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Scott Timber Co. v. United States

Citation: 28 ELR 21149
No. 94-784C, 96-204C, 40 Fed. Cl. 492/(Fed. Cl., 03/12/1998)

The court holds that the U.S. Forest Service possessed limited contractual authority to suspend performance of 11 timber sale contracts in the Siskiyou and Siuslaw National Forests in Oregon due to the Endangered Species Act (ESA) listing of the marbled murelet. However, the court cannot grant summary judgment on the issue of liability under the breach of contract claims because timber company-plaintiff raised a genuine issue of material fact as to whether the Forest Service's suspension of the contracts was reasonable. The court first holds that it has jurisdiction under the Contract Disputes Act (CDA) to consider certain aspects of the plaintiff's claims. A CDA action brought in the Court of Federal Claims must be based on the same claim previously presented to and denied by the Forest Service's contracting officer (CO). The plaintiff's claim in this case is the same basic claim pursued before the CO. The court then holds that six of the contracts contain a clause that authorized the Forest Service to suspend plaintiff's contracts while it consulted with the U.S. Fish and Wildlife Service (FWS) to determine whether the proposed sales would adversely impact the marbled murrelet and/or its habitat. The court then holds that the Forest Service's continued suspension of plaintiff's contracts was implicitly authorized by a clause in all 11 contracts that allowed the cancellation or modification of the contract if a new species is listed under the ESA. A common sense reading of the clause dictates that once a species is added to the list of endangered or threatened species, or once a listed species is discovered on a sale area, the Forest Service must be afforded some reasonable amount of time to determine whether to cancel, modify, or go forward with the sale. The court also holds that a clause in all 11 contracts that requires plaintiff's operations to comply with federal and state law cannot be construed either explicitly or implicitly to authorize suspension of the contracts. Likewise, the court holds that a clause in all 11 contracts that allows contract modification due to an act of the government does not authorize unilateral suspension of plaintiff's contracts.

The court next notes that although the Forest Service possessed contractual authority to unilaterally suspend the plaintiff's performance under two of the clauses, both clauses require that the Forest Service exercise the authority reasonably. The court then holds that the Forest Service's alleged failure to comply with the ESA's time period for FWS consultation was not unreasonable. The Forest Service's obligation to complete the consultation process within 150 days arose, if at all, under ESA § 7(b) and not under the contracts at issue in this breach of contract case. However, the court next holds that the plaintiff raised a genuine issue of material fact as to whether the Forest Service's suspension of plaintiff's contracts was unnecessary and unreasonable because the Forest Service failed to design sales with adequate predictions for the marbled murrelet. A clause in the contract warranted that the Forest Service had taken adequate measures to protect sensitive species such as the marbled murrelet when designing the sales. The plaintiff and all other bidders on the sales were entitled to reasonably rely on the Forest Service's representation in the clause that there were no areas requiring special measures to protect any sensitive species — including the marbled murrelet — in formulating their bids.

Finally, the court holds that the government is not shielded from liability for an alleged breach of the contracts under the sovereign acts defense. To satisfy the second prong of the sovereign acts defense, the government must show that the nonoccurrence of the sovereign act was a basic assumption of the contract. In this case, the government cannot satisfy the second prong of the defense. In particular, the government cannot establish that the non-occurrence of the listing of the marbled murrelet was a basic assumption of the contract.

Counsel for Plaintiff
Alan I. Saltman
Saltman & Stevens
1801 K St. NW, Washington DC 20036
(202) 452-2140

Counsel for Defendant
John S. Groat, Frank W. Hunger
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000