Opinion ID: 211884
Heading Depth: 2
Heading Rank: 2

Heading: Waiver of Breach

Text: 16 Next, the government contends that Westfed waived its right to bring a claim for the government's material breach of their contract by accepting hundreds of millions of dollars from the government. The trial court found that Westfed had reserved its rights to bring a claim for the breach despite its alleged continued acceptance of the government's payments. Westfed I, 52 Fed. Cl. at 158. The government responds that only New Western, but not its holding company, Westfed, preserved its legal rights, and the trial court erred by assuming that having substantially identical interests between the holding company and the held corporation suffices to preserve the holding company's right to claim breach of contract. In support of its position, the government notes that: (1) when New Western failed, Westfed hid behind the corporate form to shield itself from New Western's liabilities; and (2) the trial court's holding allegedly conflicts with rulings it made during trial, in which it found that there was no showing that Westfed had ever authorized New Western to speak on its behalf. Westfed II, 55 Fed. Cl. at 564. 17 A party to a contract may waive the breach of an agreement by the continued acceptance of performance by the breaching party without reservation of rights. Ling-Temco-Vought, Inc. v. United States, 201 Ct.Cl. 135, 475 F.2d 630, 637-38 (1973). Waiver is an affirmative defense, as to which the breaching party bears the burden of proof. See Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1299 (Fed.Cir.2002). When the government knows of the non-breaching party's timely reservation of rights in protest to the breach, the acceptance of payments from the government does not waive the party's rights arising from the breach. N. Helex Co. v. United States, 197 Ct.Cl. 118, 455 F.2d 546, 555 (1972). The reservation of rights may be express or implied. Id. 18 The government takes issue with the trial court's conclusion that New Western's reservation of rights sufficed to preserve Westfed's rights to remedies from the government's breach, particularly when the trial court found that no agency relationship existed to allow attributing New Western's statements to Westfed as party-opponent admissions under Federal Rules of Evidence (FRE) 801(d)(2)(D). See Westfed II, 55 Fed.Cl. at 564. The court noted that FRE 801(d)(2)(D) expressly provides that the statement be made by the `party's agent.' Id. Because it found insufficient evidence to conclude that Westfed established an agency relationship with New Western, it declined to attribute statements by New Western to Westfed. Id. Nevertheless, in view of the substantial identity of legal interest between New Western and Westfed, the trial court found that New Western's repeated statements of its intent to preserve its rights and remedies negated any inference of waiver by Westfed. Westfed I, 52 Fed.Cl. at 159 n. 21. 19 As the party claiming waiver, the government bears the burden of proof to show by a preponderance of evidence that Westfed waived its rights to assert its breach of contract claim. The government does not dispute that it never received an express statement of intent to waive the breach. Rather, it contends that we should find that Westfed impliedly expressed an intent to waive the breach from its acceptance of the government's monetary assistance. Implied waiver may be inferred by conduct or actions that mislead the breaching party into reasonably believing that the rights to a claim arising from the breach was waived. See N. Helex, 455 F.2d at 551 (As a general proposition, one side cannot continue after a material breach by the other, . . . act as if the contract remains fully in force . . ., run up damages, and then go suddenly to court.). Although in some instances, silence by the non-breaching party in response to the breaching party's conduct might be evidence of a waiver, Ling-Temco-Vought, 475 F.2d at 637, we find Westfed's alleged failure to object does not amount to evidence of a waiver in view of the non-waiver clauses at section 22 of the Assistance Agreement and section 11 of the RCMA. Coast Fed. Bank, FSB v. United States, 48 Fed.Cl. 402, 417-18 (2000). 20 Like the non-waiver clause in Coast Federal, id. at 417, section 22 of the Assistance Agreement provides that [n]o forbearance, failure, or delay by any party in exercising or partially exercising . . . right [given by the Agreement], power, or remedy shall operate as a waiver thereof or preclude its further exercise. Similarly, section 11 of the RCMA contains language that is virtually identical to the non-waiver clause in Coast Federal. Id. The government cites no controlling federal contract law to demonstrate that a non-waiver clause in a Winstar -related case is unenforceable. According to the choice of law provision in the contract, [t]o the extent that Federal law does not control, [the Assistance Agreement and RCMA] and the parties' rights and obligations under it shall be governed by the law of the state of California. Again, the government cites no laws or cases from the state of California that preclude application of the non-waiver clause. We find no persuasive reason supplied by the government to justify ignoring the terms of the parties' contract, so as to find Westfed's alleged failure to object to the government's breach to be a waiver of its right to assert a claim. Moreover, the government cites no other record evidence from which we might otherwise infer that Westfed intended in fact to waive the government's breach. 1 We agree with the trial court that the government has failed to meet its burden to support its affirmative defense that Westfed waived its right to assert its claim.