1200 SIXTH STREET v. USA

Filing 18

ORDER granting 8 Motion to Dismiss - Rule 12(b)(6) Signed by Judge Thomas C. Wheeler. (md) Copy to parties.

In the United States Court of Federal Claims
No. 12-388C
(Filed: February 14, 2013)
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1200 SIXTH STREET, LLC,
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Plaintiffs,
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v.
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THE UNITED STATES,
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Defendant.
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Breach of Contract Claim; Rule
12(b)(6) Motion to Dismiss;
GSA Option Agreement to
Purchase
Real
Property;
Whether Option Was Ever
Exercised.

Carl G. Becker, Becker Law Firm, Rochester, Michigan, for Plaintiff.
David S. Silverbrand, with whom were Stuart F. Delery, Acting Assistant Attorney
General, Jeanne E. Davidson, Director, and Deborah A. Bynum, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington,
D.C., for Defendant.
OPINION AND ORDER
WHEELER, Judge.
On June 18, 2012, plaintiff 1200 Sixth Street, LLC filed a breach of contract claim
against the United States in this Court. Plaintiff alleges that the General Services
Administration (“GSA”) breached a contract for the purchase of real property in Detroit,
Michigan, and as a result, Plaintiff seeks $4.5 million in damages for the loss of property
value and other costs.1

In its complaint, Plaintiff also sought attorney’s fees under the Equal Access to Justice Act (“EAJA”), a
claim which it concedes was premature. See Pl.’s Resp. 1; 28 U.S.C. § 2412. Accordingly, this claim is
not currently before the Court.
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On August 17, 2012, Defendant filed a motion to dismiss pursuant to Rule
12(b)(6) of the Court of Federal Claims (“RCFC”) for failure to state a claim upon which
relief can be granted. Plaintiff filed a response to Defendant’s motion on September 18,
2012, and Defendant replied on October 2, 2012. Initially, this case was assigned to
Judge Francis M. Allegra, but by mutual consent was transferred to the undersigned on
January 7, 2013. The Court heard oral argument on January 30, 2013. After carefully
reviewing the parties’ filings, the Court concludes that Plaintiff has failed to allege
sufficient facts to support its claim for breach of contract. Accordingly, Defendant’s
motion to dismiss is GRANTED.
Background
Plaintiff is a limited liability company with its principal place of business in
Detroit, Michigan. Compl. ¶ 1. Plaintiff owns real property on the western edge of
downtown Detroit, upon which there is a high rise office complex comprised of two
towers and adjoining parking areas. Compl. ¶¶ 4-5. The building was vacant at the time
of purchase except for the presence of telecommunication tower equipment operated by
the Federal Aviation Administration (“FAA”) and the Michigan State Police (“MSP”).
Compl. ¶ 6. The FAA and the MSP had an express easement for their use of the building,
which Plaintiff was obligated to honor. Compl. ¶ 6.
In 2005, the GSA sought to create new field offices for the Federal Bureau of
Investigation (“FBI”) and began soliciting bids for possible locations, including Detroit,
Michigan. Compl. ¶ 7. Plaintiff’s managing member, Sam Danou, attended a GSA
conference regarding the sales process, and learned that the acquisition of any property
would be made through an option agreement, assignable by the GSA to a third party
developer. Compl. ¶¶ 8-9. Mr. Danou met with the GSA’s project supervisor, Julie
Hoffman, among others, and the parties began negotiating a deal. Compl. ¶¶ 10-12.
After preliminary meetings and tests on the property, the parties executed a Real Estate
Option Agreement (“Option Agreement”) with an effective date of August 1, 2006.
Compl. ¶¶ 16-19; Ex. E. Under the terms of the Option Agreement, the option was
exercisable whether or not the GSA had selected a developer for the property. Compl.
¶ 21. Concurrently, the parties also drafted an unsigned Agreement for Purchase and Sale
of Property (“Purchase Agreement”). Compl. ¶ 20; Ex. G.
The Option Agreement included an integration clause which provided that “the
Option [Agreement] and its exhibits were the sole understanding between the parties.”
Compl. ¶ 25; see Ex. E ¶ 18. Under the Option Agreement, both Plaintiff and the GSA
were “obligated to expend substantial amounts of money, time, effort and energy” in
pursuing the project even though the GSA was not obligated to purchase the property
until it exercised the option. Compl. ¶ 26; see Ex. E ¶ 12. According to Plaintiff, these
obligations included employing an expert to prepare an environmental assessment,
achieving due care activities, securing title insurance and surveys, securing state, county,
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or city governmental approval for a Brownfield plan, street vacations, utility relocations,
rezoning, site plan approval, special use permits and variances, and certain traffic studies
if necessary. Compl. ¶ 27; Ex. E ¶¶ 5, 6, 8, 11, 12. Ultimately, if the GSA elected to
exercise the option, Plaintiff was required to deliver the property “free and clear of all
liens and encumbrances whatsoever.” Ex. E ¶ 4.
Based upon “media disclosures” and the “conduct and activities of the GSA in
approving the content of such disclosures” in the summer of 2006, Plaintiff believed the
exercise of the option to be imminent. See Compl. ¶ 32; Exs. I & J. The last major
encumbrance remaining on the property was the communication tower equipment on the
building, held under the express easement by the FAA and the MSP. See Compl. ¶ 6;
Pl.’s Resp. 4. Therefore, to fulfill the terms of the Option Agreement, Plaintiff’s lawyer
sought a prospective commitment from the MSP for removal of the communication tower
equipment earlier than permitted by the easement. Compl. ¶ 33. Plaintiff learned that
such early termination would require an approximate 90-day notice and cost $114,000,
information it then relayed to the GSA. Compl. ¶¶ 33, 34.
Up until this point, the GSA’s Ms. Hoffman and Plaintiff had communicated much
of the “required performance due from each other under the Option” by email. Compl.
¶ 35. On May 10, 2007, Ms. Hoffman instructed Plaintiff by email to “proceed with
contacting the State regarding the 90-day notice for removal of the antennaes [sic],”
referring to the communication tower equipment. Ex. L. In this email, Ms. Hoffman also
noted the GSA’s intent to further “discuss the assignable option” the following day, and
said she would be in contact with Plaintiff the next week. Ex. L; Compl. ¶¶ 38-39.
Plaintiff assumed that this email constituted the exercise of the option, and immediately
proceeded to have the towers removed at the cost of $114,000. Compl. ¶¶ 40-41.
By this time, however, the GSA had lost the only developer with which it had
negotiated and, when it could not secure another acceptable developer, the GSA ended
the deal with Plaintiff in August 2008. Compl. ¶¶ 61, 68. Plaintiff was left with a
“building that had remained unoccupied for [two] years . . . and had been left without
maintenance, repair or ordinary upkeep.” Compl. ¶ 68. Plaintiff claims the property
depreciated by more than $4 million between the date of purchase and April 5, 2012, the
date of a recent Michigan tax assessment. Compl. ¶ 70; Ex. Q.
Plaintiff initially brought suit in the United States District Court for the Eastern
District of Michigan, Southern Division, alleging claims of promissory estoppel and
detrimental reliance, quasi contract, negligent misrepresentation, declaratory and
injunctive relief, and attorney’s fees under the EAJA. Compl. ¶ 72; Ex. R at 5. The
district court granted the Government’s motion to dismiss based on lack of subject matter
jurisdiction due to sovereign immunity. Ex. R at 20; Compl. ¶ 73. Plaintiff has since
filed its claim in this Court, and now alleges breach of contract and seeks attorney’s fees
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under the EAJA. Compl. ¶¶ 74-86. Plaintiff demands $4.5 million in damages for its
losses and other expenses incurred.
Discussion
I.

Standard of Review

In reviewing Defendant’s motion to dismiss pursuant to RCFC 12(b)(6), the Court
accepts as true all well-pleaded allegations in the complaint and draws all reasonable
inferences in favor of the plaintiff. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To
survive a motion to dismiss, a plaintiff need only show “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). A claim is plausible on its face “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556).
II.

Analysis

The crux of Plaintiff’s argument is that the Government elected to exercise its
option through the email sent by Ms. Hoffman to Plaintiff’s attorney on May 10, 2007.
See Compl. ¶¶ 40, 47-48; Ex. L. Based on this email, Plaintiff contends, the Government
thereby entered into a contract to purchase the property and has since breached that
contract. Compl. ¶¶ 74-82. In contrast, Defendant asserts that there was no contract that
could have been breached, as Plaintiff does not allege sufficient facts to find that the GSA
exercised its right under the Option Agreement, or that the proposed Purchase Agreement
was ever signed. See Def.’s Mot. 5-7. The Court agrees with Defendant that the facts
alleged are insufficient to demonstrate the existence of a contract and, therefore, there can
be no breach.
When contract language is unambiguous on its face, the plain language of the
contract controls. Hunt Constr. Grp., Inc. v. United States, 281 F.3d 1369, 1373 (Fed.
Cir. 2002). Courts should look to the plain language of the contract to resolve any
questions of contract interpretation. Aleman Food Servs., Inc. v. United States, 994 F.2d
819, 822 (Fed. Cir. 1993). When a contract term is unambiguous, it cannot be assigned
another meaning. Triax Pac., Inc. v. West, 130 F.3d 1469, 1473 (Fed. Cir. 1997); see
Allied Tech. Grp., Inc. v. United States, 39 Fed. Cl. 125, 138 (1997) (citation omitted),
aff’d, 173 F.3d 435 (Fed. Cir. 1998) (Table) (noting that contract terms must be given the
meaning that would be derived by a “reasonably intelligent person acquainted with the
contemporaneous circumstances.”).
Here, the Option Agreement provided for a “no-cost assignable option,” and
explicitly stated that if the “Optionee elects not to exercise the rights, option, or fee
simple interests granted herein and to complete the purchase within the time and in the
manner provided herein, then this Option shall terminate without further action or
obligation on the part of either party.” Ex. E ¶ 14 (emphasis added). In order to have
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exercised the option in accordance with the Option Agreement’s terms, the GSA was
required to serve “written notice on the [Plaintiff] in the manner prescribed in Section
20.” Ex. E ¶ 2. Section 20 of the Option Agreement required written notice to be served
by “certified or registered, return receipt requested, postage prepaid, United States mail,
personal delivery, or recognized, private, overnight courier.” Ex. E ¶ 20.
Plaintiff argues that Ms. Hoffman’s email instructing Plaintiff to “proceed with
contacting the State” of Michigan about removing the communication towers from its
building constituted the exercise of the option by the GSA. Compl. ¶ 40; Ex. L.
However, this email falls well short of the unambiguous exercise requirements contained
in the Option Agreement. 2 Plaintiff fails to allege any facts purporting to demonstrate
that the GSA provided the required written notice in accordance with the contract terms.
Moreover, even assuming that the written notice requirements of the Option
Agreement did not govern the election of the option, the Court cannot agree that Ms.
Hoffman’s email was “clear, precise and unequivocal.” Pl.’s Resp. 5. Any acceptance of
a contract must be positive and unequivocal to have effect, and any equivocation by the
offeree in its purported acceptance will prevent the creation of the contract. See 2
Richard A. Lord, Williston on Contracts § 6:10 (4th ed. 2012). Here, the email does not
purport to elect the option or to ratify the Purchase Agreement, and instead merely directs
Plaintiff to contact the MSP regarding their aforementioned request of a 90-day notice for
removal. Furthermore, the email underscores the continued existence of the option when
it states, “We are meeting internally tomorrow to discuss the assignable option and
remaining items.” Ex. L. At best, the meaning of the email is ambiguous. Thus,
regardless of Ms. Hoffman’s authority to bind the GSA in contract, Plaintiff has not
shown that her May 10, 2007 email binds the GSA to anything. Plaintiff’s claims sound
more properly in tort, under theories of misrepresentation and detrimental reliance, which
are not within the purview of this Court. Although it may be unfortunate that Plaintiff
suffered a financial loss, the incurred expenses were contemplated by the terms of the
Option Agreement regardless of whether the GSA exercised the option. Plaintiff has not
alleged sufficient facts to support the existence of the contract, and therefore Plaintiff has
no claim for breach of contract.

2

Plaintiff argues that Paragraph 2 of the Option Agreement, which defines the required method of notice,
is merely an “optional” or “preferred choice” due to the use of the word “may.” Pl.’s Resp. 7. The Court
finds this argument without merit, as the contract terms plainly and unambiguously allude to the GSA’s
ability to exercise the option at its will within the specified time frame, and do not render the notice
requirements themselves optional. See Def.’s Reply 3; Triax Pac., Inc., 130 F.3d at 1473 (noting that
when a contract term is unambiguous, it cannot be assigned another meaning, no matter how reasonable
that other meaning may be).

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Conclusion
For the foregoing reasons, the Court hereby GRANTS Defendant’s Rule 12(b)(6)
motion, and dismisses Plaintiff’s complaint without prejudice.
IT IS SO ORDERED.

s/ Thomas C. Wheeler
THOMAS C. WHEELER
Judge

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