United States Court of Appeals for the Federal Circuit 

2008-5114, -5115 

FRANCISCO JAVIER RIVERA AGREDANO 

and ALFONSO CALDERON LEON, 

 Plaintiffs-Cross Appellants, 

v. 

UNITED STATES, 

Defendant-Appellant. 

Teresa Trucchi, Suppa, Trucchi and Henein LLP, of San Diego, California, 

argued for plaintiffs-cross appellants. 

Patricia M. McCarthy, Trial Attorney, Commercial Litigation Branch, Civil Division, 

United States Department of Justice, of Washington, DC, argued for defendantappellant. With her on the brief were Tony West, Assistant Attorney General, and 

Jeanne E. Davidson, Director. Of counsel on the brief were Devin A. Wolak, Trial 

Attorney, and Christopher J. Duncan, Attorney, Office of Assistant Chief Counsel, 

Department of Homeland Security, United States Customs and Border Protection, of 

San Diego, California. 

Appealed from: United States Court of Federal Claims 

Chief Judge Emily C. Hewitt
United States Court of Appeals for the Federal Circuit 

 

 

2008-5114, -5115 

FRANCISCO JAVIER RIVERA AGREDANO 

and ALFONSO CALDERON LEON, 

Plaintiffs-Cross Appellants, 

v. 

UNITED STATES, 

 Defendant-Appellant. 

Appeals from the United States Court of Federal Claims in 

 05-CV-608, Chief Judge Emily C. Hewitt. 

 __________________________ 

DECIDED: February 17, 2010 

 __________________________ 

Before MAYER, CLEVENGER, and DYK, Circuit Judges. 

Opinion for the court filed by Circuit Judge MAYER. Concurring opinion filed by Circuit

Judge DYK. 

MAYER, Circuit Judge. 

The United States appeals the judgment of the Court of Federal Claims holding 

that United States Customs and Border Protection (“Customs”) breached an implied-infact warranty when it inadvertently sold a vehicle containing concealed narcotics to 

Francisco Javier Rivera Agredano. See Agredano v. United States, 82 Fed. Cl. 416 

(2008). Because the court erred in finding an implied warranty in the agreement 

between Customs and Agredano, we reverse. 
BACKGROUND 

Agredano attended a Customs auction of forfeited vehicles on September 5, 

2001. In order to participate in the auction, Agredano was required to sign a bidder 

registration form stating that he “agree[d] to comply with the terms of sale contained in 

the sale catalog for this sale.” The sale catalog, in turn, stated: 

The vehicles offered to you for purchase at any U.S. Customs Auction are 

sold “AS IS, WHERE IS”. This means that neither U.S. Customs or 

McCormack Auction Company, or EG & G Dynatrend, extend any 

warranties or promises of any kind regarding any aspect of the vehicle or 

its ability to operate, including but not limited to the vehicle’s identity, 

previous ownership, physical condition, registration status, or ability to 

pass a smog certification. 

A second disclaimer, printed on a flyer displayed at the auction, stated “[a]ll 

merchandise is sold on an ‘AS IS, WHERE IS’ basis, without warranty or guarantee as 

to condition, fitness to use, or merchantability stated, implied or otherwise. Please bid 

from your personal observations.” 

Agredano purchased a 1987 Nissan Pathfinder at the auction. The vehicle had 

been seized by Customs and forfeited when its previous owner attempted to transport 

marijuana across the Mexican border into the United States. While Customs agents 

detected and removed some of the marijuana at that time, more remained in the vehicle 

unbeknownst to Customs or Agredano. Several months after the auction, on January 

24, 2002, Agredano was traveling in the Pathfinder in Mexico with Alfonso Calderon 

Leon, his business partner and brother-in-law. The two men were stopped at a 

checkpoint by Mexican soldiers who inspected the vehicle and found the hidden 

marijuana. Both men were arrested and spent nearly a year in prison before being 

exonerated by a Mexican appellate court on January 10, 2003. 

2008-5114, -5115 2
Agredano and Leon jointly filed a claim against the United States in the United 

States District Court for the Southern District of California pursuant to the Federal Tort 

Claims Act (“FTCA”), 28 U.S.C. §§ 1346(b), 2671-2680, alleging, inter alia, negligence 

and breach of contract. While the case was pending, the Supreme Court issued its 

decision in Sosa v. Alvarez-Machain, which held that a statutory exception to the FTCA 

“bars all claims based on any injury suffered in a foreign country, regardless of where 

the tortious act or omission occurred.” 542 U.S. 692, 712 (2004). Relying on Sosa, the 

district court granted the government’s motion for summary judgment. The parties then 

stipulated to the filing of an amended complaint, alleging only contract claims, and the 

transfer of the action to the Court of Federal Claims. 

The Court of Federal Claims held that a contract arose when Agredano agreed to 

purchase and Customs agreed to sell the Pathfinder, the contract contained an impliedin-fact warranty that the vehicle did not contain contraband, and Customs breached this 

warranty. Agredano, 82 Fed. Cl. at 452. The court awarded damages for Agredano’s 

past and future medical bills, past and future psychiatric treatment, attorney fees in 

connection with the criminal proceedings in Mexico, and costs incurred by Agredano’s 

family to visit him in prison. Id. The trial court denied third-party beneficiary status to 

Leon, denied Agredano’s request for damages for emotional distress, and held that 

Customs did not violate the implied covenant of good faith and fair dealing. Id. at 428-

29, 447, 451-52. The United States appeals the finding of an implied-in-fact warranty. 

Agredano and Leon cross-appeal as to third-party beneficiary status for Leon, damages 

2008-5114, -5115 3
for emotional distress, and the implied covenant of good faith and fair dealing.1

 We 

have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3). 

DISCUSSION 

 We review the Court of Federal Claims’s decision de novo for errors of law and 

for clear error on findings of fact. Ind. Mich. Power Co. v. United States, 422 F.3d 1369, 

1373 (Fed. Cir. 2005). Contract interpretation is a matter of law, and is therefore 

reviewed de novo. St. Christopher Assocs., L.P. v. United States, 511 F.3d 1376, 1380 

(Fed. Cir. 2008). 

 “[T]o recover for a breach of warranty, a plaintiff must allege and prove (1) that a 

valid warranty existed, (2) the warranty was breached, and (3) plaintiff’s damages were 

caused by the breach.” Hercules Inc. v. United States, 24 F.3d 188, 197 (Fed. Cir. 

1994). At issue in this case is the first prong. It is undisputed that Customs made no 

express warranties regarding the vehicle, and the trial court appropriately determined 

that it did not have jurisdiction to entertain a claim that a warranty was implied-in-law. 

Agredano, 82 Fed. Cl. at 430 (citing Hercules, Inc. v. United States, 516 U.S. 417, 423 

(1996)). Instead, the trial court held that the contract between Agredano and Customs 

contained an implied-in-fact warranty that the Pathfinder was free of contraband, 

despite the disclaimers of warranty made by Customs at the auction. 

As the trial court correctly stated, an agreement implied-in-fact requires a 

“‘meeting of minds’” that can be inferred from the conduct of the parties. Id. at 440 

(quoting Baltimore & Ohio R.R., 261 U.S. 592, 597 (1923)). We have found implied 

 1

 Agredano and Leon also argue that we should transfer the FTCA claims 

they raised in the Southern District of California to the United States Court of Appeals 

for the Ninth Circuit. Because these claims were not before the Court of Federal 

Claims, we lack jurisdiction over them. 

2008-5114, -5115 4
warranties only where “the circumstances strongly supported a factual inference that a 

warranty was implied.” Lopez v. A.C. & S., Inc., 858 F.2d 712, 715 (Fed. Cir. 1988). 

The trial court held that the actions of Agredano and Customs, indicating that 

both parties believed the Pathfinder was free of contraband, demonstrate the requisite 

meeting of the minds to form an implied warranty. Agredano, 82 Fed. Cl. at 440. The 

foundation of the parties’ belief is an expectation that Customs had fulfilled its regulatory 

duty to remove any contraband from the vehicle before selling it. Id. at 437 (“The 

officers and agents of Customs are tasked with the duty to identify and remove all 

contraband from vehicles that cross into the United States.”). However, Customs’ 

responsibility to remove contraband from forfeited vehicles does not provide a 

contractual warranty to future purchasers of the vehicles that it has done so. D & N 

Bank v. United States, 331 F.3d 1374, 1378-79 (Fed. Cir. 2003) (“An agency’s 

performance of its regulatory or sovereign functions does not create contractual 

obligations.”). While Agredano is correct that the sale of the vehicle was a commercial 

transaction, not a regulatory function, the source of any responsibility on the part of 

Customs to search vehicles and remove contraband is its regulatory function and a 

failure to adequately perform this responsibility does not provide a contractual remedy. 

The existence of an implied-in-fact warranty is further undermined by the express 

disclaimers Customs made at the auction, which show that Customs did not intend to 

make any warranty with regard to the vehicle. The meeting of the minds required to 

form an implied-in-fact warranty therefore could not have occurred. The trial court held 

that Customs did not disclaim a warranty that the vehicle was free of contraband by 

interpreting the scope of disclaimer to be limited to “the construction, maintenance, and 

2008-5114, -5115 5
2008-5114, -5115 6

mechanical operation of the vehicle” and not extending to “a situation in which ‘the 

vehicle had been modified in a way that had no effect on its ability to function for 

transportation.’” Agredano v. United States, 70 Fed. Cl. 564, 572 (2006) (quoting 

Rodriguez v. United States, 69 Fed. Cl. 487, 498 (2006)). This interpretation ignores 

the language found in the sale catalog, which indicates that the disclaimer goes beyond 

mechanical operation of the vehicle by stating that no warranties are provided 

“regarding any aspect of the vehicle or its ability to operate” (emphasis added). The 

sale catalog offers as examples of aspects of the vehicle for which no warranty is 

provided the vehicle’s identity, previous ownership, and registration status. These 

examples further demonstrate that the disclaimer is not limited to the ability of the 

vehicle to function for transportation. Customs clearly and unambiguously stated that it 

was not extending a warranty regarding any aspect of the vehicle, and it is incongruous 

to find that Customs impliedly warranted what it expressly disclaimed. 

The issues of third-party beneficiary status and damages for emotional distress 

raised by Agredano and Leon in their cross-appeal are rendered moot by this decision. 

We have considered their argument that the government violated the implied covenant 

of good faith and fair dealing, and we concur with the trial court’s decision on this issue. 

CONCLUSION 

Accordingly, the judgment of the Court of Federal Claims is reversed. 

REVERSED
United States Court of Appeals for the Federal Circuit 

 

2008-5114, -5115 

FRANCISCO JAVIER RIVERA AGREDANO 

and ALFONSO CALDERON LEON, 

Plaintiffs-Cross Appellants, 

v. 

UNITED STATES, 

 Defendant-Appellant. 

Appeals from the United States Court of Federal Claims in 

 05-CV-608,Chief Judge Emily C. Hewitt. 

DYK, Circuit Judge, concurring. 

Absent a contractual warranty disclaimer, it seems to me that the sale of an 

automobile by the government to a private purchaser likely carries with it an implied-infact warranty of fitness, including a warranty that the vehicle does not contain illegal 

drugs. However, I agree with the majority that the contract here explicitly disclaimed all 

warranties, not just those relating to the operability of the vehicle. The government’s 

regulatory practice of inspecting such vehicles for contraband cannot overcome this 

disclaimer. I accordingly join the majority opinion.