Appeal from the United States Court of Federal Claims in No. 1:12-cv-00008, Judge Nancy B. Firestone.
LEWIS STEVEN WIENER, Sutherland Asbill & Brennan LLP, Washington, DC, argued for plaintiff-appellant. Also represented by GERIN BRENDAN BALLARD.
DAVID ALAN LEVITT, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by STUART F. DELERY, ROBERT E. KIRSCHMAN, JR., SCOTT D. AUSTIN.
Before PROST, Chief Judge, NEWMAN and TARANTO, Circuit Judges.
Prost, Chief Judge.
G4S Technology LLC (" G4S" ) appeals from the United States Court of Federal Claims' grant of summary judgment for the government. The Court of Federal Claims held that G4S is not a third party beneficiary of the government's contract with Open Range Communications, Inc. (" Open Range" ), and thus that the government is not liable on G4S's contract claims. We affirm.
This case arises out of a $267 million loan from the Department of Agriculture's Rural Utilities Service (" RUS" ) and Open Range to finance construction of wireless broadband networks in 540 RUS-approved markets. As part of the project, Open Range also planned to bring wireless broadband service to a number of other markets outside the scope of the RUS loan. To finance this aspect of the construction, Open Range secured $97 million of venture capital financing from One Equity Partners III, L.P. (" OEP" ). These agreements were announced in January 2009.
As part of the loan agreement with RUS, Open Range was required to keep a pledged deposit account, in which RUS would advance loan funds as needed over the course of the project. To receive loan funds, Open Range was required to submit a financial requirement statement (" FRS" ) outlining the purpose of the advance and including relevant invoices and purchase orders. While Open Range had some limited flexibility to shift funding from one purpose to another, Open Range was expected to use the advanced funds for the purpose stated in the corresponding FRS.
RUS anticipated that Open Range would execute the project through use of subcontractors. Accordingly, RUS and Open Range agreed that Open Range's relationships with subcontractors would be formalized through master service agreements (" MSAs" ). Each MSA included technical specifications, pricing information, target completion dates, and other requirements. RUS edited and formally approved a generic MSA for Open Range to use in contracting with subcontractors. Open Range entered into one such MSA with G4S, which at the time was called Adesta.
Unfortunately, the project encountered difficulties just eighteen months after the loan agreement was signed. In July 2010, the Federal Communications Commission (" FCC" ) suspended a spectrum permit belonging to Globalstar, Inc. Because Open Range licensed its spectrum rights from Globalstar, Open Range lost the spectrum rights necessary to operate the planned broadband network. Under the loan agreement, loss of spectrum rights gave RUS the right to terminate the loan. Consequently, on July 14, 2010, RUS gave Open Range notice of its intent to terminate all remaining funds on the loan unless Open Range could obtain replacement spectrum rights.
Open Range relied on the RUS loan money to pay its subcontractors, including G4S, so the July 14, 2010 RUS notice to Open Range worried Open Range's subcontractors.
Soon after the notice, subcontractors' fears were realized as Open Range began failing to meet its payment obligations. By mid-September, Open Range had notified RUS by email that Open Range was behind in compensating its subcontractors.
Nonetheless, Open Range kept working to secure replacement spectrum rights. On September 22, 2010, the FCC issued a temporary permit to Open Range giving Open Range spectrum access covering 264 of the originally planned 540 communities until January 31, 2011. The next day, Open Range emailed RUS to inquire about RUS advancing funds, given that some subcontractors were threatening to leave the project. Lindsay Daschle, a Senior Advisor to the Secretary of Agriculture, responded by making loan money available and offering to reassure subcontractors that the project was moving forward. Daschle also submitted a letter to Open Range to serve as RUS's press release.
Despite RUS's efforts to bolster Open Range's credibility, subcontractors remained concerned about the project's ongoing viability. On October 4, 2010, a lobbyist for Open Range requested that RUS confirm in writing that RUS would continue to fund the project. RUS responded with two more public letters explaining that RUS would continue funding the project, but that the plan would be downsized in light of Open Range's failure to secure spectrum rights for the full scope of the original project.
With Open Range still struggling to meet payment deadlines to subcontractors, Open Range and RUS exchanged emails on January 11 and 12, 2011 about funding a G4S subcontract that had been orally approved by RUS at the end of 2010. A meeting was quickly set up between Open Range and RUS to discuss the issue. Still, a weekly status report sent by Open Range to RUS on March 11, 2011 revealed that Open Range maintained outstanding debts to G4S.
As it became clear that Open Range would be unable to regain the full spectrum rights necessary to complete the originally-contemplated project, RUS and Open Range executed a loan amendment on April 29, 2011 to reflect the project's decreased scope. The loan amount was reduced to $180 million, and the project was downsized to cover 160 RUS-approved markets. RUS also required Open Range to secure $40 million of additional capital from OEP. In turn, in the equity commitment letter to Open Range, OEP conditioned its obligation to make its capital payment to Open Range upon prior satisfaction of two preconditions--that Open Range and RUS had modified their loan agreement and that RUS had advanced funds to ...