Grand Acadian Inc v. The United States

• Decision Date: 17 March 2011
• Docket Number: No. 07-849 C,07-849 C
• Parties: GRAND ACADIAN, INC., Plaintiff, v. THE UNITED STATES, Defendant.
• Court: U.S. Claims Court

GRAND ACADIAN, INC., Plaintiff, v. THE UNITED STATES, Defendant.

No. 07-849 C

United States Court of Federal Claims

E-Filed: March 17, 2011

Motion for Summary Judgment; RCFC 56; Government's Duties Under Restoration Clause of Lease; Normal Wear and Tear; Implied Covenant Against Waste

Howell Roger Riggs, Huntsville, AL, for plaintiff.

Douglas G. Edelschick, with whom were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Mark A. Melnick, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, for defendant. Jean Hardin, Office of Chief Counsel, General Law Division, Federal Emergency Management Agency, Washington, DC, of counsel.

OPINION

HEWITT, Chief Judge

Grand Acadian, Inc. (plaintiff or Grand Acadian) filed its Complaint at the United States Court of Federal Claims on November 30, 2007. Docket Number (Dkt. No.) 1. On January 25, 2008 Grand Acadian filed its First Amended Complaint (Complaint or Compl.), Dkt. No. 8. The government filed Defendant's Answer on May 20, 2008, Dkt. No. 15, and Defendant's Amended Answer and Affirmative Defense on October 14, 2008, Dkt. No. 25.

Currently before the court are the government's second motion for summary judgment, titled Defendant's Motion for Summary Judgment Concerning Restoration (defendant's Motion or Def.'s Mot.), filed October 6, 2010, Dkt. No. 82; Plaintiff's Response in Opposition to Defendant's Second Motion for Summary Judgment (Pl.'s Resp.), filed November 10, 2010, Dkt. No. 88; and Defendant's Reply in Support ofMotion for Summary Judgment Concerning Restoration, filed December 7, 2010, Dkt. No. 90.

I. Background

This case arises from a cancelled construction project on leased property where the United States government (defendant or the government), acting through the Federal Emergency Management Agency (FEMA), had sought to create a recreational vehicle (RV) park as emergency housing for victims of hurricanes Katrina and Rita. May 29, 2009 Opinion, Dkt. No. 51, Grand Acadian, Inc. v. United States (2009 Opinion or Grand Acadian I), 87 Fed. Cl. 193, 195-96 (2009).

In December 2005 the government entered into an agreement, General Services Administration Lease Number GS-07B-16028 (the Lease), with Grand Acadian to lease approximately thirty acres of property in Sulphur, Louisiana (the Property). Def.'s Ex.¹(DX) 3 (Lease); see also Compl. Summ. 3; Def.'s Mot. 2.

The court refers to the first two pages of the Lease as the "Standard Form Lease."² The Standard Form Lease incorporates four documents by reference: a rider (Lease Rider), DX 3 (Lease) 3-6; a list of general clauses (General Clauses), DX 3 (Lease) 8-39; a list of representations and certifications, DX 3 (Lease) 40-46; and a site plan (Site Plan).³ Standard Form Lease ¶ 6. The Lease commenced on December 7, 2005 for a term of three years at an annual rent of $252,262.50 "subject to termination and renewal rights." Id. ¶¶ 2-3. At issue in defendant's Motion is the interpretation of the restoration clause (Restoration Clause) contained in the Lease Rider, which reads, in relevant part:

Alterations and Improvements. Any physical additions or improvements to the Premises made by the Government will become the property of Lessor. Lessor may require that the Government, at the end of the Term and at the Government's expense, remove any physical additions and improvements, repair any alterations, and restore the premises to the condition existing at the lease commencement date, normal wear excepted.

Lease Rider ¶ 6.

On February 27, 2006 the government sent Grand Acadian notice that it was terminating the Lease, effective as of December 6, 2006. DX 5 (Notice of Termination) 2.

The parties agree that in January 2006, as it began construction activities on the Property, the government's contractor, Fluor Corp., ⁴ cleared or knocked down all of the trees on the Property, Pl.'s Resp. in Opp'n to Def.'s Proposed Findings of Uncontroverted Fact in Supp. of Def.'s Second Mot. for Summ. J.⁵ (plaintiff's Response to Defendant's Facts or Pl.'s Resp. to Def.'s Facts), Dkt. No. 88-1, ¶ 22; dug a pond (Grand Acadian claims that owing to poor construction techniques, the pond is better described as a "mud hole") in the southeast corner of the Property, id. ¶ 23; and dug drainage ditches along the east side of the Property (the East Ditch), id. ¶ 24, and the south edge of the Property (the South Ditch), id. ¶ 25. The South Ditch continued through a non-leased portion of Grand Acadian's property and emptied into a bayou outside of Grand Acadian's property. Id. ¶ 26.

In or around September 2006 Fluor filled in the portion of the South Ditch that was on the leased Property. Id. ¶ 27. The government contends that Fluor also"performed cleaning and grading work upon the leased property." Def.'s Proposed Findings of Uncontroverted Fact in Supp. of Mot. for Summ. J. Concerning Restoration (defendant's Facts or Def.'s Facts), Dkt. No. 83, ¶ 27. Grand Acadian argues that Fluor did not fill the ditch in the manner required by the Lease. Pl.'s Resp. to Def.'s Facts ¶ 27. The Restoration Clause of the Lease states that Grand Acadian "may require that the Government, at the end of the Term and at the Government's expense, remove any physical additions and improvements, repair any alterations, and restore the premises to the condition existing at the lease commencement date, normal wear excepted." Lease Rider ¶ 6. Grand Acadian alleges that Fluor "simply pushed dirt and organic debris into the ditch and covered it up, exacerbating the unstable soil conditions." Pl.'s Resp. to Def.'s Facts ¶ 27. Grand Acadian further contends that Fluor did not clean or grade the fill material. Id.

The parties agree that when the Lease term began, "ruts, downed trees, tree stumps, and other debris were scattered across the property." Id. ¶ 19. Grand Acadian alleges that, despite Fluor's engineering plan to the contrary, Fluor failed to clear this material or to provide adequate drainage prior to employing heavy equipment on the Property. Compl. ¶¶ 50-53; see also Pl.'s Resp. to Def.'s Facts ¶ 25 ("construction of the drainage ditch was not initiated until... well after construction had already begun"); Pl.'s Ex. (PX) 2 (Nov. 10, 2010 Decl. of Pat McConnaughhay) ¶ 11 (stating that "the Government knocked down all of the trees... and drove on top of many [of] them with heavy machinery, forcing them down into the sub-surface soils"). Grand Acadian alleges that "[a]s this heavy machinery tracked back and forth across the undrained site, it mixed topsoil, surface debris, mud, clay, and other material," Compl. ¶ 54, creating "an unstable surface that is unable to support the proposed structures," id. ¶ 55; PX 2 (Nov. 10, 2010 Decl. of Pat McConnaughhay) ¶ 14 (stating that construction "cannot be undertaken today on [the Property] due to the excessive amount of debris mixed with the soil, mixture of soil types and alterations to the clay base").

The parties dispute what remedial measures, if any, are required to restore the soil to its condition at the beginning of the Lease term. See Pl.'s Resp. to Def.'s Facts 3334. Grand Acadian argues that it "cannot develop the leased property today in the same manner in which it developed the neighboring tract." Id. ¶ 33 (citing PX 2 (Nov. 10, 2010 Decl. of Pat McConnaughhay) ¶ 14). The government contends that the Property in its current condition is no less suitable for development than at the beginning of the Lease term and that, if necessary, "organic debris can be removed from the soil using a common procedure known as 'root raking, '" which would cost approximately $100,000. Def.'s Reply 1 (citation omitted). According to the government, Grand Acadian unnecessarily claims "the exorbitant cost of removing more than 4.6 million cubic feet of the preexisting silty soil and replacing it with new compacted structural fill material" at a cost of approximately $3.5 million. Id.

On December 1, 2008 the parties filed an initial set of cross-motions for summary judgment. Grand Acadian I, 87 Fed. Cl. at 195. Grand Acadian sought summary judgment on its claims that the government failed to construct certain improvements on the Property and to restore the Property to its pre-Lease condition at the termination of the Lease term. Id. at 196 (citing Compl. Summ. 3). Grand Acadian sought approximately twenty-one million dollars in damages. Id. (citing Compl. ¶ 178). The government sought summary judgment on the grounds that it was not required to construct improvements on the Property and that and that it was not liable for the costs of restoration that Grand Acadian sought. Id. (citation omitted). The court granted both motions in part and denied both in part, finding that the government had no duty to construct infrastructure on the Property, but that, if restoration is required, then the government has a duty under the Lease to restore the Property in accordance with the Restoration Clause—that is, to its pre-Lease condition, "normal wear excepted." Id. at 216-17. The court did not address the meaning of the phrase "normal wear." See id. passim.

The court determined that genuine issues of material fact remained as to the condition of the soil on the Property at the beginning and at the end of the Lease term. Id. at 213. After considering the conflicting evidence presented by the parties on the amount of organic matter in the soil and the suitability of the soil for development at the beginning and at the end of the Lease term, the court concluded that "[t]he evidence proffered by the parties concerning the condition of the Property would be better presented through live testimony subject to cross-examination." Id.

The government argues in its current Motion that Grand Acadian's restoration claim "is without merit" because it would result in a "windfall of nearly $7 million-under the guise of restoration--for construction of new...