## Facts

- In 1990, Reservation Ranch entered into a U.S. Forest Service timber-sale contract authorizing the ranch to harvest a substantial quantity of timber from California’s Six Rivers National Forest.
- The contract included a provision allowing the Forest Service to cancel the sale if the agency determined that continued logging would threaten the continued existence of the spotted owl, a species protected under the Endangered Species Act of 1973 (ESA).
- The contract also included a limitation-of-remedies provision stating that if the Forest Service canceled on that ESA-related basis, the purchaser would not be entitled to ordinary compensatory damages such as lost profits, but only to the limited remedies specified in the contract.
- In 1992, after environmental review and agency action taken in response to concerns about impacts on the spotted owl, the Forest Service invoked the contractual cancellation provision and canceled the timber sale.
- Reservation Ranch filed suit in the United States Court of Federal Claims under the Tucker Act, seeking approximately $5.5 million in damages, largely framed as expectancy losses (including lost profits).
- The ranch argued that the contract’s damages-limiting provisions were not authorized by law, contending that the National Forest Management Act (NFMA) did not authorize limits on damage awards for breach of a timber-sale contract.
- The United States responded that NFMA did not prohibit the Forest Service from limiting its liability through express contract terms and that the agency acted within its contractual cancellation right.

## Issues

1. Whether the Forest Service breached the timber-sale contract by canceling the sale to protect the spotted owl, or instead acted within an express contractual right.
2. Whether NFMA or other governing law barred the Forest Service from including and enforcing contract provisions that limit a timber purchaser’s damages (including lost profits) when cancellation occurs for ESA-related wildlife-protection reasons.

## Decision

- The Court of Federal Claims granted the United States’ motion for summary judgment.
- The court held that the Forest Service’s cancellation was authorized by the contract’s ESA-related cancellation clause and therefore was not a breach of contract.
- The court held that the contract’s limitation-of-remedies scheme was valid and enforceable and that NFMA did not prohibit the Forest Service from negotiating such limits.
- As a result, Reservation Ranch could not recover the claimed lost profits and other ordinary expectation damages beyond the contract’s specified remedies.

## Legal Principles

- When a government contract unambiguously reserves to the agency a right to cancel upon specified environmental findings, the agency’s exercise of that right is treated as performance under the contract rather than a breach.
- Absent a statutory prohibition, a federal agency may include and enforce express contract terms that limit available remedies and damages for a defined cancellation event.
- NFMA’s silence on damages for canceled timber-sale contracts does not, by itself, prevent the Forest Service from limiting its liability through clear contractual provisions.
- On summary judgment, where the contract terms and the basis for cancellation are not materially disputed, the government may obtain judgment as a matter of law enforcing the agreed remedial limits.

## Conclusion

Reservation Ranch v. United States upheld the Forest Service’s use of an ESA-related cancellation clause and a related limitation-of-remedies provision in a timber-sale contract, concluding that the Forest Service did not breach the contract by canceling the sale to protect the spotted owl and that NFMA did not bar the government from enforcing contract terms that precluded recovery of lost profits and other ordinary compensatory damages.


Reservation Ranch v. United States, 39 Fed. Cl. 696 (1997)