Free Motion for Default Judgment - District Court of Federal Claims - federal

Case 1:87-cv-00435-EGB

Document 28

Filed 02/08/2007

Page 1 of 5

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

GATEWAY LUMBER CO., et al. (Gateway Lumber Co.), Plaintiffs, v. THE UNITED STATES, Defendant.

) ) ) ) ) ) ) ) ) )

Consolidated under lead case No. 87-435C (No. 87-435C) (Judge Bruggink)

DEFENDANT'S MOTION FOR DEFAULT JUDGMENT AS TO QUANTUM IN GATEWAY LUMBER CO. v. UNITED STATES, NO. 87-435C Pursuant to Rule 55(b) and this Court's January 9, 2007 Order, we respectfully request that the Court enter a default judgment against Gateway Lumber Company ("Gateway") and in favor of the United States on its counterclaim in the amount of $916,412.61, plus interest calculated pursuant to the Contract Disputes Act ("CDA"), 41 U.S.C. § 611.1 In support of this motion, we rely upon the pleadings, this Court's April 11, 2006 Order which entered a default against Gateway pursuant to Rule 55(a), the attached Declaration of Christine Anderson, and the documents reproduced in our attached appendix. Rule 55(b) provides for the entry of a default judgment, where, as here, Gateway has failed to defend itself and the Government "establishes a claim or right to relief by evidence satisfactory to the court." Id. As a result of Gateway's earlier failure to respond to our motion for partial summary judgment as to liability, this Court, in its April 11, 2006 Order, concluded
1

The United States is entitled, as a matter of law, to prejudgment interest calculated pursuant to the CDA from January 1, 1994. Seaboard Lumber Co. v. United States, 48 Fed. Cl. 814, 836-37 (2001), aff'd 308 F.3d 1283 (Fed. Cir. 2002). -1-

Case 1:87-cv-00435-EGB

Document 28

Filed 02/08/2007

Page 2 of 5

that "liability is established" and directed the clerk "to enter default in favor of the [United States] on its counterclaim. See Order of April 11, 2006. Gateway's Eldred Creek Timber Sale Contract, which is the subject of this case, contained Standard Provision B9.4, which provides the formula for determining the damages, if any, due the United States in the event of a purchaser's default. Standard Provision B9.4 provides in pertinent part: B9.4 Failure to Cut. In the event of (a) termination for breach or (b) Purchaser's failure to cut designated timber on portions of the Sale Area by Termination date, Forest Service shall appraise remaining Included Timber, unless termination is under B8.22. Such appraisal shall be made with the standard Forest Service method in use at time of termination. Damages due the United States for Purchaser's failure to cut and remove such timber meeting Utilization Standards shall be the amount by which the Current Contract Value[,] plus the cost of resale, less any effective Purchaser Credits remaining at time of termination, exceeds the resale value at new Bid Rates. If there is no resale, damages due shall be determined by subtracting from the value established by said appraisal from the difference between Current Contract Value and Effective Purchaser Credit. See D. App. 1 (Standard Provision B9.4). After Gateway's default, the Forest Service chose not to resell the remaining timber included in the Sale. Anderson Decl. ¶ 2.2 The Federal Circuit has repeatedly held that the United States is entitled to damages calculated in the manner prescribed by Standard Provision B9.4 where, as here, the Forest Service chooses not to resell the remaining, uncut timber included in a defaulted sale. Hoskins Lumber Co. v. United States, 89 F.3d 816, 817 (Fed. Cir. 1996);

"Anderson Decl. ¶ of Christine Anderson.

2

" refers to the cited paragraph(s) in the accompanying Declaration -2-

Case 1:87-cv-00435-EGB

Document 28

Filed 02/08/2007

Page 3 of 5

Madigan v. Hobin Lumber Co., 986 F.2d 1401, 1405 (Fed. Cir. 1993). Further, the Federal Circuit has made clear that "the only question" for the trial court in a case such as this is "whether the government complied with its standard appraisal method" in determining the value of the remaining timber at the time of contract termination. Hoskins Lumber, 89 F.3d at 817 (emphasis in original). As demonstrated in her Declaration, Ms. Anderson has determined the damages due the United States as a result of Gateway's default using the standard Forest Service appraisal method in use at the time of contract termination (August 1985). See Anderson Decl. ¶¶ 1-8. We incorporate here, by reference, Ms. Anderson's Declaration which sets forth the amount of the damages due the United States ($916,412.61) and demonstrates the manner in which they were determined (i.e., using the then-standard Forest Service appraisal method). Conclusion For the foregoing reasons, the United States respectfully requests that the Court enter a default judgment against Gateway and in favor of the United States on its counterclaim in the amount of $916,412.61, plus interest pursuant to the CDA from January 1, 1994. Respectfully submitted, PETER D. KEISLER Assistant Attorney General J. CHRISTOPHER KOHN Director JOHN W. SHOWALTER Assistant Director

-3-

Case 1:87-cv-00435-EGB

Document 28

Filed 02/08/2007

Page 4 of 5

s/Richard P. Nockett RICHARD P. NOCKETT Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 1100 L Street, N.W. (8th Floor) Washington, D.C. 20530 Tele: (202) 307-1134 Fax: (202) 307-0494 Attorneys for Defendant Dated: February 8, 2007

-4-

Case 1:87-cv-00435-EGB

Document 28

Filed 02/08/2007

Page 5 of 5

CERTIFICATE OF SERVICE I hereby certify under penalty of perjury that on this 9th day of Feburary 2007,

I caused copies of the foregoing "DEFENDANT'S MOTION FOR DEFAULT JUDGMENT AS TO QUANTUM IN GATEWAY LUMBER CO. v. UNITED STATES, No. 87-435C," and the accompanying "DECLARATION OF CHRISTINE ANDERSON", and the "APPENDIX TO DEFENDANT'S MOTION FOR DEFAULT JUDGMENT AS TO QUANTUM" to be served upon the following individual by United States mail (first-class, postage prepaid) and also by facsimile transmission.

DENNIS J. DUNPHY, Esq. Schwabe, Williamson & Wyatt 1420 Fifth Avenue, Suite 3010 Seattle, Washington 98101-2393

s/Richard P. Nockett

-5-

Case 1:87-cv-00435-EGB

Document 28-2

Filed 02/08/2007

Page 1 of 3

APPENDIX TO DEFENDANT'S MOTION FOR DEFAULT JUDGMENT AS TO QUANTUM IN GATEWAY LUMBER CO. v. UNITED STATES, NO. 87-435C

Case 1:87-cv-00435-EGB

Document 28-2

Filed 02/08/2007

Page 2 of 3

~

action by Purchaser, Purchaser shall have SO practicable operating days during Norma! Operating Season to do SO, except under emergency conditions when action should not be delayed to prevent major damage. (b) If such breach does not require on-the-ground action by Purchaser, such breach shall be remedied within 30 calendar days. B9.4 FAilure to Cut. In event of (a) termination for breach or (b) Purchaser's failure to cut designated timber .on portions of Sale Area by Termin.ation date, Forest Service shall appraise remaining Included Timber, unless termination is under B8.22. Such appraisal shall be made with the standard Forest Service method in use at time of termination. Damages due the United States for Purchaser's failure to cut and remove such timber' meeting Utilization Standards shall be the amount by whleh Current Contract Value plus the cost of resale, less any effective Purchaser Credit remaining at time of termination, exceeds the resale value at new Bid Rates. If there is no resale, damages due sha!l be determined by subtracting the value established by said appraisal from the difference between Current Contract Value and Effective Purchaser Credit.

If Purchaser has failed to cut individual trees in %/~e poWaions of Sale Area cutover and there' is no resale of such individual trees, Purchaser shall pay Forest Service for eost of felling and removal or otherwise eliminating such uncut trees in addition to payment of damages described above, except for trees not cut for reasons stated in B6.4. B9.5 Settlement. If obligations of Put'baser have not been fully discharged by Termination Date, any money advanced or deposited hereunder shall be retained to be applied toward unfulfilled obligations of Purchaser without prejudice to any other rights or remedies of Forest Service. Such funds may be treated as cooperative .deposits under B4.225 for uncompleted work S0 calendar days after receipt of ~ritten notice from Forest Service to Purchaser of work to be done and Purchaser's failure to deny the obligation or to do the work. B9.6 Contract Closure. The Forest Service officer signing this contract, his successor or superior officer shall give appropriate written notice to Purchaser when Purchaser has complied with the terms of this contract. Purchaser shall be paid refunds due from Timber Sale Account under B4.24 and excess cooperative deposits under B4.225.

DIVISION C
Special Provisions In accordance with A23, the Sections, Subsections, and Items therein listed are a~ached and made a part hereof. This material is indexed by the numbering system used in DivisionB. The numbers after the C (which identifies material in this Division) indicate the Part, Section, Subsection, or Item of Division B, which is being supplemented or modified by each particular provision included in this Division.

¯ ~,U.S. Government Printing Office: 1973 0--517-270

128

12/19,°05Case 1:87-cv-00435-EGB ~[ON 13:3~ FAX 3609562330 0LYHFIC Filed Document 28-2 NF.SO

02/08/2007

Page 3 of 3

~003

¯ ~ALE NAH£: ELDRED CRIEER

APPRAISALSUHHARY ..... SUMMARY I::HECIKE~ BY: .~.~.~~~.

[)ATE: 0~,/24/~6

SPECIFIED Rb CONST (rifLES) .0 RECON~TRUCTI~ PRODUCT= ~ AF'F'I~A I SED l'[l~ EUE~'E TT HAUL ~S}C D~TA

................................................... C~F:D TYPE

33.48 33.4~ 33.40 26.~5 51,,~8 51.58 51.58 36.63 0.~3 ' 0.33 0.33 0.00

...... ----~.0--~ ......

01. 0--0.~ .......................

J._ A ............

00_(.

0.00

Case 1:87-cv-00435-EGB

Document 28-3

Filed 02/08/2007

Page 1 of 7

IN THE UNITED STATES COURT OF FEDERAL CLAIMS GATEWAY LUMBER CO., et al. (Gateway Lumber Co.), Plaintiffs,
Vo

THE UNITED STATES, Defendant.

) ) ) ) ) ) ) ) ) )

Consolidated under lead case No. 87-435C (No. 87-435C) (Judge Bruggink)

DECLARATION OF CHRISTINE ANDERSON IN GATEWAY LUMBER CO. v. UNITED STATES, NO. 87-435C I, Christine Anderson, am a Contract Administration Forester in the Forest Service Regional Headquarters Office for the Pacific Northwest Region. I have been a contracting officer on the Olympic National Forest since 1985 and a contracting officer on the Mr. Baker'Snoqualmie National Forest since 1993. My responsibilities include the determination of damages in these consolidated cases and testifying, as needed, on behalf of the United States. I make this Declaration for the purpose of establishing the amount of damages due to the United States as a result of the default of Gateway Lumber Company ("Gateway') on the Eldred Creek Timber Sale Contract. I have reviewed the official Forest Service contract files and records pertaining to the Eldred Creek Sale. In making this Declaration, I have relied, among other things, upon the information contained in the Forest Service's records concerning the Eldred Creek Sale, as well as my knowledge and thirty years of experience as a Forest Service contracting officer, appraiser, and pre-sale administrator. I have not only prepared appraisals, but also served as a reviewer of -1-

Case 1:87-cv-00435-EGB

Document 28-3

Filed 02/08/2007

Page 2 of 7

appraisals prepared by other Forest Service personnel to ensure that they complied with the standard Forest Service appraisal method. My appraisal experience includes assisting ranger districts with the appraisal of timber on defaulted sales and reviewing such appraisals, including the appraisals of sales such as the Eldred Creek Sale, which were not resold following the purchaser's default. 1. Gateway's Eldred Creek Contract terminated uncompleted on August 17, 1985. The Contract contained Standard Provision B9.4 which provides the formula for determining the damages, if any, due the United States in the event of a purchaser's default. Standard Provision B9.4 provides in pertinent part: B9.4 Failure to Cut. In the event of (a) termination for breach or (b) Purchaser's failure to cut designated timber on portions of the Sale Area by Termination date, Forest Service shall appraise remaining Included Timber, unless termination is under B8.22. Such appraisal shall be made with the standard Forest Service method in use at time of termination. Damages due the United States for Purchaser's failure to cut and remove such timber meeting Utilization Standards shall be the amount by which the Current Contract Value[,] plus the cost of resale, less any effective Purchaser Credit remaining at time of termination, exceeds the resale value at new Bid Rates. If there is no resale, damages due shall be determined by subtracting the value established by said appraisal from the difference between Current Contract Value and Effective Purchaser Credit. D. App. 1.1 2. After Gateway's default, the Forest Service chose not to resell the remaining timber included in the Sale. During the relevant period, when there was no resale, the standard Forest

~ "D. App. ____" refers to the cited page(s) in the appendix to our accompanying motion for default judgment. -2-

Case 1:87-cv-00435-EGB

Document 28-3

Filed 02/08/2007

Page 3 of 7

Service method for estimating the value of the uncut timber at the time of termination was a two-step process. The first step involved the determination of appraised rates, also known as "advertised rates," through the application of the Forest Service's residual value appraisal method. These rates are the product of a standardized computer program that the Forest Service developed for appraisal purposes. The program was designed to store the data needed to appraise timber as of a specified date. In general, the residual value appraisal method begins with the selling value of the end products that could be produced from the timber included in a particular sale, and then subtracts production costs, such as logging, hauling, and manufacturing costs, etc, as well as profit, io arrive at the estimated value (the residual value) of the standing timber included in the sale. The residual value appraisal methodology uses historical cost data and price data to estimate the value of the timber to an operator of average efficiency, not the value to a particular purchaser or high bidder. 3. Using the residual value method, the appraised value of the remaining timber included in Gateway's Eldred Creek Sale equaled $461,013.25 at the time of contract termination (August 17, 1985). As set forth in the Forest Service "APPRAISAL SUMMARY" (D. App. 2), dated June 24, 1986, the appraised value was determined as follows:

-3-

Case 1:87-cv-00435-EGB

Document 28-3

Filed 02/08/2007

Page 4 of 7

S_S_S~ecies Ca DF4 H&O5 PAM6

Volume (MBF2) 1,267 197 3,589 392

Appraised Rate~ $177.13 201.61 52.73 19.45

Total $224,423.71 39,717.17 189,247.97 7,624.40 $461,013.25

Total Value at Termination:

After reviewing the pertinent files and records, it is my opinion that the appraised rates set forth .in the APPRAISAL SUMMARY (D. App. 2) were determined in accordance with the Forest Service's standard residual value method in use when Gateway's Eldred Creek Contract terminated uncompleted. 4. When there was to be no resale, the second step in the standard Forest Service appraisal method was to add, if appropriate, an estimated bid .premium to the appraised rates produced bythe residual value appraisal method described above. A bid premium - also known as an "overbid" - on a particular timber sale is the amount by which a purchaser's bid rate exceeds the advertised or appraised rate for a particular species. An estimated bid premium.was added, where appropriate, to the appraised rates for biddable species only, not for species that were sold at a fixed, non-biddable rate. When there was no resale, the Forest Service generally added an estimated bid premium to the appraised rates (for bidd.able species) because the agency 2 "MBF" is a unit of measurement meaning "thousand board feet." Thus, 1 MBF equals one thousand board feet of timber. 3 "C" refers to the cedar included in the Sale. 4 "DF" refers to the douglas fir included in the Sale. 5 "H&O" refers to the western hemlock and other coniferous species included in the Sale. 6 "PAM" refers to the per-acre material included in the Sale.
-4-

Case 1:87-cv-00435-EGB

Document 28-3

Filed 02/08/2007

Page 5 of 7

recognized that the rates established by its residual value appraisal methodology generally tended to be lower than actual bid or sales prices. The addition of an estimated bid premium to the appraised rates increased the total estimated value of the remaining timber and, thus, reduced the amount of damages that would otherwise be due under the.damages formula prescribed by Standard Provision B9.4. 5. In this case, the contracting.officer did add an estimated bid premium in determining the damages due as a result of Gateway's default. However, in doing so, the contracting officer failed to follow the standard Forest Service appraisal method. To correct this, I have redetermined the estimated bid premiums. 6. Two of the three species in Gateway's Elred Creek Sale were biddable: the Cedar ("C") and the western hemlock and other coniferous species ("H&O"). To calculate estimated bid premiums for these species, I identified and used six sales that occurred on the Darrington Rgnger District of the Mt. Baker-Snoqualmie National Forest within the twelve-month period preceding the default termination of Gateway's Eldred Creek Sale. The Darrington Ranger District now includes the area from the former Monte Cristo Ranger District in which Gateway's Eldred Creek Sale was located. These six sales were non-salvage sales that included the same species mix as the Eldred Creek Sale: DF, C, and H&O. Using the actual bid premiums for the C and the H&O on these six sales, I calculated a weighted average bid premium for each species. Adding these weighted average bid premiums to the appraised rates set forth in the appraisal summary (D. App. 2), I calculated the total value of Gateway's Eldred Creek Sale at the time of contract termination to be $477,989.15. I calculated the total value as follows:

Case 1:87-cv-00435-EGB

Document 28-3

Filed 02/08/2007

Page 6 of 7

Species Volume C DF H&O PAM 1,267~ 197 3,589 392

Appraised Rates Bid Premium Adjusted Rate $177.13 201.61 52.73 19.45 $6.94 rda 2.28 n/a $184.07 201.61 55.01 19.45

Total $233,216.69 39,717.17 197,430.89 7,624.40 $477,989.15

Total Value at Termination:

7. Under Standard Provision B9.4, the damages (if any) are determined by subtracting the appraised value at termination from the difference between the Current Contract Value at termination and Effective Purchaser Credit. Gateway had no such credit on the Eldred Creek Sale. Current Contract Value is a mathematical computation. It is the sum of the products of the purchaser's contract rates and the estimated remaining volume by species. The contract rates at the time the Eldred Creek Sale terminated were Gateway's bid rates. The Current Contract Value of the Eldred Creek Sale at the time of termination equals $1,394,401.76, calculated as follows: Species
C DF H&O PAM

.Volume
1,267 197 3,589 392

Contract Rate
$410.00 250.08 230.00 0.50

Total
$519,470.00 49,265.76 825,470.00 196.00 $1,394,401.76

Current Contract Value at Termination:

8. Thus, under the damages formula prescribed by Standard Provision B9.4, the damages due the United States are as follows: Current Contract Value: Less Purchaser Credit: Subtotal: Less Appraised Value: Damages: $1,394,401.76 0.00 $1,394,401.76 477,989.15 $916,~12.61

-6-

02/02/07 FRI 09:15 FAX 3609562330 Case 1:87-cv-00435-EGB

OLYMPIC Document 28-3 NF SO Filed 02/08/2007

Page 7 of 7

~008

Pursuant to 28.U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and eorrect to the best of my knowledge, infomaation, and belief. Executed at Olympia, Washington, on this ~ day of January 2007. 3 ] ~-r"

ANDERSON

-7-