Court Opinion

ID: 772783
Source: CourtListenerOpinion
Date Created: 2012-04-18 11:16:59+00
Date Added: 2024-06-11T17:56:06.901882
License: Public Domain

245 F.3d 1352 (Fed. Cir. 2001)
US ECOLOGY, INC., Plaintiff-Appellant,  and  CALIFORNIA DEPARTMENT OF HEALTH SERVICES,  Plaintiff,v.UNITED STATES, Defendant-Appellee.
00-5062
United States Court of Appeals for the Federal Circuit
DECIDED: March 30, 2001

Appealed from: United States Court of Federal Claims
Judge Robert H. Hodges, Jr.
Karl S. Lytz, Latham & Watkins, of San Francisco, California, argued for plaintiff-appellant. With him on the brief was Laurence H. Levine, of Chicago, Illinois.
Mark R. Haag, Attorney, Appellate Section, Environment & Natural Resources Division, Department of Justice, of Washington, DC, argued for defendant- appellee.
Laurens H. Silver, California Environmental Law Project, of Mill Valley, California, for amicus curiae, Los Angeles City Council Women, Et. Al. Of counsel on the brief was Stanton J. Price, Law Offices of Stanton J. Price, of Santa Monica, California.
Before MICHEL, Circuit Judge, PLAGER, Senior Circuit Judge, and LINN, Circuit Judge.
MICHEL, Circuit Judge.

1
This appeal concerns a claim for damages for the breach of an alleged  contract between the United States Department of the Interior ("federal  government") and the State of California for the sale of federal land  located in California. US Ecology asserts that it is entitled to recover as  a third-party beneficiary under the alleged contract. The trial court,  however, held on summary judgment that no contract had been formed. The  government agrees, and also argues that US Ecology lacks standing to  appeal. We do not reach the issues of contract formation and standing to  appeal, however, because we hold that US Ecology failed to raise a genuine  issue as to whether the federal government intended for any third party--  such as US Ecology--to have rights under the alleged contract, and  therefore we must affirm.

I. BACKGROUND

2
In 1985, the California Department of Health Services ("CDHS") began  planning for the development of a low-level radioactive waste ("LLRW")  disposal facility in California. California law required that the facility  be built upon land owned by the State. US Ecology has constructed and  operated such facilities throughout the United States. LLRW includes waste  that has been exposed to nuclear radiation, such as certain types of  medical and industrial waste. CDHS is the agency of the State of California  responsible under California law for managing the disposal of  LLRW.1 Under California law, the operator of the planned LLRW  facility must first be licensed by CDHS. See Cal. Health & Safety Code §§  25810, 25812 (1985). Once CDHS has determined that a license applicant will  "likely" satisfy the eligibility requirements for a license it designates  that applicant as the "license-designee." Cal. Health & Safety Code §  25812.5(a) (1985). In 1985, CDHS identified US Ecology as its "license-  designee" for the LLRW facility. CDHS did not actually grant the license to  US Ecology until September 1993, after the alleged formation and breach of  the contract at issue.

3
In January 1993, the federal government and the State of California agreed  to terms for the sale of a parcel of 1,000 acres of federal land in the  Ward Valley region of California (the "Site"), and US Ecology paid the  purchase price of $500,000 to the federal government on behalf of the State  of California. On January 7, 1993, Secretary of the Interior Manuel Lujan  issued an internal memorandum to document his decision to sell the Site to  California. On January 19, 1993, Secretary Lujan issued a statutorily-  required Record of Decision ("ROD") informing the public that the federal  government had decided to sell the Site to California. The issuance of an  ROD was the penultimate step in the sale process, the final step--which  never occurred--being execution and issuance of the land patent, which  would have passed title to the Site to California. Governor Bruce Babbitt  then succeeded Secretary Lujan at the Department of the Interior. On  February 18, 1993, Secretary Babbitt rescinded the January 19 ROD. The  federal government refunded US Ecology's payment, and refused further  requests by the State of California to transfer ownership of the Site.

4
On January 30, 1997, US Ecology brought suit against the federal government  in the United States Court of Federal Claims under the Tucker Act, 28  U.S.C. § 1491(a) (1994). US Ecology subsequently joined CDHS as a third-  party plaintiff. US Ecology sought damages as a third-party beneficiary  under a contract allegedly formed in January 1993 between the federal  government and CDHS for the sale of the Site. The contract, it argued, was  manifest from Secretary Lujan's January 7 memorandum, the ROD, and the  payment. US Ecology's claimed damages included $73 million in costs  incurred in preparation for the sale--primarily for environmental studies  required by the federal government. US Ecology also claimed lost profits,  i.e., profits it would have earned if the land had been transferred and US  Ecology had been licensed and had built and operated an LLRW disposal  facility.

5
The Court of Federal Claims granted summary judgment to the federal  government, holding that its contracting authority had been divested by the  entry of a temporary restraining order ("TRO") on January 8, 1993, in a  separate action in district court brought by environmentalists under the  Endangered Species Act to prevent the sale. US Ecology, Inc. v. United  States, No. 97-65L, slip op. at 7 (Fed. Cl. March 27, 2000).

6
US Ecology appeals the judgment, although CDHS does not. We have exclusive  jurisdiction over this appeal pursuant to 28 U.S.C. § 1295(a)(3) (1994).  As noted, the trial court's subject-matter jurisdiction was grounded in the  Tucker Act. We heard oral argument on February 6, 2001. Because US Ecology  failed to submit evidence sufficient to raise a genuine issue as to its  alleged rights as a third-party beneficiary under the alleged contract, the  United States is entitled to judgment as a matter of law and the summary  judgment in favor of the federal government is affirmed.

II.  ANALYSIS

7
We review the grant of summary judgment by the Court of Federal Claims as  we do any grant of summary judgment, de novo. Costain Coal, Inc. v. United  States, 126 F.3d 1437, 1440 (Fed. Cir. 1997). Summary judgment is  appropriate where "the pleadings, depositions, answers to interrogatories,  and admissions on file, together with the affidavits, if any, show that  there is no genuine issue as to any material fact and that the moving party  is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).  Thus, summary judgment is proper only when no "reasonable jury could return  a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 US  242 , 255 , 106 S. Ct. 2505, 2510 (1986).

8
The federal government asserts that US Ecology lacks standing to appeal  because, even assuming that there is a contract, US Ecology is not a third-  party beneficiary. We agree that the issues of standing and third-party  beneficiary status are intertwined. We hold that US Ecology has no rights  under the alleged contract. Therefore, the summary judgment must be  affirmed, even assuming standing is otherwise established.

Third-Party Beneficiary Rights

9
US Ecology can prevail on appeal only if it shows that there is in dispute  a genuine issue of material fact as to its status as a third-party  beneficiary with rights under the alleged land-sale contract. US Ecology  argues that the alleged land-sale contract between California and the  federal government created enforceable rights in US Ecology as a third-  party beneficiary. As evidence that the federal government intended for it  to benefit from the alleged contract, US Ecology relies upon the  cooperative course of dealings amongst itself, California, and the federal  government that resulted in the alleged contract. It is undisputed that US  Ecology worked cooperatively with the federal government and CDHS to  perform the expensive environmental testing of the Site required under  federal law. However, neither federal law nor the Department of the  Interior required that the tests be performed and paid for by US Ecology.  CDHS and the plaintiff-appellant chose that arrangement independently. US  Ecology also points to the undisputed facts that the federal government was  aware that US Ecology was CDHS's license-designee and that US Ecology paid  the $500,000 purchase price for the Site on behalf of California. Once  again, the federal government did not require that US Ecology pay the  purchase price.

10
US Ecology also relies upon a memorandum of agreement between the federal  government and US Ecology, dated April 20, 1988, in which US Ecology agreed  to reimburse the federal government for its costs associated with the  proposed sale of the Site. This agreement states that it was made pursuant  to 43 U.S.C. § 1734, "which allows [the federal government] to charge  applicants for the reasonable costs associated with the processing of a  federal land transaction." US Ecology asserts that "applicants" refers to  US Ecology and that this is evidence that the federal government deemed it  to be the real party in interest, and therefore an intended third-party  beneficiary. This assertion, however, is contradicted by the agreement  itself, which does not refer to US Ecology as the "applicant," but instead  specifically states that the California State Lands Commission is the  "applicant" for the land sale.

11
US Ecology also relies upon Secretary Lujan's internal memorandum of  January 7, 1993, the ROD, and the draft land patent for the Site as  evidence that the sole purpose of the land sale was to allow US Ecology to  develop the planned LLRW disposal facility on the Site. US Ecology also  relies upon an affidavit by Secretary Lujan in which he states that  "[g]iven the public importance of the Ward Valley project and the fact that  development of such a facility was required by federal laws . . . Interior  had decided to support California's efforts by conveying suitable land for  the project." In his affidavit, however, Secretary Lujan refers to US  Ecology only as CDHS's "contractor," and none of his statements indicates  that the federal government intended either for US Ecology to benefit from  the contract, or for the alleged contract to confer rights upon any third  party.

12
US Ecology argues that this evidence at least raises a genuine issue of  fact as to whether the federal government intended to confer rights upon it  under the alleged contract.

13
A. Did the Federal Government Intend for a Third Party to Have Rights Under the Alleged Contract?

14
In order to create rights in a third party, "the contract must 'reflect[]  the express or implied intention of the parties to benefit the third  party.'" Montana v. United States, 124 F.3d 1269, 1273 (Fed. Cir. 1997);  see also Restatement (Second) Contracts § 302(1) ("Unless otherwise agreed  between promisor and promisee, a beneficiary of a promise is an intended  beneficiary if recognition of a right to performance in the beneficiary is  appropriate to effectuate the intention of the parties.") (emphasis added).  "One way to ascertain such intent is to ask whether the beneficiary would  be reasonable in relying on the promise as manifesting an intention to  confer a right on him." Montana, 124 F.3d at 1273 (emphasis added) (citing  Restatement (Second) Contracts § 302 cmt. d ("[I]f the beneficiary would be  reasonable in relying on the promise as manifesting an intention to confer  a right on him, he is an intended beneficiary.")).

15
There is no indication in any of the evidence presented by US Ecology that  Secretary Lujan intended for the alleged contract to "confer a right" on  any third party. Montana, 124 F.3d at 1273. While the federal government  did cooperate with a third party during the course of its dealings with  California, it did so only because that third party--US Ecology--was  assisting California in its effort to purchase the Site.

16
Secretary Lujan's internal memorandum of January 7, 1993, the ROD, and his  affidavit provide unambiguous and consistent evidence of his intent in  entering into the alleged contract. In each document he stated that the  federal government's purpose and intent in contracting were to assist  California in complying with federal laws requiring the development of an  LLRW disposal facility, such as the one CDHS had planned for the Site. It  is undisputed that the evidence contains no statement by the federal  government that it intended for the alleged contract to benefit any third  party.

17
While federal law required California to develop an LLRW disposal facility  somewhere within the State, it did not require California to do so on the  Site. US Ecology has provided no evidence to indicate that CDHS was bound  to develop an LLRW disposal facility on this particular site even if the  government had transferred it to California.

18
By January 7, 1993, CDHS had informed the federal government that it hoped  to license US Ecology, but that it had not yet ruled on US Ecology's  license application. It is undisputed that after discussing the licensing  issue with California Governor Pete Wilson, Secretary Lujan insisted upon,  and California agreed to, the inclusion of language in the proposed land  patent for the Site providing that ownership of the Site would revert to  the federal government if CDHS had not licensed any entity to operate the  planned LLRW facility within ten years. The January 19, 1993 ROD issued by  Secretary Lujan also set forth this condition subsequent to the sale. At  the times of formation and breach of the alleged contract, therefore, it  was uncertain not only whether CDHS would eventually grant US Ecology a  license to operate an LLRW disposal facility on the Site, but whether it  would license anyone to operate such a facility on the Site.

19
If the federal government had intended for the alleged contract to confer a  right upon a third party, it could have expressly provided for such a right  in the contract documents. It did not do so. The government's acceptance of  payment, at the request and designation of CDHS, from a third party that  may have benefited from the contract if CDHS had subsequently issued it a  license does not indicate any intent by the government to confer a right  upon that third party.

20
US Ecology relies exclusively upon Montana in support of its argument that  it is a third-party beneficiary because the federal government entered into  the alleged contract with the knowledge that US Ecology was CDHS's license-  designee and had assisted CDHS in preparing for the sale. Montana, however,  compels the opposite conclusion, because US Ecology has failed to provide  evidence sufficient to raise a triable issue as to whether the federal  government intended for the alleged contract to confer a right upon any  third party. The federal government's insistence upon a reversionary right  to the Site that would vest if CDHS did not license anyone to operate an  LLRW facility on the Site is undisputed evidence that the federal  government was uncertain whether CDHS would proceed with development of an  LLRW disposal facility on the Site. Given this, combined with the absence  of any evidence of an intent by the federal government to benefit any third  party, it cannot be claimed that the federal government intended for the  alleged contract to confer a right upon a third party. Montana, 124 F.3d at  1273; see also 4 A. Corbin, Corbin on Contracts § 779D at 43-46 (1951) (a  third party has no rights under a contract that would not necessarily  benefit that party, as where benefit to the third party depends upon an  "intervening voluntary action" of the promisee).

21
B.Even if the Federal Government had Intended to Confer a Right on a Third Party, was US Ecology Qualified as such a Third Party?

22
1.   US Ecology was Not Licensed Before the Alleged Breach

23
As of January 1993, US Ecology was not yet licensed by CDHS to operate the  planned LLRW disposal facility. It was only in September 1993, after the  formation and breach of the alleged land-sale contract, that CDHS licensed  US Ecology. It is undisputed that, under California law, US Ecology could  not operate the LLRW disposal facility unless and until it had been so  licensed.

24
In Montana, the State of Montana brought suit against the United States,  claiming that it held a lien against an asset that had been awarded to the  United States as a creditor in an unrelated bankruptcy proceeding. Montana,  124 F.3d at 1272. The award had been made pursuant to a compromise  settlement agreement in which the United States acknowledged that its claim  to the asset was subject to any third-party claims of superior or equal priority. Id. We affirmed the dismissal of Montana's claim because it had  not shown that it was intended as a third-party beneficiary of the  settlement agreement.The key to our holding was that, even though the  government had intended for the agreement to confer rights upon certain  third parties, Montana did not qualify as such a third party. Id. at 1276.  Under the relevant statutory and regulatory law, which provided a  "comprehensive scheme for federal lien priority," it was clear that  Montana's claim was subordinate to that of the United States. Id. ("Because  the rule of law mandates that [the United States'] lien have priority over  Montana's lien, Montana is not adjudged to be a third-party beneficiary.").

25
Thus, even assuming that the federal government had intended to confer a  right under the alleged contract on the party licensed by CDHS to benefit  from the alleged contract, US Ecology was not licensed prior to the  government's alleged breach, and therefore cannot qualify as a third-party  beneficiary. Id.

26
2.   California Was Not Obligated to License US Ecology

27
US Ecology would have been qualified to benefit from the alleged contract  only if and when CDHS decided to approve its application for a facility  license--which it could do only after determining that the license would be  "consistent with public health and safety." Cal. Health & Safety Code  § 25812(a)(2) (1985). US Ecology has failed to provide any evidence that  CDHS was obligated to approve its license application. Furthermore, it is  undisputed that the federal government did not seek to limit the ability of  CDHS to license an applicant other than US Ecology.

28
The January 19, 1993 ROD states only that US Ecology is CDHS's license-  designee. The draft land patent does not refer to US Ecology, nor does  Secretary Lujan's January 7 internal memorandum. Thus, the evidence  presented by US Ecology provides no indication that, prior to the breach of  the alleged contract, US Ecology was certain to be licensed by CDHS in the  future, much less that California and the United States intended to grant  it rights under the alleged contract. The United States Court of Appeals  for the District of Columbia Circuit also concluded that US Ecology had  failed to prove that it had a right to develop the planned LLRW disposal  facility. See US Ecology, Inc. v. United States Dep't of the Interior, 231  F.3d 20, 25 (D.C. Cir. 2000). In that case, the court dismissed US  Ecology's appeal for lack of standing because it had failed to show that  the harm resulting from the government's alleged breach of the same land-  sale contract at issue in the instant appeal would be redressable by the  relief US Ecology sought--a writ of mandamus compelling the government to  transfer ownership of the site to the State of California. Id. ("Indeed,  the record before this court does not even support a finding that US  Ecology would be entitled to develop the facility were California  ultimately to pursue the Ward Valley Site."). Thus, even assuming that the  federal government had intended to benefit a third-party developer that  CDHS was obligated to license, US Ecology has failed to raise a triable  issue as to whether it was certain to be licensed by CDHS.

CONCLUSION

29
Because US Ecology has failed to raise a triable issue as to its alleged  rights as a third-party beneficiary under the alleged contract, and  therefore the government is entitled to judgment as a matter of law, the  summary judgment to the government is affirmed.

AFFIRMED

Notes:

1
  In  1987,  the States of California, Arizona,d, North Dakota and South Dakota entered into  the Southwestern Low-rizona,d, Level Radioactive Waste Disposal Compact, under  which Californiarizona,d, was to establish a regional disposal site for LLRW for use by all states  in  the  compact,  pursuant  to the Low-Level Radioactive Waste  Policy  Act Amendments of 1985, 42  U.S.C.  §  2021(b)-(j)a,d, (1994).