Hamilton Square, LLC v. United States

In the United States Court of Federal Claims

No. 20-1285

(Filed: July 20, 2022)

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HAMILTON SQUARE, LLC, *

* Lack of Subject-Matter Jurisdiction;

Plaintiff, * RCFC 12(b)(1); Failure to State a

* Claim; RCFC 12(b)(6); Breach of

v. * Contract; Breach of the Implied Duty

* of Good Faith and Fair Dealing;

THE UNITED STATES, * Contract Interpretation; Request to

* Amend Complaint.

Defendant. *

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Joanne Leah Castella, Burke, Williams & Sorensen, LLP, Oakland, CA, counsel for Plaintiff.

Allision Schilling Vicks, U.S. Department of Justice, Civil Division, Washington, DC, counsel

for Defendant.

OPINION AND ORDER

DIETZ, Judge.

Hamilton Square, LLC (“Hamilton”) brings suit against the United States alleging breach

of contract and breach of the implied duty of good faith and fair dealing in connection with

Hamilton’s 2005 purchase of a plot of land formerly used as a naval exchange gas and public

works station. Hamilton alleges that the United States Department of the Navy (“Navy”)

breached its contractual obligations by failing to remediate the land after Hamilton notified the

Navy of newly discovered contamination in 2019. The government seeks to dismiss Hamilton’s

amended complaint as untimely pursuant to Rule 12(b)(1) of the Rules of the United States Court

of Federal Claims (“RCFC”) and, alternatively, for failure to state a breach of contract claim

pursuant to RCFC 12(b)(6). Hamilton opposes the motion, and, in the alternative, requests that

the Court grant it leave to further amend its complaint.

The Court finds that Hamilton has sufficiently stated a claim for breach of contract based

on the Navy’s failure to remediate the newly discovered contaminants on the property after

receiving notice from Hamilton and that such claim is timely. Hamilton’s other breach of

contract claims are dismissed for failure to state a claim or as untimely. The Court also finds that

Hamilton has sufficiently stated a claim for breach of the implied duty of good faith and fair

dealing. Accordingly, the Court GRANTS-IN-PART and DENIES-IN-PART the government’s

motion to dismiss. The Court DENIES Hamilton’s request to further amend its complaint.

I. BACKGROUND

This dispute concerns 2.7 acres of land (“Property”) located in Novato, California that

was previously owned by the Navy. Am. Compl. ¶ 7, ECF No. 19. The Property was used from

the mid-1970s through the early 1990s as a Naval Exchange gas station and public works support

area, and it housed several underground gasoline storage tanks. Id. ¶ 8. After closure of the

service stations and removal of the underground storage tanks, the Property was designated by

the Navy as property to be sold for commercial use as part of a base realignment and closure

program. Id. ¶¶ 7-8; App. to Def.’s Mot. to Dismiss at 62 (Deed at 1), ECF No. 22-1 [hereinafter

Def.’s App.].1 During preparation for sale, the Navy engaged in various clean up and remediation

efforts to make the Property suitable for commercial use. Am. Compl. ¶¶ 1, 10-15.

To begin the site closure process, the Navy released a draft work plan in January 1998 for

soil and groundwater remediation. Am. Compl. ¶ 10. The objective of the plan was to achieve

site closure by demonstrating that the Property will not pose an unacceptable threat to human

health based on its planned use as a commercial property. Id. ¶¶ 10-12. The Navy released the

final corrective action plan (“CAP”) in March 2002. Id. ¶ 14. The CAP provided that the Navy

was the lead agency administering the remediation and closure of the Property and that the

Property was suitable for its intended commercial use. Id. ¶¶ 14-15.

In August 2003, the Navy released the Finding of Suitability to Transfer (“FOST”). Am.

Compl. ¶ 16. The purpose of the FOST was “to determine whether [the Property is]

environmentally suitable for transfer by deed under Section 120(h) of the Comprehensive

Environmental Response, Contamination, and Liability Act [(“CERCLA”)] in a manner

protective of human health and the environment.” Id.; Def.’s App. at 6 (FOST at 1). The FOST

stated that “[t]he only outstanding environmental issues [on] the [Property] are petroleum

contamination in groundwater and residual contamination in soil” and that “[a]ll other

environmental issues [on] the [Property] have been resolved.” Def.’s App. at 6 (FOST at 1). The

FOST ultimately concluded that the Property “is environmentally suitable for transfer by deed

for commercial use, subject to compliance with the covenants, conditions, and restrictions set

forth in this FOST.” Id. at 28 (FOST at 23).

The FOST required that the deed transferring the Property “include a covenant by the

United States, made pursuant to the provisions of CERCLA § 120(h)(3)(A)(ii)(II), warranting

that any remedial or corrective action found to be necessary after the date of the deed shall be

conducted by the United States.” Def.’s App. at 25 (FOST at 20). CERCLA applies to “any

contract for the sale or other transfer of real property which is owned by the United States and on

1

The government attached the following documents as appendices to its motion to dismiss and its reply: the Finding

of Suitability of Transfer; the first amendment to the FOST report; the California Department of Toxic Substances

Control concurrence with the FOST report; the Quitclaim Deed for the Property; the covenant for restrict use of

property and environmental restriction; and two soil vapor investigation reports from consultant Ninyo & Moore

from June 12, 2019 and October 11, 2019. See generally Def.’s App; App. to Def.’s Reply, ECF No. 30-1. The

Court may rely on these documents when evaluating the government’s motion to dismiss because these documents

are referenced in Hamilton’s amended complaint and, thus, are incorporated into the pleadings. See RCFC 10(c);

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (holding that the court “must consider the

complaint in its entirety, . . . in particular, documents incorporated into the complaint by reference, and matters of

which a court may take judicial notice”).

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which any hazardous substance was stored for one year or more, known to have been released, or

disposed of.” 42 U.S.C. § 9620(h)(3). Under CERCLA, any contract for the sale of property

must include a notice of “the type and quantity of such hazardous substances” and “the time at

which such storage, release, or disposal took place.” Id. § 9620(h)(3)(i)(I-II). CERCLA contains

a list of covered hazardous substances, see 40 C.F.R. § 302.4(a), and it expressly excludes

petroleum. See 42 U.S.C. § 9601(14). The CERCLA notice in this case identified lead as the

only hazardous substance that was known to have been stored, released, or disposed of on the

Property. Def.’s App. at 77 (Deed at Ex. D). CERCLA requires a covenant warranting that all

necessary remedial action has been conducted prior to the date of transfer and that any remedial

action found to be necessary after the date of the transfer “shall be conducted by the United

States.” See 42 U.S.C. § 9620(h)(3)(ii)(I-II).

In 2004, the Navy released an invitation for bids to purchase the Property as a

“Commercial/Retail Development Opportunity.” Am. Compl. ¶ 25. The invitation directed

potential bidders to the FOST, which was incorporated into the invitation for bids by reference

and contained a draft copy of the proposed deed. Id. ¶¶ 27-29. Hamilton submitted a bid to the

Navy in the amount of $900,000, and its bid was accepted. Id. ¶ 29. Hamilton and the Navy

finalized the sale and executed the deed (“Deed”) on April 18, 2005. Id. ¶ 33. The Deed included

a restriction on residential use, which prohibited the use of the Property for residential purposes.

Id. ¶ 36. However, the Deed permitted Hamilton to request approval from the Navy for a

variance or termination of such restriction subject to approvals by the state and local government

agencies. Id.

Starting in 2013, Hamilton sought to develop the Property for residential use. Am.

Compl. ¶ 46. After several years of coordinating with the City of Novato and state and local

government agencies, Hamilton began the process of subsurface soil and groundwater

remediation and clean-up aimed at improving the Property to meet residential standards. Id. ¶¶

47, 51. As part of this effort, Hamilton removed 10,000 tons of impacted soil from the Property

and replaced it with clean fill. Id. ¶ 52. At the direction of state and local government agencies

and its environmental consultant, Hamilton conducted additional soil vapor sampling to analyze

the Property’s suitability for residential use. Id. ¶¶ 53-60. The soil vapor samples from the

Property showed that “[t]he contaminants on the Subject Property have been found at levels that

exceed the screening levels for commercial/industrial use in effect on the date of the Deed.” Id. ¶

61. Following this discovery, Hamilton notified the Navy of the contaminants on the Property

and attempted to get the Navy to perform additional remediation. Id. ¶ 65. Despite Hamilton’s

efforts, the Navy neither attempted to remediate the Property nor compensated Hamilton for

costs to remediate the Property. Id. ¶ 64. As of the date of Hamilton’s amended complaint,

Hamilton has spent over $3.5 million to remediate the Property. Id.

Hamilton filed a complaint in this Court on September 29, 2020, alleging that the Navy

breached its obligations under the Deed and breached the implied duty of good faith and fair

dealing. See Compl., ECF No. 1. Hamilton later amended its complaint to plead more facts

following a motion to dismiss by the government. See Am. Compl.; Def.’s Mot. to Dismiss, ECF

No. 16. On May 7, 2021, the government filed a motion to dismiss Hamilton’s amended

complaint as untimely pursuant to RCFC 12(b)(1) and for failure to state a claim pursuant to

RCFC 12(b)(6). See Def.’s Mot. to Dismiss, ECF No. 22 [hereinafter Def.’s Mot.]. Hamilton

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opposed the motion and, alternatively, requested another opportunity to amend its complaint. See

Pl.’s Opp’n to Def.’s Mot. to Dismiss, ECF No. 27 [hereinafter Pl.’s Opp’n]. The Court held oral

argument on the government’s motion on November 3, 2021. See ECF No. 31.

II. LEGAL STANDARDS

This Court is a court of limited jurisdiction. Brown v. United States, 105 F.3d 621, 623

(Fed. Cir. 1997). This Court’s jurisdiction is defined by the Tucker Act, which waives the

sovereign immunity of the United States for “any claim against the United States founded either

upon the Constitution, or any Act of Congress or any regulation of an executive department, or

upon any express or implied contract with the United States, or for liquidated or unliquidated

damages in cases not sounding in tort.” 28 U.S.C. § 1491(a).

This Court’s jurisdiction is barred “unless the petition thereon is filed within six years

after such claim first accrues.” 28 U.S.C. § 2501. This six-year statute of limitations is “absolute”

and is not subject to equitable tolling.2 John R. Sand & Gravel Co. v. United States, 552 U.S.

130, 134-39 (2008). A claim against the United States first accrues on the date when “all events

have occurred that are necessary to enable the plaintiff to bring suit.” Martinez v. United States,

333 F.3d 1295, 1303 (Fed. Cir. 2003) (en banc). The focus for when a claim accrues is at the

time of the defendant’s actions, “not upon the time at which the consequences of the acts became

most painful.” Del. State Coll. v. Ricks, 449 U.S. 250, 258 (1980) (emphasis in original).

Additionally, the claim only accrues once “the plaintiff was or should have been aware of [the

claim’s] existence.” Hopland Band of Pomo Indians v. United States, 855 F.2d 1573, 1577 (Fed.

Cir. 1988). However, a plaintiff “does not have to possess actual knowledge of all the relevant

facts in order for the cause of action to accrue.” Fallini v. United States, 56 F.3d 1378, 1380

(Fed. Cir. 1995). For a breach of contract claim, the “cause of action accrues when the breach

occurs.” Holmes v. United States, 657 F.3d 1303, 1317 (Fed. Cir. 2011).

A motion to dismiss for lack of subject-matter jurisdiction pursuant to RCFC 12(b)(1)

challenges the court’s “general power to adjudicate in specific areas of substantive law[.]”

Palmer v. United States, 168 F.3d 1310, 1313 (Fed. Cir. 1999); see also RCFC 12(b)(1). A

plaintiff must establish jurisdiction by a preponderance of the evidence. Lujan v. Def. of Wildlife,

504 U.S. 555, 561 (1992); Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed.

Cir. 1988). When considering a motion to dismiss for lack of subject-matter jurisdiction, the

court “must accept as true all undisputed facts asserted in the plaintiff’s complaint and draw all

reasonable inferences in favor of the plaintiff.” Trusted Integration, Inc. v. United States, 659

F.3d 1159, 1163 (Fed. Cir. 2011).

A motion to dismiss a claim pursuant to RCFC 12(b)(6) challenges this Court’s ability to

“exercise its general power with regard to the facts peculiar to the specific claim.” Palmer, 168

F.3d at 1313. When deciding a motion to dismiss for failure to state a claim upon which relief

may be granted, the Court likewise construes the complaint’s allegations in favor of the plaintiff.

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This Court grants equitable tolling in breach of contract claims “where the government fraudulently or deliberately

conceals material facts relevant to a plaintiff’s claim[.]” Hopland Band of Pomo Indians v. United States, 855 F.2d

1573, 1577 (Fed. Cir. 1988). Hamilton has not alleged that the government fraudulently or deliberately concealed

any material facts relevant to its claims. See generally Am. Compl.

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RCFC 12(b)(6); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on other grounds by

Harlow v. Fitzgerald, 457 U.S. 800, 814-15 (1982). The Court must inquire whether the

complaint contains “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). In other words, the Court must assess whether “a

claim has been stated adequately” and whether “it may be supported by [a] showing [of] any sets

of facts consistent with the allegations in the complaint.” Id. at 563. The plaintiff’s factual

allegations “must be enough to raise a right to relief above the speculative level.” Id. at 555.

III. DISCUSSION

Hamilton asserts two causes of action: breach of contract and breach of the implied duty

of good faith and fair dealing. See Am. Compl. ¶¶ 66-78. For the reasons discussed below, the

Court finds that Hamilton has sufficiently stated a breach of contract claim based on the Navy’s

alleged failure to remediate the Property after Hamilton provided notification of newly

discovered chloroform and petroleum contamination and that such claim is timely. Hamilton’s

other breach of contract claims are dismissed for failure to state a claim or as untimely. The

Court also finds that Hamilton has sufficiently stated a claim for breach of the implied duty of

good faith and fair dealing. The Court denies Hamilton’s request to amend its complaint.

A. Hamilton’s Breach of Contract Claim

Hamilton alleges that the Navy breached its obligations under the Deed by failing to: (1)

remediate the Property, either through performance or payment of costs, after Hamilton provided

notice of hazardous substances, including petroleum, that were existing on the Property prior to

the date of the Deed; (2) adequately perform ongoing corrective action as required by the Deed;

and (3) ensure that the Property was suitable for commercial development. Am. Compl. ¶ 69(a-

c). The government argues that Hamilton has not identified any obligation in the Deed that has

been breached by the Navy and that its breach of contract claim is untimely. See Def.’s Mot. at

11-21.

For a breach of contract claim, the plaintiff must show a valid contract between the

parties, an obligation arising out of the contract, a breach of that obligation, and damages caused

by the breach. San Carlos Irrigation & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed.

Cir. 1989). When considering a motion to dismiss a breach of contract claim, the Court must

“interpret the contract’s provisions to ascertain whether the facts plaintiff alleges would, if true,

establish a breach of contract.” Bell/Heery v. United States, 739 F.3d 1324, 1330 (Fed. Cir.

2014); see also S. Cal. Edison v. United States, 58 Fed. Cl. 313, 321 (2003) (“Contract

interpretation is a matter of law and thus may be addressed by the Court in resolving a motion to

dismiss.”). “Contract interpretation begins with the language of the written agreement.” Coast

Fed. Bank, FSB v. United States, 323 F.3d 1035, 1038 (Fed. Cir. 2003). The terms of the contract

are given “their ordinary meaning unless the parties mutually intended and agreed to an

alternative meaning.” Harris v. Dep’t of Veteran Affs., 142 F.3d 1463, 1467 (Fed. Cir. 1998).

Additionally, a contract should “be considered as a whole and interpreted so as to harmonize and

give reasonable meaning to all of its parts.” NVT Techs., Inc. v. United States, 370 F.3d 1153,

1159 (Fed. Cir. 2004). “An ambiguity exists when there is more than one reasonable

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interpretation of a contract.” King Fisher Co. v. United States, 51 Fed. Cl. 94, 99 (2001) (citing

Grumman Data Sys. Corp. v. Dalton, 88 F.3d 990, 997 (Fed. Cir. 1996)).

1. Hamilton has sufficiently stated a breach of contract claim based on the

Navy’s alleged failure to remediate the Property after notification of newly

discovered contamination, and this claim is timely.

Hamilton alleges that the Navy breached the terms of the Deed by failing to remediate

newly discovered chloroform and petroleum contamination on the Property after notification

from Hamilton. Am. Compl. ¶ 69(c). The government argues that Hamilton does not allege facts

sufficient to show that chloroform existed on the Property prior to the Deed, as would be

required to trigger the Navy’s obligation to remediate, and that the Navy does not have an

obligation to remediate petroleum because it is excluded from CERCLA’s definition of

hazardous substances. See Def.’s Mot. at 16-21; Def.’s Reply at 3-6, ECF No. 30. Further, the

government argues that this claim is time barred because the breach, to the extent that it

occurred, accrued at the time of transfer. See Def.’s Mot. at 10-16. The Court finds that Hamilton

has sufficiently stated a breach of contract claim based on the Navy’s alleged failure to remediate

the newly discovered contaminants on the Property and that the claim is timely.

Hamilton has alleged enough facts to demonstrate a plausible breach by the Navy of its

obligation to remediate chloroform. Section II.K (“Section K”) of the Deed contains the

CERCLA notices, assurances, covenants, and declarations regarding hazardous substances and

sets forth procedures that apply if a previously unidentified hazardous substance is discovered on

the Property. Def.’s App. at 68-69 (Deed at II.K). Section K(3) imposes an obligation on the

Navy to remediate hazardous substances that were present on the Property prior to the date of the

Deed. Specifically, Section K(3) states:

GRANTOR covenants for the benefit of the GRANTEE . . . as a covenant running

with the land, that GRANTOR shall conduct any additional remedial action found

to be necessary after the date of this Deed for any hazardous substance existing on

the Property prior to the date of this Deed.

Id. at 68 (Deed at II.K(3)). Section K(5) requires Hamilton to notify the Navy “within 90 days

after learning of any previously unidentified condition of the Property that suggests a response

action is necessary” and to “provide . . . reasonable access to the records and personnel of

[Hamilton] . . . for purposes of defending or resolving the need for additional response action.”

Def.’s App. at 69 (Deed at II.K(5)).

The Navy’s obligation to remediate under Section K(3) applies to “any hazardous

substance existing on the Property prior to the date of [the] Deed.” Def.’s App. at 68 (Deed at

II.K(3)). Despite the government’s arguments to the contrary, it is not limited only to those

hazardous substances identified by the Navy as having been stored, disposed of, or released prior

to the transfer. See Def.’s Reply at 4; Def’s App. at 77 (Deed at Ex. D) (identifying lead as the

only known hazardous substance). Hamilton alleges that it discovered chloroform in 2019, Am.

Compl. ¶¶ 55-56, and that chloroform is a hazardous substance under CERCLA. See Pl.’s Opp’n

at 8; see also 40 C.F.R. § 302.4. Thus, upon notification from Hamilton of the newly discovered

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chloroform, the Navy was obligated to remediate the chloroform if the chloroform existed on the

Property prior to transfer (and if remedial action is “found to be necessary”).

Whether the chloroform existed on the Property prior to the date of the Deed is a question

of fact to be resolved through discovery. Hamilton alleges that the “contaminants on the Subject

Property have been found at levels that exceed the screening levels for commercial/industrial use

in effect on the date of the Deed[,]” and that such contamination resulted from the Navy’s

activities prior to the transfer because Hamilton did not introduce chloroform to the Property.

Am. Compl. ¶ 61; see Oral Arg. Tr. 40:7-19, ECF No. 34. At this stage, assuming these

allegations to be true and drawing all reasonable inferences in Hamilton’s favor, this is sufficient

to state a plausible claim for breach of contract and to avoid dismissal under RCFC 12(b)(6).3

See Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995) (stating that when assessing a

motion under RCFC 12(b)(6), the Court is “obligated to assume all factual allegations to be true

and to draw all reasonable inferences in plaintiff's favor”).

Hamilton also claims that the Deed contains an obligation for the Navy to remediate

petroleum and petroleum derivatives that it discovered on the Property in 2019. See Pl.’s Opp’n

at 9-12. The Deed is ambiguous as to whether the Navy is obligated to remediate previously

unidentified petroleum contamination on the Property. Petroleum and its derivatives are

expressly excluded from the definition of “hazardous substances” for the purposes of the

CERCLA warranty. See 42 U.S.C. § 9601(14, 33). This exclusion makes Section K, on its own,

inapplicable to the newly discovered petroleum. The Deed, however, includes Section II.L

(“Section L”), which states:

GRANTEE agrees . . . that upon learning of any previously unidentified release or

threatened release of petroleum or petroleum derivative (including without

limitation MTBE) from, on, under or about the Property and any related soils or

ground or surface waters, which may have been associated with Department of

Defense activities at or about the Property, GRANTEE will notify GRANTOR by

the following the notification procedures set forth in [Section K(5)] above.

Def.’s App. at 69 (Deed at II.L). The government argues that Section L requires only that

Hamilton notify the Navy of any unidentified release of petroleum, with no “follow-on

remediation obligation for petroleum.” Def.’s Reply at 9. Hamilton, however, interprets Section

L, in the context of the entire Deed, to impose an obligation on the Navy for the “remediation of

petroleum on the Property.” Pl.’s Opp’n at 12.

Both interpretations are reasonable. The government is correct that, by itself, the plain

language of Section L does not obligate the Navy to remediate previously unidentified releases

of petroleum discovered on the Property. On the other hand, however, the cross-reference to the

notification procedures of Section K(5) in Section L could reasonably be interpreted as intending

3

The government argues that Hamilton “does not allege that it informed the Navy of the presence of a CERCLA

hazardous substances” and, thus, has not followed its obligations under the Deed. Def.’s Reply at 6 n.3. During oral

argument, Hamilton represented to the Court that it timely notified the Navy of the chloroform. See Oral Arg. Tr.

60:3-16, ECF No. 34. For the purposes of this motion, the Court assumes that Hamilton has followed the proper

notification procedures.

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to treat previously unidentified petroleum as equivalent to a previously unidentified CERCLA

hazardous substance. Section K(5) requires that Hamilton notify the Navy “after learning of any

previously unidentified condition of the Property that suggests a response action is necessary.”

Def.’s App. at 69 (Deed at II.K(5)) (emphasis added). Like the discovery of a previously

unidentified hazardous substance that existed on the Property prior to the Deed, the discovery of

previously unidentified petroleum that may have been associated with Navy activities on the

Property could trigger remediation action by the Navy. More discovery is needed to clarify the

intent of this provision. Accordingly, construing the ambiguity in Hamilton’s favor, Hamilton

has alleged enough facts to demonstrate a plausible breach by the Navy of its obligation to

remediate the newly discovered petroleum.4 Doe v. United States, 95 Fed. Cl. 546, 554 (2010)

(“The court’s task in considering a motion to dismiss for failure to state a claim is not to

determine whether a plaintiff will ultimately prevail, but ‘whether the claimant is entitled to offer

evidence to support the claims.’” (quoting Chapman Law Firm Co. v. Greenleaf Constr. Co., 490

F.3d 934, 938 (Fed. Cir. 2007))).

The Court must now determine whether Hamilton’s breach of contract claim arising from

the Navy’s alleged failure to remediate the previously unidentified chloroform and petroleum

falls within this Court’s six-year statute of limitations. Hamilton argues that its “claim accrued in

October 2019, when Hamilton informed the Navy of the environmental conditions on the

Property and the Navy failed to conduct remedial action as required by the Deed.” Pl.’s Opp’n at

4. The government argues, with respect to petroleum, that Hamilton’s claims accrued at the time

of the transfer in April 2005 because, at this time, “Hamilton knew of the contamination” and

“its . . . complaints are related to that known contamination.” Def.’s Mot. at 14.

The Court finds that Hamilton’s claim that the Navy failed to remediate the previously

unidentified contaminants after Hamilton provided notice is timely. The government’s argument

that the claim accrued at the time of the transfer because Hamilton knew of the contamination

misunderstands the claim. Hamilton’s breach of contract claim is not based on contaminants that

were known to exist on the Property at the time of the Deed. Instead, Hamilton’s claim arises

from the Navy’s failure to remediate newly discovered contamination after Hamilton provided

notice to the Navy. For a breach of contract claim, the “cause of action accrues when the breach

occurs.” Holmes, 657 F.3d at 1317. Hamilton alleges that it discovered previously unidentified

chloroform and petroleum on the Property in June 2019. Am. Compl. ¶ 55. The Deed requires

that Hamilton notify the Navy in writing “within 90 days after learning of any previously

unidentified condition of the Property that suggests a response action is necessary.” Def.’s App.

at 69 (Deed at II.K(5), II.L). Hamilton alleges that it provided such notice to the Navy. Am.

Compl. ¶ 65. Hamilton states that it communicated with the Navy between October 8, 2019, and

the date it filed its complaint and that, thus far, the Navy has refused to fulfill its obligations to

remediate the Property. Id. Therefore, its claim that the Navy breached its obligation under the

Deed to remediate the newly discovered contaminants accrued when the Navy refused to

remediate the contamination, which occurred at some point on or after October 8, 2019.

4

For the purposes of this motion, the Court construes Hamilton’s allegation as seeking the Navy to remediate a

previously unidentified release of petroleum that may have been associated with Department of Defense activities on

or about the Property. Petroleum contamination that was known to exist on the Property at the date of the Deed is

not covered by Section L because it was known to the parties and disclosed to Hamilton as part of the Deed. See

Def.’s App. at 64 (Deed at II.C).

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Hamilton filed its complaint in this Court on September 29, 2020, see Compl., so Hamilton’s

claim falls well within this Court’s six-year statute of limitations.

2. Hamilton fails to state a claim for breach of contract based on its

allegation that the Navy failed to perform ongoing corrective action on the

Property.

Hamilton claims that the Navy breached its obligation under the contract by “fail[ing] to

adequately perform the required ongoing corrective action on the Subject Property as required by

the Deed.” Am. Compl. ¶ 69. Hamilton claims that this obligation is found in Section II.J

(“Section J”) of the Deed. See Pl.’s Opp’n at 6-7. Section J(1) grants the Navy “the right . . . to

enter and inspect the Property to ensure the viability of the selected land use controls . . . or to

perform ongoing corrective actions.” Def.’s App. at 67 (Deed at II.J). It provides that “[t]he

ongoing corrective actions include sampling and maintenance of subsurface groundwater wells

and soil-gas probes as described in the [CAP] . . . , which the CAP is referenced in the FOST.”

Id. The FOST states that the CAP for the Property consisted of a biosparging system “located to

the North of the Property by a minimum of 250 feet [which] is not intended to affect the

Property” and “quarterly groundwater monitoring[.]” Id. at 19-20 (FOST at 14-15). Aside from

this, the Deed does not provide any further definition of the term “ongoing corrective actions.”

Section J(2) requires that the Navy and Hamilton “agree to cooperate in good faith to minimize

any conflict between necessary ongoing remedial and corrective actions being conducted by [the

Navy] at the Property, and the operations and construction activities of [Hamilton.]” Id. at 68

(Deed at II.J).

The plain language of Section J does not obligate the Navy to perform any ongoing

corrective actions on the Property. It merely gives the Navy the right to access the Property for

the purpose of performing ongoing corrective actions and obligates the parties to cooperate to

minimize disruptions to each party’s activities on the Property. Unlike the Navy’s obligation to

remediate previously unidentified contaminants, which is at least arguably found in the Deed, the

Deed contains no provision obligating the Navy to generally perform ongoing corrective actions.

Aside from its allegation that the Navy failed to remediate the previously unidentified

chloroform and petroleum as Hamilton alleges is required by the Deed, Hamilton neither alleges

that the Navy failed to perform a particular corrective action required by the Deed nor identifies

when such a failure occurred. Because Hamilton has not demonstrated that the Deed creates an

obligation for the Navy to perform ongoing corrective actions, its claim must be dismissed.

3. Hamilton fails to state a claim for breach of contract based on its

allegation that the Navy failed to ensure that the Property was suitable for

commercial development, and this claim is untimely.

Hamilton alleges that the Navy breached the Deed when it “failed to ensure that the

Subject Property was suitable for commercial development.” Am. Compl. ¶ 69(b). This alleged

breach may be interpreted in two ways: that the Navy failed to ensure that the Property was

suitable for commercial development on the date of the Deed or that the Navy failed to ensure

that the Property remained suitable for commercial development after the date of the Deed.

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If Hamilton’s claim is that the Navy failed to ensure that the Property was suitable for

commercial development on the date of the Deed, this claim falls outside of this Court’s six-year

statute of limitations. A claim challenging whether the Property was suitable for commercial use

at the time of the Deed or whether the Navy had adequately performed remediation of the

Property prior to the date of the Deed needed to be brought within six years of the date of the

Deed—April 18, 2005. If the Property were not suitable for commercial development at that

time, the date of the Deed is when “all events [had] occurred to fix the [Navy’s] alleged liability”

entitling Hamilton to challenge the terms of the Deed and the condition of the Property as

described in the Deed. See Martinez, 333 F.3d at 1303. Hamilton brought its claim on September

29, 2020, over fifteen years after it executed the Deed. Accordingly, this claim is time-barred and

must be dismissed for lack of subject-matter jurisdiction.

If Hamilton’s claim is that the Navy failed to ensure that the Property remained suitable

for commercial use after the date of the Deed, Hamilton fails to state a claim because the Deed

does not contain a provision that obligates the Navy to ensure that the Property remains suitable

for commercial use after the Deed. Section II.C (“Section C”) of the Deed provides that

Hamilton accepted the Property “as is” and that the Navy was “not liable for any latent or patent

defects in the Property, except to the extent provided” in the Deed. Def.’s App. at 64 (Deed at

II.C). While the Deed states that the Navy “found and determined that the [P]roperty is suitable

for transfer pursuant to the [FOST],” Def.’s App. at 62 (Deed at 1), and the FOST concluded that

the Property “is environmentally suitable for transfer by deed of commercial use,” id. at 28

(FOST at 23), the Deed does not contain any language that obligates the Navy to ensure the

continued commercial viability of the Property after the date of the Deed. Therefore, Hamilton

cannot state a claim for breach of contract based on the Navy’s failure to ensure that the Property

remained suitable for commercial development after the date of the Deed.

B. Hamilton’s Breach of the Implied Duty of Good Faith and Fair Dealing

Hamilton also brings a cause of action alleging that the Navy breached its implied duty of

good faith and fair dealing. Am. Compl. ¶¶ 71-78. The implied duty of good faith and fair

dealing “imposes obligations on both contracting parties that include the duty not to interfere

with the other party’s performance and not to act so as to destroy the reasonable expectations of

the other party regarding the fruits of the contract.” Centex Corp. v. United States, 395 F.3d

1283, 1304 (Fed. Cir. 2005). The implied duty depends, in part, on what the contract promises or

disclaims because of “the duty’s focus on ‘faithfulness to an agreed common purpose and

consistency with the justified expectations of the other party[,]’ which obviously depend on the

contract’s allocation of benefits and risks.” Metcalf Constr. Co., Inc. v. United States, 742 F.3d

984, 991 (Fed. Cir. 2014) (quoting Restatement (Second) of Contracts § 205 cmt. A (1981)).

“While the implied duty exists because it is rarely possible to anticipate in contract language

every possible action or omission by a party that undermines the bargain, the nature of that

bargain is central to keeping the duty focused on ‘honoring the reasonable expectations created

by the autonomous expressions of the contracting parties.’” Id. “The implied duty of good faith

and fair dealing cannot expand a party’s contractual duties beyond those in the express contract

or create duties inconsistent with the contract’s provisions.” Precision Pine & Timber, Inc. v.

United States, 596 F.3d 817, 831 (Fed. Cir. 2010). “[A]ny breach of [the implied duty] has to be

connected, though is not limited, to the bargain struck in the contract.” Metcalf, 742 F.3d at 994.

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The Court finds that Hamilton has sufficiently stated a plausible claim that the Navy

breached the implied duty of good faith and fair dealing. As discussed above, Hamilton has

sufficiently alleged that the Navy breached a provision in the Deed by refusing to remediate the

previously unidentified chloroform and petroleum on the Property after Hamilton provided

notification to the Navy. See supra Section III.A(1). Thus, it is not necessary for Hamilton to

invoke the doctrine of good faith and fair dealing to impose the same obligation on the Navy. See

BGT Holdings LLC v. United States, 984 F.3d 1003, 1016 (Fed. Cir. 2020) (providing that a

sufficiently plead breach of contract claim, thereby providing an avenue for relief, “preempt[s]

the need to invoke the doctrine of good faith and fair dealing”).

However, Hamilton also alleges that the Navy breached the implied duty “by failing to

diligently perform[] all ongoing obligations required by the Deed, including performing ongoing

corrective actions required by the Navy after the date of the Deed to protect human health and

the environment with respect to the contaminants (including petroleum products) and to ensure

that the Subject Property was suitable for commercial development.” Am. Compl. ¶ 75. While

these obligations are not contained in the Deed as express provisions, a breach of the implied

duty does not necessitate a violation of an express provision. See Metcalf, 742 F.3d at 991.

Hamilton alleges that “the Navy’s conduct destroyed its reasonable expectations regarding the

fruits of the Deed.” Am. Compl. ¶ 78; see Centex, 395 F.3d at 1304. Whether Hamilton’s

expectations and the Navy’s conduct, in the context of the Deed, were reasonable is a fact-

intensive inquiry. This determination depends on the express terms of the Deed, including its

allocation of risks and benefits, in combination with the nature of the bargain struck by Hamilton

and the Navy and their respective expectations. Thus, Hamilton’s claim warrants further

exploration during discovery, and the government’s motion to dismiss is denied.

C. Hamilton’s Request to Amend its Complaint

To the extent the Court grants the government’s motion to dismiss, Hamilton requests

leave to amend its complaint to plead additional facts. Pl.’s Opp’n at 15. RCFC 15(a)(2) states

that “a party may amend its pleading only with the opposing party’s written consent or the

court’s leave.” Further, it states that “[t]he court should freely give leave when justice so

requires.” RCFC 15(a)(2). The decision to grant leave to amend a complaint is within the

discretion of the Court. Zenith Radio Corp. v. Hazeltine Rsch., Inc., 401 U.S. 321, 331 (1971).

However, granting a motion for leave to amend is not appropriate in certain circumstances, such

as when the amendment is futile. Foman v. Davis, 371 U.S. 178, 182 (1962). An amendment is

futile if it could not survive a dispositive pretrial motion. Kemin Foods, L.C. v. Pigmentos

Vegetales Del Cenro S.A. de C.V., 464 F.3d 1339, 1354-55 (Fed. Cir. 2006). To amend a

complaint, the moving party “must proffer sufficient facts supporting the amended pleading that

the claim could survive a dispositive pretrial motion.” Id.

The Court denies Hamilton’s request to amend its complaint because such an amendment

would be futile. The Court dismissed, as untimely, Hamilton’s breach of contract claim that the

Navy failed to ensure the Property was suitable for commercial development as of the date of the

Deed. See supra Section III.A(3). Hamilton cannot allege facts that would change the date of

accrual of this claim and avoid its dismissal as untimely. The Court also dismissed Hamilton’s

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breach of contract claims alleging that the Navy failed to perform ongoing corrective actions as

required by the Deed and failed to ensure that the Property remained suitable for commercial use.

See supra Sections III.A(2-3). The Court dismissed these claims because the Deed does not

contain such obligations on the part of the Navy. Hamilton cannot allege facts that would change

the obligations contained in the Deed. For these reasons, allowing Hamilton to amend its

complaint to plead additional facts with respect to these claims would be futile, and Hamilton’s

request to amend its complaint is denied.

IV. CONCLUSION

Accordingly, the government’s motion to dismiss is GRANTED-IN-PART and

DENIED-IN-PART. The motion to dismiss is GRANTED with respect to Hamilton’s breach of

contract claims based on the Navy’s failure to adequately perform the required ongoing

corrective actions on the Property as required by the Deed and failure to ensure that the Property

was suitable for commercial development. These claims are DISMISSED WITH PREJUDICE.

The motion to dismiss is DENIED with respect to Hamilton’s breach of contract claim

based on the Navy’s failure to remediate the newly discovered contaminants on the Property

after receiving notice from Hamilton and Hamilton’s claim that the Navy breached the implied

duty of good faith and fair dealing. Hamilton’s request to amend its complaint is DENIED.

The parties SHALL FILE a joint status report on or before August 19, 2022, setting

forth a proposed schedule for further proceedings in this case.

IT IS SO ORDERED.

s/ Thompson M. Dietz

THOMPSON M. DIETZ, Judge

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