U.S. Court of Appeals, Federal Circuit
February 17, 1999
BETA CONSTRUCTION COMPANY, INC. PLAINTIFF-APPELLANT,
UNITED STATES, DEFENDANT-APPELLEE.
Before Rich, Newman, and Rader, Circuit Judges.
The opinion of the court was delivered by: Newman, Circuit Judge.
The Beta Construction Company entered into a contract with the government for replacing the roof of the Housing and Urban Development Building in Washington, D.C. Beta appeals from the decision *fn1 of the Court of Federal Claims holding, upon cross-motions for summary judgment, that the contract required Beta to use asbestos abatement procedures for the removal of certain rigid (or screen) insulation that was not an "asbestos-containing material" as defined in the contract but was adjacent to the roof membrane which contained asbestos. The contracting officer directed Beta to remove the rigid insulation as asbestos-containing material, on the basis that the rigid insulation became contaminated with asbestos during removal of the roof membrane. Beta did so, protesting, and requests recovery of the additional cost. We conclude that Beta's reading of its contract obligations was reasonable, that the contract contained no patent ambiguity, and that Beta is entitled to an appropriate recovery. We reverse the decision of the Court of Federal Claims and remand for determination of quantum.
The contract between Beta and the government required "removal, containment, and disposal of asbestos-containing materials." Subpart M of 40 C.F.R. '61, incorporated into the contract by reference, defined "asbestos-containing material" as "any material containing more than 1 percent asbestos [as determined using a specified method.]" The parties stipulated that the insulation layer was not asbestos-containing material.
The court concluded that the cutting method used by Beta to remove the roof membrane "created the threat of contamination, if not actual contamination, to the underlying insulation." The court determined that "preventing contamination, and thus the threat or risk of contamination, however remote, was of paramount concern in the asbestos abatement procedures." Thus the court held that, although the contract was not patently ambiguous, Beta's interpretation was unreasonable.
Beta states that its interpretation was straightforward and reasonable, and that nothing in the contract suggested that the rigid insulation was required to be removed as if it were asbestos-containing, when it was clearly and correctly understood not to be asbestos-containing. The contract stated that the asbestos-containing roof membrane could be removed by wetting and cutting; it was silent as to the rigid insulation. We agree with Beta that if the "threat of contamination" were meant to require that expensive asbestos abatement measures must be used for removal of non asbestos-containing material, such an intention could not be inferred by silence. This contract, drafted by the government, requires sufficient clarity at the points of performance that reasonable persons would know the contract requirements, and would bid in accordance with these obligations.
The government argues that the shaded areas in a drawing showed areas of asbestos-containing material and that all materials within those areas were to be removed as asbestos-containing. The government argues that if the contract contained a latent ambiguity, as the trial court ruled, Beta's interpretation of the contract was unreasonable, because Beta should have recognized that the possibility of asbestos-containing dust and debris required full asbestos-containing material removal procedures. The government also argues that even if Beta's interpretation were reasonable, there existed a patent ambiguity as to whether the rigid insulation was required to be removed as asbestos-containing, and Beta did not fulfill its duty of pre-contract inquiry.
Beta points out that the containment and cleanup of asbestos dust is set forth in the contract as a separate procedure from the removal and disposal of asbestos-containing material, and cites the provisions of the contract concerning vacuuming of dust and use of HEPA filters:
"Essential parts of asbestos dust control are housekeeping and cleanup procedures. Maintain all surfaces on the roof area free of accumulations of asbestos fibers to prevent further dispersion. Give meticulous attention to restricting the spread of dust and debris, keep waste from being distributed over the general area or to lower floors. Use approved industrial vacuum cleaners with a HEPA filter to collect dust and small scrap. . . ."
Beta states that these provisions would be meaningless if mere contact with dust or waste required the full abatement method of removal of every item touched by dust. Beta is correct that the contract does not state that contact with asbestos dust requires the use of complete asbestos abatement methods for removal of the entire contacted material. Indeed, the reasonable reading of the contract is that it does not.
Interpretation of the provisions of a contract receives plenary review. ITT Federal Servs. Corp. v. Widnall, 132 F.3d 1448, 1450 (Fed. Cir. 1997). Test reports showed that the rigid insulation was not asbestos-containing. Although the government disputes the value of the test reports, citing a letter by GSA's roofing expert stating that the reports were inconclusive as they did not indicate the location from which the tested sample was taken, there was proffered no evidence whatsoever that the rigid insulation became asbestos-containing.
We conclude that if there was an ambiguity it was latent, and that Beta reasonably interpreted the contract as not requiring removal of the non-asbestos rigid insulation by asbestos abatement procedures. Judgment on the issue of contract interpretation shall be entered in favor of Beta, thus entitling Beta to recover the additional costs of the extra procedures required by the contracting officer. The case is remanded to the Court of Federal Claims for determination of quantum.
Taxable costs in favor of Beta.