119 F.3d 1576 (Fed. Cir. 1997), 96-5071, New Valley Corp. v. United States

Docket Nº:96-5071.
Citation:119 F.3d 1576
Party Name:NEW VALLEY CORPORATION, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
Case Date:July 23, 1997
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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119 F.3d 1576 (Fed. Cir. 1997)

NEW VALLEY CORPORATION, Plaintiff-Appellant,


The UNITED STATES, Defendant-Appellee.

No. 96-5071.

United States Court of Appeals, Federal Circuit

July 23, 1997

Rehearing Denied; Suggestion for Rehearing In Banc Declined

Nov. 13, 1997.

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Sarah S. Gold, Proskauer Rose Goetz & Mendelsohn, LLP, New York City, argued for plaintiff-appellant. With her on the brief was Arnold I. Burns.

Geoffrey C. Cook, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, argued for defendant-appellee. With him on the brief were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director.

Clarence T. Kipps, Jr., Miller & Chevalier, Chartered, Washington, DC, for amicus curiae. With him on the brief was Kevin C. Dwyer. Of counsel on the brief were John J. Higgins, John T. Kuelbs, Jennifer A. Smolker, Scott B. Tollefsen, and M. Keith Nocket, Hughes Electronics Corporation, Los Angeles, CA.

Before RICH, MAYER, and LOURIE, Circuit Judges.

Opinion for the court filed by Circuit Judge MAYER. Dissenting opinion filed by Circuit Judge LOURIE.

MAYER, Circuit Judge.

New Valley Corporation appeals the order of the United States Court of Federal Claims, 34 Fed.Cl. 703 (1996), dismissing its complaint seeking damages for breach of contract or just compensation for a taking allegedly caused by the National Aeronautics and Space Administration's (NASA) failure to launch New Valley's satellite. Because New Valley did not fail to exhaust its administrative remedies, did not waive its rights to bring this claim, and because the government did not terminate their contract, we reverse and remand.


This case, like Hughes Communications Galaxy, Inc. v. United States, 998 F.2d 953 (Fed.Cir.1993), and American Satellite Co. v. United States, 998 F.2d 950 (Fed.Cir.1993) (ASC ), arises out of the space shuttle Challenger's tragic explosion on January 28, 1986. Prior to that time, in January 1984, New Valley Corporation (then known as Western Union Telegraph Company) entered into a Launch Services Agreement ("LSA" or "contract") with the United States, represented by NASA. Under the LSA, NASA agreed to use its "best efforts" to launch two New Valley telecommunications satellites, the Westar VI and Westar VII (later renamed Westar VI-S), from the space shuttle. The

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LSA was to be effective until September 1995 or until both satellites were launched, whichever came first. NASA successfully launched Westar VI and ultimately assigned Westar VI-S a "Firm Launch Date" of June 24, 1986.

The LSA granted the government the right to terminate the LSA for four specific reasons, only one of which is relevant here. Under Article VII, 1 NASA could terminate the LSA "upon a determination in writing that NASA is required to [t]erminate such services for Reasons Beyond NASA's Control." Article XX defined "Reasons Beyond NASA's Control" to include "acts of the United States Government other than NASA, in either its sovereign or contractual capacity."

Article V of the LSA allocated the risks of liability "arising out of" the launch services to be provided by the government. Paragraph 4 of that article addressed "Customer Claims Against the United States Government and Its Contractors," and provided, in part:

Without affecting the right of the Customer to pursue the procedure under the Disputes provision set forth in Article XVIII of this Agreement, the Customer shall not make any claim against the United States Government or the United States Government's contractors and subcontractors ... for the non-performance or improper performance of Launch and Associated Services, including, but not limited to, the performance by the United States Government or the United States Government's contractors and subcontractors of research, design, development, test, manufacture, assembly, integration, transportation or use of any materials related to STS [Space Transportation System] Operations or in the performance of other services related to STS Operations....

The LSA's Disputes clause, referenced in paragraph 4 of Article V, provided, in part:

Any dispute, whether or not involving an alleged breach of this Agreement, concerning a question of fact or of law arising under this Agreement, which is not disposed of by agreement, shall be reviewed by the NASA Associate Administrator for Space Flight, who shall attempt to resolve the dispute. If the attempt of the NASA Associate Administrator for Space Flight is not successful within sixty days after written submission to him, either party may mail or otherwise furnish a written appeal addressed to the NASA Administrator and the President, or other appropriate official, of the Customer. The joint decision of the NASA Administrator and the President, or other appropriate official, of the Customer, or their duly authorized representatives for the determination of such appeal, shall be final and conclusive....

On January 28, 1986, four days after Westar VI-S was assigned its June 24, 1986, "Firm Launch Date," the space shuttle Challenger exploded just after takeoff. President Reagan formed a commission to investigate the tragedy. It concluded that NASA's responsibility to launch commercial payloads like New Valley's was at least partly responsible for the decision to launch the Challenger. On August 15, 1986, the President announced that "NASA will no longer be in the business of launching private satellites." 22 Weekly Comp. Pres. Doc. 1103, 1104 (Aug. 15, 1986). At that time, forty-four commercial payloads containing satellites, including Westar VI-S, were scheduled for launch. As for these payloads, the President decided ultimately to put only the payloads requiring launch from a manned vehicle or having national security or foreign policy implications on the launch manifest. We held in Hughes and ASC that this new policy conflicted with Article IV's launch priority and scheduling policy and that the government was required under the LSA to bear the costs for this change, absent the successful assertion of another defense. See Hughes, 998 F.2d at 958-59 & n. 8.

On October 3, 1986, NASA announced the new launch manifest, which did not include Westar VI-S. By letter dated October 30, 1986, NASA formally notified New Valley that it had not been possible to set a launch date for Westar VI-S and that it

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appear[ed] almost certain [New Valley] w[ould] not be provided launch services either prior to or after [its] ... contract expire[d] in September 1995. At the very least, it can be said with absolute certainty that [New Valley's] payload will be delayed far in excess of the nine-month period described in ... your [LSA]. Thus, should you wish to terminate your LSA prior to its expiration, Article VII provides you may do so based on this delay.

On January 21, 1987, New Valley representatives met with NASA representatives to discuss New Valley's claim for losses caused by NASA's failure to launch Westar VI-S. New Valley then sent a letter to NASA's "General Manager" seeking $58,596,964. This amount included $4,783,264 paid to NASA for launch services and reservation fees for future launches; $12,063,700 that it spent preparing Westar VI-S for launch; $29,750,000 spent for increased launch expenses (including modifications to the satellite and increased insurance costs); and $12,000,000 for "Loss of Capital Investment." In March 1987, NASA agreed to refund $4,783,264 in progress payments and earnest money. Each party expressly reserved "any and all claims or rights it may have with respect to damages arising from the LSA." In May 1988, New Valley sold Westar VI-S to Hughes Communications Galaxy, Inc., and it was launched commercially in October 1990.

On March 24, 1994, New Valley wrote NASA's Associate Administrator...

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