Empire Energy Management Systems, Inc. v. Roche
| Decision Date | 24 March 2004 |
| Docket Number | No. 03-1277.,03-1277. |
| Citation | 362 F.3d 1343 |
| Parties | EMPIRE ENERGY MANAGEMENT SYSTEMS, INC., Appellant, v. James G. ROCHE, Secretary of the Air Force, Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Carter G. Phillips, Sidley Austin Brown & Wood LLP, of Washington, DC, argued for appellant. With him on the brief were Virginia A. Seitz, Joseph C. Port, Jr., Mark P. Guerrera, and Kimberle E. Dodd.
Kyle Chadwick, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for appellee. With him on the brief were Robert D. McCallum, Jr., Associate Attorney General; David M. Cohen, Director; and Mark Melnick, Assistant Director.
Before MAYER, Chief Judge, GAJARSA, and DYK, Circuit Judges.
Opinion for the court filed by Circuit Judge DYK. Dissenting opinion filed by Chief Judge MAYER.
The Department of the Air Force ("Air Force") terminated a contract between Empire Energy Management Systems, Inc. ("Empire") and the Air Force for default. The Armed Services Board of Contract Appeals ("Board") sustained the Air Force's default termination. Empire Energy Mgmt. Sys., Inc., ASBCA No. 46741, 03-1 BCA P 32,079, 2002 WL 31501910 (2002). We affirm.
On June 10, 1988, Empire and the Air Force entered into a contract under which Empire was to provide cogeneration1 ("cogen") of electricity, chilled water, hot water, and steam to MacDill Air Force Base ("MacDill") for a lengthy period of time concluding on October 6, 2019. The Air Force did not agree to pay for the construction of the plant; Empire was required to furnish "all plant, labor, equipment, [and] engineering and perform all operations necessary to furnish, install, own, operate and maintain a cogeneration plant" at its own expense. Id. at 158,531. Instead, the Air Force contracted only to pay for the utility services provided by the cogen plant, at a discount from the market price. The contract specified a commercial operation date ("COD") by which Empire was required to have completed commercial operations acceptance tests successfully and to have substantially completed construction of the cogen plant. The contract also required Empire "to comply with all Federal, State and local environmental and archeological laws and regulations." Id. The contract contained several standard contract clauses from the Federal Acquisition Regulations ("FAR"), including the standard FAR default clause, FAR 52.249-8.2
On June 11, 1990, the Air Force and Empire entered into Modification 6 of the contract, which obligated Empire to construct two cogen plants at MacDill, rather than the original single plant. In Modification 6, the Air Force agreed to lease the site to be used for the purpose of constructing and operating the second cogen plant (the "cogen site") to Empire for only nominal consideration. The Air Force and Empire subsequently agreed to build only the second cogen plant and to postpone the construction of the first cogen plant. The dispute in this case relates only to the construction of the second cogen plant.3
The Air Force had previously used land adjacent to the cogen site for washing fuel bladders. To prevent the release of fuel to the surrounding land and storm drains, it had installed an oil-water separator, a device that uses gravity to separate oil and other petroleum products from water, based on their respective densities. Nonetheless, because some petroleum products are water-soluble, the oil-water separator could not completely eliminate potential pollutants from the water, which was discharged to a storm sewer. The oil-water separator and its discharge were subject to regulation by the United States Environmental Protection Agency ("EPA"). After the cogen site was selected, Empire requested information from the Air Force about the environmental conditions at both the cogen site and the site of the oil-water separator, which the Air Force provided.
Shortly after groundbreaking at the cogen site on February 7, 1991, Empire stopped work on the project because of a dispute with the company through which Empire had arranged financing for the project. This work stoppage continued until May 4, 1992, when the parties executed Modification 7 ("Mod 7") and a novation agreement. Among other provisions, Mod 7 contained a release of all claims that arose from facts and circumstances that existed prior to Mod 7, with an exception not pertinent here. Mod 7 also provided a new completion schedule for the cogen site and a facility charge to be paid monthly by the Air Force after COD. May 4, 1992, the date Mod 7 was executed, was "the starting date for performance" of the completion schedule, and the COD was set at 300 days from that start date. Empire Energy, 03-1 B.C.A. (CCH) at 158,539. Although the COD was set at 300 days from the starting date, or February 28, 1993, the Air Force agreed not to terminate the contract for default within 480 days of the starting date, or 180 days after the COD.4 Thus, Mod 7 set August 27, 1993, as the first date on which the Air Force could terminate the contract for default ("the termination date"). Mod 7 further provided that the Air Force was required to provide a cure notice allowing Empire at least ten days to cure any default other than the failure to achieve the COD.
Pursuant to the Resource Conservation and Recovery Act of 1976 ("RCRA"), Pub. L. No. 94-580, 90 Stat. 2795 (), the EPA regulates owners and operators of facilities that generate, transport, treat, store, or dispose of hazardous materials. The EPA's primary regulation of treatment, storage, and disposal facilities is through the RCRA permitting system. Owners and operators of such facilities must have a RCRA permit for the facility; treatment, storage, or disposal of hazardous waste is prohibited without a permit. 40 C.F.R. § 270.1(b)-(c) (2003); see also 42 U.S.C. § 6925(a). A RCRA permit allows the operation of a facility for treatment, storage, or disposal and outlines the precautions and corrective actions that the operator must take to protect the environment.
During the work stoppage, the EPA notified the Air Force on August 15, 1991, that it had issued the corrective action portion of a permit for MacDill pursuant to RCRA.5 The permit required the Air Force to conduct a RCRA Facility Investigation ("RFI") with respect to several solid waste management units ("SWMU") located throughout MacDill, including the oil-water separator near the cogen site. Although the boundaries of the oil-water separator SWMU are disputed, the Board found that "for purposes of the RFI the [oil-water separator] and an area three to five feet around it was the SWMU." Empire Energy, 03-1 B.C.A. (CCH) at 158,549. Thus, the SWMU encompassed only a small portion of the cogen site.6 The permit also provided that the Air Force "shall give notice to the Regional Administrator as soon as possible of any planned physical alterations or additions to the permitted facility." United States Environmental Protection Agency, Permit No. FLD 570 024 582, HSWA7 Portion of the RCRA Permit ("EPA Permit"), at 8 (1991).
On May 15, 1992, shortly after it had started working again in response to Mod 7, Empire investigated the storm sewer near the oil-water separator, where it allegedly discovered oil-based contaminants. Empire stopped working and requested a stop work order from the Air Force on May 19, 1992, stating that "Empire has just become aware that it is being prevented from proceeding with performance by the presence of an unknown quantity of an environmentally hazardous substance on the project site," allegedly left by the oil-water separator. (App. at 1063.) The contracting officer, Ms. Judith Hall, denied Empire's request for a stop work order on May 20, 1992. Empire did not learn of the RFI until June 5, 1992.
The Air Force subsequently hired Dames & Moore, an environmental contractor, to investigate the soil conditions at the site. Between July 21 and July 23, 1992, Dames & Moore took samples throughout the cogen site and tested for organic vapors. Dames & Moore reported:
The results of the investigation in this report indicate that further site assessment is not required by state or federal rules or regulations.
The site investigation confirmed compliance with all applicable federal, state and local environmental laws and regulations and that the site is suitable to complete construction of the cogen facility.
(App. at 29.) On August 28, 1992, the Dames & Moore report was provided to Empire.
On September 3, 1992, Air Force officials met with an EPA representative and provided the Dames & Moore report to the EPA. The Board found that this meeting also constituted notice to the EPA, in accordance with the permit, that the Air Force intended to change the RCRA site. On December 11, 1992, Ms. Elizabeth Wilde, the EPA representative at MacDill, stated in a letter that, Empire Energy, 03-1 B.C.A. (CCH) at 158,546 (). The Air Force provided this letter to Empire on January 8, 1993, and directed Empire to return to work. However, in a letter dated March 12, 1993, the EPA appeared to contradict the December 11, 1992, letter, by suggesting that the cogen site still required investigation under the RFI. In light of Empire's refusal to work on portions of the cogen site, the Air Force apparently requested an even more definite statement from the EPA. The EPA responded in a letter on June 2, 1993, stating that it did not object to the construction activities planned near the oil-water separator SWMU and that it did not believe that any such activities would interfere with the RFI.8 The...
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