Seven Resorts, Inc. v. United States

• Decision Date: 16 September 2013
• Docket Number: No. 09-184C,09-184C
• Parties: SEVEN RESORTS, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Claims Court

SEVEN RESORTS, INC., Plaintiff, v. UNITED STATES, Defendant.

No. 09-184C

United States Court of Federal Claims

Filed: September 16, 2013

Partial Summary Judgment;

National Parks Service Concessions

Contract; Valuation of

Concessioner's Possessory Interest;

Leasehold Surrender Interest;

Statutory Interpretation; Contract

Interpretation; Implied-in-Fact

Contract.

Kevin R. Garden, The Garden Law Firm P.C., Alexandria, VA, for plaintiff.

A. Bondurant Eley, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With her were Franklin E. White, Jr., Assistant Director, Jeanne E. Davidson, Director, Commercial Litigation Branch, and Stuart F. Delery, Assistant Attorney General, Civil Division, Washington, D.C.

OPINION

HORN, J.

FINDINGS OF FACT and STATUTORY FRAMEWORK

Plaintiff, Seven Resorts, Inc. (Seven Resorts), asserts a claim for compensation arising under a United States Department of Interior, National Parks Service (NPS) concessions contract, which authorized Seven Resorts to conduct operations at the Boulder Beach Site, Lake Mead National Recreation Area, Nevada. The facts relevant to the above captioned case, including decisions by the government agency regarding the property and site involved, have developed and evolved over time, although appear, at this point in time, sufficiently stable to allow for a decision in the case.¹

On August 14, 1974, pursuant to the National Park System Concessions Policy Act (the 1965 Concessions Act), Pub. L. No. 89-249, 79 Stat. 969 (Oct. 9, 1965) (repealed 1998), NPS entered into concessions Contract No. CC-LAME003-74 (the original concessions contract) with Leisurama, Inc. (Leisurama). The original concessions contract provided Leisurama with a possessory interest in improvements created under the contract pursuant to the following provision: "It is the intention of the parties that the Concessioner shall have a possessory interest in all concessioner's improvements consisting of all incidents of ownership, except legal title which shall be vested in the United States." On July 1, 1975, Leisurama assigned the original concessions contract to Lake Mead Enterprises, Inc. On March 14, 1979, Lake Mead Enterprises, Inc. assigned the original concessions contract to an entity identified as Lake Mead Resort. The parties have stipulated that the original concessions contract and its corresponding possessory interest were subsequently assigned to Seven Resorts in 1987. Under section 2 of the original concessions contract, Seven Resorts was authorized "to provide accommodations, facilities, and services for the public at the Boulder Beach Site within Lake Mead National Recreation Area," including the provision of marina and lodging facilities. Specifically, section 2 of the original concessions contract authorized:

1. Marine services, including: Boat docks and slips, boat repair and mooring service, rental of boats and motors, fueling facilities, and unscheduled charter service (boat and pilot).

2. Food and beverage service facilities, including on and off sale of liquor, beer, and wine.

3. Marine and general merchandising facilities.

4. Dry boat storage area.

5. Lodging facilities and services.

6. Any and all services and facilities which are customary in connection with such operations.

The original concessions contract had a twenty-five year term, from January 1, 1973 to December 31, 1997. The original concessions contract, at section 12(b), also contained a clause that allowed for a continuation of operations after the expiration of the original concessions contract's term. The continuation clause stated in relevant part:

To avoid interruption of service to the public upon the termination of this contract for any reason, the Concessioner, upon the request of the Secretary, will (1) continue to conduct the operations authorized hereunder for a reasonable time to allow the Secretary to select asuccessor, or (2) consent to the use by a temporary operator designated by the Secretary of the concessioner's improvements and personal property . . . .

NPS invoked the continuation clause at various points after the expiration of the original concessions contract's term on December 31, 1997, purporting to authorize Seven Resorts to continue operations until December 31, 2008.

According to the original concessions contract, Seven Resorts had a possessory interest in "all concessioner's improvements," which included "buildings, structures, fixtures, equipment, and other improvements . . . ." The original concessions contract further provided that Seven Resorts' possessory interest in these improvements could not "be extinguished by the expiration or other termination of this contract, and may not be terminated or taken² for public use without just compensation." The original concessions contract described how to value "just compensation" for the termination or "taking" of Seven Resorts' possessory interest in two circumstances, by payment of either "sound value" or "book value." Specifically, section 12(a) of the original concessions contract provided:

(a)(1) If for any reason, the Concessioner shall cease to be authorized to conduct the operations authorized hereunder, or any of them, and thereafter such operations are to be conducted by a successor, whether a private person or an agency of the government . . . the Secretary will require such successor, as a condition to the granting of a permit or contract to operate, to purchase from the Concessioner such possessory interest and other property, and to pay the Concessioner the fair value thereof. The fair value of a possessory interest shall be deemed to be the sound value of the improvement to which it relates at the time of transfer of such possessory interest, without regard to the term of the contract. The sound value of any structure, fixture, or improvement shall bedetermined upon the basis of reconstruction cost less depreciation evidenced by its condition and prospective serviceability in comparison with a new unit of like kind, but not to exceed fair market value. . . .

(2) If the Secretary shall determine that, during the term of this contract or upon its termination for any reason, it is desirable to discontinue the operations authorized hereunder, or any of them, and/or to abandon, remove, or demolish any of the concessioner's improvements, then the Secretary will, before making such determination effective, take such action as may be necessary to assure the Concessioner of compensation . . . for its possessory interest in such improvements in the amount of their book value, provided that is such an improvement is to be replaced by the Concessioner then such compensation shall be the sound value thereof determined as provided in subsection (a)(1) of this section . . . .

(emphasis added; indentation in original). Under section 12(a), therefore, if NPS discontinued Seven Resorts operations and subsequently authorized the continuation of those operations by a successor contractor, Seven Resorts was to receive sound value for its possessory interest. If there was no successor to Seven Resorts, and the Secretary³ made a determination to discontinue operations during the original concessions contract's term, or "upon its termination for any reason," Seven Resorts was to receive book value for its possessory interest. The original concessions contract also provided that "[p]erformance of the obligations assumed by the Secretary under Section 12 herein shall constitute just compensation in the circumstances therein described," indicating that section 12(a) did not necessarily provide the exclusive method of measuring just compensation in the event Seven Resorts made a possessory interest claim. (emphasis added).

As a result of the discontinuation of Seven Resorts' operations, on December 31, 2008, Seven Resorts seeks sound value for its possessory interests in the lodging facilities⁴ constructed under the original concessions contract (Lake Mead Lodge), which include:

the lodge structure and all of its associated improvement including but not limited to the office and conference building, swimming pool, utilities suchas electric and sewers, sidewalks, fencing, landscaping; and the fuel system, including but not limited to the utility chase and equipment, sewage lift pump, digging costs and a Nevada Environmental Upgrade.

Seven Resorts asserts that NPS breached the terms of the original concessions contract by refusing to compensate Seven Resorts using sound value to value its possessory interest. Based perhaps, in part, on the continuous uncertainty over whether NPS would authorize continued operations at the Boulder Beach Site following Seven Resorts removal, and even after Seven Resorts filed its complaint, plaintiff has advanced different arguments at various times as to why it is entitled to sound value for its possessory interest under the original concessions contract. Seven Resorts' complaint alleges that it is entitled to sound value for its possessory interest in Lake Mead Lodge "[p]ursuant to the terms of the Contract and the 1965 Concessions Act, 16 U.S.C. § 20e . . . ." In its motion for partial summary judgment, however, Seven Resorts argues that it is entitled to sound value either pursuant to the terms of the original concessions contract or the National Park Service Concessions Management Improvement Act of 1998 (the 1998 Concessions Act), Pub. L. No. 105-391, Title IV, 112 Stat. 3503 (1998) (codified as amended at 16 U.S.C. §§ 5951-66 (2006)). The 1965 Concessions Act and the 1998 Concessions Act are described more fully below. In a supplemental brief, Seven Resorts most recently argued that it is entitled to sound value under the original concessions contract, the 1965 Concessions Act, and the 1998 Concessions Act.

Defendant, however, argues that Seven Resorts is entitled to book value for its possessory interest under the terms of the original concessions...