DNC Parks & Resorts at Yosemite, Inc. v. United States
133 Fed. Cl. 314
Fed. Cl.2017Background
- DNC Parks & Resorts at Yosemite (plaintiff) held a concession contract with the National Park Service (NPS) for Yosemite operations that expired Feb. 29, 2016; Yosemite Hospitality, LLC now operates the concessions.
- Contract Sections 12 (Termination) and 13 (Compensation) set out termination-for-default procedures and require the Secretary to ensure a successor purchases the concessioner’s possessory interest and property at "fair value," with payment rules specified.
- Plaintiff alleges the United States breached the contract and covenant of good faith by failing to require the successor to buy plaintiff’s property at fair value, per Sections 12–13 and the prospectus.
- The United States pleaded, among other defenses, that plaintiff committed a prior material breach (bad-faith inflation of property value), excusing NPS performance under Section 13.
- Plaintiff moved for partial summary judgment seeking dismissal of the government’s prior-material-breach affirmative defense on the ground the contract displaces that common-law defense.
- The Court found the contract language unambiguous: termination for default still triggers Section 13 compensation; therefore the parties contracted to displace the prior material breach defense as to the Section 13 compensation obligation. The court granted plaintiff’s motion and dismissed the third affirmative defense.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether parties can contractually displace the common-law prior-material-breach defense | Parties may agree to terms that bind performance and preclude the defense | The prior-material-breach defense is available despite contractual termination/compensation clauses, especially for bad-faith breaches | Parties can contractually displace the defense; court rejects blanket exception to that freedom |
| Whether the contract here displaces the prior-material-breach defense as to Section 13 compensation | Contract’s Sections 12–13 explicitly require compensation on termination, even for default | Plaintiff’s breach in bad faith excuses NPS’s obligation to pay under Section 13 | Sections 12–13 are unambiguous; they require compensation on default, so the defense is displaced |
| Whether extrinsic evidence or factual disputes prevent summary judgment on this question | Contract is unambiguous; no extrinsic evidence needed | Factual disputes about bad faith are immaterial to contractual interpretation | No genuine factual issue; question is a matter of law resolved for plaintiff |
| Whether contractual divisibility allows defendant to raise the defense anyway (raised by third-party defendant) | Contract terms require compliance with Section 13 even if divisible | Divisibility could permit raising the defense for portions of the contract | Court rejected divisibility argument for same reasons: Section 13 applies on default |
Key Cases Cited
- Olin Corp. v. Central Indus., 576 F.2d 642 (5th Cir. 1978) (discusses when termination clause is non-exclusive and prior-material-breach remedy may remain available)
- K-Con Bldg. Sys., Inc. v. United States, 131 Fed. Cl. 275 (Fed. Cl. 2017) (contract terms can require contractual remedies despite the other party’s breach)
- Barron Bancshares, Inc. v. United States, 366 F.3d 1360 (Fed. Cir. 2004) (definition and explanation of prior material breach doctrine)
- Am. Chemical Soc’y v. United States, 438 F.2d 597 (Ct. Cl. 1971) (parties are generally bound by lawful contract terms they agree to)