The Minesen Co. v. McHugh

671 F.3d 1332, 2012 WL 678150, 2012 U.S. App. LEXIS 4376
CourtCourt of Appeals for the Federal Circuit
DecidedMarch 2, 2012
Docket2010-1453
StatusPublished
Cited by24 cases

This text of 671 F.3d 1332 (The Minesen Co. v. McHugh) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
The Minesen Co. v. McHugh, 671 F.3d 1332, 2012 WL 678150, 2012 U.S. App. LEXIS 4376 (Fed. Cir. 2012).

Opinions

Opinion for the court filed by Circuit Judge REYNA.

Dissenting opinion filed by Circuit Judge BRYSON.

REYNA, Circuit Judge.

The Minesen Company (“Minesen”) appeals the final decision of the Armed Services Board of Contract Appeals (“ASBCA” or “Board”) which granted the motion to dismiss of the United States Army’s Morale, Welfare, and Recreation Fund (“the Fund”). Minesen has been under contract with the Fund since 1993 to build and operate a hotel facility at a military base on Oahu Island, Hawaii. With eighteen years remaining on the agreement, the ASBCA determined that the Fund breached the core of the contract and the parties entered the quantum phase of the dispute. While in the quantum phase, Minesen filed a separate complaint alleging that the Fund had done nothing to cure its ongoing breach. The ASBCA dismissed Minesen’s second complaint as duplicative of the first breach of contract action. Minesen appeals the ASBCA dismissal of its second complaint. Because we find that Minesen voluntarily waived its right to appeal to this court under its negotiated contract with the Fund, we dismiss.

I. Background

Minesen, a small business from Denver, Colorado, was created for the purpose of acquiring and fulfilling government contracts. In January of 1993, after several years of negotiation, Minesen and the Fund entered into Contract No. NAFBA393-C-0001 (“the Contract”) to create accommodations for travelling military personnel. The Contract provided that Mine-sen would construct and operate, for a term of thirty-two years, a “transient lodging facility” at Schofield Barracks in central Oahu. Joint Appendix (“J.A.”) 272. Schofield Barracks is an 18,000 acre site twenty-three miles northwest of Honolulu, and is the largest Army installation in Hawaii. The Minesen lodging facility, to be built on four acres leased from the government, became known as the Inn at Schofield Barracks (“the Inn”). The Inn was to feature 184 rooms with kitchenettes, as well as other hotel amenities such as a vending area, guest laundry, playground, convenience store, and deli. Id. On a secure installation, the Inn would offer lodging only to eligible active and temporary military personnel, their families, and qualifying veterans. Under the Contract, Minesen’s lease and operation of the Inn terminates in 2026. Id.

In addition to revenue generated operating the facility, Minesen’s consideration for the bargain was that the Inn was officially deemed “government quarters” under the Joint Federal Travel Regulation (“JFTR”). Id. at 274. This designation was significant because it required travelling military personnel to patronize the Inn or else forfeit reimbursement for lodging costs. The Contract stated:

The completed [Inn] will fall within the current Joint Federal Travel Regulation [1334]*1334definition of government quarters.... Travelers receiving government per diem payment, in order not to forfeit their per diem entitlement, will be required to patronize the [Inn] on a mandatory basis as long as confirmed reservation priorities are in accordance with those provided at Section III, Operation Requirements.

Id. The Contract did not require the Fund to deliver any specific level of occupancy to the Inn.

The Contract indicated on its face that “NO FUNDS OF THE UNITED STATES GOVERNMENT WILL BE PAID OR BE DUE TO THE CONTRACTOR BY VIRTUE OF THIS CONTRACT.” Id. at 271 (emphasis original). In the definition section, the Contract further specified that: “The Fund is ... a nonappropriated fund instrumentality (NAFI) of the United States.... The Government is not a party to this contract, and no funds appropriated by Congress are in any way obligated or can be obligated by virtue of any provision of this contract.” Id. at 273.

Significant for purposes of this appeal are the Contract’s express provisions regarding dispute resolution.' In the “Disputes Clause” at § 11(6), the Contract stated:

a. This contract is not subject to the Contract Disputes Act of 1978 (41 U.S.C. 601-613).
c. All disputes arising under or relating to this contract shall be resolved under this clause.
g. The Contracting Officer’s decision shall be final unless the Contractor appeals as provided in paragraph h. of this clause.
h. The Contracting Officer’s final decision may be appealed by submitting a written appeal to the Armed Services Board of Contract Appeals within 90 days of receipt of the Contracting Officer’s final decision. Decisions of the Armed Services Board of Contract Appeals are final and are not subject to further appeal.

J.A. 276-78 (emphasis original). On February 1, 1993, the parties executed Lease No. DACA84-1-91-14, which became an attachment to the Contract. After the parties finalized the Contract in early 1993, the Inn was constructed and opened for business by June 1994.

In 1997 and 1998, the JFTR, the travel regulation incentivizing military personnel to patronize the Inn, was amended. As a result of the amendments, the Department of Defense began reimbursing for any lodging costs up to the amount charged at government quarters, whether or not the traveler actually stayed at government quarters such as the Inn.

On June 7, 1999, Minesen filed a certified claim with the Contracting Officer (“CO”) in which it alleged that the JFTR amendments eliminating the mandatory per diem forfeiture breached the Contract and negatively impacted occupancy rates. Minesen sought (1) $2,541,670.14 in lost revenues through May of 1999, and (2) future performance, or alternatively, immediate termination of the Contract with a payment of $25,506,325.00.

The CO denied the claim. On February 18, 2000, Minesen submitted further claims to the CO, seeking, inter alia, anticipatory profits for breach of contract. These claims were also denied by the CO. Mine-sen timely appealed both claims to the ASBCA, a right guaranteed in the Contract.

On November 20, 2006, after a five-week merits hearing, the ASBCA issued its deci[1335]*1335sion. Minesen Co., ASBCA Nos. 52488, 52811, 07-1 BCA ¶ 33,456 (the “2006 Decision”). The ASBCA rejected Minesen’s argument that the Fund had repudiated the Contract by acquiescing to the changes in the JFTR. The administrative judge (“AJ”) found no outright repudiation of the Contract because the Fund never stated that it refused to perform. But the AJ also found that the Contract provision requiring travelers receiving the per diem reimbursement to patronize the Inn

constituted the core of Minesen’s benefit of the bargain. The Inn was located on a secure military installation and was not open to the general public. In order to capture a market for its services, Minesen had to rely on an incentive to encourage official travellers [sic] to stay at the Inn. This device was the mandatory forfeiture provision of Clause 7. In acquiescing to the 1997 and 1998 changes in the JFTR which removed this mandatory forfeiture provision, the Fund affected [sic] a basic alteration in the parties’ contractual relationship.

Id. at 123-24.

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Bluebook (online)
671 F.3d 1332, 2012 WL 678150, 2012 U.S. App. LEXIS 4376, Counsel Stack Legal Research, https://law.counselstack.com/opinion/the-minesen-co-v-mchugh-cafc-2012.