Hahnenkamm, LLC v. United States

United States Court of Appeals
for the Federal Circuit
______________________
HAHNENKAMM, LLC,
Plaintiff-Cross-Appellant
v.
UNITED STATES,
Defendant-Appellant
______________________
2022-2018, 2022-2054
______________________
Appeals from the United States Court of Federal
Claims in No. 1:17-cv-00855-CFL, Senior Judge Charles F.
Lettow.
______________________
Decided: June 21, 2024
______________________
ROGER J. MARZULLA, Marzulla Law, LLC, Washington,
DC, argued for plaintiff-cross-appellant. Also represented
by N ANCIE G AIL MARZULLA .
G EOFFREY M. L ONG, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellant. Also repre-
sented by BRIAN M. BOYNTON, P ATRICIA M. MCCARTHY ;
J OSHUA RIDER, Office of the General Counsel, United
States Department of Agriculture, San Francisco, CA.
______________________
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HAHNENKAMM , LLC v. US 2
Before D YK, CUNNINGHAM , Circuit Judges and
BENCIVENGO, District Judge.1
D YK, Circuit Judge.
This case involves a claim for breach of a land purchase
contract between Hahnenkamm, LLC (“Hahnenkamm”),
and the United States Forest Service (“Forest Service”).
The Court of Federal Claims (“Claims Court”) held that the
Forest Service breached the agreement by not supporting
the purchase price with an independent appraisal that
complied with the Uniform Appraisal Standards for Fed-
eral Land Acquisitions (hereinafter, the “Yellow Book”).2
We understand the Claims Court’s decision to find a breach
of an implied warranty that the purchase price was sup-
ported by an independent, Yellow Book-compliant ap-
praisal. The Claims Court rejected the government’s
affirmative defenses of waiver and equitable estoppel and
awarded damages to Hahnenkamm.
The government does not appeal the breach of implied
warranty determination except to the extent it appeals the
Claims Court’s rejection of its affirmative defenses. As to
the defense of waiver, we conclude that Hahnenkamm
could not have reasonably relied on the contractual repre-
sentation that the appraisal was independent, but conclude
that further proceedings on remand are necessary as to
whether it reasonably relied on the representation that the
appraisal was Yellow Book-compliant. We also remand the
Claims Court’s rejection of the equitable estoppel defense.
1 Honorable Cathy Ann Bencivengo, District Judge,
United States District Court for the Southern District of
California, sitting by designation.
2 Interagency Land Acquisition Conference, Uniform
Appraisal Standards for Federal Land Acquisitions (5th
ed. 2000).
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HAHNENKAMM , LLC v. US 3
Hahnenkamm cross-appeals the damages award con-
tending that the Claims Court erred by not assessing the
value of the property as a so-called “trophy property.” We
affirm the Claims Court’s rejection of Hahnenkamm’s chal-
lenge to the damages award.
BACKGROUND
I
The Forest Service has the authority to acquire land
through purchase, exchange, donation, and eminent do-
main. 43 U.S.C. § 1715(a). The Forest Service’s land ac-
quisition authority in this case is governed by the Nevada
and Lake Tahoe Basin Land Disposal and Acquisition Act
(“Santini-Burton Act”), Pub. L. No. 96-586, 94 Stat. 3381
(1980), and the Southern Nevada Public Land Manage-
ment Act of 1998 (“Southern Nevada Land Act”), Pub. L.
No. 105-263, 112 Stat. 2343. The statutes “provide for ac-
quisition of environmentally sensitive lands in the Lake
Tahoe Basin.” § 1(b), 94 Stat. at 3381; see also § 5(a)(2),
112 Stat. at 2347.
Under the Santini-Burton Act, the Secretary of Agri-
culture3 is authorized to acquire lands with the consent of
the landowner and also without the consent of the land-
owner but only after “all reasonable efforts to acquire such
lands or interests therein by negotiation have failed.”
§ 3(d), 94 Stat. at 3385; see also § 3(c)(1), 94 Stat. at 3384.
When acquiring land under this Act, the Secretary of Agri-
culture is required to support the purchase price with “an
independent appraisal made, where practicable, on the ba-
sis of comparable sales at the time of acquisition.” § 3(e),
94 Stat. at 3385; § 3(c)(5), 94 Stat. at 3385.
3 The Forest Service is part of the Department of Ag-
riculture. U.S. Forest Service Home Page,
https://www.fs.usda.gov/ (last visited Apr. 19, 2024).
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HAHNENKAMM , LLC v. US 4
Under the Southern Nevada Land Act, the Secretary of
Interior may only acquire lands with the landowner’s con-
sent. § 5(a)(2), 112 Stat. at 2347. The Southern Nevada
Land Act provides that “[t]he fair market value of land . . .
to be acquired by the Secretary [of Interior] or Secretary of
Agriculture under this section shall be determined pursu-
ant to section 206 of the Federal Land Policy and Manage-
ment Act of 1976 and shall be consistent with other
applicable requirements and standards.” § 5(c), 112 Stat.
at 2348. The Federal Land Policy and Management Act
provides that rules and regulations “governing appraisals
shall reflect nationally recognized appraisal standards, in-
cluding to the extent appropriate, the [Yellow Book].” 43
U.S.C. § 1716(f)(2).
The Yellow Book, a publication of the Interagency Land
Acquisition Conference, provides guidelines and standards
for how the fair market value of a property should be ap-
praised. See generally Hahnenkamm, LLC v. United
States, 159 Fed. Cl. 678, 687, 690–94 (2022). The Yellow
Book is written for use by appraisers. The Forest Service
has also adopted regulations governing the process of ac-
quiring land, including appraisal standards. See generally
36 C.F.R. § 254; see also 36 C.F.R. § 254.9. Under those
regulations, the Forest Service is required to adhere to the
Yellow Book and Uniform Standards of Professional Ap-
praisal Practice in making appraisals.
II
In 2008, Hahnenkamm purchased the Cave Rock Sum-
mit property, a parcel of land in the Lake Tahoe area of
Nevada. After purchasing the property, Hahnenkamm
proceeded to secure a variety of permits for developing the
land. Hahnenkamm, 159 Fed. Cl. at 683. Hahnenkamm
first contacted the Forest Service in 2005 and began dis-
cussions about selling the property in 2006, despite not yet
owning the property.
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HAHNENKAMM , LLC v. US 5
For the Forest Service to proceed with a voluntary pur-
chase of property the prospective seller must execute a will-
ing-seller statement. In 2009, Hahnenkamm executed a
willing-seller form, stating that it was willing to consider a
sale of the property to the Forest Service.
The willing-seller form stated that an appraisal of the
Cave Rock Summit property would be performed by a “li-
censed independent appraiser” and in compliance with the
Yellow Book. J.A. 299. “A qualified review appraiser em-
ployed by the Forest Service [would] review and approve or
reject the appraisal report from the independent appraiser
to ensure that the appraisal complies with the Uniform Ap-
praisal Standards . . . .” Id. Hahnenkamm would be per-
mitted “a reasonable amount of time to consider the offer,
ask questions, or request clarifications of any unclear parts
of the offer or option.” J.A. 300. If Hahnenkamm found the
appraised value acceptable, it could extend an option con-
tract “allow[ing] the Forest Service to acquire” the property
for the appraised value. Id. Hahnenkamm had no obliga-
tion to offer an option contract to the Forest Service at the
appraised value if it found the value to be unacceptable.
A first appraisal was prepared by Daniel Leck (the
“Leck appraisal”) that estimated the fair market value of
the Cave Rock Summit property to be $4 million. The Leck
appraisal was provided to Hahnenkamm, and Hah-
nenkamm rejected the offer because it “fe[lt] the selection
of sales comparables [did] not reflect fair market value and
the characteristics of the property.” J.A. 483. Hah-
nenkamm contemplated employing its own appraiser to re-
view the Leck appraisal but decided to request a second
appraisal from the Forest Service instead. Hahnenkamm
then requested a second appraisal, and Hahnenkamm and
the Forest Service agreed that Lance Doré would perform
a second appraisal. Mr. Doré was retained by the Forest
Service to complete the appraisal.
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HAHNENKAMM , LLC v. US 6
Mr. Doré completed his appraisal (the “Doré ap-
praisal”), estimating the fair market value of the Cave
Rock Summit property to be $5.03 million. Based on the
Doré appraisal, the Forest Service extended an offer to
Hahnenkamm to purchase the Cave Rock Summit property
for $5.03 million. The Forest Service provided Hah-
nenkamm with a copy of the Doré appraisal, a copy of the
Forest Service’s Correlated Appraisal Review Report of the
appraisal, and a copy of a proposed purchase option agree-
ment.
Hahnenkamm obtained a copy of the Yellow Book and
reviewed it and the Doré appraisal in an attempt to deter-
mine whether the Doré appraisal was Yellow Book-compli-
ant. Based on its reviews, Hahnenkamm initially rejected
the Forest Service’s offer, arguing that the Doré appraisal
was not Yellow Book-compliant and significantly underes-
timated the value of the Cave Rock Summit property. Hah-
nenkamm submitted to the Forest Service a lengthy
document raising its issues with the Doré appraisal. As
the Claims Court found, in this document, Hahnenkamm
“raised concerns” that the Doré appraisal did not comply
with the Yellow Book because it “used a comparable involv-
ing a forced sale due to bankruptcy, [] it used a government
sale comparable, [] it failed to account for deed restrictions
on a comparable, [] it failed to consider the value of land
permits, and [] it failed to make required adjustments on a
comparable.” Hahnenkamm, 159 Fed. Cl. at 686–87 (citing
J.A. 1304–46). Hahnenkamm argued that the fair market
value of the Cave Rock Summit property was approxi-
mately $75 million. The Forest Service rejected Hah-
nenkamm’s assertions, reiterated that the Doré appraisal
complied with the Yellow Book in the specific respects ar-
gued by Hahnenkamm, and informed Hahnenkamm that
its offer was still $5.03 million. There is no claim that the
Forest Service employees’ extra-contractual
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HAHNENKAMM , LLC v. US 7
representations about compliance with the Yellow Book
were inaccurate.
Hahnenkamm accepted the Forest Service’s offer of
$5.03 million and provided an option contract (the “Option
Contract”) to the Forest Service to purchase the Cave Rock
Summit property. The Option Contract stated the pur-
chase price of the property was $5.03 million and, even
though the appraisal had already been prepared, stated
that the “purchase price shall be supported by an appraisal
prepared in conformity with the [Yellow Book].” J.A. 1409–
10. The Forest Service exercised its option to purchase the
Cave Rock Summit Property on July 7, 2015, and the sale
closed on November 4, 2015.
Six months later, in early 2016, Mr. Hartman, the man-
aging partner of Hahnenkamm, saw in a newspaper that a
property he believed to be similar to the Cave Rock Summit
property had sold for a price “much greater than”
$5.03 million. J.A. 2751. Mr. Hartman asserted that this
caused him to doubt that the Doré appraisal was Yellow
Book-compliant. Hahnenkamm then contacted legal coun-
sel.
III
In 2017, Hahnenkamm filed suit in the Claims Court
asserting that the Forest Service had breached the Option
Contract because the appraisal was not independent and
did not comply with the Yellow Book. Hahnenkamm also
alleged that it relied on the Forest Service’s representation
in the contract that the appraisal used was independent
and complied with the Yellow Book. Hahnenkamm alter-
natively alleged that the Forest Service violated the San-
tini-Burton Act and the Southern Nevada Land Act.
After trial, the Claims Court found the Forest Service
had a contractual duty to support the purchase price with
an independent, Yellow Book-compliant appraisal and had
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HAHNENKAMM , LLC v. US 8
breached its duty because the Doré appraisal was not inde-
pendent and not Yellow Book-compliant. Hahnenkamm,
159 Fed. Cl. at 689–95. Those conclusions are not chal-
lenged on appeal.
However, at trial and during summary judgment pro-
ceedings, the government raised affirmative defenses of
waiver and equitable estoppel. The government contended
that Hahnenkamm waived its right to challenge the ap-
praisal as non-compliant because Hahnenkamm reviewed
the Doré appraisal and related information before extend-
ing the Option Contract to the Forest Service, “knew of (1)
the Yellow Book, (2) its right to appraisal in compliance
with the Yellow Book’s guidelines, and (3) the Forest Ser-
vice’s intention to rely on the Doré appraisal to derive the
value of Cave Rock Summit,” and voluntarily entered into
the contract. Hahnenkamm, LLC v. United States, 147
Fed. Cl. 383, 389 (2020) (deferring motions for summary
judgment). With respect to the issue of independence, the
government argued that “Hahnenkamm knew before the
sale that Ms. McAuliffe[4] had, in developing her review re-
port, reviewed drafts of Mr. Doré’s appraisals and provided
comments—she detailed the process in her correlated ap-
praisal review report, which was provided to Hah-
nenkamm.” Defendant Post-trial Br. at 44, Hahnenkamm,
LLC v. United States, No. 17-cv-0855, ECF No. 134. In the
alternative, the Forest Service argued that Hahnenkamm
should be equitably estopped from challenging the ap-
praisal because Hahnenkamm entered into the contract
without reserving its right to challenge the appraisal.
The Claims Court rejected the government’s affirma-
tive defenses. Hahnenkamm, 159 Fed. Cl. at 689 & n.7. At
summary judgment, the Claims Court determined that the
government’s affirmative defense of equitable estoppel
4 Ms. McAuliffe was the Forest Service reviewer.
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HAHNENKAMM , LLC v. US 9
failed because the government could not identify any bad
faith or intent to mislead and thus failed to demonstrate
misleading conduct on the part of Hahnenkamm. Hah-
nenkamm, 147 Fed. Cl. at 388 n.7. The Claims Court de-
ferred ruling on the issue of waiver because it found a
factual dispute with respect to Hahnenkamm’s subjective
state of mind at the time the Option Contract was executed.
Id. at 389–90. After trial, the Claims Court denied the
waiver defense “based on the evidence addressed at trial”
without further explanation. Hahnenkamm, 159 Fed. Cl.
at 690.
The Claims Court acknowledged Hahnenkamm alleged
that the Forest Service violated the Santini-Burton Act and
Southern Nevada Land Act, but only addressed Hah-
nenkamm’s breach of contract claim in its post-trial opin-
ion, apparently on the ground that the contract itself
imposed the same requirements as the statutes. Hah-
nenkamm does not raise the issues of statutory violations
on appeal and concedes that we need not address the issue
of statutory compliance.
The Claims Court determined that, because of the
breach, Hahnenkamm was entitled to be paid the fair mar-
ket value of the Cave Rock Summit property. The Claims
Court determined that value to be $9 million and that Hah-
nenkamm was entitled to $3.97 million in expectation
damages, which represented the excess value over the
amount originally paid. The Claims Court rejected Hah-
nenkamm’s argument that the Cave Rock Summit prop-
erty’s highest and best use was a so-called “trophy
property” that deserved an “extraordinary premium.” Id.
at 694.
The government appeals the Claims Court’s denial of
its affirmative defenses. Hahnenkamm cross-appeals the
Claims Court’s determination of damages. We have juris-
diction under 28 U.S.C. § 1295(a)(3).
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HAHNENKAMM , LLC v. US 10
D ISCUSSION
“We review the [Claims Court’s] decision de novo for
errors of law and for clear error on findings of fact.”
Agredano v. United States, 595 F.3d 1278, 1280 (Fed. Cir.
2010). “Contract interpretation is a matter of law, and is
therefore reviewed de novo.” Id.
I
Before addressing the merits of the government’s af-
firmative defenses, we must first construe the Option Con-
tract’s appraisal provision. The appraisal provision of the
Option Contract states:
The purchase price shall be supported by an ap-
praisal prepared in conformity with the Uniform
Appraisal Standards for Federal Land Acquisition.
J.A. 1410.
We note the Claims Court’s opinion suggests that the
Forest Service had an obligation under the contract to pay
fair market value for the Cave Rock Summit property.
Hahnenkamm, 159 Fed. Cl. at 689. We disagree.
The contract did not provide that the government
would pay fair market value as assessed after the fact.
There is no single, precise “fair market value” for a given
property. As Hahnenkamm acknowledged at oral argu-
ment, two appraisals can reach two different conclusions of
the value of a property, but both still be Yellow Book-com-
pliant and thus provide a basis for determining fair market
value. The appraisal provision only provides a representa-
tion that the purchase price stated in the contract is sup-
ported by an independent, Yellow Book-compliant
appraisal, not a separate obligation to pay the fair market
value as determined after the fact. Hahnenkamm con-
ceded at oral argument that the Option Contract did not
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HAHNENKAMM , LLC v. US 11
provide that Hahnenkamm would be paid fair market
value as determined after the fact.5
At oral argument, the government argued the ap-
praisal provision was simply a condition to the contract,
and Hahnenkamm contended it was a representation or a
warranty that the proper protocol had been followed by the
Forest Service.
We agree with Hahnenkamm and interpret the ap-
praisal provision to be a representation (an implied war-
ranty) that the purchase price was supported by an
independent, Yellow Book-compliant appraisal. While the
contract does not explicitly reference the Doré appraisal,
both parties acknowledge the Option Contract was refer-
ring to the Doré appraisal as the required appraisal. Thus,
the provision was an implied warranty that the Doré ap-
praisal was an independent, Yellow Book-compliant ap-
praisal.
We also agree with the Claims Court that the govern-
ment could be held liable for damages flowing from the For-
est Service’s representation if it was inaccurate and other
requirements are satisfied. It has long been established
that in government contract cases the government “is lia-
ble for damage attributable to misstatements of fact (in a
contract or specifications) which are representations made
to the contractor.” Flippin Materials Co. v. United States,
312 F.2d 408, 413 (Ct. Cl. 1963); see also Flippin, 312 F.2d
at 413 n.8 (collecting cases).
5 THE COURT: “The contract did not provide that
they would be paid fair market value.”
COUNSEL FOR HAHNENKAMM: “It did not. As
the court said, it said the sales price would conform
to . . . [the] Yellow Book.”
Oral Arg. 33:38–45.
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HAHNENKAMM , LLC v. US 12
For example, the government has been held liable for
damages incurred due to inaccurate statements in bid spec-
ifications on the theory that there is an implied warranty
that these statements are accurate. See, e.g., United States
v. Spearin, 248 U.S. 132, 137 (1918) (finding a contract pro-
vision “prescribing the character, dimensions, and location
of the sewer [to be constructed] imported a warranty that
if the specifications were complied with, the sewer would
be adequate”); Morrison-Knudsen Co. v. United States, 345
F.2d 535, 539 (Ct. Cl. 1965) (finding “positive representa-
tions amounted to a warranty . . . and established a predi-
cate for a possible action for breach of contract”); Everett
Plywood & Door Corp. v. United States, 419 F.2d 425, 431
(Ct. Cl. 1969); E.L. Hamm & Assocs., Inc. v. England, 379
F.3d 1334, 1338 (Fed. Cir. 2004) (“Whenever the govern-
ment uses specifications in a contract, there is an accompa-
nying implied warranty that these specifications are free
from errors.”); John Cibinic, Jr., et al., Administration of
Government Contracts 237 (5th ed. 2016) (“Absent express
provisions, the government’s liability is based on an im-
plied warranty that the information furnished is correct.”).
II
On appeal, the government does not challenge the
Claims Court’s determination that it was obligated to sup-
port the purchase price with an independent, Yellow Book-
compliant appraisal, nor does it challenge the Claims
Court’s determination that the Doré appraisal was not Yel-
low Book-compliant and was not independent. However,
the government argues that Hahnenkamm waived its right
to recover for the misrepresentation that the Doré ap-
praisal was Yellow Book-compliant and independent. Un-
der the circumstances, the government’s argument is best
characterized as an argument that Hahnenkamm did not
rely on this representation when it entered into the
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HAHNENKAMM , LLC v. US 13
contract and that it could not reasonably rely on the repre-
sentation in any event.6
III
Although the Claims Court viewed the relevant ques-
tion to be whether Hahnenkamm subjectively believed the
appraisal was independent and Yellow Book-compliant,
that is not the relevant inquiry. See Hahnenkamm, 147
Fed. Cl. at 389. The issue is whether, objectively, a con-
tracting party did in fact rely and could have reasonably
relied on the appraisal provision under the circumstances.
See E.L. Hamm, 379 F.3d at 1339–43 (analyzing separately
whether contracting party actually relied on representa-
tion and whether such reliance was reasonable).
In general, “a warranty is an assurance by one party to
an agreement of the existence of a fact upon which the
other party may rely; it is intended precisely to relieve the
6 See Appellant Opening Br. 26 (arguing that “Hah-
nenkamm had access to the information it needed to decide
for itself whether the Doré appraisal matched Hah-
nenkamm’s own assessment of fair market value”); Def.’s
Am. Answer at 8, Hahnenkamm, LLC v. United States, No.
17-cv-0855, ECF No. 32 (arguing Hahnenkamm “waived its
claims” because prior to the sale it “was aware of facts that
now give rise to its claim that the Government violated
statutes and breached the parties’ sales contract”).
If a contract defect is patent (apparent on the face of
the contract), which is not the case here, waiver may exist.
See Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308,
1313 (Fed. Cir. 2007) (“We also hold that a party who has
the opportunity to object to the terms of a government so-
licitation containing a patent error and fails to do so prior
to the close of the bidding process waives its ability to raise
the same objection subsequently in a bid protest action in
the Court of Federal Claims.”).
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HAHNENKAMM , LLC v. US 14
promisee of any duty to ascertain the facts for himself.”
Oman-Fischbach Int’l (JV) v. Pirie, 276 F.3d 1380, 1383
(Fed. Cir. 2002) (citation omitted). However, as we discuss
below, statements of opinion, such as statements of value,
typically cannot be relied on without a further showing.
A recipient of a misrepresentation also “is not entitled
to relief if his reliance was unreasonable in the light of his
particular circumstances.” Restatement (Second) of Con-
tracts § 172 cmt. a (Am. L. Inst. 1981).7 The Restatement
(Second) of Contracts further explains
[i]f the recipient knows that the assertion is false
or should have discovered its falsity by making a
cursory examination, his reliance is clearly not jus-
tified and he is not entitled to relief. . . . He is ex-
pected to use his senses and not rely blindly on the
maker’s assertion. On the other hand, he is not
barred by the mere failure to investigate the truth
of a misrepresentation, even where it might be rea-
sonable to do so.
Restatement (Second) of Contracts § 172, cmt. b (Am. L.
Inst. 1981) (internal citation omitted).8 At the same time,
receiving information that suggests inaccuracy can trigger
7 In the government contract context, and, in partic-
ular, for the issue of misrepresentations, we have looked to
the Restatement (Second) of Contracts (Am. L. Inst. 1979).
See, e.g., T. Brown Constructors, Inc. v. Pena, 132 F.3d 724,
729 (Fed. Cir. 1997).
8 The commentary in the Restatement (Second) of
Contracts § 172 cites to the Restatement (Second) of Torts
discussion of duty to investigate, which provides a similar
standard. See Restatement (Second) of Torts § 540, cmt. a
(“[I]f a mere cursory glance would have disclosed the falsity
of the representation its falsity is regarded as obvi-
ous . . . .”).
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HAHNENKAMM , LLC v. US 15
a duty to investigate beyond a “cursory examination.” Var-
ious state decisions recognize that a party is not entitled to
rely on a representation when it is aware of issues that
would cause a reasonable person to doubt the representa-
tion (i.e., there are red flags).9 See also Restatement (Sec-
ond) of Torts § 540, Reporters Note (recognizing “[s]ome
jurisdictions impose a duty to investigate, especially if
there is reason to suspect that the statement is false.”).
Our own case law in the government contract context
similarly recognizes that a contracting party cannot re-
cover if a defect in a contract specification is patent—i.e.,
one that is “glaring or obvious” from a facial inspection of
the specification—because reliance on such a defect is not
reasonable. E.L. Hamm, 379 F.3d at 1342–43; M.R.
Pittman Grp., LLC v. United States, 68 F.4th 1275, 1283
(Fed. Cir. 2023) (“A defect in the solicitation is ‘patent’ ‘if it
is an obvious omission, inconsistency, or discrepancy of
9 See, e.g., JPMorgan Chase Bank, N.A. v. Orca As-
sets G.P., L.L.C., 546 S.W.3d 648, 655 (Tex. 2018) (“[A] per-
son may not justifiably rely on a misrepresentation if ‘there
are “red flags” indicating such reliance is unwarranted.’”
(quoting Grant Thornton, LLP v. Prospect High Income
Fund, 314 S.W.3d 913, 923 (Tex. 2010))); K-B Trucking Co.
v. Riss Int’l Corp., 763 F.2d 1148, 1158 (10th Cir. 1985)
(noting that under Kansas law the test for reasonable reli-
ance on a fraudulent misrepresentation “is whether the re-
cipient has information which would serve as a danger
signal and a red light to any normal person of his intelli-
gence and experience” (citation and internal quotation
marks omitted)); Calloway v. Wyatt, 97 S.E.2d 881, 885
(N.C. 1957) (finding buyer could not rely on the seller’s
fraudulent representation of there being “plenty of water”
when buyer’s suspicions should have been aroused that the
representations were false and buyer could have investi-
gated the water supply to confirm the representations).
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HAHNENKAMM , LLC v. US 16
significance’ or ‘if it could have been discovered by reason-
able and customary care.’” (quoting Inserso Corp. v. United
States, 961 F.3d 1343, 1349 (Fed. Cir. 2020))); Per Aarsleff
A/S v. United States, 829 F.3d 1303, 1313 (Fed. Cir. 2016)
(same). While there is no patent defect here apparent on
the face of the contract, we have also held that even when
the defect is not patent “reliance is unreasonable when a
contractor has reason to doubt the accuracy of a represen-
tation, such as knowledge of a flaw in the information un-
derlying the representation,” (i.e., there are red flags). Int’l
Tech. Corp. v. Winter, 523 F.3d 1341, 1352 (Fed. Cir. 2008).
The examples of government contract cases involving
lack of reasonable reliance because of contractor knowledge
are legion. For example, in Robins Maintenance, Inc. v.
United States, we determined that a contractor could not
reasonably rely on a misstatement in the specification
about the amount of acreage that was to be serviced be-
cause the contractor was aware that the stated acreage was
inaccurate. 265 F.3d 1254, 1258 (Fed. Cir. 2001).
In International Technology Corp. v. Winter,10 we af-
firmed the Armed Services Board of Contract Appeals’s
10 We note that International Technology is a so-
called “Differing Site Conditions” case, which is a specific
line of cases for which our precedent has developed specific
rules. Differing Site Conditions cases typically involve con-
tracts with a clause that provides that a contractor has
taken reasonable steps to investigate a construction site’s
conditions, “including all exploratory work done by the
Government” and the specifications that are part of the
contract. 48 C.F.R. § 52.236-3. Those provisions also re-
lieve the Government from responsibility of conclusions
made by the contractor and clarify the Government is not
responsible for “any understanding reached or representa-
tion made concerning conditions . . . unless that
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HAHNENKAMM , LLC v. US 17
finding that a contractor could not reasonably rely on clay
content figures in a report to represent that the clay con-
tent in a stockpile was below ten percent “because it was
aware of a flaw in how those test samples were obtained.”
523 F.3d at 1352. Because the contractor was aware of the
flaws in the sampling method and that those types of flaws
would mean that the values in the provided report revealed
nothing about the soil in the middle of the stockpile, the
reliance on those figures was not reasonable. Id. at 1353.
Similarly, in Helene Curtis Industries, Inc. v. United
States, our predecessor court found no liability when the
contractor contracted to supply chlormelamine to the Army
was aware of a misrepresentation that the chlormelamine
could be produced without any need for grinding. 312 F.2d
774, 776–79 (Ct. Cl. 1963). The need for grinding caused
production issues and led to increased costs. Id. at 776.
The Court of Claims determined that the contractor could
not recover damages stemming from the misrepresentation
because the contractor was aware of the misrepresentation
when it entered into the contract. Id. at 779.11
understanding or representation is expressly stated in
[the] contract.” Id. No such contract clauses are involved
here. However, we find International Technology informa-
tive because the contract at issue there did not contain a
Differing Site Conditions clause, and the court noted, “[t]he
same requirements apply whether the contractor asserts
such a common law breach claim or a Type I claim under
the Differing Site Conditions clause.” 523 F.3d at 1348.
11 However, the Court of Claims affirmed liability for
an earlier contract the contractor entered into before the
contractor became aware of the misrepresentation. Id. at
778.
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HAHNENKAMM , LLC v. US 18
IV
In applying these general principles to the facts of this
case, “we review the question of whether a contractor rea-
sonably relied upon a representation as a question of fact.”
Int’l Tech., 523 F.3d at 1352. The burden is on the contrac-
tor to establish reasonable reliance. In government con-
tract law, we have repeatedly held that “[i]n order for a
contractor to prevail on a claim of misrepresentation, the
contractor must show that the [g]overnment made an erro-
neous representation of a material fact that the contractor
honestly and reasonably relied on to the contractor’s detri-
ment.” AT&T Commc’ns, Inc. v. Perry, 296 F.3d 1307, 1312
(Fed. Cir. 2002) (quoting T. Brown Constructors, 132 F.3d
at 729). Reasonable reliance is thus part of plaintiff’s case
and is necessary to prevail on a claim that it was damaged
from an inaccurate representation in the contract. See also
E.L. Hamm, 379 F.3d at 1339 (noting that in order to re-
cover, the contractor must show that it relied on the defect
in the specification and that such reliance was not unrea-
sonable).
A
We first consider whether Hahnenkamm established
that it reasonably relied on the Forest Service’s represen-
tation that the Doré appraisal was independent.12 The
12 Hahnenkamm argues that a waiver defense must
fail because the requirement that an “appraiser determine
the fair market value of the property to be acquired” is a
statutory requirement under the Santini-Burton Act and
Southern Nevada Land Act that cannot be waived. Cross-
Appellant Br. 36–40. We disagree with Hahnenkamm.
The issue here is whether Hahnenkamm waived the right
to enforce the implied warranty in the Option Contract
(i.e., whether it reasonably relied on the representation).
The mere fact that the implied warranty in the contract
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HAHNENKAMM , LLC v. US 19
Claims Court interpreted the appraisal provision to repre-
sent that the appraisal would be independent and deter-
mined that the Doré appraisal lacked independence
because “the Forest Service review appraiser, Ms.
McAuliffe, had significant and ongoing communications
with Mr. Doré while Mr. Doré prepared his appraisal, pro-
vided comparable sales data, and was permitted not only
to see Mr. Doré’s draft appraisal before it was finished but
also to make comments and suggestions that resulted in
substantive changes to the report’s conclusion of fair mar-
ket value.” Hahnenkamm, 159 Fed. Cl. at 695. The Claims
Court determined that “Ms. McAuliffe’s communications
and suggestions during the drafting of the report [] influ-
enced it.” Id.
Notably, Hahnenkamm itself was in contact with Mr.
Doré and had provided him with a variety of materials.
J.A. 878–82. Hahnenkamm was also aware of the facts
that led to the Claims Court finding that the Doré ap-
praisal was not independent because the Correlated Ap-
praisal Review Report, which Hahnenkamm had received,
indicated that Ms. McAuliffe reviewed drafts of the Doré
appraisal and had provided comments on them, at least
some of which were addressed by Mr. Doré. J.A. 1092. Be-
cause Hahnenkamm was aware of the Forest Service’s in-
volvement with the Doré appraisal, as a matter of law,
Hahnenkamm could not have reasonably relied on the rep-
resentation that the appraisal was independent in this re-
spect. Helene Curtis, 312 F.2d at 779 (finding that a
has its origins in statute does not mean it cannot be waived.
See Millmaster Int’l Inc. v. United States, 427 F.2d 811, 814
(C.C.P.A. 1970), modified, 429 F.2d 985 (C.C.P.A. 1970)
(“The Supreme Court earlier stated that ‘(a) party may
waive any provision, either of a contract or of a statute, in-
tended for his benefit.’” (quoting Shutte v. Thompson, 82
U.S. (1 Wall) 151, 159 (1872))).
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HAHNENKAMM , LLC v. US 20
contractor who entered into an agreement “with its eyes
open” to the fact a representation was inaccurate “could no
longer assert that it was relying on a misrepresentation”).
B
The question whether Hahnenkamm reasonably relied
on the Forest Service’s representation in the Option Con-
tract that the Doré appraisal was Yellow Book-compliant
is more difficult. The contract stated that “[t]he purchase
price shall be supported by an appraisal prepared in con-
formity with the Uniform Appraisal Standards for Federal
Land Acquisitions.” J.A. 1410. The Claims Court found
the Doré appraisal did not comply with the Yellow Book.
With respect to “comparables 1, 2, and 3[,] [they] lacked the
same permits and entitlements that were in place for Cave
Rock Summit”; they were all government sales or forced
sales (i.e., bankruptcy sales), which required “extraordi-
nary verification to ensure that they reflected market value
and properly documented adjustments if necessary”; and
they did “not replicate[] or match[]” “[t]he views and pri-
vacy offered” by the Cave Rock Summit Property. Hah-
nenkamm, 159 Fed. Cl. at 691–93. The Claims Court also
found that comparables 4, 5, 6, and 7 were too small to have
the same highest and best use as the Cave Rock Summit
property. Id. at 693.
We do not think that the question of reliance and rea-
sonable reliance on Yellow Book-compliance can be decided
as a matter of law on this appeal. Given the Claims Court’s
application of an incorrect standard (subjective belief) and
the parties’ failure to focus on the relevant cases, we con-
clude the parties should be permitted to present further ev-
idence as to whether Hahnenkamm relied on the
contractual representation of Yellow Book-compliance and
whether this reliance was objectively reasonable. In order
to recover, Hahnenkamm must establish three proposi-
tions.
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HAHNENKAMM , LLC v. US 21
First, Hahnenkamm must establish that it in fact re-
lied on the representation in the first place. Here, Hah-
nenkamm elected to conduct a detailed investigation of the
accuracy of the representation as to the Yellow Book-com-
pliance, including obtaining a copy of the Yellow Book and
raising numerous supposed flaws in Yellow Book-compli-
ance with the Forest Service. As Hahnenkamm admitted
at oral argument, at the time of executing the Option Con-
tract, Hahnenkamm was aware of all of the facts that the
Claims Court found rendered the Doré appraisal non-com-
pliant.13 And it questioned the appraisal with respect to
the comparables on which the Claims Court ultimately re-
lied in finding non-compliance (though not raising the spe-
cific flaws on which the Claims Court relied).
For example, in a document titled “Yellow Book Issues
Affecting Dor[é] Group Sales Comparables,” Hahnenkamm
objected to the Forest Service (1) that none of the compara-
bles had the same building permits and entitlements as the
13 THE COURT: “Let me ask a question. So the
Court of Federal Claims in finding that this was not a
Yellow Book-compliant appraisal relied on various fea-
tures of the appraisal.”
COUNSEL FOR HAHNENKAMM: “Correct.”
THE COURT: “Is it accurate to say that your client
was aware of each of those features on which the Court
of Federal Claims relied to find it not compliant?”
COUNSEL FOR HAHNENKAMM: “Well, not
aware that they were non-compliant.”
THE COURT: “No. No, I understand that. But
just aware of the facts on which the Court of Federal
Claims relied.”
COUNSEL FOR HAHNENKAMM: “Factually,
yes, I can’t, I can’t say there was any particular fact
that the clients were unaware of.”
Oral Arg. 31:15–32:01.
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HAHNENKAMM , LLC v. US 22
Cave Rock Summit property; (2) that comparables 1 and 3
were government sales and comparable 2 was a forced sale;
and (3) that properties between 0.5–6 acres in size were
“not representative for the buyer looking for a 20 acres–60
acres residential compound like” the Cave Rock Summit
property. Hahnenkamm quoted relevant portions of the
Yellow Book in this document. See, e.g., J.A. 1304–05,
1307–09.
This investigation is evidence that Hahnenkamm did
not in fact rely on the Option Contract’s representation of
Yellow Book-compliance. The Restatement (Second) of
Contracts explains
[t]he extent of a party’s investigation also bears on
the question of causation. If he relies solely on his
investigation and not on the misrepresentation, he
is not entitled to relief. One who makes an investi-
gation will often be taken to rely on it alone as to
all facts disclosed to him in the course of it. On the
other hand, if the fact is not one that the investiga-
tion disclosed or would have been likely to disclose,
the recipient may still be relying on the misrepre-
sentation as well as on the investigation. Particu-
larly when the investigation produces results that
tend to confirm the misrepresentation but are still
somewhat inconclusive, it may be found that the
recipient relied on both and that he attached im-
portance to the truth of the misrepresentation in
making the contract.
Restatement (Second) of Contracts, § 167, cmt. b; see also
McNabb v. Thomas, 190 F.2d 608, 611 (D.C. Cir. 1951)
(finding no reliance on a representation of a property’s
value because the party made its own investigation suffi-
cient to make its own estimate of the property’s value);
Slaughter’s Adm’r v. Gerson, 80 U.S. 379, 384 (1871);
McCormick & Co. v. Childers, 468 F.2d 757, 768 (4th Cir.
1972).
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HAHNENKAMM , LLC v. US 23
Second, if in fact, Hahnenkamm can establish that it
relied on the contract representation of Yellow Book-com-
pliance, it must also establish that its reliance was reason-
able given that statements of value are statements of
opinion that typically cannot be relied upon. See Restate-
ment (Second) of Contracts § 168(1) (1981) (“An assertion
is one of opinion if it expresses only a belief, without cer-
tainty, as to the existence of a fact or expresses only a judg-
ment as to quality, value, authenticity, or similar
matters.”). A party typically cannot reasonably rely on an
expression of opinion as to value, especially when it is
aware of all of the relevant facts, as Hahnenkamm was
here, Oral Arg. 31:15–32:01. See Restatement (Second) of
Contracts § 169 (“To the extent that an assertion is one of
opinion only, the recipient is not justified in relying on
it . . . .”).
However, the Restatement acknowledges an exception
to this general rule when the recipient “reasonably believes
that, compared with himself, the person whose opinion is
asserted has special skill, judgment or objectivity with re-
spect to the subject matter.” Id. § 169(b). Hahnenkamm
appears to argue that it reasonably believed that Mr. Doré
and the Forest Service had special skill, judgment, and ob-
jectivity with respect to determining Yellow Book-compli-
ance that it did not have.
Third, Hahnenkamm must establish that its reliance
on the appraisal was reasonable in light of its knowledge of
the facts contained in the appraisal and its own investiga-
tion as to Yellow Book-compliance.
We express no opinion as to whether Hahnenkamm can
prevail in establishing these three propositions. We also
express no opinion as to whether Hahnenkamm should be
equitably estopped. Equitable estoppel requires “(1) mis-
leading conduct, which may include not only statements
and action but silence and inaction, leading another to rea-
sonably infer that rights will not be asserted against it;
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HAHNENKAMM , LLC v. US 24
(2) reliance upon this conduct; and (3) due to this reliance,
material prejudice if the delayed assertion of such rights is
permitted.” SUFI Network Servs., Inc. v. United States,
755 F.3d 1305, 1325 (Fed. Cir. 2014) (quoting Lincoln Logs
Ltd. v. Lincoln Pre-Cut Homes, Inc., 971 F.2d 732, 734 (Fed.
Cir. 1992)); see also Heckler v. Cmty. Health Servs. of Craw-
ford Cnty., Inc., 467 U.S. 51, 59 (1984) (quoting Restate-
ment (Second) of Torts § 894(1) (1979)). The Claims Court
rejected this defense because it found the government
failed to show misleading conduct on the part of Hah-
nenkamm. Hahnenkamm, 147 Fed. Cl. at 388 n.7.
The government contends Hahnenkamm engaged in
misleading conduct by deciding, “with the benefit of being
able to determine for itself whether to accept the Forest
Service’s reliance on the Doré appraisal, to then offer the
agency the option to purchase Cave Rock Summit and to
accept the Forest Service’s performance.” Appellant Open-
ing Br. 31. Given that we have interpreted the appraisal
provision to be a representation accompanied by an implied
warranty, an interpretation not decided below, we remand
to the Claims Court to decide whether there is a basis for
equitable estoppel based on an implied representation by
Hahnenkamm that it viewed the appraisal as Yellow Book-
compliant and would not further challenge the appraisal.
V
Since we are remanding in part, we think it is appro-
priate to consider Hahnenkamm’s cross-appeal, although
we note it could become moot on remand if the government
prevails on either of its defenses. On cross-appeal, Hah-
nenkamm argues that the Claims Court erred in its dam-
ages determination because the Cave Rock Summit
property was a “trophy property” and should “engender an
extraordinary premium.” Hahnenkamm, 159 Fed. Cl. at
694.
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HAHNENKAMM , LLC v. US 25
We review “decisions about methodology for calculat-
ing rates and amounts” of damages under an abuse of dis-
cretion standard. Shell Oil Co. v. United States, 896 F.3d
1299, 1307 (Fed. Cir. 2018) (citation omitted). Hah-
nenkamm fails to establish that the Claims Court abused
its discretion.
Hahnenkamm argues that the Claims Court erred in
not designating the Cave Rock Summit property as a “tro-
phy property.” Hahnenkamm contends that a trophy prop-
erty is a “high-end, luxury propert[y] that represent[s] the
top 2.5% of the real estate market.” Cross-Appellant Open-
ing Br. 15 (citation omitted).
But “trophy property” is not a term used in the Yellow
Book for appraising properties.14 Designating a property
as a “trophy property” does not on its face engender an ad-
ditional premium attached to its value under the Yellow
Book guidelines. Such an assertion would appear to be con-
trary to the Yellow Book’s guidelines. As the government’s
expert, Mr. Roach, testified, and as the Yellow Book states,
one of the valuation methods listed in the Yellow Book (i.e.,
sales comparison approach, cost approach, or income capi-
talization approach) would still have to be applied to esti-
mate the value of the property even if it were a trophy
property. J.A. 2991; see Yellow Book at 19–22, 37.15 We do
14 Both parties agree that the term “trophy property”
was coined in 2002 and the operative Yellow Book at the
time was published in December 2000.
15 The only contrary testimony Hahnenkamm cites in
its briefs is Dr. Kilpatrick, who the Claims Court deter-
mined “lack[ed] knowledge about the requirements and ap-
plication of the Yellow Book.” Hahnenkamm, 159 Fed. Cl.
at 696 n.10. While other witnesses recognized the trophy
property concept, J.A. 958; J.A. 2909–10; J.A. 1089, there
was no testimony that trophy property status should
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HAHNENKAMM , LLC v. US 26
not see how the Claims Court erred in determining that the
Cave Rock Summit property’s possible status as a trophy
property does not require a special premium.
Hahnenkamm also raises a series of specific, subsidi-
ary issues with respect to the Claims Court’s damages de-
termination. None has merit.
First, Hahnenkamm argues that the Claims Court
“abused its discretion by placing undue weight on a single
piece of evidence—i.e., that the property was briefly pri-
vately listed for sale, but received no serious inquiries—
when it determined the highest and best use for Cave Rock
Summit.” Cross-Appellant Opening Br. 58. The Claims
Court did not abuse its discretion. To be sure, the Claims
Court considered the lack of serious inquiries in forming its
opinion about the highest and best use. Hahnenkamm, 159
Fed. Cl. at 694. However, it is clear that the Claims Court
carefully considered the similarities and differences be-
tween the Cave Rock Summit property and the compara-
bles in the Doré appraisal, determined that they had the
same highest and best uses, and that adjustments could be
made to account for the differences. See Hahnenkamm,
159 Fed. Cl. at 690–97. We will not disturb the Claims
Court’s weighing of the evidence under these circum-
stances. See Kellogg Brown & Root Servs., Inc. v. United
States, 728 F.3d 1348, 1361 (Fed. Cir. 2013).
Second, Hahnenkamm argues the Claims Court under-
valued the Cave Rock Summit property by ignoring two
properties (the Dreyfus and Schmitt properties) as
automatically engender a higher premium. The impact of
characterizing the Cave Rock Summit property as a trophy
property would result in needing to compare it to other tro-
phy properties. Hahnenkamm does not argue the Claims
Court erred in relying on comparables 1–3, which are not
characterized as trophy properties.
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HAHNENKAMM , LLC v. US 27
comparables offered by its expert, Dr. Kilpatrick. We see
no error here. The Claims Court disregarded Dr. Kilpat-
rick’s report and testimony because his “testimony at trial
demonstrated a lack of knowledge about the requirements
and application of the Yellow Book,” and “his report used
inappropriate comparables” and “failed to show adjust-
ments for improvements, entitlements, and location of com-
parables.” Hahnenkamm, 159 Fed. Cl. at 696 n.10. Based
on this determination, which Hahnenkamm does not chal-
lenge, the Claims Court did not err in not considering these
properties. Indeed, Dr. Kilpatrick did not use the proper-
ties in his appraisal calculations. J.A. 2376 (assigning
weights of zero to the two properties); see also J.A. 2370–
71 (noting properties are “presented for comparison pur-
poses only”). There was no error in the Claims Court not
using these properties as comparables.
The Claims Court did not abuse its discretion in its
damages analysis.
CONCLUSION
As to the defense of waiver (reasonable reliance), we
conclude that as a matter of law Hahnenkamm could not
have reasonably relied on the contractual representation
that the Doré appraisal was independent. We conclude
that further factfinding and hearing is necessary to deter-
mine whether Hahnenkamm reasonably relied on the rep-
resentation that the Doré appraisal was Yellow Book-
compliant. We similarly remand as to the defense of equi-
table estoppel. We affirm the Claims Court’s damages de-
termination.
REVERSED-IN-PART, VACATED-IN-PART,
REMANDED-IN-PART AS TO THE MAIN APPEAL,
AFFIRMED AS TO THE CROSS-APPEAL
COSTS
Costs to neither party.
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