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In the United States Court of Federal Claims

No. 08-610C

(Filed: November 6, 2012)

TEXTAINER EQUIPMENT 

MANAGEMENT LIMITED, et al.,

Plaintiffs,

v.

THE UNITED STATES,

Defendant.

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Fifth Amendment Taking; Sovereign 

Versus Proprietary Capacity; Real 

Party in Interest under RCFC 17; 

“Buyer in the Ordinary Course” and 

“Entrustment” Under the Uniform 

Commercial Code

Lars H. Liebeler, Washington, DC, for plaintiffs.

Robert C. Bigler, United States Department of Justice, Washington, DC, with whom were 

Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and 

Brian M. Simkin, Assistant Director, for defendant.

OPINION

FIRESTONE, Judge.

Pending before the court are the parties’ renewed cross-motions for summary 

judgment in this Fifth Amendment takings case. For the reasons discussed below, the 

parties’ motions for summary judgment are STAYED in regard to plaintiff Textainer and 

in regard to the proper interest rate to apply in determining just compensation. Plaintiffs’

motion for summary judgment in regard to plaintiffs CAI and Cronos is DENIED, and 
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the defendant the United States’ (“the government”) cross-motion for summary judgment 

in regard to plaintiffs CAI and Cronos is GRANTED.

I. BACKGROUND

Many of the undisputed facts in this case are outlined in this court’s first summary 

judgment opinion, Textainer Equipment Management Ltd. v. United States, 99 Fed. Cl. 

211 (2011). In brief, plaintiffs CAI International, Inc. (“CAI”), Cronos Containers 

Limited (“Cronos”), and Textainer Equipment Management (U.S.) Limited (“Textainer”) 

(a company that manages shipping containers originally owned by Capital Lease Limited 

(“Capital”)) each own and/or manage a large fleet of intermodal shipping containers that 

were leased to a third party company, TOPtainer. TOPtainer, in turn, leased plaintiffs’

containers to the Army pursuant to a Master Lease agreement (“Master Lease”) between 

TOPtainer and the United States. Plaintiffs were not parties to the Master Lease. The 

containers were sent to Iraq and Afghanistan for military use. 

Under the terms of the Master Lease, the government took title to any containers 

that were “lost” or “deemed lost” ninety days after the end of the lease term. Pls.’ First 

Mot. for Summ. J. (“Pls.’ First Mot.”), Ex. 9, ECF No. 27. The Master Lease provided 

that the government would pay TOPtainer for the containers that were either lost or 

deemed lost. Id. Plaintiffs’ leases with TOPtainer had provisions that authorized 

TOPtainer to pay plaintiffs for containers that were “lost.” Id., Exs. 5, 6, 8. Plaintiffs in 

their contracts with TOPtainer expressly prohibited TOPtainer from selling their 

containers or transferring title to the containers without their consent. At the end of the 

Master Lease term, the government paid TOPtainer for approximately 1000 containers 
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that the government claimed it could not find after the lease expired. Although the 

government paid TOPtainer for these allegedly “lost” or “deemed lost” containers, 

TOPtainer did not pay or only partially paid plaintiffs for the “lost” containers.

TOPtainer is no longer in existence.

Plaintiffs filed their original complaint in this court on September 2, 2008, alleging 

that the government had taken title to their property—their containers—without paying 

just compensation in violation of the Fifth Amendment of the Constitution of the United 

States. On June 17, 2011, the court issued an opinion denying plaintiffs’ motion for 

summary judgment on liability, and granting in part and denying in part plaintiffs’ motion 

for summary judgment on damages. The court found that “[t]he government has not 

taken property where it acts in its proprietary capacity pursuant to a contract right.” 

Textainer, 99 Fed. Cl. at 218 (citing Janicki Logging Co. v. United States, 36 Fed. Cl. 

338, 346 (1996)). Rather, “to effect a taking, the government must act pursuant to its 

sovereign powers or invoke sovereign protections.” Textainer, 99 Fed. Cl. at 218 

(citation omitted). Based on these principles, the court held that to the extent the 

government was acting in its proprietary capacity when it took title to and paid TOPtainer 

for plaintiffs’ containers, plaintiffs’ sole remedy would be against TOPtainer for breach 

of contract. Id.

However, based on the Supreme Court’s holding in Armstrong v. United States, 

364 U.S. 40, 48-49 (1960), the court went on to hold that if the government was shown to 

have acted outside of its proprietary capacity, and in its sovereign capacity, a taking may 

have occurred. Plaintiffs had presented some evidence to show that various containers 
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were not “lost” but that the government had instead simply decided to keep them for 

military use. If the government decided to “take title” to the containers outside the scope 

of the contract, the court held, a sovereign act may have occurred. Based on the evidence 

presented by plaintiffs, the court held that disputed issues of fact precluded the entry of 

summary judgment. Id. at 220-21. 

Finally, in addressing the issue of just compensation, the court agreed with the 

parties’ stipulation that if a taking were established the measure of compensation would 

be calculated using the depreciated replacement value of the containers established in 

clause H-6 of the government’s Master Lease with TOPtainer. Id. at 221. With regard to

the measure of the pre-judgment interest rate, also briefed on summary judgment, the 

court held that, absent “special proof,” it would apply the Declaration of Taking Act 

interest rate, based on the weekly average one-year constant maturity Treasury yield, id.

at 221-23 (quoting the Declaration of Taking Act, 40 U.S.C. § 3116 (2006)), if a taking 

were established.

Following the court’s decision, plaintiffs moved to amend their complaint to add 

third party beneficiary and breach of contract claims. On January 10, 2012, the court 

denied plaintiffs’ motion for leave to amend their complaint to add contract causes of 

action. Opinion, ECF No. 81. A trial date was then set for March 13, 2012 regarding 

plaintiffs’ takings claims. At the pre-trial conference on March 2, 2012, the parties 

requested permission to file renewed cross-motions for summary judgment. Specifically, 

plaintiffs presented undisputed evidence to the court to show that 125 containers that had 

been owned by Capital and were now the subject of plaintiff Textainer’s claim were 
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never “lost,” but were instead sent to Okinawa, Japan and thus appeared to have been 

“taken” outside the terms of the Master Lease. See Pls.’ Renewed Mot. (“Pls.’ Mot.”) at 

1, ECF No. 91. In addition, undisputed evidence showed that Capital had notified the 

government’s legal counsel, before the government took title or authorized any payments 

for any of the allegedly “lost” containers, that TOPtainer was in default of its contract 

with Capital and that TOPtainer no longer had any rights to lease the subject containers. 

Id. at 2; id., Ex. E. Capital asked that all containers in the government’s possession 

belonging to Capital be returned to Capital. Id., Ex. E.

The court agreed to postpone the trial and accept renewed motions. On March 16, 

2012, plaintiffs filed their pending renewed motion for summary judgment arguing, based 

on the above-cited facts, that the government effected a taking when it took “title” to 

plaintiffs’ containers after receiving notice that TOPtainer was in default of its contracts 

with plaintiffs and when the government kept many containers it knew were never lost.1

The government has filed its cross-motion for summary judgment arguing that 

irrespective of these undisputed facts, the government took lawful title to the subject 

containers because it was simply acting under its contract with TOPtainer as “a buyer in 

Plaintiffs contend that the government violated their Fifth Amendment rights by failing to 

pay them just compensation for their containers. 

 1 Plaintiffs also sought sanctions against the government for failing to timely reveal that the 

containers sent to Okinawa, Japan were never lost. See Pls.’ Mot. for Sanctions, ECF No. 94.
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the ordinary course” under the Uniform Commercial Code (“UCC”).

2

The primary question before the court in these cross-motions is whether the 

government took title to some or all of the subject containers after it learned that 

TOPtainer no longer had any legal rights to the containers. If the answer to this question 

is “yes” with respect to some or all of the containers, then the government may not be “a 

buyer in the ordinary course” and may have taken title to some or all of plaintiffs’

property in its sovereign capacity. If so, the government would be liable under the Fifth 

Amendment and would be required to pay just compensation. 

According to the 

government, it was acting in its proprietary capacity when it took title to the containers

and thus there has not been a taking within the meaning of the Fifth Amendment. The 

government also argues that plaintiffs Textainer and Cronos do not have standing to bring 

a takings claim because they are seeking compensation for containers they never owned. 

However, before turning to this question, the court must first address whether, as 

the government charges, certain plaintiffs lack standing to assert a takings claim. The 

government argues in its cross-motion for summary judgment that Textainer never owned 

any of the containers for which it is seeking compensation, and therefore the court must 

dismiss its entire takings claim for lack of standing.

3

 2 As discussed in detail infra, the UCC defines a “buyer in the ordinary course” as “a person that 

buys goods in good faith, without knowledge that the sale violates the rights of another person in 

the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of 

selling goods of that kind.” UCC § 1-201(9).

The government also argues that 

3 It is not disputed that each plaintiff must have a cognizable property interest to have standing. 

See Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363, 1372 (Fed. Cir. 2004) (“If the 

claimant fails to demonstrate the existence of a legally cognizable property interest, the court[’]s 

task is at an end.”).
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plaintiff Cronos never owned several of the containers for which it is seeking 

compensation and thus it lacks standing for certain claims. Further, the government 

argues that, to the extent Textainer and Cronos are making claims as successors to the 

original owners of the containers, their claims for just compensation are barred by the 

Anti-Assignment Act.4

Textainer does not dispute that it never owned the containers for which it seeks 

compensation. Instead, Textainer claims that it brought this suit on behalf of Capital’s 

successor in interest, Green Eagle Investments (“Green Eagle”). Textainer now moves to 

join Green Eagle as the “real party in interest” under Rule 17 of the Rules of the United 

States Court of Federal Claims (“RCFC”). In plaintiffs’ motion to ratify, join, or 

substitute Green Eagle as the real party in interest, plaintiffs argue that Textainer’s

actions in bringing this suit have been ratified by Green Eagle, and, alternatively, that 

joinder of Green Eagle as the real party in interest is appropriate in this case. See Pls.’ 

Mot. for Joinder at 3-6, ECF No. 125. The government opposes plaintiffs’ motion to

ratify or join Green Eagle as the real party in interest. The government contends that 

Green Eagle has not established that it is the real party in interest because there is 

evidence to suggest that Capital is still in existence and remains the rightful owner of any 

 

 

4 It is also not disputed that if the Anti-Assignment Act bars a claim the action must be 

dismissed. See Ins. Co. of the W. v. United States, 100 Fed. Cl. 58, 62 (2011) (citing Ins. Co. of 

the W. v. United States, 243 F.3d 1367, 1375 (Fed. Cir. 2001)) (stating that “when either of the 

Anti-Assignment Acts renders an assignment ineffective against the United States, the waiver of 

sovereign immunity found in the Tucker Act is withdrawn . . . [a]nd without that waiver of 

sovereign immunity, no jurisdiction would exist to adjudicate the claim”).
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takings claim. See Def.’s Resp. to Pls.’ Mot. for Joinder at 2-3, ECF No. 126. The 

government also argues that it would be prejudiced by joining Green Eagle at this stage 

of the litigation. Id. at 6-8.

The court now turns to the parties’ arguments. The opinion will address the 

above-identified issues for plaintiffs Textainer, CAI, and Cronos in order. The relevant 

disputed and undisputed facts for each issue will be addressed separately for each 

plaintiff. 

II. DISCUSSION

A. Green Eagle may be joined in this lawsuit as the real party in interest, 

but further discovery is needed to determine whether Green Eagle has 

standing to pursue a takings claim.

1. Factual background.

Although, as noted above, this case was filed by Textainer Equipment 

Management (U.S.) Limited, it is now undisputed that Textainer does not own the 477

containers for which it is seeking compensation. Textainer has presented evidence to 

show that Capital, the original owner of the 477 containers, was sold through a stock 

purchase agreement (“the SPA”) to Green Eagle Investments on July 23, 2007. Pls.’

Reply, Tab 2, Ex. 1 (the SPA). Textainer contends that under the SPA, Green Eagle 

became the successor to Capital and acquired Capital’s claim in this litigation. Textainer 

also presented evidence to show that after Green Eagle acquired Capital, Green Eagle

made Textainer the manager of all the containers acquired from Capital in a separate, 

contemporaneous agreement. Pls.’ Reply, Tab 2, Ex. 2 (the management agreements). 

Green Eagle has ratified Textainer’s actions in this case. Pls.’ Reply, Tab 2 ¶¶ 8-9.
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The SPA between Capital and Green Eagle states that Green Eagle paid $185 

million for one hundred percent of the stock in Capital Lease Limited and its subsidiaries.

Pls.’ Reply Tab 2, Ex. 1, at 12 (“The Seller hereby sells to the Purchaser . . . the Shares 

with economic effect as of 31 December 2006 . . . . The consideration for the Shares to be 

paid by the Purchaser shall amount to USD 185,000,000.00 . . . .”). According to the 

affidavit of Willem de Bruijn, Managing Director of Green Eagle, Capital Lease Limited 

and all of its subsidiaries ceased operations when Green Eagle purchased Capital under 

the SPA. Id., Tab 2 (“On July 23, 2007, Green Eagle purchased all the assets and 

operations of Capital Lease Limited . . . . Capital Lease Limited and all its subsidiaries 

ceased operation at this time.”). The affidavit further states that Textainer, as the 

manager of the containers acquired from Capital, has been authorized to bring this case 

on behalf of Green Eagle. Id.

The government contends that disputed issues of fact preclude the court from 

ruling that Green Eagle is the real party in interest. The government has presented

evidence suggesting that Green Eagle did not acquire the whole of Capital (both 

liabilities and assets) but instead only acquired Capital’s assets. If true, the government 

argues, Capital may still exist and may have its own claim regarding a taking of the 477 

containers. Specifically, the government relies on a press release accompanying the SPA

to argue that Capital may still exist as a separate entity. The press release states: “In a 

transaction that closed on 23 July 2007, CIF 3, an investment fund advised by DVB 

Bank, acquired Capital Lease Limited, Hong Kong, the world’s 8th largest container 

leasing company, and simultaneously sold the management rights to Capital Lease’s over 
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0.6 million TEU container fleet to Textainer.” Def.’s Cross-Mot. at 17 n.5 (citing Press 

Release, DVB Bank, DVB Fund and Textainer Team Up to Buy Capital Lease (July 24, 

2007), 

http://www.dvbbank.com/en/press/press_releases/archive/repository/2007/24_07_2007.ht

ml.). The government argues that it follows from this press release that Capital may still 

exist. The government contends that this conclusion “is consistent with DVB Bank’s 

2011 Annual Report, which discloses that DVB may own or control a list of companies 

including Green Eagle and Capital and providing the net income of Capital for 2011.” 

Def.’s Reply at 7 n.4 (citing DVB Bank, Annual Report 2011 at 204, 

http://www.dvbbank.com/en/investor_relations/publications/archive/2011/dvb_group_ar_

2011.pdf). The government also argues that it is not clear from the SPA that, even if 

Capital no longer exists, Capital’s takings claim was ever transferred to Green Eagle, 

because the SPA references the takings claim with the United States as “closed.” Id. at 7; 

Pls.’ Reply, Tab 2, Ex.1.

2. Green Eagle may be joined as the real party in interest.

The court finds that under the standards established under RCFC 17, Green Eagle 

may be joined as the real party in interest. The “real party in interest is one who has a 

real, actual, material or substantial interest in the subject matter of the action.” Haddon 

Hous. Assocs., LLC v. United States, 92 Fed. Cl. 8, 15 (2010) (quotation omitted). 

RCFC 17(a)(3) provides: “The court may not dismiss an action for failure to prosecute in 

the name of the real party in interest until, after an objection, a reasonable time has been 

allowed for the real party in interest to ratify, join, or be substituted into the action. After 
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ratification, joinder, or substitution, the action proceeds as if it had been originally 

commenced by the real party in interest.” Importantly, whether a party should be joined 

as a real party in interest is a procedural question that does not answer all questions about 

whether the court has jurisdiction over that party. Sys. Fuels, Inc. v. United States, 65 

Fed. Cl. 163, 171 (2005). 

Here, the court finds based on the language of the SPA and the affidavit of Mr. de 

Bruijn that Green Eagle has sufficiently alleged a “real, actual, material, or substantial 

interest” in this action, and therefore may be joined as the real party in interest. Haddon, 

92 Fed. Cl. at 15. It is well-settled that “courts should be lenient in permitting 

ratification, joinder, or substitution” of the real party in interest. First Hartford Corp. 

Pension Plan & Trust v. United States, 194 F.3d 1279, 1289 (Fed. Cir. 1999). In 

addition, allowing Green Eagle to join this action will effectuate the purpose of RCFC 17, 

which is to “protect defendants from multiple liability in actions by subsequent claimants 

and also to ensure that the judgment in the action will have res judicata effect.” Sys. 

Fuels, 65 Fed. Cl. at 170 (citing 4 Daniel R. Coquillette et al., Moore’s Federal Practice § 

17.10 (3d ed. 2004) (discussing the analogous federal rule)). Certainly, as between 

Textainer and Green Eagle, Green Eagle is the real party in interest.

The court further finds that joining Green Eagle will not unduly prejudice the 

government. This case has not been re-set for trial and the court will ensure that the

government is given ample time to conduct discovery into the relationship between Green 
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Eagle and Capital before resolving the case.

5 In this unique case, the court finds that it is 

appropriate to join Green Eagle as the real party in interest and allow further discovery 

into the nature of Green Eagle’s takings claim. By joining Green Eagle, the court does 

not rule on whether Green Eagle has standing to bring this takings claim. Sys. Fuels, 65 

Fed. Cl. at 171. Rather, the court will stay consideration of the government’s motion for 

summary judgment based on lack of standing, and the government’s motion for summary 

judgment under the Anti-Assignment Act, until discovery into Green Eagle’s relationship 

with Capital is closed. If the government determines that Green Eagle is not Capital’s 

successor, or that Green Eagle’s claim for the 477 containers is barred under the AntiAssignment Act, it may renew or ask for a ruling on its motion for summary judgment

pursuant to the schedule set forth at the conclusion of this opinion.

6

 5 In this connection, the court notes that the government has had ample time to take discovery 

into the relationship between Capital and Textainer and the relationship of Capital with 

TOPtainer. The government has also had ample time to take discovery into Capital’s 

interactions with the government prior to 2007 and the sale of its stock to Green Eagle 

Investments. Textainer put the government on notice from the outset of this litigation that it was 

pursuing this takings claim as a successor to Capital. As discussed supra, it is not disputed that 

Capital owned the 477 containers at issue and that Capital took steps to protect its interest in the 

477 containers prior to the government taking “title” to its containers under the Master Lease 

with TOPtainer. There is also no dispute that 125 of these containers were never lost or deemed 

lost under the TOPtainer Master Lease, but were instead transferred to Japan for use by the 

government without compensating Capital. 

6 The court will also stay consideration of plaintiffs’ motion for sanctions based on the newly 

discovered evidence that 125 of Capital’s containers were never “lost.” The court will not rule 

on this motion before Green Eagle establishes standing to pursue Capital’s takings claim.
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B. The government is entitled to summary judgment as to plaintiff CAI.

7

Plaintiff CAI claims compensation for 387 containers leased by TOPtainer that 

were not returned at the conclusion of the government’s Master Lease with TOPtainer. 

The government does not dispute, for the purposes of these renewed cross-motions, that 

CAI owned all 387 containers for which it seeks compensation, and does not challenge 

CAI’s standing to pursue its claim.

8

 The court will therefore proceed to the merits of 

CAI’s takings claim. 

 7 The standard of review for cross-motions on summary judgment is well settled. Summary 

judgment is appropriate only if “there is no genuine issue as to any material fact and . . . the 

moving party is entitled to a judgment as a matter of law.” RCFC 56(a); see Anderson v. Liberty 

Lobby, Inc., 477 U.S. 242, 247-49 (1986). The moving party carries the burden of establishing 

that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 

(1986). A “genuine” dispute is one that “may reasonably be resolved in favor of either party.” 

Anderson, 477 U.S. at 250. A material fact is one that “might affect the outcome of the suit 

under the governing law.” Id. at 248. In considering the existence of a genuine issue of material 

fact, a court must draw all inferences in the light most favorable to the non-moving party. 

Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). If no rational trier of 

fact could find for the non-moving party, a genuine issue of material fact does not exist and the 

motion for summary judgment may be granted. Id. With respect to cross-motions for summary 

judgment, each motion is evaluated on its own merits and reasonable inferences are resolved 

against the party whose motion is being considered. Marriot Intern. Resorts, L.P. v. United 

States, 586 F.3d 962, 968-69 (2009).

Summary judgment is also appropriate where the only issues to be decided are issues of law. 

Huskey v. Trujillo, 302 F.3d 1307, 1310 (Fed. Cir. 2002) (citing Dana Corp. v. United States, 

174 F.3d 1344, 1347 (Fed. Cir. 1999)); 10A Charles Alan Wright et al., Federal Practice & 

Procedure § 2725 (3d ed. 2012) (“It necessarily follows from the standard set forth in the rule 

that when the only issues to be decided in the case are issues of law, summary judgment may be 

granted.”).

8 CAI also managed 48 containers owned by Interpool, CAI’s corporate parent company, at the 

time of the alleged taking. CAI received payments from TOPtainer that covered the containers it 

owned as well as containers owned by Interpool. CAI has credited $204,854.18 of those 

payments toward all of the Interpool containers and some of the 435 CAI containers subject to 

the buyout. As such, it is seeking $359,952.94 for only 387 containers owned by CAI. Pls.’ 

Reply at 8.
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1. Factual background.

The following facts are undisputed. Under Clause H-7 of the Master Lease, the 

government had contracted for the right to take title to any of the containers the 

government had leased from TOPtainer if the government could not return the containers

to TOPtainer ninety days after the Master Lease expired. Clause H-7 of the Master Lease 

provides:

The Government shall have a period of ninety (90) days, from the date of 

expiration of the lease period, to continue leasing containers at the same per 

diem rate as the expired lease period. Containers or chassis not redelivered 

by the completion of the contract period and not returned to the contractor 

within the ninety (90) day redelivery period, may be deemed lost. At the 

time a unit(s) is determined lost or deemed lost by operation of this clause, 

title of the unit(s) will transfer from the contractor to the government. The 

contractor will be provided reimbursement for all “lost” units upon proper 

invoice, at the depreciated reimbursement price. The contractor shall notify 

the Government upon completion of the . . . lease period that the ninety 

(90) day redelivery period has commenced.

Pls.’ First Mot., Ex. 9.

The Master Lease between TOPtainer and the government expired on July 1, 

2004. It is not disputed that the government received notice prior to the end of the ninety

day period that TOPtainer was in default with Capital. The undisputed evidence 

established that Capital notified the government in August 2004 that TOPtainer had 

defaulted on its lease with Capital and that Capital had terminated that lease. 

Specifically, on August 4, 2004, Capital contacted one of the government’s contracting 

representatives and explained that TOPtainer no longer had any right to possess or sell 

Capital’s containers. Capital followed up this notice with a letter from its attorney to

Greg Ircink, an attorney responsible for work on the Master Lease at the government’s
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Surface Deployment and Distribution Command (“SDDC”). In the letter, Capital’s 

attorney reiterated that Capital had placed TOPtainer in default in July 2004 and that 

Capital was seeking the return of its containers from the government. Pls.’ Mot., Ex. E 

(“Toptainer has been selling Capital Lease’s equipment without our client’s consent. . . .

We request that SDDC turn the equipment over to Capital Lease. Alternatively, we 

request that SDDC retain the equipment until an order can be obtained from the 

appropriate Court.”). On August 13, 2004, Mr. Ircink responded to Capital’s counsel

stating that “the contracting officer feels that it is insufficient evidence with which it can 

be concluded that our contractor, TOPtainer, is in default of the contract between itself 

and your client.” Pls.’ Mot., Ex F. Thereafter, the government decided to pay TOPtainer

for the containers that had been subleased from Capital.

The undisputed evidence also established that CAI provided notice to the 

government of CAI’s rights to its containers that were leased to TOPtainer in February 

2005. Specifically, on February 8, 2005, more than four months after the ninety day 

period under the Master Lease had expired, CAI informed the government that TOPtainer

did not have the right to sell any of CAI’s containers. Pls.’ First Mot., Ex. 18 (“[T]hese 

units are CAI’s asset and Toptainer has no right to sell these containers.”). The

government responded to CAI that same day stating that the government had already 

declared CAI’s containers lost and was in the process of paying TOPtainer for the lost 

containers, in accordance with Clause H-7 of the Master Lease. The government went on 

to explain that the government would not stop paying TOPtainer for CAI’s containers 
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without a court order.9

The buyout of CAI’s containers continued in accordance with the following 

timeline. TOPtainer invoiced the government for the lost or deemed lost CAI containers 

on December 29, 2004. No later than January 14, 2005, the government stopped paying 

its per diem rates to TOPtainer for CAI’s containers. On February 4, 2005, Contracting 

Officer Greg Dawson, the contracting officer who oversaw the administration of the 

Master Lease at the SDDC, signed a contract modification, executing a buyout of certain 

containers under the Master Lease, including 8 of CAI’s containers. Four days later, on 

February 8, 2005, CAI informed the government that TOPtainer had no right to sell 

CAI’s containers. The government responded that the containers had already been 

declared lost, that the government was in the process of paying TOPtainer for the lost 

containers, and that the United States would not stop paying TOPtainer without a court 

order. On February 17, 2005, Contracting Officer Dawson signed another contract 

modification, authorizing the purchase of 427 CAI containers. Payment occurred 

separately for the two separate contract modifications. On March 21, 2005, the 

government paid TOPtainer for the 427 containers subject to the February 17, 2005 

 Id. (“Since our contract with Toptainer requires that we purchase 

the units if we are unable to redeliver[] within 90 days of expiration date of lease we 

cannot stop this action unless you have a legal stop order.”). 

 9 CAI is only pursuing a takings claim for 387 containers out of 435 CAI containers subject to 

the TOPtainer buyout. CAI concedes that it received payment from TOPtainer for a number of 

its containers. See supra note 8.
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contract modification. On May 13, 2005, the government paid TOPtainer for 8 CAI 

containers subject to the February 4, 2005 contract modification.

2. Discussion.

Based on the above-stated undisputed facts, the government argues that it took 

valid title to CAI’s containers under the terms of its Master Lease as a “buyer in ordinary 

course” and that CAI has therefore failed to establish a “taking” of those containers. 

Specifically, the government argues that it qualifies as a “buyer in the ordinary course”

under the Uniform Commercial Code (“UCC”) because it purchased plaintiffs’ containers 

in good faith and without knowledge of TOPtainer’s default, acting under the terms of the 

Master Lease. As such, the government contends, it took valid title from TOPtainer

under UCC §§ 2-403 and 2A-305(2), which recognize the “entrustment” doctrine. See 1 

White, Summers, & Hillman, Uniform Commercial Code § 4:34 (6th ed. 2010). 

Under UCC § 2-403(2), a “buyer in the ordinary course” may take good title from 

a “merchant,” even for goods that the merchant does not own but were entrusted to that 

merchant. UCC § 2A-305(2) extends this concept from sales to leases, as is the case 

here. Based on these provisions, the government argues that TOPtainer qualified as a 

“merchant” under the UCC, and that, as a “buyer in the ordinary course,” it took valid 

title to plaintiffs’ containers.

10

 10 Plaintiffs argue that TOPtainer was not a “merchant” under the UCC. The UCC defines a 

“merchant” as “a person who deals in goods of the kind or otherwise by his occupation holds 

himself out as having knowledge or skill peculiar to the practices or goods involved in the 

transaction.” UCC § 2-104(1). Given the UCC’s “expansive” definition of merchant, 

DeWeldon, Ltd. v. McKean, 125 F.3d 24, 27 (1st Cir. 1997), the court agrees with the 

government that TOPtainer is a “merchant” under the UCC because TOPtainer was a business 

In such circumstances, the government contends, the 
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government took title to CAI’s containers acting in its proprietary, not its sovereign, 

capacity.

Plaintiffs argue that the government was not a “buyer in the ordinary course”

because it was on notice that TOPtainer did not have the right to sell CAI’s containers.

Plaintiffs contend that the government’s decision to retain title to CAI’s containers 

without paying CAI after the government learned of TOPtainer’s default was a sovereign 

act, outside the terms of the Master Lease and the protective scope of the UCC’s “buyer 

in the ordinary course” and “entrustment” provisions. 

a. Under Armstrong v. United States, the government can effect a 

taking in a contractual context when its status as a sovereign 

allows it to obtain property rights it otherwise could not obtain 

as a private party.

As this court has previously held, the government has not taken property where it 

acts in its proprietary capacity, pursuant to a contract right. Textainer Equip. Mgmt. Ltd. 

v. United States, 99 Fed. Cl. 211, 218 (2011). Rather, where the government acts 

pursuant to its contracting authority, a Fifth Amendment taking may only arise if some 

intervening sovereign act is identified. Id. (citing Armstrong v. United States, 364 U.S. 

40, 48-49 (1960)). In Armstrong v. United States, the Supreme Court held that the 

government was liable for a taking where its sovereign status rendered it immune from 

suit by third parties holding liens on property that passed to the government by virtue of 

the terms of a contract. The Court explained that a taking had occurred “because the 

 

involved in leasing and managing containers. Plaintiffs argue in the alternative that even if 

TOPtainer was a merchant, the government could not take valid title once it knew that TOPtainer 

no longer had any rights to CAI’s containers. 
-19-

Government for its own advantage destroyed the value of the liens, something that the 

Government could do because its property was not subject to suit, but which no private 

purchaser could have done.” Id. at 48. Because the government’s status as the sovereign 

rendered it immune from suit, the government was liable for just compensation under the 

Fifth Amendment, even where the government’s receipt of the property at issue occurred 

in a contractual context. Id. at 48-49.

Here, the court is also presented with a potential taking in a contractual context. 

If, as plaintiffs allege, if the government knew that plaintiffs had revoked TOPtainer’s

authority over their containers but decided to take title to them anyway, the government 

“took” plaintiffs’ property outside of the rights provided for in the Master Lease and had 

to have obtained title to the containers in its sovereign capacity. Under Armstrong, such 

an action amounts to a Fifth Amendment taking. Id. at 48 (“[T]he use of a contract to 

take title [does not] relieve[] the Government from its constitutional obligation to pay just 

compensation for the value of the liens the petitioners lost and of which loss the 

Government was the direct, positive beneficiary.”).

b. The government cannot be liable for a taking unless it had notice 

of TOPtainer’s default before the date that title transferred.

A determination of whether the government acted in its sovereign rather than its 

proprietary capacity when it took title to CAI’s containers—and therefore whether a 

taking occurred—depends on whether the government knew that TOPtainer lost its rights 

over CAI’s containers when the government took title to CAI’s containers. The 

government cannot be liable for a taking where it “had no notice of plaintiff’s claim of 
-20-

title.” J.J. Henry Co. v. United States, 411 F.2d 1246, 1250 (Ct. Cl. 1969). “In the 

absence of some indication . . . through some communication to the government that 

[plaintiff] retained rights in the [property it alleged has been taken], . . . the government 

has not taken plaintiff’s property within the meaning of the Fifth Amendment.” Id. In 

this case, the timing of the notice is crucial, because if the government did not have 

notice that TOPtainer did not have the right to transfer title, the government was acting in 

its proprietary, not sovereign, capacity when title transferred under the Master Lease. On 

the other hand, if the government did have notice of TOPtainer’s default in advance of 

taking title, and knew that TOPtainer had lost its rights over the containers, the 

government was acting outside of its rights under the Master Lease when it took title to 

plaintiffs’ containers, and a taking has occurred.

In resolving this question, the court agrees with the government that the provisions 

of the UCC are instructive. See Hughes Commc’ns Galaxy, Inc. v. United States, 271 

F.3d 1060, 1066 (Fed. Cir. 2001) (“[T]he Uniform Commercial Code provides useful 

guidance in applying general contract principles.”). Section 2-403(2) of the UCC 

provides that if a party entrusts goods to a merchant that deals in those types of goods, a 

“buyer in the ordinary course” who purchases the goods from the merchant receives the 

goods free of any interest of the party that originally entrusted the goods to the 

merchant.11

 11 UCC § 2-403(2) provides: “Any entrusting of possession of goods to a merchant who deals in 

goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary 

course of business.”

 UCC § 2A-305(2) further provides that when a lessor (in this case, CAI) 
-21-

entrusts goods to a lessee (such as TOPtainer) who is a merchant that deals in those types 

of goods, and a “buyer in the ordinary course” (the government) purchases those goods 

from the merchant (TOPtainer), the buyer obtains all of the lessor’s (CAI’s) and the 

lessee’s (TOPtainer’s) rights, and takes free and clear of the existing lease contract.12

The UCC defines a “buyer in the ordinary course” as “a person that buys goods in 

good faith, without knowledge that the sale violates the rights of another person in the 

goods, and in the ordinary course from a person, other than a pawnbroker, in the business 

of selling goods of that kind.” UCC § 1-201(9). Under the most recent revision of the 

UCC, § 1-201(b)(20) defines “good faith” to “mean[] honesty in fact and the observance 

of reasonable commercial standards of fair dealing” for both merchants and nonmerchants who are “buyers in the ordinary course.” However, the states have adopted 

various versions of the UCC, some choosing to retain the old definition of “good faith” as 

“honesty in fact in the conduct or transaction concerned.” Robyn L. Meadows et al., 

2006 Uniform Commercial Code Survey: Introduction, 62 Bus. Law. 1555, 1555 n.3 

(2007).

 

Under the UCC, as long as the government was a “buyer in the ordinary course,” it could 

purchase plaintiffs’ containers free and clear of the lease between TOPtainer and 

plaintiffs.

 12 UCC § 2A-305(2) provides: “A buyer in the ordinary course of business or a sublessee in the 

ordinary course of business from a lessee who is a merchant dealing in goods of that kind to 

whom the goods were entrusted by the lessor obtains, to the extent of the interest transferred, all 

of the lessor's and lessee's rights to the goods, and takes free of the existing lease contract.” 
-22-

Here, to determine whether the government was a “buyer in the ordinary course,”

the court must first determine the date of the potential taking—the date that the 

government obtained title to plaintiffs’ containers. See Armstrong, 364 U.S. at 41, 45-46, 

48 (finding that, under a government contract for Navy boats which provided that in the 

event of default by the contractor, the government could terminate the contract and 

require the contractor to transfer title, a taking occurred for the value of plaintiffs’ liens 

on uncompleted boat hulls when title transferred to the government). Then, the court 

must determine whether the government received notice before this date such that it 

could not obtain good title to plaintiffs’ containers as a “buyer in the ordinary course.” 

As the government recognizes in its briefs, “unless plaintiffs notified the Government 

that TOPtainer was no longer validly in possession of the containers, the Government 

obtained good title to the containers.” Def.’s Reply at 1.

The government argues that the date it took title was the date the containers were 

“deemed lost,” which was at the latest January 14, 2005, the date when the government 

stopped paying the per diem rental charges for plaintiffs’ containers under the terms the 

Master Lease. Def.’s Reply at 17 (“[T]itle had already passed to the government on 

January 14, 2005.”). Plaintiffs argue that the date of the taking occurred, for CAI, when 

CAI provided notice of its right to its containers on February 8, 2005. 

After a consideration of these arguments, the court holds that, similar to the 

contract at issue in Armstrong, the relevant date for the takings analysis is the date the 

containers were declared lost or deemed lost by the government because that is the date 

on which title transferred to the government under the express terms of the Master Lease. 
-23-

See 364 U.S. at 41, 45-46, 48 (finding that the taking occurred when title passed pursuant 

to the government’s actions under a government contract). Under the UCC, “title to 

goods passes from the seller to the buyer in any manner and on any conditions explicitly 

agreed on by the parties.” UCC § 2-401(1). The government’s Master Lease with 

TOPtainer allowed the government to declare the leased containers lost ninety days after 

the July 2004 expiration of the Master Lease. Pursuant to the same clause in the Master 

Lease, the government received title to plaintiffs’ containers at the time those containers

were “determined lost or deemed lost.” Pls.’ First Mot., Ex. 9. In exchange, the 

government agreed to reimburse TOPtainer for the lost containers upon proper invoicing. 

Therefore, pursuant to the express terms of the Master Lease, title transferred to the 

government, and the taking, if one occurred, occurred when the government declared 

plaintiffs’ containers lost. 

Plaintiffs argue that the Master Lease should not be controlling because they were

not parties to that lease and therefore should not be bound by those terms. The court 

disagrees. The undisputed facts demonstrate that the Master Lease pre-dates plaintiffs’

leases, and that plaintiffs chose to enter into their contracts after the Master Lease was 

executed. As this court has previously held, after an examination of the Master Lease 

and plaintiffs’ contracts with TOPtainer, “plaintiffs, knowing their containers were in use 

by the government, agreed to accept payment from TOPtainer, and TOPtainer alone, if 

the government lost the plaintiffs’ containers.” Textainer, 99 Fed. Cl. at 219. Plaintiffs 
-24-

were aware, or should have been aware, of the terms of the Master Lease vis-à-vis their 

own contracts with TOPtainer.13

In sum, title transferred and a taking may have occurred when plaintiffs’

containers were “deemed lost” by the government under the terms of the Master Lease. 

To determine whether a compensable taking occurred, the court now turns to the facts of 

CAI’s case, and the arguments regarding whether the government received sufficient 

notice from plaintiffs such that it could not be a “buyer in the ordinary course,” but 

instead took title to the containers in its sovereign capacity, outside the terms of the 

Master Lease.

c. Capital’s notice of TOPtainer’s default was not sufficient to put 

the government on notice as to all plaintiffs, and CAI’s notice to 

the government occurred after title had transferred.

For plaintiff CAI, the government argues that it was a “buyer in the ordinary 

course” of CAI’s containers, and thus did not “take” CAI’s containers in its sovereign 

capacity. In particular, the government contends that because it did not receive notice

from CAI of TOPtainer’s default before it took title to the containers under the Master 

Lease, the government acquired plaintiffs’ containers in its proprietary capacity, and no 

taking has occurred. Plaintiffs argue that the government cannot be “a buyer in the 

ordinary course” under the UCC for CAI’s containers because the government received

notice from Capital of TOPtainer’s default under Capital’s lease in August 2004, well 

 13 Moreover, unlike the plaintiffs’ liens in Armstrong for which the Supreme Court found a 

taking had occurred, plaintiffs’ contracts with TOPtainer in this case were “affected by the 

contractual arrangements” between TOPtainer and the United States executed before plaintiffs 

entered into their own contracts with TOPtainer. 364 U.S. at 45-46.
-25-

before the government took title. Plaintiffs also argue that CAI notified the government 

of CAI’s rights to its containers before the government executed the contract 

modification authorizing the buyout of CAI’s containers, and before the government paid 

TOPtainer for those containers. In such circumstances, plaintiffs argue, the government 

could have paid the rightful owner of the containers.

As noted above, the court holds that the relevant date for the takings analysis 

occurred when title passed to the government—when, under the Master Lease, it declared 

plaintiffs’ containers lost. While the government pegs the date of the taking in this case 

on January 14, 2005, when the government stopped paying per diem rental charges to 

TOPtainer for the lost containers, the undisputed facts show that even before that date,

the government had determined the containers were lost. Under the terms of the Master 

Lease, the government could declare plaintiffs’ containers lost and take title to those 

containers ninety days after the expiration of the Master Lease, and, in return, would pay 

TOPtainer for the lost containers that were properly invoiced. TOPtainer submitted its 

invoices for all of CAI’s containers on December 29, 2004, showing that these containers 

were identified as “lost” before that date. In any event, the undisputed facts show that at 

the very least, the government had declared CAI’s containers lost before it received 

notice from CAI on February 8, 2005. On that same date, CAI received notice from the 

government that title had transferred sometime before that date. Government contractor 

Len Priber’s email to CAI on February 8, 2005, states that “we have notified Toptainer of 

all units declared lost.” Pls.’ First Mot., Ex. 18.
-26-

Thus, CAI’s notice to the government occurred after title had passed. This notice 

also occurred after TOPtainer had invoiced the government for CAI’s lost containers

pursuant to the Master Lease on December 29, 2004. Therefore, the government was not 

put on notice by CAI, before title had passed, of TOPtainer’s default under its lease with 

CAI. Under the UCC, good title will pass if the buyer—here, the government—is 

“without knowledge that the sale violates the rights of another person in the goods.”

UCC § 1-201(9). Furthermore, under UCC § 2-403, CAI assumed the risk that 

TOPtainer might sell its containers. See DeWeldon, Ltd. v. McKean, 125 F.3d 24, 28 

(1st Cir. 1997) (“When a person knowingly delivers his property into the possession of a 

merchant dealing in goods of that kind, that person assumes the risk of the merchant’s 

acting unscrupulously by selling the property to an innocent purchaser.”). This concept 

extends to the lease contracts for the case at hand under UCC § 2A-305(2). Under that 

section, a “buyer in the ordinary course” will take free and clear of any existing lease 

contract—here, the lease contract between CAI and TOPtainer.

The court is not persuaded by plaintiffs’ argument that a taking occurred after title

had passed because the government did not authorize the buyout until February 17, 2005 

and did not pay TOPtainer until March 21, 2005, and that, therefore, the government 

could have stopped the buyout after it had received notice from CAI. As discussed 

above, title already passed to the government once the government declared plaintiffs’

containers lost. Once TOPtainer had properly invoiced the government for CAI’s 

containers, the government was obliged to pay TOPtainer under the terms of the Master 

Lease. Therefore, the court finds that the government was acting in its proprietary 
-27-

capacity when it authorized the contract modification and paid TOPtainer, instead of 

CAI, for CAI’s containers.

Nor is the court persuaded by plaintiffs’ argument that Capital’s notice to the 

government in August 2004 served as constructive notice to the government for plaintiff 

CAI, and that, therefore, the government cannot claim valid title under the terms of the 

Master Lease.

14

 14 Plaintiffs also generally argue that that because TOPtainer did not own any of the containers 

that it was leasing to the government, any provision in the Master Lease involving title transfer is 

void. Plaintiffs provide no authority for this statement. In addition, as discussed above, this 

court has previously held after an examination of the relevant contracts that “plaintiffs, knowing 

their containers were in use by the government, agreed to accept payment from TOPtainer, and 

TOPtainer alone, if the government lost the plaintiffs’ containers.” Textainer, 99 Fed. Cl. at 219. 

Plaintiffs were aware, or should have been aware, of the terms of the Master Lease vis-à-vis their 

own contracts with TOPtainer, and plaintiffs’ contracts did not operate to void any provision of 

the Master Lease with TOPtainer.

 Specifically, plaintiffs argue that to be a “buyer in the ordinary course,”

the government was required to act in “good faith,” which meant that the government had

to observe “reasonable commercial standards” under the UCC. Pls.’ Reply at 22-23 

(citing Touch of Class Leasing v. Mercedes Benz Credit, 591 A.2d 661, 671 (N.J. Super. 

Ct. App. Div. 1991)). Plaintiffs further contend that observance of “reasonable 

commercial standards” mandated that the government conduct a reasonable inquiry into

the ownership status of all other container owners that leased their containers with 

TOPtainer once the government became aware that TOPtainer was in default with 

Capital. The government argues in response that it had no such duty to inquire into the 

status of TOPtainer’s rights over CAI’s containers based on Capital’s notice to the 

government. The government contends that nothing in the UCC or in the cases 

interpreting the UCC suggests that the government had a duty to inquire into TOPtainer’s 
-28-

relationship with its other contractors because the government learned TOPtainer was in 

default with one. 

After consideration of these arguments, the court finds that Capital’s notice to the 

government of TOPtainer’s default under its own lease with TOPtainer was not enough to 

put the government on notice as to the other plaintiffs’ containers. If the United States 

had a duty to inquire into the rights TOPtainer had in the leased containers once it learned 

of TOPtainer’s default under its lease with Capital, the court finds that that duty was

limited to an inquiry into the status of TOPtainer’s rights in Capital’s containers only. To 

hold otherwise would put an unreasonable burden on the government to inquire into the 

status of a prime contractor’s relationship with all of its subcontractors, based on notice 

of default from one. The burden should be on each subcontractor to provide the 

government with notice.15

Moreover, under the unique facts of this case, the court does not find it 

commercially unreasonable that the government would conclude that TOPtainer’s default 

with Capital was limited only to Capital. The undisputed facts show that CAI is seeking 

compensation for only 387 out of the 435 containers declared lost by the government 

because CAI was in fact paid by TOPtainer for some of the containers declared lost by 

the government. In other words, TOPtainer continued to pay CAI after title had 

transferred to the government in accordance with both the Master Lease and CAI’s 

contract with TOPtainer.

 15 This holding is consistent with UCC §§ 2-403 and 2A-305, which place the risk of loss onto 

the party that entrusts its property to a merchant—here, the plaintiffs—rather than onto a “buyer 

in the ordinary course” of that property.
-29-

In addition, although CAI asserts that TOPtainer had fallen significantly behind in 

its per diem payments to CAI as early as 2004, CAI never alerted the government of 

TOPtainer’s default until February 8, 2005. CAI could have provided timely notice, but 

for its own reasons elected not to. Accordingly, the court finds that the notice the 

government received from Capital in August 2004 did not serve to put the government on 

notice that TOPtainer was in default with CAI. For all of these reasons, the court holds 

that the government, as a “buyer in the ordinary course,” took valid title to CAI’s 

containers under the terms of the Master Lease in its proprietary, rather than sovereign 

capacity. The government is therefore entitled to summary judgment as to plaintiff CAI’s 

takings claim.

C. The government is entitled to summary judgment as to plaintiff 

Cronos’s claim.

Plaintiff Cronos also seeks just compensation for 103 of its containers that were 

subject to the TOPtainer buyout. Before moving onto the merits of Cronos’s takings 

claim, the court must also establish that it has jurisdiction to consider Cronos’s claims. 

The government does not dispute that Cronos owns 72 of the 103 containers for which it 

is seeking compensation. However, the government does dispute whether Cronos may 

assert a claim for 31 containers that it did not own, but managed for “external investors.” 

Cronos argues that these containers were “retired” and Cronos paid the external investors 

for their property interest in the containers. Cronos argues that in such circumstances it is 

properly the successor to the claims of the external investors with regard to the 31 

containers. 
-30-

The court agrees with the government that Cronos may not pursue compensation 

for these 31 containers. Cronos has produced no evidence as to the identity of these 

investors or Cronos’s purchase of the 31 containers from the external investors. The 

court finds that as a matter of law Cronos has not established a valid property interest in 

the 31 containers. See Wyatt v. United States, 271 F.3d 1090, 1096 (Fed. Cir. 2001) 

(holding that only persons with a valid property interest at the time of the taking are 

entitled to compensation). The court therefore holds that the government is entitled to 

summary judgment as to these 31 containers. 

The court also concludes that the government is entitled to summary judgment for 

the remaining 72 Cronos containers at issue in this case. It is undisputed that Cronos 

never notified the government of TOPtainer’s default under its lease with Cronos. As a 

result, the government was at all times a “buyer in the ordinary course” of Cronos’s 

containers. Therefore, for the reasons discussed above with regard to CAI’s takings 

claim, the court finds that the government is entitled to summary judgment as to plaintiff 

Cronos’s 103 containers.

III. CONCLUSION

For the foregoing reasons, the court holds as follows:

1. Plaintiffs’ motion to join Green Eagle as the real party in interest is GRANTED. 

The parties shall have until January 31, 2013 to conduct limited discovery into 

whether Green Eagle has standing to pursue this takings claim and whether 

Capital’s takings claim transferred to Green Eagle by operation of law or is barred 

by the Anti-Assignment Act. The court STAYS ruling on the parties’ crossmotions in regard to the government’s liability as to Green Eagle, and on 
-31-

plaintiffs’ motion for sanctions,16 until after discovery is complete. Upon 

completion of discovery, the parties shall submit a status report by February 8, 

2013, outlining next steps in this litigation.

2. Plaintiffs’ motion for summary judgment as to plaintiffs CAI and Cronos is 

DENIED. The government’s cross-motion for summary judgment as to plaintiffs 

CAI and Cronos is GRANTED.

3. The court STAYS ruling on the proper interest rate to apply pending resolution of 

Green Eagle’s claim.

IT IS SO ORDERED.

s/Nancy B. Firestone 

NANCY B. FIRESTONE

Judge

 16 The court will consider plaintiffs’ motion for sanctions only as it relates to Capital’s 

containers.