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Parties Involved:
Bay County, Florida
Appellee
United States
Appellant

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

BAY COUNTY, FLORIDA,

Plaintiff-Appellee

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2014-5149

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:11-cv-00157-CFL, Judge Charles F. 

Lettow. 

______________________ 

Decided: August 11, 2015

______________________ 

CHARLES FRANKLIN BEALL, JR., Moore, Hill & Westmoreland, P.A., Pensacola, FL, argued for plaintiffappellee. Also represented by GEORGE R. MEAD, II.

ANTONIA RAMOS SOARES, Commercial Litigation 

Branch, Civil Division, United States Department of 

Justice, Washington, DC, argued for defendant-appellant. 

Also represented by JOYCE R. BRANDA, ROBERT E.

KIRSCHMAN, JR., DEBORAH A. BYNUM; CHRISTOPHER S.

COLE, Commercial Law Litigation, Air Force Legal Operations Agency, JB Andrews, MD. 

______________________ 

Case: 14-5149 Document: 50-2 Page: 1 Filed: 08/11/2015
2 BAY COUNTY, FLORIDA v. UNITED STATES

Before PROST, Chief Judge, CLEVENGER, and MOORE,

Circuit Judges.

CLEVENGER, Circuit Judge. 

The United States appeals the decision of the United 

States Court of Federal Claims, holding that Bay County, 

Florida is an independent regulatory body and may revise 

rates in utility contracts without resorting to negotiations 

with the Air Force. Bay County v. United States, 112 Fed. 

Cl. 195, 203–04 (2013). This court has jurisdiction under 

28 U.S.C. § 1295(a)(3) (2012). Because the Court of Federal Claims correctly applied the regulatory definitions of 

independent and nonindependent regulatory bodies, we 

affirm.

I 

Bay County, Florida (“Bay County” or “County”) owns 

and operates Bay County Utilities, a department which 

provides water and sewer services throughout the County. 

The Bay County Board of Commissioners (“Board”) is 

responsible for establishing the rates and charges for 

these services. 

In 1966, the United States Air Force (“Air Force”) and 

Bay County entered a contract under which the County 

agreed to provide water services to Tyndall Air Force 

Base (“the water contract”). The parties entered into a 

similar contract for the provision of sewer services in 1985 

(“the sewer contract”). Early iterations of both contracts 

contained clauses requiring the parties to renegotiate any 

new rates, and provided that new rates would become 

effective upon mutual agreement. 

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BAY COUNTY, FLORIDA v. UNITED STATES 3

A 

In 1994, the Federal Acquisition Regulations (“FAR”)1

were amended to require certain standardized clauses be 

included in utility service contracts. As it pertains to the 

present appeal, the FAR articulate two clauses for adopting new rates in existing utility contracts. There is a

negotiated rates clause at FAR 52.241-8. When the government is contracting with an unregulated utility, the 

contract should include this clause requiring the parties

to negotiate new rates. 48 C.F.R. § 41.501(d)(2) (2014). On 

the other hand, there is a clause for when the government 

agrees to pay the rate approved by the regulator—without 

further negotiation. This clause, FAR 52.241-7, is to be 

included when the government is contracting with a 

regulated utility. 48 C.F.R. § 41.501(d)(1).2 

1 Federal Acquisition Regulations are at title 48 of 

the Code of Federal Regulations.

2 In 1997, the Air Force and Bay County agreed to a 

bilateral modification of the sewage contract. At that 

time, the parties incorporated FAR 52.241-8—the negotiated rates clause—into the agreement. The parties have 

not been able to find a copy of the water contract reflecting amendments in light of the FAR. The Court of Federal 

Claims held that because Bay County satisfies the regulatory definition of “independent regulatory body,” as a 

matter of law FAR 52.241-7—the no further negotiation 

clause—must be deemed to be incorporated into both 

contracts. Bay County, 112 Fed. Cl. at 203. The parties do 

not dispute that on appeal. The only issue is whether Bay 

County is an independent or nonindependent regulatory 

body under the regulations. The parties do not challenge

that the same FAR clause should be incorporated into 

both contracts, depending only on Bay County’s status as 

a regulator. 

 

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4 BAY COUNTY, FLORIDA v. UNITED STATES

The Department of Defense (“DoD”) has adopted a 

modified version of the FAR. The Defense Federal Acquisition Regulation Supplement (“DFARS”) incorporates 

slightly different, but substantially similar, language to 

satisfy these FAR requirements for utility service contracts. If the utility providing service to the DoD is subject 

to oversight by an independent regulatory body (“IRB”), 

then the government includes the no further negotiation

clause at FAR 52.241-7. 48 C.F.R. § 241.501(d)(1). However, if a utility is unregulated or subject to a nonindependent regulatory body (“NIRB”), then the parties 

have to negotiate any change in rate. 48 C.F.R. 

§ 241.501(d)(2) (requiring that DoD include the negotiated 

rates clause from FAR 52.241-8 in NIRB contracts).

B 

In 2007 and 2009, Bay County adopted resolutions to 

increase wholesale water rates. The Air Force ignored 

those increases, and continued to pay at the pre-2007 

rate. In 2009 and 2010, the Air Force unilaterally modified the water contract, and incorporated new rates. 

However, the Air Force’s self-imposed rates were still 

lower than the rates set by Bay County. Similarly, in 2009 

Bay County notified the Air Force that the County was 

increasing sewer rates. Again, the Air Force refused to 

pay those higher rates, and instead instituted a unilateral 

contract modification in 2010 to moderately increase 

sewer rates.

On April 8, 2010, Bay County submitted two Contract 

Disputes Act (“CDA”) claims to recover the unpaid balance on the Air Force’s utility contracts. The contracting 

officer denied Bay County’s claims, and concluded that 

Bay County is an unregulated utility. Therefore, according to the contracting officer, while Bay County is allowed 

to propose new rates, the parties have to negotiate rate 

changes and incorporate them as contract modifications. 

Bay County has alleged breach of both contracts, because 

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BAY COUNTY, FLORIDA v. UNITED STATES 5

the Air Force has failed to pay the Bay County-set utility 

rates since 2007. Bay County asserted a balance of unpaid 

invoices of approximately $850,000. 

The present dispute turns on whether Bay County is 

an IRB or an NIRB. If, as the government contends, Bay 

County is an NIRB, then the parties must negotiate any 

rate changes in the water and sewer contracts. If, on the 

other hand, Bay County is an IRB, then the government 

must pay utility rate increases fixed by the Board. 

The Court of Federal Claims held that Bay County is 

an IRB, because under Florida law it is an agency of the 

state and Florida authorized the County to regulate 

utilities. Bay County, 112 Fed. Cl. at 201. Therefore, Bay 

County was allowed to revise utility rates without negotiating with Tyndall Air Force Base. Id. at 203. The Court 

of Federal Claims granted summary judgment in favor of 

Bay County, and reserved the determination of damages 

for a later proceeding, id. at 204, which was concluded 

before this appeal, see Bay County v. United States, 117 

Fed. Cl. 131 (2014) (damages calculation decision). We 

agree with the Court of Federal Claims that Bay County 

is an IRB under the DFARS definitions.

II

We review the Court of Federal Claims’ legal conclusions without deference, Vaizburd v. United States, 384 

F.3d 1278, 1282 (Fed. Cir. 2004), and its grant of summary judgment de novo, AmeriSource Corp. v. United 

States, 525 F.3d 1149, 1152 (Fed. Cir. 2008).

This is a straightforward case of regulatory interpretation. The DFARS defines both of the relevant terms:

Independent regulatory body means the Federal 

Energy Regulatory Commission [(“FERC”)], a 

state-wide agency, or an agency with less than 

state-wide jurisdiction when operating pursuant 

to state authority. The body has the power to fix, 

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6 BAY COUNTY, FLORIDA v. UNITED STATES

establish, or control the rates and services of utility suppliers. 

Nonindependent regulatory body means a body 

that regulates a utility supplier which is owned or 

operated by the same entity that created the regulatory body, e.g., a municipal utility.

48 C.F.R. § 241.101.

Based on the plain meaning of these definitions, Bay 

County is clearly an IRB. Bay County has been authorized 

by the State of Florida to fix, establish, and control the 

rates and services of utility suppliers. Specifically, each 

Florida county has the power to: (1) “[p]rovide and regulate waste and sewage collection and disposal, [and] water 

and alternative water supplies . . . ,” Fla. Stat. 

§ 125.01(1)(k)(1), as well as (2) “fix and collect rates, fees 

and other charges for the service and facilities furnished 

by any such water supply system or . . . sewage disposal 

system . . . ,” Fla. Stat. § 153.03(3).

This delegation of state authority also makes Bay 

County “an agency with less than state-wide jurisdiction.” 

Neither party can reasonably dispute that Bay County 

has less than state-wide jurisdiction. Oral Arg. at 3:24–

3:59, available at http://www.cafc.uscourts.gov/oralargument-recordings/2014-5149/all. And, in its capacity of 

regulating utilities—as a county acting pursuant to state 

authority—Bay County is an agency of the State of Florida. See Amos v. Mathews, 126 So. 308, 321 (Fla. 1930) 

(“[A] county in the performance of certain functions is an 

agency or arm of the state . . . .”). Therefore, Bay County 

plainly satisfies the regulatory definition of an IRB.

Moreover, Bay County clearly falls outside the definition of an NIRB. To fit the NIRB definition, there must be 

a single entity which both created the relevant regulatory 

body and owns or operates the regulated utility supplier. 

In this case, Bay County is the regulatory body and it

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BAY COUNTY, FLORIDA v. UNITED STATES 7

owns the utility supplier. There is no entity that created 

one and owns the other. The State of Florida created Bay 

County. See Fla. Const. art. VIII, § 1. And Bay County, 

not Florida, owns and operates the utility supplier. Therefore, Bay County is not an NIRB under the DFARS definition.

The government suggests it is improper to rely on 

state law to resolve this case. Br. of Def.-Appellant at 22–

23, 51–52; see also Roedler v. Dep’t of Energy, 255 F.3d 

1347, 1351 (Fed. Cir. 2001) (federal common law governs 

contracts of the United States).

Not only is it proper, but it is necessary to refer to 

state law when applying these regulations. The regulations are written in terms of state authority and jurisdiction. The Court of Federal Claims was, and this court is, 

correct to look at Florida law to decide whether Bay 

County was created by the state and whether it is acting 

pursuant to state authority. Cf. Baltimore Gas & Elec. Co. 

v. United States, 133 F. Supp. 2d 721, 738 (D. Md. 2001) 

(“[T]he federal government has absorbed state law, including utilities law, to supply the regulatory standards 

necessary and appropriate for the operation and maintenance of the electricity and natural gas distribution 

systems at Fort Meade . . . .”).

III

Since the terms of the regulation are unambiguous, 

and the Court of Federal Claims correctly applied the 

definitions of “independent regulatory body” and “nonindependent regulatory body,” no further inquiry is required. Glover v. West, 185 F.3d 1328, 1332 (Fed. Cir. 

1999). However, the government makes four arguments 

against the plain meaning of the regulations, and we 

respond to each briefly.

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8 BAY COUNTY, FLORIDA v. UNITED STATES

A 

The government’s overarching argument that Bay 

County lacks the requisite independence relies on DFARS 

policy and historical context. The government explains 

that DoD complies with decisions of IRBs as a matter of 

comity, and it is DoD policy that rates set by independent

bodies are determined to be fair and reasonable. 48 C.F.R. 

§ 241.201. “This policy does not extend to nonindependent 

regulatory bodies.” Id.

To that end, the government suggests that regulated 

utilities are only those regulated by statewide public 

utility commissions (“PUC”). Therefore, the government 

contends that in Florida, the only IRB is the Florida 

Public Service Commission. Br. of Def.-Appellant at 31–

32. If utilities lack independent oversight from a 

statewide PUC, then DoD and the Air Force have traditionally treated them as unregulated and required new 

rates be negotiated. This policy is reflected in the preDFARS version of the water and sewer contracts—they 

both originally contained negotiated rates clauses.

The rationale for this policy is, according to the government, obvious. “The federal government does not want 

its utility providers to have authority to set their own 

rates, without any ‘independent’ review.” Br. of Def.-

Appellant at 37 (quoting Jeffrey A. Renshaw, Utility 

Privatization in the Military Services: Issues, Problems, 

and Potential Solutions, 53 A.F.L. Rev. 55, 100 (2002)). 

That concern is directly implicated in the case of county 

and municipal utilities where the utility supplier and the 

rate-setting body are indistinguishable.

We do not challenge the logic of this policy. The DoD 

may have good reasons for treating a statewide PUC 

differently from a municipal or county legislative body 

when it comes to accepting fixed rates. That policy does 

not, however, alter the plain language of the regulations. 

An IRB can have “less than state-wide jurisdiction,” 48 

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BAY COUNTY, FLORIDA v. UNITED STATES 9

C.F.R. § 241.101, and therefore cannot be limited to 

statewide PUCs. Similarly, the NIRB definition does not 

say that utilities owned by local governments are unregulated. See id. We decline to rewrite the regulation to 

convert Bay County to a nonindependent body where the 

text of the regulations define Bay County as independent. 

B 

The government also argues we should defer to the 

Air Force’s interpretation of the regulatory definitions.3

According to the government, the interpretation is consistent with DFARS policy and the Air Force has historically treated Bay County as an NIRB. Under these 

circumstances, the government asserts, the DoD interpretation of its own regulation should be entitled to deference. Br. of Def.-Appellant at 28 (citing Auer v. Robbins, 

519 U.S. 452, 461 (1997)).

The court should defer to agency interpretation only 

when a “regulation is ambiguous and the agency’s interpretation is neither plainly erroneous nor inconsistent 

with the regulation.” Gose v. U.S. Postal Serv., 451 F.3d 

831, 836 (Fed. Cir. 2006); see also Christensen v. Harris 

County, 529 U.S. 576, 588 (2000) (“[D]eference is warranted only when the language of the regulation is ambiguous.”); Bowles v. Seminole Rock & Sand Co., 325 U.S. 

410, 414 (1945) (“[A]dministrative interpretation . . . 

becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.”). Here we have 

3 In this case, the Air Force is interpreting a regulation promulgated not by it, but by DoD. Bay County 

argues that deference is limited to interpretations presented by the promulgating agency. We do not reach this

argument, because this is an unambiguous regulation and 

the agency interpretation is inconsistent with the regulatory text.

 

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an unambiguous regulation and the agency interpretation 

is inconsistent with it. Therefore, deference is not appropriate.

First, the regulatory definitions at issue are not ambiguous. The definition of an NIRB unequivocally describes the relationship between three units: an entity

which created a regulator and owns a utility. Similarly, 

this case does not demonstrate ambiguity in the definition 

of an IRB. Deferring to the Air Force here would essentially allow the government to rewrite the regulatory 

definitions under the guise of interpretation. See Christensen, 529 U.S. at 588 (deferring to an agency position 

where the regulation is not ambiguous “would be to 

permit the agency, under the guise of interpreting a 

regulation, to create de facto a new regulation”).

Second, the Air Force’s interpretation is plainly inconsistent with the regulations. As explained in the previous 

section, Bay County satisfies the definition of an IRB. It 

does not fit the definition of an NIRB. Because the Air 

Force’s contrary interpretation is inconsistent with the 

regulatory text, we will not defer to it. Gose, 451 F.3d at 

840 (where an agency’s proposed interpretation is “per se

inconsistent with the regulation [it] may be accorded no 

deference”). 

C 

Next, the government argues that Bay County falls 

within the definition of an NIRB. To that end, the government faults the Court of Federal Claims for failing to 

consider the plain meaning of “nonindependent,” points to 

the paradigm example of a “municipal utility,” and argues 

that Bay County created the Board of Commissioners as a 

regulatory body. None of these arguments succeed in 

establishing Bay County is an NIRB, given the text of the 

regulations in suit. 

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BAY COUNTY, FLORIDA v. UNITED STATES 11

As to plain meaning, the government suggests the 

Court of Federal Claims erred when it focused exclusively 

on the words contained in the DFARS definitions, without 

considering the plain meaning of the terms that make up 

the defined phrase. It argues that the meaning of “independent” and “nonindependent” should also have informed the court’s interpretation of these terms. Br. of 

Def.-Appellant at 42. According to the government, Bay 

County cannot be an IRB because it is plainly not independent—it both owns the utility supplier and sets its 

rates. 

The court refers to the ordinary meaning of terms only when they are not defined elsewhere in a regulation. 

Cf. Asgrow Seed Co. v. Winterboer, 513 U.S. 179, 187 

(1995) (“When terms used in a statute are undefined, we 

give them their ordinary meaning.”); Terry v. Principi, 

340 F.3d 1378, 1382–83 (Fed. Cir. 2003) (“In the absence 

of an express definition, we presume that Congress intended to give these words their ordinary meanings.”). By 

including a specific definition for “independent” and 

“nonindependent,” the agency chose to refine what those 

terms mean in this regulation. We refer to the regulatory 

definition, and not the dictionary, to interpret the terms.

The government also highlights the fact that a “municipal utility” is an example of an NIRB; and because 

Bay County has a municipal utility, the government 

suggests it must be an NIRB. We disagree. The example 

does not overwhelm the rest of the definition. This example shows that municipal utilities might meet the definition of an NIRB. The example does not indicate that every 

municipal utility is necessarily an NIRB. 

According to the government, Bay County also qualifies as an NIRB because it created the Board of Commissioners, and the Board sets the utility rates. Therefore, 

the Board is an NIRB—created by the County which owns 

the utility supplier. 

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12 BAY COUNTY, FLORIDA v. UNITED STATES

This argument fails because Bay County did not create its own Board of Commissioners. The Board is Bay 

County’s governing body, and the County acts through the 

Board. Both the Board and the County are creatures of 

Florida law. The Florida Constitution divides the state 

into counties, and provides that each county shall have a 

board of commissioners as its governing body. Fla. Const. 

art. VIII, § 1. Moreover, Florida law defines “county” and 

“board” as one and the same. Fla. Stat. § 125.011(1) (“Use 

of the word ‘county’ within the above provisions shall 

include ‘board of county commissioners’ of such county.”). 

The government’s attempt to parse the County and the 

Board are not persuasive, and this argument strains the 

concept of “created” too far in an effort to wedge Bay 

County into the NIRB definition.

D 

Finally, the government argues that Bay County is 

not an IRB. Relying on the canon of ejusdem generis, the 

government argues the Court of Federal Claims should 

have read the regulation differently. The definition explains that FERC, state agencies, and agencies with less 

than state-wide jurisdiction are IRBs. When read in the 

context of that list, the government suggests that “an 

agency with less than state-wide jurisdiction when operating pursuant to state authority” does not refer to any

agency with state authorization. Instead, the phrase 

should be read in context to refer to agencies that are 

similar to FERC and statewide PUCs. When read in that 

context, the government contends that Bay County is not 

an IRB. Br. of Def.-Appellant at 50–51.

We do not think ejusdem generis applies here, and instead take the phrase “an agency with less than statewide jurisdiction when operating pursuant to state authority” at face value. Ejusdem generis is a tool for determining “the correct meaning of words when there is 

uncertainty. Ordinarily, it limits general terms which 

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BAY COUNTY, FLORIDA v. UNITED STATES 13

follow specific ones to matters similar to those specified . . . .” Gooch v. United States, 297 U.S. 124, 128 

(1936). “[T]he inference embodied in ejusdem generis [is] 

that Congress remained focused on [a] common attribute 

when it used [a] catchall phrase.” Ali v. Fed. Bureau of 

Prisons, 552 U.S. 214, 225 (2008). We do not need such a 

tool in this case. First, this definition does not lend itself 

to application of ejusdem generis because the “an agency 

with less than state-wide jurisdiction” phrase is not a 

general term following a list of specific items. See id.

Second, ejusdem generis is used to avoid giving general phrases at the end of a list such broad meaning that 

they swallow the specific words preceding them. For 

example, to understand “fishing rods, nets, hooks, bobbers, sinkers, and other equipment,” it would be useful to 

apply ejusdem generis. “Other equipment” should be 

interpreted to give meaning to the previous words—it 

refers to other fishing equipment, and reading it broadly 

to include all types of equipment would render the preceding list meaningless. See CSX Transp. Inc. v. Ala. Dep’t of 

Revenue, 562 U.S. 277, 294–95 (2011) (first quoting United States v. Aguilar, 515 U.S. 593, 615 (1995) (Scalia, J., 

concurring in part dissenting in part); then citing Circuit 

City Stores, Inc. v. Adams, 532 U.S. 105, 114–15 (2001)). 

In this case, there is no risk that “an agency with less 

than state-wide jurisdiction when operating pursuant to 

state authority” will render the rest of the definition 

superfluous. This definition identifies three distinct types 

of IRBs. We do not need to rely on our understanding of 

two of those entities to give meaning to the third.

CONCLUSION

The regulations do not support the Air Force’s interpretation that Bay County is an NIRB. It should not be a 

matter of great difficulty for the DoD to amend the regulations to provide for definitions that accomplish its policy 

goals. This court is not authorized to misinterpret the 

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14 BAY COUNTY, FLORIDA v. UNITED STATES

regulatory language to achieve those goals. Because the 

Court of Federal Claims correctly interpreted the regulatory text, we affirm. 

AFFIRMED

No costs.

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