Government Terminated for Default. Why Did ASBCA Find the Termination Was a Breach?

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The government terminated a lease for default. The ASBCA found termination was not justified. The lease didn’t contain a termination for convenience clause. Thus, the wrongful termination was a breach allowing the contractor to recover damages. 

Appeal of Flatland Realty, LLC, ASBCA No. 63409 
  • The Lease – The contractor leased land from the government. The lease required the contractor to operate a commercial concession on the property. The lease had a use and development plan, which set forth development benchmarks for the first five years. 
  • Government Terminates Lease – The government terminated the lease for default. The government contended the contractor had not operated a concession on the property for two years. Additionally, the government argued that the contractor had not proposed an acceptable use and development after the first five years.  
  • Government Seizes Contractor’s Property – The government gave the contractor a deadline for removing contractor property. The contractor didn’t adhere to the deadline. The government seized the contractor’s property. The contractor appealed to the ASBCA. 
  • Property Was Operational – The board found the termination was not justified. First, contrary to the government’s contentions, the board found the property had been operational. The government had not defined what it meant by operational. Things had been happening on the property. And throughout the period the government claimed the property wasn’t operational, it had been receiving revenue from activities on the property. 
  • Use and Development Plan – The government also terminated due to the contractor’s failure to submit an acceptable use and development plan after the first five years. But the board noted that while the lease required the government to approve modifications to the use and development plan, nothing in the lease said the government got terminate if it didn’t approve a new plan after five years.
  • Government Breach – The termination was not justified. Also, the lease didn’t contain a termination for convenience clauses. Thus, the government’s termination amounted to a breach. 
  • Quantum – As damages for the breach, the contractor requested the cost of the building and over $360,000 in concessions business. The board found the contractor was not entitled to the building. The government had revoked the lease, which triggered the contractor’s duty to remove property. The contractor had not removed the building and thus lost it. But the board allowed the contractor to recover a percentage of the concession’s profits. 

The contractor is represented by Tyler Brinkman. The government is represented by Michael P. Goodman and Brandon D. Belt of the Army Corps of Engineers. 

–Case summary by Craig LaChance, Senior Editor