Appeal from the Civilian Board of Contract Appeals in No. 2397, 2427, Administrative Judge Joseph A. Vergilio.
RICHARD ALLAN PAYNE, Doney, Crowley, Bloomquist & Uda, Helena, MT, argued for appellant.
ELLEN MARY LYNCH, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for appellee. Also represented by STUART F. DELERY, ROBERT E. KIRSCHMAN, JR., BRYANT G. SNEE.
Before NEWMAN, MOORE, and TARANTO, Circuit Judges.
Moore, Circuit Judge.
EM Logging appeals from the Civilian Board of Contract Appeals' (" the Board" ) judgment that the United States Forest Service (" the Forest Service" ) properly terminated a timber sale contract based on EM Logging's flagrant disregard of material contract provisions. Because the record does not contain substantial evidence to support the Board's conclusion that EM Logging flagrantly disregarded the terms of the contract, we reverse.
A. Contract and Course of Performance
On August 31, 2010, the Forest Service awarded EM Logging a timber sale contract for the Kootenai National Forest in Northern Montana. The contract included two provisions relevant to this appeal regarding EM Logging's transportation of logs from the national forest to weighing locations. " C5.12# -- Use of Roads by Purchaser" states in pertinent part that " [a]ll vehicles shall comply with statutory load limits unless a permit from the Forest Service and any necessary State permits are obtained prior to overload vehicle use," (" the load limit clause" ). J.A. 1217. " C6.849 -- Route of Haul" states in pertinent part that " [a]ll products removed from Sale Area shall be transported over the designated routes of haul," (" the haul route clause" ). J.A. 668. It further required that " Purchaser shall notify Forest Service when a load of products, after leaving Sale Area, will be delayed for more than 12 hours in reaching weighing location," (" the notification clause" ). Id. The contract also included a termination provision, under which the Forest Service terminated the contract at issue. " B9.31 -- Termination for Breach" states in pertinent part that the " Contracting Officer, with the concurrence of the Regional Forester, may terminate this contract for breach in the event Purchaser . . . [h]as engaged in a pattern of activity that demonstrates flagrant disregard for the terms of this contract," (" the termination clause" ). J.A. 1211.
Before transporting logs, EM Logging sent the Forest Service a map highlighting the roads over which it would transport logs. The Forest Service requested, in addition to the map, written descriptions of the proposed haul routes. EM Logging provided written descriptions of the haul routes and requested that it be allowed 24 hours to transport logs to weighing locations because regulations on maximum working time for drivers would make it difficult to meet the notification clause's 12-hour requirement. The Forest Service approved the written descriptions, but denied the request to vary the notification clause.
EM Logging began transporting logs under the contract in November 2010. J.A. 326. Between November 2010 and March 2011, the Forest Service issued six Notifications of Breach. On November 30, the Forest Service issued a Notification stating that EM Logging breached the load limit clause and other terms of the contract not at issue in this appeal. With respect to the breach of the load limit clause, the Forest Service identified one truck load that exceeded 80,000 pounds gross vehicle weight and one truck and trailer load that exceeded 84,500 pounds gross vehicle weight. On January 14, 2011, the Forest Service issued a Notification stating that EM Logging breached the load limit clause, identifying three truck loads that exceeded 80,000 pounds gross vehicle weight and four truck and trailer loads that exceeded 84,500 pounds gross vehicle weight. On January 14, the Forest Service also issued a Notification stating that EM Logging breached the haul route and notification clauses. It
stated that EM Logging " had 12 product loads . . . that have been documented as being delayed for more than 12 hours in transit to the approved scaling location," that " [s]ome of these loads were transported over 13 miles one-way off of the approved haul route and overnighted in Eureka," and that " [r]equired notification about these loads has not been timely or very explicit." J.A. 242. On January 21, the Forest Service issued a Notification stating that EM Logging breached the load limit clause because one of EM Logging's drivers received a ticket on January 20 for exceeding Montana state weight limits. The Forest Service also issued Notifications on November 4, 2010, and March 2, 2011, stating that EM Logging breached provisions of the contract regarding washing of equipment, sanitation and servicing, and late payment. The breaches in these additional Notifications are not at issue in this appeal.
With the Notification sent January 21, 2011, the Forest Service suspended operations and informed EM Logging that the Forest Service was considering terminating the contract for breach. The Forest Service terminated the contract on March 11, 2011, " for repeated and ongoing disregard for the terms of [the] contract ...