Carter v. United States

102 Fed. Cl. 61, 2011 U.S. Claims LEXIS 2247, 2011 WL 5998867
United States Court of Federal Claims·Decided November 30, 2011·No. No. 10-048C·Published·Cited by 15 cases

Opinion

OPINION

BRUGGINK, Judge.

This is an action for breach of an asserted contract between the United States Department of Agriculture, acting through the Commodity Credit Corporation (“CCC”), and beneficiaries of a drought relief program coordinated by the government and several states. Under the program, the federal government provided large quantities of nonfat dry milk to individual states, which distributed the nonfat dry milk to livestock producers. Before the court is defendant’s motion for summary judgment and plaintiffs1 motion for Rule 56(d) discovery. The matter is fully briefed. Oral argument was held on September 6, 2011. For the reasons discussed below, we grant in part and deny in part defendant’s motion for summary judgment and deny plaintiffs motion for additional discovery.

[63]*63BACKGROUND2

The early 2000s were a time of severe drought in western states, resulting in a significant shortage in livestock feed. To ameliorate the effects of the drought, the United States Department of Agriculture (“USDA”) created a drought relief program in 2002 pursuant to 7 U.S.C. § 7285 (2006)3 The program allowed the USDA to contract with drought-afflicted states for the distribution of nonfat dry milk (“NDM”) to foundation livestock producers and feed dealers. The program continued through 2004.

The NDM program was administered primarily by the CCC, a wholly-owned government corporation designed to aid and support agricultural producers. Each participating state executed a uniform document with the CCC, entitled “Nonfat Dry Milk Sales Agreement between the Commodity Credit Corporation and the State of__”4 Under the sales agreement, the CCC agreed to provide the state with NDM at a price of $1 per 21-ton truckload. It also provided a formula for determining the quantity of NDM which each state could request. The CCC also agreed to pay for transportation costs to deliver NDM to the states.

The standard agreement contained certain terms and conditions limiting the states’ distribution to certain recipients and the recipients’ use of the NDM. Each participating state agreed in section III of the agreement, “STATE COMMITMENTS,” to:

1. Purchase NDM using documents provided by CCC ... and to refrain from assigning or transferring any rights or obligations under this Agreement without written approval of CCC.
2. Establish and maintain distribution points capable of receiving, unloading from trucks, moving into storage, and distributing NDM to eligible producers.
3. Be responsible for all costs associated with the operation of the distribution points and all costs of delivery____
4. Take action that the State determines to be appropriate to ensure that only producers of foundation herd livestock ... receive NDM____
5. Report to CCC the quantity of NDM purchased from CCC that exceeds the quantity authorized under this Agreement. ...

NDM Agreement 2. The USDA retained the responsibility to enforce the limits on the use of NDM acquired by “third parties” other than states and eligible livestock producers.

Each participating state subsequently entered into form agreements, each entitled “Agreement to Participate in the 2003 NDM Livestock Feed Assistance Program,” with feed dealers and livestock producers for the distribution and use of that state’s share of the NDM. Plaintiff entered into such a standard agreement with several states. Plaintiff has offered the agreement between it and the state of Utah as representative of these agreements and transactions. That agreement contained the same restrictions enumerated above on the use of NDM. After signing the agreement, plaintiff then had to complete a voucher issued by the state authorizing receipt of a stated quantity of NDM and requesting a delivery date and location. Vouchers were issued by and returned to Utah and, like the sales agreement, contained the same limitations on NDM use discussed above. Plaintiff submitted NDM order forms for the 2003 NDM program, and apparently received some NDM. In January 2004, however, CCC denied plaintiffs request for additional NDM.

R & J filed suit here in January of 2010, alleging that it had a contractual right to receive NDM and that the United States had breached that agreement. R & J subse[64]*64quently amended its complaint, seeking $21 million in damages, and alleging five causes of action: (1) breach of implied-in-fact contract, (2) breach of third-party beneficiary contract, (3) breach of written contract, (4) breach of the covenant of good faith and fair dealing, and (5) equitable estoppel.

Defendant filed a motion to dismiss under Rules 12(b)(1) and 12(b)(6) of the Rules of the Court of Federal Claims (“RCFC”). We granted the motion to dismiss in part, eliminating all counts except the third-party beneficiary claim. See Order, Apr. 29, 2011, ECF No. 34. Defendant then filed the present motion for summary judgment under RCFC 56 directed at that remaining claim. It argues that there was no enforceable contract between the government and the states, and even if there was, plaintiff is nevertheless precluded from recovering as a third-party beneficiary. In response, plaintiff contends there was a valid and enforceable contract, but that it is unable to fully respond to the motion without additional discovery under RCFC 56(d).

DISCUSSION

We are presented with a contract interpretation issue. Interpreting a contract is a question of law amenable to summary judgment, assuming there are no relevant disputed facts. Varilease Tech. Group, Inc. v. United States, 289 F.3d 795, 798 (Fed.Cir. 2002). Defendant offers a number of theories to support its position that there was not an enforceable contract. Although we ultimately agree in part with some of those theories, we address first an argument with which we disagree.

I. The subject matter of the agreement does not insulate it from treatment as a contract

Defendant argues that even if the NDM Agreement was otherwise binding, liability is nevertheless precluded because the government was acting in its sovereign ca: pacity when it entered into the NDM Agreement.5 The government relies primarily on Kentucky v. United States, 27 Fed.Cl. 173, 180 (1992), for the proposition that no express or implied contract can arise from acts performed by the government in its sovereign capacity. In this ease, it contends, no contract was actually formed because the government was acting as sovereign, not as a contractor; the government’s motivations were charitable and not commercial. In opposition, plaintiff argues that the NDM program was not a sovereign act and that additional discovery is required to show that the CCC’s real purpose was to reduce costs to itself as well as to benefit drought states.

In Kentucky, the United States Army Corps of Engineers assumed control and operation over a series of locks and dams that the Commonwealth of Kentucky had built in the mid-1800s. See 27 Fed.Cl. at 174. In addition to rehabilitating the locks, the Corps built additional locks along the river.

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Carter v. United States, 102 Fed. Cl. 61, 2011 U.S. Claims LEXIS 2247, 2011 WL 5998867 (uscfc 2011).

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