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Cedar Lumber Inc. v. United States

Decided: September 15, 1988.

CEDAR LUMBER, INC., PLAINTIFF-APPELLANT,
v.
THE UNITED STATES, DEFENDANT-APPELLEE



Appeal from: U.S. Claims Court, Judge Bruggink.

Rich, Davis*fn* and Nies, Circuit Judges.

Rich

Rich, Circuit Judge.

This appeal is from the November 4, 1987, judgment of the United States Claims Court (Bruggink, J.), 13 Cl. Ct. 547 (1987), denying Cedar Lumber's (Cedar's) motion for summary judgment and granting the Government's cross-motion for summary judgment. We affirm.

BACKGROUND

In 1976, Cedar Lumber entered into a timber sale contract, called the Upper Sardine Timber Sale, with the United States Department of Agriculture, Forest Service (USFS). The contract called for Cedar to purchase, cut, and remove certain timber in the Willamette National Forest, and was originally scheduled to terminate on March 31, 1981. During the term of the contract, the USFS extended the termination date four times, under para. B8.21 of the contract. That provision permits contract term adjustments (CTAs) for events beyond Cedar's control, such as weather or soil conditions, that cause Cedar to lose harvesting days during the Normal Operating Season of June 1 through October 31. When the last CTA was granted, the adjusted termination date became September 4, 1984.

Because many timber companies (including Cedar) had bid, and agreed to, purchase prices far in excess of the market price in the late 1970s (presumably expecting existing supplies to remain low and prices to climb), these companies faced a grim economic future several years later when their expectations of high prices for lumber products failed to materialize. It became apparent that the companies could not convert the timber into finished lumber products without incurring substantial losses.

In April 1983, Cedar and several other timber companies filed a class action suit against the Forest Service, seeking, among other things, to prevent enforcement of certain timber sales contracts on the ground of commercial impracticability. North Side Lumber Co. v. Block, Civ. No. 83-490 (D. Or. filed April 5, 1983).

Rather than waiting for timber companies to default on the contracts and resort to bankruptcy, the federal government decided to give qualified companies the option of extending the time specified in the contracts for harvesting the timber. This strategy would allow the companies to mix the timber from the higher-priced contracts with timber harvested under newer, lower-priced contracts, thus achieving a "blending down" of the cost to the companies. The Government also recognized a public interest in softening the economic blow to small- and medium-sized timber companies, in that jobs would be saved and competition in the timber industry would be maintained.

The Government first put this policy into effect through the USFS's adoption of the Multiple-Sale Extension Program (MSEP)*fn1 in August and December 1983. The following year, Congress enacted the Federal Timber Contract Payment Modification Act,*fn2 which codified, with slight alterations, the provisions of MSEP.

As part of a 1985 settlement agreement reached in the North Side litigation, the USFS agreed to accept and approve qualifying contracts under MSEP. On Feb. 4, 1986, the USFS formally notified Cedar that its MSEP was approved. Under this plan, the termination date for the Upper Sardine contract was extended to December 31, 1989. On June 23, 1986, the USFS sent Cedar an "Agreement to Extend and Modify Timber Sale Contract" (Agreement) for the Upper Sardine sale. That proposed agreement included a redetermined rate schedule for "timber scaled on or after January 1, 1986." Although Cedar's president signed the modification on August 1, 1986, Cedar protested this rate redetermination, culminating in this lawsuit.

Cedar brought this action in the Claims Court under the Contract Disputes Act, 41 U.S.C. ยง 601 et seq., challenging a contract officer's final decision denying Cedar's claim that the USFS improperly calculated Cedar's rate redetermination appraisal, under the Agreement executed on August 5, 1986, and incorrectly made the rate effective January 1, 1986. After grant and denial of the cross-motions for summary judgment, this appeal followed.

Discussion

I. USFS Authority to ...


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