Anchorage, Amunicipal Corp. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
ANCHORAGE, A MUNICIPAL CORP.,
Plaintiff-Appellee
v.
UNITED STATES,
Defendant-Appellant
______________________
2022-1719
______________________
Appeal from the United States Court of Federal Claims
in No. 1:14-cv-00166-EJD, Senior Judge Edward J.
Damich.
______________________
Decided: December 16, 2024
______________________
JASON N. SMITH, Seyfarth Shaw LLP, Washington, DC,
argued for plaintiff-appellee. Also represented by EDWARD
VICTOR ARNOLD, BENNETT DAVID GREENBERG; DONALD
FEATHERSTUN, San Francisco, CA; ANNE HELZER, ROBERT
OWENS, Municipality of Anchorage, Anchorage, AK.
EVAN WISSER, Commercial Litigation Branch, Civil
Division, United States Department of Justice,
Washington, DC, argued for defendant-appellant. Also
represented by BRIAN M. BOYNTON, VINCENT DE PAUL
PHILLIPS, JR., STEVEN JOHN GILLINGHAM, DANIEL
HOFFMAN, PATRICIA M. MCCARTHY, KARA WESTERCAMP.
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ANCHORAGE v. US 2
______________________
Before TARANTO, HUGHES, and CUNNINGHAM, Circuit
Judges.
HUGHES, Circuit Judge
The United States appeals a decision from the United
States Court of Federal Claims holding that the United
States breached two contracts with the municipality of
Anchorage to improve the Port of Alaska. Anchorage and
the United States signed a Memorandum of Understanding
in 2003 and a Memorandum of Agreement in 2011 to
upgrade and expand the Port of Alaska. The Court of
Federal Claims held that the government breached the
2003 agreement by not delivering a defect-free port and
breached the 2011 agreement by settling subcontractor
claims without conferring with Anchorage.
Because the 2003 Memorandum of Understanding did
not require the United States to deliver a defect-free port,
we vacate the Court of Federal Claims’ decision as it relates
to the 2003 Memorandum of Understanding and remand
for further proceedings as described below. We affirm the
Court of Federal Claims’ determination that the United
States breached the 2011 Memorandum of Agreement by
settling subcontractor claims without conferring with
Anchorage, as well as the court’s award of damages to
Anchorage for the United States’ breach of the 2011
Memorandum of Agreement.
I
A
The Port of Alaska (Port), formerly the Port of
Anchorage, is a critical national seaport and the “kingpin
in Alaska’s corridor of commerce.” J.A. 5698. An estimated
90% of the merchandise goods for 85% of Alaska’s
populated areas pass through the Port annually.
Additionally, jet fuel for military operations at Joint Base
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ANCHORAGE v. US 3
Elmendorf-Richardson and for the Ted Stevens Anchorage
International Airport arrives via the Port.
Prior to 2003, “[t]he Municipality of Anchorage
determined that the facilities at the Port . . . were
deteriorating and outdated.” J.A. 3. Anchorage envisioned
a multi-year project that would help increase the Port’s
ability to serve Anchorage, the State of Alaska, commercial
tenants, and the United States military. “Not having the
expertise to undertake the [p]roject on its own, [Anchorage]
sought a party to provide the requisite technical expertise.”
Id. After considering the private sector, Anchorage
contracted with the Maritime Administration (MARAD),
within the U.S. Department of Transportation “to embark
on a port infrastructure development program.” Id.
Anchorage selected MARAD for its “purported expertise in
designing, constructing, and overseeing port development
projects and its authority to administer federal and non-
federal share funds.” Compl. at ¶ 17, Anchorage v. United
States, Case No. 1:14-cv-00166 (Fed. Cl. Feb. 28, 2014),
ECF No. 1.
Anchorage and MARAD executed two contracts over
the life of the project. The first contract was a
Memorandum of Understanding executed in 2003 (2003
Memorandum), which “described project administration,
funding, and the obligations of the parties.” J.A. 3.
The express terms of the 2003 Memorandum required
Anchorage to “[p]rovide overall program requirements and
direction of Port Expansion to MARAD.” J.A. 16044. The
2003 Memorandum also specified, with regard to the level
of program control to be exerted by Anchorage, that
Anchorage had the responsibility to “[r]eview all plans,
specifications, and status reports submitted by the primary
contractor and its subcontractors before submission to
MARAD.” J.A. 16045. “[Anchorage] was also responsible
for certifying completion and acceptance of the work.” J.A.
3. Specifically, Anchorage was required to certify that a
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ANCHORAGE v. US 4
contractor’s work was acceptable and, if so, would issue a
certificate of completion to MARAD. Only with the
completed certificate of completion could MARAD accept
the work and pay the contractor.
The 2003 Memorandum also outlined MARAD’s
responsibilities, which included “[c]oordinat[ing] with
other Federal agencies that receive annual Congressional
appropriations for Port Expansion” to increase funding for
the project. J.A. 16045. Additionally, MARAD was
responsible for executing all financial documents,
accepting transfers of non-federal funds, and to “[o]bligate
and disburse funding for Port Expansion project oversight,
program management, study, environmental analysis,
engineering, design, construction, or rehabilitation
pursuant to Port Expansion requirements consistent with
contract requirements.” J.A. 16046. Either party could
terminate the 2003 Memorandum by providing ninety
days’ notice to the other party.
To complete the project, MARAD contracted with
Integrated Concepts and Research Corporation (ICRC) in
2003 (the MARAD-ICRC contract). ICRC, in turn, was to
“[sub]contract[] with other design/engineering firms and
contractors to complete various aspects of the work.”
Compl. at ¶ 31, Anchorage, Case No. 1:14-cv-00166 (Feb.
28, 2014), ECF No. 1. The contract between MARAD and
ICRC “included contract clauses which provided [MARAD]
the right to require ICRC to correct defective work without
charge.” Id. at ¶ 35.
Problems with the project were discovered during a
third-party inspection in 2010, when “large-scale damage
was found in the installed sheet piles”, which protect an
excavated area from earth and groundwater. J.A. 3. While
ICRC and its subcontractors performed the work,
Anchorage ultimately blamed the project issues on
MARAD, alleging that MARAD failed to “develop[] [p]roject
management or inspection protocols” over ICRC and its
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ANCHORAGE v. US 5
subcontractors, and “abdicated its responsibilities” to
oversee the project. Compl. at ¶¶ 61–65, Anchorage, Case
No. 1:14-cv-00166 (Feb. 28, 2014), ECF No. 1. The damage
resulted in “large sections of the [Port] being unsuitable for
use.” J.A. 3 The damage was the “impetus for [Anchorage
and MARAD] entering into a second agreement in 2011.”
J.A. 3.
The 2011 Memorandum of Agreement (2011
Memorandum), which supplemented the 2003
Memorandum, “redefined the roles and responsibilities of
Anchorage and [MARAD], outlined authorities, and
assured accountability for the [p]roject” through joint
oversight by both parties. J.A. 3–4. “It created a Port
Oversight and Management Organization [] to ‘provide
overall executive leadership, vision, policy, strategic
objectives, and priorities for the project.’” Id. (internal
citations omitted). The Port Oversight and Management
Organization consisted “of a committee of decision makers
from both Anchorage and MARAD, who would hold
frequent meetings to address issues related to the Port
construction.” J.A. 16. The 2011 Memorandum also
removed Anchorage’s prior “responsibility to provide
program requirements and direction for the [p]roject and
instead gave [the Port Oversight and Management
Organization] the responsibility to ‘[m]anage the scope,
schedule, and budget of the [p]roject on a day-to-day
basis.’” J.A. 4 (internal citations omitted).
That same year, another issue arose when Quality
Asphalt Paving, Inc. and MKB Constructors—two
subcontractors hired by ICRC—sought to file a claim
against MARAD for work performed that they alleged was
not reimbursed. As the prime contractor, ICRC certified the
validity of the claim (known as a certified pass-through
claim) and presented it to MARAD. MARAD denied the
certified pass-through claim from ICRC and, as a result,
ICRC brought three claims under the Contract Disputes
Act of 1978 to the Civilian Board of Contract Appeals
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ANCHORAGE v. US 6
(CBCA). Without consulting Anchorage, MARAD settled
the claims with ICRC in 2012, with MARAD paying ICRC
$11,279,059. On March 8, 2013, Anchorage filed its own
lawsuit against ICRC, Quality Asphalt Paving, Inc., and
MKB Constructors, among others, for deficient work on the
project. “[Anchorage] recovered approximately $19.35
million through settlements with all parties in that suit.”
J.A. 14518.
B
In 2014, Anchorage filed suit against the United States
in the Court of Federal Claims, alleging that MARAD had
breached the 2003 Memorandum and the 2011
Memorandum. Compl., Anchorage, Case No. 1:14-cv-00166
(Feb. 28, 2014), ECF No. 1. On December 9, 2021, after
trial, the court issued a decision, holding that MARAD had
breached express duties under the plain text of the 2003
Memorandum and the 2011 Memorandum while stating
that it would issue a separate damages opinion. J.A. 35–
62.
In the opinion, the trial court held that the 2003
Memorandum contained an unambiguous duty for MARAD
to deliver a defect-free port structure to Anchorage. It
further held that MARAD had breached this duty by failing
to deliver to Anchorage a completed, defect-free project.
The trial court also held that MARAD had breached duties
under the 2003 Memorandum by failing to exercise its
contractual rights and remedies against ICRC under the
MARAD-ICRC contract. Finally, the trial court held that,
in the 2011 Memorandum, MARAD had promised to
pursue and defend claims on Anchorage’s behalf, which
MARAD breached by settling ICRC’s claims without
Anchorage’s input.
During trial, the United States sought to show that
Anchorage was responsible for the managerial decision to
contract with ICRC. But the court deemed Anchorage’s
decision-making on the project irrelevant because, in its
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ANCHORAGE v. US 7
view, “MARAD held the legal right [under the 2003
Memorandum] to refuse” Anchorage’s directions, and
MARAD’s choice to accommodate Anchorage’s instructions
was “not the requirement under the 2003 [Memorandum].”
J.A. 52.
The trial court issued a separate opinion addressing
damages on February 24, 2022. Anchorage v. United
States, No. 14-166C, 2022 WL 577669 (Fed. Cl. Feb. 24,
2022). In the opinion, the court found that Anchorage had
adequately proven its entitlement to $367,446,809 in
expectation damages. The court’s damages calculation
contained two parts. First, the court determined that
Anchorage had proven its entitlement to $180,839,809,
representing the value of the structure Anchorage expected
but did not receive. Included in this amount was
$11,279,059, the amount MARAD paid to ICRC out of
project funds as part of the CBCA litigation settlement.
The court did not explain how this sum was related to the
value of the port structure Anchorage claimed. The
expectation damages also encompassed a deduction for the
$19,350,000 in funds Anchorage recovered through its
settlements with ICRC and other contracts. Second, the
court determined that Anchorage had proven its
entitlement to $186,607,000 in costs Anchorage anticipates
it will have to pay to remediate the defects in the existing
sheet pile structure. The United States filed a timely notice
of appeal to our court on April 22, 2022. We possess
jurisdiction under 28 U.S.C. § 1295(a)(3) to review final
decisions and judgments of the Court of Federal Claims.
II
“We review the Court of Federal Claims’ legal
conclusions de novo and its factual findings for clear error.”
Shell Oil Co. v. United States, 896 F.3d 1299, 1306
(Fed. Cir. 2018). Contract interpretation is a question of
law that we review de novo. Pac. Gas & Elec. Co. v. United
States, 536 F.3d 1282, 1284–85 (Fed. Cir. 2008) (citing
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ANCHORAGE v. US 8
Winstar Corp. v. United States, 64 F.3d 1531, 1540
(Fed. Cir. 1995) (en banc), aff’d, 518 U.S. 839 (1996)).
III
When interpreting a contract, we “begin[] with the
language of the written agreement.” Bell/Heery v. United
States, 739 F.3d 1324, 1331 (Fed. Cir. 2014) (quotation
omitted). We may also look to contemporaneous evidence of
the parties’ understanding to confirm the plain meaning of
the contract. TEG-Paradigm Env’t, Inc. v. United States,
465 F.3d 1329, 1338 (Fed. Cir. 2006) (citing Coast Fed.
Bank FSB v. United States, 323 F.3d 1035, 1040 (Fed. Cir.
2003) (en banc)). We interpret the contract in a way that
gives reasonable meaning to all parts of the contract and
avoids a conflict among the provisions. NOAA Maryland,
LLC v. Adm’r of Gen. Servs. Admin., 997 F.3d 1159, 1166
(Fed. Cir. 2021). Further, we cannot insert words into the
contract that the parties never agreed to. George Hyman
Const. Co. v. United States, 832 F.2d 574, 581 (Fed. Cir.
1987).
The first question before us is whether the 2003
Memorandum required the United States to provide
Anchorage with a defect-free port. The second question is
whether the United States breached the 2011
Memorandum by settling ICRC’s claims against the United
States without conferring with Anchorage. We address
each in turn.
A
Our predecessor, the Court of Claims, identified some
of the essential “terms normally needed for a construction
contract . . . [such as] time period, . . . specifications as to
form and height, . . . [and] the methods or procedures to be
followed.” Nat’l By-Prods., Inc. v. United States, 405 F.2d
1256, 1266 (Ct. Cl. 1969); see also First Hartford Corp.
Pension Plan & Tr. v. United States, 194 F.3d 1279, 1290
n.3 (Fed. Cir. 1999) (citing S. Corp. v. United States,
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ANCHORAGE v. US 9
690 F.2d 1368, 1370 (Fed. Cir. 1982) (en banc) (explaining
that the Court of Federal Claims and our court are both
“bound by the decisions of the Court of Claims”)). While the
absence of some standard construction terms could be
remedied by implying reasonable terms, “the lack of any
terms which would ordinarily be present in such a contract
is persuasive that this was not a contract to construct a
[structure] or to assure that one would be built.” Nat’l By-
Prods., 405 F.2d at 1266 n.9 (emphasis added).
Turning to the 2003 Memorandum, we find no
language that could be read to create a duty for MARAD to
deliver any completed item of construction. Nothing states
what specifically is to be built, where, or with what
dimensions. Nothing identifies a deadline for delivery, or
any binding timeline for any part of the project. Nothing
identifies the cost for what MARAD is ostensibly delivering
to Anchorage. Consistent with the 2003 Memorandum’s
plain language, Cheryl Coppe, a former Anchorage official
and one of the primary drafters of the 2003 Memorandum,
J.A. 39, testified that the 2003 Memorandum did not define
any particular project structure to be built or any price, and
that the decision of what was going to be built had not yet
been made when the 2003 Memorandum was executed.
J.A. 15063 (Trial Tr. 788:2–19 (Coppe)). The absence of any
of these terms demonstrates that MARAD did not
contractually promise to construct a port structure or to
assure that one would be built through the 2003
Memorandum.
Anchorage’s assertion that MARAD was required to
deliver a defect-free port disregards the 2003
Memorandum’s text. Although Anchorage directs us to
certain provisions in the 2003 Memorandum, Anchorage
repeatedly relies on paraphrases of those provisions,
avoiding full quotes of the 2003 Memorandum’s text. First,
Anchorage cites to sections IV.7. and V.7. of the 2003
Memorandum, Appellee’s Br. 31–33, which state in full:
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ANCHORAGE v. US 10
IV. MOA, PORT OF ANCHORAGE
RESPONSIBILITIES: . . . 7. Authorize all Port
Expansion funding maintained by MARAD for
federal project oversight, program management,
study, environmental analysis, engineering,
design, construction, or rehabilitation as necessary.
V. MARAD RESPONSIBILITIES: . . . 7. Obligate
and disburse funding for Port Expansion project
oversight, program management, study,
environmental analysis, engineering, design,
construction, or rehabilitation pursuant to Port
Expansion requirements consistent with contract
requirements.
J.A. 16045–46.
The United States argues that this language
established reciprocal responsibilities for expending funds
on the project—Anchorage was required to authorize all
expenditures for substantive project activities, after which
MARAD would disburse funding for those activities
through the MARAD-ICRC contract. We agree. The 2003
Memorandum does not state that MARAD was responsible
for delivering anything to Anchorage. Anchorage
emphasizes that these clauses refer to the authorization,
obligation, and disbursement of funds for “federal project
oversight” and “Port Expansion project oversight.”
Appellee’s Br. 31–32 (emphasis omitted). This language
does not obligate MARAD to deliver any specific structure,
and it also does not obligate MARAD to manage the project
on Anchorage’s behalf. Yet, Anchorage asserts that the
language in these clauses “cannot be more clear” and that
Anchorage authorized project funding so MARAD could
“deliver a defect free [p]ort to [Anchorage].” Appellee’s Br.
32–33. But Anchorage fails to identify any such language.
See Pete Vicari Gen. Contractor, Inc. v. United States,
51 Fed. Cl. 161, 169 (2001) (“The court may not insert a
term into the contract that simply is not there.”), aff’d, 64
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ANCHORAGE v. US 11
F. App’x 780 (Fed. Cir. 2003); see also Pacificorp Cap., Inc.
v. United States, 25 Cl. Ct. 707, 716 n.8, 717 n.9 (1992).
Anchorage further asserts that Addendum 2 of the
2003 Memorandum required MARAD to deliver a defect-
free port to Anchorage. Addendum 2 states:
Acceptance by MARAD of work shall be effective
upon execution by a MARAD Contracting Officer’s
Technical Representative (COTR) of a properly
executed Certificate of Completion tendered by
MARAD’s prime contractor. Upon acceptance by
MARAD of work tendered, all right, title and
interest to such work, and all warranties, and
guarantees applicable thereto, shall be conveyed to
the Municipality of Anchorage and its Department,
the Port of Anchorage (MOA), unless otherwise
provided. The term “Work” includes, but is not
limited to: Materials, workmanship, warranties,
guarantees, and manufacture and fabrication of
components.
The Certificate of Completion shall be a document
executed by MARAD’s prime contractor attesting to
the prime contractor’s inspection of the work, and
certifying the work was completed according to
specifications and all applicable requirements,
including but not limited to customary industry
standards, and is free from material defects. Prior
to submission to a MARAD COTR, the Certificate
of Completion shall also be signed by an authorized
representative of the Municipality of Anchorage.
Such signature indicates acceptance by MOA of the
work provided by MARAD’s prime contractor as
specifically described in the Certificate of
Completion.
J.A. 21681.
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ANCHORAGE v. US 12
We find that Addendum 2 simply describes the process
for reviewing and accepting work done on the project, with
acceptance to be performed by Anchorage. See Appellant’s
Br. 28–29. Anchorage asserts that Addendum 2 provides
that “MARAD would certify ‘the work was completed
according to specifications’” and that “MARAD [would]
ensure that the work was completed consistent with
specifications and free of defects.” Appellee’s Br. 34–35. But
those words never appear in Addendum 2. Instead, the
addendum only established a process whereby: (1)
“MARAD’s prime contractor” was responsible for
“certifying the work was completed according to
specifications and all applicable requirements . . . and is
free from material defects,” and then (2) “the Municipality
of Anchorage[,]” not MARAD, was responsible for
“accept[ing] . . . the work provided by MARAD’s prime
contractor.” J.A. 21681.
Finally, a duty to deliver a defect-free port would
conflict with another express provision in the 2003
Memorandum. Any interpretation of a contract must give
a reasonable meaning to all terms and avoid a conflict
among the provisions. NOAA Maryland, LLC v. Adm’r of
Gen. Servs. Admin., 997 F.3d 1159, 1166 (Fed. Cir. 2021).
Here, the termination clause of the 2003 Memorandum
granted both parties an unlimited and unilateral right to
terminate the agreement at any time with ninety days’
written notice. J.A. 21678–79. The trial court
acknowledged this clause in its damages opinion but
disagreed with the United States “that[,] because MARAD
could terminate the Agreement at any time, this disproves
that MARAD owed Anchorage any specific item of
construction . . . . The termination clause is just standard
government contracting language.” J.A. 71. Not so. The
clause here allowed MARAD to walk away from the project,
unlike a “standard” termination clause that permits the
government as procurer to relieve the contractor of its
obligation, at the expense of paying close out costs. See, e.g.,
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ANCHORAGE v. US 13
FAR 52.249-2. The trial court did not explain how the
parties’ actual termination provision could be harmonized
with an obligation to deliver a defect-free port. In short,
MARAD could not have made a contractual promise to
deliver any completed item of construction if it also had the
undisputed freedom to end the agreement at any time for
any reason.
For all of these reasons, we conclude that the plain
language of the 2003 agreement did not require MARAD to
deliver a defect free port.1 Accordingly, we vacate the trial
court’s decision and remand for the court to consider any
adequately preserved arguments for breach of duties found
1 Anchorage urges us to consider testimony from
contracting personnel as further evidence that both parties
understood MARAD was to deliver a defect-free port. See,
e.g., Appellee’s Br. 8–11, 36–38. Testimony from contracting
personnel regarding their understanding and expectations
cannot be used to add terms to the 2003 Memorandum. The
parol evidence rule is a rule of substantive law that
precludes the admission of prior or contemporaneous
evidence seeking to add to or vary the terms of a written
agreement when the parties have adopted a written
agreement as an expression of their final intent. David
Nassif Assocs. v. United States, 557 F.2d 249, 256 (Ct. Cl.
1977). “The rule thus renders inadmissible evidence
introduced to modify, supplement, or interpret the terms of
an integrated agreement.” Barron Bancshares, Inc. v.
United States, 366 F.3d 1360, 1375 (Fed. Cir. 2004) (citing
McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1435
(Fed. Cir.1996)).
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ANCHORAGE v. US 14
in the 2003 Memorandum and, if such a breach is found, a
determination of reliance damages.
B
The United States also argues that it did not breach
the 2011 Memorandum by settling ICRC’s claims against it
without conferring with Anchorage. The trial court
correctly rejected this argument. The United States’
argument contradicts the plain language of clause V.B.7 of
the 2011 Memorandum, which states that MARAD’s role
was to “administer claims submitted by [MARAD]
contractors and coordinate and cooperate with the
[Muncipality of Anchorage/Port of Alaska] in affirmative
and defense of claims consistent with federal contract law.”
J.A. 18333 (emphasis added).
The United States claims that federal contract law
instructs the federal government to try to resolve all
contractual issues in controversy at the contracting
officer’s level, which gave “MARAD full discretion
regarding the management of claims.” Appellant’s Br. 51;
see also FAR 33.210. But this interpretation would render
the 2011 Memorandum’s requirement for MARAD to
coordinate contract disputes with Anchorage meaningless.
See Jemal’s Lazriv Water, LLC v. United States, 114 Fed.
Cl. 512, 516 (2013), aff’d, 578 F. App’x 982 (Fed. Cir. 2014)
(“It is a fundamental tenet of contract construction that a
contract should be interpreted so as not to render portions
of it meaningless.”). Considering the full language of the
clause, the correct interpretation is that MARAD was to
coordinate a response to contract disputes with Anchorage,
with the requirement that any such response be consistent
with federal contract law. Thus, we affirm the trial court’s
holding that the United States breached the 2011
Memorandum by settling ICRC’s claims without conferring
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ANCHORAGE v. US 15
with Anchorage, as well as the trial court’s award of
$11,279,059 in damages to Anchorage.2
IV
We have considered the remainder of the parties’
arguments and find them unpersuasive. Because the 2003
Memorandum of Understanding did not require the United
States to deliver a defect-free port, we vacate the Court of
Federal Claims’ decision as it relates to the 2003
Memorandum of Understanding, as well as its award of
damages, and remand for consideration consistent with
this opinion. We affirm the Court of Federal Claims’
determination that the United States breached the 2011
Memorandum of Agreement by settling subcontractor
claims without coordinating with Anchorage, as well as the
court’s award of damages to Anchorage for the United
States’ breach of the 2011 Memorandum of Agreement.
VACATED-IN-PART, AFFIRMED-IN-PART, AND
REMANDED
COSTS
No costs.
2 While the trial court awarded the damages from
the United States’ breach of the 2011 Memorandum under
an expectation theory, J.A. 71, 74, the damages are more
correctly categorized as reliance damages, which “put [the
plaintiff] in as good a position as he was in before the
promise was made.” Amber Res. Co. v. United States,
73 Fed. Cl. 738, 744 (2006), aff’d, 538 F.3d 1358 (Fed. Cir.
2008). Nevertheless, the award itself is correct.
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