Jackson Ave LLC v. United States

United States Court of Appeals
for the Federal Circuit
______________________
27-35 JACKSON AVE LLC,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2023-1122
______________________
Appeal from the United States Court of Federal Claims
in No. 1:16-cv-00947-DAT, Judge David A. Tapp.
______________________
Decided: February 4, 2025
______________________
J EFFREY W. VARCADIPANE , Varcadipane & Pinnisi,
P.C., New York, NY, argued for plaintiff-appellant.
STEPHANIE F LEMING, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellee. Also repre-
sented by BRIAN M. B OYNTON, ELIZABETH MARIE H OSFORD,
P ATRICIA M. MC CARTHY .
______________________
Before L OURIE, BRYSON, and STARK, Circuit Judges.
BRYSON, Circuit Judge.
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27-35 JACKSON AVE LLC v. US 2
The owner of real estate in New York City, 27-35 Jack-
son Avenue LLC (“Jackson”), appeals from a decision of the
United States Court of Federal Claims (“the Claims
Court”). That court granted summary judgment to the
United States, holding that the government did not breach
its lease agreement with Jackson when it terminated the
agreement after finding the leased property to be un-
tenantable. We affirm.
I
A
In May 2009, the government leased two floors of an
office building from Jackson to house the Field Office of the
United States Citizenship and Immigration Services
(“USCIS”) in Queens, New York. App. 2001. The term of
the lease was for 15 years beginning after the initial build-
out was completed.
The lease contained clauses that permitted early ter-
mination under specific conditions. The clause relevant to
this appeal is the fire and casualty damage clause, which
provided:
If the entire premises are destroyed by fire or other cas-
ualty, this lease will immediately terminate. In case of
partial destruction or damage, so as to render the
premises untenantable, as determined by the Govern-
ment, the Government may terminate the lease by giv-
ing written notice to the Lessor within 15 calendar
days of the fire or other casualty . . . .
App. 2050.
On the morning of January 8, 2015, a Field Office em-
ployee discovered extensive water damage throughout the
premises caused overnight by a burst sprinkler head. App.
1138. The Field Office was vacated, and operations were
ultimately resumed at a different location. App. 1404. On
the day after the flood, Daren Marshall, a contracting
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officer with the General Services Administration (“GSA”),
made a preliminary finding that the flood had rendered the
property “no longer tenantable” and sent a letter to Jack-
son informing it of the government’s view. Specifically, Mr.
Marshall wrote:
As you are aware, on January 8, 2015, the entire Prem-
ises was flooded. All personal property of the Govern-
ment within the Premises was damaged or rendered
inoperable. Pursuant to Paragraph 17 of the General
Clauses of the Lease, the Government has the unilat-
eral right to terminate the Lease if the Premises has
been rendered untenantable by fire or other casualty
damage . . . . The Government has determined that the
entirety of the leased premises is no longer tenantable.
Please be advised that the Government may elect to
terminate this Lease if the Lessor is unable to remedi-
ate the space and restore all the tenant improvement
to the as built conditions corresponding to the Lease
commencement date (the “As-Built Conditions”).
Please provide, by the close of business Monday, Janu-
ary 12, 2015, a remediation plan which outlines the
restoration plan to return the space back to tenantable
condition . . . . [and] a schedule which shows the time-
line in which the Government space will be restored
and when we can expect [to] regain occupancy at this
location. Please provide this schedule by Monday, Jan-
uary 12, 2015 as well.
After receiving your plans for remediation and restora-
tion, the Government will review your plan and sched-
ule as the basis for determining if it’s in the best
interest of the Government to terminate the Lease.
Please keep in mind that if we do not receive a response
to this notification, then our only choice at that time
will be to terminate.
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27-35 Jackson Ave. LLC v. United States, 16-cv-947 (Fed.
Cl.), Dkt. No. 82-1 at 449–50.
At his deposition, Mr. Marshall testified that he made
his initial determination that the property was un-
tenantable after examining photographs of the water dam-
age and speaking with employees who had personally
viewed the damage. App. 1508–09. He explained that he
understood untenantability to mean that “the space would
not be able to be used.” App. 1520.
On January 10, 2015, an Operations Support Specialist
for the government prepared a detailed memorandum not-
ing that approximately one inch of water covered much of
the first floor and most of the second floor of the premises.
The memorandum estimated that the Field Office would be
unusable for months, depending on Jackson’s efforts to per-
form the necessary work to remedy the damage. App.
1356–58. The memorandum included photographs of the
ceiling-to-floor wallboard damage and estimates of how
much drywall would need to be removed and replaced.
App. 1357.
On January 12, 2015, Jackson wrote to advise the gov-
ernment that the first-floor remediation and restoration
would be completed by January 21, 2015, and that the sec-
ond-floor remediation and restoration would be completed
by January 30, 2015. App. 2113. Jackson defined remedi-
ation to mean that the property would be totally dry with
test results certifying the absence of mold conditions. App.
2113. Jackson defined restoration to mean that all dam-
aged floor tiles would be replaced with at least temporary
floor tiles until permanent replacement tiles could be ap-
proved by the government. App. 2113.
Two days later, GSA informed Jackson that it had de-
termined Jackson’s remediation and restoration plan was
insufficient. App. 2122. The letter stated that the plan and
schedule “does not address how you plan to restore the Gov-
ernment’s space to the As-Built conditions at the time of
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27-35 JACKSON AVE LLC v. US 5
lease commencement. Please be advised that as-built con-
ditions would include items such as flooring ceiling walls
and other items that were completed as part of the initial
construction (tenant improvement) of the Government’s
space.” App. 2122.
The following day, Jackson submitted a revised reme-
diation plan and schedule, stating that “it is our best judg-
ment that all remediation will be completed by February 7,
2015,” and further explaining the components of the reme-
diation plan. App. 2126. The letter did not address the
schedule for the restoration work, nor did it address GSA’s
request that Jackson state how it planned to restore the
premises to “as-built” condition. App. 2125–26.
On January 20, 2015, shortly before the 15-day dead-
line under the lease for the government to make a determi-
nation of untenantability, GSA notified Jackson that,
effective immediately, the government was terminating
the lease based on its determination that the water damage
had rendered the property untenantable and that the prop-
erty remained untenantable. App. 1123–24.
B
Following the notice of termination, Jackson filed a
complaint in the Claims Court. Jackson’s complaint, as
amended, contained three counts. Only Count III is at is-
sue in this appeal. That count asserted breach of contract
and violation of the implied covenant of good faith and fair
dealing based on the government’s termination of the lease
for untenantability. App. 1011–12. The complaint alleged
that the government’s determination that the property was
untenantable due to the water damage was unreasonable
and therefore constituted a breach of contract and a viola-
tion of the covenant of good faith and fair dealing implicit
in the contract. App. 1012. The complaint further alleged
that the government’s actions following the flooding “pro-
vide sound basis for a strong inference that the Govern-
ment’s motivations and intentions were to escape their
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27-35 JACKSON AVE LLC v. US 6
contractual obligations on a technicality rather than to co-
operate, in good faith, to bring about the express purposes
of the Lease, as contemplated by the parties when it was
entered into.” App. 1012.
After discovery, the parties cross-moved for summary
judgment. The Claims Court granted the government’s
motion. The court rejected Jackson’s request to find that
the government had applied an erroneous definition of the
term “untenantable” when it made its determination of un-
tenantability. The court explained that the plain language
of the lease, which provided that untenantability would be
“determined by the Government,” left the untenantability
determination to the discretion of GSA, as long as that dis-
cretion was exercised in good faith. App. 7. The court fur-
ther explained that the disagreement between the parties
as to whether the property was untenantable was merely
an honest difference in judgment. Accordingly, the court
held that the government’s determination of untenantabil-
ity was conclusive and did not result in a breach of contract.
App. 7–9.
Turning to the question whether the government had
violated the duty of good faith and fair dealing, the court
explained that such a violation must be established by
clear and convincing evidence because Jackson’s claim in-
volved allegations of bad faith. App. 10–14. Applying that
standard, the court held that the evidence offered by Jack-
son, even when viewed in the light most favorable to Jack-
son, could not support the conclusion that the government
exercised its discretion to determine untenantability in bad
faith. App. 10–14.
II
A
Jackson contends that the Claims Court erroneously
construed the clause allowing the government to terminate
the lease if the premises were rendered “untenantable, as
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determined by the Government.” In determining whether
the premises have been rendered untenantable, Jackson
argues that the government was required to apply the com-
mon law meaning of “untenantable” in landlord-tenant
law. If the government had done so, Jackson contends, it
could not have determined that the USCIS offices were un-
tenantable.1
The problem with Jackson’s argument is that it effec-
tively reads the words “as determined by the Government”
out of the contract. Jackson’s interpretation of that clause
accords no deference to the government’s determination
and treats the clause as if it permitted termination of the
lease only if the premises were found (presumably by a
court) to be untenantable.
We reject Jackson’s interpretation. Instead, we agree
with the Claims Court that the disputed clause should be
interpreted according to its plain meaning, i.e., that the
government was given the authority to determine whether
the property was untenantable. That is particularly so be-
cause the lease does not define “untenantable,” nor does it
1 Jackson argues (Br. 18) that the term “un-
tenantable” has a well-established meaning in landlord-
tenant law, referring to “such significant destruction that
the space is not only temporarily unoccupiable, but that it
cannot be restored using ordinary repairs in a reasonable
period of time, with particular regard to the amount of time
and cost of the repairs compared to the remaining time and
value of the lease.” That characterization is not so much a
definition of “untenantable” as a list of some of the factors
a decisionmaker may consider when determining whether
premises have been rendered untenantable. While some
courts confronted with issues of untenantability have ap-
plied some or even all of these factors, other courts have
not. Thus, we do not agree with Jackson that “un-
tenantable” has a singular meaning.
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provide a framework or standard for evaluating un-
tenantability.
Our construction of the “untenantable” clause in the
contract is consistent with the construction given to an
identical clause on very similar facts by the Court of
Claims. In Brown v. United States, No. 13-79, 1981 WL
30810 (Ct. Cl. Nov. 17, 1981), the court adopted the opinion
of the trial judge in the case, who construed the language
“untenantable, as determined by the Government,” to
mean that the government “cannot be held liable for exer-
cising, in good faith, the discretion it was given under [the
contract] to terminate the lease.” Id. at *3 n.3.2
Even earlier, the Supreme Court addressed a similar
contract clause, which provided that for the payment of
transportation costs for contractors delivering goods be-
tween certain points, the distance between those points
would be “ascertained and fixed by the chief quartermaster
of the district of New Mexico.” Kihlberg v. United States,
97 U.S. 398, 400 (1878). The Court found that language “to
be susceptible of no other interpretation than that the ac-
tion of the chief quartermaster, in the matter of distances,
was intended to be conclusive.” Id. at 401. The Court
added that “in the absence of fraud or such gross mistake
as would necessarily imply bad faith, or a failure to exer-
cise an honest judgment, his action is conclusive,” id. at
402, and that his action “cannot be subjected to the revisory
power of the courts without doing violence to the plain
words of the contract,” id. at 401.
2 Jackson correctly notes that the referenced portion
of the Court of Claims’ decision in Brown was dictum and
thus is not binding on us. The court’s analysis of that issue,
however, is set forth in some detail, and even though it is
not part of the court’s holding, it is entitled to respect.
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To be sure, the government’s discretion is not without
limits. When the government is given the power to render
final decisions on questions of fact, its decision will be set
aside if the decision is arbitrary, capricious, or unreasona-
ble. Knotts v. United States, 128 Ct. Cl. 489, 491 (1954).
More specifically, in a case in which a contract gives the
government unilateral authority to make a decision affect-
ing its contracting partner, the Supreme Court has held
that the government’s “judgment should be exercised not
capriciously or fraudulently, but reasonably, and with due
regard to the rights of both the contracting parties.” Ripley
v. United States, 223 U.S. 695, 701–02 (1912). That princi-
ple is consistent with decisions from this court and our pre-
decessor court recognizing the well-established rule that
“[a] party vested with contractual discretion must exercise
his discretion reasonably and may not do so arbitrarily or
capriciously.” Pac. Far E. Line, Inc. v. United States, 394
F.2d 990, 998 (Ct. Cl. 1968); see also Scott Timber Co. v.
United States, 333 F.3d 1358, 1368 (Fed. Cir. 2003); Am.
Export Isbrandtsen Lines, Inc. v. United States, 499 F.2d
552, 576 (Ct. Cl. 1974); Fox Valley Eng’g Inc. v. United
States, 151 Ct. Cl. 228, 236–37 (1960) (A clause vesting in
the contracting officer the right to reject work for “any de-
ficiencies which in the opinion of the contracting officer
would adversely affect the reproduction quality” of the
work must “necessarily be given wide scope. Nevertheless,
it is equally elementary that the discretion involved must
be exercised reasonably and fairly.”).3
3 By analogy, government contracts often contain a
clause allowing the government to terminate the contract
if the contracting officer “determines that a termination is
in the Government’s interest.” See 48 C.F.R. § 52.249-2.
This court and its predecessor have held that “[i]n the ab-
sence of bad faith or clear abuse of discretion, the contract-
ing officer’s election to terminate for the government’s
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The case law on which Jackson relies does not persuade
us otherwise. Jackson cites W.G. Cornell Co. of Washing-
ton D.C., Inc. v. United States, 376 F.2d 299 (Ct. Cl. 1967).
In that case, the Court of Claims acknowledged that the
government had the “undisputed right” to decide whether
particular material met the standards set forth in the con-
tract specifications, but that it had to exercise its discretion
“reasonably and fairly.” Id. at 313. Based on the facts be-
fore it, the court found that the government’s interpreta-
tion of the specifications was “arbitrary and capricious”
and the failure to grant the contractor an equitable adjust-
ment was “grossly erroneous.” Id. We apply the same
framework as the Cornell court in that we consider
whether the government’s exercise of its discretion was un-
reasonable or arbitrary and capricious.4
convenience is conclusive.” T & M Distributors, Inc. v.
United States, 185 F.3d 1279, 1283 (Fed. Cir. 1999); see also
Caldwell & Santmyer, Inc. v. Glickman, 55 F.3d 1578, 1581
(Fed. Cir. 1995); John Reiner & Co v. United States, 325
F.2d 438, 442 (Ct. Cl. 1963).
4 Jackson also relies on W. R. Lathom Tool & Ma-
chine Co. v. Mutual Leasing Associates, Inc., 435 N.E.2d
510 (Ill. App. Ct. 1982), for the proposition that the govern-
ment was required to apply the common law meaning of
“untenantable.” Lathom is not binding authority, but in
any event Lathom is consistent with our analysis. In
Lathom, the contract provided that “fair market value” for
a particular product would be determined by Lathom. Id.
at 511. Adopting the same rule we apply in this case, the
court there held that Lathom had the discretion to deter-
mine the value of the product so long as that value was not
arbitrarily chosen or unrelated to the actual market value
of the product. Id. at 512–13. Applying that principle, the
Lathom court found that the party’s value determination
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This framework does not render the term “un-
tenantable” in the contract irrelevant. Nor does it mean
the government may define untenantability unilaterally or
without regard to the meaning of that term in landlord-
tenant law. To the contrary, the ordinary definition of the
term “untenantable” provides context for our evaluation of
whether the government’s determination of untenantabil-
ity was unreasonable or arbitrary and capricious. See
Cnty. of Suffolk v. United States, 26 Cl. Ct. 924, 927–28
(1992).
In the case of leases that do not contain detailed provi-
sions regarding a lessee’s right to terminate the lease for
untenantability, courts have typically focused on the extent
of the damage and whether the premises can be restored
without unreasonable interruption of the tenant’s occu-
pancy. See Flores v. Allstate Tex. Lloyd’s Co., 229 F. Supp.
2d 697, 700 (S.D. Tex. 2002); Marcel Hair Goods Corp. v.
Nat’l Savings & Trust Co., 410 A.2d 1, 6 (D.C. Ct. App.
1979); Presbyterian Distribution Serv. v. Chicago Nat’l
Bank, 171 N.E.2d 86, 90 (Ill. App. Ct. 1960); Luis v. Ada
Lodge #3, Independent Order of Odd Fellows, 294 P.2d
1095, 1098–99 (Idaho 1956).
Because the extent of the damage affects the lessee’s
rights principally through its effect on the lessee’s ability
to resume full enjoyment of the premises, the key question
is typically whether the tenant will lose the use of the
leased property for an unreasonable period of time. See Re-
statement (Second) of Prop.: Landlord and Tenant § 5.4 &
(of $1 for a product that, at minimum could be sold for
scrap) was arbitrary. Nothing about the court’s ruling on
those extreme facts supports a conclusion that the govern-
ment’s determination of untenantability in this case was
unreasonable or arbitrary and capricious.
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cmt. f (1977). That inquiry turns on factors such as the
nature of the lessee’s use of the property and the extent to
which the loss of occupancy disrupts the tenant’s business.
See 1 Andrew R. Berman, Friedman on Leases § 9.5, at 9-
41 to 9-45 (6th ed. 2017). By their nature, those factors
often give rise to disputes between the parties. Parties can
minimize such disputes by bargaining to give one party the
right to determine whether the casualty in question has
rendered the property untenantable.
If the contract in this case had simply stated that the
government could terminate the lease if the premises were
untenantable, the determination of whether the property
was untenantable would be for the court. Instead, the con-
tract left the untenantability decision to the government in
the first instance. The court’s role was therefore limited by
the terms of the contract to determining whether the gov-
ernment’s decision was the product of an unreasonable as-
sessment of whether the premises were untenantable.5
The contract also permits the court to assess the govern-
ment’s understanding of the meaning of “untenantable”
5 Although state court cases in which lessees have
the contractual right to determine whether damaged prem-
ises are untenantable are rare, one such case is Amick v.
Metropolitan Mortgage & Securities Co., 453 P.2d 412
(Alaska 1969). The court in that case reached a conclusion
similar to ours, although it articulated the test somewhat
differently. The court held that a clause stating that “the
lessee’s decision shall be controlling” as to whether or not
the premises are fit for occupancy did not “give the lessee
the right to abate the rent by deciding without more that
the premises were unfit for occupancy,” but that the clause
made the lessee’s decision controlling “where there is room
for an honest difference of opinion between the lessor and
the lessee as to whether the premises are fit for occupancy
by the lessee.” Id. at 414.
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and whether it applied a definition so removed from the
ordinary meaning as to constitute arbitrary, capricious, or
unreasonable action.
With that interpretation of the relevant provision in
mind, we turn to Jackson’s arguments for why the govern-
ment’s determination should be set aside.
B
The undisputed facts of this case support the Claims
Court’s conclusion, on summary judgment, that no reason-
able factfinder could find that the government’s determi-
nation of untenantability was unreasonable or arbitrary
and capricious. For example, the Operations Support Spe-
cialist who examined the premises after the flood found
that much of the leased space was covered by approxi-
mately an inch of water, that there was ceiling-to-floor
damage, that more than 1,500 square feet of drywall would
have to be removed and replaced, and that the property
would be unusable for months. App. 1355–58. Jackson’s
remediation plan involved water extraction; moving furni-
ture, business machines, and files; removing damaged ma-
terial, including insulation, carpet, drywall, and ceiling
tiles; placing drying equipment on the premises; disinfect-
ing all areas of the building; using air scrubbers to remedi-
ate air quality; and cleaning the HVAC system and ducts.
App. 2125. Even under Jackson’s proposed schedule, that
work was expected to take at least a month from the date
of the accident.6 App. 2126.
6 It is undisputed that Jackson revised its estimate
for when remediation would be complete and identified
February 7 as the expected completion date, after initially
suggesting earlier dates (e.g., January 13 for the first floor
and January 16 for the second floor).
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Beyond that, Jackson’s letter identifying February 7 as
the expected date for completing remediation still failed to
provide an estimate of when restoration would be complete.
Therefore, at the time the government was required to ex-
ercise its right to terminate the lease (which was only 15
days after the flood), it was unknown when USCIS could
return to the leased premises.
We are also unpersuaded that the timing of the govern-
ment’s determination of untenantability shows that the
government’s decision to terminate the lease was unrea-
sonable. The government sent Jackson a letter on January
9, 2015 (one day after the accident), in which it stated that
it had determined that the property was untenantable, but
it did not seek to terminate the lease at that time, and thus
it was clear that the government’s January 9, 2015, assess-
ment of untenantability was only tentative. Instead, the
government waited until January 20, 2015—12 days after
the accident—to make its final untenantability determina-
tion.
During those 12 days, the Operations Support Special-
ist evaluated the damage, App. 1355–58, and GSA consid-
ered Jackson’s proposed remediation and restoration plan,
App. 2122. Jackson argues that the government acted with
undue haste in making its termination decision only 12
days after the accident. Yet by the terms of the lease the
government was required to make its determination of un-
tenantability within 15 days of the accident. App. 2050.
The government therefore did not have the luxury of wait-
ing to see whether the remediation and restoration work
would be completed quickly. Had the government waited
four more days than it did to make its final untenantability
decision, it would have lost its right to terminate the lease
no matter how long the restoration process took. Given the
short window provided by the lease and the investigative
steps that the government took during that period, the gov-
ernment’s decision to terminate the lease when it did can-
not be deemed unreasonable.
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An important consideration bearing on the reasonable-
ness of the government’s action is the nature of the busi-
ness conducted at the office in question. The USCIS Field
Office was responsible for distributing information regard-
ing immigration, reviewing applications, adjusting status,
and naturalizing approved immigrants. As part of its mis-
sion the office received up to 750 visitors per day. In con-
sidering the needs of the office, the extent of the damage,
the nature of the restoration efforts that would be required,
and the uncertainty as to when the restoration work would
be completed, it was not arbitrary and capricious for the
government to determine that the property was un-
tenantable.7 App. 2345.8
7 Because of the need to continue its work to the ex-
tent possible, the USCIS had to move all its operations to
a location in downtown Manhattan. App. 1404. Jackson
suggests (Br. 38) that the fact that USCIS was able to find
another location at which to continue its work is an indica-
tion that the damaged premises should not have been de-
clared untenantable. That argument is unpersuasive. The
work was important and had to continue, so the govern-
ment was going to have to find a place to continue the work,
even if relocation of its operations was burdensome and ex-
pensive. The fact that the government was able to find a
substitute workplace does not suggest that the flooded of-
fices were tenantable.
8 If there had been a transient condition that briefly
required the premises to be abandoned—such as, for exam-
ple, a malfunctioning fire alarm that required the premises
to be vacated for an hour, or even for a day—the govern-
ment’s contractual right to “determine untenantability”
would not extend to such an interruption because such a
brief interruption could not reasonably be deemed to ren-
der the property untenantable. At his deposition, Mr.
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Jackson argues that the Claims Court erred by not im-
posing on the government the burden of proving that the
property was untenantable. Under that theory, only if the
government satisfied that initial burden would Jackson be
required to show that the government’s decision was arbi-
trary and capricious.
For that argument, Jackson relies on the unpublished
Fifth Circuit decision in Spodek v. United States Postal Ser-
vice, 551 F. App’x 781 (5th Cir. 2014). Besides not being a
binding precedent, Spodek did not involve a clause that al-
located to the lessee the right to determine whether the
property was untenantable, as determined by the lessee.
For that reason, the decision in that case turned on
whether the property was in fact untenantable. Id. at 785.
It is therefore not surprising that the court in Spodek as-
signed the burden of proving untenantability to the party
seeking to invoke the untenantability clause and terminate
the lease. In this case, by contrast, the question is not
whether the property was in fact untenantable, but
whether the government abused its discretion in determin-
ing the property to be untenantable. In that context, it
would make no sense to allocate the burden of proof on un-
tenantability to the government. Instead, the burden was
properly placed on Jackson to show that the government
abused the authority that was delegated to it under the
contract.
In sum, we agree with the Claims Court’s analysis. It
was undisputed that (1) a large portion of the Field Office
was unfit for the purpose for which it was leased, (2) the
government had to cease daily operations in the premises
due to the water damage, and (3) it was clear that the
Marshall agreed with that proposition, stating that he
would not regard a property as being untenantable if it
were unusable for “a couple of hours or a day,” or a week.
App. 1523.
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27-35 JACKSON AVE LLC v. US 17
premises would be under remediation and restoration for
at least a month, and probably longer. Moreover, by the
terms of the lease, the government was required to make
an untenantability determination within 15 days of the day
of the flood. As a result, the government necessarily had
to make its determination of untenantability without
knowing all the facts that would bear on untenantability,
such as how long the restoration process would take once
remediation was complete.
For these reasons, we agree with the Claims Court that
no reasonable factfinder could find the government’s deter-
mination of untenantability to be unreasonable or arbi-
trary and capricious. App. 8–9. We conclude that the
dispute between the government and Jackson over
whether the property was untenantable amounts to a dif-
ference in judgment and is not a reason to set aside the
government’s determination, given the language of the
lease agreement that left the determination of un-
tenantability to the government. App. 7.
C
Jackson’s second argument for overturning the sum-
mary judgment decision is that the Claims Court erred in
applying the clear and convincing evidentiary standard
when evaluating Jackson’s claim that the government
breached the implied covenant of good faith and fair deal-
ing that attaches to all contracts. In making that argu-
ment, Jackson denies that it is asserting a bad faith claim.
We find Jackson’s attempt to distinguish its claim from a
claim of bad faith to be unconvincing.
Jackson argues in its opening brief that the govern-
ment expressed animus toward Jackson, that a reasonable
factfinder could conclude that following the water damage
the government planned to cancel the lease regardless of
whether the property was actually untenantable, and that
the government through its agents conspired to manufac-
ture circumstances to support the termination. Based on
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27-35 JACKSON AVE LLC v. US 18
this characterization, it is clear that Jackson is alleging
bad faith by the government. See, e.g., Rd. & Highway
Builders, LLC v. United States, 702 F.3d 1365, 1370 (Fed.
Cir. 2012) (considering evidence of improper motive when
evaluating bad faith claim); Am-Pro Protective Agency, Inc.
v. United States, 281 F.3d 1234, 1240 (Fed. Cir. 2002) (con-
sidering evidence of conspiracy “to get rid of plaintiff” and
animus toward plaintiff when evaluating a bad faith
claim).
Even if Jackson were correct that its claim is not based
on allegations of bad faith, it must establish at least the
absence of good faith, because “there can be no relief from
an erroneous judgment exercised in good faith pursuant to
valid discretion power.” Pac. Far E. Line, 394 F.2d at 998.
Therefore, Jackson must rebut the presumption that “gov-
ernment officials are presumed to discharge their duties in
good faith.” Rd. & Highway Builders, 702 F.3d at 1368. In
view of that presumption, Jackson needed to prove a lack
of good faith by clear and convincing evidence. See id. at
1369; see also Am-Pro Protective Agency, 281 F.3d at 1240.
Accordingly, we find that the Claims Court applied the cor-
rect standard of clear and convincing evidence to Jackson’s
claim.
Applying that standard, we agree with the Claims
Court that a reasonable factfinder could not find that the
government’s decision to terminate the lease because of the
water damage was pretextual. As the Claims Court ex-
plained, Jackson did marshal some evidence that the
USCIS employees were dissatisfied with the property and
Jackson’s management. App. 11. But the decision to ter-
minate was made by GSA officers, not by the dissatisfied
USCIS employees. Id. Furthermore, although Jackson
presented evidence that the dissatisfied employees urged
GSA officers to terminate the lease, the evidence showed
that the GSA officers exercised independent judgment
when doing so. App. 12. In short, Jackson’s evidence was
insufficient for a reasonable factfinder to find, by clear and
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27-35 JACKSON AVE LLC v. US 19
convincing evidence, that the government acted in bad
faith when determining untenantability.9 That conclusion
is further supported by our finding above that the govern-
ment’s determination was not unreasonable or arbitrary
and capricious in view of the extent of the damage, the ex-
tent of the restoration that would be required to return the
office to its pre-flood condition, and the immediate need for
a facility that could support the Field Office’s busy daily
operations serving as many as 750 daily visitors.
III
We have considered Jackson’s remaining arguments
and find them unpersuasive. For the reasons stated, we
affirm the Claims Court’s summary judgment decision.
AFFIRMED
9 Jackson argues (Br. 51) that under “the correct le-
gal standard” it raised “questions of fact regarding Jack-
son’s fair dealing claim.” Because we hold that the “clear
and convincing evidence” standard applies to Jackson’s fair
dealing claim, and because we conclude that the evidence
proffered by Jackson failed to create a triable question of
fact under that standard, we uphold the Claims Court’s
summary judgment ruling on that issue.
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