California Ridge Wind Energy v. United States ( 2020 )

Case: 19-1463 Document: 58 Page: 1 Filed: 05/21/2020
United States Court of Appeals
for the Federal Circuit
______________________
CALIFORNIA RIDGE WIND ENERGY LLC,
INVENERGY WIND LLC, BISHOP HILL ENERGY
LLC,
Plaintiffs-Appellants
v.
UNITED STATES,
Defendant-Appellee
______________________
2019-1463, 2019-1465
______________________
Appeals from the United States Court of Federal
Claims in Nos. 1:14-cv-00250-RHH, 1:14-cv-00251-RHH,
Senior Judge Robert H. Hodges, Jr.
______________________
Decided: May 21, 2020
______________________
JOHN C. HAYES, JR., Nixon Peabody LLP, Washington,
DC, argued for plaintiffs-appellants. Also represented by
BRIAN P. DONNELLY.
CLINT CARPENTER, Tax Division, United States Depart-
ment of Justice, Washington, DC, argued for defendant-ap-
pellee. Also represented by BRUCE R. ELLISEN, RICHARD E.
ZUCKERMAN.
______________________
Case: 19-1463 Document: 58 Page: 2 Filed: 05/21/2020
2 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
Before PROST, Chief Judge, MAYER and TARANTO, Circuit
Judges.
TARANTO, Circuit Judge.
California Ridge Wind Energy LLC and Bishop Hill
Energy LLC each own a windfarm that was put into service
in 2012. Thereafter, each company applied for a cash grant
from the federal government, based on specified energy-
project costs, under section 1603 of the American Recovery
and Reinvestment Tax Act of 2009, Pub. L. No. 111-5, 123
Stat. 306, 364. The United States Department of the
Treasury awarded California Ridge and Bishop Hill less
than the amounts they had requested, rejecting as unjusti-
fied the full amounts of certain development fees included
in the submitted cost bases. Each windfarm owner sued
the United States in the Court of Federal Claims for the
difference between the amounts they had been paid and the
amounts allegedly mandated by section 1603. The govern-
ment counterclaimed, alleging that it had actually over-
paid the two firms.
The Court of Federal Claims ruled in favor of the gov-
ernment. California Ridge Wind Energy, LLC v. United
States, 143 Fed. Cl. 757, 763 (2019); Bishop Hill Energy,
LLC v. United States, 143 Fed. Cl. 540, 545 (2019). 1 The
sole issue on appeal is whether the two firms proved that
their proposed development fees, in the amounts asserted,
were properly included in their cost bases. The trial court
held that they did not. California Ridge, 143 Fed. Cl. at
762–63. California Ridge and Bishop Hill appeal on that
issue, making no separate argument about the amount of
development fees ultimately included in the cost basis if
1 The two cases were consolidated for trial, and the
two opinions are materially identical. California Ridge,
143 Fed. Cl. at 759 n.1; Bishop Hill, 143 Fed. Cl. at 541 n.1.
For simplicity, we generally cite only California Ridge.
Case: 19-1463 Document: 58 Page: 3 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 3
the trial court properly rejected their proposed amounts.
We affirm.
I
Section 1603 requires the Secretary of the Treasury to
“provide a grant to each person who places in service spec-
ified energy property to reimburse such person for a por-
tion of the expense of such property . . . .” Pub. L. No. 111-
5, § 1603(a). The amount of the grant is the “applicable
percentage of the basis of such property,” id., § 1603(b)(1),
which is the cost of the property, 26 U.S.C. § 1012(a). For
“qualified small wind energy property,” the applicable per-
centage is thirty percent. Pub. L. No. 111-5,
§ 1603(b)(2)(A), (d)(4).
California Ridge and Bishop Hill belong to a family of
related entities, which we refer to generally as “Invenergy.”
Invenergy is in the business of creating windfarms. Gen-
erally, Invenergy determines what type of facility will be
built, acquires the legal entitlements to construct that fa-
cility, and ensures that the facility is properly constructed.
Invenergy uses various subsidiaries to perform different
functions in the creation task; relevant to this appeal are
Invenergy Wind North America LLC (IWNA) and Inven-
ergy Wind Development North America LLC (IWDNA). In-
venergy also partly or wholly owns or controls, through
various subsidiaries, some of the completed windfarms.
California Ridge and Bishop Hill each own a namesake
windfarm located in central Illinois. Each firm is con-
trolled by Invenergy and owned through a partnership be-
tween Invenergy and Firstar Development (USBank).
Development of the Bishop Hill windfarm began in
2005. Development of the California Ridge windfarm be-
gan in 2008. Bishop Hill LLC and California Ridge Wind
Energy LLC were formed on August 1, 2006, and Septem-
ber 26, 2008, respectively.
Case: 19-1463 Document: 58 Page: 4 Filed: 05/21/2020
4 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
On July 18, 2011, years after development work began,
Bishop Hill entered into a development agreement with
IWNA. J.A. 14783. The agreement states that “IWNA has
provided development services to [Bishop Hill] to assist it
in developing the Project,” including “negotiating construc-
tion financing terms, negotiating the project and opera-
tional documents necessary or appropriate for the Project,
obtaining permits and performing other services relating
to the Project.” Id. In exchange for those services, Bishop
Hill was obligated to pay IWNA $60 million. Id. California
Ridge entered a similar development agreement with
IWDNA on February 29, 2012, also long after development
of its windfarm began. J.A. 14780. The California Ridge
agreement states that “IWDNA has provided and hereby
agrees to provide further development services” identical
to those listed in the Bishop Hill agreement. Id. In ex-
change, California Ridge was obligated to pay IWDNA
$50 million. Id.
Payment under the Bishop Hill agreement occurred on
July 5, 2012—involving a round trip of funds starting and
ending with IWDNA. On that day, IWDNA transferred
$60 million to Bishop Hill, which then wired $60 million to
IWNA—the entity owed the money under the agreement.
The same day, IWNA wired $60 million to IWDNA.
Payment under the California Ridge agreement oc-
curred on November 19, 2012—also involving a round trip
of funds starting and ending with IWDNA. On that day,
IWDNA transferred $50 million to California Ridge, which
then wired $50 million back to IWDNA—the entity owed
the money under the agreement.
On August 13, 2012, Bishop Hill applied to Treasury
for a section 1603 grant totaling $129,923,109. To support
its request, Bishop Hill submitted a breakdown of its direct
and indirect costs. Bishop Hill included the $60 million de-
velopment fee in the indirect costs of its windfarm and, of
Case: 19-1463 Document: 58 Page: 5 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 5
that $60 million, allocated $56,956,837 to section-1603-
qualified property. J.A. 1266.
On November 19, 2012, the same day that it paid
IWDNA the development fee, California Ridge applied for
a section 1603 grant totaling $136,858,980. To support its
request, California Ridge submitted a cost breakdown sim-
ilar to Bishop Hill’s. Of the $50 million development fee,
California Ridge allocated $49,315,067 to section-1603-
qualified property. J.A. 1270.
On October 9, 2012, Treasury awarded Bishop Hill
$117,216,098—which was $12,707,011 less than the
amount Bishop Hill sought. Treasury explained:
The amount requested was reduced because the
presented cost basis was higher than open market
expectations for projects of this size and in this lo-
cation and the transaction involved related parties
and/or related transactions. The cost basis has
been adjusted to allow for base costs plus an appro-
priate markup (to include reasonable overhead,
profit, and, if appropriate, development fees) re-
sulting in a total that more closely reflects the
amount that would have been paid in an arms’
length transaction between parties with adverse
interests.
J.A. 6525.
On December 5, 2012, Treasury awarded California
Ridge $127,699,997—which was $9,158,983 less than the
amount California Ridge sought. Treasury’s explanation
for the reduction was identical to that given to Bishop Hill.
J.A. 6523.
On March 28, 2014, California Ridge and Bishop Hill
each filed a complaint against the United States in the
Court of Federal Claims, alleging that Treasury had un-
lawfully withheld payment mandated by section 1603.
Each sought damages in the amount that Treasury had
Case: 19-1463 Document: 58 Page: 6 Filed: 05/21/2020
6 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
reduced its requested awards. The government counter-
claimed, alleging the “development fees” specified in the
two development agreements were not includable as eligi-
ble costs given the circumstances and characteristics of
those non-arm’s-length agreements—which the govern-
ment characterized as “sham” transactions. The govern-
ment sought to recover the amounts of the awards
attributable to the development fees—$5,635,537 from Cal-
ifornia Ridge and $4,380,039 from Bishop Hill.
The trial court ruled in favor of the government. The
court determined that California Ridge and Bishop Hill
failed to show that the development agreements had eco-
nomic substance and concluded that the agreements were
sham transactions. California Ridge, 143 Fed. Cl. at 761–
62. The court determined that California Ridge’s evi-
dence—in particular, the “independent certification” of the
development fees proffered by California Ridge and Bishop
Hill’s accounting firm, Deloitte; the development agree-
ment “without quantifiable services”; and the “round-trip
wire transfer that began and ended in the same bank ac-
count, on the same day”—fell “well short” of showing that
the development agreements were not shams and, more
generally, that the development-fee amounts stated in
those agreements were eligible costs. Id. at 762. Accord-
ingly, the court dismissed California Ridge’s and Bishop
Hill’s complaints and entered judgment for the government
in the amounts it sought. Id. at 763; see J.A. 1–2.
California Ridge and Bishop Hill timely appealed, and
we consolidated the appeals. We have appellate jurisdic-
tion under 28 U.S.C. § 1295(a)(3). The Court of Federal
Claims had jurisdiction over the claims under the Tucker
Act, 28 U.S.C. § 1491(a)(1); as is undisputed, section 1603
is a money-mandating statute. The trial court also had ju-
risdiction over the overpayment-based counterclaims.
28 U.S.C. §§ 1503, 2508.
Case: 19-1463 Document: 58 Page: 7 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 7
II
On appeal, California Ridge 2 argues that the Court of
Federal Claims failed to make sufficient findings of fact to
allow this court to meaningfully review its decision, that
the facts it did find are clearly erroneous, and that its con-
clusion that the development agreements were sham trans-
actions is a legal error. If those errors are corrected,
California Ridge argues, it is entitled to the amount of the
section 1603 grants disallowed by Treasury. California
Ridge presents no separate challenge to the court’s award
if the development fee amounts were properly disregarded.
As the Court of Federal Claims concluded, and Califor-
nia Ridge has not meaningfully disputed on appeal, it was
California Ridge’s burden to justify the amount of the de-
velopment fee it claimed in support of the grant amount
(30% of the eligible costs) it sought. See California Ridge,
143 Fed. Cl. at 760; see WestRock Virginia Corp. v. United
States, 941 F.3d 1315, 1318 (Fed. Cir. 2019) (invoking for
section 1603 the established burden rule for tax deduc-
tions); cf. Alt. Carbon Resources, LLC v. United States, 939
F.3d 1320, 1328 (Fed. Cir. 2019); WMI Holdings Corp. v.
United States, 891 F.3d 1016, 1021–22 (Fed. Cir. 2018).
The trial court found that California Ridge had not carried
that burden. Thus, the question before us is whether the
Court of Federal Claims committed reversible error in so
finding.
“The characterization of a transaction for tax purposes
is a question of law that is subject to de novo review, while
the underlying facts are reviewable for clear error.” Salem
Financial, Inc. v. United States, 786 F.3d 932, 940
2 On appeal, there is no material distinction between
California Ridge and Bishop Hill. For simplicity we use
“California Ridge” to refer to both parties, unless otherwise
noted.
Case: 19-1463 Document: 58 Page: 8 Filed: 05/21/2020
8 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
(Fed. Cir. 2015). “A finding is ‘clearly erroneous’ when[,]
although there is evidence to support it, the reviewing
court on the entire evidence is left with the definite and
firm conviction that a mistake has been committed.”
United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).
Whether the trial court made sufficient factual findings is
reviewed for abuse of discretion. See Medtronic, Inc. v.
Daig Corp., 789 F.2d 903, 906 (Fed. Cir. 1986).
III
Section 1603 provides for government reimbursement
to qualified applicants of a portion of the “expense” of put-
ting certain energy-generating property into service.
Pub. L. No. 111-5, § 1603(a). That expense is measured by
the “basis” of such a property, id., § 1603(b)(1), and “basis”
is defined as “the cost of such property,” 26 U.S.C.
§ 1012(a). Accordingly, California Ridge, to support its
claim, was required to prove that the dollar amounts of the
development fees claimed—stated in the development
agreements and paid to IWNA and IWDNA out of IWDNA’s
own funds—reliably measured the actual development
costs for the windfarms.
We read the Court of Federal Claims opinion as finding
that the amounts stated in the development agreements do
not reliably indicate the development costs. That finding
is not clearly erroneous. It is sufficiently supported by at
least the round-trip nature of the payments; the absence in
the agreements of any meaningful description of the devel-
opment services to be provided; and the fact that all, or
nearly all, of the development services had been completed
by the time the agreements were executed.
California Ridge argues primarily that the develop-
ment agreements had economic purpose and that, there-
fore, the court’s holding that those agreements were sham
transactions was error. But that argument does not estab-
lish that the trial court erred on the distinct question
whether the dollar amounts of those agreements are a
Case: 19-1463 Document: 58 Page: 9 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 9
reliable indicator of the true development costs. Because
we see no clear error in the trial court’s finding on that is-
sue, California Ridge cannot prevail regardless of whether
additional proof would be needed to characterize the trans-
actions as shams, an issue we need not address.
A
Three aspects of the development agreements support
the trial court’s finding that the agreement-specified devel-
opment fees do not reliably establish the actual develop-
ment costs.
First, California Ridge paid the development fees with
funds it obtained from another Invenergy subsidiary, re-
sulting in a round-trip transaction in which the funds left
from and returned to the same pocket on the same day. As
noted by relevant Treasury guidance, “in certain circum-
stances, a taxpayer’s stated cost for an asset does not re-
flect the true economic cost of that asset to the taxpayer
and will be ignored for purposes of determining the basis of
the asset.” U.S. Dep’t of the Treasury, Evaluating Cost Ba-
sis for Solar Photovoltaic Properties 1 (2011) (Cost Basis
Guidance) (quoting Bryant v. Comm’r, 790 F.2d 1463, 1466
(9th Cir. 1986)). This may be the case when “a transaction
is not conducted at arm’s-length by two economically self-
interested parties or where a transaction is based upon pe-
culiar circumstances.” Id. (quotation marks omitted) (quot-
ing Lemmen v. Comm’r, 77 T.C. 1326, 1348 (1981)). Here,
not only was the amount of the development fee negotiated
between related entities, the fee was paid in a round-trip
transaction such that neither the payor nor the payee was
materially affected by the transaction. Such circumstances
are “peculiar.” And substantively, the trial court could rea-
sonably view the agreed amount as not reliably indicating
the actual value transferred, since the economic impact on
payee or payor of the round-trip movement of money was,
if not zero or negligible, wholly unrelated to the dollar fig-
ures written into the agreements.
Case: 19-1463 Document: 58 Page: 10 Filed: 05/21/2020
10 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
California Ridge contends that the characterization of
the payments as nothing more than “round-trip” wire
transfers ignores the complicated treatment featured in In-
venergy’s accounting books. As to the specific California
Ridge development fee (as opposed to the Bishop Hill fee):
there is evidence that payment was meant to be funded by
Invenergy Wind Global—yet another Invenergy entity—
but at the time that payment was due, IWDNA happened
to be holding the money. J.A. 3387–88. Thus, California
Ridge posits that moving the money directly from IWDNA
to California Ridge was a transactional shortcut, which left
out intermediate steps of moving money up one side of the
Invenergy organizational chain and then back down an-
other. J.A. 3314–15. But even if Invenergy intended for
the money to come from the pocket of one Invenergy sub-
sidiary and end in the pocket of another, both pockets still
are Invenergy’s. The trial court could readily find that the
transaction, despite any characterization in Invenergy’s ac-
counting books, did not change the economic positions of
IWDNA or California Ridge in anything like the amount
stated in the agreement. See Frank Lyon Co. v. United
States, 435 U.S. 561, 573 (1978) (“The Court has never re-
garded the simple expedient of drawing up papers as con-
trolling for tax purposes when the objective economic
realities are to the contrary.” (internal citation omitted)).
As to the specific Bishop Hill fee: there is evidence that the
initial payment from IWDNA to Bishop Hill was treated as
a loan to IWNA, which IWNA paid back later that day after
receiving payment from Bishop Hill, using the money
IWDNA gave it. J.A. 3321–22. But even so characterized,
the transaction did not change the economic position of any
party in anything like the amount stated in the agreement.
Therefore, Invenergy’s accounting treatment does not un-
dermine the Court of Federal Claims’ determination that
the development fees are not a reliable indicator of value.
Second, the development agreements lack any mean-
ingful description of the services provided. The
Case: 19-1463 Document: 58 Page: 11 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 11
development agreements obligate Invenergy to perform
only generic development services: “[n]egotiat[e] construc-
tion financing terms, negotiat[e] the project and opera-
tional documents necessary or appropriate for the Project,
obtain[] permits and perform[] other services relating to
the Project.” J.A. 14780, 14783. There is no concrete spec-
ification of services that, if examined, might lend support
to the amount set in the agreement for a premium on those
services. And the choice to include only a highly generic
description may reasonably be taken to suggest that the fee
was not the result of a careful determination of what pre-
mium was justified for the particular work done.
It is no answer to say, as California Ridge does, that
there is extensive evidence that services were performed
that come within the generic descriptions in the agree-
ments. Development services certainly were provided to
California Ridge. In its cost-breakdown submitted to
Treasury, California Ridge described several categories of
indirect costs separately included in the grant request,
such as “Development legal,” “Internal Development,” and
“Misc Site Development.” J.A. 6530, 6569. And trial testi-
mony provides some further details. See, e.g., J.A. 3288–
89 (outside counsel work, for “any number of development
activities,” including “zoning and permitting”; payroll and
travel costs for Invenergy’s employees). But the generic
character of the service description in the agreement
makes it reasonable to find unproven the assertion that the
fee amounts set in those agreements were a reliable indi-
cator of the value of the development work.
Third, the development agreements were executed af-
ter the development services were substantially completed.
The Bishop Hill agreement states that Invenergy “has pro-
vided development services,” J.A. 14783 (emphasis added),
while the California Ridge agreement states that Inven-
ergy “has provided and hereby agrees to provide further
development services,” J.A. 14780 (emphasis added). Be-
cause the services were already rendered, in full or in large
Case: 19-1463 Document: 58 Page: 12 Filed: 05/21/2020
12 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
part, the negotiated price for a premium as part of those
services was not part of a pre-acquisition market transac-
tion that would lend the price reliability as an indicator of
market value.
The facts we have summarized provide a strong basis
for the Court of Federal Claims’ determination that Cali-
fornia Ridge did not prove that the development fees stated
in the agreements were reliable indicators of the develop-
ment costs. And we see no clear error when we consider
the foregoing facts together with California Ridge’s addi-
tional arguments, discussed next.
B
California Ridge argues that the Court of Federal
Claims erred because its sham-transaction determination
effectively denies Invenergy the ability to transfer value to
California Ridge by selling its services to California Ridge
at fair market value. That contention is incorrect. In this
case, the trial court could reasonably find, on the particular
facts, that the agreement-stated figures do not accurately
value eligible costs. That is hardly a general bar to
properly valued transactions within the Invenergy family.
California Ridge also argues that the development
agreements had economic substance because the economic
position of third-party USBank was affected by the round-
trip fee payments. But California Ridge forfeited this ar-
gument by not raising it below. We may deem an argument
forfeited when a party raises it for the first time on appeal.
Personal Audio, LLC v. CBS Corp., 946 F.3d 1348, 1354
(Fed. Cir. 2020); Sage Products, Inc. v. Devon Industries,
Inc., 126 F.3d 1420, 1426 (Fed. Cir. 1997). California Ridge
cites a portion of its closing statement to show that it raised
the point to the trial court, Appellants’ Reply Br. 15, but
those statements were made to explain how USBank would
be affected if the development fees were not included in the
windfarms’ bases, J.A. 3579–80. The cited statements do
not show that California Ridge previously argued that the
Case: 19-1463 Document: 58 Page: 13 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 13
payment of the development fees affected USBank. There-
fore, California Ridge has forfeited the argument.
California Ridge further argues that the development
agreements had economic substance because they created
a positive net cash flow to Invenergy. The argument that
there is some positive net cash flow to Invenergy does not
undermine the essential finding on the only issue on ap-
peal—that the agreement-specified figures themselves
were not proved to be accurate values for the costs at issue.
Indeed, this argument is premised on faulty calculations.
At trial, California Ridge’s witness Mr. Murphy deter-
mined the net cash flow to Invenergy by subtracting Inven-
ergy’s equity contribution to each windfarm from the
respective development fee. J.A. 3016–26. In turn, Mr.
Murphy determined Invenergy’s equity contribution by
subtracting the amount of third-party funding from the to-
tal cost of the windfarm. J.A. 3019–22. When performing
this calculation, however, Mr. Murphy used a total facility
cost that included the cost of the development fee. Com-
pare J.A. 3020 with J.A. 6568. The implication of Mr. Mur-
phy’s own testimony, it appears, is that the net cash to
Invenergy is independent of the amount of the development
fee. Such an implication undermines, rather than sup-
ports, any inference that the amounts of the development
fees are a reasonable indication of the development costs.
In addition, California Ridge argues that the independ-
ent attestation of its accounting firm, Deloitte, shows that
the development agreements have economic substance.
But those attestations do not prove that the fees are a reli-
able indication of cost. In its memo to California Ridge,
Deloitte indicated that its examination was “primarily con-
cerned with the potential errors of classification of assets
as eligible property and determination of eligible basis
. . . .” J.A. 14690. Deloitte’s examination of the develop-
ment fees appears to have been focused on whether the de-
velopment fees were allocable to grant-eligible costs. And
it concluded that Invenergy’s assertions that “the full
Case: 19-1463 Document: 58 Page: 14 Filed: 05/21/2020
14 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
amount of the development fee is capitalizable to the pro-
ject assets and that the allocation to basis eligible for Sec-
tion 1603 grants is appropriate” were reasonable.
J.A. 14701. Deloitte did not independently examine and
determine whether the dollar amounts of the development
fees accurately reflected the value of the premium on de-
velopment work, as California Ridge claims. Although
Deloitte stated that “the amount of the fee is consistent
with the amounts paid by other third[-]party investors in
other Invenergy projects,” it did not aver that the amount
of the fee was an accurate measure of cost in this particular
circumstance. Id.
Lastly, California Ridge argues that the testimony of
its expert Mr. Gross shows that the development fees are
reliable measures of the value Invenergy provided to the
windfarms. In particular, California Ridge argues that Mr.
Gross’s testimony shows that the amount of the fees was
within the range of “appropriate markups” identified by
Treasury in certain published guidance. That guidance de-
scribes three approaches to determining the appropriate
costs basis for purposes of section 1603. Cost Basis Guid-
ance, at 3–4. Under the “cost approach,” an applicant
“should clearly show the cost buildup, including hard costs,
soft costs, and profit.” Id. at 4. The guidance further pro-
vides that an applicant may include a “markup” in its cost
basis and that “appropriate markups typically fall in the
range of 10 to 20 percent.” Id. California Ridge argues that
the amounts of the development fees fall in that range,
when measured as a percent of the other grant-eligible
costs. But California Ridge has not established that this is
an appropriate reading of the guidance, which specifies
that markups are appropriate only when they are con-
sistent with the “scope of the work for which the markup is
received.” Id. That language suggests using a percentage
of the cost of the development work provided, rather than
of all grant-eligible costs. And, as discussed above, the ser-
vices in the development agreements are described so
Case: 19-1463 Document: 58 Page: 15 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 15
generically as to make it difficult to determine what spe-
cific work the development-fee “markups” are tethered to.
Therefore, Mr. Gross’s testimony that the amounts of the
development fees comply with Treasury’s guidance does
not establish clear error on the trial court’s behalf.
We need not decide whether Mr. Gross’s testimony—
regarding the cost approach or the other approaches for de-
termining basis—might have supported a finding in Cali-
fornia Ridge’s favor regarding the development fees. The
question on appeal is whether we are left with a definite
and firm conviction that the trial court erred in finding to
the contrary. We are not.
IV
California Ridge argues that the Court of Federal
Claims clearly erred in two findings of fact.
First, it disputes the trial court’s finding that Mr.
Schueler “did not give testimony specific[ally] related to
the development services outlined in the three-page devel-
opment agreement[s].” Appellants’ Br. 18 (quoting Califor-
nia Ridge, 143 Fed. Cl. at 761). We conclude, however, that
the court’s finding is not clearly erroneous in light of the
record. The court noted that Mr. Schueler testified that he
was “not immediately familiar” with the development
agreements. California Ridge, 143 Fed. Cl. at 761 (citing
J.A. 2911). California Ridge cites many portions of Mr.
Schueler’s testimony as purportedly showing the extensive
development work that he and his team did at the wind-
farms. Appellants’ Br. 18–19. But much of that testimony
is about the type of development work that Mr. Schueler
did for Invenergy windfarms generally, see, e.g., J.A. 2805–
06, 2815–17, and the rest of his testimony, while focused
on development work done at the Bishop Hill or California
Ridge windfarms, does not indicate any relation between
the work done and the development agreements, see, e.g.,
J.A. 2837–39, 2849–60. Additionally, the documents that
California Ridge cites as evidence of the development work
Case: 19-1463 Document: 58 Page: 16 Filed: 05/21/2020
16 CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES
done are all dated earlier than the relevant development
agreement, see, e.g., J.A. 12982–92 (dated May 3, 2011),
J.A. 13034–35 (dated June 20, 2011); thus, these docu-
ments do not show that the work documented was specifi-
cally related to the services outlined in the development
agreements. Therefore, the Court of Federal Claims’ find-
ing that Mr. Schueler did not give testimony specifically
related to the development agreements is not clear error.
Second, California Ridge challenges the court’s finding
that the developers did not quantify the services provided
under the agreements. Appellants’ Br. 22–23 (citing Cali-
fornia Ridge, 143 Fed. Cl. at 762). California Ridge argues
that the services to be provided were clearly defined, it was
possible to objectively verify whether the services were per-
formed, and the services were quantified by the $50- and
$60-million development fees. We understand the chal-
lenged trial-court finding, however, as meaning that Cali-
fornia Ridge failed to provide any specificity as to what,
concretely, was done under the development agreements
that would warrant the development-fee premiums in the
amounts stated in the agreements. So understood, the
finding is not clearly erroneous.
As discussed above, the development agreements obli-
gate Invenergy to perform development services identified
only at a very high level of generality. And California
Ridge’s provided method for determining whether those
tasks have been completed is equivalent to a determination
that the project has been completed. Such a determination
does not show that the development agreements were in-
dependently valuable and necessary when there are many
other costs—all necessary to the completion of the pro-
jects—also accounted for in California Ridge’s evidence.
Lastly, although California Ridge did provide evidence as
to how it arrived at the $50- and $60-million figures, see
J.A. 2964–78, that evidence does not show that the valua-
tions were reliable. Therefore, the Court of Federal Claims
did not clearly err when it found that the development
Case: 19-1463 Document: 58 Page: 17 Filed: 05/21/2020
CALIFORNIA RIDGE WIND ENERGY v. UNITED STATES 17
agreements provide only a general valuation of non-specific
services—in its terminology: the services are not “quantifi-
able.” California Ridge, 143 Fed. Cl. at 762.
V
For the foregoing reasons, we affirm the judgment of
the Court of Federal Claims.
Costs awarded to the appellee.
AFFIRMED