FORD MOTOR COMPANY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
No. 03-5092.
United States Court of Appeals, Federal Circuit.
Aug. 10, 2004.
378 F.3d 1314
CONCLUSION
The judgment of the trial court is AFFIRMED.
Michael W. Kirk, Cooper & Kirk, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Charles J. Cooper and Elisebeth B. Collins.
Kyle Chadwick, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General; and David M. Cohen, Director. Of counsel was Timothy P. McIlmail, Attorney.
Before NEWMAN, SCHALL, and LINN, Circuit Judges.
PAULINE NEWMAN, Circuit Judge.
Ford Motor Company appeals the decision of the United States Court of Federal Claims, denying Ford‘s claim for certain environmental cleanup costs arising from a World War II bomber contract at Willow Run in Ypsilanti, Michigan.1 We conclude that Ford is entitled to recover the costs of the environmental cleanup that was required by Federal and State agencies. The decision of the Court of Federal Claims is reversed.
BACKGROUND
In 1941 Ford and the United States Army Air Force entered into Contract No. W535-ac-21216 (the War Contract), a cost-plus-fixed-fee contract to manufacture B-24 Liberator bomber airplanes and spare parts. At the government‘s direction Ford built the Willow Run Bomber Plant and leased it back from the government for conduct of the contract. Ford also built,
In 1988 the Michigan Department of Natural Resources, together with the United States Environmental Protection Agency acting under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
While the state and federal environmental proceedings were pending, on January 20, 1994 Ford wrote to the Air Force Materiel Command, addressed to the “Successor to the Contracting Officer” for the War Contract and stating “this notice is
On March 16, 1995 Ford again wrote to the Air Force, providing updated information concerning the consent judgment of liability. On August 10, 1995 the Director of Contract Law for the Air Force Materiel Command responded by letter; he agreed to serve as the “point of contact,” and summarily denied Ford‘s request for reimbursement. He stated that there was “no basis for recovery or the appointment of a contracting officer.”
Meanwhile, the federal and state proceedings continued. In March 1998, after completion of the multi-party arbitration and allocation, Ford wrote to the Director of Contract Law for the Materiel Command, advising of Ford‘s share of the cleanup costs and requesting reimbursement. Ford directed attention to the Contract Settlement Act of 1944,
In March 1999 Ford filed this suit in the Court of Federal Claims. In Count I, Ford charged the United States with breach of contract for failure to reimburse the environmental cleanup costs as required by the War Contract and the Termination Agreements. Count II was for failure to pay “fair compensation” in violation of
Both sides moved for summary judgment as to Counts I, II, and III. Neither side addressed Counts IV and V, and the Court of Federal Claims held these counts abandoned. The court granted summary judgment in favor of the government on Counts II and III, and dismissed Count I without prejudice. This appeal followed.
DISCUSSION
On appellate review of judgments of the Court of Federal Claims, issues of contract interpretation receive plenary review, as a matter of law. Mass. Bay Transp. Auth. v. United States, 254 F.3d 1367, 1372 (Fed. Cir. 2001). Summary judgments also receive plenary review, the appellate tribunal applying the same criteria as did the trial court, with all justifiable factual inferences drawn in favor of the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
A
The parties debate whether Ford followed appropriate procedures. Ford states that it gave notice of the claim in accordance with the provisions of the CSA, and that the government‘s refusal to provide findings as required by the statute, and its summary denial of the claim, satisfied the procedural requirements.
Under the CSA, if a claim has not been settled by agreement, a contractor may submit a demand for written findings from the contracting agency. The claim is sub
41 U.S.C. § 113(a) . Failure to settle claims by agreement; preparation of findings; notice to war contractorWhenever the contracting agency responsible for settling any termination claim has not settled the claim by agreement or has so settled only a part of the claim, (1) the contracting agency at any time may determine the amount due on such claim or such unsettled part, and prepare written findings indicating the basis of the determination, and deliver a copy of such findings to the war contractor, or (2) if the termination claim has been submitted in the manner and substantially the form prescribed under this chapter, the contracting agency, upon written demand by the war contractor for such findings, shall determine the amount due on the claim or unsettled part and prepare and deliver such findings to the war contractor within ninety days after the receipt by the agency of such demand....
(b) Rights of war contractor
Whenever any war contractor is aggrieved by the findings of a contracting agency on his claim or part thereof or by its failure to make such findings in accordance with subsection (a) of this section, he may bring suit against the United States for such claim or such part thereof, in the United States Court of Federal Claims or in a United States district court, in accordance with sections 1346, 2401, and 2402 of Title 28....
(c) Procedure
Any proceeding under subsection (b) of this section shall be governed by the following conditions:
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(2) A war contractor may initiate proceedings in accordance with subsection (b) of this section (i) within ninety days after delivery to him of the findings by the contracting agency, or (ii) in case of protests or appeal within the agency, within ninety days after the determination of such protest or appeal, or (iii) in case of failure to deliver such findings, within one year after his demand therefor....
The government states that the Air Force was not required to respond to Ford‘s 1998 demands for findings, that Ford tendered its claim in January 1994, and that when the Air Force denied the claim in August 1995, Ford had 90 days in which to seek judicial review. Ford states that the government‘s proposed procedure is not that of the statute, and is incorrect.
The CSA statute makes clear that a demand for written findings is a necessary predicate to bringing a claim under the CSA. Ford‘s January 1994 and March 1995 letters to the Air Force do not contain a demand for findings, and were written before the cost of the cleanup was assessed. The demand for findings was made in March 1998 after Ford‘s monetary allocation was established, and was repeated in November 1998.
In Somerset Mach. & Tool Co. v. United States, 144 Ct. Cl. 481 (1959), on which the government relies in arguing that Ford‘s claim is time-barred, the plaintiff submitted termination claims under the CSA, and in February 1956 the contracting officer notified the plaintiff that its claim was denied. Suit was not filed until January 1958, and the court held that the claim was barred. The February 1956 denial letter
Although the Court of Federal Claims held that Ford should have proceeded under the Contract Disputes Act and its procedures,
B
Both the government and Ford stated at trial that the CSA governs Ford‘s claim. The Court of Federal Claims held that the CSA is not applicable because the War Contract was terminated and final Termination Agreements were entered into in 1945 and 1946. We agree with Ford and the government that the CSA applies, and that the Termination Agreements are construed in the context of the CSA. The CSA defined “termination claim” as follows:
(h) The term “termination claim” means any claim or demand by a war contractor for fair compensation for the termination of any war contract and any other claim under a terminated war contract, which regulations prescribed under this chapter authorize to be asserted and settled in connection with any termination settlement.
(4) Claims of the Contractor against the Government which are based upon responsibility of the Contractor to Third parties ... and which involve costs reimbursable under the Contract ... but which are not now known to the Officers, Directors, or other personnel of the Contractor whose duties include the acquisition of such knowledge.
Termination Agreement, article 4(c)(4) (May 7, 1946).
Article 4(c)(4) of the Termination Agreement, which reserved unknown claims from a general release of claims, preserved Ford‘s claim for payment under the War Contract. The Court of Federal Claims acknowledged that Ford was asserting a claim for payment under the provisions of the War Contract. Because Ford‘s claim was exempted from settlement by the terms of the Termination Agreement, the government‘s liability under the CSA was not released. Thus, the Court of Federal Claims’ conclusion that the CSA was not applicable was in error.
C
The Court of Federal Claims held that the provision in the Termination Agreement for reimbursement of costs
Ford points out that the CSA explicitly contemplated later-arising claims, and set no period of limitations. Ford states that the Court of Claims has held that an unknown claim need not be in existence at the time of contracting to be covered by an indemnification clause. In United States Rubber Co. v. United States, 142 Ct. Cl. 42, 160 F.Supp. 492 (1958), the wartime contract included an unknown claims provision nearly identical to that of the Termination Agreement in this case. Although the government had argued that later-arising claims were barred, the Court of Claims held that the government‘s liability to the contractor was “not diluted by the intervention of time” and awarded the contractor its after-arising costs. Id. at 499-500. Ford argues that the unknown costs and damage to property provisions in its War Contract were broadly stated, for their purpose was to provide appropriate assurance to wartime contractors as to indemnification for property damage claims incident to the contract, whether those claims arose before or after termination.
The government argues that article 4(c)(4) of the 1946 Termination Agreement should be strictly construed to apply only to already-existing claims that were unknown at the time of termination. The government states that Ford‘s claim is not an “unknown” claim under the Termination Agreement because it did not exist until after environmental laws were later enacted. The government also argues that Ford‘s claim is not “reimbursable under the Contract” pursuant to CSA article 3(b)(13) because “damage to property” means tort claims, not later-arising environmental claims.
These principles were again considered in E.I. DuPont de Nemours & Co. v. United States, 365 F.3d 1367 (Fed. Cir. 2004), where the indemnity provision in a World War II contract to produce chemicals for munitions provided that: “the Government shall hold [DuPont] harmless against any loss, expenses ... or damage of any kind whatsoever arising out of or in connection with the performance of the work under this Title....” In DuPont this court confirmed the government‘s obligation of indemnification for a later-arising CERCLA claim. Id. at 1373-74. The corresponding clause in Ford‘s contract refers to property damage, see article 3(b)(13) (allowable costs include “loss or destruction of or damage to property as may arise out of or in connection with the performance of the work under this contract“), and covers the CERCLA claim here at issue.
The Termination Agreement with Ford by its terms includes all claims “not now known” arising from performance of the War Contract; there is no temporal limit as to when the claims would become known, provided their origin is performance of the War Contract. This differs from the contract provision in the case relied upon by the government, Chrysler Corp. v. Ford Motor Co., 972 F.Supp. 1097
D
The government does not press the Anti-Deficiency Act,
Conclusion
The Court of Federal Claims erred in holding that this later-arising claim is not reimbursable. The War Contract, its termination conditions, the Contract Settlement Act of 1944, and precedent, establish the government‘s liability. The contrary decision of the Court of Federal Claims is reversed. We remand for implementation of judgment in favor of Ford, including any appropriate review of the quantum of recovery.
REVERSED AND REMANDED.
SCHALL, Circuit Judge, dissenting.
I agree with the majority that the Contract Settlement Act of 1944 applies to Ford‘s claim, and that Ford‘s complaint was timely filed. I am unable to agree, however, that Ford is entitled to recover its contribution to the CERCLA settlement under the terms of the War Contract. Because I do not agree with the majority‘s interpretation of the War Contract, I respectfully dissent from its conclusion that pursuant to the indemnification clause in the Termination Agreement, the government must reimburse Ford for its contribution to the CERCLA settlement. I therefore would affirm the judgment of the Court of Federal Claims.
In cases in which the United States is a party to a contract, we apply general rules of contract construction. Scott Timber Co. v. United States, 333 F.3d 1358, 1366 (Fed. Cir. 2003) (citing Lockheed Martin IR Imaging Sys., Inc. v. West, 108 F.3d 319, 322 (Fed. Cir. 1997)). “When the United States
It is one thing to interpret CERCLA section 107(e)(1), as we have, as permitting the government to indemnify a private party for costs assessed pursuant to CERCLA. E.I. DuPont de Nemours & Co. v. United States, 365 F.3d 1367, 1372 n. 10 (Fed. Cir. 2004) (interpreting
As noted above, the laws of contracts generally applicable to private parties also determine the government‘s rights and responsibilities when it enters into contracts. See Winstar, 518 U.S. at 895. Courts have held that indemnification provisions entered into between private parties prior to the passage of CERCLA may cover costs assessed pursuant to that statute. See, e.g., Dent v. Beazer Materials & Servs., Inc., 156 F.3d 523, 534 (4th Cir. 1998); Beazer E., Inc. v. Mead Corp., 34 F.3d 206, 211 (3d Cir. 1994), cert. denied, 514 U.S. 1065 (1995); Kerr-McGee Chem. Corp. v. Lefton Iron & Metal Co., 14 F.3d 321, 327 (7th Cir. 1994); Mobay Corp. v. Allied-Signal, Inc., 761 F.Supp. 345, 356-58 (D.N.J.1991). One of two types of indemnification provisions is required. The indemnification language must either be “specific enough to include CERCLA liability or general enough to include any and
The indemnification provision in the Termination Agreement preserves
(4) Claims of [Ford] against the Government which are based upon responsibility of [Ford] to Third parties ... and which involve costs reimbursable under the Contract, including without being limited thereto, wage adjustments which are approved by properly constituted Government Departments or Agencies or determined to be payable under the Davis-Bacon Act, but which are not now known to the Officers, Directors, or other personnel of [Ford]....
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(1) In addition to the payment of the sum provided for in Article 4, the government will reimburse [Ford] for costs incurred in discharging claims described in subparagraphs (c)(1), (c)(3), (c)(4), (c)(6), (c)(7), and (c)(16) of said Article.
Supplemental Agreement No. 69, arts. 4(c)(4), 5(1) (May 7, 1946) (emphases added). In other words, upon the termination of the War Contract, Ford retained its claims against the government for costs that were reimbursable under the War Contract but were not known at the time of the Termination Agreement. This indemnity provision thereby directs the court to the reimbursable costs provisions of the War Contract. Ford contends that the following provision from the War Contract encompasses its contribution to the CERCLA settlement:
(13) ... costs and expenses incurred in the defense and/or discharge of such claims of others on account of death or bodily injury of persons or loss or destruction of or damage to property as may arise out of or in connection with the performance of the work under this contract shall be an allowable item of cost hereunder....
Supplemental Agreement No. 4, art. 3(b)(13) (emphasis added). According to Ford, costs assessed pursuant to CERCLA fall within the “loss or destruction of or damage to property” clause in this provision because they arose as a direct result of Ford‘s performance of the War Contract.
I do not agree. This language fails to transfer the responsibility for paying Ford‘s CERCLA costs to the government. It neither specifically mentions CERCLA, nor is it broad enough to include “any and all environmental liability....” Beazer E., 34 F.3d at 211. The provision is one of fourteen reimbursable cost provisions in article 3(b) of the War Contract. In these provisions, the parties to the contract set forth in detail the specific costs for which the government would reimburse Ford. The reimbursable cost provisions demonstrate that the parties to the War Contract did not intend to shift all liabilities to the government, but only those explicitly listed in the War Contract as reimbursable. Moreover, the language of article 3(b)(13) is limiting. Only costs for the “loss or destruction of or damage to property” are reimbursable. Under these circumstances, CERCLA costs do not fall within the ambit of “costs reimbursable under the Contract” under the Termination Agreement. Accordingly, I would rule that the indemnification provision in this case is insufficient to transfer the financial responsibility for Ford‘s CERCLA costs to the United States.
Lessee [Elf Atochem] agrees to save Defense Corporation [United States] harmless against any liability whatsoever because of accidents or injury to persons or property occurring in the operation or use of the [leased] Machinery by Lessee....
Id. at 870. The government argued that this indemnity covered liability under CERCLA. Id. Relying on Beazer East, 34 F.3d 206, the court determined that this language did not “clearly or unequivocally” allocate “all present and future claims“: “It is not a broad waiver of ‘all liabilities of any type whatsoever,’ but rather a waiver of all liabilities of a specific nature.” Id. at 871. Because the clause did not specifically include CERCLA, the court concluded that the clause did not indemnify the United States for CERCLA costs.3 Id.
The court in Elf Atochem further relied on Mobay, which also involved indemnification language very similar to the reimbursable costs provision in Ford‘s War Contract. In Mobay, Harmon Color Works, which later merged into Mobay Corporation, had purchased the site at issue from Allied Chemical Corporation, a predecessor of Allied-Signal, Inc., pursuant to a purchase agreement dated 1976 and an assumption agreement dated 1977. 761 F.Supp. at 348. The agreement stated that Harmon Color Works would indemnify Allied Chemical from
(2)(b) all obligations and liabilities relating to the Haledon Plant or Haledon Products arising out of claims made, or suits brought, on or after the Closing Date for (i) injury, sickness, disease or death of any person, or (ii) any damages to any property, in either case which is ultimately determined by the finder of fact to have resulted from any condition existing, substance consumed or dis-
charged, product manufactured or action taken or omitted....
Id. (emphasis added). Allied-Signal asserted that the assumption agreement transferred liabilities for environmental claims to Harmon Color Works. Id. at 355. The court concluded that the indemnification did not encompass environmental liabilities, for it neither mentioned environmental liabilities specifically nor broadly waived all liabilities. Id. at 355-58, 358 n. 15. Rather, “Mobay‘s predecessor only assumed liabilities for personal injury and property damage to third parties....” 4 Id. at 358.
Accordingly, because I do not agree with the majority‘s interpretation of the Termination Agreement and War Contract, I respectfully dissent from the majority‘s conclusion that pursuant to the indemnification in the Termination Agreement, the government must reimburse Ford for its contribution to the CERCLA settlement. As indicated above, I therefore would affirm the judgment of the Court of Federal Claims.
PAULINE NEWMAN
UNITED STATES CIRCUIT JUDGE
Notes
No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section.