GSA leased property from the contractor. The contractor alleged GSA breached the covenant to not commit waste. The CBCA sided with the contractor. The contractor’s building was contaminated with lamprey poison and uninhabitable. The board entered judgment on liability but needed more evidence to assess damages.
Rita A. Wadel Revocable Living Trust and 229 Jebavy Road, LLC dba Luddington Industries Building v. General Services Administration, CBCA 6558, 7079
- Contamination – The contractor leased a building to GSA. U.S. Fish and Wildlife used the building as a station to combat the infiltration of sea lampreys into the Great Lakes. For years, the government stored lampricide in the building. The poison contaminated the property. Over the years the government tried to remediate. But in 2017 the poison was still in the building. The government evacuated and ceased using the building.
- Claim – The contractor submitted a claim to GSA for breach of the covenant not to commit waste. The contractor alleged the building was uninhabitable and worthless. The contractor sought over $14 million to demolish the building, remediate, and replace the facility. GSA denied the claim. The contractor appealed to CBCA. Both parties moved for summary judgment.
- Covenant Not to Commit Waste – Every lease contains a provision, implied if not expressed, that a tenant will not commit waste by damaging the property. Here, the board found GSA committed waste by returning a building to the contractor that was contaminated with lamprey poison. This was a material change that damaged the building.
- Damages – The contractor sought the costs of remediation. But the board noted the remedy for waste is limited to the diminution in fair market value of the property. Here, the board found issues of fact on the fair market value of the property. Thus, the board declined to enter summary judgment on damages.
- Lost Profits – The contractor also sought lost profits from future rental income it could have received from the government. But the board found the lost profits theory was too speculative. It was not clear the government would continue to rent the building without the contamination.
The contractor is represented by Adam D. Bruski, John V. Byl, and Gaetan Gerville-Reache of Warner Norcross + Judd LLP. The government is represented by James Scott of the General Services Administration.
--Case summary by Craig Lachance, Senior Editor
CBCA - Rita Wadel Trust