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Inc. v. Secretary of Army

United States Court of Appeals, Federal Circuit

August 2, 2017

LEE'S FORD DOCK, INC., Appellant

         Appeal from the Armed Services Board of Contract Appeals in No. 59041, Administrative Judge Craig S. Clarke.

          Alan Irving Saltman, Smith, Currie & Hancock LLP, Washington, DC, argued for appellant.

          Barbara E. Thomas, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for appellee. Represented by Chad A. Readler, Robert E. Kirschman, Jr., Martin F. Hockey, Jr., Jeffrey a. Regner.

          Elizabeth Graham Weber, Dressman Benzinger LaVelle PSC, Crestview Hills, KY, for amici curiae Kentucky Marina Association, Tennessee Marina Association. Also represented by Kevin Fitzpatrick Hoskins, Cincinnati, OH.

          Before Taranto, Schall, and Stoll, Circuit Judges.


         This case comes to us from the Armed Services Board of Contract Appeals ("Board"). Lee's Ford Dock, Inc. ("LFD") appeals the decision of the Board granting summary judgment in favor of the Secretary of the Army and denying LFD's claims for contract reformation and breach of contract. Lee's Ford Dock, Inc., ASBCA No. 59041, 16-1 BCA ¶ 36, 298 ("LFD II"). The contract at issue is LFD's lease agreement with the U.S. Army Corps of Engineers ("Corps"). For the reasons set forth below, we affirm-in-part and dismiss-in-part.



         LFD operates a marina at Lake Cumberland, Kentucky on land leased from the Corps. LFD entered into the lease on August 29, 2000 under Lease No. DACW62-1-00-0105 (the "Lease"). LFD II, 16-1 BCA ¶ 36, 298, at *2 (citing J.A. 237). The Lease superseded prior leases between LFD and the Corps dating back to 1971. The lease area, referred to as the "premises" throughout the Lease, comprises approximately 166 acres (130 acres of water and 36 acres of land). Id. The Lease runs for a 25-year term, effective from September 1, 2000 to August 31, 2025. Id. On October 7, 2003, the Corps and LFD executed a first supplemental agreement (the "Supplemental Agreement"). The Supplemental Agreement gives LFD the option to extend the Lease for another 25 years to 2050 when it expires in 2025. See J.A. 271-72.

         One particular provision of the Lease is pertinent to this appeal. Condition 9, "RIGHT TO ENTER AND FLOOD, " states:

The right is reserved to the United States, its officer[s], agents, and employees to enter upon the premises at any time and for any purpose necessary or convenient in connection with Government purposes; to make inspections; to remove timber or other material, except property of the Lessee; to flood the premises; to manipulate the level of the lake or pool in any manner whatsoever; and/or to make any other use of the lands as may be necessary in connection with project purposes, and the Lessee shall have no claim for damages on account thereof against the United States or any officer, agent, or employee thereof.

J.A. 241-42.


         Lake Cumberland was impounded from the Cumberland River when the Corps constructed Wolf Creek Dam in 1951. The Wolf Creek Dam-Lake Cumberland project is managed by the Corps. On January 19, 2007, Brigadier General ("BG") Bruce Berwick, Commander of the Corps' Great Lakes and Ohio River Division, and Lieutenant Colonel ("LTC") Steven Roemhildt, Commander of the Corps' Nashville District, signed a Memorandum for Record titled "Wolf Creek Dam Interim Risk Reduction Measures" (the "IRR Memo"). LFD II, 16-1 BCA ¶ 36, 298, at *3. The IRR Memo documented the decision by BG Berwick and LTC Roemhildt to "lower the pool [of Lake Cumberland] to elevation 680 immediately and hold that elevation for an indefinite period, unless and until the Corps determines that a different pool elevation is more appropriate." Id. at *4 (citing J.A. 74). The IRR Memo's Executive Summary stated: "I consider Wolf Creek Dam to be in a high risk of dam failure and therefore I am taking necessary emergency measures to reduce imminent risk of human life, health, property, and severe economic loss." Id. (citing J.A. 67). The IRR cited four reviews, conducted in 2005 and 2006, documenting the condition of Wolf Creek Dam. Three of the reviews concluded that the dam was at a high risk of failure. Id.

         On January 22, 2007, in accordance with the IRR Memo, the Corps began lowering the water level in Lake Cumberland. Id. When the drawdown was completed, the level of the lake was reduced to an elevation of 680 feet. J.A. 81. The lake was maintained at that level while restorative construction was undertaken to repair Wolf Creek Dam. The Corps returned the lake to its previous levels in 2014 after the restoration work was completed.


         Condition 32 of the Lease is titled "DISPUTES CLAUSE." J.A. 250. It provides, in subsection a., that, "[e]xcept as provided in the Contract Disputes Act . . ., all disputes arising under or relating to this lease shall be resolved under this clause and the provisions of the Act."[1]Id. The DISPUTES CLAUSE further provides, in subsection c., that "[a] claim by the Lessee shall be made in writing and submitted to the District Engineer for a decision." Finally, subsection c. (2) of the DISPUTES CLAUSE requires that all claims in excess of $100, 000 be certified. Id.

         On January 18, 2013, LFD submitted a certified claim to the District Engineer, who was acting as the contracting officer for the Lease. In its claim, LFD asserted that, at the time they entered into the Lease, the parties "could not have envisioned" that Lake Cumberland "would be drawn down to such an extreme degree for such a long period of time, as the Lake has only been lowered to 680' once in its more than fifty year history." J.A. 63. LFD continued that, "[a]gainst this background, the purpose of the Lease contract has been frustrated to such an extent that . . . the Lease should be reformed in a manner that requires the Corps to compensate [LFD] for the damages it has incurred as a result of the long-term drawdown of the Lake." Id. LFD stated that these damages amounted to at least $4, 000, 000. J.A. 65. In a final decision dated August 26, 2013, the District Engineer denied LFD's claim. The District Engineer informed LFD that it had the option of appealing the final decision to the Board or to the U.S. Court of Federal Claims. J.A. 176.

         On November 27, 2013, LFD timely appealed the District Engineer's final decision to the Board. J.A. 83. In its one-count complaint, LFD alleged that the Corps had breached its contract with LFD by failing to disclose to it superior knowledge on the Corps' part. See J.A. 87-88. According to LFD, the Corps conducted major inspections of Wolf Creek Dam in 1994 and 1999, and in 1999 inspectors identified expanding leaks in the dam and called for a crack survey. J.A. 86 ¶ 14. LFD asserted that, prior to entering into the Lease, the Corps failed to disclose this information to LFD, and also failed to disclose to LFD concerns it had about the condition of the dam. Id. ¶ 15.

         On February 5, 2014, the Corps filed a motion to dismiss LFD's complaint. The Corps argued that the Board lacked jurisdiction under the CDA because LFD had failed to submit its superior knowledge claim to the District Engineer and had failed to certify the claim. See J.A. 90-91.

         On July 23, 2014, the Board issued a decision addressing the Corps' motion to dismiss. Lee's Ford Dock, ASBCA No. 59041, 14-1 BCA ¶ 35, 679 ("LFD I"). After stating that it had jurisdiction to entertain LFD's appeal under both the Lease's DISPUTES CLAUSE and the CDA, id. at *1, the Board turned to the substance of the Corps' motion. The Board held that the superior knowledge claim was a new claim that had not been certified to the District Engineer for a decision because there was nothing in the operative facts of LFD's certified claim that supported a superior knowledge theory. Id. at *10-11. The Board found that the only allegation related to knowledge at the time of the award was the allegation that the parties could not have envisioned that Lake Cumberland would be drawn down to such an extreme degree for such a long time. Id. In that regard, the Board stated:

[LFD's] assertion that the parties could not have envisioned at the time they entered into the Lease that the lake would be drawn down to such an extreme degree for such a long period of time communicates a common understanding that is inconsistent ...

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