Monday, February 22, 2010

Precision Pine & Timber, Inc. v. US

Feb 19: In the U.S. Court of Appeals, Federal Circuit, Case No. 08-5092. The Appeals Court explains that this is a government contract case, "We must decide whether the federal government's suspension of fourteen contracts breached any express or implied warranties." These fourteen contracts are between the U.S. Forest Service and Precision Pine & Timber, Inc. (Precision Pine), and provide for timber harvesting in Forest Service Region 3, which covers Arizona's national forests. In August 1995, the Forest Service suspended the contracts pursuant to a court order. The order prohibited further timber harvesting in that region until the Forest Service consulted with the U.S Fish and Wildlife Service about the pertinent land resource management plans. The order explained that such consultation was required under § 7 of the Endangered Species Act, due to the recent listing of the Mexican spotted owl as an endangered species. The fourteen contracts remained suspended until completion of the consultation process in December 1996.

    Precision Pine subsequently brought the suit in the U.S. Court of Federal Claims, alleging that suspension of the contracts breached both express and implied warranties. The trial court agreed with Precision Pine. On liability, it granted summary judgment in favor of Precision Pine, concluding that the government breached both an express contractual warranty and the implied duty of good faith and fair dealing. (Precision Pine I or liability decision). Following this decision, the case was transferred to a different judge for the sole purpose of adjudicating damages. After five years of discovery, a twenty-four day bench trial, and extensive supplemental briefing, the trial court awarded $3,343,712 in damages to Precision Pine (Precision Pine V or preliminary damages decision). The United States then appealed the liability determination and damages award. The Appeals Court reversed the lower court decision.

    Although the contract dates and terms differ slightly, the Appeals Court said "for our purposes the issues posed are the same." The Appeals Court said, "Seven of the contracts present the question of whether a particular clause (CT 6.25) created an express warranty and, if so, whether it was breached. If CT 6.25 did create an express warranty, then we must also decide whether the government breached its implied duty to cooperate as to those contracts. For eleven of the contracts, we must also decide whether the United States breached its implied duty not to hinder. We conclude that the answer to each of these questions is no. Clause CT 6.25 of the contracts did not create an express warranty, and the Forest Service's actions did not breach any implied duty to cooperate or not to hinder. Accordingly, we reverse the trial court's liability decision and vacate the damages award for all contracts, except the Hay contract. Because the government concedes it lacked authority to suspend the Hay contract, we remand for further proceedings as to that contract. For the other thirteen contracts, the trial court should enter judgment for the United States."

    Access the complete opinion (click here).