Case: 24-1531 Document: 56 Page: 1 Filed: 12/17/2025

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit ______________________

FLATLAND REALTY, LLC, Appellant

v.

SECRETARY OF THE ARMY, Appellee ______________________

2024-1531, 2024-1534 ______________________

Appeals from the Armed Services Board of Contract Appeals in No. 63409, Administrative Judge Timothy Paul McIlmail, Administrative Judge Michael N. O’Connell, Ad- ministrative Judge Richard Shackleford. ______________________

Decided: December 17, 2025 ______________________

HAYDEN HOWLETT, Silverpine Law PLLC, Washington, DC, argued for appellant.

ANNA BONDURANT ELEY, Commercial Litigation Branch, Civil Division, United States Department of Jus- tice, Washington, DC, argued for appellee. Also repre- sented by WILLIAM JAMES GRIMALDI, PATRICIA M. MCCARTHY, BRETT SHUMATE. ______________________ Case: 24-1531 Document: 56 Page: 2 Filed: 12/17/2025

2 FLATLAND REALTY, LLC v. SECRETARY OF THE ARMY

Before LOURIE, SCHALL, and STOLL, Circuit Judges. SCHALL, Circuit Judge. DECISION This case comes to us from the Armed Services Board of Contract Appeals (“Board”). Flatland Realty, LLC (“Flatland”) appeals the decision of the Board that awarded Flatland some, but not all, of the damages it sought on ac- count of the breach by the Army Corps of Engineers (“Corps”) of a lease agreement between the Corps and Flat- land. Flatland Realty, LLC, ASBCA No. 63409, 2023 WL 7797531 (Oct. 30, 2023), Appx. 1–10. We have jurisdiction pursuant to 41 U.S.C. § 7107(a)(1)(A) and 28 U.S.C. § 1295(a)(10). For the reasons set forth below, we affirm- in-part, reverse-in-part, and remand. DISCUSSION I The pertinent facts are not in dispute and are set forth in the decision of the Board. In 2014, the Corps and an entity named KFE, LLC (“KFE”) entered into a 15-year lease requiring KFE, as lessee, to operate a commercial concession at the Dam East Recreation Center, Carlyle Lake, in Illinois. Appx. 1. In February of 2016, KFE’s in- terests under the lease were assigned to Flatland. Id. The assignment extended the lease expiration date to September 14, 2030, and included a Use and Development Plan (“UDP”). Id. The UDP included a “Five-Year Plan” that set forth development benchmarks for “Year One” through “Year Five,” as well as minimum performance re- quirements for those periods that included the provision of kayaks and bicycles for rent to visitors to the lake and the operation of a fish restaurant. Id. The lease provided that the use and occupation of the leased premises was subject to the general supervision and Case: 24-1531 Document: 56 Page: 3 Filed: 12/17/2025

FLATLAND REALTY, LLC v. SECRETARY OF THE ARMY 3

approval of the Corps’s District Engineer. Id. at 2. The lease also provided, in section 19, that it could be “revoked” in the event that the lessee violated any of its terms and conditions. Appx. 21.1 The lease further provided, in sec- tion 12, that if the lease was revoked, the lessee was re- quired to “vacate the premises, remove [its] property, and restore the premises to [their original] condition within such time as the District Engineer may designate.” Id. at 18. Finally, section 12 also provided that if the lessee failed or neglected to remove its property and restore the prem- ises, “then, at the option of the District Engineer, said prop- erty shall either become the property of the United States without compensation therefore, or the District Engineer may cause the property to be removed and no claim for damages against the United States or its officers or agents shall be created by or made on account of such removal and restoration work.” Id. at 18–19. In 2020, Flatland and the Corps began discussions on a new UDP. Appx. 2. Eventually, they entered into an ar- rangement whereby the building at the Dam East Recrea- tion Center was used for wedding and party events during the October through April “off-season.” Id. However, de- spite the apparent agreement that the concession could be operated at least some of the time as a wedding and event venue, the parties were unable to agree on all the details of a new UDP. Id. at 2–3. During the period between March and December of 2021, Flatland and the Corps tried to reach an agreement on the terms of a new UDP. Id. at 3. These efforts were unsuccessful, however, and on December 7, 2021, the Corps revoked the lease. In its letter of revocation, the Corps in- formed Flatland that its most recent UDP proposal could

1 The lease did not contain the termination for con- venience clause typically found in government contracts, or any equivalent clause. See Appx. 2. Case: 24-1531 Document: 56 Page: 4 Filed: 12/17/2025

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not be approved because Flatland “ha[d] been unable to provide a plan for facilities that meet[s] the expectations of a commercial concessions lease.” Id. (first alteration in original). Pursuant to section 12 of the lease, the Corps requested that Flatland submit a plan to restore the prem- ises. Id. at 4. On May 23, 2022, after the parties were un- able to agree on a restoration plan, the Corps notified Flatland that “[d]ue to your refusal to submit a restoration plan for the removal of improvements from[,] and restora- tion of[,], the leased area, all property that remains on the premises effective immediately, will become property of the United States without compensation, per the terms of the lease.” Id. (first alteration and emphasis in original). On May 24, 2022, the Corps told Flatland that the lease “was terminated because [Flatland was] unable to provide rec- reational opportunities to the public during the recreation season.” Id. (alteration in original). On May 26, 2022, Flatland submitted a certified claim to the contracting officer, alleging wrongful termination of the lease and seeking $800,000 in alleged damages. Id. Af- ter the contracting officer denied the claim, Flatland ap- pealed to the Board, where the parties submitted the appeal on the record and without a hearing under Board Rule 11. Id. at 1. II In the decision on appeal, the Board first addressed Flatland’s challenge to the Corps’s action terminating the lease for default. When a contractor challenges the default termination of a lease, the government has the burden of establishing the validity of the termination. Oscar Narvaez Venegas, ASBCA No. 49291, 98–1 BCA ¶ 29,690 at 147,140, 1998 WL 164415 (Apr. 3, 1998); see Dep’t of Transp. v. Eagle Peak Rock & Paving, Inc., 69 F.4th 1367, 1375 (Fed. Cir. 2023) (“When a contracting officer termi- nates a contract for default, and the contractor appeals that termination decision, ‘the government . . . bear[s] the Case: 24-1531 Document: 56 Page: 5 Filed: 12/17/2025

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burden of proof with respect to the issue of whether termi- nation for default was justified.’” (alterations in original) (quoting Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987))); Moreland Corp. v. United States, 76 Fed. Cl. 268, 284 (2007) (explaining that the principal that the government bears the burden of proof to show the propriety of the default termination of a contract “appl[ies] with equal force where the Government has ter- minated a lease”) (first citing Lisbon Contractors, 828 F.2d at 765, then citing Oscar Narvaez Venegas, 98-1 BCA ¶ 29,690 at 147,142). The Board determined that the Corps had failed to carry its burden. The Board concluded that the Corps was not justified in revoking the lease, and because the lease lacked a termination for convenience clause, the unjustified revocation constituted a breach. Appx. 6 (citing Krygoski Constr. Co. v. United States, 94 F.3d 1537, 1540–41 (Fed. Cir. 1996)). Having found that the Corps had breached the lease, the Board turned to the matter of quantum. Before the Board, Flatland sought $800,000 in damages, plus interest. The $800,000 figure consisted of (1) $460,000 for the build- ing in which the concession operated, plus (2) $360,000 for the business (the concession that Flatland was entitled to operate through September 14, 2030), minus (3) a $20,000 “salvage value,” representing the value of property that Flatland had removed from the concession site. Appx. 6–7. The Board concluded that Flatland was not entitled to recover for the building. The Board reasoned that “[a]lthough the government’s revocation of the lease was a breach, the government did revoke the lease, triggering the lease’s provisions [in section 12] governing removal of the lessee’s property and restoration of the premises, which provisions provide, essentially, that property abandoned by the lessee becomes government property, without compen- sation, at the option of the government.” Id. at 7 (emphasis in original). Case: 24-1531 Document: 56 Page: 6 Filed: 12/17/2025

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Addressing Flatland’s claim for the loss of the conces- sion, the Board determined that Flatland was entitled to a recovery in the amount of $210,000. Id. at 8–9. The Board arrived at this figure by reducing the amount in Flatland’s appraisal ($360,000) by 5/12. Id. The Board made this re- duction based on its finding that while Flatland’s appraisal was based on operation of the concession as a year-round wedding and event venue, in fact Flatland was only per- mitted to conduct events for seven months of the year. Id. Accordingly, the Board held that Flatland was entitled to recover the amount of $210,000 plus interest, in accordance with 41 U.S.C. § 7109. Id. at 9. Following the denial of its motion for reconsideration, Appx. 11, Flatland timely ap- pealed. III We review the Board’s legal conclusions, including con- tract interpretation, de novo. 41 U.S.C. § 7107(b); Lessors of Abchakan Vill. v. Sec’y of Def., 137 F.4th 1301, 1309 (Fed. Cir. 2025). We may only set aside a factual finding if it is “(A) fraudulent, arbitrary, or capricious; (B) so grossly er- roneous as to necessarily imply bad faith; or (C) not sup- ported by substantial evidence.” 41 U.S.C. § 7107(b); Kellogg Brown & Root Servs., Inc. v. Sec’y of the Army, 973 F.3d 1366, 1370 (Fed. Cir. 2020). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). IV A Flatland’s first argument on appeal is that the Board erred in denying it recovery for the loss of its building. Flatland contends that because the Corps breached its con- tract with Flatland when it revoked the lease, the Board erred in applying the provisions of section 12 of the lease, thereby allowing the Corps to take Flatland’s property. Case: 24-1531 Document: 56 Page: 7 Filed: 12/17/2025

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Appellant’s Br. 17–23. The government responds that alt- hough the Board correctly determined that the Corps’s rev- ocation of the lease was a breach, the fact remains that the Corps did revoke the lease, thereby triggering the provi- sions of section 12 governing removal of Flatland’s property and restoration of the premises. Appellee’s Br. 15–16. We agree with Flatland. When the Corps breached the contract, Flatland was excused from performing the re- moval and restoration provision of section 12 of the lease pursuant to the common law rule of prior material breach. See Barron Bancshares, Inc. v. United States, 366 F.3d 1360, 1380–81, 1383 (Fed. Cir. 2004) (explaining that a prior material breach by investors could excuse the govern- ment from its contractual obligations to the investors, ren- dering moot the government’s breach); Restatement (Second) of Contracts § 237 cmt. b (discussing “first mate- rial failure of performance,” and stating that “[t]he rule is based on the principle that where performances are to be exchanged under an exchange of promises, each party is entitled to the assurance that he will not be called upon to perform his remaining duties of performance with respect to the expected exchange if there has already been an un- cured material failure of performance by the other party”); see also id. cmt. a (“[A material failure of performance] pre- vents performance of [the other party’s] duties from becom- ing due, at least temporarily, and it discharges those duties if it has not been cured during the time in which perfor- mance can occur.”).2 Accordingly, we reverse the Board’s

2 The lease did not contain a choice-of-law provision, but we note that Illinois, where the concession was located, recognizes the common law rule of prior material breach. See, e.g., Mohanty v. St. John Heart Clinic, S.C., 866 N.E.2d 85, 96–98 (Ill. 2006) (concluding that the plaintiffs did not prove a prior material breach of a contract and Case: 24-1531 Document: 56 Page: 8 Filed: 12/17/2025

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legal conclusion that Flatland was not entitled to recover for the loss of its building. We remand the case to the Board for a determination of damages based upon the value of the building. B Flatland’s second argument on appeal is that the Board should have awarded it the entire $360,000 that it sought for the value of the concession business. It contends that the Board’s reduction in the amount Flatland sought is not supported by substantial evidence. We do not agree. The Board’s reduction from the $360,000 that Flatland sought to $210,000 was premised on the Board’s findings that the appraisal Flatland presented was based on (1) Flatland’s operation as a year-round wedding and event venue value; and (2) that Flatland was only permitted to conduct events for seven months of the year. Appx. 8–9. Flatland does not dispute that the Corps only permitted it to host events for seven months a year. At the same time, the finding that the appraisal was based on a year-round wedding and event venue business model is supported by substantial evidence. The appraisal provided that “[t]he company is a wedding venue business,” that “[t]he manage- ment team is similar to that of a typical wedding venue business,” and that the “property will be functional full time.” Appx. 238. Nowhere in the appraisal is there an indication that the wedding venue appraisal was for a

therefore could not be relieved of their obligations under the contract); id. at 95 (“Under general contract principles, a material breach of a contract provision by one party may be grounds for releasing the other party from his contrac- tual obligations.” (citing William Blair & Co. v. FI Liqui- dation Corp., 830 N.E.2d 760 (Ill. App. Ct. 2005))); id. at 95–96 (discussing Galesburg Clinic Ass’n v. West, 706 N.E.2d 1035 (Ill. App. Ct. 1999)). Case: 24-1531 Document: 56 Page: 9 Filed: 12/17/2025

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partial-year term. We therefore affirm the part of the Board’s decision that awarded Flatland $210,000 in dam- ages for the loss of the concession business. CONCLUSION We have considered the parties’ remaining arguments and find them unpersuasive. For the foregoing reasons, we affirm the decision of the Board that awarded Flatland $210,000 for the loss of its concession business, but we re- verse the decision of the Board that denied Flatland recov- ery for the loss of its building. The case is remanded to the Board for a determination as to the value of the building and the award of that value to Flatland for the loss of the building. AFFIRMED-IN-PART, REVERSED-IN-PART, AND REMANDED COSTS Costs to Flatland.