# Air Terminal Services, Inc. v. The United States

> United States Court of Claims · April 17, 1964 · 330 F.2d 974

URL: https://www.frixlaw.com/law-library/cases/9449990

## Case

- **Full name:** AIR TERMINAL SERVICES, INC. v. the UNITED STATES
- **Court:** United States Court of Claims
- **Decided:** April 17, 1964
- **Citations:** 330 F.2d 974; 165 Ct. Cl. 525; 1964 U.S. Ct. Cl. LEXIS 88
- **Precedential status:** Published
- **Opinion:** Dissent by Jones
- **Judges:** Jones, Whitaker, Laramore, Durfee, Davis
- **Cited by:** 20 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

JONES, Chief Judge
(dissenting).
I do not question the immunity of the Government from liability for its essential sovereign acts, but I do think it important to realize that whether the action taken should be classed as such a sovereign act as would justify an exemption from liability depends upon the setting and facts of the particular case; also it is important to determine whether some other action might have served the purpose.
Just because the Government has the sheer power to claim that a certain action was taken in its asserted sovereign capacity does not mean that a Government agency may disregard its voluntary contract obligations, nor that it may ride roughshod over the citizens’ rights by *981 simply donning the cloak of immunity without showing a necessity for doing so. That would mean going back more than 100 years to the time when we still had the reflected doctrine of “the King can do no wrong.”
The question here is not whether the Government may perform an essential sovereign act. That is conceded. The question here is whether there was sufficient necessity for the particular act to justify the Government interfering with the successful operation of its own contract without any adjustment of damages caused to one of its own citizens, who was the other party to the contract.
When the Government enters into a contract it should carry out its terms in good faith, and invoke its great power of a sovereign act when and only when and to the extent necessary to carry out its essential governmental functions. As was stated by Chief Justice Waite in the case of Cooke, et al. v. United States, 91 U.S. 389, 398 , 23 L.Ed. 237 (1875):
“If it [the Government] comes down from its position of sovereignty, and enters the domain of commerce, it submits itself to the same laws that govern individuals there.”
In Goldblatt v. Hempstead, 369 U.S. 590, 591, 594 , 82 S.Ct. 987 , 8 L.Ed.2d 130 (1962), in which, commenting on the effect of a Government regulation on an outstanding contract, the Supreme Court said:
“This is not to say, however, that governmental action in the form of regulation cannot be so onerous as to constitute a taking which constitutionally requires compensation. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 [ 43 S.Ct. 158 , 67 L.Ed. 322 ] (1922); see United States v. Central Eureka Mining Co., supra [ 357 U.S. 155 , 78 S.Ct. 1097 , 2 L.Ed.2d 1228 ]. There is no set formula to determine where regulation ends and taking begins. * * *
“ * * * The classic statement of the rule in Lawton v. Steele, 152 U.S. 133, 137 [ 14 S.Ct. 499, 501 , 38 L.Ed. 385 ] (1894), is still valid today:
‘To justify the State in * * * interposing its authority in behalf of the public, it must appear— First, that the interests of the public * * * require such interference; and, second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals.’ ” [pp. 594-595 of 369 U.S., p. 990 of 82 S.Ct., 8 L.Ed.2d 130.]
Thus, to come within the rule of immunity for a sovereign act, the action taken must be (1) in the public interest, (2) must have general rather than a specific or local application, and (3) if it goes too far it will be recognized as a taking.
There are a number of reasons, good and sufficient, which should preclude exemption from liability in the present case:
1. The defendant owned all the land involved here. There was no other convenient area which could be used by a competitor for parking purposes aside from the land owned by the Government. At the time of signing there was nothing in the appearance of the premises to indicate the possibility of competing parking space, and certainly no indication that the Government meant to change the premises.
2. As an inducement to bidders, the defendant submitted a data sheet showing gross receipts from this particular parking area for the previous 12-month period to have been $341,780. It disclosed the total number of airline passengers enplaning and deplaning for the two previous fiscal years. It showed an increase in passengers in 1957 over the number of such passengers in 1956. It submitted an estimated increase of a substantial percentage for the year 1958. The invitation also stated that the Government would not consider a proposal which contained a minimum guarantee of less than $175,000 for each contract *982 year. The Government later increased this minimum to $225,000 per year. The contract as actually signed required plaintiff to pay the defendant 86.4 percent of the gross receipts up to $360,000 per annum; the percentage increasing up to 95.1 percent of all receipts above $400,000 with the guarantee of minimum rental of $300,000 per annum, whichever was greater.
3. At the time of the letting of the concession contract, the defendant had in contemplation and under discussion a plan to increase the number of parking meters. It did not disclose this fact to the bidders. I believe, in fairness, the Government owed the duty to have told plaintiff before the contract was signed of its contemplated increase of parking meters. As early as 1956 the defendant’s representatives were seriously considering various proposals for increasing the number of parking meters in this general area, but this fact was not in any way disclosed to plaintiff prior to or at the time of signing the lease contract. There can be no question that plaintiff was misled to its damage by the Government’s withholding of information. (Finding No. 7.) Defendant’s withholding of information, under the circumstances of this case, amounted to a breach of contract under the holding of this court in Ragonese v. United States, 120 F.Supp. 768 , 128 Ct.Cl. 156 (1954). See United States v. Atlantic Dredging Co., 253 U.S. 1 , 40 S.Ct. 423 , 64 L.Ed. 735 (1920).
Judge Learned Hand in Heil v. United States, D.C., 273 F. 729 , at page 731 (1921), used the following language:
“•» * * Whatever be the justification in policy of the sovereign’s immunity, the first consideration ought to be this: That in the performance of its voluntary engagements with its citizens it should conform to the same standard of honorable conduct as it exacts of them touching their conduct with each other. Any policy which would exempt the United States from the scrupulous performance of its obligations is base and mean; it serves in the end to bring the United States'into contempt, to prejudice it in its dealings when it enters into the common fields of human intercourse, and to arouse the indignation of honorable men. Congress by the Tucker Act meant to avoid such consequences.”
4. After the contract had been signed,, the defendant widened the so-called street or driveway, reduced the island circle so as to make more room, removed the no-parking signs that had been placed on some of the narrower places, installed 122 new meters from which the Government collected and pocketed the money, and at the same time continued to exact the minimum guaranty rental from the plaintiff even though plaintiff’s receipts concurrently went down through the remaining 2 years of its contract, causing the plaintiff to lose money during that period. During the same 2' years the defendant’s income from parking meters leaped from $21,000 during the previous years before the new meters were installed, to $88,353 during the fii’st year after the installation of the new meters (the second year of the contract), and to $98,304 during the third year of the contract. Plaintiff’s receipts were correspondingly reduced during this period.
The primary cause of the decrease in plaintiff’s short-term parking revenue was the installation by defendant of the 122 new parking meters after the contract had been signed. (Finding No. 16.)
The so-called “parking regulation” did not rise to the dignity of a sovereign act, but sank to the level of a local rule of convenience. It was an affirmative act on the part of the Government which caused plaintiff’s receipts to be reduced substantially and it turned what would have been a profitable concession into one that entailed a substantial loss. This was an act of interference on the part of the Government which the circumstances of this case do not justify. State of California v. United States, 151 F.Supp. 570 (N.D.Cal.1957); Bateson- *983 Stolte, Inc. v. United States, 172 F.Supp. 454 , 145 Ct.Cl. 387 (1959); Sunswick Corporation v. United States, 75 F.Supp. 221 , 109 Ct.Cl. 772 (1948). 2
We quote from the opinion of the Supreme Court in the Pennsylvania Coal Company v. Mahon, 260 U.S. 393, at 415 , 43 S.Ct. 158, at 160 , 67 L.Ed. 322 (1922), as follows:
“ * * * When this seemingly absolute protection is found to be qualified by the police power, the natural tendency of human nature is to extend the qualification more and more until at last private property -disappears. But that cannot be accomplished in this way under the ■Constitution of the United States.
“The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”
The particular regulation was not necessary. There were other means of controlling the traffic in the area with-cut installing meters, e. g., the findings state that “ [although an absolute prohibition against any parking in the area would have furthered the primary objective of improving the flow of moving traffic, they [defendant’s representatives] felt that parking spaces near the terminal were badly needed to accommodate the short-term parker.” Why did the Government choose the installation of parking meters of its own to control traffic when other equally effective methods were available which would not interfere with plaintiff’s successful operation of the leased parking area? It could have permitted plaintiff to install and operate the additional meters or to cperate them after defendant had installed them. It could have made an adjustment in the rental guarantee. It could have adjusted the contract price. It could have permitted plaintiff all net profits arising from the extra meters it installed to be applied as a credit on the payments otherwise due the defendant. It could have credited all receipts from the extra meters, less actual operating costs, to a reduction in the contract price. It could have had an unloading zone without parking meters. There were many ways of adjusting the situation without brusquely ignoring its own obligation under a contract of its own choosing. Is it possible that the officials in charge were persuaded by the fact that the Government would get more money even though the increased revenue would be at the expense of one of its citizens who had contracted in good faith with the Government? Without ceremony, negotiation, or adjustment, it used its stark power to destroy a contract which it had initiated.
This was an attempt to bring far more under the protective umbrella of a sovereign act than can be logically brought within its appropriate shelter.
It is one thing to exercise the power of sovereign immunity when it is an essential part of progress and development. Every property owner is aware of this latent power before he becomes the owner of property. But it is an entirely different thing for the officials of Government to place a show window outside the gates depicting the advantages of a contract to be performed within its enclosure; and then after a contract is signed, and without previous notice, to throw a road block in the form of affirmative acts of interference which destroys any chance of a successful operation of the contract, which they had invited.
*984 Does anyone believe the Government, after signing a written 3-year lease contract, could have immediately widened the street and installed parking meters along the entire frontage of the leased parking area, thus destroying the value of the lessee’s contract, and still have escaped any liability? That is, in effect, what they did as to the short-term parking privilege. The action of the Government in installing these meters should not be classed as an act of the sovereign with the attendant immunity because it bears no relationship to the “means * * * reasonably necessary for the accomplishment of the purpose” of decreasing traffic congestion, and because the action was “unduly oppressive upon” plaintiff. Goldblatt v. Hempstead, supra; Lawton v. Steele, supra.
Plaintiff was held to the rental payments in spite of its losses occasioned primarily by the action of the Government in installing the new meters. This is swinging the “sovereign act” weapon with a vengeance.
Today, as the activities of Government become more complex and the Government is engaging in wider fields of activity, the need is becoming manifest that there should be a more accurate definition of the term sovereign act and a more flexible application of its effects on day-to-day activities. As we enter the electronics and space age, the contracts with the Government will become vastly more complicated. Already the Government is necessarily spending billions on national defense involving immense contracts. The Nation’s business, which was once primarily local, has become largely interstate, greater sums are being and will be spent on conservation projects, irrigation, soil and water conservation, as well as military and other development projects.
If the contractors on these great projects are to be met at frequent trouble spots with the plea of a sovereign act as a defense against the Government’s interference with their opei'ation of public contracts, they will of necessity take these road blocks into consideration in calculating and submitting their bids. The costs to the Government will be higher, the irritations and misunderstandings will be greater and court dockets more crowded.
It would be in the interest of all concerned if either the limits of the term could be better defined or if a more flexible approach to the old harsh doctrine could be had, especially in peacetime periods. As it is, the contractor must face the uncertainty; the lawyers for the defense must raise the defense of a sovereign act if there is any possibility of its application; the lawyers for plaintiff must continue to insist that it does not apply — thus carrying on a continuing cold war. That conflict is gradually ripening into a real battle, with the litigants charging back and forth across a no-man’s land, with the courts being caught in the middle. As in most modern wars, everyone loses.
The Government’s immunity from the consequences of a sovereign act is a valuable and essential right. It should be invoked where and to the extent it is applicable. But it is a powerful weapon and should not be used in too wide a field or to cover inappropriate matters under the guise of necessary protection for the Government. It is fitting to say, “0, it is excellent to have a giant’s strength; but it is tyrannous to use it like a giant.” 3
Defense counsel seeks to include within its broad sweep a number of acts by officials of the Government which definitely lap over into the field of interference with the normal operation of its own contracts.
Also from Ottinger v. United States, 88 F.Supp. 881 , at page 883, 116 Ct.Cl. 282 , at page 285 (1950) :
“ * * * Government] needs no such immunity in order to be able to go on governing wisely and as circumstances require without being hampered by its outstand *985 ing contracts. We think that to treat every act of a Government agent, done in the name of the Government, as an act of sovereignty within the meaning of the doctrine here under discussion would be a retreat, without reason, from the purpose of the statute permitting citizens to sue the United States for breach of contract.”
The facts and circumstances of each case have a bearing on the ultimate application of the doctrine of exemption from liability due to a sovereign act. The record does not justify its application in the instant case. 4
The facts of record are wholly insufficient to justify the allowance of an independent counterclaim apart from a finding for plaintiff on the general issue.
I would allow plaintiff to recover the sums calculated in the trial commissioner’s findings which we have approved as the findings of the court. These findings are based on the actual losses which are shown by the evidence to have been the direct result of the affirmative acts of interference on the part of the defendant.
It would be wholly insufficient to allow the plaintiff the net profits from the meters. No doubt the widening of the streets, and the reducing of the center island, plus the cost of buying, installing, supervising, repairing and collecting from the parking meters was nearly as great, perhaps greater, as the income from the meters during the two remaining years of plaintiff’s lease. It was evidently a long-range program. Besides, the defendant’s action destroyed all profits from plaintiff’s lease and his actual loss was greater than the amount found by the trial commissioner.
. It is stated in the opinion of Wall Chang Corporation v. United States, 282 F.2d 728, 733 , 151 Ct.Cl. 41, 49 (1960).
“This court has held that it is ‘an implied provision of every contract, whether it be one between individuals or •between an individual and the Government, that neither party to the contract will do anything to prevent performance thereof by the other party or that will hinder or delay him in its performance.’ George A. Fuller Co. v. United States, 1947, [ 69 F.Supp. 409 ], 108 Ct.Cl. 70, 94 . See also United States v. Peck, 1880, 102 U.S. 64 [ 26 L.Ed. 46 ]; 5 Williston, Contracts § 1293A (Rev. Ed. 1937); Restatement, Contracts § 315.”
. “Measure for Measure,” Act II, Sc. 2, line 107.
. It should be noted that while in the original opinion of the court in Hallman v. United States, 68 F.Supp. 204 , 107 Ct.Cl. 555 (1946), cited by the majority herein, the Government’s demurrer to the petition was sustained and the petition dismissed on the ground that the traffic regulation involved therein was a sovereign act, the demurrer to plaintiff’s amended petition was later overruled, and after a trial on the merits the court, in its final opinion, 80 F.Supp. 370 , at page 373, 112 Ct.Cl. 170 , at page 187 (1948), stated that it was “not necessary for us to consider or decide whether the regulation of traffic at the army post in question was a sovereign act, which, as such, could not be a breach of contract by the Government, Horowitz v. United States, 267 U.S. 458 , 45 S.Ct. 344 , 69 L.Ed. 736 ; Froemming Bros. of Tex. v. United States, 70 F.Supp. 126 , 108 Ct.Cl. 193 , or whether a sovereign act might under any circumstances amount to an unforeseen condition within the meaning of Article 4 of the contract.”

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9449990. Public record. Not legal advice.