     In the United States Court of Federal Claims
                                   No. 14-376C
                         (Filed: November 21, 2014)


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PIONEER RESERVE, LLC,

                      Plaintiff,
                                               Clean Water Act; mitigation bank;
v.                                             contract; regulatory function;
                                               subject matter jurisdiction
THE UNITED STATES,

                      Defendant.


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       Douglas E. Kahle, Virginia Beach, VA, for plaintiff.

      Sarah M. Valenti, Civil Division, Department of Justice, Washington,
DC, with whom were Steven J. Gillingham, Assistant Director, Robert E.
Kirschman, Jr., Director, and Stuart F. Delery, Assistant Attorney General, for
defendant. Milton W. Boyd, Office of the Chief Counsel, U.S. Army Corps of
Engineers, Washington, DC, of counsel for defendant.

                               _______________

                                  OPINION
                               _______________


BRUGGINK, Judge.

        Pioneer Reserve, LLC (“Pioneer” or “plaintiff”), presents this court
with a breach of contract claim. Defendant, the United States Government,
filed a motion to dismiss plaintiff’s complaint, contending that plaintiff did not
have a contract with the federal government and that we, therefore, do not
have subject matter jurisdiction. The matter is fully briefed and we heard oral
argument on November 6, 2014. For the reasons explained below, we deny
defendant’s motion.

                              BACKGROUND1

       Pioneer Reserve, LLC was formed by the Walther family to manage
two tracts of valuable land (“the tracts” or “the land”) located in Matanuska-
Susitna Borough, Alaska that the family acquired in 1998. These tracts of land
were capable of being developed and therefore had significant value. The
Walther family also suspected that there would be even greater value in
preserving the land and selling its status as a preserved natural resource to
developers who were required to compensate for the impact their
developments elsewhere would have on other natural resources. The
framework for this arrangement is set forth in the following statutes and
regulation.

I.     The Clean Water Act and Its Implementation Through Regulation

       Congress passed the Clean Water Act to “restore and maintain the
chemical, physical, and biological integrity of the Nation’s waters.” 33 U.S.C.
§ 1251(a) (2012). The Act accomplishes this restoration by prohibiting the
discharge of pollutants into bodies of water, id. § 1311(a), except by special
permit issued by the appropriate federal agency. Id. § 1344(a). Thus, if a
developer seeks to dredge or dump fill, i.e., discharge pollutants, into the
waters, including wetlands,2 of the United States, it must apply for a permit,
which may or may not be granted after a period for public notice and comment.
Id.

       After the developer applies for the permit, the Department of the Army,
Corps of Engineers (“Corps”), engages in a public-interest analysis that takes
into account measures proposed by the developer to mitigate the unavoidable

       1
         The facts are taken from plaintiff’s complaint, and are presumed
correct for the purposes of defendant’s motion to dismiss, unless challenged.
Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995).
       2
        Wetlands are also protected because they “constitute a productive and
valuable public resource, the unnecessary alteration or destruction of which
should be discouraged as contrary to the public interest.” 33 C.F.R. §
320.4(b)(1) (2014).

                                      2
impact to the waters or wetlands. 33 C.F.R. § 320.4(r) (2014). The mitigation
may be accomplished on or off the site intended for development, and the
Corps may condition the permit upon the implementation of the proposed
mitigation. Id. § 325.4(a). Additionally, the developer is not required to be the
entity that accomplishes the mitigation. Rather, the regulations contemplate
an option whereby the developer may secure mitigation “credits” from a third
party mitigation bank,3 which assumes responsibility for the preservation of a
piece of land containing natural resources, such as wetlands, in exchange for
compensation from the developer. See id. § 332.2 (“The operation and use of
a mitigation bank are governed by a mitigation banking instrument.”).

       The mitigation banking instrument4 (“instrument”) features prominently
in the process of proposing, approving, and establishing a mitigation bank.
The process begins when the entity seeking to establish a mitigation bank,
which is referred to as the “sponsor,” submits a proposal to the Corps. This
proposal must contain the following: a draft mitigation plan describing “the
ecological characteristics of the proposed compensatory mitigation project
site;” a work-plan for restoring, enhancing, or preserving the resources
described; “the number of credits to be provided, including a brief explanation
of the rationale for this determination;” and the method of achieving
preservation, including any legal arrangements or instruments necessary to
ensure the long-term protection of the site. Id. § 332.8(c)(1)(iii). The district
engineer, on behalf of the Corps, then assembles an Interagency Review Team
(“IRT”) to review the documents submitted by the sponsor. Id. § 332.8(b)(1).
“[R]epresentatives from the U.S. Environmental Protection Agency, U.S. Fish

       3
         A mitigation bank is defined as “a site or suite of sites, where
resources (e.g., wetlands, streams, riparian areas) are restored, established,
enhanced, and/or preserved for the purpose of providing compensatory
mitigation for impacts authorized by” a permit issued by the Army Corps of
Engineers. 33 C.F.R. § 332.2. “In general, a mitigation bank sells
compensatory mitigation credits to permittees whose obligation to provide
compensatory mitigation is then transferred to the mitigation bank sponsor.”
Id.
       4
         “Mitigation bank instrument means the legal document for the
establishment, operation, and use of a mitigation bank.” 33 C.F.R. § 332.2.
“The instrument provides the authorization for the mitigation bank . . . to
provide credits to be used as compensatory mitigation for [Department of the
Army] permits.” Id. § 332.8(d)(1).

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and Wildlife Service, NOAA Fisheries, the National Resource Conservation
Service, and other federal agencies, as appropriate, may participate in the
IRT.” Id. § 332.8(b)(2).

        The IRT will review the proposal, instrument, “and other appropriate
documentation and provide comments to the district engineer” in order “to
facilitate the establishment of mitigation banks.” Id. § 332.8(b)(3). During the
IRT review period, the public is also given a 30-day period to comment on the
sponsor’s proposal. Id. § 332.8(d)(5). If the district engineer determines that
the proposal has potential, he or she will provide the sponsor with the district
engineer’s initial evaluation letter along with comments from the public and
the IRT. Id. § 332.8(d). “After considering comments from the district
engineer, the IRT, and the public, if the sponsor chooses to proceed with
establishment of the mitigation bank . . . he must prepare a draft instrument
and submit it to the district engineer.” Id. § 332.8(d)(6)(i). The draft
instrument must contain the mitigation plan and a credit release schedule. Id.
§ 332.8(d)(6). When the sponsor submits the draft instrument, it triggers one
more round of review and comments by the district engineer and the IRT. Id.
§ 332.8(d)(7). The sponsor has the ability to alter the draft instrument to
respond to comments. If the feedback during this round of review indicates
that the draft instrument is generally acceptable, then the sponsor may submit
a final instrument. Id.

        Submission of the final instrument results in a final round of review by
the district engineer and the IRT. Id. § 332.8(d)(8). Although the district
engineer “retains final authority for approval of the instrument,” he or she
“will give full consideration to any timely comments and advice of the IRT.”
Id. § 332.8(b)(4). Once the final instrument is approved, the district engineer
arranges for the instrument to be signed by the parties. Id. § 332.8(d)(8); 33
C.F.R. § 332.8(a)(1) (“All mitigation banks . . . must have an approved
instrument signed by the sponsor and the district engineer prior to being used
to provide compensatory mitigation” credits.). Members of the IRT also have
the option of signing the instrument to “indicate their agreement with the terms
of the instrument” or to “submit a letter expressing concurrence with the
instrument.” 33 C.F.R. § 332.8(b)(3). Once the mitigation banking instrument
is signed, the mitigation bank may begin to sell credits according to the agreed-
upon credit release schedule.




                                       4
II.    The Process of Establishing the Pioneer Reserve Mitigation Bank

       When plaintiff first began contemplating the option of using its land to
establish a mitigation bank, it operated under the belief that the Alaska
Railroad Corporation was planning to construct an extension of the railroad
that would impact wetlands and other water resources. The future railroad
extension would be located within the same watershed, or “land area that
drains to a common waterway,” id. § 332.2, as the tracts of land owned by the
Walther family. The fact that the proposed railroad extension and the tracts
were located within the same watershed was important to plaintiff’s calculus
regarding future use because the applicable regulations require, as a general
proposition, that compensatory mitigation “be located within the same
watershed as the impact site, and should be located where it is most likely to
successfully replace lost functions and services.” Id. § 332.8(b)(1).

       Believing that the Alaska Railroad Corporation’s extension project
would generate demand for compensatory mitigation credits, plaintiff
considered whether it would be beneficial to become the supplier. To that end,
it engaged an environmental consulting firm, Restoration and Science
Engineering (“RSE”), to assess the potential use of the land as a mitigation
bank. During this assessment period, the Walther family and RSE sought the
Corps’ opinion about the possible use of the land as a mitigation bank.
“Members of the Walther family and RSE met with Corps’ representatives, on
numerous occasions, including site visits that made detailed findings about the
habitats, characteristics, and ecological functions performed by the [l]and.”
Compl. ¶ 24. After that evaluation, RSE concluded that the land was suitable
for preservation and use as mitigation bank because of the land’s ecological
functions. The Corps similarly determined “that the proposed preservation
was appropriate and practicable.” Compl. ¶ 25. Having gained the sense that
preservation of the tracts would “generate significant wetland mitigation
credits, suitable for use in a wetland mitigation bank,” the Walther family
proceeded to draft a mitigation banking instrument. Compl. ¶ 26.

        Part of the draft instrument was the mitigation plan and map of the two
tracts of land: the Edgerton Bank Parcel, which is comprised of 165.80 acres,
and the Seldon Bank Parcel, which measures 105 acres. RSE mapped each
parcel, indicating the different habitats and the corresponding capacity for
certain ecological functions. This map was used to determine the proposed
number of credits. The Corps indicated its agreement with the proposed
figures for each parcel: 151.81 wetland mitigation credits for the Edgerton

                                      5
Bank Parcel and 83.73 wetland mitigation credits for the Seldon Bank Parcel.
“In reliance on the Corps’ determination that the Pioneer Reserve Bank would
be authorized to sell 151.81 wetland mitigation credits by virtue of inclusion
of the Edgerton Bank Parcel, the Walther family conveyed the [l]and to
Pioneer.” Compl. ¶ 31.

        Representatives of the Corps and Pioneer signed the mitigation banking
instrument. The document provides that it “is an agreement made and entered
into by Pioneer Reserve, LLC (Sponsor) and the U.S. Army Corps of
Engineers, Alaska District (Corps),” that becomes “effective upon the latter
date of signature by the Sponsor and the Corps.” Compl. Ex. B, at 1-2.
Specifically, the instrument characterizes itself as “[t]he legally binding and
enforceable agreement between the District Engineer of the Corps, and a
mitigation Bank Sponsor that formally establishes the mitigation Bank and
stipulates the terms and conditions of its construction, operation, use and long-
term management.” Id. at 12. In addition, the instrument states that
“[c]ertification of 83.73 credits in the Seldon Bank Parcel and 151.81 credits
in the Edgerton Bank Parcel is established by the execution of this instrument.”
Id. at 10. The instrument also includes Pioneer’s obligations for proper
physical, legal, and financial maintenance of the wetland bank into the future.
Attached to and included by reference in the instrument are the mitigation
plan, ecological reports, and the maps used to determine the number of credits.
See id. at 21, 57, 63.

        Once the mitigation banking instrument was signed, Pioneer
encumbered both parcels of land with a perpetual conservation and
preservation easement as required in the agreement. Thereafter, Pioneer was
able to sell some its Edgerton Bank Parcel credits to the Alaska Department
of Transportation for $79,000 per credit. No further sales took place, however,
because, although the Alaska Railroad Corporation was seeking credits to
compensate for the unavoidable impacts caused by its railroad extension, the
Corps unilaterally reduced the number of wetland mitigation credits available
from the Edgerton Bank Parcel from 151.81 to 16.92. The Alaska Railroad
Corporation purchased the remaining 16.92 credits attributable to the Edgerton
Bank Parcel and then had to secure the remaining credits from another bank
located in a different service area. According to plaintiff, its inability to sell
the full complement of credits cost resulted in a loss of $12 million.

      Pioneer filed its complaint here on May 5, 2014. It asserts that the
Corps materially breached the contract when it unilaterally and without cause

                                        6
drastically reduced the number of credits available for sale from the Edgerton
Bank Parcel. Defendant has moved to dismiss on the ground that plaintiff’s
complaint does not allege a cause of action within this court’s jurisdiction
because the mitigation banking instrument is not a contract. We conclude, for
the reasons explained below, that the complaint alleges sufficient facts to
support its assertion that the mitigation banking instrument was, in fact, a
contract. We thus deny the motion.

                                DISCUSSION

        The Court of Federal Claims possesses only that jurisdiction authorized
by statute. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 373
(1994). The relevant provision here is the Tucker Act, which grants us
jurisdiction to adjudicate “any claim against the United States founded either
upon the Constitution, or any Act of Congress or any regulation of an
executive department, or upon any express or implied contract with the United
States, or for liquidated or unliquidated damages in cases not sounding in tort.”
28 U.S.C. § 1491(a)(1) (2012). Plaintiff must establish by a preponderance of
the evidence that its claim falls within the subject matter jurisdiction of this
court before we may consider the merits of the claim. M. Maropakis
Carpentry, Inc. v. United States, 609 F.3d 1323, 1327 (Fed. Cir. 2010).

        Pioneer asserts that we have jurisdiction pursuant to the Tucker Act
because there is an express contract between plaintiff and the United States
government. To prove the existence of a contract, “[o]ne must show (1)
mutuality of intent to contract; (2) consideration; and (3) lack of ambiguity in
offer and acceptance.” D & N Bank v. United States, 331 F.3d 1374, 1378
(Fed. Cir. 2003) (citing Lewis v. United States, 70 F.3d 597, 600 (Fed. Cir.
1995)). Additionally, when the federal government is party to the contract,
“the government representative whose conduct is relied upon must have actual
authority to bind the government in contract.” Id. While defendant does not
dispute that plaintiff dealt with a government agent that had authority to enter
into a binding agreement, it does contest the existence of the other elements of
a contract. Specifically, defendant alleges that Pioneer cannot establish the
requisite intent to contract because the agency gave its approval to the
instrument as an exercise of its regulatory function rather than in its role as a
party exchanging a promise. Defendant points to the regulations set forth at
33 C.F.R. Part 332, and argues the following:



                                       7
       [T]he regulations specifically frame the mitigation bank
       instrument as “provid[ing] the authorization for the mitigation
       bank . . . to provide credits to be used as compensatory
       mitigation for [Corps] permits.” 33 C.F.R. § 332.8(a)(1). The
       regulations also state that “[a]ll mitigation banks must have an
       approved instrument signed by the sponsor and the district
       engineer prior to being used to provide compensatory mitigation
       for DA permits.” 33 C.F.R. § 332.8(a)(1). Such approval is a
       regulatory function, and not a contractual relationship.

Def.’s Mot. to Dismiss 10.5 According to defendant, “the Corps does not
execute mitigation bank instruments to accomplish wetlands restoration, but
rather to document that the Corps has evaluated and approved the mitigation
banker’s plan.” Id. at 11 (quotations omitted). Thus, defendant argues that the
Corps has nothing to exchange in consideration for its approval of the
mitigation banking instrument. According to defendant, the absence of
consideration and mutual intent to contract show that plaintiff did not have a
contract with the government6 and, therefore, plaintiff’s complaint should be
dismissed for lack of subject matter jurisdiction.

        To support its argument, defendant points to D & N Bank v. United
States, 331 F.3d 1374 (Fed. Cir. 2003). In that case, D & N Bank (“D & N”)
sought to recover damages for breach of contract which occurred when,
because of new federal legislation, D & N was not able to use the goodwill
value of the thrift that it recently acquired with the approval of the Federal
Home Loan Bank Board. Id. at 1376-77. D & N argued that its ability to use

       5
         The regulation quoted by defendant provides, in full, that “All
mitigation banks and in-lieu fee programs must have an approved instrument
signed by the sponsor and the district engineer prior to being used to provide
compensatory mitigation for DA permits.” 33 C.F.R. § 332.8(a)(1) (General
Considerations). In another section, the regulation defines mitigation banking
instrument as “the legal document for the establishment, operation, and use of
a mitigation bank.” Id. § 332.2 (Definitions).
       6
          We note that the government’s position in this case should be
contrasted with its stance in United States v. Hawkins, No. 3:05CV-12-H
(W.D. Ky. March 31, 2006), where the government sought to enforce the terms
of a mitigation banking instrument by arguing that the instrument was a
contract.

                                      8
the goodwill value gained in the merger was a term of the contract it had with
the Federal Home Loan Bank Board regarding the acquisition. Id. The
problem in that case, however, was that D & N did not provide sufficient
evidence that a contract existed between it and the Federal Home Loan Bank
Board. The Court of Appeals for the Federal Circuit described the evidence
as follows:

       [N]one of these documents purports to be a contract between D
       & N and the government or indicates that it binds parties on
       either side of the transaction. . . . [T]he only piece of paper that
       can be viewed as indicating a promise by someone with any
       authority is the Bank Board Resolution. This document,
       however, only shows the [Federal Home Loan] Bank Board’s
       approval of the merger. Mere approval of the merger does not
       amount to intent to contract. The Bank Board, in its regulatory
       capacity, must approve all mergers.

Id. at 1378. The Court of Appeals went on to note that there was no evidence
of negotiation, no evidence of mutual intent to contract, especially in the
absence of a written agreement purporting to set forth the agreement of the
parties, and no discussion of goodwill, let alone D & N’s right to use the value
of goodwill, in the documents presented to the court by D & N. Id. at 1378-79.
In the absence of the aforementioned, the Federal Circuit concluded that the
Federal Home Loan Bank Board’s approval of the merger was a function of
its regulatory or sovereign duty rather than evidence of its intent to contract
with D & N. Id. at 1380, 1382; see also Anderson v. United States, 344 F.3d
1343, 1355-57 (Fed. Cir. 2003) (holding that the agency had not expressed the
requisite intent to be bound and instead imposed a regulatory condition when
it included in the resolution a provision requesting the bank to submit and
justify the value of the goodwill and the proposed amortization schedule at a
later date).

        We find defendant’s reliance on D & N to be misplaced. Unlike the
situation in D & N, there is a document in this case which provides that it is
“[t]he legally binding and enforceable agreement between the District
Engineer of the Corps, and a mitigation Bank Sponsor that formally establishes
the mitigation Bank and stipulates the terms and conditions of its construction,
operation, use and long-term management.” Compl. Ex. B, at 12. The
agreement states that “[c]ertification of 83.73 credits in the Seldon Bank Parcel
and 151.81 credits in the Edgerton Bank Parcel is established by the execution

                                        9
of this instrument.” Compl. Ex. B, at 10. Furthermore, the agreement records
a promise “whereby Pioneer agrees to acquire and preserve 235.54 acres of
threatened resources which benefits the Corps in its efforts to maintain the
ecological health of the region and to carry out its duties to protect the quality
of the area’s waters under the Clean Water Act.” Pl.’s Resp. 3-4 (citations
omitted). In exchange for plaintiff’s promise “to preserve the [l]and, the Corps
agreed to award Pioneer ‘Bank credits’ which it can sell to third parties.” Id.
Additionally, plaintiff alleges and defendant does not dispute that these terms
were agreed to after a series of meetings, site visits, and the production of
ecological reports. The complaint thus alleges negotiation, mutual intent to
contract, bargained for exchange of consideration, and a memorialized final
instrument setting forth the terms of the bargain.

       Plaintiff argues that this case is analogous to Davis Wetlands Bank, LLC
v. United States, which was recently decided by this court, and which also
involved environmental mitigation banking. 114 Fed. Cl. 113 (2013). In
Davis Wetlands Bank, the court was presented with defendant’s theory that
Davis’ signed final mitigation banking instrument was merely a regulatory
action, not a contract. The court examined the instrument and supporting
documents “‘to see if they consist of only regulatory proclamations, or if they
include additional language, which clearly manifests the government’s intent
to contract.’” Id. at 122 (quoting First Fed. Lincoln Bank v. United States, 60
Fed. Cl. 501, 504 (2004)). After reviewing the relevant documents, the court
held the following:

       [T]he Final Agreement contains definite terms and recites the
       obligations contained and acceptance manifested by the
       signatures from a Bank representative, a District Engineer for
       the Army Corps, and a representative from [the United States
       Fish and Wildlife Service]. The documents and exhibits that
       together comprise the Final Agreement were reviewed and
       signed by the parties over the course of several years, suggesting
       a negotiated arms-length process. This ongoing process . . .
       represents the manifestation of willingness to enter into a
       bargain, so made as to justify another person in understanding
       that his assent to that bargain is invited and will conclude it.

             As consideration for the Bank’s promise to restore
       wetlands subject to the Final Agreement, the Army Corps
       promised to issue the bank credits . . . .

                                       10
              Therefore, under the Final Agreement, the Army Corps
       agreed to enter into a contract with private parties to accomplish
       wetland restoration in exchange for issuing credits that could be
       sold to third parties . . . .

Id. at 121-22 (quotations and citations omitted). The court concluded that
“[t]he fact that ‘no landowner can develop a mitigation bank absent [Army]
Corps approval,’ does not preclude the Army Corps from contracting with a
private party.” Id. at 122 (quoting Hearts Bluff Game Ranch v. United States,
669 F.3d 1326, 1331 (Fed. Cir. 2012)).

        We agree with the analysis in Davis Wetlands Bank. The instrument
presented by Pioneer purports to be the a legally binding agreement between
plaintiff and the Army Corps, which lays out the obligations that each party
assumes by entering into the agreement. Pioneer agreed to preserve in
perpetuity two parcels of valuable land in exchange for the ability to sell
“credits” to third parties who have “debits” owing to development projects that
unavoidably impact waterways. The Corps, by agreeing to this arrangement,
carries out a purpose of the agency, which is to restore and preserve the United
States waterways pursuant to the Clean Waters Act. While this arrangement
is made against a regulatory background, that background is not incompatible
with the development of a binding agreement. The regulations merely describe
the ground rules pursuant to which the Corps may accept, reject, or respond to
an offer. In turn, if a counter-offer is made, the sponsor is not obligated to
accept it, but may respond with acceptance, a rejection, or another counter-
offer. In this case, the process ended in the memorialization of a mitigation
banking instrument that establishes the parties’ respective roles, benefits, and
obligations concerning the mitigation bank. In the absence of any factual
challenge to the elements of the contract asserted by Pioneer, we hold that the
complaint alleges sufficient facts to establish the existence of a contract.

        Defendant makes a second challenge to our jurisdiction, namely that
plaintiff has not identified a right to recover money damages. A money-
mandating source is necessary because “jurisdiction under the Tucker Act
requires the litigant to identify a substantive right for money damages against
the United States separate from the Tucker Act.” Todd v. United States, 386
F.3d 1091, 1094 (Fed. Cir. 2004). Defendant contends that “[n]ot even a
liberal reading” of the instrument “creates any inference that the Government
obligated public money to this instrument.” Def.’s Mot. to Dismiss 13.
Plaintiff responds that the standard is whether there is a fair inference that the

                                       11
contract is “reasonably amenable to the reading that it mandates a right of
recovery in damages.” Holmes v. United States, 657 F.3d 1303, 1309 (Fed.
Cir. 2011). Additionally, plaintiff cites Holmes, for the proposition that “when
a breach of contract claim is brought in the Court of Federal Claims under the
Tucker Act, the plaintiff comes armed with the presumption that money
damages are available, so that normally no further inquiry is required.” Id. at
1314. Defendant has offered us no plausible reading of the agreement under
which the parties disavow the possibility of money damages if plaintiff
prevails on the merits. Plaintiff has presented a contract that can be fairly
interpreted as mandating money damages as a remedy and thus brings a claim
for breach within our jurisdiction.

                               CONCLUSION

      We deny the motion to dismiss. Defendant is directed to answer the
complaint on or before December 19, 2014.



                                            s/ Eric G. Bruggink
                                           ERIC G. BRUGGINK
                                           Judge




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