Summary
This Federal Circuit opinion affirms a Court of Federal Claims decision granting summary judgment to the United States in a commercial lease dispute. The court held that the government properly exercised its contractual authority to terminate a lease after determining that extensive water damage rendered the leased USCIS office untenantable. The appellate court concluded that the government's determination was neither arbitrary nor capricious, rejecting the plaintiff's argument that a strict common-law definition of untenantability should apply.
Topics
Practice areas
Questions Presented
- Whether the government’s determination that the premises were untenantable was unreasonable, arbitrary, or capricious.
- Whether the government breached the implied covenant of good faith and fair dealing in terminating the lease.
Holdings
- The government’s determination was not unreasonable, arbitrary, or capricious; therefore the determination is conclusive and does not constitute a breach of contract.
- The government did not breach the implied covenant of good faith and fair dealing; the clear‑and‑convincing‑evidence standard was correctly applied and the evidence was insufficient to show bad faith.
Key quotations
“The plain language of the lease, which provided that untenantability would be “determined by the Government,” left the untenantability determination to the discretion of GSA, as long as that discretion was exercised in good faith.” (at 7-9)
“A violation of the implied covenant of good faith and fair dealing must be established by clear and convincing evidence because Jackson’s claim involved allegations of bad faith.” (at 10-14)
Factual background
In May 2009 the United States leased two floors of a New York City office building from Jackson. In January 2015 a burst sprinkler caused extensive water damage, rendering the premises untenantable. The General Services Administration (GSA) determined the premises were untenantable and, within the lease’s 15‑day window, terminated the lease on January 20, 2015.
Procedural history
The United States Court of Federal Claims granted summary judgment to the United States, holding that the government did not breach its lease when it terminated the lease after water damage rendered the premises untenantable. Jackson appealed.