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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ ) THE SWEETWATER, A WILDERNESS ) LODGE LLC, ) ) Plaintiff, ) ) No. 02-1795C v. ) (Senior Judge Merow) ) THE UNITED STATES, ) ) Defendant. ) ____________________________________) DEFENDANT'S MEMORANDUM OF CONTENTIONS OF FACT AND LAW
PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director KATHRYN A. BLEECKER Assistant Director JOHN H. WILLIAMSON Trial Attorney Commercial Litigation Branch Civil Division U.S. Department of Justice ATTN: Classification Unit 1100 L St. N.W., 8th floor Washington, D.C. 20530 Tel: (202) 307-0277 Fax: (202) 307-0972 E-mail: [email protected] Attorneys for Defendant
OF COUNSEL: KENNETH S. CAPPS Attorney-Advisor Office of the General Counsel Mountain Region U.S. Department of Agriculture P.O. Box 25005 Denver, CO 80225-0005
August 12, 2005
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TABLE OF CONTENTS TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii CONTENTIONS OF FACT I. History Of Sweetwater Lodge And Bridges . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A. B. Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Lodge Permittee Immediately Preceding The Sweetwater Entered A Cooperative Road Maintenance Agreement With The Forest Service . . . . . . . . . . 2
II.
The Sweetwater Buys The Lodge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A. B. Negotiations Between The Brannons And Jeff Mummery . . . . . . . . . 4 During A June 12, 1995 Meeting To Discuss The Terms Of The Permit, The Sweetwater Declined To Enter Any Agreement About The Bridges . . . . . . . . . . . . . . . . . . . 5 The Sweetwater Completes Its Purchase Of The Lodge, And The Forest Service Issued A Permit On August 21, 1995 . . . . . . . . . . 8
C.
III.
The Forest Service Has Shown Good Faith In Its Decisions About Whether To Fund The Replacement Of The Sweetwater Bridges . . . . . . . . 10 The Sweetwater Has Never Operated The Lodge As A Public Resort . . . . . 12
IV.
ISSUES OF FACT AND LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 CONTENTIONS OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 I. The Permit Issued To The Sweetwater Is A License, Not A Contract For Services . . . . . . . . . . . . . . . . . . . . . . . . . . 16 The Permit Is Not A Contract Covered By The Contract Disputes Act . . . . 17 The Forest Service Does Not Owe, And Did Not Violate, Any Implied Contractual Duties That Plaintiff Asserts In Count I . . . . . . . . 19 A. The Terms Of The Permit Do Not Require The Forest Service To Replace The Bridges . . . . . . . . . . . . . . . . . . . 19
II. III.
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B.
The Parties' Discussions Before The Permit Issued Preclude Any Implied Duty To Ensure Access By Car To The Lodge . . . . . 24 The Alleged Actions Of The Forest Service After The Permit Issued Did Not Breach Any Implied Duties To Cooperate And Not Hinder . . . . . . . . . . . . . 30
C.
IV.
The Forest Service Has Not Violated Clause 15 Of The Permit, As Asserted In Count II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Plaintiff's Failure To Operate The Lodge As A Public Resort Was A Material Breach Of Contract That Excused Any Alleged Non-Performance By The Forest Service . . . . . . . . . . . . . . . . 43 The Forest Service Has Not Committed Any Tortious Breach Of The Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Plaintiff Is Unable To State A Claim For A Fifth Amendment Taking . . . . . 51 Plaintiff Is Not Entitled To Recover Any Breach Of Contract Damages . . . 56 A. Plaintiff Could Have Covered Its Out-Of-Pocket Expenses By Operating . . . . . . . . . . . . . . . . . . . . . . . 57 Plaintiff Cannot Meet Any Of The Three Requirements To Recover Lost Profits . . . . . . . . . . . . . . . . . . . . . 58 Plaintiff Is Not Entitled To Recover The Market Value Or Replacement Cost Of Its Lodge As Damages For Breach Of Contract . . . . . . . . . . . . . . . . 62
V.
VI.
VII. VIII.
B.
C.
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
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TABLE OF AUTHORITIES CASES
Allied-General Nuclear Servs. v. United States, 839 F.2d 1572 (Fed. Cir.), cert. denied, 488 U.S. 819 (1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Alpine Camping Services, B-238 90-1 CPD ¶ 580 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Alves v. United States, 133 F.3d 1454 (Fed. Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 American Pelagic Fishing Co., L.P. v. United States, 379 F.3d 1363 (Fed. Cir. 2004), cert. denied, ___ U.S. ____, 125 S. Ct. 2963 (2005) . . . . . . . . . . . . . . . . . . . 53, 54, 55 Anderson v. United States, 344 F.3d 1343 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Andrus v. Allard, 444 U.S. 51 (1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 B-West Imports, Inc. v. United States, 75 F.3d 633 (Fed. Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Bonneville Assocs. v. United States, 43 F.3d 648 (Fed. Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Bradley v. Chiron Corp., 136 F.3d 1317 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 31 Caldwell & Santmyer, Inc. v. Glickman, 55 F.3d 1578 (Fed. Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34, 36 California Fed. Bank v. United States, 395 F.3d 1263 (Fed. Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59, 60, 61, 62 Casa de Cambio Comdiv S.A., de C.V. v. United States, 291 F.3d 1356 (Fed. Cir. 2002), cert. denied, 538 U.S. 921 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Castle v. United States, 301 F.3d 1328 (Fed. Cir. 2002), cert. denied, 539 U.S. 925 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 iii
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Cedar Lumber v. United States, 5 Cl. Ct. 539, (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33, 34 Chancellor Manor v. United States, 331 F.3d 891 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Commerce Int'l Co. v. United States, 338 F.2d 81 (Ct. Cl. 1964) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Contel of California, Inc. v. United States, 37 Fed. Cl. 68 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Conti v. United States, 291 F.3d 1334 (Fed. Cir. 2002), cert. denied, 537 U.S. 1112 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53, 54, 55 Davidson Industrial, Inc. AGBCA No. 95-166-1, 96-2 BCA ¶ 28,299 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40, 41 Dolan v. City of Tigard, 512 U.S. 374 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Energy Capital Corp. v. United States, 1314, (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60, 62 Essex Electro Engineers v. Danzig, 224 F.3d 1283 (Fed. Cir. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Glendale Federal Bank, F.S.B. v. United States, 239 F.3d 1374 (Fed. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56, 63 H. Landau & Co. v. United States, 886 F.2d 322 (Fed. Cir. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Hage v. United States, 35 Fed. Cl. 147 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 25 Hansen Bancorp, Inc. v. United States, 367 F.3d 1297 (Fed. Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Hardeman-Monier-Hutcherson v. United States, 458 F.2d 1364, 198 Ct. Cl. (1972) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
iv
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Harris v. Department of Veterans Affairs, 142 F.3d 1463 (Fed. Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Hughes Communications Galaxy, Inc. v. United States, 271 F.3d 1060 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Kaiser Aetna v. United States, 444 U.S. 164 (1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 LaSalle Talman Bank F.S.B. v. United States, 317 F.3d 1363 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 60, 63 Lamirage, Inc. v. United States, 44 Fed. Cl. 192 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Lenry v. United States, 156 Ct. C 297 F.2d 550 (1962) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 23 Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 M & J Coal Co. v. United States, 47 F.3d 1148 (Fed. Cir.), cert. denied, 516 U.S. 808 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Maritrans Inc. v. United States, 342 F.3d 1344 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 McAbee Constr., Inc. v. United States, 97 F.3d 1431 (Fed. Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Meyers Cos., Inc v. United States, 41 Fed. Cl. 303 (1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Mitchell Arms, Inc. v. United States, 7 F.3d 212 (Fed. Cir. 1993), cert. denied, 511 U.S. 1106 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Mountain States Telephone and Telegraph Co. v. United States, 499 F.2d 611 (Ct. Cl. 1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 26 Ness Investment Corp. v. United States Department of Agriculture, Forest Service, 360 F. Supp. 127 (D. Ariz. 1973), aff'd, 512 F.2d 706 (9th Cir. 1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Oman-Fischbach Int'l (JV) v. Pirie, 276 F.2d 1380 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 v
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Oroville-Tonasket Irrigation Dist. v. United States, 33 Fed. Cl. 14 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Pacific Gas & Elec. Co. v. United States, 3 Cl. Ct. 329 (1983), aff'd, 738 F.2d 452 (Fed. Cir. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26, 27 Robinson v. United States, 305 F.3d 1330 (Fed. Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57, 59 Renda Marine, Inc. v. United States, ____ Fed. Cl. ____, 2005 WL 1793421 (No. 02-306C, July 28, 2005) . . . . . . . . . . 47 S.A. Healey Co. v. United States, 216 Ct. Cl. 172, 576 F.2d 299 (1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30, 31, 32 Scott Timber Co. v. United States, 333 F.3d 1358 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Son Broadcasting v. United States, 52 Fed. Cl. 815 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 20, 23, 28, 31 Southern Comfort Builders, Inc. v. United States, ___ Fed. Cl. ____, 2005 WL 1804325 (No. 00-542C, July 29, 2005) . . . . . . . . . . . 46 Sun Oil Co. v. United States, 215 Ct. Cl. 716 F.2d 786 (1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 T&M Distributors, Inc. v. United States, 185 F.3d 1279 (Fed. Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Torncello v. United States, 681 F.2d 756 Ct. Cl. (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Trauma Serv. Group v. United States, 104 F.3d 1321 (Fed. Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Walter Dawgie Ski Corp. v. United States, 30 Fed. Cl. 115 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 29, 30, 33 Wetsel-Oviatt Lumber Co., Inc. v. United States, 38 Fed. Cl. 563 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40, 41
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STATUTES 16 U.S.C. § 497 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16 U.S.C. § 580d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 16 U.S.C. § 5954(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 41 U.S.C. § 602(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 18
REGULATIONS 36 C.F.R. 211.20-211.37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 36 C.F.R. 251 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 36 C.F.R. § 251.51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 36 C.F.R. § 251.55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
OTHER AUTHORITIES John D. Calamari & Joseph M. Perillo, The Law of Contracts § 14.9 (4th ed.1998)) . . . . . 56 Corbin on Contracts § 564, p. 20 (Interim Ed. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Restatement (Second) of Contracts, § 344 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Restatement (Second) of Contracts, § 347 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Restatement (Second) of Contracts, § 350 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ ) THE SWEETWATER, A WILDERNESS ) LODGE LLC, ) ) ) Plaintiff, ) ) No. 02-1795C v. ) (Senior Judge Merow) ) THE UNITED STATES, ) ) Defendant. ) ____________________________________)
DEFENDANT'S MEMORANDUM OF CONTENTIONS OF FACT AND LAW Pursuant to Appendix A, ¶ 14(b) of the Rules of the United States Court of Federal Claims, and this Court's March 29, 2005 Order, defendant, the United States, respectfully files this Memorandum of Contentions of Fact and Law. CONTENTIONS OF FACT I. History Of Sweetwater Lodge And Bridges A. Location
The buildings and other site improvements (collectively, "the lodge") owned by The Sweetwater, A Wilderness Lodge LLC ("The Sweetwater") are located on 15.4 acres in the Shoshone National Forest ("the Shoshone"), approximately 3.5 miles north of Wyoming State Highway 14/16/20, also known as the "Yellowstone Highway." Forest Service Road 423 ("Sweetwater Road") is an unpaved road that runs approximately 3.5 miles from the Wapiti Campground up the Sweetwater Creek drainage to The Sweetwater's lodge. Sweetwater Road is classified on the Shoshone's INFRA road database as a Level 2 road. The Forest Service Handbooks states that Level 2 is the maintenance level "[a]ssigned
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to roads open for use by high clearance vehicles. Passenger car traffic is not a consideration." There are three bridges for vehicular traffic on Sweetwater Road. The first bridge on FSR 423, FS No. 423-.3, spans the North Fork ("the North Fork bridge"), and is located approximately .3 miles north of the Yellowstone Highway. The other two bridges, FS Nos. 423-2.5 and 423-3.0, span Sweetwater Creek ("the Sweetwater bridges"), and are located approximately 2.5 and 3.0 miles from the Yellowstone Highway. It appears from Forest Service records that permittees built the Sweetwater bridges from available materials. The Forest Service required lodge permittees in the 1960s and 1970s to upgrade the condition of the Sweetwater bridges. Forest Service records from the 1970s indicate that the then-permittee owned bridges. The Forest Service built the North Fork bridge in 1981 for approximately $85,000. The Forest Service maintains no trails in the Sweetwater Creek drainage beyond the lodge because it is a pristine area. Few members of the public other than guests at the lodge use Sweetwater Road because "there's really no place for for people to go." The Sweetwater's lawyer who met with the Forest Service before The Sweetwater bought the lodge testified that "I don't know why you would want to drive up that road unless it was to go to the lodge." B. The Lodge Permittee Immediately Preceding The Sweetwater Entered A Cooperative Road Maintenance Agreement With The Forest Service
The permittees who operated the lodge from 1983 until 1995 were David and Nancy Brannon d/b/a Brannons' Wilderness Lodge. The Brannons' permit was amended in 1985 to include a "Memorandum Of Understanding For Cooperation In Road Maintenance ("the 2
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Brannons' MOU"), under which the Forest Service assumed responsibility for bridge and road maintenance for Forest Service traffic, and permittee assumed responsibility for "traffic generated from use of lands leased by the COOPERATORS for the purposes of operating and maintaining a guest lodge." The Brannons' MOU provided that "The FOREST SERVICE shall: 1. Assume road maintenance responsibility for all National Forest traffic as defined and for two bridges (FS No. 423-2.5 and FS No. 423-3.0), including abutments and approaches." The MOU's "Definition of Terms" section defines "National Forest traffic" as "traffic generated by use of National Forest lands or road systems for recreation purposes exclusive of traffic related to commercial, administration, or protection needs of lands owned or leased by the COOPERATORS." The Brannons' MOU also provided that "New construction or reconstruction, such as bridge replacement, will be agreed to as part of the yearly Joint Maintenance plan." A prospective purchaser of the lodge, Ms. Wanda Smith, spoke with the Forest Engineer of the Shoshone, Jim Fischer, on or about May 15, 1995 about the road and bridge conditions. Mr. Fischer discussed with her the possibility of replacing the bridges with fords. He noted that he recorded in his calendar for that day that "Ms. Smith isn't real excited about that." Ms. Smith did not purchase the lodge from the Brannons because of her concerns about the road and bridges. Mike Bree, one of the Forest Service employees who had responsibility at that time for administering permits in the Shoshone National Forest, spoke to the Brannons, who were upset that the Forest Service talked about the road and bridges with Ms. Smith. Mr. Bree
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told the Brannons that the Forest Service has "to make sure that anybody that's going to purchase it knows the good points and the bad points, everything about it." II. The Sweetwater Buys The Lodge A. Negotiations Between The Brannons And Jeff Mummery
Jeff Mummery is the manager of The Sweetwater. He is also the president of Western Wyoming Properties & Investment Corporation, which owns shares of The Sweetwater. Mr. Mummery is self-employed, and engages in financial consulting regarding real estate. On Friday, May 19 1995, Mr. Mummery learned from Buck Wilkerson, a friend who was a realtor, that the closing on the Brannons' sale of the lodge had fallen through, and that Mr. Mummery "could make [him]self a good deal and buy it." Mr. Wilkerson told Mr. Mummery that he thought the previous prospective purchaser had been prepared to pay $450,000 for the lodge. Mr. Wilkerson told Mr. Mummery that the Brannons were very motivated to sell the lodge, because they were retiring, had made a commitment to buy a boat, and had made no bookings for the lodge for the summer season that was just beginning because they had been negotiating the sale of the lodge for several months. Mr. Mummery testified in his deposition that "I looked at it as a bargain sale." He also testified that "since I looked at it as a bargain sale, I wasn't going to evaluate how their gross revenues or net revenues or how they they ran their business." Unlike the Brannons, who lived at the lodge and who Mr. Mummery said "charged their whole life to it," Mr. Mummery did not intend to live at the lodge or operate it with his wife, but intended to hire a cook. On Sunday morning, May 21, 1995, Mr. Mummery faxed Mr. Brannon an offer on
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the lodge for $275,000. The Brannons made a counter-offer for $287,500, which Mr. Mummery, as president of Western Wyoming Properties, accepted later that day, May 21, 1995. Paragraph 8 of the original offer provided for a closing date of June 21, 1995. Mr. Mummery testified that "I didn't look at the bridges before I put in the offer. I mean, I I looked at them driving out. . . . my primary concern at the time was even getting the you know, I I had offered substantially less than I think he'd felt his lodge was worth. I mean, you know, 40 percent less, or in that neighborhood." Mr. Mummery elected not to consult an engineer about the bridges before he bought the lodge. B. During A June 12, 1995 Meeting To Discuss The Terms Of The Permit, The Sweetwater Declined To Enter Any Agreement About The Bridges
On June 12, 1995, Mr. Mummery and The Sweetwater's lawyer, Bill Simpson, met with three Forest Service representatives Bob Rossman, Monte Barker, and Mike Bree to discuss the permit that The Sweetwater desired to obtain for the lodge. At the time of the meeting, Bob Rossman was Acting District Ranger for the Wapiti District of the Shoshone, where the lodge is located. Mr. Rossman was the only Forest Service line officer at the meeting. In an internal Forest Service email dated June 13, 1995, Mr. Rossman summarized the discussions that he, Mr. Barker, and Mr. Bree held with Mr. Mummery and Mr. Simpson the preceding day. In his deposition, Mr. Rossman testified that his concern during the June 12, 1995 meeting was that before Mr. Mummery closed the sale on the lodge, that he have "knowledge of the condition of the access, the risks associated with it, and being able to make a decision to purchase the facilities with that in mind." Mr. Rossman recalled that the participants in the meeting discussed "that the Sweetwater drainage is unstable, the bridges are in poor condition and not expected to last in perpetuity, that they could fail and could fail at any time 5
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. . . [a]nd if that happened, that the Forest Service had no wherewithal at the present time, and to our knowledge at the time for the foreseeable future, to replace those bridges." Mr. Barker similarly recalled that during the June 12, 1995 meeting "there was never any commitment from the Forest Service that we would build or replace or fix the bridges. The only I guess there may be an implication that the fact that we did talk about it had been put on the CIP list, and we would do to the best of our ability to elevate it as a concern from a public safety perspective to look at the bridges again, but there was never any commitment made that we would in any way fix the bridges." The participants in the June 12, 1995 meeting had a copy of the Brannons' permit and MOU. Mr. Mummery stated that The Sweetwater would not enter into any road maintenance agreement with the Forest Service for Sweetwater Road or the Sweetwater bridges. Mr. Mummery did not want to enter into a road maintenance agreement because he was concerned about protecting his other assets from lawsuits arising from accidents on the road. In his deposition, Mr. Mummery agreed that "I elected not to enter into an agreement that the Forest Service explicitly assumed responsibility for the bridges." Mr. Mummery also testified that "I do not believe either Mr.Simpson or myself specifically stated to the Forest Service the request to put in writing that if the bridges had a catastrophic failure, they would replace them." At the time of the June 12, 1995 meeting, Mr. Mummery understood that the Forest Service could not commit itself to replacing the Sweetwater bridges if they failed. He testified that the Forest Service representatives stated at the June 12, 1995 meeting that if there were a catastrophic failure of the bridges, they would have to go through "a budgeting and procurement process that they couldn't guarantee the outcome of to be able to repair or
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replace the bridges." Mr. Mummery understood that the Forest Service representatives at the June 12, 1995 meeting, including Mr. Rossman, whom the permit identifies as the "Issuing Officer," lacked the authority to bind the Forest Service to repairing or replacing the bridges. Mr. Mummery also understood and was told clearly that once the decision was moved up the chain of command, that a decision could be made not to replace the bridges. Mr. Rossman recalls that The Sweetwater representatives were told during the meeting that if the bridges became impassable, the Forest Service would allow The Sweetwater to use fords to cross Sweetwater Creek. Mr. Bree testified about the June 12, 1995 meeting that "we talked about alternatives and what the conversation went was that we would -- worst case scenario, we would put fords in. . . . If the bridges washed out, we weren't going to replace them, and that we would put fords in." Mr. Barker also testified that during the June 12, 1995 meeting "there was never any agreement that we would put fords in or that we would do anything. It was just when it washes out, if it does, fords would be the only option, and we'll have to take a look at it then and evaluate the situation based on the situation." Mr. Mummery testified that he recalls that after the subject of fords arose during the June 12, 1995 meeting, "I -- I don't remember who said it again -- it might have been Simpson -- but obviously temporary fords were better than no access, so you had to have something." He expected that if the bridges became impassable, it could take three years or more to replace the bridges. Clause 16 of the Brannons' permit provided that if the Forest Service "shall determine that the public interest requires termination of this permit" the Government would pay "equitable consideration" for the permittee's improvements, and that if the Forest Service and
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the permittee were unable to agree upon the amount of the consideration, "the Forest Service shall determine the amount and if the permittee is dissatisfied with the amount thus determined to be due him he may appeal the determination in accordance with the Appeal Regulation (36 C.F.R. 211.20-211.37) and the amount as determined on appeal shall be final and conclusive." The lawyer who represented The Sweetwater at the June 12, 1995 meeting, Bill Simpson, has no recollection of any discussion during the meeting about paragraph 16 of the Brannons' permit. Acting District Ranger Bob Rossman does not recall any discussion during the June 12, 1995 meeting about the subjects addressed in paragraph 16 of the Brannons' permit. During the June 12, 1995 meeting, none of the Forest Service representatives communicated to The Sweetwater representatives, either by action or omission, that the Forest Service agreed to make any payment to The Sweetwater if the Forest Service did not repair or replace the Sweetwater bridges, or did not pursue efforts to obtain funds to repair or replace the Sweetwater bridges. Neither during the June 12, 1995 meeting, nor at any other time to Mr. Rossman's knowledge, did Mr. Mummery or Mr. Simpson ever say anything that suggested that if paragraph 16 were included in a permit issued to The Sweetwater, they interpreted it to mean that the Forest Service agreed to pay The Sweetwater "equitable consideration" for the lodge if the Forest Service did not repair or replace the Sweetwater bridges. C. The Sweetwater Completes Its Purchase Of The Lodge, And The Forest Service Issued A Permit On August 21, 1995
The Sweetwater closed its purchase of the lodge from the Brannons on June 21, 1995. At no time before The Sweetwater closed on the purchase of the lodge on June 21, 1995 did Mr. Mummery ask the Forest Service for any written information that they had about the 8
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condition of the road and bridges because "seeing that these bridges were more of the homemade variety, I assumed that probably there was no engineering involvement." There was never any time when Mr. Mummery asked the Forest Service for information that they refused to provide to him. On August 21, 1995, the Forest Service issued a term special use permit for The Sweetwater to operate a public resort on 15.4 acres at the end of Sweetwater Road. Mr. Rossman was not a contracting officer, and did not hold a warrant, when he signed the permit issued to The Sweetwater using delegated authority as Acting Forest Supervisor. The front page of the permit states that it was "issued for the purpose of [m]aintaining and operating a public resort." The front page also states, "[t]his use shall be actually exercised at least 93 days each year, unless otherwise authorized in writing," and that "[t]his permit is accepted subject to the conditions set forth herein, and to conditions 3 to 55 attached hereto, and made a part of this permit." Neither the permit nor the 1995 or 1996 annual operating plans, which were incorporated into the permit, contained any references to replacing the Sweetwater bridges or to maintenance or repair of Sweetwater Road. Clause 15 of the permit sets forth a process pursuant to which "equitable consideration" is paid to the permittee if the Forest Service "determine[s] that the public interest requires termination of this permit." Clause 15 makes no reference to paying The Sweetwater equitable consideration if the Forest Service did not repair or replace the Sweetwater bridges. Clause 15, titled "Risks and Hazards," states that "[a]valanches, rising waters, high winds, falling limbs or trees, and other hazards are natural phenomena in the Forest that present risks which the holder assumes. The holder has responsibility of [sic] inspecting the
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site, lot, right-of-way, and immediate adjoining area for dangerous trees, hanging limbs, and other evidence of hazardous conditions and, after securing permission from the Forest Service, of removing such hazards." Clause 53, titled "Disputes," states that "[a]ppeal of any provisions of this authorization or any requirements thereof shall be subject to the appeal regulations at 36 CFR 251, Subpart C or revisions thereof." III. The Forest Service Has Shown Good Faith In Its Decisions About Whether To Fund The Replacement Of The Sweetwater Bridges The Sweetwater bridges were inspected in August 1992 by Forest Service bridge inspectors from the Wasatch-Cache National Forest. After performing the inspections, the bridge inspectors discussed the condition of the bridges with Jim Fischer, the Forest Engineer of the Shoshone from 1986 until 2001. The inspectors did not perform a technical loadrating, but using their judgment as professional engineers, said that the bridges were probably safe with signage that limited their use to vehicles no more than 3 to 5 tons. The inspection reports recommended the replacement of the abutments for the lower bridge (FS No. 423-2.5), and the replacement of the entire upper bridge (FS No. 423-3.0). In 1993, signs were posted on the approaches to the bridges that stated, "WEIGHT LIMIT 3 TONS." In March 1992, the Shoshone had prepared a Forest Service Region 2 "Capital Investment Project Description Form" that proposed replacing the bridges. The proposal was updated by Mr. Fischer in February 1997. The estimated cost to replace the two bridges was $186,000. Mr. Fischer maintained a list that he used to track the projects that the Shoshone proposed for the Capital Investment Program ("CIP") during each fiscal year. In the list, for fiscal year 1994, he recorded next to "Sweetwater Bridges" the notation "Indef. Postponed, do w/Mtce $," meaning that the project was indefinitely postponed, and might be done with 10
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maintenance dollars. On June 11, 1996, Mr. Fischer sent an internal email to Bob Rossman and other Forest Service employees stating that Mr. Fischer had met with Mr. Mummery, and told him that the Shoshone had the new bridges back into the CIP for fiscal year 1998 or 1999. At a June 5, 1996 meeting, Mr. Fischer had succeeded in getting the project back into the CIP for fiscal years 1998 and 1999 for the Shoshone's proposal that was forwarded to the regional office. Road and bridge projects like the Sweetwater bridges, which were not connected to a recreational project (such as a campground), were not identified as line items on the list of projects submitted to Congress for budgetary approval. The proposal remained subject to competing priorities for CIP funds on the Shoshone. In fiscal years 1998 and again in 1999, Mr. Fischer testified that the project was deferred, possibly because the Shoshone was shorthanded in the engineering section, and possibly because it could not be fit into the budget. Mr. Fischer testified that during fiscal year 2000, funds became available from the Forest Service's regional office to replace the Sweetwater bridges, and that he intended to proceed with construction of the bridges, but that as a result of conversations that he had with Wapiti District Ranger Brent Larson and Forest Supervisor Rebecca Aus, the decision was made not to go forward with the project. Forest Supervisor Rebecca Aus testified that sometime in 1999 or 2000, she spoke with Wapiti District Ranger Brent Larson and perhaps Forest Engineer Jim Fischer about funding the replacement of the Sweetwater bridges. Ms. Aus determined that the project once again should be indefinitely postponed because any CIP money available was better spent on campgrounds than on replacing the Sweetwater bridges, which were on a Level 2
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road that was by definition a low-maintenance road for high-clearance vehicles. Mr. Mummery testified that it was Mr. Larson who proposed going through the process of seeking termination of the permit in the public interest as one possible option of addressing Mr. Mummery's desire for new bridges. Rebecca Aus, the Forest Supervisor, testified that Mr. Larson raised the prospect of terminating The Sweetwater's permit in the public interest pursuant to paragraph 15, but that she could not see any basis for terminating the permit in the public interest, because the lodge was consistent with the Shoshone's Forest Plan. In late 2000, Mr. Mummery requested that the Forest Service permit him to perform work to upgrade the bridges. At the suggestion of the Shoshone's Bridge Inspector, Tom Koenig, who said there was no point in putting money into the bridges if they could not be load rated, Mr. Mummery retained an engineer, who determined that the deteriorated condition of the bridges prevented him from load rating the bridges in January 2001. The Forest Service then determined that it must close the Sweetwater bridges to vehicular access by the public, which it did in April 2001. IV. The Sweetwater Has Never Operated The Lodge As A Public Resort In November or December 1995, Mr. Mummery tried to sell the lodge to Daren Singer and Bram Lassiter. In February 1996, Mr. Mummery signed a sales contract to sell all the stock of The Sweetwater to Mr. Carl Bixby for $600,000. However, Mr. Mummery never informed the Forest Service that he had signed the sales contract, even though paragraph 51 of the permit requires that the permittee "shall immediately notify the Forest Supervisor when a sale and transfer in ownership of the permitted improvements is planned." Mr. Mummery granted Mr. Bixby and his family and friends exclusive use of the
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lodge during 1996 in return for payments totaling $71,500. Section 2343.3 of the Forest Service Manual requires a permittee to operate a lodge "in a manner that ensures the general public has full access to the facilities," and denies "exclusive or preferential use by holders, their employees, families, friends, business associates, partners, stockholders, lenders, or others who may have a monetary interest in the facilities." Mr. Bixby was unable to close the purchase of the lodge, and the owners of The Sweetwater kept 10 percent of the purchase price $60,000 pursuant to the terms of the sales contract. In February 1997, a prospective sale of the lodge to Ray and Judi Sutherland for $595,000 fell through because the Sutherlands contacted the Forest Service and asked about the condition of the Sweetwater bridges. On February 19, 1997, Jennifer Watson of the Forest Service faxed copies of the 1992 bridge inspections to the Sutherlands with a note from Shoshone Forest Engineer Jim Fischer stating that the bridges had been "basically condemned in '92." The Forest Service sent the Sutherlands a letter the next day, on February 20, 1997, explaining that the bridges had not been condemned, and that the 1992 bridge inspections were given a rating code of 2, which indicated "a deficiency that may be dealt with through load limit restrictions." The letter also stated: While the Shoshone Forest clearly desires to maintain access in the Sweetwater Drainage, that access would more likely become seasonal fords of the Sweetwater River should the condition of the bridges deteriorate to the point where they can no longer be used. As explained in previous discussion, this is because funding for replacement of these bridges is not currently available, and the liklihood [sic] of obtaining adequate funding to replace these bridges in the future is low. When Jeff Mummery purchased this lodge several years ago, the condition of the bridges was an issue at that time. He agreed that fords would be an acceptable alternative for access to the lodge should the bridges either fail or become unsafe. Whether this method of access will be adequate for you and 13
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your proposed business at the Sweetwater Lodge must figure into your business plans. Id. Mr. Mummery received a copy of the February 20, 1997 letter. At Mr. Mummery's request, on February 27, 1997, the Forest Service sent a second letter about the Sweetwater bridges, this one addressed to Mr. Mummery, for which he proposed language to District Ranger Brent Larson. Mr. Mummery testified that once he learned about the 1992 bridge inspections in February 1997, he determined that he could not operate the lodge because of the risk of liability. Mr. Mummery testified that no one from the Forest Service before April 2001 ever told him that he could not use the bridges. Paragraph 54 of the permit requires the permittee to prepare annually an operating plan. The Sweetwater did not submit any operating plans from May 1996 until May 2002, even though Forest Service representatives repeatedly asked Mr. Mummery for The Sweetwater to submit a written proposal for how he could operate the lodge. After the Forest Service sent a written "Notice of Non-Compliance And Opportunity To Cure" on December 21, 2001, The Sweetwater did submit an operating plan on May 1, 2002. Neither the permit nor the operating plan was ever amended in writing to relieve The Sweetwater of its obligation to operate the lodge 93 days per year as a public resort. ISSUES OF FACT AND LAW 1. 2. Whether the permit issued to The Sweetwater is a contract. Whether the permit issued to The Sweetwater is a contract covered by the
Contract Disputes Act, 41 U.S.C. § 602(a). 3.a. Whether the permit issued to The Sweetwater could give rise to any implied
contractual duty to replace the bridges when The Sweetwater declined to enter a 14
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memorandum of understanding addressing the subject of road and bridge maintenance, and the Forest Service expressly disclaimed any commitment to replace the Sweetwater bridges before The Sweetwater closed its purchase of its lodge. 3.b. Whether the Forest Service breached any implied contractual duty to obtain
funds to replace the Sweetwater bridges when no official authorized to bind the Government ever agreed to approve the replacement of the bridges. 4. Whether the Forest Service has effected a termination in the public interest of
the permit issued to The Sweetwater that requires the Forest Service to pay The Sweetwater "equitable consideration" pursuant to clause 15 of the permit. 5. Whether plaintiff's failure to operate the lodge relieves the Forest Service of
responsibility for any alleged violation of the permit. 6. Whether the plaintiff can pursue a claim for tortious breach of contract at trial
when it has not pleaded that claim in its complaint. 7.a. Whether plaintiff can state a claim for a Fifth Amendment taking if plaintiff
concurrently pursues damages for breach of contract. 7.b. Whether plaintiff possesses any property interest in the permit or in its
buildings and site improvements that is compensable pursuant to the Fifth Amendment. 8.a. Whether plaintiff is entitled to recover any breach of contract damages for
out-of-pocket expenses when it has failed to operate its lodge, as required by the permit. 8.b. Whether plaintiff meets all three requirements to recover lost profits for
breach of contract. 8.c. Whether, if the Court determines that the Government is liable on Count I, the
proper measure of plaintiff's damages is the replacement cost of the bridges.
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8.d.
Whether, if the Court determines that the Government is liable on Count II,
plaintiff is entitled to recover the reconstruction cost or market value of its lodge as "equitable consideration" for termination of the permit. CONTENTIONS OF LAW I. The Permit Issued To The Sweetwater Is A License, Not A Contract For Services The permit issued to The Sweetwater is not a contract for services, as plaintiff contends, but is a license whose issuance has been authorized by Congress pursuant to its management and control of public lands granted in Article IV, Section 3 of the Constitution. Pl. Mem.1 27-37. The Term Permit Act authorizes the Secretary of Agriculture "under such regulations as he may make and upon such terms and conditions as he may deem proper, [] to permit the use and occupancy of suitable areas of land within the national forests . . . for the purpose of constructing or maintaining hotels, resorts, and any other structures or facilities necessary or desirable for recreation, public convenience, or safety." 16 U.S.C. § 497 (emphasis added). The nature of the interest created by a term permit is a license, that provides a revocable personal privilege to the permittee to occupy National Forest System lands and conduct activities only for the purposes specified in the permit. 36 C.F.R. § 251.55. The permit issued to plaintiff possesses "the traditional characteristics of a revokable license." Hage v. United States, 35 Fed. Cl. 147, 166 (1996). The first sentence of the permit states that "[p]ermission is granted to . . . use subject to the conditions set out below, the following described lands," and states the personal "privileges granted by this permit" to
"Pl. Mem." refers to Plaintiff's Memorandum of Contentions of Fact and Law, filed July 12, 2005. 16
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occupy and use National Forest land (emphasis added). This is consistent with the definition of license expressed by Bill Simpson, the lawyer who represented The Sweetwater during its discussions with the Forest Service preceding issuance of the permit: "a privilege, not necessarily a contractual right, so that it can be revoked or terminated at the discretion of the issuing agency, subject to certain terms and right of review." The permit provides that it "may be revoked upon breach of any of the conditions herein" (¶ 14), and that it cannot be assigned or transferred ( Id. ¶¶ 12, 51). The Court has ruled that the permit is "sufficiently contractual" for the Court to exercise jurisdiction over plaintiff's claims, because clause 15 of the permit provides that the permittee will be compensated if the Forest Service terminates the permit in the public interest. Dec. 30, 2004 Order at 12. While we respectfully disagree with the Court's ruling, we agree that the Court has properly reserved for trial the threshold issue presented by Counts I and II of the complaint: whether the permit gives rise to the specific contractual duties that plaintiff asserts were breached by the Government. As shown below in sections "III." and "IV.," the permit does not give rise to any implied duty to repair or replace the Sweetwater bridges (as asserted in Count I), nor any duty to pay plaintiff equitable consideration pursuant to clause 15 because the Forest Service has not repaired or replaced the bridges (as asserted in Count II). Thus, even if the Court concludes that the permit is a contract in some respects, the Court should still rule in favor of the Government on Counts I and II, because the Government does not owe the specific contractual duties asserted by plaintiff. II. The Permit Is Not A Contract Covered By The Contract Disputes Act Even if the Court were to conclude that the permit is a contract in some respects, the
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Court should reject plaintiff's assertion that the permit issued to The Sweetwater is a contract for the "procurement of services" within the meaning of the Contract Disputes Act, 41 U.S.C. § 602(a). Pl. Mem. 36. Plaintiff cites no decisions of this Court in support of its assertion, but relies only upon a single decision of the Government Accountability Office ("GAO") and the observations of two lower-level Forest Service employees, neither of whom are lawyers or hold any authority to speak on behalf of the Government. As this Court stated in Son Broadcasting v. United States, 52 Fed. Cl. 815, 821 (2002), regarding term special use permits that granted use of a communication site, "[b]y their plain language, the Permits and incorporated Site Plan are not contracts by which the Forest Service acquired commercial supplies or services. The parties agree that the primary responsibility of Forest Supervisors is the management of National Forest System land, not the procurement of goods and services." This Court has also stated that "[a] `procurement' is an acquisition by purchase, lease, or barter, of property or services for the direct benefit or use of the federal government." Oroville-Tonasket Irrigation Dist. v. United States, 33 Fed. Cl. 14, 21 (1995) (citing Bonneville Assocs. v. United States, 43 F.3d 648, 653 (Fed. Cir. 1994)). In Oroville, the Court noted that Congress authorized the Secretary of the Interior "to construct, operate, and maintain" the irrigation project at issue, and that "ownership of the project is retained by the United States." 33 Fed. Cl. at 22. The Court determined that because the irrigation district was required by contract "to carry out the obligation placed by Congress on the Secretary of the Interior to operate and maintain the project in question. . . . Clearly by the contract in question, the government has procured the services of OTID to operate and maintain a
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government-owned facility. This is a procurement of services." Id. (emphasis added). In contrast, the Forest Service did not enter into a contract with plaintiff to operate or maintain a Government-owned facility. The Sweetwater owns all the improvements that are located within the 15.4 acre site identified in its permit; indeed, the alleged loss of this property is the basis of most of its damages claim. Any responsibilities that the permit requires The Sweetwater to perform to care for the Forest lands within or around its site are strictly a result of its occupancy, and are not services that the Government set out to find someone to provide. Similarly, the GAO decision cited by plaintiff also involved the provision of services to maintain and operate Government-owned facilities. Alpine Camping Servs., B-238,625, 90-1 CPD ¶ 580. In Alpine, the Forest Service issued a prospectus inviting offerors to submit proposals for two special use permits for campground concessionaire operations. Id. The GAO noted that the permits were "issued pursuant to 16 U.S.C. § 580d, which authorizes the Secretary of Agriculture to require concessionaires to, at their expense, recondition and maintain Forest Service recreation facilities" (emphasis added), such as "to replace, paint and straighten barricades, signs, posts, tables, restrooms, etc.; recondition and install fire rings and hydrant posts." Id. Because the Forest Service had conducted a competition to select a concessionaire to maintain the Government-owned campground facilities, the GAO stated that "we conclude that the prospectus at issue is a procurement for services." Id The Forest Service never has conducted a competition to select a concessionaire to operate a lodge on the site occupied by The Sweetwater's lodge, and the Government has
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never owned the lodge. Thus, the permit is not covered by the Contract Disputes Act, because it is not a contract for the "procurement of services," as plaintiff asserts. III. The Forest Service Does Not Owe, And Did Not Violate, Any Implied Contractual Duties That Plaintiff Asserts In Count I A. The Terms Of The Permit Do Not Require The Forest Service To Replace The Bridges
To determine what, if any, contractual duties arise from the permit issued to The Sweetwater, the Court should start with the text of the permit. In Son Broadcasting, one of the principal cases on which plaintiff relies, this Court observed that "[c]ourts have reached divergent conclusions about whether a particular permit constitutes a binding contract. However, they agree that an examination of the language and characteristics of the permit is critical to the determination." 52 Fed. Cl. at 822. The site plan that was incorporated in the communication site permit at issue in Son Broadcasting expressly provided that "`a third antenna tower which may be self supporting may be authorized when the technical capacity of the intial [sic] two towers is reached.'" Id. at 817. The Court stated "[t]he plain language of these provisions suggests that although the Forest Service has the discretion to authorize a third tower, the exercise of that discretion is conditioned upon the technical capacity of the first two towers having been reached." Id. at 825. The Court noted that the permit expressly provided that "`[t]he Forest Service agrees not to issue authorizations to additional users'" until it was satisfied that the additional users had agreed to pay rent to the original permittee to compensate it for the original expense it had borne to develop the site. Id. at 823. The Court also noted that the permit "plainly provides that the Forest Service reserved the right to authorize other users only if `such use does not interfere with the rights and privileges' authorized by the Permit." Id. at 825.
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Based upon the express language in the permit and site plan, the Court found that "[p]laintiff's rights under the contract embodied in these documents included the right to rent out all available space on its tower as long as it was economically and technologically feasible before the Forest Service could authorize construction of a third tower." Id. (emphasis added). The Court held "that the Special Use Permit, together with the incorporated Site Plan, constitutes a binding contract between plaintiff and the government and that this contract prohibited construction of the third tower until the first two had reached capacity." Id. at 820. The Court's holding that the permit formed a contract was limited to enforcing what it found to be a specific right of the permittee that the Forest Service would refrain from authorizing construction of a third tower until the first two reached their capacity that was explicitly provided in the permit and site plan. In contrast, the permit issued to The Sweetwater does not grant the permittee any right that the Forest Service would repair or replace the Sweetwater bridges. As plaintiff concedes, and as the Court noted in its December 30, 2004 order, plaintiff declined to enter into a memorandum of understanding ("MOU") that addressed road and bridge maintenance and was incorporated into the permit, as had the previous permittees, the Brannons. Indeed, the permit expressly provides that The Sweetwater assumed the risk that the road or bridges leading to The Sweetwater's lodge would become impassable. Clause 30 of the permit, titled "Risks and Hazards," states in its entirety: "Avalanches, rising waters, high winds, falling limbs or trees, and other hazards are natural phenomena in the Forest that present risks which the holder assumes. The holder has responsibility of [sic] inspecting the site, lot, right-of-way, and immediate adjoining area for dangerous trees, hanging limbs, and other evidence of hazardous conditions and, after securing permission from the Forest
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Service, of removing such hazards." Clause 30 placed upon the permittee the risk that heavy rainfall or snowmelt in Sweetwater Creek would wash out Sweetwater Road or the abutments that supported the Sweetwater bridges. The risk that Sweetwater Creek presented to the Sweetwater bridges was contemplated and discussed by The Sweetwater and the Forest Service before the permit issued. Jeff Mummery, the owner of The Sweetwater, testified in his deposition that when he discussed the bridges with Forest Service representatives in June 1995 before the permit issued, "What I was worried about was a catastrophic failure from a flood primarily." However, clause 30 placed upon the permittee all risk for any failure of the bridges resulting from rising waters in Sweetwater Creek, whether resulting from a single catastrophic event or through less dramatic storms or annual snowmelt that eroded the abutments. The clause also placed upon the permittee the responsibility to inspect the right-of-way for hazardous conditions caused by rising waters, such as debris or unsafe bridges, and to seek permission from the Forest Service to remove the hazards. The Court of Claims rejected a contractor's claim that the Government bore responsibility for ensuring vehicular access to a construction site despite a flood that rendered unavailable access roads to the site. Lenry v. United States, 156 Ct. Cl. 46, 297 F.2d 550 (1962). The contractor had anticipated using the roads in its method of operation, which was not a part of the contract itself. Id. The court rejected the plaintiffs' claim that because parts of existing roads that led to the construction site were shown on the contract drawings, that the Government "impliedly warranted, for the life of the contract, the continued availability of the streets intended by plaintiff to be used as access roads." 297 F.2d at 553. The court stated, "plaintiffs make no attempt to define the scope of the warranty
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they find implicit in the contract. . . . Had defendant ever intended to make such a unique and all-encompassing guarantee, and had plaintiffs expected it, we believe they would have so specified in clear and unmistakable language." Id. If the Forest Service had intended to assume responsibility for ensuring that the Sweetwater Road and bridges would remain passable for cars for the 20-year life of the permit, it would have expressly stated that commitment in the permit. Instead, clause 30 of the permit provides that the permittee assumes the risk that rising waters might render the roads or bridges impassable. The Court of Appeals for the Federal Circuit cited Lenry in a decision that also rejected a contractor's assertion that an implied warranty of access was created to reach a construction site. Oman-Fischbach Int'l (JV) v. Pirie, 276 F.2d 1380, 1385 (Fed. Cir. 2002). In Oman-Fischbach, the court relied in part upon the standard site investigation clause, FAR 52.236-3, which the court ruled placed the burden of determining the availability of roads upon the contractor. Id. If the permit issued to The Sweetwater is treated as a contract, clause 30 similarly required The Sweetwater to assume the responsibility for ensuring that the road and bridges leading to its lodge remained passable. The court of appeals also found that the risk of increased costs caused by third parties, like the flood in Lenry, were not shifted to the Government unless the parties had agreed so "in unmistakable terms." Id. In Son Broadcasting, this Court also relied upon Lenry in holding that the permit did not support any implied warranty of access. 30 Fed. Cl. at 128. As the Court of Claims has recognized, it lies within the discretion of the Forest Service to establish the terms and conditions of special use permits, including term special use permits. Mountain States Telephone and Telegraph Co. v. United States, 499 F.2d 611,
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613-14 (Ct. Cl. 1974). In Mountain States, the Court of Claims refused to read new terms into the special use permit at issue, rejecting the plaintiff's request to "'judicially set conditions and terms for a use permit'" that had not been set by the Forest Service in the permit. 499 F.2d at 616 (quoting Ness Investment Corp. v. United States Department of Agriculture, Forest Service, 360 F. Supp. 127, 128 (D. Ariz. 1973), aff'd, 512 F.2d 706 (9th Cir. 1975)). This Court should follow the precedent of Mountain States (which plaintiff has not addressed, let alone distinguished in its pre-trial brief), and should reject The Sweetwater's attempt to judicially set new terms that the Forest Service did not include in the permit. B. The Parties' Discussions Before The Permit Issued Preclude Any Implied Duty To Ensure Access By Car To The Lodge
Acknowledging that the promise that it seeks to enforce is not expressly stated in the permit, plaintiff asserts in Count I that the permit is a contract that gives rise to implied duties to cooperate and not hinder The Sweetwater's performance of its alleged contractual duty to operate a public resort. Pl. Mem. 3. The Federal Circuit has ruled that the implied duties to cooperate and not hinder performance of Government contracts are "an aspect of the duty of good faith and fair dealing." Essex Electro Engineers v. Danzig, 224 F.3d 1283 (Fed. Cir. 2000). The Federal Circuit has also ruled that "implied covenants of good faith and fair dealing are limited to assuring compliance with the express terms of the contract and cannot be extended to create new obligations not contemplated in the contract." Bradley v. Chiron Corp., 136 F.3d 1317, 1326 (Fed. Cir. 1999). Plaintiff acknowledges that the scope of the implied duty to cooperate and not hinder "is dependent on the particular facts and circumstances of the case at hand." Pl. Mem. 29 (citing Commerce Int'l Co. v. United States, 338 F.2d 81, 86 (Ct. Cl. 1964) and Walter 24
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Dawgie Ski Corp. v. United States, 30 Fed. Cl. 115, 130 (1993)). The implied duty that plaintiff asserts the Forest Service owed pursuant to the permit was "to maintain FSR 423 to provide vehicle access to the site." Dec. 30, 2004 Order at 12. Although plaintiff contends that it "has never argued that this case involved a guarantee that access would exist" (Pl. Mem. 6 n.2, emphasis in original), plaintiff later asserts that the permit requires the Forest Service to "`do [its] best' as to events within its control to ensure that the lodge had sufficient access for operations." Id. 30 (emphasis added). The specific implied duty asserted by plaintiff is that the Forest Service would ensure that the two Sweetwater bridges remained passable so that cars could reach plaintiff's lodge. The conduct of the parties before the permit issued contradicts the implied duty that plaintiff asserts. Plaintiff agrees that at the June 12, 1995 meeting before the permit was issued, The Sweetwater and the Forest Service had a copy of the permit issued to the Brannons, including the Memorandum of Understanding ("MOU") regarding road maintenance. Paragraph ¶ C.4. of the MOU carefully limited the Forest Service's responsibility regarding the Sweetwater bridges, stating that "[n]ew construction or reconstruction, such as bridge replacement, will be agreed to as part of the yearly Joint Maintenance plan." Thus, the Brannons' MOU reserved the subject of replacing the bridges for future consideration by the parties, and required that bridge replacement would take place only if the parties "agreed." The MOU did not require the Forest Service to reconstruct or replace the bridges. If the permit is to be treated like a contract, as plaintiff contends, then the parties' discussion concerning the permit and MOU should be treated like any other negotiation
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session between contracting parties. The Forest Service did not agree in the MOU to do anything more than consider in the yearly maintenance plan whether it would agree to replace the bridges. Plaintiff declined to enter that MOU or any other written agreement with the Forest Service regarding the road or bridges because of plaintiff's concerns about liability. The implied duty to replace the bridges that plaintiff asserts is flatly contradicted by the clearly expressed intent of the Forest Service in the proposed MOU, in which it declined to assume any responsibility for replacing the bridges. "[A] provision should not be found by 'implication' when the testimony convincingly shows that such a provision was intentionally omitted." Corbin on Contracts § 564, p. 20 (Interim Ed. 2002). The Claims Court found that no implied-in-fact contract was formed in a similar situation. Pacific Gas & Elec. Co. v. United States, 3 Cl. Ct. 329 (1983), aff'd, 738 F.2d 452 (Fed. Cir. 1984). In PG&E, the Claims Court declined to find that an implied-in-fact contract had arisen when the Forest Service and PG&E never finalized an agreement about the costs of reconstructing a road that PG&E used heavily. Id. at 340. The court relied upon the ruling in Mountain States to note the broad scope