13 In fact, Mr. Boling advised his superiors that the RTV Directive "effectively excluded much of the red tree vole's habitat from survey, which is inconsistent with the ROD requirement to survey `all' ground-disturbing activities `within the known or suspected ranges and within the habitat type or vegetation communications associated with the species.' ROD C-5." PX 154 at 4. In Precision Pine, the court granted the plaintiff summary judgment on liability where the FS unreasonably failed to submit LRMPs for consultation to the Fish & Wildlife Service ("F&WS") in the face of the Ninth Circuit's "clear ruling" in Pacific Rivers Council v. Thomas, 30 F.3d 1050, 1051-52 (9th Cir. 1994), that the FS was required to do so under the Endangered Species Act ("ESA"). 50 Fed. Cl. at 68-69. The FS tried to avoid these requirements by issuing amendments to its LRMPs and submitting the amendments, but not the underlying LRMPs, for consultation. An environmental organization sued to enforce the consultation requirements and,

Because the district court held that the RTV Directive was arbitrary, capricious and contrary to law (id. at 1096-97), it also held, ipso jure, that the RTV Directive was unreasonable. See supra note 8. 25

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citing Pacific Rivers, the district court found that the FS's actions were "contrary to the ESA and clear Ninth Circuit law." Silver v. Babbitt, 924 F. Supp. 976, 985 (D. Ariz. 1995). The district court issued an injunction that caused the FS to suspend Precision Pine's timber sales until the required consultations were completed. 50 Fed. Cl. at 38. Precision Pine then filed suit in this Court alleging that the suspensions breached the implied duties to cooperate and not to hinder. The Court in Precision Pine found that for some of the suspensions prior to Pacific Rivers, there was a reasonable legal argument for not submitting LRMPs for consultation because there was "an open . . . legal question" on the matter up to that point, but afterwards the FS was unreasonable for trying "to avoid the clear mandate of Pacific Rivers." Id. at 68, 70. In the instant case, there is no need for a Pacific Rivers-type court decision because the intent and direction of the NFP Category 2 surveys is "clear, plain and unmistakable." PX 143 at 1094. There was never any genuine "open legal question" before the FS regarding the unreasonableness of "NEPA decision equals implementation" or the RTV Directive and the use of these interpretations to exempt 221 awarded timber sales (574 MMBF), including Scott's sales, from surveys. PX 154 at 6. Moreover, as in Precision Pine, there is uncontroverted evidence that the Department of Justice ("DOJ") expressed deep concerns about the defensibility of the FS's actions prior to the award of Scott's sales. See 50 Fed Cl. at 45, 68-69; PX 90; Tr. 247:17-248:20. The theory of liability on which Precision Pine prevailed was that the FS breached its duties to cooperate and not to hinder. 50 Fed. Cl. at 70, 72. Since the Precision Pine decision, several tribunals have agreed that the FS's unreasonable failure to comply with critical underlying environmental requirements prior to contract award may constitute a breach of the

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duties to cooperate and not to hinder. E.g., Trinity River, 66 Fed. Cl. at 112; H.N. Wood Products, 59 Fed. Cl. at 490-91; Tamarack Mills, 04-1 BCA at 161,228; Shawn Montee, 04-1 BCA at 161,077. The plain language of the ROD, plus the holding of ONRC Action and the supporting facts established at trial demonstrate that it was not reasonable for the FS to have adopted "NEPA decision equals implementation" or the RTV Directive. B. The FS Rushed To Award The Contracts Before The Final Decision In ONRC Action Despite Being On Notice That Its Legal Rationale For Not Conducting Surveys Was Deficient

Before the award of Scott's contracts, the FS was repeatedly put on notice that "NEPA decision equals implementation" and the RTV Directive were without any reasonable basis. Warnings piled upon warnings from the FS, other agency personnel and high level officials of DOJ that were repeatedly ignored by FS management. The FS either knew or should have known that it was not reasonable to award Scott's sales in these circumstances. At least as early as 1995, an Issue Resolution Team ("IRT") was established as an interagency workgroup for the FS and BLM to provide recommendations to higher lev