American Ground Transportation, Inc. ( 2023 )

In the United States Court of Federal Claims
No. 20-123C
Filed: May 26, 2023
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AMERICAN GROUND *
TRANSPORTATION, INC. *
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and *
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LIBERTY LAUNCH, INC., *
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Plaintiffs, *
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v. *
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UNITED STATES, *
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Defendant. *
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Maryann Cazzell, Cazzell & Associates, California, for plaintiffs.
Joshua A. Mandlebaum, Trial Attorney, Commercial Litigation Branch, Civil
Division, Department of Justice, Washington, D.C., for defendant.
OPINION
FUTEY, Senior Judge.
This case concerns a concession contract formerly held by plaintiffs to provide
shuttle services on a military base. Plaintiffs’ complaint alleges that the United
States violated this contract and breached the duty of good faith and fair dealing
when the government permitted competitors to operate on base and to commit
various torts against plaintiffs. Plaintiffs also maintain that the United States’
actions constitute intentional interference with prospective economic relations,
negligent interference with prospective economic relations, and ordinary negligence.
Plaintiffs seek damages for all these alleged harms, subject to proof as to amount.
Currently before the Court is the government’s motion to dismiss the case.
Also pending is plaintiffs’ motion to strike one of the government’s exhibits. 1
The matter is now ripe for disposition.
I. BACKGROUND
a. Factual Background
Plaintiffs American Ground Transportation (American Ground) and its
subcontractor Liberty Launch, Inc. (Liberty) (together plaintiffs or the
Concessionaires) held a concession contract to provide base-wide shuttle service at
Camp Pendleton, CA (the Base). The Marine Corps Community Services (the
Agency), a nonappropriated fund instrumentality of the United States, awarded this
contract on December 13, 2010, after a competitive bidding process. Second Amend.
Compl. (Compl.), ECF No. 38, ¶ 21. The contract was to last for five years, with the
Agency holding the unilateral option to extend for up to five additional one-year
terms. Ex. 1 to Def.’s Mot. (Contract), ECF No. 39-1, at 1, 19. Plaintiffs replaced
the previous concessionaire, SeaBreeze, after a period with no contractor. Compl.
¶ 28. At the conclusion of the contract term, on December 31, 2015, the Agency
notified plaintiffs that it would not renew and would not award any concession
contract for these services in the future. Letter, Ex. 3 to Def.’s Mot., ECF No. 39-2.
The Agency, however, extended the contract until January 24, 2016, to give the
Concessionaires time to discontinue operations and leave the Base. Id.
Under the terms of the contract, the Agency agreed to “provide the
operational space to [American Ground] that is empty and without trade fixtures or
furniture,” to assist with “marketing and advertising” at plaintiffs’ expense, and to
coordinate with them about routes, hours of operation, and similar logistics.
Contract at 1, 10. In consideration, the Concessionaires paid a monthly commission
on sales and a monthly fee for the upkeep of each “location in shopping centers,
parking lots, etc. assigned and occupied as a fixed management or operations site.”
Id. at 6, 9, 19. “In the event office or operational building spaces are provided,” the
Concessionaires had additional repair obligations. Id. at 18.
The contract also contained a provision in Attachment A, labeled “Non-
Exclusivity Contract.” Id. at 47; see also id. at 1 (incorporating Attachment A into
the contract). This provision declares that that “[u]nless specified elsewhere, this
contract does not establish Contractor as the sole supplier of goods or services to be
1As discussed below, plaintiffs originally titled this document “objections to
evidence” but has since described it as a motion to strike. See Pls.’ Mot. To Strike
(Pls.’ Mot.), ECF No. 50, at 1; Pls.’ Reply on Mot. To Strike (Pls.’ Reply), ECF No.
53, at 1.
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provided on this military installation.” 2 Two merger clauses also appear in the
contract, stating that the written provisions and five attachments together
“constitute the entire agreement” between the government and the Concessionaires.
Id. at 19–20. Both parties concede that the contract is fully integrated. See Def.’s
Reply, ECF No. 41, at 8; Pls.’ Mot., at 4.
During the five years of the Concessionaires’ incumbency, SeaBreeze---along
with other shuttle services---continued to operate on base and used the same pick-
up and drop-off locations as the Concessionaires. See Compl. ¶¶ 28–29. Neither
party alleges that SeaBreeze is an agent of the United States.
On June 13, 2017, the Concessionaires were banned from the Base via a
separate disciplinary process. They also lost their RapidGate passes at that time.
See Compl. ¶ 41; Pls.’ Opp’n, ECF No. 40, at 33.
b. Procedural Background
After exhausting administrative remedies, the Concessionaires filed a
complaint in the United States District Court for the Southern District of California
on March 21, 2019. Compl. ¶¶ 4, 42–43. On October 15, 2019, the district partially
dismissed the case and transferred the remaining portion to this Court. ECF No.
21. While a motion to dismiss the case was pending, the Concessionaires moved for
leave to file a Second Amended Complaint, and that motion was granted. ECF Nos.
33–35. The government moved to dismiss the case, the Concessionaires responded,
and the government replied in support of its motion. ECF Nos. 39–41.
The Second Amended Complaint alleges that the United States breached its
agreement by allowing SeaBreeze to operate on base during the Concessionaires’
incumbency. It also maintains that SeaBreeze committed multiple torts against
plaintiffs, and that the Agency further breached the contract by not preventing
those third-party torts. The complaint also alleges that the Agency violated the
implied duty of good faith and fair dealing through its actions. Id. ¶¶ 54–57.
The earlier Transfer Complaint, in comparison, suggested that the Agency
also breached an implied-in-fact contract that existed after the explicit contract
2 At first, the parties presented differing version of Attachment A. Compare
Contract with Ex. A to Pls.’ Status Report, ECF No. 44 (Pls.’ Attach. A). In
plaintiffs’ version, the non-exclusivity provision starts with a prefatory clause
(“Unless specified elsewhere”) that is not in the government’s variant. See Pls’
Attach. A at 4. On the Court’s request, the government clarified that the prefatory
clause was not in the original Request for Proposals (RFP) but was added to
Attachment A in the final contract. Def.’s Supp. Br., ECF No. 49, at 16–17. The
government admits, then, that plaintiffs are correct and that this prefatory
language is in the contract.
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ended. See Transfer Compl., ECF No. 27, ¶ 28. This argument does not appear in
the Second Amended Complaint, but the Concessionaires’ opposition to the motion
to dismiss develops the same theory. The Concessionaires allege that the Agency
allowed continued performance as if under the contract even though the Agency
neither renewed nor insisted upon payment of the monthly commissions. See
generally Pls.’ Opp’n at 28–33.
The government maintains that the contract did not provide for exclusivity,
Def.’s Mot. at 14–16, that SeaBreeze’s alleged torts cannot be attributed to the
Agency, id. at 17–19, and that the United States is therefore not liable for these
torts. As for the implied-in-fact contract, the United States maintains that there
was no continued performance as under the contract. See Def.’s Reply at 11–13.
Finally, the government points out that the implied duty of good faith and fair
dealing cannot create new obligations and must be keyed to the promises in the
contract. Because the Concessionaires cannot point to specific promises that were
allegedly undermined, says the government, it cannot plausibly allege a breach of
the duty. Def.’s Mot. at 22–24.
On August 21, 2021, defendant filed a supplemental brief in support of its
motion to dismiss. Def.’s Supp. Br., ECF No. 49. To this brief, the government
attached a Declaration of Richard A. Scott. Scott Dec., Ex. 1 to Def.’s Supp. Br.,
ECF No. 49-1. A week later, plaintiffs filed document entitled “Objections to
Evidence,” challenging the Scott Declaration on various admissibility grounds,
including the personal knowledge requirement, the authentication requirement,
and the best evidence rule. Pl.’s Mot. at 1, 3, 10–11, 13; see also FED. R. EVID. 602,
901, 1002. The Court has construed this document as a motion to strike portions of
the Scott Declaration. Order, ECF No. 51. Plaintiffs themselves now refer to that
filing as “motion to strike” that was previously “filed as ‘objections to evidence’.”
Pls.’ Reply, at 1.
II. DISCUSSION
a. Legal Standards
i. Subject Matter Jurisdiction, RCFC 12(b)(1)
Under the Rules of the United States Court of Federal Claims (RCFC), this
Court must dismiss claims that do not fall within its subject-matter jurisdiction.
RCFC 12(b)(1). When considering a motion to dismiss a case for lack of subject-
matter jurisdiction, the Court generally accepts all factual allegations by the non-
movant and draws all reasonable inferences in the light most favorable to that
party. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Pixton v. B&B Plastics, Inc.,
291 F.3d 1324, 1326 (Fed. Cir. 2002) (stating that on a motion to dismiss for lack of
subject-matter jurisdiction courts view “the alleged facts in the complaint as true,
and if the facts reveal any reasonable basis upon which the non-movant may
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prevail, dismissal is inappropriate”); CBY Design Builders v. United States, 105
Fed. Cl. 303, 325 (2012).
ii. Failure to State a Claim, RCFC 12(b)(6)
Cases that fall within the Court’s jurisdiction must still be dismissed if they
fail to state a claim on which the Court can grant relief. See RCFC 12(b)(6).
Notably, “[w]hen considering a motion to dismiss a case for failure to state a claim
upon which relief can be granted pursuant to Rule 12(b)(6), a court accepts all well-
pled facts as true and draws all reasonable inferences in plaintiff's favor.” Silver
Buckle Mines, Inc. v. United States, 117 Fed. Cl. 786, 791 (2014) (citing Scheuer, 416
U.S. at 236; Pixton, 291 F.3d at 1326; Englewood Terrace Ltd. P'ship v. United
States, 61 Fed. Cl. 583, 584 (2004)). Granting a motion to dismiss a case for failure
to state a claim “is appropriate when the facts asserted by the claimant do not
entitle him to a legal remedy.” Lindsay v. United States, 295 F.3d 1252, 1257 (Fed.
Cir. 2002). Denial of the motion is warranted when the complaint presents
“sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Because contract interpretation is question of law, not of fact, the Court may
interpret a contract on a motion to dismiss and need not accept the non-moving
party’s claims as to its meaning. See Varilease Tech. Grp., Inc. v. United States, 289
F.3d 796, 798 (Fed. Cir. 2002); Fin. & Realty Servs., LLC v. United States, 128 Fed.
Cl. 770, 777 (2016).
iii. Motion to Strike, RCFC 12(f)(2)
This Court “may strike from a pleading an insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.” RCFC 12(f). “[C]ourts
view motions to strike with disfavor and rarely grant them. A motion to strike must
be directed to a ‘pleading,’ which term has been construed narrowly by the courts.
Other court documents may not be attacked by a motion to strike.” Fisherman’s
Harvest, Inc. v. United States, 74 Fed. Cl. 681, 690 (2006) (citations omitted); see
also Info. Scis. Corp. v. United States, 86 Fed. Cl. 269, 276 n. 1 (2009).
Furthermore, “it has been the practice of the United States Court of Federal Claims
to decline to grant a motion to strike, where the moving party is unable to show
prejudice or confusion.” Id. at 276 n. 1 (citations omitted).
b. Analysis
i. Plaintiffs’ Breach of Contract Claim
Plaintiffs maintain that the Agency breached the contract by permitting other
shuttle services to operate on base. Undoubtedly, the contract disclaimed
exclusivity. Contract at 47. Nevertheless, plaintiffs contend that the contract
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offered a partial form of exclusivity---enough to obligate the Agency to stop
SeaBreeze from competing in the manner it did. See Pls’ Opp’n, ECF No. 40, at 10–
14.
First, the Concessionaires maintain that, without some level of exclusivity,
the contract lacks consideration. Id. at 13–14. Supposedly, without exclusivity, the
Agency offered nothing and gave nothing in exchange for the concession payments.
Id. at 14. Thus, the Court should interpret the contract in a manner that will make
it valid by reading exclusivity into it. Id.
Next, the Concessionaires contend that the contract as a whole is ambiguous.
Moreover, the Concessionaires argue that the non-exclusive clause is itself
ambiguous, when read in light of provisions elsewhere in the contract. Id. at 23
(stressing that the non-exclusivity clause starts with “Unless specified elsewhere”).
Thus, the clause should be interpreted against the drafter and in favor of the
contractor, American Ground. Id. at 21–22.
Finally, the Concessionaires locate exclusivity in the language of the Request
for Proposals (RFP). See id. at 23–24. Contrary to the government’s claims,
discussed below, plaintiffs maintain that the RFP was incorporated into the
contract. Id. at 23; see also Contract at 1 (incorporating Attachment E---the RFP---
into the contract).
Responding to the government’s argument that some of the alleged breaches
took place after the contract expired, Def.’s Mot. at 21, the Concessionaires counter
that they held an implied-in-fact contract at that time. Pl.’s Opp’n at 28–29; see
also Trauma Serv. Group v. United States, 104 F.3d 1321, 1326 (Fed. Cir. 1995)
(setting forth the elements of an implied-in-fact contract with the United States).
The Concessionaires point to a conversation between American Ground’s
President and the Agency’s authorized representative Steven Garbutt, in which the
latter represented that the Concessionaries could continue to operate at Camp
Pendleton as if under the contract. Pls.’ Opp’n at 28–29. According to plaintiffs,
this representation was an implied exercise of the government’s option to extend the
contract by a year. See Contract at 19. In support of this argument, plaintiffs
highlight the government’s June 13, 2017 order purporting to terminate the
agreement. Id. at 32. If no agreement still existed in 2017, why did the government
need to issue an order ending an agreement? Similarly, plaintiffs note that they
possessed RapidGate passes until that date. Id. at 33.
Additionally, the Concessionaires argue that the Agency was obligated, at
least on base, to enforce California law regarding shuttlebuses, taxicabs, and motor
vehicles. See Pl.’s Supp. Br., ECF No. 45, at 17. The failure to do so, the
Concessionaires insist, is a breach. Id. To this end, they cite Attachment D of the
contract describing the Provost Marshal’s law enforcement authority. See id. at 19.
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This provision states that civilians not subject to the Uniform Code of Military
Justice may be tried in the appropriate district court for offenses on base. Id.; see
also Contract at 74. Plaintiffs reason that, given the Provost Marshal’s authority to
enforce California law and the Concessionaires’ inability to do so, the Agency was
obligated to enforce these laws against SeaBreeze, yet failed and refused to do so.
Pl.’s Supp. Br. at 19. Plaintiffs also point to contractual provisions requiring them
to use licensed drivers. Id. at 11.
The government argues that the Concessionaires were promised nothing
beyond what they received. Chiefly, the argument rests on the non-exclusivity
clause, which the government portrays as unambiguous. See Def.’s Mot., ECF No.
39, at 14; Def.’s Reply at 2. Because the contract is fully integrated, parole evidence
is inadmissible as regards unambiguous terms. Nothing in the contract establishes
exclusivity, so plaintiffs were not promised any. Even without exclusivity, the
contract contained ample consideration: coordination with the Agency and an on-
base presence. Id. at 4.
Turning to the non-exclusivity provision, the government maintains that the
Concessionaires have not identified a second reasonable interpretation and hence
cannot show the clause to be ambiguous. Id. at 2. Next, the government argues
both that the RFP is irrelevant because it was not incorporated into the contract
and that it does not establish exclusivity regardless. Def.’s Mot. at 15.
The government also denies that certain allegations can be breaches because
they occurred after the contract lapsed. According to the government, plaintiffs
mischaracterize these events. Def.’s Reply at 12. The 2017 Order did not terminate
a contract. Rather, it banned Liberty from the Base. And the ban came from the
Air Force Disciplinary Control Board, not the Agency at all. Id.
Finally, the government notes that the Concessionaires’ state law argument
cites no legal authorities. Federal government contracts are governed by federal
law. Def.’s Supp. Br. at 3. And federal contracts do not impliedly force the
government to obey any state laws nor incorporate any state legal requirements.
Id. at 4–5 (citing Agredano v. United States, 595 F.3d 1278, 1281 (Fed. Cir. 2010))
Plaintiffs do not allege a plausible claim for breach of contract. Because the
Court cannot detect exclusivity in this contract and the contract did not make any
promises about third-party torts, the breach of contract claim must be dismissed.
The consideration for this contract was clear---space, advertising at cost, and
coordination with the Agency. See generally Contract at 9; see also Def.’s Reply at 4
(listing the benefits that both parties admit plaintiffs received). The
Concessionaires, however, believe that these benefits are inadequate. But
consideration only requires the loss of a legal right or the gain of a legal burden: not
any specific quantity. See Ridge Runner Forestry v. Veneman, 287 F.3d 1058, 1061
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(Fed. Circ. 2002); Nebco & Assocs. v. United States, 23 Cl. Ct. 635, 645 (1991).
Parties decide for themselves what consideration is sufficient. If bargained for, a
mere peppercorn satisfies. Nat’l Air Cargo Grp., Inc. v. United States, 126 Fed. Cl.
281, 296 (2016). It is irrelevant that the Concessionaires now assert that they
would not have entered the contract without more consideration. What matter is
whether, objectively, the parties mutually assented to the deal. See Lamle v.
Mattel, Inc., 394 F.3d 1355, 1359 (Fed. Circ. 2005). Secret hopes and wishes count
for nothing. Skycom Corp. v. Telstar Corp., 813 F.2d 810, 814–15 (7th Cir. 1987)
(Easterbrook, J.)
The primary problem with the Concessionaires’ breach of contract claim is
that, at bottom, all their allegations amount to an assertion of exclusivity. See
Compl. ¶¶ 19, 21, 27, 30, 31, 32, 34, 55. But the contract disclaimed exclusivity
“[u]nless otherwise specified.” Contract at 9. Although the Concessionaires assert
that the contract otherwise specified through various provisions of the RFP, the
Court is not convinced.
The Concessionaires come closest to persuading on the issue of the
operational space. Compl. ¶¶ 30, 31, 34, 55. The contract required the Agency to
“provide the operational space to [American Ground] that is empty and without
trade fixtures or furniture.” Contract at 10. The contract never defines what “the
operational space” is, but the direct article and use of the singular indicates that a
specific site was envisioned. According to the Concessionaires, both parties
understood at formation that “the operational space” referred to a designated
loading zone in one parking lot in Area 52 on the Base. Pls.’ Supp. Br. at 20, 24;
Pls.’ Opp’n at 15. Plaintiffs argue that the clause obliged the Agency to prevent
other shuttle services from picking up passengers from this location. The
operational space would not be “empty”---empty that is of rival companies’ vehicles.
The Court will assume that “the operational space” referred to this loading
zone (although the government contests this, claiming the phrase denoted an office).
Plaintiffs’ interpretation fits with the provision, elsewhere in the contract, requiring
them to pay upkeep for each “location in . . . parking lots, etc. assigned and occupied
as a fixed management or operations site.” Contract at 6. And the Agency
evidently had discretion to supply plaintiffs with an office if it chose, but “the
operational space” was mandatory. See id. at 18 (setting plaintiffs’ extra duties “[i]n
the event office or operational building spaces are provided”). Thus, plaintiffs’
construal of the phrase “the operational space” is reasonable---indeed, more
reasonable than the government’s alternative.
Nonetheless, the operational space provision cannot mean that the Area 52
loading zone had to remain empty of competing vehicles. Contra Pls.’ Opp’n at 15–
16. Plaintiffs themselves concede that rival shuttle services such as SeaBreeze
were allowed to drop off passengers in this zone. See Pls.’ Supp. Br. at 20; Pl.’s 2d.
Supp. Br. at 12, ECF No. 59. They assert, however, that after a drop-off, rivals
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could not reload their vehicles in this zone. No matter why vehicles entered the
zone, the operational space would not be “empty” of them.
Moreover, the space provision modifies the word “empty” with the phrase
“without fixtures or furniture.” Under the immediate context canon, an ambiguous
term receives more precise content from the neighboring words associated with it—
the companions it keeps. See United States v. Stevens, 559 U.S. 460, 474 (2010);
Bank of America v. United States, 964 F.3d 1099, 1104 (Fed. Circ. 2020); ANTONIN
SCALIA & BRYAN E. GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS
204–05 (2012) (discussing possible meanings of general term followed by specifics).
“Empty,” thus, means free of fixtures and other furnishings. Competing
shuttlebuses are not fixtures and are not captured within “empty.”
A contrary reading would be untenable. Does empty mean the loading zone
must be free of passengers, free of luggage, free of drop-offs? Of course not. Just as
clearly, it does not mean free of competitors. To maintain that “empty” means free
of competing vehicles---but of nothing else---is indefensible. The operational space
provision unambiguously cannot support the reading that plaintiffs give it.
As for the RFP provisions, the Court agrees with plaintiffs that these
provisions were incorporated into the contract. See Contract at 1 (“This Contract
consists of the provisions herein, and . . . Attachment ‘E’ RFP”). But the Court
agrees with the government that none of these RFP provisions helps plaintiffs, as
stated below.
Section 3002 pledged that the contract would be awarded to the responsible
offeror whose application is the “most advantageous” to the Agency. Compl. Ex. B
at 21. Although the Concessionaires do not elaborate, presumably this supposedly
promises exclusivity because it is in the singular.
Section 3003 provides the procedures by which an incumbent contractor will
turn over to a new contractor. See also Contract at 18. Admittedly, change-over
provisions often appear in exclusive concession contracts. But there was a clear
explanation why this non-exclusive contract needed such a provision. The contract
guaranteed the Concessionaires a presence on base---including the operational
space---and assured the Base that scheduled shuttles would run. It is reasonable
that, at the time of the solicitation, the Agency would have wanted to maintain this
presence continuously and minimize service disruption during the transition.
Section 4000(b) required a competitive bid and stated that only a single
concession agreement would be awarded. Compl. Ex. B at 22. Section 4001
explained that the Agency wanted to “expand the services currently provided” by its
then-contractor. Id. It described the Base and the nature of the transportation
needs. Id. Plaintiffs do not enlarge upon why these sections imply exclusivity.
Section 4002 called for a high-quality, professionally operated shuttle service. Id. at
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22–23. Presumably, this supports exclusivity because it is phrased in the singular.
Plaintiffs do not elaborate.
For the most part, the Concessionaires do not explain why these RFP
provisions support exclusivity, neither in the complaint nor in the briefing. It is, for
the most part, simply declared. See, e.g., Pls.’ Opp’n at 23 (saying “[a]nd boy, was it
specified elsewhere!” then citing the RFP sections discussed above).
Nor does the Court detect ambiguity. See Park Village Apartments v. United
States, 25 Cl. Ct. 729, 732 (1992) (unambiguous contract terms govern over
unilateral expectations). The phrasing of the non-exclusivity provisions is as clear
as possible. And the Concessionaires have not produced a plausible alternative
reading. See Metric Constructors, Inc. v. Nat’l Aeronautics & Space Admin., 169
F.3d 747, 752 (Fed. Cir. 1999) (requiring that a party show it reasonably relied at
formation on an alternate interpretation of the wording). The Concessionaires have
not demonstrated that the “unless” language, discussed above, is helpful to them.
Nor is the entire contract ambiguous through contradiction, as the Concessionaires
claim. The Concessionaires have not pointed to anything in the contract creating a
contradiction.
As to the rest, the Concessionaires unpersuasively claim they have the right
to operate exclusively. Pls.’ Opp’n at 10, 14, 16; see also Compl. ¶ 21. Plaintiffs say,
correctly, that they could operate without interference. But then they stretch
interference to mean competition. Plaintiffs cannot turn a right of non-interference
into a right to exclusivity expressly disclaimed in the contract’s plain language. See
Ala. Lumber & Pulp Co. v. Madigan, 2 F.3d 389, 392 (Fed. Cir. 1993) (“Where
contract provisions are clear and unambiguous, they must be given their plain and
ordinary meaning.”) (citation omitted).
One portion of the contract is confusing. The contract states that, if new
routes or locations are established, the Agency may, at its discretion, give American
Ground “the first right of refusal for the location[s].” Contract at 5. If American
Ground declines, the Agency can offer this location or locations to a different
contractor. Id. Given that the contract is non-exclusive, it is not obvious what this
means. If an additional location is set up, what is the value of offering it first (at
the government’s discretion) to the Concessionaires, when others can then serve the
same route and pick up in the same location anyway? At first glance, this clause
seems to presume that routes or locations can be held by one shuttle operator
versus another.
But the Court is not convinced that this oddity is enough to render the
contract provisions relating to exclusivity ambiguous. The right of refusal
provision, although awkwardly drafted, fits when read alongside other sections in
the contract. As discussed, the Agency is obligated to “provide the operational space
. . . empty and without trade fixtures or furniture.” Contract at 10. The
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Concessionaires, moreover, must pay upkeep for each “location in shopping centers,
parking lots, etc. assigned and occupied as a fixed management or operations site.”
Id. at 6. And the two parties together must coordinate about various “exterior and
interior signs,” posted to inform potential customers about fare rates, schedules,
and so forth. Id. at 6, 9. Presumably, exterior signs would be trade fixtures.
Evidently, then, the contract anticipated that the Agency might create extra
loading zones beyond the Area 52 zone discussed above. The Agency had the
discretion to offer these new loading zones to plaintiffs. And, if plaintiffs accepted
the Agency would have to keep the new zones empty of trade fixtures (e.g., a rival
shuttle company’s signage), just like the original “operational space.” If plaintiffs
declined, though, the Agency could give a rival company its own operational space
with its own coordinated signage and fixtures. The right of first refusal is
discretionary, but the Agency cannot abuse this discretion by failing to grant the
right in bad faith. See Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed. Cir.
2005) (noting that every contract imposes an implied duty of good faith and fair
dealing in its performance and enforcement); Dobyns v. United States, 915 F.3d 733,
739–40 (Fed. Cir. 2019) (stressing that that breaches of the duty must connect to
specific contractual provisions). Implicitly, the right of refusal provision requires
the Agency to consider in good faith offering the location to American Ground first,
before it fills a new location with a rival company. Properly understood, this
provision is consistent with the non-exclusivity of the contract.
As for the implied-in-fact contract claims, the Court concludes that the
Concessionaires never formed an implied-in-fact contract after expiration of their
express contract. An implied-in-fact contract “must be ‘founded upon a meeting of
the minds, which, although not embodied in an express contract, is inferred, as a
fact, from conduct of the parties showing, in the light of the surrounding
circumstances, their tacit understanding.’” Trauma Servs. Group v. United States,
104 F.3d 1321, 1326 (Fed. Cir. 1997) (quoting Hercules Inc. v. United States, 516
U.S. 417, 424 (1996)). Only an “authorized agent of the Government” may enter
into an implied-in-fact contract binding the government. Id. After expiration of an
express contract, continued performance “under the contract’s terms” generally
establishes an implied-in-fact contract. Seven Resorts, Inc. v. United States, 112
Fed. Cl. 745, 780 (2013).
Here, on the Concessionaires’ own facts, performance did not continue on the
contract’s terms. All that the Concessionaires allege is that they still served
Marines on base---exactly what they claim SeaBreeze did during the period of the
express contract. And the Concessionaires admits that they stopped paying
commissions---again, just like SeaBreeze. Compl. ¶ 38. As discussed, the Agency’s
choice to permit SeaBreeze to pick up and drop off on base did not breach the
contract. So too, the Court holds, the Concessionaires’ post-expiration operations
were not continued performance. It was just another illustration of what bus
companies may do without a contract.
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Plaintiffs have not alleged all the elements of an implied-in-fact contract.
First, this supposed contract would fail for want of consideration to the government.
See Stanwyck v. United States, 127 Fed. Cl. 308, 312–13 (2016) (listing the elements
of an implied-in-fact contract). The Concessionaires allege that they no longer paid
anything and that they were allowed (but not required) to pick up passengers on
base. This supposed implied contract, thus, was illusory. The Concessionaires
promised to benefit the government only if and when they wanted to.
Moreover, plaintiffs rely heavily on the 2017 order banning them from the
Base. “Why else,” ask the Concessionaires, “would the United States issue an Order
purporting to terminate that agreement as of June 13, 2017?” Pls.’ Opp’n at 32.
But plaintiffs describe this order as issued by the Agency and the Armed Forces
Disciplinary Control Board together. Compl. ¶ 41. The latter entity would not be
involved in the termination of a shuttlebus contract. It would be if, for disciplinary
reasons, a company were banned from the Base. Thus, these allegations do not
show that a contract existed. At most, they show that a contract was breached---if
other allegations supported an implied-in-fact contract. A company can be banned
from the Base without having an underlying concession contract to terminate.
The same is true for the saga of the RapidGate passes. Pls.’ Opp’n at 32–33;
Contract at 79. The Concessionaires were contractually obligated to secure
RapidGate passes. But keeping those passes until the summer of 2017 does not
mean that the contract remained in effect until then. Many people who do business
on base have passes. The business/vendor category is broad. It includes, for
instance, insurance salesmen, house cleaners, and pizza delivery trucks.
Attachment D, ¶ 3(f)(2)(b)(8)–(9). If pizza boys have RapidGate passes, it is
unsurprising that non-contracted shuttlebus drivers have them too.
Consider that, once the Concessionaires’ contract expired, the Agency decided
not to have a new contractor. By plaintiffs’ logic, the consequence should have been
no shuttle drivers with RapidGate passes. People on base without passes are
defined as visitors. Contract ¶ 3(f)(2)(e). A business without a pass may only enter
the Base three times within a 45-day window. Id at 3(f)(3)(f). This, of course, would
make shuttlebus operations impossible. So, it is not the rule. Shuttlebus drivers
may obtain RapidGate passes because passes are not limited to contractors. This
same error repeats when the Concessionaires argue that the government should
have taken away SeaBreeze’s passes when its contract ended. Pl.’s Supp. Br. at 22.
RapidGate passes are not just for contractors.
Because the Concessionaires have not alleged sufficient facts to establish
plausibly that performance continued after the expiration of the contract on the
contract’s terms or on any terms, the Court holds that they have not alleged an
implied-in-fact contract. All claims resting on facts occurring after the expiration of
the express contract must be dismissed.
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Finally, on the state law argument, the Court agrees with defendant that
government contracts typically do not incorporate any law, federal or state, unless
they do so on their face. See St. Christopher Assocs. v. United States, 511 F.3d 1376,
1384 (Fed. Cir. 2008); Smithson v. United States, 847 F.2d 791, 794 (Fed. Cir. 1988).
But even if state law was incorporated by implication so that the government had to
obey, on threat of breach, the Concessionaires would need something more. They
need a contractual obligation on the part of the Agency to enforce state law against
its competitors. That term cannot be read into any contract by implication:
certainly not into a government contract. The obligation to obey the law is not an
affirmative duty to enforce the law.
The contractual language which the Concessionaires cites falls far short of
obligating the government to enforce any law against third parties. See Contract at
10–11. The language requires “the Contractor”---that is, American Ground---to
maintain California licenses. SeaBreeze and other competitors are not contractors,
and the contract never hints that it obligates the government to ensure that third
parties follow any state laws.
Turning to the law enforcement power provisions, Attachment D pertains to
“Applicable Base Pass and Regulations.” See Contract at 74. It deals with the
regulations that the Concessionaires must follow on base. Right away, this is a
problem for plaintiffs, who need the contract to incorporate state motor vehicle law
and to obligate enforcement against third parties. Moreover, Attachment D
discusses rules on base and describes the Provost Marshal’s authority to enforce
laws, issue personnel directives, and conduct searches and vehicle inspections. Id.at 75–76. A discussion of curfew hours, for instance, does not establish rights
against the government. See id. at 77. Attachment D is not a promise to enforce
laws against third parties. It puts the contractor on notice as to what to expect on
base and ensures the contract will not hinder law enforcement. Nothing in this
section expands the Concessionaires’ rights or take away the Agency’s prosecutorial
discretion.
After all, defendant here has three distinct roles: government actor, property
owner, and contracting party. Plaintiffs believe that defendant’s role as a
government actor means that it has a contractual duty to enforce all laws at all
times. It does not. If the Agency or the Base has an obligation to enforce the law,
this obligation is not contractual. The mere mention of law enforcement powers
does not imply a contractual duty to enforce the law against third parties.
To the extent the Concessionaires may have a claim related to the Agency
permitting SeaBreeze’s behavior, this claim must rest on actions to the detriment of
the Concessionaires: not on general legal obligations. SeaBreeze’s behavior, legal or
illegal, must have interfered with the Concessionaires’ reasonable expectation
under the contract. And something more than Agency passivity will be required.
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The Court, thus, GRANTS defendant’s motion to dismiss the breach of
contract claim. The concessionaire contract never guaranteed any form of
exclusivity, so plaintiffs’ allegations cannot constitute breach of contract. And
plaintiffs have not alleged sufficient facts to establish an implied-in-fact contract.
ii. Plaintiffs’ Good Faith and Fair Dealing Claim
Plaintiffs also maintain that the government’s actions violated the duty of
good faith and fair dealing. They may be correct.
The duty, implied in every contract, obligates each party not to prevent the
other from performing and not to interfere with that party’s reasonable expectations
of gain from the contract. Centex, 395 F.3d at 1304. Plaintiffs allege only that the
second was violated.
Plaintiffs aver, in support of this claim, that this case is analogous to Centex.
Pls.’ Opp’n at 34–35. In Centex, healthy financial institutions acquired failing
thrifts in transactions assisted by the Federal Savings and Loan Insurance
Corporation (FSLIC) and the Federal Home Loan Bank Board (FHLBB). See
Centex, 395 F.3d at 1289. Under the contracts, this assistance reimbursed the
acquiring institutions for the difference between the “book basis of the covered
assets and the value of those assets when they were sold or written down.” Id. at
1288. Part of the inducement to enter the contracts, as the RFP and the contracts
both noted, was that the FSLIC’s reimbursement of losses upon disposal was not
taxable, and, nonetheless, the losses were deductible. See id. That is, built-in
losses provided a tax benefit without a corresponding economic loss for the
acquiring institutions.
Congress later amended the tax code, requiring the institutions to “take[] into
account” the reimbursements in calculating losses. Id. at 1289. Consequently, they
no longer could gain a tax advantage from reimbursed built-in loss. The Federal
Circuit held that the acquiring institutions were entitled to the monetary value of
the deductions under the duty of good faith and fair dealing. Id. at 1314. These tax
benefits formed part of the consideration under the contract. Indeed, the contracts
required the financial institutions to “maximize any tax benefits,” id. at 1290, and
to split these tax savings 50-50 with the FSLIC, id. at 1313. Taking away the
benefits deprived the financial institutions of their reasonably-expected gains from
performance, and thus violated the duty by recapturing their gains for the
government. Pls.’ Opp’n at 35.
Plaintiffs claim that this case is similar. Here, the government, by allowing
SeaBreeze to operate and to compete unfairly in the Concessionaires’ operational
space, took the gains the Concessionaires hoped to capture from the contract and
reappropriated them to SeaBreeze in violation of the duty. Id.- 14 -
The government reminds the Court that the duty of good faith and fair
dealing does not change the allocation of burdens and benefits established by the
contract. Def.’s Mot. at 22; see Dobyns, 915 F.3d at 739. Rather, it polices the outer
bounds of the contract by stopping parties from frustrating the promises made in
the contract. The duty must key to specific contractual provisions. Id. 739–40.
Because the contract does not promise exclusivity, the government contends that it
contains no provision that can be undermined by allowing others to service the
Base. Def.’s Mot. at 23.
The Court holds that plaintiffs’ claim of a breach of the duty of good faith and
fair dealing cannot be dismissed at this stage, as to alleged events occurring during
the years of the written contract. The Agency’s actions and inactions in regard to
the Concessionaires’ competitors and the Holiday Excursion, for instance, plausibly
make out a breach of this duty.
Although the Court concludes, as explained below, that the Concessionaires
have plausibly alleged a violation of the duty, it is not illuminated by any supposed
similarity to Centex. In that case, the deduction was part of the consideration.
Centex, 395 F.3d at 1288, 1304–05. The violation tied directly to a specific
contractual promise. But here, there was no reasonable expectation of exclusivity
and so no benefit to be reappropriated by permitting SeaBreeze to operate.
But the Concessionaires were due benefits, not nothing at all. Contractors
enter into concession contracts to gain access to a market on terms that inspired
them to pay for entry. See generally Frazier v. United States, 67 Fed. Cl. 56, 58
(2005) (Wolski, J.). In this case, the contract expressly promised coordination as a
benefit. Thus, two promises induced plaintiffs to enter the contract and pay the
commission---that they could offer its services on favorable, or at least equal, terms,
and that the Agency would coordinate with them. These two promises interact.
Coordination serves to protect plaintiffs’ ability to operate on favorable or equal
terms by enlisting the government as a partner. The government could coordinate
with others too. The contract promised no exclusivity. But it could not coordinate
with others to the Concessionaires’ detriment without thereby depriving plaintiffs of
the reasonable fruits of the contract. That is, the government could not decide, with
SeaBreeze, to make it harder for plaintiffs to conduct business. And the
Concessionaires have plausibly alleged this.
Consider the Holiday Excursion. See Compl. ¶ 34. Plaintiffs stress that
Liberty had the right to provide transportation for excursions during Christmas and
other holidays. Id. The Court does not believe that this right was exclusive.
Rather, it simply meant that, if people on base wished to use Liberty for
transportation, they could. This right itself was not breached. But when Liberty
inquired as to why so many passengers preferred its competitor SeaBreeze, Liberty
was told that the officer responsible (Michael C. Dittamo) “didn’t recognize [the]
contract.” Id. The contract, inexplicably not recognized, promised coordination. An
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officer who does not acknowledge the contract’s existence cannot possibly
coordinate.
Even so, Liberty was booked to carry some travelers and received a schedule
showing when to pick these passengers up. Yet, plaintiffs allege, non-commissioned
officers intentionally released those scheduled to travel with Liberty early, so that
these passengers were gone before Liberty even arrived. Id. Of course, Liberty had
no right to demand that the officers not release their men. But Liberty, unlike its
competitors, had a contractual right to coordination. And the officers’ actions
plausibly constitute lack of coordination. Worse, these actions could spell out a case
for false coordination---working together to set times, only to then undermine those
times. Indeed, plaintiffs allege that at least one non-commissioned officer was
bribed to divert passengers to SeaBreeze. Compl. ¶ 44. And some non-
commissioner officers putatively worked as SeaBreeze drivers. Pl.’s 2d. Supp. Br. at
19. The Holiday Excursion passengers, sure enough, traveled with SeaBreeze. Id.
¶ 34. Whether by lack of coordination or by false coordination, Liberty lost the
reasonably expected value of coordination.
The government responds that Liberty has no right to pick up personnel at
any specific place and time for the Holiday Excursion. Def.’s Mot. at 19. True, but
irrelevant. The government either failed to coordinate with Liberty or coordinated
and then behaved in a manner that benefitted its competitors at its expense.
Coordination reveals information. The government knew when Liberty planned to
pick up its fares. This information allowed the government to release passengers
early and push them onto SeaBreeze vehicles. At least, that has been plausibly
alleged.
Likewise, plaintiffs allege that SeaBreeze drivers used their vehicles to
physically block the Concessionaires’ vehicles from the loading zone. Compl. ¶ 34.
This zone was not exclusive. Nonetheless, the Concessionaires had a right to use
the zone, without fear of torts by others. The torts themselves, of course, cannot be
attributed to the United States. But the obligation to prevent them could be, as
part of a responsibility to coordinate.
This points to the larger issue of defendant’s three roles: as a government
entity, a property owner, and a counterparty on the contract. These are separate
roles. Plaintiffs can insist on payment for the government’s failure to perform its
contractual duties in its role as property owner, regardless of what it was obligated
to do in its government role.
In its roles as property owner and contracting party, the government had to
supply adequate security to prevent SeaBreeze from committing intentional torts
against the Concessionaires. At the bare minimum, the Concessionaires reasonably
could expect that level of coordination. Plaintiffs would be unreasonable to think
that the contract entitled them to exclusivity, or to profit, or even to any customers.
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Why, then, did they enter the contract? To gain coordination from the government,
above all else. As in Centex, this contract specifically envisions coordination. The
Concessionaires expected that the government, as the owner of the property where
the shuttle services occurred, would enable the Concessionaires to compete on at
least an equal footing with others. Plaintiffs paid to be free from illegal anti-
competitive actions by SeaBreeze and similar rivals. Thus, although this Court
cannot accept plaintiffs’ breach theory, the Court will countenance a violation of the
duty of good faith and fair dealing.
Other factual allegations also might constitute a violation of good faith.
Supposedly, plaintiffs pressed their contracting officer to remove SeaBreeze’s
equipment---that is, fixtures and furniture---from plaintiffs’ designated operational
space. See Compl. ¶ 30. No action was taken. What is the value of the coordination
if the Agency refused to investigate and response to complaints? Eventually, the
evidence may show that the Agency did investigate and, if necessary, responded.
But the Concessionaires plausibly allege that they were ignored, leaving that
factual question for another day.
Likewise, plaintiffs allege that competitors told passengers they were not
allowed to use the Concessionaires’ shuttle vans and taxicabs; re-directed
passengers to SeaBreeze instead; falsely claimed that American Ground and
Liberty did not have a proper license or contract to pick up on base; verbally
maligned the Concessionaires; intimidated drivers and prospective fares; physically
accosted or harassed the Concessionaires’ employees; and wrote false anonymous
reports about wrongdoing by the Concessionaires. Compl. ¶ 33.
That is a lot. Certainly, none of this asserts a wrongful act by the
government. Nor does any of it assert that SeaBreeze or anyone else committed a
tort while acting as an agent of the government. Nor can any of this breach the
contract. But these facts do plausibly show that the government failed to prevent
SeaBreeze from attempting to monopolize base business with lies and intimidation.
The Concessionaires reasonably may have expected that the government (as the
owner of the property and counterparty on the contract) would maintain a fair
market. Equal footing entails such a market. Coordination may include, at least,
responding to complaints when received. Cf. id. ¶¶ 35–36 (noting these acts were
reported). Putatively, the government disciplined American Ground and Liberty for
these events instead. Id. ¶ 39.
The government protests that the Concessionaires offer no facts supporting
the conclusion that the government allowed, enabled, or acquiesced in SeaBreeze’s
conduct. Def.’s Mot. at 6. But because the government is the property owner, it
arguably acquiesced to all of SeaBreeze’s conduct. Military bases, after all, are
tightly controlled. And the Concessionaires’ ban from the Base in 2017, as well as
the loss of its RapidGate passes, demonstrates that the government had the ability
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to keep out rogue bus drivers. If SeaBreeze committed these torts and the Agency
knew of them, then the government may have allowed them to happen.
Therefore, the Court DENIES defendant’s motion to dismiss plaintiffs’ good
faith and fair dealing claim. 3
iii. Plaintiffs’ Remaining Claims
The government also moved to dismiss the case pursuant to RCFC 12(b)(1),
noting that the Court does not possess subject-matter jurisdiction over tort claims
or claims against private parties. Def.’s Mot. at 12, 24–25. This is true. See United
States v. King, 395 U.S. 1, 4 (1969) (private parties); Awad v. United States, 301
F.3d 1367, 1372 (Fed. Cir. 2002) (torts). But the case is against the United States,
so there are no private parties for the Court to dismiss.
As for the claims presented, the first is for breach of an express contract.
Compl. ¶¶ 51–53. The second claim is for breach of the implied covenant of good
faith and fair dealing. Id. ¶¶ 55–57. Both of these are contract claims.
The third claim, however, seeks damages for intentional interference with
prospective economic relations. Id. ¶¶ 59–62. Plaintiffs suggest that the United
States deliberately interfered with the contract between the Agency and the
Concessionaires. See id. ¶¶ 59–60. This is nonsensical. Contracts with the Agency
are contracts with the government, so the government cannot interfere with itself.
Furthermore, if the United States were somehow not a party to the contract, then
this Court would lack jurisdiction. Regardless, interference with prospective
economic relations sounds in tort. This Court may only hear tort claims when they
arise entirely in contract: that is, when the violated duty stems from contract. See
Wood v. United States, 961 F.2d 195, 198 (Fed. Cir. 1992); Kenny Orthopedic, LLC v.
United States, 83 Fed. Cl. 35, 46 (2009).
Although the Concessionaires allege that the actions here were wrongful
because of contractual obligations, they do not contend that the supposed
misconduct was committed by a party to the contract. Rather, plaintiffs argue that
an outsider to the contract (the United States) interfered, somehow, with its own
contract. And they never contend that the torts violated a duty that exists only
through the contract. Thus, the Court lacks jurisdiction over this tort claim, and it
is therefore dismissed. To the extent this claim is really about breach or unmet
contractual expectations, it is better cognized under the claims for the breach of
contract and the breach of the duty of good faith and fair dealing.
3The Concessionaires have alleged sufficient facts that, if proven true, could
convince a factfinder that the government violated its duty of good faith and fair
dealing. Also any damages plaintiffs might collect on this claim remain subject to
proof as to amount.
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The same if true of the fourth claim, for negligent interference with
prospective economic relations. Compl. ¶¶ 64–66. This count sounds in tort and
must be dismissed.
The fifth claim, for negligence, id. ¶¶ 68–69, also sounds in tort. Because
none of the factual allegations related to this claim tie it to a contractual duty, the
claim is dismissed.
Because the third, fourth, and fifth claims all allege torts outside this Court’
subject-matter jurisdiction, the Court GRANTS defendant’s motion to dismiss these
three claims.
iv. Plaintiffs’ Motion to Strike the Scott Declaration
Plaintiffs have moved to strike the declaration of Mr. Richard A. Scott (one of
the government’s witnesses) on evidentiary grounds, lest the Court consider this
exhibit in ruling on the government’s RCFC 12(b) motions. See Pls.’ Reply.
Plaintiffs, however, are unable to show any prejudice or confusion at this stage of
the litigation. When considering whether to grant a motion to dismiss a case for
lack of subject-matter jurisdiction, this Court generally accepts as true all factual
allegations the non-movant made and draws all reasonable inferences in the light
most favorable to that party. See Scheuer, 416 U.S. at 236; Pixton, 291 F.3d at
1326; CBY Design Builders, 105 Fed. Cl. at 325.
Here, defendant presented the Scott Declaration in response to the Court’s
request for an explanation of why two different versions of the text of the non-
exclusivity clause appeared in the original pleadings. Therefore, for purposes of this
12(b) motion, the Court accepts all plaintiff’s factual allegations as true. As a
result, the Court must use the version of the clause that plaintiffs offered, as
discussed above, although it appears that there is no material difference between
the two. In fact, the government has now conceded that plaintiffs’ version is
accurate. Def.’s Supp. Br. at 16–17.
As a result, the Concessionaires cannot show prejudice from the inclusion of
the Scott Declaration. The declaration is simply irrelevant at this stage. Therefore,
the Court DENIES the motion to strike.
III. CONCLUSION
For the above stated reasons, the following is hereby ordered:
1. Defendant’s motion to dismiss Plaintiffs’ claims for breach of contract
including implied-in-fact contract, intentional interference with
prospective economic relations, negligent interference with prospective
economic relations, and negligence is GRANTED.
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2. Defendant’s motion to dismiss Plaintiffs’ claim for breach of the implied
covenant of good faith and fair dealing is DENIED. Plaintiffs have
alleged facts that plausibly constitute a breach of the implied covenant.
The amount of plaintiffs’ damages, if any, is subject to proof.
3. Plaintiffs’ motion to strike the Scott Declaration is DENIED.
The Clerk is directed to enter judgment accordingly. No costs.
It is so ORDERED.
s/ Bohdan A. Futey
Bohdan A. Futey
Senior Judge
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