Rehearing Denied; Suggestion for Rehearing In Banc Declined October 26, 1993.
MAYER, Circuit Judge.
Hughes Communications Galaxy, Inc., appeals the judgment of the United States Court of Federal Claims,
On December 5, 1985, Hughes Communications entered into a contract with the United States, represented by NASA, in which NASA agreed to use its "best efforts" to launch ten of Hughes' commercial satellites through its Space Shuttle program. At that time, NASA operated a fleet of four manned shuttles. The United States government was then promoting commercial use of its shuttle fleet by private industry to offset the costs of its space program. To further this goal, NASA actively marketed its shuttles as launch vehicles for commercial payloads to both domestic and foreign users.
The contract executed between Hughes and NASA was, as the Claims Court recognized, unique. Labeled a Launch Services Agreement (LSA), the contract provided at the outset that "[a]ll Launch and Associated Services to be furnished by NASA to the Customer under this Agreement shall be so furnished by NASA using its best efforts." Art. I.
Article I of the contract designated a "Planned Launch Date" for each of Hughes' spacecraft.
In addition, Article XV, entitled "Services Consistent with United States' Obligations, Law and Published Policy" provided that, "NASA shall provide Launch and Associated Services under this Agreement to the extent consistent with the United States' obligations (including any intergovernmental memorandum of understanding entered into by NASA and the Customer), United States' Law and United States' Published Policy." Article IV also addressed NASA's obligation to provide launch services, and provided in relevant part, "With respect to launch priority and scheduling, NASA will provide Launch and Associated Services in accordance with the United States policy governing launch assistance approved by the President of the United States on August 6, 1982. Consistent with this policy, NASA will generally treat all comparable payloads on the same basis." The referenced policy was issued by President Reagan on August 6, 1982, and was entitled "Space Assistance and Cooperation Policy." It provided:
NASA compiled a list of all scheduled pay-loads to be launched, including Hughes', into a "manifest." The manifest listed commercial payloads in order of their Planned or Firm Launch Dates, and indicated which payloads were to be launched on which shuttle. Hughes' spacecraft were assigned specific slots on this manifest. However, on January 28, 1986, the Shuttle Challenger exploded shortly after takeoff from the Kennedy Space Center at Cape Canaveral, Florida. None of Hughes' spacecraft had been launched at this point, less than two months after Hughes and NASA executed the LSA.
As a consequence of the Challenger tragedy, NASA's shuttle fleet was reduced to three craft. Also, NASA immediately initiated an investigation to determine the cause of the accident. Ultimately, following extensive evaluation of space policy by various governmental entities, the President issued an order on August 15, 1986, in which he announced that NASA would no longer be in the business of launching commercial spacecraft. However, the government was left with the question of how best to handle the remaining 44 commercial payloads it had contracted to launch.
In response to this problem, the government grouped the remaining payloads into four categories — "Shuttle Unique," "National Security and Foreign Policy," "Costly to Retrofit," and the "Remainder." The "Shuttle Unique" category included payloads which could not be launched using an expendable launch vehicle (ELV) but require a manned vehicle launch. The "National Security and Foreign Policy" category included those payloads which were designated as having national security or foreign policy implications. The third category referred to payloads which could be launched by an ELV, but with considerable additional expense. Three of Hughes' satellites fell into this category, while the other seven were included in the "Remainder" category.
Based on these categories and the President's revised policy, NASA announced a new manifest for its shuttle fleet. This manifest included only those payloads which fell into the "Shuttle Unique" and "National Security and Foreign Policy" categories. Accordingly,
Hughes filed suit in the United States Claims Court claiming that NASA breached the LSA and that Hughes' contract rights were taken in violation of the Fifth Amendment. On cross motions for summary judgment, the court granted the government's motion and held that Hughes could not recover under either of its claims.
With regard to the first claim, the Claims Court held that there was no breach of the LSA. Initially, the court determined that in spite of its "unusual features," the LSA was a binding contract because the government was obligated to use its best efforts to launch Hughes' spacecraft. 26 Cl.Ct. at 134. The court declined to determine whether or not the combined effect of the government's actions operated to invoke the contract's termination clause. Id. at 136. Instead, the Claims Court determined that the new manifest, and the exclusion of Hughes' spacecraft, were the result of a valid sovereign act — a policy decision issued by the President with proper authority. The court reasoned that Article XV of the contract incorporated the sovereign act defense by its terms and that the LSA was therefore explicitly made subject to changes in policy. Id. at 140. The Claims Court concluded that because the reorganization of the manifest was in compliance with the new policy announced by the President, the government did not breach the LSA.
The Claims Court also determined that the Fifth Amendment did not provide any basis for compensating Hughes. Recognizing that Hughes must have an identifiable property interest in order to establish a Fifth Amendment taking, the court determined that Article XV's incorporation of all future policy changes precluded Hughes from establishing any "`distinct investment-backed expectation' that its slot on the Shuttle manifest would be unaffected by subsequent sovereign acts." Id. at 145. Hughes now appeals.
Contract interpretation is a matter of law which we review de novo. Blake Constr. Co. v. United States, 987 F.2d 743, 746 (Fed.Cir.1993). We hold that the Claims Court erred in its conclusion that Hughes' right to have its spacecraft launched under the LSA was subject to all policy changes issued after August 6, 1982.
We disagree with the conclusion that Article XV, and not Article IV, is the more specific provision of the contract. Article XV limits NASA's obligation to provide Launch and Associated Services "to the extent consistent with United States' obligations ..., United States' Law and United States' Published Policy." Article IV, on the other hand, states that NASA "will provide Launch and Associated Services in accordance with the United States policy governing launch assistance approved by the President of the United States on August 6, 1982."
By identifying and incorporating an existing, specific and dated item of presidential policy, Article IV is manifestly more specific than Article XV, which subordinates the contract
This interpretation of the contract does not render Article XV redundant or superfluous. By its reference to all obligations, law and policy, Article XV has broader scope than Article IV, which only limits launch priority and scheduling to comply with the August 6, 1982, policy. There could be changes in the United States' obligations, laws or policy which are not superseded by Article IV's more narrow language and would still apply to the contract. A contract should be interpreted in such a way that all parts make sense. United States v. Johnson Controls, Inc., 713 F.2d 1541, 1555 (Fed.Cir.1983). Article IV's reference to the August 6, 1982, policy would be superfluous and meaningless if launch priority and scheduling remained subject to any subsequent change in policy.
We also believe the government's reiteration that Article XV embodies the sovereign act defense contributes nothing in aid of interpreting the contract. Under the sovereign act doctrine, the United States as contractor will not be held responsible for the acts of the United States as sovereign. Atlas Corp. v. United States, 895 F.2d 745, 754 (Fed.Cir.1990) (citing Horowitz v. United States, 267 U.S. 458, 461, 45 S.Ct. 344, 344, 69 L.Ed. 736 (1925)). The sovereign act defense is an inherent element of every contract to which the government is a party, whether or not explicitly stated.
Finally, we address the government's invocation of the principle that it retains the authority to act as sovereign unless it surrenders this right in "unmistakable terms." Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52, 106 S.Ct. 2390, 2397, 91 L.Ed.2d 35 (1986) (citing Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 147, 102 S.Ct. 894, 906, 71 L.Ed.2d 21 (1982)). Under our interpretation of the contract, we have no trouble concluding that Article IV obligates the government to provide launch priority and scheduling in accordance with the August 6, 1982, policy in language which more than satisfies the "unmistakable terms" requirement.
We do not share the concern that our reading of Article IV "would have the effect of allowing NASA to contract away Congressional and Presidential power to set space policy for the entire term of the LSA, twelve years." 26 Cl.Ct. at 139. In the cases relied on for this proposition, the plaintiffs sought literally to enjoin the exercise of sovereign power. It was in this context that the "unmistakable terms" standard was developed. See Public Agencies, 477 U.S. 41, 106 S.Ct. 2390 (The state of California and other parties sought to enjoin Congress from enforcing an amended provision of the Social Security Act of 1935, 42 U.S.C. § 301 et seq.); Jicarilla Apache Tribe, 455 U.S. 130, 102 S.Ct. 894 (Oil and gas companies who entered into long term leases to extract and produce oil and gas from tribal land sought to enjoin the tribe from acting as sovereign by imposing a severance tax on oil and gas removed from the land.); see also Transohio Sav. Bank v. Director, OTS, 967 F.2d 598 (D.C.Cir.1992) (Thrifts challenged Congress' authority to revise capital accounting rules issued by government agencies for thrifts with forbearance agreements.). These cases also required the reviewing court to determine whether Congress, by enacting the legislation which authorized the government to enter into the contracts in question, waived in "unmistakable terms" its right to exercise certain sovereign powers.
In contrast, the present case simply involves the question of how liability for certain contingencies was allocated by the contract. In its contractual capacity, the government executes countless agreements with private
Accordingly, the judgment of the Court of Federal Claims is reversed, and the case is remanded for further proceedings consistent with this opinion.
The government shall bear the costs of this appeal.
REVERSED AND REMANDED.
NASA's obligation to provide Shuttle Launch and Associated Services to the Customer under this Agreement shall remain in force through September 30, 1994 (unless mutually extended by NASA and the Customer) or until all the obligations and responsibilities of the parties herein have been fulfilled, whichever occurs first.