Scott Timber Co. v. United States , 692 F.3d 1365 ( 2012 )

United States Court of Appeals
for the Federal Circuit
__________________________
SCOTT TIMBER COMPANY,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
__________________________
2011-5092
__________________________
Appeal from the United States Court of Federal
Claims in case no. 05-CV-708, Judge Charles F. Lettow.
__________________________
Decided: September 5, 2012
___________________________
ALAN I. SALTMAN, Smith, Currie & Hancock LLP of
Washington, DC, argued for plaintiff-appellee. With him
on the brief was RUTH G. TIGER. Of counsel on the brief
was JAMES J. WHITE, of Ann Arbor, Michigan.
ELLEN M. LYNCH, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
Justice, of Washington, DC, argued for defendant-
appellant. With her on the brief were TONY WEST, Assis-
tant Attorney General, JEANNE E. DAVIDSON, Director,
and BRYANT G. SNEE, Deputy Director.
__________________________
SCOTT TIMBER COMPANY v. US 2
Before LOURIE, DYK, and WALLACH, Circuit Judges.
Opinion for the court filed by Circuit Judge DYK. Dissent-
ing opinion filed by Circuit Judge WALLACH.
DYK, Circuit Judge.
The United States appeals from a judgment of the
Court of Federal Claims (“Claims Court”) finding that the
government breached three timber-harvesting contracts
and awarding damages to Scott Timber Company
(“Scott”). See Scott Timber Co. v. United States (“Dam-
ages Decision”), 97 Fed. Cl. 685 (2011); Scott Timber Co. v.
United States (“Liability Decision”), 86 Fed. Cl. 102(2009). We reverse.
BACKGROUND
I
This is another in a series of cases involving allega-
tions that the government breached contracts for the sale
of timber on public lands. Timber-harvesting contracts,
such as those at issue here, allow the contract holder to
cut and remove a specified volume of timber from desig-
nated federally-owned lands during a designated period of
time. Here, the United States Forest Service held oral
auctions in October 1998 for the sale of timber on plots of
land in the Umpqua National Forest in the Pacific
Northwest, including plots named Pigout, Jigsaw, and
Whitebird. At the time, Scott was pursuing litigation
against the government based on delays in other contracts
resulting from environmental litigation. See Scott Timber
Co. v. United States (“Scott I”), 333 F.3d 1358, 1362 (Fed.
Cir. 2003) (action initiated on October 27, 1994). Before
the October 1998 auctions for the Pigout, Jigsaw, and
Whitebird plots, the Forest Service read a notice telling
“prospective bidders that the sale is currently under
[environmental] litigation and award may be delayed.”
3 SCOTT TIMBER COMPANY v. US
J.A. 207. The Forest Service awarded the timber con-
tracts for Pigout, Jigsaw, and Whitebird to Scott on July
8, 1999. Curiously, the initial harvesting period for each
of the contracts is not clear from the record, but the period
apparently spanned the time from 2000 to 2003.
Because of the risk posed by potential environmental
litigation, and by litigation against the government for
the resulting delays, the government included provisions
in the timber-harvesting contracts involved here authoriz-
ing the Forest Service to suspend the awarded contracts
in order to comply, for example, with a court order enjoin-
ing harvesting on the involved lands. The suspension
provision in each of the Pigout, Jigsaw, and Whitebird
contracts provided in relevant part:
CT6.01 – INTERRUPTION OR DELAY OF
OPERATIONS. . . . Purchaser agrees to interrupt
or delay operations under this contract, in whole
or in part, upon the written request of Contracting
Officer:
(a) To prevent serious environmental degrada-
tion or resource damage that may require con-
tract modification under CT8.3 or termination
pursuant to CT8.2;
(b) To comply with a court order, issued by a
court of competent jurisdiction; or
(c) Upon determination of the appropriate Re-
gional Forester, Forest Service, that condi-
tions existing on this sale are the same as, or
nearly the same as, conditions existing on
sale(s) named in such an order as described in
(b).
Purchaser agrees that in the event of interruption
or delay of operations under this provision, that
SCOTT TIMBER COMPANY v. US 4
its sole and exclusive remedy shall be: (i) Contract
Term Adjustment pursuant to BT8.21 . . . plus
out-of-pocket expenses incurred as a direct result
of interruption or delay of operations under this
provision. Out-of-pocket expenses do not include
lost profits, attorney’s fees, replacement cost of
timber, or any other anticipatory losses suffered
by Purchaser . . . .
J.A. 67-68, 85, 103 (emphases added). In the event of a
suspension delaying the performance, the contract pro-
vided for a term adjustment “to include additional calen-
dar days in one or more Normal Operating Seasons equal
to the actual time lost.” J.A. 62, 79, 97 (Provision BT8.21
Contract Term Adjustment). However, the suspension
clause specifically prohibited the award of “lost profits,
attorney’s fees, replacement cost of timber, or any other
anticipatory losses suffered” by Scott as the result of an
authorized suspension. J.A. 67, 85, 103.
At the time of the award, Oregon Natural Resources
Council Action (“Oregon Natural”) had brought suit
against the government claiming that the Forest Service
“ha[d] violated the Northwest Forest Plan adopted in
1994, and hence ha[d] violated applicable statutes, by
authorizing timber sales without first conducting surveys
for certain species of wildlife.” Oregon Natural Res.
Council Action v. U.S. Forest Serv., 59 F. Supp. 2d 1085,
1087 (W.D. Wash. 1999). The Plan required that surveys
of certain species of wildlife “must be completed prior to
ground disturbing activities that will be implemented”
after a specified cut-off date. J.A. 179. The Plan encom-
passed the area including the Pigout, Jigsaw, and White-
bird plots. Oregon Natural’s July 1998 complaint did not
identify any particular timber sales. However, the com-
plaint challenged the validity of the Forest Service’s
interpretation of the Northwest Forest Plan that ex-
5 SCOTT TIMBER COMPANY v. US
empted various timber sales in the Pacific Northwest,
including those in dispute here, from the Plan’s survey
requirements. Oregon Natural, 59 F. Supp. 2d at 1087-
88. The suit was a matter of public record.
On July 26, 1999, following a hearing, and after the
award of the contracts in question, the Oregon Natural
court issued a preliminary injunction against further
operations under two timber sales, neither of which is at
issue here. On August 2, 1999, the district court deter-
mined on summary judgment that the Forest Service had
failed to perform wildlife surveys as required by the
Northwest Forest Plan prior to awarding certain other
timber contracts in the Pacific Northwest, and expanded
the preliminary injunction to include additional timber
sales, again not including the sales at issue here. See id.
at 1093, 1097. The district court rejected the Forest
Service’s theory that certain timber sales were exempt
from the Plan’s survey requirements because, according to
the Forest Service, environmental impact assessments
under the National Environmental Policy Act (“NEPA”)
had been successfully completed before the cut-off date
and such NEPA determinations were equivalent to “im-
plementation” of ground disturbing activities under the
Plan. 1
1 The Forest Service had issued interpretive memo-
randa stating that timber sales for which environmental
impact assessments had already been completed before
the cut-off date were exempt from the Northwest Forest
Plan’s survey requirements, even if the actual ground-
disturbing activities had not commenced before the cut-off
date. Oregon Natural, 59 F. Supp. 2d at 1088. The
Claims Court characterized this interpretation as the
“NEPA decision equals implementation” interpretation.
See Liability Decision, 86 Fed. Cl. at 113. The Oregon
Natural plaintiffs challenged the validity of the Forest
Service’s administrative interpretation, and thereby
SCOTT TIMBER COMPANY v. US 6
On August 26, 1999, the court expanded the prelimi-
nary injunction to include another twenty-five sales,
including the Pigout, Jigsaw, and Whitebird sales. See
Order on Additional Motions re Preliminary Injunction,
Oregon Natural Res. Council Action v. U.S. Forest Serv.,
No. 98-CV-942, slip op. at 9 (W.D. Wash. Aug. 26, 1999).
In this order, the court noted that the Forest Service had
“inform[ed] at least some purchasers that the sales were
subject to litigation,” and that “[e]ven without an explicit
mention, the prospect of an injunction was obvious.” Id.
at 5. Pursuant to the court’s order, the Forest Service
suspended the Pigout, Jigsaw, and Whitebird contracts on
August 31, 1999.
In November 1999, the Forest Service entered into a
settlement agreement with the Oregon Natural plaintiffs
under which the Forest Service agreed to “continue th[e]
suspension of current operations” under certain timber
harvesting contracts, including the Pigout, Jigsaw, and
Whitebird contracts, until the Forest Service completed
the required wildlife surveys. J.A. 214-15. The district
court ordered compliance with the settlement agreement
on December 17, 1999, and dismissed the case “subject
only to reinstatement for enforcement against material
breach” of the settlement agreement. J.A. 214.
In accordance with the Oregon Natural court’s order,
the Forest Service began conducting surveys for protected
species in September 1999, and continued those surveys
pursuant to the settlement agreement. The Jigsaw and
Whitebird surveys were completed in the fall of 2000.
However, Forest Service continued the suspension of the
Jigsaw and Whitebird contracts due to litigation initiated
challenged the Forest Service’s ability to proceed with
timber sales in the region without completing the re-
quired surveys. Oregon Natural, 59 F. Supp. 2d at 1088.
7 SCOTT TIMBER COMPANY v. US
on March 22, 2001, and titled Umpqua Watersheds, Inc. v.
U.S. Forest Service, No. 01-399 (D. Or. Mar. 22, 2001).
The Umpqua Watersheds plaintiffs, who had been co-
plaintiffs in the Oregon Natural litigation, alleged that
environmental assessments for lands including the Jig-
saw and Whitebird plots “fail[ed] to adequately disclose
and analyze the environmental impacts of the projects.”
See Order, Umpqua Watersheds, Inc. v. U.S. Forest Serv.,
No. 01-399, slip op. at 3 (D. Or. Nov. 2, 2001) (describing
complaint). On November 2, 2001, the Umpqua Water-
sheds court dismissed the claims affecting the Jigsaw and
Whitebird contracts on res judicata grounds, see id. at 9-
12, and the Ninth Circuit affirmed in relevant part on
May 28, 2003, Headwaters, Inc. v. U.S. Bureau of Land
Mgmt., 65 F. App’x 636. The Jigsaw and Whitebird
suspensions were subsequently lifted on June 9, 2003.
Meanwhile, the Pigout surveys were completed on
August 7, 2001, and the Pigout suspension was lifted on
June 11, 2002. The lifting of the Pigout suspension was
not affected by the Umpqua Watersheds litigation. Scott
subsequently harvested the total amount of timber cov-
ered by the Pigout, Jigsaw, and Whitebird contracts
between 2004 and 2008.
II
On June 30, 2005, Scott filed an action in the Claims
Court seeking damages for the government’s alleged
breach of the Pigout, Jigsaw, and Whitebird contracts.
After a trial on liability, the Claims Court found the
government liable for breaching each of the contracts. See
Liability Decision, 86 Fed. Cl. at 104, 121. The Claims
Court first concluded that the Forest Service’s award of
the three contracts without informing Scott of the risks to
those contracts posed by the Oregon Natural litigation
“amounted to a breach of [the government’s] implied duty
SCOTT TIMBER COMPANY v. US 8
[of good faith and fair dealing].” Id. at 118. Second, the
Claims Court found that, while acting pursuant to the
settlement agreement, the Forest Service “unreasonably
delayed completing the surveys of the Pigout, Jigsaw, and
Whitebird timber areas . . . [which] unduly lengthen[ed]
the contract suspension periods.” Damages Decision, 97
Fed. Cl. at 689-90 (summarizing liability decision). The
Claims Court found that all of the required surveys could
have been completed by the spring of 2000, but the Jigsaw
and Whitebird surveys were not completed until the fall of
2000, and the Pigout surveys were not completed until
August 2001. The Claims Court also found that the
Forest Service “unreasonably . . . continu[ed] the suspen-
sions of [the Jigsaw and Whitebird] contracts even after
the requisite surveys had been completed, because of the
existence of [the Umpqua Watersheds] lawsuit in which
no injunction was ever issued.” Id.
After a trial on damages, the Claims Court found that
the government was liable not only for Scott’s alleged
losses, but also for those of Scott’s sister company, Rose-
burg Forest Products. The Claims Court determined that
the contracts required Scott to process the logs and that
Roseburg was a subcontractor of Scott for this purpose.
The Claims Court concluded that Scott was entitled to
recover Roseburg’s losses via a so-called “pass-through”
claim, and that Roseburg experienced $6,771,397 in lost
profits as a result of the lost opportunity to process the
logs. The Claims Court determined that Scott itself was
entitled to recover $28,742 in lost profits and $129,599 in
additional costs to purchase commodity quality hem-fir
logs to replace those it would have harvested under the
contracts in 2000 and 2001. The Claims Court offset
Scott’s award by $62,638 to account for profits actually
made in 2007 and 2008 on premium quality logs, but
declined to offset Scott’s award by Scott’s profits actually
9 SCOTT TIMBER COMPANY v. US
made in 2007 and 2008 on the Pigout, Jigsaw, and White-
bird non-premium timber.
The government timely appealed. We have jurisdic-
tion under 28 U.S.C. § 1295(a)(3).
DISCUSSION
We review legal conclusions of the Claims Court with-
out deference and its findings of fact for clear error. Ind.
Mich. Power Co. v. United States, 422 F.3d 1369, 1373
(Fed. Cir. 2005). Contract construction is a question of
law, which we review de novo. Sevenson Envtl. Servs.,
Inc. v. Shaw Envtl., Inc., 477 F.3d 1361, 1364-65 (Fed.
Cir. 2007).
I
The government challenges the Claims Court’s hold-
ing that the Forest Service breached the implied duty of
good faith and fair dealing by failing to notify Scott that
the timber contracts were at risk of being suspended due
to the Oregon Natural litigation.
As noted earlier, the Oregon Natural litigation was
initiated in July 1998, but the Pigout, Jigsaw, and White-
bird contracts were not originally identified in Oregon
Natural’s July 1998 complaint. The government con-
ducted settlement negotiations “to avoid a temporary
restraining order or preliminary injunction.” Liability
Decision, 86 Fed. Cl. at 106. In the course of the ongoing
settlement negotiations in Oregon Natural (which oc-
curred before the award of the contracts), each of the
three contracts was identified by Oregon Natural on “lists
of ‘at risk’ timber sales that [Oregon Natural] believed
‘fail[ed] to comply with the Northwest Forest Plan, and
. . . would need to be withheld from award pending [the]
negotiations.’” Id. Pigout was identified as an “at risk”
sale in a letter from Oregon Natural to the government
SCOTT TIMBER COMPANY v. US 10
dated August 26, 1998. Jigsaw and Whitebird were later
identified as “at risk” sales in a subsequent letter from
Oregon Natural to the government dated July 6, 1999.
Although at each of the auctions in October of 1998
the Forest Service read a standard notice to “prospective
bidders that the sale is currently under litigation and
award [of the timber contracts] may be delayed,” J.A. 207,
and although the Oregon Natural litigation was a matter
of public record, the government never notified Scott that
Pigout was identified by Oregon Natural as an “at risk”
sale before the October 1998 auction, or that Jigsaw and
Whitebird were identified by Oregon Natural as “at risk”
sales on July 6, 1999, immediately before the award of the
contracts on July 8, 1999. Apparently, the government
thought that the lists were confidential because they were
part of a settlement negotiation.
The Claims Court held that due to “the circumstances
surrounding why the suspension occurred and the degree
of knowledge held by the Government at certain times, it
was unreasonable for the Forest Service to have awarded
these contracts to Scott without informing Scott of the
specific risks to its contracts from the [Oregon Natural]
litigation.” Liability Decision, 86 Fed. Cl. at 118 (internal
quotation marks omitted). The Claims Court accordingly
held that the Forest Service’s failure to inform Scott of the
Oregon Natural litigation “amounted to a breach of its
implied duty” of good faith and fair dealing. 2 Id. We
disagree.
2 The Claims Court termed the government’s duty
as an “implied duty to cooperate.” Liability Decision, 86
Fed. Cl. at 118. We have previously recognized that the
implied duty of good faith and fair dealing encompasses
the implied duty not to hinder and the implied duty to
cooperate. Precision Pine & Timber, Inc. v. United States,
596 F.3d 817, 827 (Fed. Cir. 2010). For simplicity, we will
11 SCOTT TIMBER COMPANY v. US
The Forest Service could not have breached the cove-
nant of good faith and fair dealing by its pre-award con-
duct because the covenant did not exist until the contract
was signed. “Every contract imposes upon each party a
duty of good faith and fair dealing in its performance and
its enforcement.” Restatement (Second) of Contracts § 205
(1981). But that duty “does not deal with good faith in the
formation of a contract.” Id. cmt. c. As our sister circuits
have explained, “because the existence of th[e] covenant
[of good faith and fair dealing] depends on the existence of
an underlying contractual relationship, there is no claim
for a breach of this covenant where a valid contract has
not yet been formed.” Mountain Highlands, LLC v.
Hendricks, 616 F.3d 1167, 1171 (10th Cir. 2010) (internal
quotation marks omitted); see also AccuSoft Corp. v. Palo,
237 F.3d 31, 45 (1st Cir. 2001) (“[T]he covenant applies
only to conduct during performance of the contract, not to
conduct occurring prior to the contract’s existence.”);
Indep. Order of Foresters v. Donald, Lufkin & Jenrette,
Inc., 157 F.3d 933, 941 (2d Cir. 1998) (“[T]he implied
covenant of good faith and fair dealing does not apply to
. . . pre-contract conduct . . . .”). This does not suggest that
pre-contract actions by the government cannot bear on
the question of whether the government has complied
with its obligations that are eventually imposed by the
contract. For example, if the contract obligates the gov-
ernment to take action within a reasonable period, delays
by the government even before contract signing may bear
on the reasonableness of delays during the period that the
contract is in force. See Scott I, 333 F.3d at 1368-69.
Although the Claims Court did not rely on the so-
called “superior knowledge” doctrine, Scott seeks to sus-
refer generally to the government’s implied duty of good
faith and fair dealing.
SCOTT TIMBER COMPANY v. US 12
tain the Claims Court’s judgment on this theory. Even if
Scott’s claim were analyzed as a superior knowledge
claim, it would nonetheless fail. “The superior knowledge
doctrine imposes upon a contracting agency an implied
duty to disclose to a contractor otherwise unavailable
information regarding some novel matter affecting the
contract that is vital to its performance.” Giesler v.
United States, 232 F.3d 864, 876 (Fed. Cir. 2000).
The doctrine of superior knowledge is generally
applied to situations where (1) a contractor under-
takes to perform without vital knowledge of a fact
that affects performance costs or duration, (2) the
government was aware the contractor had no
knowledge of and had no reason to obtain such in-
formation, (3) any contract specification supplied
misled the contractor or did not put it on notice to
inquire, and (4) the government failed to provide
the relevant information.
Hercules Inc. v. United States, 24 F.3d 188, 196 (Fed. Cir.
1994) (internal quotation marks omitted).
As Hercules and other cases make clear, the doctrine
only applies if “the government was aware the contractor
had no knowledge of and had no reason to obtain such
information” and “any contract specification supplied
misled the contractor or did not put it on notice to in-
quire.” Id. Here, the government explicitly put Scott (and
all other bidders) on notice that the contracts were “cur-
rently under litigation and award may be delayed.” J.A.
207. Though the Forest Service did not disclose that the
Pigout, Jigsaw, and Whitebird contracts had been identi-
fied by the Oregon Natural plaintiffs on a list of “at-risk”
contracts before the award, the government did not mis-
lead Scott, and the pre-auction notice put Scott on notice
of the risk that the contracts would be suspended. As the
13 SCOTT TIMBER COMPANY v. US
Oregon Natural court itself noted, “[e]ven without an
explicit mention, the prospect of an injunction was obvi-
ous. The [government] and the [timber company]-
intervenors entered the timber sale agreements with
knowledge that a suspension could occur.” Oregon Natu-
ral, No. 98-CV-942, slip op. at 5 (W.D. Wash. Aug. 26,
1999). The notice here, in fact, was far more explicit than
notices found sufficient in other cases. See, e.g., Glasgow
Assocs. v. United States, 495 F.2d 765, 766, 769 (Ct. Cl.
1974) (finding that the industry’s general knowledge that
government-guaranteed interest rates could rise gave the
plaintiff sufficient notice to protect itself from such an
increase and precluded a superior knowledge claim).
Accordingly, the government satisfied any duty it had to
disclose the pending litigation to Scott. 3
We reverse the Claims Court’s holding that the gov-
ernment is liable for breaching the duty of good faith and
fair dealing in awarding the Pigout, Jigsaw, and White-
bird contracts to Scott.
II
Scott contends that suspension was not authorized af-
ter December 17, 1999, because the suspensions were not
thereafter necessary to “comply with a court order,” but
rather to comply with a settlement agreement in the
Oregon Natural litigation. The Claims Court appears to
have rejected this theory, see Liability Decision, 86 Fed.
3 The Claims Court also found that the Forest Ser-
vice should have informed Scott of the “weakness of its
‘NEPA decision equals implementation’ interpretation.”
Liability Decision, 86 Fed. Cl. at 118. However, the
government had no obligation to disclose the merit, or
lack of merit, of any argument it was making before the
Oregon Natural court.
SCOTT TIMBER COMPANY v. US 14
Cl. 119-20, and Scott’s contention is, in any event, without
merit.
In the November 1999 settlement agreement with the
Oregon Natural plaintiffs, the Forest Service agreed that
it “shall continue th[e] suspension of current operations”
under various timber harvesting contracts, including the
Pigout, Jigsaw, and Whitebird contracts, “until Defen-
dants have completed surveys and any species locations
have been managed in accordance with the survey proto-
cols and management standards applicable to such land
management actions at the time of the Defendants’ deci-
sion to lift th[e] suspension.” J.A. 214-15. The district
court entered the stipulation agreement as a formal order
of the court and dismissed the case on December 17, 1999,
“subject only to reinstatement for enforcement against
material breach” of the settlement agreement. J.A. 214.
Scott argues that the Forest Service did not have the
authority to continue the suspensions of the contracts
pursuant to the settlement agreement. We disagree.
Here, the surveys were initiated because the court
had enjoined further operations under the contracts due
to the Forest Service’s previous failure to perform those
required surveys. The settlement agreement provided for
their continuation, and was the result of an order by the
district court instructing the parties to negotiate such an
agreement regarding the surveys. See Minute Order,
Oregon Natural, No. 98-CV-942 (W.D. Wash. Aug. 27,
1999). The district court specifically ordered compliance
with the settlement agreement. The district court con-
templated that, if the surveys were not conducted, a court
order would be entered enforcing the agreement and, for
that purpose, maintained jurisdiction. See J.A. 214. The
agreement specifically stated that the action was “subject
only to reinstatement for enforcement against material
breach of the following points of agreement.” J.A. 214.
15 SCOTT TIMBER COMPANY v. US
Among those “points of agreement” was the Forest Ser-
vice’s promise to “continue th[e] suspension of current
operations” under various timber harvesting contracts,
including the Pigout, Jigsaw, and Whitebird contracts,
until, among other things, the required surveys were
completed. J.A. 214. In this light, it is clear that the
agreement was the equivalent of a “court order” within
the suspension clause of the contracts. Accordingly, the
Forest Service had the authority to continue the suspen-
sions of those contracts while it was completing the sur-
veys required by the settlement agreement.
III
The government also challenges the Claims Court’s
holding that in conducting the surveys pursuant to the
court order and settlement agreement the Forest Service
“unreasonably delayed completing the surveys . . . [which]
unduly lengthen[ed] the contract suspension periods.”
Damages Decision, 97 Fed. Cl. at 689-90.
This issue is directly controlled by Precision Pine &
Timber, Inc. v. United States, 596 F.3d 817 (Fed. Cir.
2010). As in this case, the Forest Service in Precision
Pine had suspended timber-harvesting under contracts
with identical suspension clauses in order “to comply with
a court order.” Id. at 828. “Because the suspensions were
authorized, the only remaining question [wa]s whether
the Forest Service’s actions during the suspensions vio-
lated the implied duty of good faith and fair dealing.” Id.We concluded that the Forest Service did not breach its
implied duty of good faith and fair dealing because its
actions during the suspensions “were (1) not ‘specifically
targeted,’ and (2) did not reappropriate any ‘benefit’
guaranteed by the contracts, since the contracts contained
no guarantee that . . . performance would proceed unin-
terrupted.” Id. at 829.
SCOTT TIMBER COMPANY v. US 16
Here too, Scott has not established specific targeting
because there is no evidence that any delays in complet-
ing the surveys were incurred “for the purpose of delaying
or hampering [Scott’s] contracts.” Id. at 830. Here too,
the suspension clauses expressly qualified Scott’s bar-
gained-for harvesting rights, and uninterrupted perform-
ance cannot be considered a “‘benefit’ guaranteed by the
contracts.” Id. As in Precision Pine, the Forest Service’s
actions while conducting the required surveys did not
breach its implied duty of good faith and fair dealing.
Scott argues that we should decline to apply Precision
Pine because, according to Scott, it is inconsistent with
our prior decision in Scott I, 333 F.3d 1358. As a panel,
we are obliged to follow Precision Pine if the cases are
consistent. See Sacco v. Dep’t of Justice, 317 F.3d 1384,
1386 (Fed. Cir. 2003) (“A panel of this court is bound by
prior precedential decisions unless and until overturned
en banc.”). The two cases are easily reconcilable. The
timber contracts in Scott I were initially suspended in
order to comply with a temporary restraining order. 333
F.3d at 1361. But the suspensions were continued under
contract provision C6.01(a) after the expiration of the
order “to prevent serious environmental degradation or
resource damage.” Scott Timber Co. v. United States, 40
Fed. Cl. 492, 501 (1998). We found that the “serious
environmental degradation” clause only authorized sus-
pensions for a “reasonable” period of time. Scott I, 333
F.3d at 1368. We held that if the suspension continued
for an unreasonable period, there was a breach of the
contract, and remanded for a determination of whether
the prolonged suspensions were unreasonable. Precision
Pine, as here, dealt with the “court order” clause, which
does not require that the court order—issued by an inde-
pendent court—be limited to a reasonable period of time.
Despite the scope of the “court order” clause, Precision
17 SCOTT TIMBER COMPANY v. US
Pine argued that the implied duty of good faith and fair
dealing required that actions ordered by the court be
completed in a reasonable period. As our predecessor
court ruled in David Nassif Assocs. v. United States, 644
F.2d 4, 12 (Ct. Cl. 1981), “the assertion of a legitimate
contract right cannot be considered as violative of a duty
of good faith and fair dealing.” Significantly, here, as in
Precision Pine, the obligation to comply with the injunc-
tion is not owed to the timber company but to the court
that issued the injunction and the party that sought the
injunction. There is no basis for redefining the concept of
good faith and fair dealing to include a requirement of
diligence in complying with obligations imposed by an-
other tribunal in a separate case. The only basis here to
find liability would be if the government’s purpose in
delaying compliance with the injunction was to specifi-
cally target the plaintiff and reappropriate a benefit
guaranteed by a contract with the plaintiff. Precision
Pine, 596 F.3d at 829. Just as neither condition was
satisfied in Precision Pine, neither condition is satisfied
here. Precision Pine and Scott I are not inconsistent. 4
We reverse the Claims Court’s holding that the gov-
ernment is liable for the continued suspension of the
4 The dissent suggests that Precision Pine and Scott
I are irreconcilable because the contract suspensions in
both cases were pursuant to a court order. Dissenting Op.
at 6–7. In Scott I, however, the court order expired before
the Forest Service allegedly breached its implied duty of
good faith and fair dealing. Scott I, 333 F.3d at 1361. In
contrast, a court order was in effect at the time of the
alleged breach in Precision Pine. Precision Pine, 596 F.3d
at 828. Here, Precision Pine is held applicable only in the
period governed by the order, not in the period after the
order expired, as to which the government sought to
justify the delay on other grounds, an issue addressed in
the following discussion.
SCOTT TIMBER COMPANY v. US 18
Pigout, Jigsaw, and Whitebird contracts caused by delays
in the completion of the required wildlife surveys.
IV
The government also challenges the Claims Court’s
holding that the Forest Service was liable for the delay in
lifting the Jigsaw and Whitebird suspensions after the
surveys required by the Oregon Natural injunction and
settlement agreement had been completed.
The government continued the suspensions of the Jig-
saw and Whitebird contracts past the completion of the
surveys in the fall of 2000 because of other environmental
litigation in Umpqua Watersheds v. U.S. Forest Service,
No. 01-399 (D. Or. Nov. 2, 2001). However, the Claims
Court held that because “no injunctive order was ever
issued in the Umpqua Watersheds litigation,” the gov-
ernment had no “reasonable contractual basis” for con-
tinuing the suspensions. See Liability Decision, 86 Fed.
Cl. at 120. The Claims Court also held that the govern-
ment was liable for delaying the lifting of the Pigout
suspension as to the portions of Pigout for which the
surveys had been completed in 2000.
We need not reach the issue of whether the Forest
Service had the authority to continue the suspensions,
because, as described in detail below, Scott has failed to
establish that it suffered any damages. See Cosmo
Constr. Co. v. United States, 451 F.2d 602, 605-06 (Ct. Cl.
1971) (“[T]here must be some evidence of damage . . .
sufficient to demonstrate that the issue of liability is not
purely academic; that some damage has been incurred.”);
Puritan Assocs. v. United States, 566 F.2d 1191 (Ct. Cl.
1977) (Table) (“Even if . . . the assessment of damages is
reserved for the quantum phase of the case, the plaintiff
as part of its proof of entitlement, must show it was
19 SCOTT TIMBER COMPANY v. US
damaged to some extent, by defendant’s derelictions
. . . .”).
The $6,867,100 in damages to Scott had two compo-
nents: (1) an award of $6,771,397 in damages attributed
to the alleged loss incurred by Scott’s sister company,
Roseburg, and asserted by Scott via a pass-through claim;
and (2) an award of $95,703 in damages attributed to the
alleged loss incurred directly by Scott. We address each
separately.
A
Under the Severin doctrine, Scott may assert a “pass-
through” claim for Roseburg’s damages, i.e., on behalf of a
subcontractor, if Scott can establish that Roseburg is a
subcontractor for the purposes of the Pigout, Jigsaw, and
Whitebird contracts, and that Scott is liable to Roseburg
for Roseburg’s damages caused by the government’s
alleged breach. See Severin v. United States, 99 Ct. Cl.
435 (1943); see also Int’l Tech. Corp. v. Winter, 523 F.3d
1341, 1347-48 (Fed. Cir. 2008).
The Claims Court found that the domestic processing
provision in each of the Pigout, Jigsaw, and Whitebird
contracts obligated Scott to perform or provide for the
processing of the harvested timber. The Claims Court
then found that Roseburg was a subcontractor due to an
“implicit” agreement with Scott, under which “Roseburg
was required to process the logs that met its quality
specifications, in accordance with the domestic processing
requirements of Scott’s Forest Service timber-sales con-
tracts.” Damages Decision, 97 Fed. Cl. at 696. The
Claims Court thus held that Scott could recover Rose-
burg’s alleged losses from the government.
We conclude that Scott did not have a legitimate pass-
through claim against the government. The Pigout,
SCOTT TIMBER COMPANY v. US 20
Jigsaw, and Whitebird contracts did not require Scott to
provide for the processing of the harvested timber. Each
contract described Scott’s consideration with no reference
to processing:
In consideration of the premises and promises
hereinafter contained, unless provided otherwise
herein, Forest Service agrees to sell and permit
Purchaser to cut and remove and Purchaser
agrees to purchase, cut and remove Included Tim-
ber.
J.A. 55, 72, 90 (emphasis added). The Claims Court,
however, relied on the domestic processing provision in
each of the contracts, which stated in relevant part:
CT8.641# - USE OF TIMBER. (10/96) This con-
tract is subject to the Forest Resources Conserva-
tion and Shortage Relief Act of 1990 (16 U.S.C.
620, et seq.).
. . . [U]nprocessed Included Timber shall not be
exported from the United States nor used in direct
or indirect substitution for unprocessed timber
exported from private lands by Purchaser or any
person as defined in the Act (16 U.S.C. 620e).
...
Unless otherwise agreed in writing, unprocessed
Included Timber shall be delivered to a domestic
processing facility and shall not be mixed with
logs intended for export.
...
Prior to delivering unprocessed Included Timber
to another party, Purchaser shall require each
buyer . . . to execute an acceptable agreement,
which shall: (a) identify the federal origin of the
21 SCOTT TIMBER COMPANY v. US
timber, (b) specify domestic processing for the
timber involved, (c) require the execution of such
agreements between the parties to any subse-
quent transactions involving said timber, (d) re-
quire that all hammer brands and/or yellow paint
must remain on logs until they are either legally
exported or domestically processed, whichever is
applicable, and (e) otherwise comply with the re-
quirements of the Act (16 U.S.C. 620d).
J.A. 71, 88-89, 106-07 (emphases added). This provision
merely ensured compliance with export laws that require
processing to be done domestically. The domestic process-
ing provision only required that Scott “deliver[]” the
harvested timber to a processor. The provision did not
require that Scott provide for the processing of the timber,
much less that Scott undertake the processing. Because
processing is not required by the contracts, Roseburg
cannot be considered a subcontractor for the purposes of
those contracts.
Even if Roseburg were a subcontractor, Scott’s pass-
through claim would nonetheless fail. As stated above, in
order to establish a pass-through claim Scott must also
show that it is liable to Roseburg for Roseburg’s damages
caused by the government’s alleged breach. See Int’l
Tech. Corp., 523 F.3d at 1347-48. Here, Scott simply
agreed to use its “best efforts” to supply Roseburg with
timber. 5 Specifically, “Scott was required to use ‘best
5 Scott argues that the implied contract between
Scott and Roseburg was not a “best efforts” contract.
However, the only evidence of the existence of the con-
tract was the testimony of Mr. Ford, the president of both
Scott and Roseburg, which, as the Claims Court found,
explained that Scott was obligated “to use ‘best efforts’ to
purchase, harvest, and provide Roseburg with logs.”
Damages Decision, 97 Fed. Cl. at 696.
SCOTT TIMBER COMPANY v. US 22
efforts’ to purchase, harvest, and provide Roseburg with
logs.” Damages Decision, 97 Fed. Cl. at 696. Even if the
Forest Service’s suspensions of the harvesting contracts
were unauthorized, Scott did not breach its “best efforts”
contract with Roseburg by abiding by the suspensions.
“If, despite its best efforts,” Scott could not provide Rose-
burg with the contracted-for timber, then Roseburg “ob-
tained precisely what it bargained for, namely, [Scott]’s
best efforts.” Gen. Dynamics Corp. v. United States, 671
F.2d 474, 481 (Ct. Cl. 1982). Because Scott has not estab-
lished that it is liable to Roseburg, Scott cannot assert a
pass-through claim for Roseburg’s alleged damages.
For these reasons, we reverse the award of $6,771,397
to Scott for the alleged damages incurred by Scott’s sister
company, Roseburg.
B
Finally, we address the Claims Court’s award of
$95,703 in damages attributed to the loss allegedly in-
curred directly by Scott. The Claims Court determined
that Scott was entitled to recover $28,742 in lost profits,
plus $129,599 in additional replacement costs, minus
$62,638 to account for profits actually made in 2007 and
2008 on premium quality logs. We first consider Scott’s
alleged lost profits, and then consider Scott’s replacement
costs.
1
After the contract suspensions were lifted in 2002 and
2003, Scott harvested the timber covered by the contracts
between 2004 and 2008. Scott makes no claim that the
government’s alleged breach prevented it from harvesting
other timber during the period of performance of the
original contracts. Scott also does not claim that it could
have harvested the three plots covered by the contracts
23 SCOTT TIMBER COMPANY v. US
twice, once during the originally scheduled period, and
once at the later time. Under these circumstances, Scott
is limited to recovering any costs resulting from the delay
in performance. But Scott made no claim on appeal that
any delay in performance made the timber harvesting
under the contracts less profitable than if the timber had
been harvested in accordance with the original contracts.
See Restatement (Second) of Contracts § 246 cmt. b, illus.
2 (a non-breaching party who accepts delayed perform-
ance may claim “damages for partial breach because of
the delay”). Indeed, the $62,638 that Scott actually
earned in 2007 and 2008 on premium logs alone was
greater than Scott’s alleged $28,742 in losses in 2000 and
2001 on all other grades of logs that would have been
harvested and sold absent the suspensions. Accordingly,
Scott has not established that any delay in performance of
the Pigout, Jigsaw, and Whitebird contracts resulted in
lost profits.
2
The Claims Court also awarded $129,599 in costs for
replacing commodity-quality hem-fir logs that Scott would
have harvested under the contracts in 2000 and 2001
absent the suspensions. This does not fall within the
category of lost profits, and Scott makes no serious effort
to provide an alternative theory for awarding these costs.
Even if it had, there is no basis for such a claim. At the
time of the alleged breach, Scott was entitled to elect one
out of two options: (1) treat the suspensions as a total
breach, seek to rescind the contract, and sue for damages
including the costs of replacing the contracted-for timber;
or (2) treat the suspensions as a partial breach, accept the
government’s delayed performance, and sue for damages
caused by that delay. See Richard A. Lord, Williston on
Contracts § 39:32 (4th ed. 2000) (“When one party com-
mits a material breach of contract, the other party has a
SCOTT TIMBER COMPANY v. US 24
choice between two inconsistent rights—he or she can
either elect to allege a total breach, terminate the contract
and bring an action, or, instead, elect to keep the contract
in force, declare the default only a partial breach, and
recover those damages caused by that partial breach . . .
.”).
Scott chose to harvest the Pigout, Jigsaw, and White-
bird lands after the suspensions were lifted and thereby
elected to treat the suspensions as a partial breach. See
Williston on Contracts § 40:1 (“[I]f a party in default
under a contract is allowed to continue to perform, this
precludes any right of the other party to rescind the
contract or declare a material breach . . . because of any
known default that has already taken place.”). We have
held:
Damages [for a partial breach] are calculated on
the assumption that both parties will continue to
perform in spite of the breach. They therefore
compensate the injured party only for the loss it
suffered as the result of the delay or other defect
in performance that constituted the breach, not
for the loss of the balance of the return perform-
ance.
Yankee Atomic Elec. Co. v. United States, 536 F.3d 1268,
1280 (Fed. Cir. 2008) (quoting E. Alan Farnsworth,
Farnsworth on Contracts § 8.15 (2d ed. 2000)). Scott is
thus precluded from recovering damages on a theory of
material breach, including the $129,599 in claimed re-
placement costs.
For these reasons, we reverse the judgment of the
Claims Court.
REVERSED
United States Court of Appeals
for the Federal Circuit
__________________________
SCOTT TIMBER COMPANY,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
__________________________
2011-5092
__________________________
Appeal from the United States Court of Federal
Claims in Case No. 05-CV-708, Judge Charles F. Lettow.
__________________________
WALLACH, Circuit Judge, dissenting.
The court errs when it finds Scott I and Precision Pine
reconcilable and Scott I inapplicable in this case. See
Majority Op. at 15-18. These cases are irreconcilable, and
therefore this court should take the case en banc to re-
solve the conflict the two cases present or the panel
should hold that Scott I is the earlier, and therefore
precedential, decision over Precision Pine.
In Scott Timber Co. v. United States, 333 F.3d 1358(Fed. Cir. 2003) (“Scott I”), Appellant Scott Timber sought
review of the Court of Federal Claims’s (“Claims Court”)
grant of summary judgment which determined that the
Forest Service did not breach Scott Timber’s eleven tim-
ber sales contracts when it suspended performance on the
SCOTT TIMBER COMPANY v. US 2
contracts to protect the marbled murrelet, a threatened
species. Id. at 1360. We held, inter alia, that the text of
clause C6.01 expressly granted the Forest Service the
authority to suspend the contract. Id. at 1366. We also
found that “clause C6.01 does not authorize the Forest
Service to indefinitely or permanently suspend the con-
tracts.” Id. at 1368 (internal quotation omitted). We
articulated the proper course of action: “Therefore, in
order for the prolonged suspensions in this case to be
considered a breach of the C6.01 contracts, the court must
determine whether the suspensions were reasonable.” Id.(internal quotation omitted). Ultimately we remanded
the determination of reasonableness to the Claims Court,
noting that “[b]ecause the reasonableness issue is in-
tensely factual, this court finds that the [Claims Court]
erred when it determined the suspensions were reason-
able on summary judgment.” Id. at 1369.
Scott I, albeit sub silentio, fully addressed the duty of
good faith and fair dealing. Scott Timber originally
argued before the contracting officer “that the Forest
Service did not possess the contractual authority to sus-
pend any of the contracts at issue for an extended and
indefinite period of time, and that the Forest Service’s
continued suspension of the contracts therefore violated
the government’s duty not to unduly hinder Scott’s per-
formance of the contracts.” Scott Timber Co. v. United
States, 40 Fed. Cl. 492, 499 (1998), rev’d 44 Fed. Cl. 170(1999). 1
The Claims Court noted that Scott Timber’s argu-
ments in support of summary judgment were “virtually
1 In Precision Pine, we noted that both the duty not
to hinder and the duty to cooperate are aspects of the
implied duty of good faith and fair dealing. Precision Pine
& Timber, Inc. v. United States, 596 F.3d 817, 820 n.1
(Fed. Cir. 2010).
3 SCOTT TIMBER COMPANY v. US
identical” to those raised before the contracting officer. Id.Scott Timber moved for summary judgment, arguing “that
the Forest Service’s suspension of [the] contracts amounts
to a breach of the government’s implied duty to cooperate
and not hinder plaintiff’s performance of the contracts.”
Id. The Claims Court noted that Scott Timber correctly
argued that “the Forest Service was under an implied
duty to act reasonably in exercising its discretion under
Clause C6.01 . . . .” Id. at 502. The Court of Federal
Claims ultimately denied Scott Timber’s motion for sum-
mary judgment, id. at 507, and granted summary judg-
ment to the government, Scott Timber, 44 Fed. Cl. at 183.
Scott Timber appealed to this court challenging the
Claims Court’s decisions. Brief of Appellant, Scott Timber
Co. v. United States, 333 F.3d 1358 (Fed. Cir. 2003) (No.
02-5142), 2002 WL 32817253. On appeal, Scott Timber
specifically argued that breach of the implied duties
occurred and that reasonableness was the proper stan-
dard for measuring the breach. It stated:
[The contract language] does not mean that the
[Forest Service] can modify or cancel a contract
based on information that it had at the time of
bidding but which it chose not to disclose or that
the [Forest Service] can mislead the contractor by
making representations that it has complied with
certain procedures in preparing the contract speci-
fications when it had not. Such an interpretation
would be in direct conflict with the [Forest Ser-
vice’s] implied obligation of good faith and fair
dealing as well as its affirmative duty not to mis-
lead its contractors.
Id. at *27 (emphasis added). Scott Timber contended that
“the [Forest Service’s] suspension of Scott’s contracts was
unreasonable . . . [and] any unreasonable delay by the
SCOTT TIMBER COMPANY v. US 4
[Forest Service] in gathering facts in order to determine
whether to modify, cancel, or go forward with the con-
tracts constituted a breach of the [Forest Service’s] im-
plied duty of cooperation.” Id. at *37. Scott Timber also
argued that the Forest Service’s failure to follow the time
periods for action set forth in the Endangered Species Act
was evidence of unreasonableness sufficient to show “a
breach of the implied duties to cooperate and not to hin-
der the other party’s performance.” Id. at *40. Scott
Timber’s Reply Brief also emphasized the implied duties.
Scott argued that the contract language “cannot be read
in a vacuum as the government suggests but must be read
in light of the [Forest Service’s] implied duty of good
faith.” Reply Brief of Appellant, Scott Timber Co. v.
United States, 333 F.3d 1358 (Fed. Cir. 2003) (No. 02-
5142), 2003 WL 24031963.
While Scott I focused on the reasonableness of the
government’s actions, the history of the case demon-
strates that the purpose for discussing reasonableness
was as a measure for the type of breach of implied duties
claimed by Scott Timber.
More recently, in Precision Pine & Timber, Inc. v.
United States, 596 F.3d 817 (Fed. Cir. 2010), we revisited
the same contractual provisions in a different procedural
posture. Fourteen contracts were awarded to Precision
Pine & Timber, Inc. (“Precision Pine”) between June 1991
and July 1995. Id. at 821. In August 1995, these con-
tracts were suspended when a federal district court or-
dered the Forest Service to consult the U.S. Fish and
Wildlife Service about the impact on the Mexican spotted
owl of harvesting timber. Id. at 819-20. Precision Pine
subsequently brought suit at the Claims Court, which
found that the government had breached some, but not
all, of the provisions of its contracts. Id. at 823-24. We
reiterated that clause CT6.01 expressly granted the
5 SCOTT TIMBER COMPANY v. US
Forest Service the authority to suspend the contract. Id.
at 828-29. We also held, inter alia, that the Forest Ser-
vice’s actions did not breach any implied duty of good
faith and fair dealing. Id. at 830. We determined in
Precision Pine that there was no breach of the implied
duty of good faith and fair dealing, because “the Forest
Service’s actions during these formal consultations were
(1) not ‘specifically targeted,’ [at a benefit of Precision
Pine’s contract] and (2) did not reappropriate any ‘benefit’
guaranteed by the contracts, since the contracts contained
no guarantee that the Precision Pine’s performance would
proceed uninterrupted.” Id. at 829.
Both Scott I and Precision Pine articulate a standard
to be applied with regards to the implied duty of good
faith and fair dealing in the context of the relevant con-
tract provision, and the two are squarely opposed. The
majority states that Scott I and Precision Pine are recon-
cilable because Scott I’s timber contracts were suspended,
after the expiration of a temporary restraining order,
“under contract provision C6.01(a) . . . to prevent serious
environmental degradation or resource damage,” whereas
Precision Pine’s timber contracts were suspended pursu-
ant to the “court order” clause of the contracts. Majority
Op. at 16-17. 2
2 Purchaser agrees to interrupt or delay opera-
tions under this contract, in whole or in part, upon the
written request of Contracting Officer:
(a) To prevent serious environmental degradation
or resource damage that may require contract
modification under CT8.3 or termination pursuant
to CT8.2;
(b) To comply with a court order, issued by a court
of competent jurisdiction . . . .
J.A. at 67-68, 85, 103.
SCOTT TIMBER COMPANY v. US 6
This is a distinction without a difference. We cannot
reconcile these cases based on whether or not the suspen-
sion is pursuant to a court order because federal agencies,
like the Forest Service, are required by statute to suspend
affected timber sales under these circumstances. 16
U.S.C. § 1536(d). 3 In other words, the facts of this case
and other similar cases render the timber sales automati-
cally suspended without regard to how the suspensions
were initiated; in some cases there may be a court order,
in some cases not, but federal agencies are bound by
statute to suspend in either situation. 4
Additionally, factually, the present case parallels
Scott I not Precision Pine. The suspension of the con-
tracts at issue was initially pursuant to a district court
order but then was pursuant to no court order at all, but
3 d) Limitation on commitment of resources. Af-
ter initiation of consultation required under sub-
section (a)(2), the Federal agency and the permit
or license applicant shall not make any irreversi-
ble or irretrievable commitment of resources with
respect to the agency action which has the effect
of foreclosing the formulation or implementation
of any reasonable and prudent alternative meas-
ures which would not violate subsection (a)(2).
16 U.S.C. § 1536(d).
4 In Precision Pine, we noted: “While such consulta-
tions are taking place, § 7(d) of the [Endangered Species
Act] prohibited the Forest Service from making any
‘irreversible or irretrievable commitment of resources’
during the consultation process. 16 U.S.C. § 1536(d).”
Precision Pine, 596 F.3d at 821. “The Ninth Circuit
further explained that pursuant to its decision in Lane
County Audubon Society v. Jamison, 958 F.2d 290 (9th
Cir. 1992), timber sales were ‘per se irreversible and
irretrievable commitments of resources under section 7(d)
[of the ESA], and thus could not go forward during this
consultation period.’” Id. at 822 (quoting Pac. Rivers
Council v. Thomas, 30 F.3d 1050, 1057 (9th Cir. 1994)).
7 SCOTT TIMBER COMPANY v. US
pending litigation in a separate and unrelated case. See
Majority Op. at 6-7 (“However, Forest Service continued
the suspension of the Jigsaw and Whitebird contracts due
to litigation initiated on March 22, 2001 and titled Um-
pqua Watersheds, Inc. v. U.S. Forest Service, No. 01-399
(D. Or. Mar. 22, 2001).”). Precision Pine, on the other
hand, suspended pursuant to a court order. See id. at 14.
Scott I suspended pursuant, initially, to a court order, and
then pursuant to no court order at all. See id. at 15.
The correct inquiry under clause C6.01, as stated in
Scott I, is to “determine whether the suspensions were
reasonable,” Scott I at 1368 (internal quotation omitted),
regardless of the sub-provisions those suspensions in-
voked.
As a result, we are required to seek en banc resolution
or to follow the holding in Scott I, our earlier and there-
fore precedential decision. 5 The panel has rejected both of
these options; I respectfully dissent.
5 See Newell Cos., Inc. v. Kenney Mfg. Co., 864 F.2d
757, 765 (Fed. Cir. 1988) (“This court has adopted the rule
that prior decisions of a panel of the court are binding
precedent on subsequent panels unless and until over-
turned in banc. Where there is a direct conflict, the
precedential decision is the first.”) (internal citation
omitted); see also Preminger v. Sec’y of Veterans Affairs,
517 F.3d 1299, 1309 (Fed. Cir. 2008) (“A prior preceden-
tial decision on a point of law by a panel of this court is
binding precedent and cannot be overruled or avoided
unless or until the court sits en banc.”); cf. Gen. Protecht
Grp., Inc. v. Leviton Mfg. Co., Inc., 651 F.3d 1355, 1363
(Fed. Cir. 2011) (“Even if Leviton’s reading of the import
of that statement were correct, this would not be a direct
conflict of panel opinions as is necessary to invoke this
court’s rule of precedence.”).