ARMED SERVICES BOARD OF CONTRACTAPPEALS
Appeal of

--
Lee's Ford Dock, Inc.

Under ContractNo. DACW62-1-00-0105

APPEARANCES FORTHE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ) ) ) ) ) ASBCANo. 59041

Alan I. Saltman, Esq. Evangelin L. Nichols, Esq.

Smith, Currie & Hancock LLP Washington, DC

Karl F. Dix, Jr., Esq.

Smith, Currie & Hancock LLP Atlanta, GA

Thomas H. Gourlay, Jr., Esq.

Engineer ChiefTrial Attorney Thomas M. Browder III, Esq.

Engineer Trial Attorney U.S. Army EngineerDistrict,

Nashville

OPINIONBYADMINISTRATIVE JUDGE CLARKE ON THE GOVERNMENT'S MOTION TO DISMISS

The United States Army Corps ofEngineers (COE) moves to dismiss this appeal , alleging that Lee's FordDock, Inc. (Lee's Ford) raised a new claim for the first time on appeal, failed to certify the new claim, and filed the claim more than six years after accrual. We havejurisdictionpursuantto the Disputes clause ofthe lease at issue and the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109. We grantthe motion on the first basis.

STATEMENT OF FACTS (SOF) FORPURPOSES OF THE MOTION 1

1. The COE and Lee's Ford entered into LeaseNo. DACW62-1-00-0105 on 29 August 2000 for a commercial concession (marina) at WolfCreek Dam-Lake Cumberlandproject, Kentucky, commencing on 1 September2000 and lasting

1 The COE's motion includes numerous other facts relating to bankruptcy and other matters that are not relevantto the central issue in the motion for the Boardto decide.

### 25 years (R4, tab 3 at 1, 17). Paragraph 32 ofthe lease, the Disputes clause, stated that, except as provided in the CDA, all disputes arising under orrelated to the lease
were to be resolved underthis clause and the provisions ofthe CDA. The Disputes clause provided that claims were to be submitted to the district engineer. The district engineer's decision was to be final unless the lessee appealed as provided in the CDA. 

### See 41 U.S.C. § 7104. Claims over $100,000 required certification. 

### (Id. at 14-15)

2. The lease providedthat the United States had the right "to manipulate the level ofthe lake orpool in any manner whatsoever

...and the lessee shall have no claim for damages on account thereofagainst the United States" (R4, tab 3 at 6). On 19 January 2007 the COE decided that the dam was at high risk offailure and emergency measures were necessary "toreduce imminent risk ofhuman life, health, property, and severe economic loss" (R4, tab 15 at 1). The COE concluded that it would incrementally lower the "pool"to elevation 680 to achieve maximum risk reduction while continuing hydropower and water supply operations (id.).



### 3. On 12 July 2007, as a result oflowering the water level in the "pool," the COE reduced rentpayments to one dollar for the period 1July 2007 through 30 June 2008 (R4, tab 7). Regularrents were reinstated on 1July 2008 (gov't mot. at 4,**~** 

### 15).

4. On 18 January 2013, Lee's Ford's attorney emailed a claim to the COE's district engineer and on 19 January 2013 a copy ofthe claim was placed in the U.S. mail (gov't mot. at 4,**~** 

### 18; app. opp'n at 2,**~** 

### 18). The claim includes the following:

As discussed below, Lee's Ford asserts that the very purpose ofthe Lease contracthas been frustrated by the
now six-year drawdown ofLake Cumberland caused by the Corps' decision to lowerthe Lake on January 19, 2007. As aresult, Lee's Ford demands thatthe Lease contractbe reformed in one or more ofthe following ways to compensate Lee's Ford for the damages it has incurred due to the drawdown: (a) rent owed by Lee's Fordto the Corps under the Lease should be fully abated until such time as the abated rent equals at least $4,000,000.00, which is the amount ofLee's Ford's disaster loan debt to the U.S. Small Business Administration ("SBA"); (b) the Corps will pay the SBAthe sum of$4,000,000.00, plus all accrued interest and loan fees, in satisfaction ofLee's Ford's disaster loan debt to neutralize the detrimental effect that the frustrated contract continues to have on Lee's Ford; and/or (c) the Corps will committo working with the SBA to develop a federal governmentpolicy that

2

### would allow the SBA to hold the disaster loan debt fully satisfied by offsetting Lee's Ford's damages arising out of its frustrated Lease against its disaster loan debt under the unitary creditor doctrine.

B. THE LOWERING OF LAKE CUMBERLAND



### As you are aware, Lake Cumberland is dammed by Wolf CreekDam. On January 19, 2007, LTC Steven J. Roemhildt and Brigadier General Bruce A. Berwick signed the Memorandum for Record onthe subject of"WolfCreek Dam Interim Risk Reduction Measures" (the "January 19th Memo"), which discussed concerns with the possible failure of WolfCreekDam and the need to repair it. The January 19th Memo concluded that the Lake must be substantially lowered in order to accomplish the necessary repairs. Recognizing the impacts ofthe lowering on the Lake region, the Memo providedthat "[p]lans are being developed to mitigate to the maximum extentpossible those impacts." Memo, p. 14. The Memo also included a commitment that the "Nashville District [ofthe Corps] will workwith Lake Cumberland stakeholders to minimize to the extent practicable the impact to recreation," which was said to include the "relocation ofmarinas" and the "relaxation ofuser fees." Id. 

### at 15. On January 22, 2007, the Corps began to lower the Lake water levels by a total of 43 feet.

As the District Engineer for the Nashville District ofthe Corps, Lee's Ford is submittingthis letter to you to formally assert its "claim" against the Corps and to demand reformation ofthe frustrated Lease contract in such a manner as to compensate Lee's Ford for the damages it has incurred as a result ofthe drawdown through payment, the adjustment ofLease terms, and/or similarreliefrelating to the Lease

....
As the lessee under the Lease, Lee's Ford expected to have a certain water level at its dock and the business

3traffic thathas historically followed that water level. While the Lease does contemplate that the Corps has the right "to manipulate the level ofthe lake orpool," the parties couldnot have envisioned at the time that they entered into the Lease that the Lake would be drawn down to such an extreme degree for such a long period oftime,
as the Lake has only been lowered to 680' once in its more than fifty year history. Instead, all that the parties could have anticipated was perhaps a short-term drawn [sic] down for repairs to the Dam

- not a seven-yearterm of drastically lowered levels that required Lee's Ford to relocate its entire dock system withinthe leased area. [Footnotes omitted]
(R4, tab 8 at 1, 2, 5) The claim included other facts relating to SBA involvement (id. at 2) and COE actions following the lowering ofthe lake (id. at 3).

5. By a 26 August 2013 final decision, signed by both the district engineer and the contracting officer (CO), sent by certified mail, the COE denied the claim (R4, tab 2). Lee's Fordreceivedthe final decision on 29 August 2013 (Bd. corr. file). On 27 November 2013, Lee's Fordtimely appealedthe final decision to the Board (R4, tab 1at 1). Lee's Ford's complaint, filed with its appeal, included one count, Breach ofContract-Nondisclosure ofSuperior Knowledge, and itemized alleged breach damages of$5,755,212.

6. On 2 December 2013, the Board docketed the appeal as ASBCA No. 59041.

7. On 5 February 2014, the COE filed its motion to "dismiss appellant's complaint," which it referred to in the body ofthe motion as one to dismiss the appeal. We treatthe motion as one to strike the complaint. The COE contends that the claim for "nondisclosure ofsuperiorknowledge was raised for the first time on appeal" and
was "neverpresentedto the [CO] for decision as required by the CDA." (Gov'tmot. at 7,**~~** 34, 35)

8. On 21March2014, Lee's Ford filed its oppositionto the COE's motion. On 29 April 2014, the COE notified the Boardthat it had decided not to file a reply to the opposition.

4DECISION

Initial Jurisdictional Considerations

The leases's Disputes clause invokes the CDA. Parties cannot, by contractual agreement, confer CDAjurisdictionupon the Board ifCDAjurisdiction does not otherwise exist. 

### See Florida Power & 

### Light Co. v. UnitedStates, 307 F.3d 1364, 1371 (Fed. Cir. 2002); 

### PatriotPrideJewelry, LLC, ASBCA No. 58953, 2014 ASBCA Lexis at *15 (9 June 2014). However, the Board hasjurisdictionto entertainthis appeal under the Disputes clause alone, which incorporates procedures for appeal to the Board. 

### See, e.g., DonaldM Lake, dlbla Shady Cove Resort & 

### Marina, ASBCA No. 54422,**05-1BCA~32,920.** We also havejurisdictionunder the CDA because a lease involves the disposal ofpersonal property within the CDA's coverage. 41 U.S.C. 

### §7102(a)(4);

### Arnold 

### V. Hedberg, ASBCA Nos. 31747, 31748, 90-1 BCA**~** 22,577; 

### accordNew LondonDevelopment Corp., ASBCA No. 54535, 05-2 BCA**~** 33,018; 

### see also Forman v. UnitedStates, 767 F.2d 875 (Fed. Cir. 1985).

Jurisdictional Dispute at Issue

Bothparties correctly recognize that whetherthe complaint asserts a new claim
ornot depends, in part, on ifit relies on the same "operative facts" cited in the claim. The alleged new claim in this case is failure to disclose superior knowledge.

The elements ofproofofsuperior knowledge are: (1) a contractor undertakes to perform without vital knowledge ofa fact that affects performance costs or duration, (2) the government was aware the contractor had

no knowledge ofand had no reason to obtain such information, (3) any contract specification supplied misled the contractorordid not put it on notice to inquire, and (4) the government failed to provide the relevant information.



### Scott Timber Co. v. UnitedStates, 692 F.3d 1365, 1373 (Fed. Cir. 2012). As reflected in these elements ofproof, the "operative facts'' alleged in the claim must somehow communicate to the CO a disparity in knowledge between the parties at contract award ofwhich the government was aware. The theory ofsuperiorknowledge is unique in that it normally relies on "operative facts" in existence 

### before award. Grumman Aerospace Corp. v. Wynne, 497 F.3d 1350, 1357 (Fed. Cir. 2007) (addressing Board's determinations about the contractor's knowledge during "pre-award period" and "vital knowledge or the opportunity to obtain that knowledge 

### before contract entry" (emphasis added); 

### Bannum, Inc. v. UnitedStates, 80 Fed. Cl. 239, 247 (2008) (A superiorknowledge claim ordinarily relates to knowledge regarding contractual

5specifications that the government failed to impart to a contractor priorto the contractor's agreement to undertake performance ofa contract); RendaMarine, Inc.

v. UnitedStates, 66 Fed. Cl. 639, 721 (2005) ('"When analyzing a claim that the government breached its duty to disclose superiorknowledge, "(t]he court

...must focus its inquiry on the government's knowledge at the time ofcontracting and its relationship to the contractor's lack ofknowledge)"' (citations omitted). Itis the pre-award disparity in knowledge that distinguishes the operative facts pertinent to superior knowledge allegations from those ofother cases ofaction.

In ToddPacific Shipyards Corp., ASBCANo. 55126, 06-2 BCA

### ii 33,421, cited by appellant, the contract involved work related to maintenance ofU.S. Navy vessels. In orderto performthe contractToddhadto maintain a large dry dock. After award the Navy transferred several ofthe vessels and decommissioned anotherresulting in less work for Todd. Todd's 18 June 2004 certified claim referred to its 5 March 2004 "DrydockNo. 3 SettlementProposal" that alleged the following operative facts:

Todd stated that, upon concluding contract negotiations in June, 2001, it had undertaken a five-year repair and maintenance project to ensure that dry dock No. 3 would remain certified andready to support all scheduled and potential <lockings covered by the contract. It alleged that, since nearly all ofits non-Navy customers could be accommodated on a mid-sized dry dock, its continuing need for a dock as large as dry dock No. 3 was driven by this AOE contract and the Navy's representations and commitments as to the future work. It alleged that the project cost was $16 million; it was clearly understood that the Navy would pay for the dry dock costs through direct charges or as unrecovered costs included in overhead; and Todd had engaged in the project because ofthe Navy's representations and commitments and the $8.9 million in support Todd expected from it. However, after signing the contract, the Navy decided to transfertwo vessels elsewhere and to decommission the U.S.S. Sacramento early. Todd alleged that it and the Navy hadbeen discussing the need to change Todd's dry dock No. 3 cost recovery methodology for three years, and thatthe Navy's decisions had damaged it.
Todd, 06-2 BCA

### ii 33,421 at 165,684. Afterthe claim, final decision and appeal, Todd filed a complaintwith seven counts, one ofwhichwas superiorknowledge that had not been asserted in the claim. We held:

6Although many ofappellant's legal theories ofrecovery remained the same, itexpanded upon them in the complaintto articulate suchtheories as breach ofcontract and superiorknowledge. However, appellant essentially alleged the operative facts necessary to those theories in its 28 March 2005 claim, in the 18 June 2004 claim referenced therein, and in the 5 March 2004 submission to which the 18 June claim, in tum, referred.


### Todd, 06-2 BCA**~** 33,421 at 165,688. Itis significantthat the operative facts stated in the 5March 2004 settlementproposal included Navy pre-award "representations and commitments" concerning the amount ofwork to be performed under the contract. We found that these facts were sufficientto supportthe added legal theory ofsuperior knowledge.

We see a different result in

### Advanced Technologies & 

### TestingLaboratories, Inc., ASBCA No. 55805, 08-2 BCA**~** 33,950 (ATTL), which involved a 21September2002 COE delivery order contract with a small business for sampling and testing dredged material. After award ATTL submitted its "initial demonstration ofcapability data" and "standard operating procedures" on 21 February 2003, 5 September 2003, 30 December 2003, and 18 June 2004 to the Environmental Protection Agency (EPA) for approval. On 12 August 2004 the EPA found the last submission deficient, as it had all ofthe previous submissions. As a result, the COE decided notto order more than the contract's minimum quantity of$5,000 worth ofwork. ATTL submitted a claim alleging constructive change based on a 29 October 2002 letter and the EPA's "improper" rejection ofits submissions. During discovery ATTL obtained a memorandum written by Ms. Beth Nash on 4 December 2001, before contract award, which statedthe contract should notbe a Small Business set-aside, because the contract required a high degree of precision and would be difficult for a small business to perform. ATTL also obtained a December 2001 memorandum written by Mr. John Hartmann agreeing with Ms. Nash. ATTL movedto amend its complaintto allege a superiorknowledge cause ofaction. The Boardheld, "[a]ppellant's original claim alleged operative facts limited to two theories of recovery

- the government changedthe contract and the EPAreview ofappellant's submittals was faulty." 

### Advanced Technologies, 08-2 BCA**~** 33,950 at 167,975. The Boardheld, "[ w]e do nothavejurisdiction to the extent that the underlying bases for the superiorknowledge and commercial impracticability theories are the information in the Discovery Documents (i.e., a small business would find it difficult to complete the contract)". Id. The operative facts in the claimrelated to a 29 October 2002 letter and EPA rejections ofATTL's submissions on 21February2003, 5 September 2003, 30 December 2003, and 18 June 2004. Itis significantthat all ofthe operative facts alleged in the claim were well afterthe 21 September 2002 award ofthe contract. Again, the theory ofsuperiorknowledge requires an allegation ofoperative facts occurring in the pre-awardperiod.

7

### Shams Engineering & 

### Contracting Co. andRamli Co., ASBCANos. 50618, 50619, 98-2 BCA

### ii 30,019, involved a United States Agency for International Development (USAID) contract to constructresidential buildings in Gaza. Shams submitted claims alleging "unfair settlement ofclaims submitted to USAID," "extra difficulties which cost us more than ABB SUSA on purchasing materials from Israel because ofthe [border] closure" and "delay ofpayingthe amount ofClaims on time 'interest' as perFAR (Clause 52.233-1)." 

### Shams, 98-2 BCA

### ii 30,019 at 148,523. Appellant appealed the final decision denying the claims andthen movedto amend its complaint to add six counts. Count2 was breach ofthe duty to disclose superior knowledge. The Boardheld:

In Count 2, appellants contend that USAID breached its duty to disclose information vital for appellants' performance underthe contracts, and that it knew or should have known that appellants did notpossess the information. That information allegedly included (a) the volatile political and economic conditions in the region, which USAID should have anticipated, (b) the terms ofthe contract written in a language understandable to appellants and the physical inclusion ofFARprovisions rather than their incorporation by reference into the contract, and (c) the business and accounting standards to which USAID would hold appellants. Those contentions

are essentially different than those presented to the contracting officer in appellants' claims seeking equitable adjustments. With respect to Count 2, appellants' motion to amend is denied.


### Shams, 98-2 BCA

### ii 30,019 at 148,526. As before, it is significant that none ofthe operative facts cited in the claim involved facts reflecting a disparity ofknowledge betweenthe government and the contractors before award.

Court ofFederal Claims cases in this area are also instructive. Forexample, in 

### LaidlawEnvironmentalServices (GS), Inc. v. UnitedStates, 43 Fed. Cl. 44 (1999), which involved a waste disposal (magnesiumbatteries) contract, theparties filed cross-motions for summaryjudgmentand the government filed a motionto dismiss for lack of jurisdiction. The motion to dismiss allegedthat Laidlaw raised three theories ofentitlement in its complaintthat were notpresented in its claim to the CO, including superiorknowledge:

As noted

### supra, the complaint in this court asserts three basic theories ofliability, 

### i.e., i) breach ofcontract, ii) constructive change, and iii) failure to disclose superior

8knowledge. In contrast, the claim previously filed before the contracting officer asserted, in essence, that-i) CLIN 0502 cannot be used on the contract because it is for state regulated batteries only; ii) the tests indicating the toxicity ofmagnesium batteries are disputable; iii) magnesium batteries are not regulated in North Carolina; iv) the use of CLIN 0502 in the contract was erroneous; and v) such use constituted a change in the contract.


### Laidlaw, 43 Fed. Cl. at 50. The operative facts supporting the claim were: i) The state ofNorth Carolina 

### does not regulate magnesium batteries so that the use ofCLIN 0502 was erroneous; ii) The basis ofthe tests finding the magnesium batteries to be 

### hazardous is disputable; iii) The government changed the terms ofthe contract when it informed Laidlaw itwould use CLIN 0500 or CLIN 0502 in delivery orders because magnesium batteries exhibited '"toxicity characteristics for chromium" making them a RCRA regulated waste; iv) CLIN 0502 cannot be used on the contract because it is for state regulated batteries only and magnesium batteries are not regulated in North Carolina; and v) A new "'RCRA" CLIN with a unit price based on supportable data must be added to the contract.


### Laidlaw, 43 Fed. Cl. at 48. Focusing on the superiorknowledge theory, the court held:

The nature ofthis last claim is an assertion regarding 

### what the government and Laidlaw knew in regard to the toxicity ofmagnesium batteries, and 

### when they knew it. While such a claim before the contracting officerneed not be legally precise, ifthe general nature ofthis claim had been presented to the contracting officer, we would expect a statement in Laidlaw's claim to the effectthat Laidlaw was


### unaware ofthe government studies finding that magnesium batteries were hazardous under the RCRA; that the government did not inform Laidlaw ofthe results of such studies; and that Laidlaw was damaged by this lack of, or withheld, knowledge. This claim is thus a new claim, and a variance, based on "operative facts'' beyond those

9

### presented for the contracting officer's final decision and must, therefore, be dismissed.
Laidlaw, 

### 43 Fed. Cl. at 50. Significantly, it was the lack ofoperative facts reflecting that Laidlaw was "unaware" ofinformation the government was aware ofthat caused the court to dismiss. The court commented, "[n]o reasonable person could have inferred, from reading Laidlaw's claim before the contracting officer, that Laidlaw was alleging that the government had superior information that Laidlaw did not possess, which it had a duty to disclose." Id. 

### at 51.

The common thread in these and other superiorknowledge cases is their analysis ofwhether the operative facts in a claim to the CO communicated the disparity ofknowledge between the contractor and the government before contract award. If

### they did, there isjurisdictionto considerthe claim, ifnot, there is no jurisdiction. That is the standard we apply to Lee's Ford. The legal theories asserted in the claim are "frustration ofpurpose" and "reformation" (SOF 

### ii 4). The claim cites the following material operative facts2:



### • On 19 January 2007 a decision was made to lower the water level in the lake.

• Lee's Ford expected to have "acertain water level at its dock and the business traffic that has historically followed that water level."

• The parties could nothave envisioned at the time they entered into the Lease thatthe Lake would be drawn down to such an extreme degree for such a long period oftime, as the Lake has only been lowered to 680' once in its more than fifty year history.
(SOF 

### ii 4) The last two bullets relate to pre-award knowledge.

The parties entered into the lease on 29 August 2000 (SOF 

### ii 1 ). The decision to lowerthe water level was made over six years afterthe lease was executed3 

### (SOF 

### ii 2). While two ofthe operative facts in the claim deal with the parties' knowledge at award ofthe lease, they do notreflect the disparity ofknowledge between the parties required to support a superiorknowledge theory. Indeed, Lee's Ford's assertion that the parties could not have envisioned at the time they entered into the Lease that the lake would be

2 

### The facts presented in the claim relating to the SBA and the Corps' mitigation efforts are not material to superior knowledge. 3 

### We do not considerthe fact that ownership ofLee's Ford changed in 2003 to be significant (R4, tab 4).

10drawn down to such an extreme degree for such a long period oftime communicates a
common understanding that is inconsistent with the disparity ofknowledge required for superiorknowledge. We disagree with the implication in appellant's briefthat it alleged facts supporting superior knowledge, "[f]irst, the claim letter certainly indicates that, priorto lease execution, the Corps did not provide Lee's Ford with any information about defects with the WolfCreek Damthat were likely to result in major reconstruction." (App. br. at 15) Ofcritical importance is the complete absence ofany assertion that the COE had information that appellant did not.

There is nothing in Lee's Ford's operative facts alleged in the claim that arguably supports the theory ofsuperiorknowledge. As in 

### Laidlaw, no reasonable person could have inferred, from reading Lee's Ford's claim, that it was alleging the governmenthad pre-award superior informationthat Lee's Ford did not possess. Accordingly, the complaint incorporated into the appeal constitutes a new claim that has not been presentedto a CO for decision as required by the CDA, 41 U.S.C. § 7103(a)(l), we do not havejurisdictionto consider it, and we strike it.

Since we do not havejurisdiction overthe superiorknowledge count, we do not address the government's othertwo issues, failure to certify and timeliness.

CONCLUSION

Forthe reasons stated above, we strike the complaint as it relates to the theory ofsuperiorknowledge withoutprejudice to the filing ofaproperclaim with the CO.4 The appeal, however, remains within thejurisdiction ofthe Board and Lee's Fordmay amend its complaintto assert theories supported bythe operative facts stated in the claim.

Dated: 23 July 2014

Administr, tive Judge Armed Services Board ofContract Appeals

4 Since this claim is not before us we express no opinion on any possible untimeliness ofthe filing ofthe claim, should such occur.

11(Signatures continued) I concur

Administrative Judge Acting Chairman Armed Services Board ofContractAppeals I concur



## caministrative Judge Acting Vice Chairman Armed Services Board ofContractAppeals

I certify that the foregoing is a true copy ofthe Opinion andDecision ofthe Armed Services Board ofContractAppeals in ASBCANo. 59041, Appeal of Lee's Ford Dock, Inc., rendered in conformance withthe Board's Charter.

Dated:

12 JEFFREY D. GARDIN Recorder, Armed Services Board ofContractAppeals