Although a lease may be a “contract” in common parlance, does a lease qualify as a contract under the Contract Disputes Act?
The answer is
The United States Court of Federal Claims recently decided the issue–and came down on the side of lessors, at least under the facts at hand.
In Lee’s Ford Dock, Inc. v. Secretary of the Army, 865 F.3d 1361 (Fed. Cir. 2017), the Court of Appeals for the Federal Circuit was called on to resolve a dispute between the United States Army Corps of Engineers and Lee’s Ford Dock, a marina operator on Lake Cumberland, Kentucky.
Lake Cumberland is a man-made lake resulting from the damming of the Cumberland River. The dam was constructed in 1951 by the Corps and has been in continuous operation ever since.
In 2000, Lee’s Ford Dock, Inc. entered into a lease with the Corps for roughly 166 acres of land and water real-estate on Lake Cumberland. The lease was for a
In 2007, seven years into the lease, the Corps determined the dam was at a high risk of failure and initiated risk reduction measures, including lowering the water level. It was not until 2014 that remedial work on the dam was completed and the water level returned to its pre-2007 levels.
The drawdown of Lake Cumberland had significant ramifications for Lee’s Ford Dock, which was dependent on the higher water-levels for its marina operations. It filed a claim with the contracting officer for damages associated with the depressed water levels and reduced marina revenues. Lee’s Ford Dock alleged these damages totaled at least $4 million dollars.
The Contracting Officer denied the claim, and Lee’s Ford Dock appealed to the Armed Services Board of Contract Appeals. After the ASBCA ruled in the Corps’ favor, Lee’s Ford Dock appealed yet again, this time to the Federal Circuit.
The Corps argued that the Federal Circuit lacked jurisdiction because the case did not arise under the Contract Disputes Act. That forced the Federal Circuit to address a threshold question, is a lease a “contract” subject to the Contract Disputes Act?
Pursuant to Section 7102(a), the Contract Disputes Act generally applies to “any express or implied contract . . . made by an executive agency for” the following:
(1) the procurement of property, other than real property in being;
(2) the procurement of services;
(3) the procurement of construction, alteration, repair, or maintenance of real property; or
(4) the disposal of personal property.
Of the available options, the best chance for jurisdiction would be if the lease was considered
The Federal Circuit found the lease to constitute a contract for
Next, the Federal Circuit considered whether the Corps “disposed” of
Finding the lease was personal property that was disposed of by the government, the Federal Circuit concluded it had jurisdiction to decide the case on the merits. But unfortunately for Lee’s Ford Dock, it won the battle but lost the war: the Federal Circuit dismissed a portion of the appeal on different jurisdictional
Although Lee’s Ford Dock didn’t win its appeal, the Federal Circuit’s decision establishes an important precedent for those who engage in lease transactions with the government. While the Lee’s Ford Dock decision was specific to the facts at hand and won’t necessarily apply to every lease, the Court’s broad reading of the Contract Disputes Act is a good thing for contractors.
This content originally appeared on SmallGovCon.
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