Case: 23-1122 Document: 47 Page: 1 Filed: 02/04/2025
United States Court of Appeals for the Federal Circuit ______________________
27-35 JACKSON AVE LLC, Plaintiff-Appellant
v.
UNITED STATES, Defendant-Appellee ______________________
2023-1122 ______________________
Appeal from the United States Court of Federal Claims in No. 1:16-cv-00947-DAT, Judge David A. Tapp. ______________________
Decided: February 4, 2025 ______________________
JEFFREY W. VARCADIPANE, Varcadipane & Pinnisi, P.C., New York, NY, argued for plaintiff-appellant.
STEPHANIE FLEMING, Commercial Litigation Branch, Civil Division, United States Department of Justice, Wash- ington, DC, argued for defendant-appellee. Also repre- sented by BRIAN M. BOYNTON, ELIZABETH MARIE HOSFORD, PATRICIA M. MCCARTHY. ______________________
Before LOURIE, BRYSON, and STARK, Circuit Judges. BRYSON, Circuit Judge. Case: 23-1122 Document: 47 Page: 2 Filed: 02/04/2025
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The owner of real estate in New York City, 27-35 Jack- son Avenue LLC (“Jackson”), appeals from a decision of the United States Court of Federal Claims (“the Claims Court”). That court granted summary judgment to the United States, holding that the government did not breach its lease agreement with Jackson when it terminated the agreement after finding the leased property to be un- tenantable. We affirm. I A In May 2009, the government leased two floors of an office building from Jackson to house the Field Office of the United States Citizenship and Immigration Services (“USCIS”) in Queens, New York. App. 2001. The term of the lease was for 15 years beginning after the initial build- out was completed. The lease contained clauses that permitted early ter- mination under specific conditions. The clause relevant to this appeal is the fire and casualty damage clause, which provided: If the entire premises are destroyed by fire or other cas- ualty, this lease will immediately terminate. In case of partial destruction or damage, so as to render the premises untenantable, as determined by the Govern- ment, the Government may terminate the lease by giv- ing written notice to the Lessor within 15 calendar days of the fire or other casualty . . . . App. 2050. On the morning of January 8, 2015, a Field Office em- ployee discovered extensive water damage throughout the premises caused overnight by a burst sprinkler head. App. 1138. The Field Office was vacated, and operations were ultimately resumed at a different location. App. 1404. On the day after the flood, Daren Marshall, a contracting Case: 23-1122 Document: 47 Page: 3 Filed: 02/04/2025
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officer with the General Services Administration (“GSA”), made a preliminary finding that the flood had rendered the property “no longer tenantable” and sent a letter to Jack- son informing it of the government’s view. Specifically, Mr. Marshall wrote: As you are aware, on January 8, 2015, the entire Prem- ises was flooded. All personal property of the Govern- ment within the Premises was damaged or rendered inoperable. Pursuant to Paragraph 17 of the General Clauses of the Lease, the Government has the unilat- eral right to terminate the Lease if the Premises has been rendered untenantable by fire or other casualty damage . . . . The Government has determined that the entirety of the leased premises is no longer tenantable. Please be advised that the Government may elect to terminate this Lease if the Lessor is unable to remedi- ate the space and restore all the tenant improvement to the as built conditions corresponding to the Lease commencement date (the “As-Built Conditions”). Please provide, by the close of business Monday, Janu- ary 12, 2015, a remediation plan which outlines the restoration plan to return the space back to tenantable condition . . . . [and] a schedule which shows the time- line in which the Government space will be restored and when we can expect [to] regain occupancy at this location. Please provide this schedule by Monday, Jan- uary 12, 2015 as well. After receiving your plans for remediation and restora- tion, the Government will review your plan and sched- ule as the basis for determining if it’s in the best interest of the Government to terminate the Lease. Please keep in mind that if we do not receive a response to this notification, then our only choice at that time will be to terminate. Case: 23-1122 Document: 47 Page: 4 Filed: 02/04/2025
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27-35 Jackson Ave. LLC v. United States, 16-cv-947 (Fed. Cl.), Dkt. No. 82-1 at 449–50. At his deposition, Mr. Marshall testified that he made his initial determination that the property was un- tenantable after examining photographs of the water dam- age and speaking with employees who had personally viewed the damage. App. 1508–09. He explained that he understood untenantability to mean that “the space would not be able to be used.” App. 1520. On January 10, 2015, an Operations Support Specialist for the government prepared a detailed memorandum not- ing that approximately one inch of water covered much of the first floor and most of the second floor of the premises. The memorandum estimated that the Field Office would be unusable for months, depending on Jackson’s efforts to per- form the necessary work to remedy the damage. App. 1356–58. The memorandum included photographs of the ceiling-to-floor wallboard damage and estimates of how much drywall would need to be removed and replaced. App. 1357. On January 12, 2015, Jackson wrote to advise the gov- ernment that the first-floor remediation and restoration would be completed by January 21, 2015, and that the sec- ond-floor remediation and restoration would be completed by January 30, 2015. App. 2113. Jackson defined remedi- ation to mean that the property would be totally dry with test results certifying the absence of mold conditions. App. 2113. Jackson defined restoration to mean that all dam- aged floor tiles would be replaced with at least temporary floor tiles until permanent replacement tiles could be ap- proved by the government. App. 2113. Two days later, GSA informed Jackson that it had de- termined Jackson’s remediation and restoration plan was insufficient. App. 2122. The letter stated that the plan and schedule “does not address how you plan to restore the Gov- ernment’s space to the As-Built conditions at the time of Case: 23-1122 Document: 47 Page: 5 Filed: 02/04/2025
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lease commencement. Please be advised that as-built con- ditions would include items such as flooring ceiling walls and other items that were completed as part of the initial construction (tenant improvement) of the Government’s space.” App. 2122. The following day, Jackson submitted a revised reme- diation plan and schedule, stating that “it is our best judg- ment that all remediation will be completed by February 7, 2015,” and further explaining the components of the reme- diation plan. App. 2126. The letter did not address the schedule for the restoration work, nor did it address GSA’s request that Jackson state how it planned to restore the premises to “as-built” condition. App. 2125–26. On January 20, 2015, shortly before the 15-day dead- line under the lease for the government to make a determi- nation of untenantability, GSA notified Jackson that, effective immediately, the government was terminating the lease based on its determination that the water damage had rendered the property untenantable and that the prop- erty remained untenantable. App. 1123–24. B Following the notice of termination, Jackson filed a complaint in the Claims Court. Jackson’s complaint, as amended, contained three counts. Only Count III is at is- sue in this appeal. That count asserted breach of contract and violation of the implied covenant of good faith and fair dealing based on the government’s termination of the lease for untenantability. App. 1011–12. The complaint alleged that the government’s determination that the property was untenantable due to the water damage was unreasonable and therefore constituted a breach of contract and a viola- tion of the covenant of good faith and fair dealing implicit in the contract. App. 1012. The complaint further alleged that the government’s actions following the flooding “pro- vide sound basis for a strong inference that the Govern- ment’s motivations and intentions were to escape their Case: 23-1122 Document: 47 Page: 6 Filed: 02/04/2025
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contractual obligations on a technicality rather than to co- operate, in good faith, to bring about the express purposes of the Lease, as contemplated by the parties when it was entered into.” App. 1012. After discovery, the parties cross-moved for summary judgment. The Claims Court granted the government’s motion. The court rejected Jackson’s request to find that the government had applied an erroneous definition of the term “untenantable” when it made its determination of un- tenantability. The court explained that the plain language of the lease, which provided that untenantability would be “determined by the Government,” left the untenantability determination to the discretion of GSA, as long as that dis- cretion was exercised in good faith. App. 7. The court fur- ther explained that the disagreement between the parties as to whether the property was untenantable was merely an honest difference in judgment. Accordingly, the court held that the government’s determination of untenantabil- ity was conclusive and did not result in a breach of contract. App. 7–9. Turning to the question whether the government had violated the duty of good faith and fair dealing, the court explained that such a violation must be established by clear and convincing evidence because Jackson’s claim in- volved allegations of bad faith. App. 10–14. Applying that standard, the court held that the evidence offered by Jack- son, even when viewed in the light most favorable to Jack- son, could not support the conclusion that the government exercised its discretion to determine untenantability in bad faith. App. 10–14. II A Jackson contends that the Claims Court erroneously construed the clause allowing the government to terminate the lease if the premises were rendered “untenantable, as Case: 23-1122 Document: 47 Page: 7 Filed: 02/04/2025
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determined by the Government.” In determining whether the premises have been rendered untenantable, Jackson argues that the government was required to apply the com- mon law meaning of “untenantable” in landlord-tenant law. If the government had done so, Jackson contends, it could not have determined that the USCIS offices were un- tenantable. 1 The problem with Jackson’s argument is that it effec- tively reads the words “as determined by the Government” out of the contract. Jackson’s interpretation of that clause accords no deference to the government’s determination and treats the clause as if it permitted termination of the lease only if the premises were found (presumably by a court) to be untenantable. We reject Jackson’s interpretation. Instead, we agree with the Claims Court that the disputed clause should be interpreted according to its plain meaning, i.e., that the government was given the authority to determine whether the property was untenantable. That is particularly so be- cause the lease does not define “untenantable,” nor does it
1 Jackson argues (Br. 18) that the term “un- tenantable” has a well-established meaning in landlord- tenant law, referring to “such significant destruction that the space is not only temporarily unoccupiable, but that it cannot be restored using ordinary repairs in a reasonable period of time, with particular regard to the amount of time and cost of the repairs compared to the remaining time and value of the lease.” That characterization is not so much a definition of “untenantable” as a list of some of the factors a decisionmaker may consider when determining whether premises have been rendered untenantable. While some courts confronted with issues of untenantability have ap- plied some or even all of these factors, other courts have not. Thus, we do not agree with Jackson that “un- tenantable” has a singular meaning. Case: 23-1122 Document: 47 Page: 8 Filed: 02/04/2025
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provide a framework or standard for evaluating un- tenantability. Our construction of the “untenantable” clause in the contract is consistent with the construction given to an identical clause on very similar facts by the Court of Claims. In Brown v. United States, No. 13-79, 1981 WL 30810 (Ct. Cl. Nov. 17, 1981), the court adopted the opinion of the trial judge in the case, who construed the language “untenantable, as determined by the Government,” to mean that the government “cannot be held liable for exer- cising, in good faith, the discretion it was given under [the contract] to terminate the lease.” Id. at *3 n.3. 2 Even earlier, the Supreme Court addressed a similar contract clause, which provided that for the payment of transportation costs for contractors delivering goods be- tween certain points, the distance between those points would be “ascertained and fixed by the chief quartermaster of the district of New Mexico.” Kihlberg v. United States, 97 U.S. 398, 400 (1878). The Court found that language “to be susceptible of no other interpretation than that the ac- tion of the chief quartermaster, in the matter of distances, was intended to be conclusive.” Id. at 401. The Court added that “in the absence of fraud or such gross mistake as would necessarily imply bad faith, or a failure to exer- cise an honest judgment, his action is conclusive,” id. at 402, and that his action “cannot be subjected to the revisory power of the courts without doing violence to the plain words of the contract,” id. at 401.
2 Jackson correctly notes that the referenced portion of the Court of Claims’ decision in Brown was dictum and thus is not binding on us. The court’s analysis of that issue, however, is set forth in some detail, and even though it is not part of the court’s holding, it is entitled to respect. Case: 23-1122 Document: 47 Page: 9 Filed: 02/04/2025
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To be sure, the government’s discretion is not without limits. When the government is given the power to render final decisions on questions of fact, its decision will be set aside if the decision is arbitrary, capricious, or unreasona- ble. Knotts v. United States, 128 Ct. Cl. 489, 491 (1954). More specifically, in a case in which a contract gives the government unilateral authority to make a decision affect- ing its contracting partner, the Supreme Court has held that the government’s “judgment should be exercised not capriciously or fraudulently, but reasonably, and with due regard to the rights of both the contracting parties.” Ripley v. United States, 223 U.S. 695, 701–02 (1912). That princi- ple is consistent with decisions from this court and our pre- decessor court recognizing the well-established rule that “[a] party vested with contractual discretion must exercise his discretion reasonably and may not do so arbitrarily or capriciously.” Pac. Far E. Line, Inc. v. United States, 394 F.2d 990, 998 (Ct. Cl. 1968); see also Scott Timber Co. v. United States, 333 F.3d 1358, 1368 (Fed. Cir. 2003); Am. Export Isbrandtsen Lines, Inc. v. United States, 499 F.2d 552, 576 (Ct. Cl. 1974); Fox Valley Eng’g Inc. v. United States, 151 Ct. Cl. 228, 236–37 (1960) (A clause vesting in the contracting officer the right to reject work for “any de- ficiencies which in the opinion of the contracting officer would adversely affect the reproduction quality” of the work must “necessarily be given wide scope. Nevertheless, it is equally elementary that the discretion involved must be exercised reasonably and fairly.”). 3
3 By analogy, government contracts often contain a clause allowing the government to terminate the contract if the contracting officer “determines that a termination is in the Government’s interest.” See 48 C.F.R. § 52.249-2. This court and its predecessor have held that “[i]n the ab- sence of bad faith or clear abuse of discretion, the contract- ing officer’s election to terminate for the government’s Case: 23-1122 Document: 47 Page: 10 Filed: 02/04/2025
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The case law on which Jackson relies does not persuade us otherwise. Jackson cites W.G. Cornell Co. of Washing- ton D.C., Inc. v. United States, 376 F.2d 299 (Ct. Cl. 1967). In that case, the Court of Claims acknowledged that the government had the “undisputed right” to decide whether particular material met the standards set forth in the con- tract specifications, but that it had to exercise its discretion “reasonably and fairly.” Id. at 313. Based on the facts be- fore it, the court found that the government’s interpreta- tion of the specifications was “arbitrary and capricious” and the failure to grant the contractor an equitable adjust- ment was “grossly erroneous.” Id. We apply the same framework as the Cornell court in that we consider whether the government’s exercise of its discretion was un- reasonable or arbitrary and capricious. 4
convenience is conclusive.” T & M Distributors, Inc. v. United States, 185 F.3d 1279, 1283 (Fed. Cir. 1999); see also Caldwell & Santmyer, Inc. v. Glickman, 55 F.3d 1578, 1581 (Fed. Cir. 1995); John Reiner & Co v. United States, 325 F.2d 438, 442 (Ct. Cl. 1963). 4 Jackson also relies on W. R. Lathom Tool & Ma- chine Co. v. Mutual Leasing Associates, Inc., 435 N.E.2d 510 (Ill. App. Ct. 1982), for the proposition that the govern- ment was required to apply the common law meaning of “untenantable.” Lathom is not binding authority, but in any event Lathom is consistent with our analysis. In Lathom, the contract provided that “fair market value” for a particular product would be determined by Lathom. Id. at 511. Adopting the same rule we apply in this case, the court there held that Lathom had the discretion to deter- mine the value of the product so long as that value was not arbitrarily chosen or unrelated to the actual market value of the product. Id. at 512–13. Applying that principle, the Lathom court found that the party’s value determination Case: 23-1122 Document: 47 Page: 11 Filed: 02/04/2025
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This framework does not render the term “un- tenantable” in the contract irrelevant. Nor does it mean the government may define untenantability unilaterally or without regard to the meaning of that term in landlord- tenant law. To the contrary, the ordinary definition of the term “untenantable” provides context for our evaluation of whether the government’s determination of untenantabil- ity was unreasonable or arbitrary and capricious. See Cnty. of Suffolk v. United States, 26 Cl. Ct. 924, 927–28 (1992). In the case of leases that do not contain detailed provi- sions regarding a lessee’s right to terminate the lease for untenantability, courts have typically focused on the extent of the damage and whether the premises can be restored without unreasonable interruption of the tenant’s occu- pancy. See Flores v. Allstate Tex. Lloyd’s Co., 229 F. Supp. 2d 697, 700 (S.D. Tex. 2002); Marcel Hair Goods Corp. v. Nat’l Savings & Trust Co., 410 A.2d 1, 6 (D.C. Ct. App. 1979); Presbyterian Distribution Serv. v. Chicago Nat’l Bank, 171 N.E.2d 86, 90 (Ill. App. Ct. 1960); Luis v. Ada Lodge #3, Independent Order of Odd Fellows, 294 P.2d 1095, 1098–99 (Idaho 1956). Because the extent of the damage affects the lessee’s rights principally through its effect on the lessee’s ability to resume full enjoyment of the premises, the key question is typically whether the tenant will lose the use of the leased property for an unreasonable period of time. See Re- statement (Second) of Prop.: Landlord and Tenant § 5.4 &
(of $1 for a product that, at minimum could be sold for scrap) was arbitrary. Nothing about the court’s ruling on those extreme facts supports a conclusion that the govern- ment’s determination of untenantability in this case was unreasonable or arbitrary and capricious. Case: 23-1122 Document: 47 Page: 12 Filed: 02/04/2025
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cmt. f (1977). That inquiry turns on factors such as the nature of the lessee’s use of the property and the extent to which the loss of occupancy disrupts the tenant’s business. See 1 Andrew R. Berman, Friedman on Leases § 9.5, at 9- 41 to 9-45 (6th ed. 2017). By their nature, those factors often give rise to disputes between the parties. Parties can minimize such disputes by bargaining to give one party the right to determine whether the casualty in question has rendered the property untenantable. If the contract in this case had simply stated that the government could terminate the lease if the premises were untenantable, the determination of whether the property was untenantable would be for the court. Instead, the con- tract left the untenantability decision to the government in the first instance. The court’s role was therefore limited by the terms of the contract to determining whether the gov- ernment’s decision was the product of an unreasonable as- sessment of whether the premises were untenantable. 5 The contract also permits the court to assess the govern- ment’s understanding of the meaning of “untenantable”
5 Although state court cases in which lessees have the contractual right to determine whether damaged prem- ises are untenantable are rare, one such case is Amick v. Metropolitan Mortgage & Securities Co., 453 P.2d 412 (Alaska 1969). The court in that case reached a conclusion similar to ours, although it articulated the test somewhat differently. The court held that a clause stating that “the lessee’s decision shall be controlling” as to whether or not the premises are fit for occupancy did not “give the lessee the right to abate the rent by deciding without more that the premises were unfit for occupancy,” but that the clause made the lessee’s decision controlling “where there is room for an honest difference of opinion between the lessor and the lessee as to whether the premises are fit for occupancy by the lessee.” Id. at 414. Case: 23-1122 Document: 47 Page: 13 Filed: 02/04/2025
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and whether it applied a definition so removed from the ordinary meaning as to constitute arbitrary, capricious, or unreasonable action. With that interpretation of the relevant provision in mind, we turn to Jackson’s arguments for why the govern- ment’s determination should be set aside. B The undisputed facts of this case support the Claims Court’s conclusion, on summary judgment, that no reason- able factfinder could find that the government’s determi- nation of untenantability was unreasonable or arbitrary and capricious. For example, the Operations Support Spe- cialist who examined the premises after the flood found that much of the leased space was covered by approxi- mately an inch of water, that there was ceiling-to-floor damage, that more than 1,500 square feet of drywall would have to be removed and replaced, and that the property would be unusable for months. App. 1355–58. Jackson’s remediation plan involved water extraction; moving furni- ture, business machines, and files; removing damaged ma- terial, including insulation, carpet, drywall, and ceiling tiles; placing drying equipment on the premises; disinfect- ing all areas of the building; using air scrubbers to remedi- ate air quality; and cleaning the HVAC system and ducts. App. 2125. Even under Jackson’s proposed schedule, that work was expected to take at least a month from the date of the accident. 6 App. 2126.
6 It is undisputed that Jackson revised its estimate for when remediation would be complete and identified February 7 as the expected completion date, after initially suggesting earlier dates (e.g., January 13 for the first floor and January 16 for the second floor). Case: 23-1122 Document: 47 Page: 14 Filed: 02/04/2025
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Beyond that, Jackson’s letter identifying February 7 as the expected date for completing remediation still failed to provide an estimate of when restoration would be complete. Therefore, at the time the government was required to ex- ercise its right to terminate the lease (which was only 15 days after the flood), it was unknown when USCIS could return to the leased premises. We are also unpersuaded that the timing of the govern- ment’s determination of untenantability shows that the government’s decision to terminate the lease was unrea- sonable. The government sent Jackson a letter on January 9, 2015 (one day after the accident), in which it stated that it had determined that the property was untenantable, but it did not seek to terminate the lease at that time, and thus it was clear that the government’s January 9, 2015, assess- ment of untenantability was only tentative. Instead, the government waited until January 20, 2015—12 days after the accident—to make its final untenantability determina- tion. During those 12 days, the Operations Support Special- ist evaluated the damage, App. 1355–58, and GSA consid- ered Jackson’s proposed remediation and restoration plan, App. 2122. Jackson argues that the government acted with undue haste in making its termination decision only 12 days after the accident. Yet by the terms of the lease the government was required to make its determination of un- tenantability within 15 days of the accident. App. 2050. The government therefore did not have the luxury of wait- ing to see whether the remediation and restoration work would be completed quickly. Had the government waited four more days than it did to make its final untenantability decision, it would have lost its right to terminate the lease no matter how long the restoration process took. Given the short window provided by the lease and the investigative steps that the government took during that period, the gov- ernment’s decision to terminate the lease when it did can- not be deemed unreasonable. Case: 23-1122 Document: 47 Page: 15 Filed: 02/04/2025
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An important consideration bearing on the reasonable- ness of the government’s action is the nature of the busi- ness conducted at the office in question. The USCIS Field Office was responsible for distributing information regard- ing immigration, reviewing applications, adjusting status, and naturalizing approved immigrants. As part of its mis- sion the office received up to 750 visitors per day. In con- sidering the needs of the office, the extent of the damage, the nature of the restoration efforts that would be required, and the uncertainty as to when the restoration work would be completed, it was not arbitrary and capricious for the government to determine that the property was un- tenantable. 7 App. 2345. 8
7 Because of the need to continue its work to the ex- tent possible, the USCIS had to move all its operations to a location in downtown Manhattan. App. 1404. Jackson suggests (Br. 38) that the fact that USCIS was able to find another location at which to continue its work is an indica- tion that the damaged premises should not have been de- clared untenantable. That argument is unpersuasive. The work was important and had to continue, so the govern- ment was going to have to find a place to continue the work, even if relocation of its operations was burdensome and ex- pensive. The fact that the government was able to find a substitute workplace does not suggest that the flooded of- fices were tenantable. 8 If there had been a transient condition that briefly required the premises to be abandoned—such as, for exam- ple, a malfunctioning fire alarm that required the premises to be vacated for an hour, or even for a day—the govern- ment’s contractual right to “determine untenantability” would not extend to such an interruption because such a brief interruption could not reasonably be deemed to ren- der the property untenantable. At his deposition, Mr. Case: 23-1122 Document: 47 Page: 16 Filed: 02/04/2025
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Jackson argues that the Claims Court erred by not im- posing on the government the burden of proving that the property was untenantable. Under that theory, only if the government satisfied that initial burden would Jackson be required to show that the government’s decision was arbi- trary and capricious. For that argument, Jackson relies on the unpublished Fifth Circuit decision in Spodek v. United States Postal Ser- vice, 551 F. App’x 781 (5th Cir. 2014). Besides not being a binding precedent, Spodek did not involve a clause that al- located to the lessee the right to determine whether the property was untenantable, as determined by the lessee. For that reason, the decision in that case turned on whether the property was in fact untenantable. Id. at 785. It is therefore not surprising that the court in Spodek as- signed the burden of proving untenantability to the party seeking to invoke the untenantability clause and terminate the lease. In this case, by contrast, the question is not whether the property was in fact untenantable, but whether the government abused its discretion in determin- ing the property to be untenantable. In that context, it would make no sense to allocate the burden of proof on un- tenantability to the government. Instead, the burden was properly placed on Jackson to show that the government abused the authority that was delegated to it under the contract. In sum, we agree with the Claims Court’s analysis. It was undisputed that (1) a large portion of the Field Office was unfit for the purpose for which it was leased, (2) the government had to cease daily operations in the premises due to the water damage, and (3) it was clear that the
Marshall agreed with that proposition, stating that he would not regard a property as being untenantable if it were unusable for “a couple of hours or a day,” or a week. App. 1523. Case: 23-1122 Document: 47 Page: 17 Filed: 02/04/2025
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premises would be under remediation and restoration for at least a month, and probably longer. Moreover, by the terms of the lease, the government was required to make an untenantability determination within 15 days of the day of the flood. As a result, the government necessarily had to make its determination of untenantability without knowing all the facts that would bear on untenantability, such as how long the restoration process would take once remediation was complete. For these reasons, we agree with the Claims Court that no reasonable factfinder could find the government’s deter- mination of untenantability to be unreasonable or arbi- trary and capricious. App. 8–9. We conclude that the dispute between the government and Jackson over whether the property was untenantable amounts to a dif- ference in judgment and is not a reason to set aside the government’s determination, given the language of the lease agreement that left the determination of un- tenantability to the government. App. 7. C Jackson’s second argument for overturning the sum- mary judgment decision is that the Claims Court erred in applying the clear and convincing evidentiary standard when evaluating Jackson’s claim that the government breached the implied covenant of good faith and fair deal- ing that attaches to all contracts. In making that argu- ment, Jackson denies that it is asserting a bad faith claim. We find Jackson’s attempt to distinguish its claim from a claim of bad faith to be unconvincing. Jackson argues in its opening brief that the govern- ment expressed animus toward Jackson, that a reasonable factfinder could conclude that following the water damage the government planned to cancel the lease regardless of whether the property was actually untenantable, and that the government through its agents conspired to manufac- ture circumstances to support the termination. Based on Case: 23-1122 Document: 47 Page: 18 Filed: 02/04/2025
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this characterization, it is clear that Jackson is alleging bad faith by the government. See, e.g., Rd. & Highway Builders, LLC v. United States, 702 F.3d 1365, 1370 (Fed. Cir. 2012) (considering evidence of improper motive when evaluating bad faith claim); Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1240 (Fed. Cir. 2002) (con- sidering evidence of conspiracy “to get rid of plaintiff” and animus toward plaintiff when evaluating a bad faith claim). Even if Jackson were correct that its claim is not based on allegations of bad faith, it must establish at least the absence of good faith, because “there can be no relief from an erroneous judgment exercised in good faith pursuant to valid discretion power.” Pac. Far E. Line, 394 F.2d at 998. Therefore, Jackson must rebut the presumption that “gov- ernment officials are presumed to discharge their duties in good faith.” Rd. & Highway Builders, 702 F.3d at 1368. In view of that presumption, Jackson needed to prove a lack of good faith by clear and convincing evidence. See id. at 1369; see also Am-Pro Protective Agency, 281 F.3d at 1240. Accordingly, we find that the Claims Court applied the cor- rect standard of clear and convincing evidence to Jackson’s claim. Applying that standard, we agree with the Claims Court that a reasonable factfinder could not find that the government’s decision to terminate the lease because of the water damage was pretextual. As the Claims Court ex- plained, Jackson did marshal some evidence that the USCIS employees were dissatisfied with the property and Jackson’s management. App. 11. But the decision to ter- minate was made by GSA officers, not by the dissatisfied USCIS employees. Id. Furthermore, although Jackson presented evidence that the dissatisfied employees urged GSA officers to terminate the lease, the evidence showed that the GSA officers exercised independent judgment when doing so. App. 12. In short, Jackson’s evidence was insufficient for a reasonable factfinder to find, by clear and Case: 23-1122 Document: 47 Page: 19 Filed: 02/04/2025
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convincing evidence, that the government acted in bad faith when determining untenantability. 9 That conclusion is further supported by our finding above that the govern- ment’s determination was not unreasonable or arbitrary and capricious in view of the extent of the damage, the ex- tent of the restoration that would be required to return the office to its pre-flood condition, and the immediate need for a facility that could support the Field Office’s busy daily operations serving as many as 750 daily visitors. III We have considered Jackson’s remaining arguments and find them unpersuasive. For the reasons stated, we affirm the Claims Court’s summary judgment decision. AFFIRMED
9 Jackson argues (Br. 51) that under “the correct le- gal standard” it raised “questions of fact regarding Jack- son’s fair dealing claim.” Because we hold that the “clear and convincing evidence” standard applies to Jackson’s fair dealing claim, and because we conclude that the evidence proffered by Jackson failed to create a triable question of fact under that standard, we uphold the Claims Court’s summary judgment ruling on that issue.