Appeal of a CBCA decision denying a claim against the government for breach of the duty of good faith and fair dealing is denied. The contract was for the thinning of National Forests. The contract stated that the government intended to thin 150,000 acres. The contractor alleged the government breached the duty of good faith because it only ordered 71,000 acres of work. The court held that the duty of good faith and fair dealing is limited to the terms of the bargain. The contract was an IDIQ contract that guaranteed only 50,000 acres of work. The government was not obligated by the express terms of the contract to order work beyond this minimum and thus did not breach the duty of good faith by ordering work only slightly above the minimum.
Future Forest, LLC had an IDIQ contract with to thin National Forests in Arizona. The contract stated that the Forest Service anticipated releasing about 15,000 acres of year for thinning for a total of 150,000 acres over the ten year term of the contract. The contract provided that the Forest Service would guarantee a minimum of 5,000 acres per year for a total of 50,000 acres over ten years.
Over the ten year term of the contract the Forest Service released 71,000 acres for thinning. Future Forest submitted a claim to the agency alleging that it breached the contract’s duty of good faith and fair dealing by failing to order 150,000 acres of thinning. The Forest Service denied the claim.
Future Forest appealed the claim to the CBCA. On appeal, Future Forest offered evidence showing that the Forest Service had intended to order 150,000 acres of clearing. The company argued that the agency’s failure to order additional thinning was motivated by personal animus and bad faith. The board, however, granted the agency summary judgment reasoning that even if the Forest Service had intended to thin 150,000 acres, that intention did not, as a matter of law, transform an IDIQ contract into a requirements contract.
Future Forest appealed to the Federal Circuit, contending that the Forest Service breached the contract’s duty of good faith and fair dealing due to animus toward the company and a desire to fund a different project.
The court noted that the implied duty of good faith and fair dealing cannot expand a party’s contractual duties beyond those already expressly set forth in the contract. A party’s duty of good faith and fair dealing is limited to the bargain; it prevents the other party from acting in a manner that is inconsistent with the contract’s purpose to deprive the other party of the contract’s value.
Applying these principles, the court held that the duty of good faith and fair dealing cannot be used to increase a contract minimum of guarantee. Notably, Future Forest had not alleged that the Forest Service interfered with a benefit to which the company was expressly entitled under the contract. Rather, Future Forest argued that it had a reasonable expectation of 150,000 acres of work. But the implied duty is limited to the original bargain. Here, the contract required the Forest Service to order a minimum of 50,000 acres. The agency satisfied that obligation by ordering 71,000 acres. When an IDIQ contract has a minimum guarantee, exceeding that guarantee satisfies the government’s obligation. To hold otherwise would rewrite the contract and impose an additional obligation on the Forest Service.
Future Forest is represented by Jacob William Scott, Alexander Gorelik, and Alan Irving Saltman of Smith, Currie & Hancock LLP. The government is represented by William James Grimaldi, Jeffrey B. Clark, Martin F. Hockey, Jr., and Robert Edward Kirschman, Jr. of the Department of Justice as well as Andrew E. Moore and Lori Polin Jones of the Department of Agriculture.
