Free Order on Motion for Summary Judgment - District Court of Federal Claims - federal

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The United States Court of Federal Claims
No: 04-487 C March 19, 2007

TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Plaintiff, v. THE UNITED STATES OF AMERICA, Defendant.

Summary Judgment; Contract Disputes Act, 41 U.S.C. § 609(a); Tucker Act, 28 U.S.C. § 1491(a)(2); FAR § 52.236-2 Type I Differing Site Condition; Misrepresentation; Superior Knowledge; Restatement (First) Contracts; Restatement (Second) Contracts; FAR § 52.236-3

James T. Hopkins, Schiffrin Olson Schlemlein & Hopkins, PLLC for the plaintiff. J. Reid Prouty, Commercial Litigation Branch, United States Department of Justice, for the defendant.

OPINION AND ORDER
Block, Judge. This is a breach of contract case. Plaintiff, Travelers Casualty and Surety Company of America ("Travelers"), is the assignee of a claim by Red Samm Construction Company ("Red Samm") asserted against the United States, acting through its agent the United States Army Corps Engineers (the "Corps"). Red Samm entered into a contract with the Corps to improve a small boat harbor in King Cove, Alaska, part of the Aleutian Island chain. The contract called for the harbor improvements to be performed in two stages in consecutive seasons: the first stage consisted of building a breakwater, the second consisted of dredging the harbor behind the breakwater. While the breakwater first stage proceeded without a hitch, Red Samm faced--literally faced--impediments in the second stage. These impediments were copious amounts of "cobbles"--rounded or ragged stones between three and twelve inches in diameter (not dissimilar in many ways to the cobblestones paving old-fashioned city streets). The presence of these abundant cobbles prevented Red Samm from timely completing stage two of the contract. Red Samm contends that the cobbles prevented it from employing a hydraulic dredge as the contract indications led them to attempt. As a result, Red Samm was forced to hire a subcontractor, which in turn used a combination of dredging techniques to complete the job the following year at the significant added

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cost of $2,729,242. The Corps withheld payment of $218,460 from the contract balance as a result of the delay. After the assignment, Travelers brought suit in this court asserting, inter alia, Type I differing site condition, misrepresentation and failure to disclose superior knowledge claims demanding reimbursement of the added costs incurred by Red Samm as well as a claim for the alleged wrongfully-withheld payment. The contract specifications are the heart of the controversy, as plaintiff maintains the specifications misled Red Samm into believing that the dredging site contained only a "few" cobbles. The parties primarily battle over the meaning and application of the word "few." Exhibits appended to the contract and incorporated by reference here help define the contract's terms and meaning. The court does not face a Gordian knot. Meaning is ascertainable. Before the Court are the parties' cross-motions for summary judgment. As fully explained below, because Red Samm reasonably interpreted and relied upon the contract representations concerning the expected site conditions, and the actually-encountered conditions differed materially from those representations, plaintiff's motion is granted with respect to liability and defendant's motion is denied. I. FACTUAL BACKGROUND1 King Cove, Alaska is a small, rugged fishing town located on the southern side of the Alaskan Peninsula, on a sand spit fronting Deer Passage and Deer Island, some 625 miles from Anchorage. Bidding Documents SCR-3. King Cove is accessible only by air or sea. Id. Planes coming into King Cove commonly face gale force winds as they land on a 3,600-foot gravel runway. Id. at 3-4. Visitors may also visit King Cove via a state owned Ferry that operates bi-monthly between May and October. Id. King Cove's climate is relatively mild with average temperatures of 25E F to 55E F, extremes from -9E F to 76E F, and precipitation totaling about 52 inches of snow and 33 inches of rain, annually. Id. Founded in 1911 and incorporated in 1949, King Cove has a population of 723 inhabitants.2 The King Cove economy is primarily dependent on the fishing and fish processing industries. Id. The present dispute centers on the Corps' project to improve a small boat harbor in King Cove. In 1974, the Corps completed an 11 acre small boat harbor in King Cove. PPFUF ¶ 34. Twenty years later, the Corps decided to construct a new harbor and performed investigations and
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Facts from this section come from: Bidding Documents; Contract; Defendant's Proposed Findings of Uncontroverted Facts ("DPFUF"); Plaintiff's Response to Defendant's Proposed Findings of Uncontroverted Facts and Plaintiff's Additional Proposed Finding of Uncontroverted Facts ("PPFUF"); Defendant's Response to Plaintiff's Additional Proposed Finding of Uncontroverted Facts ("DRPPFUF"); Defendant's Appendix to Defendant's Proposed Findings of Uncontroverted Facts ("Def. App"); Plaintiff's Appendix to Plaintiff's Response to Defendant's Proposed Findings of Uncontroverted Facts and Plaintiff's Additional Proposed Finding of Uncontroverted Facts ("Pl. App.") and Plaintiff's Amended Complaint ("Pl. Am. Compl."). http://www.commerce.state.ak.us. (Click on "Alaska Community Database," then click "Detailed Community Information," and then click on "King Cove"). -22

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feasibility studies of three potential sites from 1995 to 1996. PPFUF ¶ 35. On June 29, 1996, the Corps' geotechnical engineer, Charles Wilson, excavated five tidal-zone test pits3 at the project site. PPFUF ¶¶ 35, 38. The test pit explorations, excavated with a backhoe during low tide, were performed to explore for bedrock and to evaluate subsurface conditions with regard to dredging. PPFUF ¶ 38. Wilson documented his work with five test pit logs, a test pit location map, photographs, and a two-page report ("the Wilson Report"). PPFUF ¶ 39. Of the documentation compiled by Wilson, only the test pit logs were included or referenced in the contract documents. PPFUF ¶ 39. The following year, the Corps' project team compiled the "Navigation Improvements Detailed Project Report and Environmental Assessment - King Cove, Alaska" ("the Detailed Project Report"), summarizing the investigation and analysis performed in the previous years. PPFUF ¶ 40. The Detailed Project Report was not included as part of the contract. Id. A Detailed Project Report appendix, entitled "Geotechnical Report," contained Wilson's five test pit logs, a test pit location map, and five photographs taken during the excavation. Pl. App. 182-06. The Detailed Project Report indicated that the Corps interpreted the test pit logs to show easily dredgable material conducive to hydraulic dredging. A cost estimate reflected this interpretation as well, indicating dredging material of "sand, gravel, and some boulders," and assumed that dredging would be performed by a hydraulic, cutterhead pipeline operation. PPFUF ¶¶ 41- 42. On May 13, 1998, the Corps published an initial solicitation for the King Cove Harbor Improvements Project ("the Project"), calling for the construction of a breakwater4 and the dredging of an entrance channel and mooring basin at the pre-existing harbor site. DPFUF ¶ 1; PPFUF ¶ 97. The solicitation included the standard Federal Acquisition Regulation ("FAR") Site Investigations Clause, providing, in part: The Contractor acknowledges that it has taken steps reasonably necessary to ascertain the nature and location of the work, and that it has investigated and satisfied itself of the conditions which can affect the work or its cost, including but not limited to . . . (5) the character of equipment and facilities needed preliminary to and during work performance. The Contractor also acknowledges that it has satisfied itself as to the character, quality, and quantity of surface and subsurface materials to be encountered insofar as this information is reasonably ascertainable from inspection of the site, including all the exploratory work done by the Government. DPFUF ¶ 2. Additionally, the solicitation included a description of the area to be dredged. Section 02222, Dredging, Excavation, and Disposal, provided:

A test pit is a subsurface excavation of materials conducted for the purpose of discovering the subsurface conditions (including depth of bedrock as well as the type of soils to be encountered); knowledge of which is necessary in making the decision as to what type of equipment will be employed during a dredging operation. PPFUF ¶ 38. A breakwater is an offshore structure (as a wall) protecting a harbor or beach from the force of waves. See Merriam-Webster OnLine Dictionary, http://m-w.com/. -34

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1.2 - Character of Materials - Exploration Logs for the area to be dredged and excavated are enclosed in Appendix A. Incidental sunken logs, boulders, rock, snags and other miscellaneous debris from harbor and fishing operations should be expected. Geophysical data for this area can be obtained from the Corps of Engineers, Geotechnical Branch - Soils and Geology Section, Alaska District. DPFUF ¶ 3. The referenced exploration logs, included in the contract documents as Appendix A, were the five test pits logs created by Wilson in 1996. The exploration log for Test Pit 1, dug to ten feet deep, indicated "Silty Sand" for the first foot, "Gravel w/ few Cobbles & Boulders"5 for the remaining nine feet, "Easy Digging" and "Sidewalls Caving - Refusal" at ten feet. DPFUF ¶ 5 (emphasis added). The exploration log for Test Pit 2, dug to nine and a half feet deep, indicated "Gravel w/ Cobbles & Boulders" throughout, "Easy Digging" and "Sidewalls Caving - Refusal" at nine and a half feet. DPFUF ¶ 6 (emphasis added). The exploration log for Test Pit 3, dug to five feet deep, indicated "Gravel and Cobbles" for the first foot, "Weathered Bedrock" for the remaining four feet, and "Difficulty of Digging - Refusal" at five feet. DPFUF ¶ 7 (emphasis added). The exploration log for Test Pit 4, dug to nine feet deep, indicated "Gravel & Cobbles" for the first foot, "Gravel" for the remaining eight feet, "Angular to Subangular," "Easy Drilling" and "Sidewalls Caving - Refusal" at nine feet. DPFUF ¶ 8 (emphasis added). The exploration log for Test Pit 5, dug to eight feet deep, indicated "Silty Sand" for the first foot, "Gravel w/ few Cobbles" for the remaining seven feet, and "Easy Digging" and "Sidewalls Caving - Refusal" at eight feet. DPFUF ¶ 9 (emphasis added). The Wilson Report, not included or referenced in the contract documents, characterized the test pits as indicating that "the basin area to be (sic) underlain primarily by gravel containing some cobbles and boulders . . . . [T]he gravel soils containing cobbles and boulders should not present major problems provided the equipment used to dredge these materials is commensurate with those conditions." Pl. App. 274. Wilson contends that he intended to convey within his report the existence of "significant cobbles and boulders present within the subsurface conditions." DRPPFUF ¶ 53. Wilson also contends that he expected his report to be available to any "prudent contractor" who requested it. Pl. App. 57. There is no evidence, however, that shows the Wilson Report was obtainable. See Hr'g Tr. 17-18. In addition to the test pit logs, the solicitation's Appendix A included drilling logs from four soil borings6 performed in November 1985 in connection with a previous project. Pl. Am. Compl.
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The American Society for Testing and Materials ("ASTM") has developed standard definitions for terms used in soil investigations that are generally recognized as industry standards. DPFUF ¶ 10. The ASTM defines a "cobble" as a particle of rock that will pass through a twelve inch square opening, but be retained by a three inch sieve. DPFUF ¶ 11. The ASTM defines a "boulder" as a particle of rock that will not pass a twelve inch square opening. DPFUF ¶ 12. A soil boring is a three inch diameter coring of the subsurface that is abstracted by drilling down with a conical drill piece and removing the earth within the coring. The narrowness of a soil boring limits the information that can be inferred from it because it is incapable of giving information of -46

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¶ 3.2. These soil borings were located in the northeastern portion of the project area, outside of the actual dredge limits. PPFUF ¶ 60. The Corps also procured a seismic survey of the King Cove area in order to determine the depth and location of bedrock. The survey resulted in an eleven-page report known as the "Golder Report." DPFUF ¶ 17. The Golder Report was the "Geophysical data" referenced in Section 02222 of the solicitation (see above), that the Corps made available to potential bidders upon request. Id. The Golder Report included a section which read as follows: This [seismic] signature is typical of course grained sediments deposited in a high energy environment. This interpretation is consistent with the test pit data from the southwest end of the site, which shows mostly gravel with some cobbles and boulders in the upper 10 ft. The seismic signature for these upper sediments is uniform and was observed in the seismic records across the site, suggesting that course-grained sediments, consisting of mostly sand and gravel with some cobbles and boulders exist throughout the site. DPFUF ¶ 18. In response to the Corps' project solicitation, Red Samm prepared and submitted a bid for the contract. While preparing its bid, Red Samm visually inspected the project site's physical appearance, reviewed the Corps' geophysical data (including the five test pits logs and soil boring logs), and requested a quote for the dredging operation from subcontractor, American Construction Company ("American"). PPFUF ¶ 62. American reviewed the Corps' geophysical data and prepared a quote to dredge the project site, which was incorporated into Red Samm's bid. Id. On December 14, 1998, Red Samm contracted with the Corps to complete the project in two construction seasons. Pl. Am. Compl. ¶ 3.1. The breakwater was to be constructed during the first construction season (1999), and the mooring basin and entrance channel were to be dredged during the second season (2000). Id. After construction of the breakwater began, the city of King Cove approached Red Samm with a proposal to save and deposit the dredge materials upland so the city could reuse it as fill. PPFUF ¶ 67; DPFUF ¶ 23. The city further proposed that Red Samm keep a portion of the dredge material for its own use or sale. While Red Samm originally planned to hire a subcontractor to utilize the "clamshell"7 dredging technique, it could better save the dredge materials per King Cove's

the existence of anything larger that three inches' in diameter. However, soil borings can indicate cobbles, and the presence of hard materials can be detected by the resistence encountered when the drilling is pushed through the ground. Def. App. 11-20.
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"Clamshell" dredging uses an excavator or crane with a "bucket" to mechanically gather the material to be dredged and place it upon a barge for disposal out at sea. DPFUF ¶ 23. -5-

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proposal if it utilized a "hydraulic"8 or "suction" technique. DPFUF ¶ 23; Def. App. 60-61, 72; Pl. App. 301. It is important to note that, in general, hydraulic dredging cannot be used if the area to be dredged contains large debris such as cobbles and rocks. PPFUF ¶ 37. In 1999, prior to dredging, Red Samm performed its own subsurface explorations. Red Samm dug several on-shore test pits, excavated fifty cubic yards of off-shore material, and sent the materials to their lab in Sand Point, Alaska for analysis. DPFUF ¶ 26; PPFUF ¶ 70. By October 1999, Red Samm decided that the subsurface material at the dredge site was suitable for hydraulic dredging. PPFUF ¶ 71; Pl. Am. Compl. ¶ 3.7. The following January, Red Samm sent its subsurface testing materials (and possibly the Corps' test pit and soil boring logs) to DeGroot Nijkerk Dredging Equipment ("DeGroot")9 to determine the feasability of using a "DeGroot DOP" dredge pump system for the project. Defendant claims that Red Samm only sent its own test data to DeGroot and points to that as evidence that Red Samm relied on its own tests rather than the Corps' data. DPFUF ¶ 26. Plaintiff argues that Red Samm did provide the Corps' data to Degroot. PPFUF ¶ 26. While the record is unclear as to what test data was actually provided to DeGroot, what is undisputed is that Red Samm ultimately decided to use the DeGroot hydraulic dredging equipment. PPFUF ¶ 27. Red Samm commenced its hydraulic dredging operation on July 12, 2000. PPFUF ¶ 83. From the beginning, the operation was severely hindered by large cobbles, which prevented efficient hydraulic dredging. PPFUF ¶ 83. Red Samm attempted various equipment modifications to overcome the conditions, and notified the Corps in a letter dated July 18, 2000, that it had encountered site conditions different than expected. Pl. Am. Compl. ¶ 4.6; PPFUF ¶ 85. In a written response dated July 21, 2000, the Corps noted that the test pits excavated by Wilson, upon which Red Samm had allegedly relied, were dug on the other end of the dredge area from where Red Samm encountered problems. PPFUF ¶ 85; Pl. App. 260. Unable to make any meaningful headway with the hydraulic dredge, Red Samm halted its hydraulic dredging operations on August 8, 2000. Up to that point, Red Samm had dredged only 10,000 cubic yards of the 361,000 cubic yards required by the contract. Pl. Am. Compl. ¶ 4.6. Because it could not hydraulically dredge the entire site, Red Samm commenced clamshell dredging on August 21, 2000. Winter weather forced Red Samm to pause operations on November 9, 2000, having completed only a third of the necessary dredging. The remaining two-thirds of the dredging was delayed until a third construction season in 2001. DPFUF ¶ 29; PPFUF ¶ 86. In 2001, Red Samm subcontracted the remaining dredge work to Western Marine Construction ("Western") at additional cost to itself. Pl. Am. Compl. ¶ 4.7. Western completed the dredging by using the clamshell dredging technique and by further subcontracting a portion of the work to Newhalem River Dredging ("Newhalem"), who employed a hydraulic operation for a portion of the work. PPFUF ¶ 86.
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"Hydraulic" or "suction" dredging uses a long tube, much like a vacuum cleaner, to suction the materials to be dredged. http://www.dredgeamerica.com/hydraulic-dredging.html DeGroot, now known as Damen Dredging Equipment, is a Dutch based dredging company that manufactured and sold to Red Samm the hydraulic dredge Red Samm ultimately employed at the site. See DPFUF ¶ 27; http://www.damendredging.com/html/en/index.htm -6-

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While Red Samm's contract with the Corps called for complete performance by November 8, 2000, Red Samm's subcontractors did not complete their work until September 10, 2001. DPFUF ¶¶ 29, 30; PPFUF ¶ 32. Pursuant to a liquidated damages provision for delayed completion, the Corp withheld $218,460 from Red Samm's payment. PPFUF ¶ 32. This provision provided that if: "The Contractor fails to complete the work within the time specified in the contract, or any extension, the Contractor shall pay to the Government, as liquidated damages, the sum of $1,655 for each day of the delay."10 DPFUF ¶ 28. On October 30, 2001, Red Samm submitted a Request for Equitable Adjustment ("REA") to the government seeking $2,729,242 for its additional incurred costs and a contract performance extension of 335 days as a result of an alleged differing site conditions. PPFUF ¶ 82. The government's Contracting Officer denied this claim on November 26, 2003, stating: [T]he dredge material encountered by the contractor was as indicated in the contract documents and is not a differing site condition. The Government maintains that the contractor's difficulties and inefficiencies were solely the result of the equipment the contractor chose to use. ... The soil description in the exploration logs are in accordance with ASTM Specification 2488-93. Per the standard, the words with cobbles or with cobbles and boulders are to be used if a field sample contains any cobbles and boulders. There is no provision for using the term and cobbles in lieu of with cobbles. The standard also included the option to provide an approximate percentage range for the material by using terms trace, few, little, some or mostly. In the case of two test pits the soil was describes as gravel w/ few cobbles. According to ASTM standard, this would equate to 5 to 10 percent cobbles by weight. Pl. App. 284-88 (emphasis in original). In April 2001, pursuant to the Assignment of Claims Act, Red Samm assigned all of its contract rights to Reliance Insurance Company ("Reliance"), a surety bonding business and Travelers subsidiary, that had issued performance and payment bonds on Red Samm's behalf for the contract. Pl. Am. Compl. ¶ 1.1; Pl. Am. Compl. Ex. 1; 31 USC § 3727; 41 U.S.C. § 15. On March 29, 2004, following the Contracting Officer's decision, Travelers filed suit in this Court asserting four claims: (1) differing site condition; (2) misrepresentation; (3) failure to disclose superior knowledge; and, (4) improper application of the liquidated damages clause. See Pl. Am. Compl. On March 27, 2006, defendant filed for summary judgment on all claims pursuant to Rule 56(b) of the Rules of the United States Court of Federal Claims ("RCFC"). Plaintiff filed a crossmotion for summary judgment and its response to defendant's motion on May 5, 2006. The Court heard oral argument on the motions on October 11, 2006.

The $218,460 the Corps withheld is mathematically equivalent to a 132-day delay. While the contract was completed 306 days late, the Corps apparently decided only to withhold 132-days' worth of liquidated damages. DPFUF ¶ 33. -7-

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II. JURISDICTION AND STANDARD OF REVIEW A. Jurisdiction The Contract Disputes Act ("CDA"), 41 U.S.C. § 609(a), operating in tandem with the Tucker Act, 28 U.S.C. § 1491(a)(2) confers jurisdiction to this Court in this action. Texas Health Choice, L.C. v. Office of Pers. Mgmt., 400 F.3d 895, 899 (Fed. Cir. 2005) (citing Quality Tooling Inc. v. United States, 47 F.3d 1569, 1572-73 (Fed. Cir. 1995)). "The Tucker Act, in conjunction with the CDA, purports to make the Court of Federal Claims the exclusive trial court for hearing disputes over government contracts that fall under the CDA." Id. See 28 U.S.C. § 1491(a)(2) ("The Court of Federal Claims shall have jurisdiction to render judgment upon any claim by or against, or dispute with a contractor arising under section 10(a)(1) of the Contracts Disputes Act of 1978 [41 U.S.C. § 609(a)(1)] . . . ." 28 U.S.C. § 1491(a)(2). B. Summary Judgment Standards Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. RCFC 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Summary judgment is not a disfavored shortcut, but rather is an integral part of the Court's rules designed to secure a just, speedy and inexpensive determination of the facts. Spirit Leveling Contractors v. United States, 19 Cl. Ct. 84 (1989) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986)). "Only disputes over facts that might affect the outcome of the case under governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. The nonmoving party is required to point to "`specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P 56(e)). In considering summary judgment, the Court will not weigh the evidence or make credibility determinations. Anderson, 477 U.S. at 249. "All reasonable inferences and presumptions are resolved in favor of the non-moving party." Id. at 255. The Court will resolve all doubt over factual issues in favor of the non-moving party. Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). When faced with cross-motions for summary judgment each motion will be evaluated on its own merits. California v. United States, 271 F.3d 1377, 1380 (Fed. Cir. 2001). Contract interpretation is a question of law that is particularly well suited for summary judgment. Gov. Sys. Advisors, Inc. v. United States, 847 F.2d 811, 812 n.1 (Fed. Cir. 1988) (citing P.J. Maffei Bldg. Wrecking v. United States, 732 F.2d 913, 916 (Fed. Cir. 1984)). However, interpretation of language, conduct and parties' intent, i.e., the question of what meaning should be given by a court to the words of the contract, may sometimes involve questions of material fact and not present a pure question of law. Beta Systems, Inc. v. United States, 838 F.2d 1179, 1183 (Fed. Cir. 1988). Should a genuine issue of material fact be presented, summary judgment would be inappropriate. Only disputes over facts that might significantly affect the outcome of the case under the governing law preclude an entry of summary judgment. Anderson, 477 U.S. at 248. Here, no factual disputes are material to interpreting the contract. Summary judgment is appropriate.

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III. DISCUSSION A. The Parties' Contentions Plaintiff asserts four claims in this matter: differing site conditions, misrepresentation, nondisclosure of superior knowledge, and unpaid contract balance. 1. Type I Differing Site Condition Type I differing site conditions consist of "subsurface or latent physical conditions at the site which differ materially from those indicated in the contract." FAR § 52.236-2(a)(1) (1994). In order to recover on a Type I differing site condition claim, a contractor must prove that: the conditions indicated in the contract differ materially from those actually encountered during performance; the conditions encountered were reasonably unforeseeable based on all the information available to the contractor at the time of bidding; the contractor reasonably relied upon its interpretation of the contract and contract-related documents; and the contractor was damaged as a result of the material variation between expected and encountered conditions. Comtrol, Inc. v. United States, 294 F.3d 1357, 1362 (Fed. Cir. 2002) (citing H.B. Mac, Inc. v. United States, 153 F.3d 1338, 1345 (Fed. Cir. 1998)). Plaintiff states that the contract indicated "loose soils, comprised of sands and gravels with few cobbles, which were suitable for hydraulic dredging." Pl. Mot. Summ. J. Plaintiff alleges that Red Samm reasonably relied on the contract indications, encountered subsurface conditions materially different than the contract indications, and incurred additional costs as a result of the differing conditions. Id. Because Red Samm relied upon the contract's indications in making its determination to employ a hydraulic dredge, plaintiff believes the increased costs that resulted from this determination are the responsibility of defendant under the contract's differing site condition clause. Pl. Am. Compl. In its summary judgment motion, defendant raises four grounds for dismissing plaintiff's differing site condition claim: (1) absence of an affirmative representation of the site conditions; (2) absence of reliance on the contract's indications; (3) failure to review contract documents, specifically the Golder Report, that would have placed Red Samm on notice of the actual site conditions; and, (4) the term "few" in the test pit logs is patently ambiguous and should be construed against plaintiff because Red Samm never inquired about the ambiguity. See Def. Mot. Summ. J. 2. Misrepresentation Plaintiff claims the government misrepresented the nature of the subsurface materials found in samples excavated from test pits 1-5. Pl. Am. Compl. ¶ 7.2. Had the test pit logs more accurately described the contents of the test pits, plaintiff believes Red Samm would have been alerted to the significant concentration of cobbles at the dredge sit and never would have attempted hydraulic dredging. Pl. Reply in Support of Mot. Summ. J. Plaintiff alleges that as a result of the government's misrepresentations, Red Samm "incurred additional costs and damages for which the government is liable to the plaintiff in the amount of $2,729,242.09. Pl. Am. Compl. ¶ 7.2. Further, -9-

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plaintiff asserts that the Corps failed to disclose to bidders that the Corps had employed the ASTM standards in compiling the test pit data and that the Corps failed to properly implement the ASTM procedures. Id. Defendant, in its motion for summary judgment on plaintiff's misrepresentation claim, reasserts that it did not affirmatively represent what the site conditions would be and that even if it did, Red Samm did not rely on the Corps' representations. Def. Mot. Summ. J. 12-13. Defendant also states that despite the Contracting Officer's decision, the Corps did not employ the ASTM and therefore it could not have failed to disclose its use or follow it incorrectly. Id. 3. Superior Knowledge Plaintiff's superior knowledge claim is essentially a reiteration of its misrepresentation claim. Plaintiff alleges the government had a duty to disclose its intent "to employ the practices and procedures of ASTM D2488 in preparing exploration logs for test pits 1-5." Am. Compl. ¶ 8.2. Plaintiff believes the Corps failure to disclose its use and understanding of the ASTM definition of "few" resulted in the Corps possessing knowledge that Red Samm did not have. Pl. Resp. 24-25. Plaintiff also reasserts that "[i]nstead of conveying the `significant' extent of the cobbles he intended, the actual language employed by the Corps' geotechnical engineer communicated the precise opposite--`few,' if any, cobbles in the subsurface conditions." Id. at 24. In its motion to dismiss plaintiff's superior knowledge claim, defendant states that it did not withhold vital information from plaintiff and that any information plaintiff did not have it could have obtained. Def. Mot. Summ. J. 17. Defendant reiterates that the test pit logs were not misleading because they were not intended to reflect subsurface conditions throughout the site. Id. at 13. Defendant also notes that plaintiff's arguments are inconsistent. Defendant observes that as a part of its differing site condition claim, plaintiff argues that defendant did not follow the ASTM, while later, as part of its superior knowledge claim, plaintiff alleges that defendant's failure to disclose or properly use the ASTM constituted a withholding of superior knowledge. Id. at 15. Ultimately, plaintiff's inconsistency is irrelevant. Because the Corp did not employ ASTM procedures, it could misuse them or fail to disclose its use. Id. at 13. 4. Unpaid Contract Balance Plaintiff claims defendant improperly withheld $218,460 from Red Samm upon the completion of the project. Pl. Compl. 8. Defendant states that it withheld the money from Red Samm as liquidated damages for failure to timely complete the project by the contract completion deadline of November 8, 2000. Def. Mot. Summ. J. 18. Defendant further states that it was actually entitled to withhold $506,430 according to the liquidated damages clause, and instead, generously overpaid almost $300,000 despite the plain language of the liquidated damages clause of the contract. Id. Defendant believes plaintiff has no basis for its underpayment claim. B. Contract Interpretation 1. Principles of Contract Interpretation: the Williston v. Corbin Feud -10-

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Both parties, but particularly the plaintiff, rely on extrinsic evidence to resolve the interpretation issues arising in this case. References to extrinsic evidence pervade their moving papers and supporting briefs. At oral argument, the Court questioned the parties as to the validity of the use of such extrinsic evidence and under what circumstances such evidence may be considered by a court. See Hr'g Tr. 25. No satisfactory answer was provided. Consequently, as an initial matter, it is appropriate to review a very short history of the law of contract interpretation to determine, among other things, when it is proper to consider extrinsic evidence. This allows the Court to better understand the context of the Federal Circuit's law on contract interpretation, as well as to how it treats extrinsic evidence of trade usage and custom, the parole evidence rule, and exactly when and under what circumstances terms in an agreement may be considered ambiguous. A good starting point is to note that all agree that both statutory and contract interpretation are searches for meaning. While statutory interpretation is often characterized as the ascertainment of the "intent of the legislature,"11 any attempt to find meaning outside the actual words of a statute is perilous at best. Determining "corporate" intent--the subjective intent of a collective body--is a statistical impracticality.12 Consequently, the goal of statutory interpretation, as Justice Holmes noted, is "not [to] inquire what the legislature meant; we ask only what the statute means." Oliver Wendell Holmes, The Theory of Statutory Interpretation, 12 Harv. L. Rev. 417, 418-9 (1899). Contract interpretation is also a search for meaning. Historical contract jurisprudence would ascertain meaning from that which was intended by the contracting parties. This "subjective" intent or "meeting of the minds" theory has an ancient lineage, dating to perhaps as early as sixteenth century English law. See E. Allan Farnsworth, `Meaning' in the Law of Contracts, 76 Yale L.J. 939, 942-46 (1967) (hereinafter "Farnsworth") (tracing the doctrine to a 1551 unresolved case in England's Exchequer Chamber, Reniger v. Forgossa, 75 Eng. Rep. 1 (Ex.1551)). Under the original iteration of the subjective theory, no contractual obligation existed unless both parties had the same contractual intent, a "meeting of the minds," which generally could be shown to be or not to be

11

See, e.g., D.C. Nat'l Bank v. D.C., 348 F.2d 808, 810 (D.C. Cir. 1965) ("[S]ince the judicial function is to ascertain the legislative intention the Court may properly exercise that function with recourse to the legislative history, and may depart from the literal meaning of the words when at variance with the intention of the legislature as revealed by legislative history."). This approach was later criticized by a panel of the D.C. Circuit as "undemocratic" and contrary to constitutional theory. See United States v. McGoff, 831 F.2d 1071, 1080 n.19 (D.C. Cir. 1987).
12

See, e.g., Max Radin, Statutory Interpretation, 43 Harv. L. Rev. 863, 870 (1930) ("[T]he intention of a legislature is undiscoverable in any real sense . . . . [T]he chances that several hundred men each will have exactly the same . . . situation . . . [is] infinitesimally small."). Thus, Chief Justice Marshall observed that when interpreting statutes, "it has been truly stated to be the duty of the court to effect the intention of the legislature; but this intention is to be searched for in the words the legislature has employed to convey it." Schooner Paulina's Cargo v. United States, 11 U.S. (7 Cranch) 52, 60 (1812). -11-

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through the use of extrinsic evidence.13 Id. at 942-43; See 1 Walter H.E. Jaeger, Williston on Contracts § 22, p.48 (3d ed. 1957); Samuel Williston, Freedom of Contract, 6 Cornell L. Q. 365, 368 (1921). True to its historical roots, the Restatement (Second) of Contracts (hereinafter "Restatement (Second)" or "Res. 2d Con.") defines "interpretation" as the "ascertainment of meaning" that corresponds to the meaning intended by the contracting parties, either mutually or separately.14 Res. 2d Con. §§ 200-01. But, the hegemony of the subjective theory of contracts was, by the nineteenth century, challenged by a bevy of legal reformers, both from the bench and the bar, who posited a contrary "objective" theory of contract interpretation. Thus, to Justice Holmes: You cannot prove a mere private convention between the two parties to give language a different meaning from its common one. It would offer too great risks if evidence were admissible to show that when they said 500 feet they agreed it should mean 100 inches or that Bunker Hill Monument should signify the Old South Church. As an artificial construction cannot be given to plain words by express agreement, the same rule is applied when there is a mutual mistake not apparent on the face of the instrument. Goode v. Riley, 153 Mass. 585, 586 (1891) (citations ommitted). Learned Hand even went so far to opine that "A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent." Hotchkiss v. Nat'l City Bank, 200 F. 287, 293 (S. D. N. Y. 1911).15 The Hand dictum--that a meeting of the minds is unnecessary for a court to uphold a

13

A renowned example being Raffles v. Wichelhaus, 2 Hurl. & C. 906, 159 Eng. Rep. 375 (Ex. 1864), better known to generations of law students as the case of the ship Peerless. Both the U.S. Supreme Court and the Federal Circuit recognize the Restatement as reflecting the traditional jurisprudence of contract law and thus as generally controlling in federal contracts. See Mobil Oil Exploration & Producing Se., Inc. v. United States, 530 U.S. 604, 608 (2000) ("The Restatement of Contracts reflects many of the principles of contract law that are applicable to [federal contracts]."); see, e.g., Centex Corp. v. United States, 395 F.2d 1283, 1304 (Fed. Cir. 2005) (noting that the precepts of contract law contained in the Restatement "applies to the government just as it does to private parties."). Nonetheless, as will be explained below, and perhaps the source of the parties' trepidation in revealing to the Court their respective views on the use of extrinsic evidence, the Restatement's position is not always the law. Judge Hand further observed that "If however, it were proved by twenty bishops that either party, when he used the words, intended something else than the ususal meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake, or something of that sort." Hotchkiss, 200 F. 2d at 293. -12-

14

15

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contract--was criticized as unfair and contrary to moral precepts.16 The harshness of the rule was somewhat ameliorated by Professor Williston, who penned a "reasonable expectation" or "belief" standard that was later adopted in the First Restatement.17 But, even this "modified objective theory" of contacts was widely criticized. Most notably, in more recent times, Professor Corbin criticized this approach and any exclusion of extrinsic evidence used to prove intent, noting the dangers of "excluding all extrinsic evidence on the ground that the express words are so `plain and clear' that their meaning as used by the parties must be determined solely by what is within the four corners of the instrument."18 Corbin's concerns harken back to the old subjective theory and the need to effectuate the parties' intent, as well as a belief that under an objective criteria, courts will inevitably rewrite contracts.19 The Corbin approach is followed in the Restatement (Second), as well as by most jurisdictions in the United States, including most United States Circuit Courts of Appeal.20 It appears that the law has come full circle.

Farnsworth at 946 n.38 & 39, citing 1 J. Austin, Jurisprudence 456 n.89 (4th ed. 1873); F. Pollack, Principles of Contract Law and Equity 309 (3d. Am. ed 1906).
17

16

Id. at 946. This new standard of reasonable expectation provided that "words or other manifestations of intentions forming an agreement . . . are given the meaning which the party making the manifestations should reasonably expect that the other party would give to them . . . ." The Restatement (First) of Contracts § 233 (1932).
18

Arthur Linton Corbin, Corbin on Contracts § 542A (1960). Id at §§ 535, 542. Professor Corbin observed that in such cases: [T]he court often says that a "court can not make a contract for the parties;" but when it holds the parties bound in accordance with a meaning that seems "plain and clear" to the court and excludes convincing evidence that the parties gave the words a different meaning; it is doing exactly what it declares that it can not do: the court is making a contract for the parties that they did not themselves make.

19

Id.
20

See 11 Richard A. Lord, Williston on Contracts § 30:5 (4th ed. 1999): Under the prevailing, more expansive view of what the court may consider, the court does not simply determine whether, from its perspective, the contractual language is clear; rather, the court hears the proffer of the parties and determines if there are objective indicia that from the parties' linguistic reference point, the contract's terms are susceptible of different meanings. The Court must consider the words of the agreement, including writings made a part of the contract by annexation or reference, the alternative meanings suggested by counsel, and any extrinsic evidence offered in support of those meanings. -13-

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Thus, while the Restatement (Second) asserts that interpretation is the search for the parties' intent, intent is evidenced by words and conduct as shown by extrinsic evidence. Res. 2d Con. § 201. Under the Restatement (Second), language will not be interpreted in its "generally prevailing meaning" if a "different intention is manifested," including evidence of trade usage or custom. Id. The `objective of interpretation in the general law of contracts is to carry out the understanding of the parties rather than to impose obligations on them contrary to their understanding."21 Even where a contract is completely integrated, parole evidence may be considered to establish the contract is indeed integrated, or to determine ambiguity of meaning.22 Needless to say, the Restatement's approach to contract interpretation is not limited to a statutory "plain meaning" approach. Nevertheless, this is not the law of the Federal Circuit. b. The Federal Circuit's Approach ­ Williston Redux [ Although in the Federal Circuit the "Restatement of Contracts is recognized as an appropriate source of authority in contract cases," Hansen Bancorp, Inc. v. United States, 367 F.3d 1297, 1308 n.9 (Fed. Cir. 2004) (citing Mobil Oil Exploration v. United States, 530 U.S. 604, 608 (2000)),23 byin-large the Federal Circuit follows the competing Williston approach, mandating that in general, trial courts should not admit extrinsic evidence to determine the meaning of contractual terms and provisions. E.g., Coast Fed. Bank v. United States, 323 F.3d 1035, 1038 (Fed. Cir. 2003) (en banc) (holding that when "the provisions of the Agreement are phrased in clear and unambiguous language, they must be given their plain and ordinary meaning, and we may not resort to extrinsic evidence to interpret them."); Hills Materials Co. v. Rice, 982 F.2d 514, 516 (Fed. Cir. 1992) (stating, "[w]herever possible words of a contract should be given their ordinary and common meaning.").24

21

Id § 201 cmt. c. Id. at § 214.

22

See generally Frederick W. Claybrook, Jr., It's Patent That "Plain Meaning" Dictionary Definitions Shouldn't Dictate: What Phillips Portends for Contract Interpretation, 16 Fed. Cir. B.J. 91, 102 n.75 (citing nearly 150 cases where the Federal Circuit cited the Restatement for contract law issues).
24

23

The Federal Circuit has been criticized for not following the majority of jurisdictions. See W. Stanfield Johnson, Interpreting Government Contracts: Plain Meaning Precludes Extrinsic Evidence and Controls at the Federal Circuit, 34 Pub. Cont. L. J. 635 (2004-5) ("Interpreting Government Contracts"). The author points out that the Federal Circuit's predecessor, the Court of Claims, for the most part took the opposite approach. Id. at 640. Thus, in Gholson, Byars & Holmes Constr. Co. v. United States, 351 F.2d 987 (Ct. Cl. 1965), in reversing the ASBCA for excluding extrinsic evidence of custom and trade meaning, the court noted that: [T]he principle is now established in this court (and almost every other court) that in order that the intention of the parties may prevail, the language of the contract is to be given effect according to its trade meaning notwithstanding that in its ordinary meaning it is unambiguous. That is to say that trade usage and custom may show that -14-

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The Circuit's rule therefore is reminiscent of the plain meaning doctrine of statutory construction: "Where the language is plain and admits of no more than one meaning, the duty of interpretation does not arise and the rules which are to aid doubtful meanings needs no discussion." Caminetti v. United States, 242 U.S. 470, 485 (1917) (citing Hamilton v. Rathbone, 175 U.S. 414, 421 (1899)). See Best Power Tech. Sales Corp. v. Austin, 984 F.2d 1172, 1177 (Fed. Cir. 1993); Teleflex, Inc. v. Ficosa N. Am. Corp., 299 F.3d 1313, 1325 (Fed. Cir. 2002) (noting that because the legal presumption is that Congress intends that words have ordinary meaning, undefined terms in a statute are deemed to have their ordinarily understood meaning). To be sure, the Federal Circuit has generally incorporated the rules of traditional statutory construction into its contract jurisprudence. For instance, it is a well-established the rule of statutory construction that it is only through context that language establishes a common and shared meaning. See Pennington v. Coxe, 6 U.S. (2 Cranch) 33, 52-53 (1804) (Marshall, C.J.) ("That a law is the best expositor of itself, that every part of an act is to be taken into view, for discovering the mind of the legislature; and the details of one part may contain regulations restricting the extent of general expressions used in another part of the same act . . . ."). See also Transcon. & W. Air v. Civil Aeronautics Bd., 336 U.S. 601, 605-06 (1949). Thus, to avoid wooden literalism, a statute and especially its component parts should be read in context. See Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 583 (2004). ("[S]tatutory language must be read in context since a phrase gathers meaning from the words around it.") (citing Jones v. United States, 527 U.S. 373, 389 (1999))). This is also the Circuit's rule in contract interpretation. See, e.g., Jowett Inc. v. United States, 234 F.3d 1365, 1368 (Fed. Cir. 2000) ("`[W]e must interpret the contract in a manner that gives meaning to all of its provisions and makes sense,'" (quoting McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1435 (Fed. Cir. 1996))); Rice v. United States, 428 F.2d 1311, 1314 ( Ct. Cl. 1970) (noting that in judging the import of words in then contract, the context and intention [of the parties to the contract] are paramount). Furthermore, because the meaning of words is very often imprecise, and no inherent meaning exists outside of context,25 interpretive tools such as dictionaries are frequently used by courts to

language which appears on its face to be perfectly clear and unambiguous has, in fact, a meaning different from its ordinary meaning. Id. at 999. Compare this outcome to the holding in the more recent R. B. Wright Constr. Co. v. United States, 919 F.2d 1569, 1572 (Fed. Cir. 1990) ("Neither a contractor's belief nor contrary customary practice, however, can make an unambiguous contract provision ambiguous, or justify a departure from its terms."). See also Hunt Constr. Group v. United States, 281 F.3d 1369, 1373 (Fed. Cir. 2002) (rejecting argument that the existence of contrary trade practice "can render a contract ambiguous that is otherwise clear on its face," because in such a circumstance trade practice is "irrelevant.").
25

Thus, to Justice Frankfurter: [U]nlike mathematical symbols, the phrasing of a document, especially a complicated -15-

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determine the meaning of a document's phrase or provision. In a statutory context the presumption is that Congress intends words to have ordinary meaning. See Teleflex, Inc., 299 F.3d at 1325; Best Power Tech. Sales Corp., 984 F.2d at 1177. Consequently, use of dictionaries as interpretive aids (e.g., "lexicography") are not considered "extrinsic" aids the use of which violates the plain meaning doctrine. See United States v. Alvarez-Sanchez, 511 U.S. 350, 357-58 (1994). See also Vanguard Prods. Corp. v. Parker Hannifin Corp., 234 F.3d 1370, 1372 (Fed. Cir. 2000) (A dictionary is not prohibited extrinsic evidence, and is an available resource of claim construction.); Int'l Bus. Mach. Corp., v. United States, 201 F.3d 1367, 1372 (Fed. Cir. 2000) (quoting Best Power Tech. Sales Corp., 984 F.2d at 1177 (It is a basic principle of statutory interpretation . . . that undefined terms in a statute are deemed to have their ordinarily understood meaning. For that meaning, we look to the dictionary. (citations omitted)).26 The Federal Circuit's lexicographic rule applies as well to contract interpretation. See TegParadigm Envtl, Inc. v. United States, 465 F.3d 1329, 1340 (Fed. Cir. 2006) (accepting use of dictionary in interpreting contractual terms, but rejecting Appellant's particular application of dictionary definition of the word "surface" in the case); See also Stewart v. United States, 316 U.S. 354, 362 & n.6 (1942); See also Norfolk S. Ry. v. James N. Kirby, Pty. Ltd., 543 U.S. 14, 31-32 (2004). And significantly, the Federal Circuit has extended the "lexicographic" approach to consideration of extrinsic evidence-evidence of trade practice and custom. See Hunt Constr., 281 F.3d at 1373 ("[E]vidence of trade practice may be useful in interpreting a contract term having an accepted industry meaning different from its ordinary meaning-even where the contract otherwise appears unambiguous-because the `parties to a contract . . . can be their own lexicographers and . . . trade practice may serve that lexicographic function in some cases,'" (quoting Jowett, 234 F.3d at 1368)). See also Teg-Paradigm., 465 F.3d at 1339 ("As we did in Coast Fed. Bank, we turn to extrinsic evidence, specifically, the course of dealing of the parties, to confirm that our interpretation of the

enactment, seldom attains more than approximate precision. If individual words are inexact symbols, with shifting variables, their configuration can hardly achieve invariant meaning or assured definiteness. Apart from the ambiguity inherent in its symbols, a statute suffers from dubieties. It is not an equation or a formula representing a clearly marked process, nor is it an expression of an individual thought to which is imparted the definiteness a single authorship can give. A statute is an instrument of government partaking of its practical purposes but also of its infirmities and limitations, of its awkward and groping efforts. Felix Frankfurter, Some Reflections on the Readings of Statutes, 47 COLUM . L. REV . 527, 528 (1947) (quoted in N. Singer, 2A Sutherland's Statutory Construction § 45.01 (West 6th ed. 2000)). In other words, the "meaning of a word is its use in the language." L. Wittgenstein, Philosophical Investigations, 20e (G. Anscombe trans. 1953).
26

The Federal Circuit has recognized that "dictionaries, encyclopedias and treatises are particularly useful resources to assist the court in determining" the meaning of highly technical or scientific terms. Texas Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1202 (Fed. Cir. 2002); Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1356-57 (Fed. Cir. 2001) (quoting C.J. Tower & Sons v. United States, 673 F.2d 1268, 1271 (C.C.P.A. 1982)). -16-

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plain and ordinary meaning was, in fact, the parties' understanding." (citing Coast Fed. Bank, 323 F.3d at 1040)). Consequently, the court allows parties to proffer extrinsic evidence of trade practice and custom to determine meaning. Nevertheless, it is crucial to note that in the Federal Circuit trade practice and custom "may not be used . . . `to create an ambiguity where a contract was not reasonably susceptible of differing interpretations at the time of contracting.'" Teg-Paradigm, 465 F.3d at 1338 (quoting Metric Constructors, Inc. v. Nat'l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999) (emphasis added)).27 This is contrary to the majority Restatement (Second) approach, which allows extrinsic evidence of the parties' intent regardless of the common or plain meaning of contractual terms. See Res. 2d Con. § 201(1). See also Res. 2d Con. § 220 ("Usage" may not only give contrary meaning to "an agreement," but may also "supplement or qualify it"). The Federal Circuit's strict approach to the consideration of extrinsic evidence has been extended to the parole evidence rule. The Restatement (Second) clearly allows the consideration of extrinsic evidence of the parties' intent to contravene that a contract is integrated, even in the face of an unambiguous written integration clause.28 But in Rumsfeld v. Freedom N.Y., Inc., 329 F.3d 1320 (Fed. Cir. 2003), reh'g denied, 346 F. 3d 1359 (Fed. Cir. 2003), the Federal Circuit announced a more restrictive view of the parole evidence rule. When a contract is integrated, "`barring certain exceptions (e.g., fraud), a party to a written contract cannot supplement or interpret that agreement with oral or parol statements that conflict with, supplant, or controvert the language of the written agreement itself.'" Id. at 1327 (quoting Schism v. United States, 316 F.3d 1259, 1278 (Fed. Cir.

27

This is not unlike the Federal Circuit's approach in the statutory construction arena, where the court recognizes that statutory words and phrases may have a specialized or highly technical meaning contrary to accepted ordinary usage, but places the burden on the proponent of specialized meaning to rebut the ordinary meaning of words and phrases. Compare Texas Digital Sys., Inc., 308 F.3d at 1203-04 and Renishaw PLC v. Marposs Societa' per Azioni, 158 F.3d 1243, 1250 (Fed. Cir. 1998) (noting that in statutory context, burden is on the advocate of specialized meaning), with Jowett, 234 F.3d at 1368 (in a contract setting "`a court should accept evidence of trade practice only where a party makes a showing that it relied reasonably on a competing interpretation of the words when it entered into the contract,'" (quoting Metric Constructors, 169 F.3d 747, 752 (Fed. Cir. 1999)). See Res. 2d Con. § 209(3) ("Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final expression."). See also Id. § 209 cmt. b ("Form of integrated agreement . . . . Written contracts, signed by both parties, may include an explicit declaration that there are no other agreements between the parties, but such a declaration may not be conclusive."); Id. § 210 cmt. b ("Proof of complete integration. That a writing was or was not adopted as a completely integrated agreement may be proved by any relevant evidence. A document in the form of a written contract, signed by both parties and apparently complete on its face, may be decisive of the issue in the absence of credible contrary evidence. But a writing cannot of itself prove its own completeness, and wide latitude must be allowed for inquiry into circumstances bearing on the intention of the parties."). -1728

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2002) (en banc)).29 The court's take on the parole evidence rule, however "does not bar the use of extrinsic evidence to interpret the terms of a contract when the plain and ordinary meaning is not clear from the contract itself." Teg-Paradigm, 465 F.3d at 1339. Akin to the statutory plain meaning doctrine,30 only where there is an ambiguity, where words are reasonably susceptible to two or at least a finite few meanings, may courts resort to extrinsic evidence to interpret a contract. E.g., Barron Bancshares Inc. v. United States, 366 F.3d 1360, 1375 (Fed. Cir. 2004); A-Transp. Nw. Co. v. United States, 36 F.3d 1576, 1584 (Fed. Cir. 1994). Like the distinction of a "facial" statutory ambiguity, where statutory ambiguity results only when the statue is "applied,"31 in contract law, the Federal Circuit divides ambiguity into two categories: patent and latent. See P.R. Burke Corp. v. United States, 277 F.3d 1346 (Fed. Cir. 2002). There is, however, no clear demarcation of what constitutes a patent ambiguity, and what makes for a latent ambiguity. Fry Commc'ns., Inc. v. United States, 22 Cl. Ct. 497, 509 (1991). Generally, "[a] patent ambiguity in a contract is one that is, on its face, glaring and obvious. This has been described as encompassing `an obvious omission, inconsistency, or discrepancy in significance,' or an `obvious error in drafting, a gross discrepancy, or an inadvertent but glaring gap.'" Tecom, Inc. v. United States, 66 Fed. Cl. 736, 748 (2005) (internal citations omitted); see Fort Vancouver Plywood Co. v. United States, 860 F.2d 409, 414 (Fed. Cir. 1988). A court must decide on an ad hoc basis by "looking to what a reasonable man would find to be patent and glaring." Max Drill Inc. v. United States, 427 F.2d 1233, 1244 (1970) (citing L. Rosenman Corp. v. United States, 390 F.2d 711, 713 (Ct. Cl. 1968)); see also Fort Vancouver Plywood, 860 F.2d at 414 (stating, "[w]hen determining whether contract language is patently ambiguous, the language must be place on a spectrum of ambiguity." (citing Newsom v. United States, 676 F.2d 647, 650 (Ct. Cl. 1982))). Relatedly, a patent ambiguity exists where there is a facial inconsistency between provisions or terms within the contract. See P.R. Burke, 277 F.3d at 1355 (holding that a patent ambiguity is one that is on the face of the contract); Metcalf Constr. Co., Inc. v. United States, 53 Fed. Cl. 617, 630 (2002) (noting "`a contract is subject to a patent ambiguity if it contains facially inconsistent

29

The fourth edition of Williston, however, recognizes the Restatement (Second) view as the majority one: "In many more jurisdictions, however, the presence of an integration clause or merger clause is merely presumptive evidence of a parties' intention as to integration." 11 Richard A. Lord, Williston on Contracts § 33:21 (4th ed. 1999). Indeed, this was noted by the Freedom NY, Inc. court. See Freedom NY, Inc., 329 F.3d at 1329 n.3. See, e.g., Caminetti, 242 U.S. at 485 ("Where the language is plain and admits of no more than one meaning the duty of interpretation does not arise and the rules which are to aid doubtful meanings needs no discussion."). See generally N. Singer, 2A Sutherland's Statutory Construction Chs. 47-48 (West 6th ed. 2000). See Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43 (holding that when a statute is clear on its face the court must give effect to "unambiguously expressed intent of congress." But, if the statute is ambiguous the court must decide if the enforcing agency's interpretation is permissible."). -1831 30

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provisions that would place the reasonable contractor on notice and prompt the reasonable contractor to rectify the inconsistency by inquiring of the appropriate parties.'" (quoting Nielson-Dillingham Builders, J.V. v. United States, 43 Fed. Cl. 5, 11 (1999))); Input/Output Tech., Inc. v. United States, 44 Fed. Cl. 65, 72 (holding "[t]he law teaches that a contract is subject to a patent ambiguity if it contains facially inconsistent provisions that would place a reasonable contractor on notice and prompt the contractor to rectify the inconsistency by inquiring of the appropriate parties." (citing Nielson-Dillingham, 43 Fed. Cl. at 11)). Unlike a patent ambiguity, which should be, to the reasonable contractor, apparent on the face of the contract, "[a] latent ambiguity generally becomes evident, when, `considered in light of objective circumstances, two conflicting interpretations appear reasonable.'" Input/Output, 44 Fed. Cl. at 72 n.10 (quoting Cray Research, Inc. v. United States, 41 Fed. Cl. 427, 438 (1998)). A latent ambiguity is an ambiguity that arises only once the contract is applied. C.f. Cherry v. Auburn Gear, Inc., 441 F.3d 476, 484 (7th Cir. 2006); see also Black's Law Dictionary (7th ed. 2002) (defining latent ambiguity as "an ambiguity that does not readily appear in the language of a document, but instead arise from a collateral matter when the document's terms are applied or executed."). The key distinction, however, between patent and latent ambiguity is in the way the law treats them and the corresponding effect on the contracting parties' rights and obligations. At common law, ambiguities are generally interpreted against the drafter (under the rule of Contra Proferentem).32 P.R. Burke., 277 F.3d at 1355; Interstate Gen. Gov't Contractors v. Stone, 980 F.2d 1433, 1435 (Fed. Cir. 1992). In the context of government contracts, contractors are required to inquire about patent ambiguities before making bids. P.R. Burke, 277 F.3d at 1355; Ryco Constr., Inc. v. United States, 55 Fed. Cl. 184, 191 (2002). The purpose of requiring pre-bid inquiry is to "prevent[] contractors from taking advantage of ambiguities in government contracts by adopting narrow interpretations in preparing its bids and then, after the award, seeking equitable adjustments to perform additional work the government actually wanted." Triax Pac., Inc. v. West, 130 F.3d 1469, 1475 (Fed. Cir. 1997). The Federal Circuit, however, "has not given the [patent ambiguity] doctrine broad application. Because the doctrine has the effect of relieving the government from consequences of its own poorly drafted contracts, the doctrine has been applied only to contract ambiguities that are judged so `patent and glaring' that it is unreasonable for a contractor not to discover and inquire about them." Triax Pac., 130 F.3d at 1475. A court's finding of a latent ambiguity, however, does not automatically mean a favorable result for the plaintiff. The court will only adopt the contractor's interpretation of a latent ambiguity if its interpretation is reasonable. P.R. Burke, 277 F.3d at 1355; Newsome, 676 F.2d 647, 649-50. Only upon a finding of reasonableness can the court apply the rule of Contra Proferentem. P.R. Burke, 277 F.3d at 1355; see also Tecom, 66 Fed. Cl. at 748.

32

Latin for "against the offeror," Contra Proferentem is the contract interpretation doctrine that requires ambiguities to be "construed unfavorably to the drafter." Black's Law Dictionary 328 (7th ed. 1999). -19-

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C. Analysis of the Instant Contract--Plain Meaning, Ambiguity and the Admissibility of Extrinsic Evidence With the Federal Circuit history detailed and the legal foundation of contract interpretation laid, the Court now turns to the instant contract. As previously noted, in order to succeed on a Type I differing site condition claim, plaintiff must prove: the conditions indicated in the contract differ materially from those actually encountered during performance; the conditions encountered were reasonably unforeseeable based on all the information available to the contractor at the time of bidding; the contractor reasonably relied upon its interpretation of the contract and the contract related documents; and the contractor was damaged as a result of the material variation between expected and encountered conditions. Comtrol, Inc., 294 F.3d at 1362 (citing H.B. Mac, 153 F.3d at 1345). 1. Contract Representations Unlike traditional contract interpretation, in a differing site condition claim, a contractor is permitted to make inferences from a contract's implications. P.J. Maffei Bldg., 732 F.2d 913. Interpretation of contract indications requires the Court to "place itself into the shoes of a `reasonable and prudent' contractor." Id. at 916. The implications in the contract need only be sufficient "to impress or lull a reasonable bidder." Stock & Grove, Inc. v. United States, 493 F.2d 629, 645 (Ct. Cl. 1974). Plaintiff's differing site conditions claim turns primarily on determ