Scott Timber Co. v. U.S.

• Decision Date: 26 June 2003
• Docket Number: No. 02-5142.,02-5142.
• Citation: 333 F.3d 1358
• Parties: SCOTT TIMBER COMPANY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1358

333 F.3d 1358

SCOTT TIMBER COMPANY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 02-5142.

United States Court of Appeals, Federal Circuit.

June 26, 2003.

Alan I. Saltman, Saltman & Stevens, P.C., of Washington, DC, argued for plaintiff-appellant. With him on the brief were Ruth G. Tiger and Richard W. Goeken.

John S. Groat, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director; Kathryn A. Bleecker, Assistant Director; Laurie Ristino, Office of General Counsel, Department of Agriculture, of Washington, DC; and Susan V. Cook, Senior Attorney, Environmental and Natural Resources Division, Department of Justice, of Washington, DC.

Before RADER, BRYSON, and GAJARSA, Circuit Judges.

RADER, Circuit Judge.

On summary judgment, the United States Court of Federal Claims determined that the United States Forest Service did not breach Scott Timber Company's timber sales contracts. See Scott Timber Co. v. United States, 40 Fed. Cl. 492 (1998) (Scott I); Scott Timber Co. v. United States, 44 Fed.Cl. 170 (1999) (Scott II); Scott Timber Co. v. United States, Nos. 94-784C, 96-204C, slip op. at 49 (Fed. Cl. filed July 11, 2001) (Scott III). This dispute arose when the Forest Service suspended Scott's performance on the timber contracts to protect the marbled murrelet, a tiny bird indigenous to the forest areas covered by the contracts. Because five of the contracts at issue do not grant the Forest Service suspension authority, this court reverses the trial court's summary judgment that those contracts granted suspension authority. Because the evidence does not justify the disposition of the reasonableness issue on summary judgment, an issue of fact, this court also reverses the holding that the suspensions were reasonable as a matter of law. This court affirms the rest of the issues on appeal and remands for further proceedings.

I.

On January 12, 1988, the National Audubon Society and thirty-two of its chapters along the western coast filed a petition with the United States Fish and Wildlife Service (FWS) requesting a listing of the marbled murrelet as a "threatened species." On January 6, 1989, FWS proposed that a listing of the murrelet "as endangered or threatened is possibly appropriate." 54 Fed.Reg. 554 (Jan. 6, 1989). This notice also "encourage[d] Federal agencies and other appropriate parties to take [the murrelet] into account in environmental planning." Id. The Forest Service listed the murrelet as a "sensitive species" within Oregon and Washington in March 1989.

In 1990, the Forest Service solicited competitive bids for the sale and harvest of timber in the Siskiyou and Siuslaw National Forests in Oregon under section 318 of the Department of the Interior Appropriations Act of 1990, Pub.L. No. 101-121, 103 Stat. 701 (1989) (§ 318). Section 318, also known as the Northwest Timber Compromise, mandated that the "Forest Service shall offer ... an aggregate timber sale level of seven billion seven hundred million board feet of net merchantable timber from the national forests of Oregon and Washington for fiscal years 1989 and 1990." Pub.L. No. 101-121, 103 Stat. at 745-50. This provision responded to a timber shortage in the Pacific Northwest resulting from competing interests of environmentalists and the timber industry. See Scott II, 44 Fed. Cl. at 175 (citing Robertson v. Seattle Audubon Soc'y, 503 U.S. 429, 431-33, 112 S.Ct. 1407, 118 L.Ed.2d 73 (1992)). Scott won eleven of those contracts (hereinafter the § 318 contracts). The Forest Service awarded the § 318 contracts to Scott between April 9, 1990 and October 16, 1990.

The Court of Federal Claims determined, in an articulate and well-reasoned opinion, that the Forest Service's compliance with § 318 satisfied its obligations under the National Forest Management Act of 1976 (NFMA) and the National Environment Policy Act of 1969 (NEPA) to provide protection for sensitive species in offering timber sales contracts. Scott II, 44 Fed. Cl. at 175-79. In other words, the trial court determined that contracts under § 318 by definition complied with NFMA and NEPA, as well as the Forest Service's sensitive species program. Id. at 179; Robertson, 503 U.S. at 437, 112 S.Ct. 1407.

In April 1991, the Audubon Society filed suit to compel FWS to list the murrelet as threatened or endangered. See Marbled Murrelet v. Lujan, No. C91-522 (W.D. Wash. filed April 17, 1991) (the listing action). The plaintiffs in the listing action added the Forest Service as a defendant in September 1992, seeking to require the Forest Service to protect the murrelet under NFMA. The district court in the listing action issued a temporary restraining order on September 16, 1992, to prohibit "the logging of any marbled murrelet habitat."

On September 17, 1992, the Forest Service orally informed Scott that it was suspending operations under the § 318 contracts. The temporary restraining order expired ten days later. However, the Forest Service informed the district court that it would continue the suspension of logging operations until FWS made a final decision on listing the murrelet. Consistent with that representation, the Forest Service notified Scott that the suspensions would remain in effect indefinitely. By order of the district court, FWS listed the murrelet as a threatened species, effective September 28, 1992. See 57 Fed.Reg. 45,328 (Oct. 1, 1992).

Section 7 of the Endangered Species Act (ESA) and its implementing regulations require every federal agency to participate in a detailed consultation process to determine what impact, if any, that agency's operations will have on any newly listed species. See 16 U.S.C. § 1536(a)(2), (b) (2000); 50 C.F.R. pt. 402. Accordingly, the Forest Service initiated a formal consultation with the FWS to analyze the impact of the timber sales contracts in the Siskiyou and Siuslaw National Forests. By letter dated October 19, 1992, Scott informed the Forest Service that it intended to participate in the consultation as an "applicant" under the ESA, specifically 16 U.S.C. § 1536(a)(3). The Forest Service notified Scott on November 13, 1992, that it was entitled to participate in the consultation process. The formal consultation began on December 8, 1992. The ESA requires completion of the formal consultation within 90 days with a potential for extension up to 150 days upon written notice. 15 U.S.C. § 1536(b) (2000). The consultation may extend beyond 150 days only with the applicant's consent. Id.

FWS issued a draft biological opinion on July 20, 1993, which the Forest Service reviewed. After considering the Forest Service's comments on the draft biological opinion, FWS issued a second draft biological opinion on September 1, 1993. The second draft biological opinion concluded that the § 318 contracts jeopardize the murrelet. Further, the opinion foresaw no reasonable or prudent alternatives to terminating the contracts in murrelet habitat.

Scott attended two applicant meetings on the draft biological opinion in September and October 1993. On October 20, 1993, the Siuslaw Timber Operations Association, including Scott, submitted comments disagreeing with the finding of jeopardy and the lack of reasonable and prudent alternatives to the § 318 contracts. In a letter to the Forest Service dated November 12, 1993, Scott expressed its preference for continued consultations rather than cancellation of the § 318 contracts. Scott further proposed "reasonable and prudent measures/alternatives" to permit operations under the § 318 contracts without harming the murrelet's habitat.

On May 11, 1994, FWS issued its final biological opinion, which effectively prohibited timber harvesting on all eleven of Scott's § 318 contracts. The final biological opinion found no reasonable and prudent alternatives to canceling timber sales in any areas of marbled murrelet habitat. Eventually, surveys found murrelet habitat in each of Scott's eleven § 318 contracts.

Scott and other timber companies filed suit in the United States District Court for the District of Oregon to challenge the final biological opinion as not complying with the ESA. See CLR Timber Holdings, Inc. v. Babbitt, No. 94-6403-TC (D.Or. Nov. 4, 1994). Due to a settlement, the district court dismissed this action without prejudice in the summer of 1994.

In an attempt to reconfigure the timber contracts to permit some harvesting without disturbing the murrelet, the Forest Service sought technical assistance from FWS through the latter part of 1994 and the early part of 1995. FWS issued a final amended biological opinion on June 12, 1995. This amended biological opinion did not permit any operations under the § 318 contracts at issue in this case.

On June 23, 1994, Scott submitted formal claims to the contracting officer (CO) under the Contract Disputes Act (CDA). Scott alleged that the Forest Service's prolonged suspensions of the § 318 contracts constituted a breach of contract. Scott contended that the Forest Service lacked authority to suspend operations under the § 318 contracts for an indefinite and extended period of time. Scott sought damages equal to the cost of obtaining replacement timber in the open market. The CO denied all of Scott's breach of contract claims. Scott began filing breach of contract actions for each of the § 318 contracts in the Court of Federal Claims on October 27, 1994. Those individual actions were consolidated into this case.

Contract clauses C6.01, C6.25, and B8.21 are at issue in this appeal. Six § 318 contracts contain clause C6.01: Cat Track (No. 074188), Raspberry (No. 074121), Formader 103 (No. 085068), Maria Skyline (No.085209), Skywalker (No. 085118), and Wapiti 305 (No. 083428) (collectively the C6.01 contracts). The remaining five § 318 contracts...