Court Opinion

ID: 9475398
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:26:06.435541+00
Date Added: 2024-06-11T17:44:41.655221
License: Public Domain

NICHOLS, Senior Circuit Judge,
concurring.
I join in Judge Archer’s able opinion, but desire to add a few words respecting my own problems with the resolution of this case which, by the authorities, we are constrained to arrive at. Were we writing on a clean slate, I would prefer to make Prudential whole for the losses it has suffered because the government, by holding over its leasehold term, prevented it from performing its contract with Cities Service.
The opinion properly relies on Northern Helex Co. v. United States, 207 Ct.Cl. 862, 524 F.2d 707 (1975), cert. denied, 429 U.S. 866, 97 S.Ct. 176, 50 L.Ed.2d 146 (1976) in which I dissented at 726, and cases cited therein. Perhaps a realistic assessment of the situation is the Holmesian doctrine that a contracting party who breaches a contract not enforceable in equity, or under tort law, really enjoys an option to withhold performance on payment of some anticipated money equivalent of what is withheld. Oliver Wendell Holmes, The Common Law (Howe Ed.1963) 236. Thus he cannot realistically be said to act illegally. The established doctrine in government contract law goes back to a case cited and quoted in Northern Helex: Myerle v. United States, 33 Ct.Cl. 1 (1897), an opinion by Davis, J, one of the ablest of that Nineteenth Century court.
Myerle’s decedent, Phineas Burgess, a New York shipbuilder, was induced by the Navy Department to establish a shipyard at Sausolito, California, in 1876 where he contracted to perform work ostensibly in repair of a U.S. warship, the Monadnock, but really to build a new one of that name. The work progressed slowly until 1878, and was thereafter suspended for lack of funding until 1883 with the new Monadnock still on the stocks in Burgess’ shipyard, blocking his acceptance of other work. The case is a compendium of about all the breaches of a shipbuilding contract it is possible for the Navy Department to commit: defective plans, defective government-furnished material, long delays in payment, etc., with the further complication that Congress took the view the contracts were illegal, a position the court rejected. The court had to, and did, override other vigorous resistance to awarding anything, but the actual award of $129,811.43 (without interest for 20 years’ delay in payment), was grossly insufficient to place the contractor in as good a position as he would have enjoyed if the government had performed, because of a rule made perfectly clear:
We hold that the plaintiff can only recover those items of damage which are the proximate result of the acts of the Government. What those items are is somewhat difficult to determine. For a damage to be direct there must appear no intervening incident (not caused by the defaulting party) to complicate or confuse the certainty of the result between the cause and the damage; the cause must produce the effect inevitably and naturally, not possibly nor even probably. The damage must be such as was to have been foreseen by the parties, who are assumed to have considered the situation, the contract, and the usual course of events; but eliminated from this consideration must be any condition of affairs peculiar to the contractor individually in the particular case and not of general application under similar conditions. There must not be two steps between cause and damage. We have followed this rule in the decision as to the different items of claim shown in the Conclusion of Law.
Myerle v. United States, 33 Ct.Cl. at 27.
Thus, interference with other business resulting from the breach was excluded from the damages. The inadequacy of “foreseeability” alone to distinguish allowable from unallowable items of cost or loss, is plain. Even though antecedently considered, injury to the other party is not only “possible,” *1303but even “probable;” in case of a breach, it may not be allowable. Judge Davis’ formulation is, I believe, about what we apply today and, on applying it to our present case, the result we reach is unavoidable. I doubt if any showing in Prudential’s power to make could have sufficed to obtain a different result. My dissent in Northern Helex was naive in treating the ostensible test of “foreseeability” as the real one.
The inadequacy of damages in case of government contract breach has become anomalous in contrast to the generosity with which damages are today awarded in other contexts. While damages are supposed or imagined to provide a disincentive to violating the legal rights of others, the government here may even enjoy incentives to commit such violation in some circumstances, when equitable relief and tort liability are both unavailable. I am not advocating judicial lawmaking, however. The matter would appear to call for congressional attention as it involves the waiver of sovereign immunity.