Court Opinion

ID: 9908646
Source: CourtListenerOpinion
Date Created: 2023-12-11 16:01:14.707888+00
Date Added: 2024-06-11T12:49:23.578957
License: Public Domain

Case: 22-1740    Document: 46     Page: 1   Filed: 12/11/2023

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

            NOVA GROUP/TUTOR-SALIBA,
                  Plaintiff-Appellant

                             v.

                    UNITED STATES,
                    Defendant-Appellee
                  ______________________

                        2022-1740
                  ______________________

     Appeal from the United States Court of Federal Claims
 in Nos. 1:15-cv-00885-MCW, 1:16-cv-00925-MCW, Senior
 Judge Mary Ellen Coster Williams.
                  ______________________

                Decided: December 11, 2023
                  ______________________

     G. SCOTT WALTERS, Smith, Currie & Hancock LLP, At-
 lanta, GA, argued for plaintiff-appellant. Also represented
 by ROBERT O'NEAL FLEMING, JR.; SARAH CARPENTER, Char-
 lotte, NC; ALEXANDER GORELIK, Tysons, VA.

     ANDREW JAMES HUNTER, Commercial Litigation
 Branch, Civil Division, United States Department of Jus-
 tice, Washington, DC, argued for defendant-appellee. Also
 represented by BRIAN M. BOYNTON, STEVEN JOHN
 GILLINGHAM, PATRICIA M. MCCARTHY.
                  ______________________
Case: 22-1740     Document: 46     Page: 2    Filed: 12/11/2023

 2                             NOVA GROUP/TUTOR-SALIBA v. US

     Before CHEN, CUNNINGHAM, and STARK, Circuit Judges.
 STARK, Circuit Judge.
     Nova Group/Tutor-Saliba (“NTS”) appeals from the
 judgment of the United States Court of Federal Claims
 that NTS failed to demonstrate it was entitled to recover
 additional compensation for alleged differing site condi-
 tions it encountered during the performance of a construc-
 tion contract. We affirm.
                               I
     In May 2008, the United States Department of the
 Navy, acting through the United States Naval Facilities
 Engineering Command (collectively, the “government”),
 awarded NTS a contract to build a new aircraft carrier
 maintenance pier at Naval Base Kitsap in Bremerton,
 Washington. The contract required NTS to demolish an old
 pier; design and build a replacement pier (“Pier B”); and
 build a new structure, known as the Mole Quaywall, that
 would be designed by the government. The Mole Quaywall
 would be integrated with the adjacent Pier B to create a
 contiguous surface.
     Construction of both the Mole Quaywall and Pier B in-
 volved driving supporting concrete piles into the subsur-
 face soils until they reached certain “pile tip elevations.” 1
 The pile tip elevations for the government-designed Mole
 Quaywall were prescribed in the solicitation for bids. In
 particular, that solicitation included a geotechnical engi-
 neering report, known as the Geotechnical Engineering
 Baseline Survey (“GEBS”). The GEBS supplied infor-
 mation about the subsurface soil conditions at the Mole

       1 Here, the “pile tip elevation” refers to the depth be-
 low ground, not the altitude above ground, to which the
 successful bidder would be required to drive the concrete
 piles.
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 NOVA GROUP/TUTOR-SALIBA v. US                              3

 Quaywall construction site and the adjacent Pier B site. It
 was anticipated, then, that the successful bidder for the
 contract, which included both the Mole Quaywall and the
 Pier B sites, would use the information provided in the
 GEBS to formulate its design for the pile tip elevations at
 Pier B. The successful bidder would also be responsible for
 calculating the length and required materials for the piles
 to be installed at the Mole Quaywall and Pier B.
     NTS was awarded the contract. During NTS’ construc-
 tion of the Mole Quaywall according to the government’s
 design, NTS encountered subsurface soil conditions that
 made it difficult to drive some of the piles to reach the tip
 elevations prescribed by the government. This required
 NTS to cut off greater lengths of those piles than planned,
 adding to the expense of the project. The subsurface con-
 ditions also caused some piles to move during installation
 and fall outside the specified levels of tolerance for varia-
 tions.
     In December 2009, NTS submitted a request for equi-
 table adjustment (“REA 5”), seeking additional costs in-
 curred due to the site conditions it encountered at the Mole
 Quaywall, in the amount of over $1 million. In response,
 the government issued Contract Modification No. A00057
 (“Mod. A00057”). Mod. A00057 was entered into pursuant
 to the authority of “FAR 52.236-2 Differing Site Conditions
 (APR 1984)” and provided for “settlement of contractor[’]s
 Request for Equitable Adjustment Number 5 for differing
 site conditions encounter[ed] at the [M]ole [Quaywall].”
 J.A. 17959-61. Under Mod. A00057, the total cost of the
 contract was increased by $675,000.
      Based on its experience with the site conditions at the
 adjacent Mole Quaywall, NTS made multiple modifications
 to its Pier B design, including revising the pile tip eleva-
 tions. NTS encountered pile-driving problems at Pier B
 just as it had at the Mole Quaywall. Some Pier B piles
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 4                            NOVA GROUP/TUTOR-SALIBA v. US

 could not reach the designed tip elevations, forcing longer-
 than-expected cutoffs, and numerous piles fell outside of
 the specified tolerance levels.
     In October 2011, NTS submitted another request for
 equitable adjustment (“REA 9”), this one for the additional
 costs incurred due to the Pier B site conditions. REA 9,
 which alleged differing site conditions at Pier B, sought
 more than $10 million of additional payments, which the
 government denied. NTS then filed suit in the Court of
 Federal Claims. NTS alleged that it had encountered
 “Type I differing site conditions” at the Pier B site due to
 conditions and obstructions not disclosed in the contract
 documents, or alternatively a “Type II differing site condi-
 tion” due to “unknown physical condition.” 2 J.A. 36.
     During discovery, the government produced a pre-ne-
 gotiation business clearance memorandum pertaining to
 REA 5 and Mod. A00057. The memo stated that while the
 government did “not see” the condition at the Mole Quay-
 wall “as being a differing site condition,” it agreed it was
 responsible for the additional costs NTS had incurred
 “[d]ue to the Government providing the [Mole Quaywall’s]
 pile tip elevations.” J.A. 8633. NTS sought to exclude the
 memo from being introduced into evidence in the Court of
 Federal Claims trial on its Pier B-related claim, invoking
 the parol evidence rule. The Court of Federal Claims de-
 nied NTS’ motion in limine and, over NTS’ objection,

     2   A Type I differing site condition arises “when the
 conditions encountered differ from what was indicated in
 the contract documents.” Renda Marine, Inc. v. United
 States, 509 F.3d 1372, 1376 (Fed. Cir. 2007). A Type II dif-
 fering site condition arises “when the conditions encoun-
 tered are of an unusual nature and differ materially from
 those normally encountered in the kind of work contem-
 plated by the contract.” Id.
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 NOVA GROUP/TUTOR-SALIBA v. US                              5

 admitted the memo and then permitted witness testimony
 supporting the government’s contention that it did not ac-
 tually believe the situation in REA 5 constituted a differing
 site condition at the Mole Quaywall. J.A. 7309-15.
       The Court of Federal Claims issued its post-trial opin-
 ion in March 2022. See Nova Grp./Tutor-Saliba v. United
 States, 159 Fed. Cl. 1 (2022). It found that NTS failed to
 demonstrate that it was entitled to relief on its Pier B dif-
 fering site condition claim. See id. at 34-44. Specifically,
 the Court of Federal Claims held that NTS had not estab-
 lished a Type I differing site condition because, among
 other things, the contract documents disclosed that NTS
 would encounter unpredictable subsurface conditions and
 possible obstructions, and indicated that “[h]ard [d]riving
 [w]as to be [e]xpected.” Id. at 39. NTS had failed to prove
 a Type II differing site condition because it had “not demon-
 strated that any of [the] potential causes for hard driving
 . . . were unknown or unusual in the region or materially
 different from comparable work.” Id. at 44.
     NTS timely appealed. The Court of Federal Claims had
 jurisdiction pursuant to 28 U.S.C. § 1491(a)(2) and we have
 jurisdiction under 28 U.S.C. § 1295(a)(3).
                              II
     We review the Court of Federal Claims’ legal determi-
 nations de novo and its fact findings for clear error. See
 Ind. Mich. Power Co. v. United States, 422 F.3d 1369, 1373
 (Fed. Cir. 2005). Contract interpretation is a question of
 law, which we review de novo. See Nw. Title Agency, Inc.
 v. United States, 855 F.3d 1344, 1347 (Fed. Cir. 2017).
     The parol evidence rule precludes the admission of ex-
 trinsic evidence “to modify, supplement, or interpret the
 terms of an integrated agreement.” Barron Bancshares,
 Inc. v. United States, 366 F.3d 1360, 1375 (Fed. Cir. 2004).
 Our precedent has not explicitly set out the standard of
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 6                             NOVA GROUP/TUTOR-SALIBA v. US

 review of a trial court’s application of the parol evidence
 rule. We have, however, recognized that the parol evidence
 rule is “a rule of substantive law,” not a rule of evidence.
 Id.; see also David Nassif Assocs. v. United States, 557 F.2d
 249, 256 (Ct. Cl. 1977). We have further explained that
 certain issues preliminary to the application of the parol
 evidence rule, including whether a contract is completely
 integrated and whether an ambiguity exists in a contract,
 are questions of law subject to de novo review. See
 Rumsfeld v. Freedom NY, Inc., 329 F.3d 1320, 1328 (Fed.
 Cir. 2003) (whether contract is completely integrated);
 Gardiner, Kamya & Assocs., P.C. v. Jackson, 467 F.3d
 1348, 1353 (Fed. Cir. 2006) (whether ambiguity exists in
 contract). It follows that we review the trial court’s appli-
 cation of the parol evidence rule de novo. In so holding, we
 join our sister circuits that have addressed this issue. See,
 e.g., GTE Wireless, Inc. v. Cellexis Int’l, Inc., 341 F.3d 1, 4
 (1st Cir. 2003); Simmons Foods, Inc. v. Hill’s Pet Nutrition,
 Inc., 270 F.3d 723, 726 (8th Cir. 2001); Day v. Am. Seafoods
 Co., 557 F.3d 1056, 1057 (9th Cir. 2009); McCurdy Grp.,
 LLC v. Am. Biomedical Grp., Inc., 9 F. App’x 822, 830 (10th
 Cir. 2001).
                               III
     NTS raises two issues on appeal. First, it argues that
 the Court of Federal Claims erred in considering parol evi-
 dence that, it asserts, contradicted the government’s
 “stated basis” for issuing Mod. A00057. Appellant’s Br. at
 2. Second, it contends that the Court of Federal Claims
 erred in denying its Pier B differing site condition claim
 based on the design-build nature of the contract. We ad-
 dress each issue in turn.
                               A
    We begin with the parol evidence rule issue. There is
 no dispute that Mod. A00057, by which the government
 granted NTS’ REA 5 seeking additional payments for a
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 NOVA GROUP/TUTOR-SALIBA v. US                               7

 differing site condition at the Mole Quaywall, is a fully in-
 tegrated agreement. NTS argues that since the terms of
 Mod. A00057 provided that the contract modification was
 issued under the authority of “FAR 52.236-2 Differing Site
 Conditions (APR 1984)” to settle “contractor[’]s Request for
 Equitable Adjustment Number 5 for differing site condi-
 tions encounter[ed] at the [M]ole [Quaywall],” J.A. 17959-
 61, the admission of evidence demonstrating that the gov-
 ernment did not actually believe there was a differing site
 condition at the Mole Quaywall violated the parol evidence
 rule. We disagree.
      “[T]he parol evidence rule does not, per se, foreclose
 consideration of matters external to the parties’ written
 agreement.” David Nassif, 557 F.2d at 256. Instead, the
 rule “prohibits the use of external evidence to add to or oth-
 erwise modify the terms of a written agreement . . . [that]
 has been adopted by the parties as an expression of their
 final understanding.” Barron, 366 F.3d at 1375 (emphasis
 added); see also Rumsfeld, 329 F.3d at 1327 (“[B]arring cer-
 tain limited exceptions (e.g., fraud), a party to a written
 contract cannot supplement or interpret [an integrated]
 agreement with oral or parol statements that conflict with,
 supplant, or controvert the language of the written agree-
 ment itself.”). Here, the evidence NTS challenges was not
 introduced by the government “to add to or otherwise mod-
 ify” the terms of Mod. A00057. The government moved the
 memo into evidence and elicited trial testimony relating to
 it not to modify its contractual obligation to pay NTS an
 additional $675,000 on REA 5 but, instead, to support its
 collateral contentions as to why it settled (i.e., because it
 was the government that prescribed the pile tip elevations
 for the Mole Quaywall project). See J.A. 8633; see also J.A.
 7309-15 (testimony that government did not agree there
 was differing site condition at Mole Quaywall). An agree-
 ment to settle a claim alleging a differing site condition un-
 der a clause governing differing site conditions is different
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 8                             NOVA GROUP/TUTOR-SALIBA v. US

 from an agreement that the alleged differing site condition
 actually existed. As we see no provision in Mod. A00057
 that actually binds the government to an agreement that a
 differing site condition existed (as opposed to Mod. A00057
 unambiguously binding the government to settle a differing
 site condition claim), the memo and related testimony do
 not modify any term of the contract. The trial court, there-
 fore, did not violate the parol evidence rule.
     NTS’ contention fails for the additional reason that the
 parol evidence rule does not prevent a party to a contract
 from presenting evidence that “‘a recital of fact in an inte-
 grated agreement may be . . . untrue.’” United Pac. Ins. Co.
 v. Roche, 401 F.3d 1362, 1365 (Fed. Cir. 2005) (quoting Re-
 statement (Second) of Contracts § 218). In United Pacific,
 we held that the government was not obligated to pay the
 surety balance referenced in a takeover agreement’s
 “[w]hereas” clause because the “[w]hereas” clause is merely
 “a recital of fact.” Id. at 1365-66.
      Here, the provisions of Mod. A00057 on which NTS re-
 lies are, at best for NTS, “a recital of fact.” See Black’s Law
 Dictionary 1524 (11th ed. 2019) (defining “recital” as “pre-
 liminary statement in a contract or deed explaining the
 reasons for entering into it or the background of the trans-
 action”); see also 17A C.J.S. Contracts § 420 (stating recit-
 als are “explanations of the circumstances surrounding the
 execution of the contract”). We know the provisions on
 which NTS relies are recitals because they do not them-
 selves create promises, obligations, or substantive rights;
 therefore, they are not operative terms that are protected
 against alteration by the parol evidence rule. See, e.g., Pop-
 plewell v. Stevenson, 176 F.2d 362, 363 (10th Cir. 1949)
 (holding that parol evidence rule “has application to actions
 where the enforcement of an obligation created by the writ-
 ing is substantially the cause of action”). Therefore, again,
 the trial court’s admission of the memo and testimony re-
 lating to it did not violate the parol evidence rule.
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 NOVA GROUP/TUTOR-SALIBA v. US                              9

                              B
      We next turn to NTS’ argument that the Court of Fed-
 eral Claims erred in denying its differing site condition
 claim on the basis that it was a design-build contract. This
 contention provides no basis to reverse the Court of Federal
 Claims because it mischaracterizes the trial court’s analy-
 sis.
     According to NTS, the Court of Federal Claims “ex-
 plained [its] ruling in a footnote.” Appellant’s Br. at 27.
 That footnote, in its entirety, reads:
       NTS suggests that because the Government
       granted an equitable adjustment of $675,000
       for differing site conditions at the adjacent
       Mole Quaywall under Contract Modification
       A00057, NTS is entitled to an equitable ad-
       justment for pile driving difficulties at Pier B.
       However, the Government did not deem the
       situation at the Mole Quaywall to be a differ-
       ing site condition. There is a significant dif-
       ference in what transpired at the Mole – the
       Government provided the design and pile tip
       elevations for the Mole Quaywall, while NTS
       designed and chose the pile lengths and ar-
       rangement for Pier B.
 Nova Grp., 159 Fed. Cl. at 35 n.17.
     This footnote, at most, addressed why NTS was not au-
 tomatically entitled to an equitable adjustment for pile-
 driving difficulties at Pier B just because the government
 had granted an equitable adjustment at the Mole Quay-
 wall. To suggest that this footnote constitutes the entire
 explanation of the Court of Federal Claims’ ruling, or even
 an alternative, independent basis for its judgment, is incor-
 rect. The Court of Federal Claims devotes approximately
 a dozen pages of its opinion to a thorough, element-by-
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 10                            NOVA GROUP/TUTOR-SALIBA v. US

 element analysis of NTS’ Type I and Type II differing site
 condition claims, carefully reviewing the entirety of the
 record evidence and applying the appropriate legal stand-
 ards. See id. at 34-44. The court’s conclusion that NTS
 failed to establish a differing site condition at Pier B is
 clearly based on the totality of that analysis, not simply on
 the design-build nature of the Pier B project.
      Thus, while NTS is correct that the design-build nature
 of a contract does not place the risk of error in the govern-
 ment’s representations on the contractor, see Metcalf Con-
 str. Co. v. United States, 742 F.3d 984, 995-96 (Fed. Cir.
 2014), the Court of Federal Claims simply did not make a
 mistake on this issue here.
                              IV
     We have considered NTS’ remaining arguments and
 find them unpersuasive. 3 For the foregoing reasons, then,
 we affirm the judgment of the Court of Federal Claims.
                         AFFIRMED

      3   In its reply brief on appeal, NTS faults the trial
 court for failing to consider extrinsic evidence NTS argues
 “[r]efuted the [i]mproperly [a]dmitted [p]arol [e]vidence.”
 Reply Br. at 4-5. This issue is forfeited. See United States
 v. Ford Motor Co., 463 F.3d 1267, 1276 (Fed. Cir. 2006)
 (“Arguments raised for the first time in a reply brief are not
 properly before this court.”).