671 F.3d 1332 (Fed. Cir. 2012), 2010-1453, The Minesen Co. v. McHugh

Docket Nº:2010-1453.
Citation:671 F.3d 1332
Opinion Judge:REYNA, Circuit Judge.
Party Name:The MINESEN COMPANY, Appellant, v. John McHUGH, Secretary of the Army, Appellee.
Attorney:Sandra B. Wick Mulvany, McKenna Long & Aldridge LLP, of Denver, Colorado, argued for appellant. With her on the brief were Thomas A. Lemmer and Joseph G. Martinez, III. James Sweet, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, D...
Judge Panel:Before BRYSON, O'MALLEY, and REYNA, Circuit Judges. Dissenting opinion filed by Circuit Judge BRYSON. BRYSON, Circuit Judge, dissenting.
Case Date:March 02, 2012
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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671 F.3d 1332 (Fed. Cir. 2012)



John McHUGH, Secretary of the Army, Appellee.

No. 2010-1453.

United States Court of Appeals, Federal Circuit.

March 2, 2012

Sandra B. Wick Mulvany, McKenna Long & Aldridge LLP, of Denver, Colorado, argued for appellant. With her on the brief were Thomas A. Lemmer and Joseph G. Martinez, III.

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James Sweet, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for appellee. With him on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Kirk Manhardt, Assistant Director. Of counsel on the brief were Scott N. Flesch and Erica Beardsley, Trial Attorneys, United States Army Litigation Center, Contract Appeals Division, of Arlington, Virginia.

Before BRYSON, O'MALLEY, and REYNA, Circuit Judges.

Dissenting opinion filed by Circuit Judge BRYSON.


REYNA, Circuit Judge.

The Minesen Company (" Minesen" ) appeals the final decision of the Armed Services Board of Contract Appeals (" ASBCA" or " Board" ) which granted the motion to dismiss of the United States Army's Morale, Welfare, and Recreation Fund (" the Fund" ). Minesen has been under contract with the Fund since 1993 to build and operate a hotel facility at a military base on Oahu Island, Hawaii. With eighteen years remaining on the agreement, the ASBCA determined that the Fund breached the core of the contract and the parties entered the quantum phase of the dispute. While in the quantum phase, Minesen filed a separate complaint alleging that the Fund had done nothing to cure its ongoing breach. The ASBCA dismissed Minesen's second complaint as duplicative of the first breach of contract action. Minesen appeals the ASBCA dismissal of its second complaint. Because we find that Minesen voluntarily waived its right to appeal to this court under its negotiated contract with the Fund, we dismiss.


Minesen, a small business from Denver, Colorado, was created for the purpose of acquiring and fulfilling government contracts. In January of 1993, after several years of negotiation, Minesen and the Fund entered into Contract No. NAFBA3-93-C-0001 (" the Contract" ) to create accommodations for travelling military personnel. The Contract provided that Minesen would construct and operate, for a term of thirty-two years, a " transient lodging facility" at Schofield Barracks in central Oahu. Joint Appendix (" J.A." ) 272. Schofield Barracks is an 18,000 acre site twenty-three miles northwest of Honolulu, and is the largest Army installation in Hawaii. The Minesen lodging facility, to be built on four acres leased from the government, became known as the Inn at Schofield Barracks (" the Inn" ). The Inn was to feature 184 rooms with kitchenettes, as well as other hotel amenities such as a vending area, guest laundry, playground, convenience store, and deli. Id. On a secure installation, the Inn would offer lodging only to eligible active and temporary military personnel, their families, and qualifying veterans. Under the Contract, Minesen's lease and operation of the Inn terminates in 2026. Id.

In addition to revenue generated operating the facility, Minesen's consideration for the bargain was that the Inn was officially deemed " government quarters" under the Joint Federal Travel Regulation (" JFTR" ). Id. at 274. This designation was significant because it required travelling military personnel to patronize the Inn or else forfeit reimbursement for lodging costs. The Contract stated:

The completed [Inn] will fall within the current Joint Federal Travel Regulation

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definition of government quarters.... Travelers receiving government per diem payment, in order not to forfeit their per diem entitlement, will be required to patronize the [Inn] on a mandatory basis as long as confirmed reservation priorities are in accordance with those provided at Section III, Operation Requirements.

Id. The Contract did not require the Fund to deliver any specific level of occupancy to the Inn.

The Contract indicated on its face that " NO FUNDS OF THE UNITED STATES GOVERNMENT WILL BE PAID OR BE DUE TO THE CONTRACTOR BY VIRTUE OF THIS CONTRACT." Id. at 271 (emphasis original). In the definition section, the Contract further specified that: " The Fund is ... a nonappropriated fund instrumentality (NAFI) of the United States.... The Government is not a party to this contract, and no funds appropriated by Congress are in any way obligated or can be obligated by virtue of any provision of this contract." Id. at 273.

Significant for purposes of this appeal are the Contract's express provisions regarding dispute resolution. In the " Disputes Clause" at § II(6), the Contract stated:

a. This contract is not subject to the Contract Disputes Act of 1978 (41 U.S.C. 601-613).

* * *

c. All disputes arising under or relating to this contract shall be resolved under this clause.

* * *

g. The Contracting Officer's decision shall be final unless the Contractor appeals as provided in paragraph h. of this clause.

h. The Contracting Officer's final decision may be appealed by submitting a written appeal to the Armed Services Board of Contract Appeals within 90 days of receipt of the Contracting Officer's final decision. Decisions of the Armed Services Board of Contract Appeals are final and are not subject to further appeal.

J.A. 276-78 (emphasis original). On February 1, 1993, the parties executed Lease No. DACA84-1-91-14, which became an attachment to the Contract. After the parties finalized the Contract in early 1993, the Inn was constructed and opened for business by June 1994.

In 1997 and 1998, the JFTR, the travel regulation incentivizing military personnel to patronize the Inn, was amended. As a result of the amendments, the Department of Defense began reimbursing for any lodging costs up to the amount charged at government quarters, whether or not the traveler actually stayed at government quarters such as the Inn.

On June 7, 1999, Minesen filed a certified claim with the Contracting Officer (" CO" ) in which it alleged that the JFTR amendments eliminating the mandatory per diem forfeiture breached the Contract and negatively impacted occupancy rates. Minesen sought (1) $2,541,670.14 in lost revenues through May of 1999, and (2) future performance, or alternatively, immediate termination of the Contract with a payment of $25,506,325.00.

The CO denied the claim. On February 18, 2000, Minesen submitted further claims to the CO, seeking, inter alia, anticipatory profits for breach of contract. These claims were also denied by the CO. Minesen timely appealed both claims to the ASBCA, a right guaranteed in the Contract.

On November 20, 2006, after a five-week merits hearing, the ASBCA issued its decision.

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Minesen Co., ASBCA Nos. 52488, 52811, 07-1 BCA ¶ 33,456 (the " 2006 Decision" ). The ASBCA rejected Minesen's argument that the Fund had repudiated the Contract by acquiescing to the changes in the JFTR. The administrative judge (" AJ" ) found no outright repudiation of the Contract because the Fund never stated that it refused to perform. But the AJ also found that the Contract provision requiring travelers receiving the per diem reimbursement to patronize the Inn

constituted the core of Minesen's benefit of the bargain. The Inn was located on a secure military installation and was not open to the general public. In order to capture a market for its services, Minesen had to rely on an incentive to encourage official travellers [sic] to stay at the Inn. This device was the mandatory forfeiture provision of Clause 7. In acquiescing to the 1997 and 1998 changes in the JFTR which removed this mandatory forfeiture provision, the Fund affected [sic] a basic alteration in the parties' contractual relationship.

Id. at 123-24. The ASBCA concluded that the Fund should have fashioned a remedy to the JFTR amendments, ranging anywhere from a new reimbursement scheme to a complete termination of the Contract for convenience. " It failed to do so," the ASBCA held, " and, thus, breached the contract, entitling Minesen to recover damages." Id. at 124.

The ASBCA remanded the case to the CO for a determination of damages. Minesen claimed entitlement to past lost profits; interest; and future lost profits. Minesen's statement of costs calculated " anticipatory profits from January 1, 2008 through the end of Minesen's contract equal [to] $34,024,454." J.A. 314. The Fund identified various documents it claimed were necessary to verify damages, particularly those showing what Minesen would have earned from soldiers who declined to stay at the Inn but who did not forfeit the lodging reimbursement. Minesen did not promptly provide, among other things, its audited financial statements for FY 1994 through FY 1996, preventing the Fund from comparing the Inn's profitability before and after breach.

In early 2008, barely a year into the quantum phase, Minesen filed a new complaint (the " 2008 Claim" ) alleging that, subsequent to the 2006 Decision, the Fund had failed to cure its ongoing breach. Minesen asserted that failure to cure over the intervening fifteen months constituted an independent ground of material breach as of December 31, 2007, given that eighteen years were left on the Contract.

The CO denied the 2008 Claim, stating: " [T]here is no new dispute. This claim duplicates claims which you previously filed ... and to which the Board, as described above, has already rendered a decision on the merits." Id. at 150. The CO noted that the earlier action " is now in the quantum phase in which the parties are working to effect settlement of the dispute."...

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