White Buffalo Construction, Inc. v. United States

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
WHITE BUFFALO CONSTRUCTION, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2012-5045
______________________
Appeal from the United States Court of Federal
Claims in Nos. 99-CV-961, 00-CV-415, and 07-CV-738,
Senior Judge Loren A. Smith.
______________________
Decided: November 1, 2013
______________________
SCOTT J. KAPLAN, Stoel Rives, LLP, of Portland, Ore-
gon, argued for plaintiff-appellant. With him on the brief
was RICHARD E. ALEXANDER.
TIMOTHY P. MCILMAIL, Senior Trial Counsel, Commer-
cial Litigation Branch, Civil Division, United States
Department of Justice, of Washington, DC, argued for
defendant-appellee. With him on the brief were STUART
F. DELERY, Acting Assistant Attorney General, JEANNE E.
DAVIDSON, Director. Of counsel on the brief was RAYANN
2 WHITE BUFFALO CONSTRUCTION v. US
SPEAKMAN, Attorney, United States Department of
Transportation, Federal Highway Administration, of
Vancouver, Washington.
______________________
Before PROST, BRYSON, and REYNA, Circuit Judges.
PROST, Circuit Judge.
White Buffalo Construction, Inc. (“White Buffalo”) ap-
peals from final judgment of the United States Court of
Federal Claims disposing of all claims in consolidated
case nos. 99-CV-961 (the “1999 Case”), 00-CV-415 (the
“2000 Case”), and 07-CV-738 (the “2007 Case”). White
Buffalo Const., Inc. v. United States, 101 Fed. Cl. 1 (2011).
We affirm in part and vacate in part and remand as
detailed below.
BACKGROUND
The Federal Highway Administration (“FHA”) con-
tracted with White Buffalo to repair damaged roads in the
Sikiyou National Forest in the fall of 1998. On December
1, 1998, the FHA decided to terminate the contract for
default, and White Buffalo was instructed to stop all work
immediately.
White Buffalo subsequently filed the 1999 Case, chal-
lenging the FHA’s default termination. One year later
White Buffalo filed the 2000 Case, seeking to recover
liquidated damages paid by White Buffalo’s surety.
Prior to the scheduled trial of the 1999 and 2000 Cas-
es, the FHA’s legal counsel requested authority from the
Department of Justice (“DOJ”) to convert the termination
for default into a termination for convenience of the
government. The legal counsel noted that trial prepara-
tion had uncovered a substantial question as to whether
the project could have been completed on time by White
Buffalo due to some unexpected site conditions. Pursuant
WHITE BUFFALO CONSTRUCTION v. US 3
to DOJ authorization, the FHA converted the termination
and released the liquidated damages.
Following the conversion, White Buffalo sought to
continue litigating the 1999 and 2000 Cases, arguing that
the conversion took away its right to relief under the
Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412,
through which White Buffalo alleges it could have ob-
tained attorney fees. White Buffalo also filed the 2007
Case to obtain lost profits on uncompleted work due to the
FHA’s alleged bad faith conduct and to challenge the
amount of the termination for convenience settlement
awarded by the FHA.
After a trial, the Court of Federal Claims found that
the 1999 and 2000 Cases were moot due to the FHA’s
conversion of the default termination to one of conven-
ience. However, it failed to dismiss those two cases in its
judgment. The Court of Federal Claims also found that
the FHA did not act in bad faith toward White Buffalo
and awarded no lost profits for uncompleted work. It did
award White Buffalo a total of $353,237.36, plus interest,
on White Buffalo’s termination for convenience claim.
DISCUSSION
On appeal, White Buffalo challenges the Court of
Federal Claims’ judgment on seven grounds. We address
each of these challenges in turn.
A. The Validity of the Termination for Convenience
Conversion
First, White Buffalo questions whether the DOJ could
moot the 1999 and 2000 Cases by converting a default
termination to a termination for convenience, arguing
that the conversion unlawfully took away White Buffalo’s
EAJA claims. However, we have stated that “[a]lthough
securing attorney fees may understandably affect a par-
ty’s litigation strategy, the availability of EAJA fees is not
an appropriate consideration for a court when determin-
4 WHITE BUFFALO CONSTRUCTION v. US
ing how to dispose of a case.” Chapman Law Firm Co. v.
Greenleaf Const. Co., 490 F.3d 934, 939 (Fed. Cir. 2007).
Therefore, without regard to EAJA, the Court of Federal
Claims properly found that the conversion mooted the
claims presented and relief sought in the 1999 and 2000
Cases. Since the Court of Federal Claims did not reflect
this in its judgment, we remand the 1999 and 2000 Cases
to the Court of Federal Claims with directions to dismiss.
B. De Novo Review of White Buffalo’s Claims in the 1999
and 2000 Cases
White Buffalo argues that the Court of Federal
Claims failed to conduct a de novo review of the FHA’s
initial default termination decision. However, once the
conversion occurred, White Buffalo was no longer identi-
fied as a defaulting party, so we need not consider wheth-
er the Court of Federal Claims properly reviewed the
motive behind the FHA’s initial determination.
C. White Buffalo’s Subcontractor Claims
The Court of Federal Claims found that White Buffalo
was entitled to $29,528 in claimed “settlement expenses”
related to White Buffalo’s subcontractor claims, but it
appears this award was not included in the judgment.
Since it is unclear whether this was an error or whether
this omission was intentional, we vacate in part the
judgment for the 2007 Case and remand to the Court of
Federal Claims so that it may consider whether to in-
crease the judgment by $29,528.
D. White Buffalo’s Testimony on Profit Margins
White Buffalo argues that it offered factual and opin-
ion testimony supporting a 44% profit margin on pre-
termination work and that the Court of Federal Claims
erred in rejecting that testimony. We note that an abuse
of discretion review applies to the methodology for calcu-
lating the rate of profit, while clear error review applies to
the calculation of the amount itself. See Home Savs. of
WHITE BUFFALO CONSTRUCTION v. US 5
Am. v. United States, 399 F.3d 1341, 1347 (Fed. Cir.
2005). And under the correct standard, we hold that the
trial judge’s choice of methodology to calculate profits
based on a comparison of actual expenditures to the
contract value of the work performed was not an abuse of
discretion.
E. Evidentiary Presumptions on Missing Witness
Testimony
White Buffalo argues that the trial court made an er-
ror of law in failing to grant White Buffalo an evidentiary
presumption that some of the Government’s witnesses
would have testified against the Government. Although
White Buffalo was able to depose the Project Engineer
and the FHA Division Engineer, neither testified at trial. 1
However, the drawing of an adverse inference based on
failure to call a witness is discretionary with the trial
court. See Ring Plus, Inc. v. Cingular Wireless Corp., 614
F.3d 1354, 1362-63 (Fed. Cir. 2010) (“[I]f [a] party chooses
to not call [witnesses within his control to produce], the
fact finder may draw the inference that the testimony
would be unfavorable.” (emphasis added)); see also Bo-
gosian v. Woloohojian Realty Corp., 323 F.3d 55, 67 (1st
Cir. 2003) (“The ‘missing witness’ rule permits, rather
than compels, the factfinder to draw an adverse inference
from the absence of a witness.”). Therefore, the Court of
Federal Claims’ failure to state that it applied a negative
inference was not an error of law.
F. Lack of Bad Faith Findings
As a preliminary matter, the Government challenges
whether the Court of Federal Claims even had jurisdic-
1 The FHA Division Engineer was deceased prior to
the trial, and upon learning this fact at oral argument,
White Buffalo focused its evidentiary presumption argu-
ment on the Project Engineer.
6 WHITE BUFFALO CONSTRUCTION v. US
tion over White Buffalo’s bad faith termination claim, as
it was filed more than six years from the termination by
default decision. See 41 U.S.C. § 7103(a)(4)(A). However,
a claim accrues when all events necessary to fix the
liability of the defendant have occurred. See Catawba
Indian Tribe of S.C. v. United States, 982 F.2d 1564, 1570
(Fed. Cir. 1993). And there is evidence in the record to
support a finding that all events relevant to White Buffa-
lo’s bad faith claim did not occur until 2000 or later, after
White Buffalo discovered the alleged disparate treatment
of contractors and learned of the Government’s alleged
“other motives.” This would make the claim timely.
Therefore, we hold that the Court of Federal Claims did
not commit clear error in finding jurisdiction.
“For a plaintiff to successfully assert a claim for
breach of the implied covenant of good faith and fair
dealing respecting a contract with the government, he or
she ‘must allege and prove facts constituting a specific
intent to injure [the] plaintiff on the part of the govern-
ment[al] official.” Bannum, Inc. v. United States, 80 Fed.
Cl. 239, 246 (2008) (citing Pratt v. United States, 50 Fed.
Cl. 469, 479 (2001)). Further, there is a presumption that
government officials act in good faith, but this presump-
tion can be overcome by evidence of such specific intent to
injure. Id. We have observed that “[t]he contractor’s
burden to prove the Government acted in bad faith,
however, is very weighty. Due to this heavy burden of
proof, contractors have rarely succeeded in demonstrating
the Government’s bad faith.” Krygoski Const. Co. v.
United States, 94 F.3d 1537, 1541 (Fed. Cir. 1996) (cita-
tions omitted).
The evidence in the record supports a finding that the
termination was motivated by a reasonable basis, as
White Buffalo does not dispute that it failed to complete
the repairs in a timely manner. White Buffalo argues
that the FHA employee’s specific intent to injure can be
shown by its unequal treatment of the contractors, but as
WHITE BUFFALO CONSTRUCTION v. US 7
the Government correctly points out, the assertion of a
legitimate contract is not bad faith. See Rumsfeld v.
Freedom NY, Inc., 329 F.3d 1320, 1331 (Fed. Cir. 2003).
Therefore, the evidence in the record does not show that
the Court of Federal Claims erred in finding a lack of bad
faith on the Government’s part.
White Buffalo further argues that the conversion de-
cision was itself in bad faith, since the FHA only made the
conversion on the eve of trial to avoid liability for lost
profits. But White Buffalo fails to explain how a desire to
minimize the Government’s litigation exposure consti-
tutes bad faith.
The Court of Federal Claims found that “the conver-
sion may have reasonably been made because there were
questions as to whether the differing site conditions
prevented White Buffalo from completing the project on
time” and that “[t]he most logical inference from the facts
is that government officials were divided on the complex
fact issue on this project and opted to give White Buffalo
the benefit of the doubt.” White Buffalo Const., 101 Fed.
Cl. at 19. This finding was not clearly erroneous. There-
fore, we affirm the Court of Federal Claims’ finding that
the Government did not act in bad faith.
G. The Testimony of the Government’s Lawyer
Finally, White Buffalo argues that the Court of Fed-
eral Claims abused its discretion in allowing a Govern-
ment lawyer to testify at trial on rebuttal about why the
FHA decided to convert the termination by default to a
termination by convenience. However, the record shows
that White Buffalo agreed to such limited testimony.
Since we review a decision of the Court of Federal Claims
in an evidentiary matter under an abuse of discretion
standard and will only disturb that court’s ruling if it
prejudiced substantial rights, Air Land Forwarders, Inc.
v. United States, 172 F.3d 1338, 1341 (Fed. Cir. 1999), we
8 WHITE BUFFALO CONSTRUCTION v. US
hold that the Court of Federal Claims did not abuse its
discretion here.
CONCLUSION
In accordance with our analysis above, we affirm in
part, vacate in part, and remand to the Court of Federal
Claims with directions to dismiss the 1999 and 2000
Cases as well as to evaluate whether the judgment in the
2007 Case should include $29,528 in awarded subcontrac-
tor damages.
AFFIRM-IN-PART, VACATE-IN-PART, AND
REMAND
COSTS
Each party shall bear their own costs.