[00:00:00] Speaker 02:
Our next case is Keyes Helium Company et al.

[00:00:05] Speaker 02:
versus the United States, 2024, 1132.

[00:00:11] Speaker 02:
Mr. Dolan, when you are ready.

[00:00:13] Speaker 02:
Yes, sir.

[00:00:14] Speaker 02:
I see you've chosen to split up your argument and to save a couple minutes.

[00:00:19] Speaker 02:
So basically, you've got six minutes to make your case.

[00:00:23] Speaker 00:
Thank you, Your Honor.

[00:00:24] Speaker 00:
May it please the Court.

[00:00:26] Speaker 00:
The Court of Claims erred.

[00:00:29] Speaker 00:
and the underlying litigation, because it wrote out the contract mandatory provision that the government will deliver a helium gas mixture of not less than 50% helium by volume.

[00:00:41] Speaker 00:
And the appellants expressly pled that argument in the original complaint.

[00:00:46] Speaker 00:
The fundamental issue here is that the direct allegation for a breach of contract that the Court of Claims erroneously read out contradicts what the expressed terms of the agreement state.

[00:00:58] Speaker 00:
And in doing so imposes or reads an obligation to monitor methane levels in the underlying storage and delivery contract.

[00:01:08] Speaker 00:
What the appellants have pled in this case is the violation of the mandatory provision contained within 2.3a, which says that the government will deliver

[00:01:20] Speaker 03:
helium not less than fifty percent by volume and the key here is that it all derives from where the acceptance and delivery point is so if i understand you got to work with one that there was an obligation to deliver fifty percent of helium which they didn't do it doesn't seem to be a dispute about that and second that the helium gas mixture that they've delivered had to be less than three percent methane because otherwise it would ruin

[00:01:49] Speaker 03:
the refining machinery, right?

[00:01:53] Speaker 03:
So to answer the first part, there's no dispute that the amount dropped below.

[00:01:58] Speaker 03:
Why is that statement not a correct statement of what you're arguing?

[00:02:02] Speaker 00:
Well, it's not that the methane, the appellants cite the general industry standard of what the methane gas composition must be.

[00:02:12] Speaker 00:
The issue about whether or not methane is a breach

[00:02:17] Speaker 00:
isn't necessarily the primary element.

[00:02:19] Speaker 00:
That aspect of the methane being injected into the plant derives itself more to causation and damages.

[00:02:27] Speaker 03:
So what's specifically- My understanding is that you're arguing that by delivering something that had more than 3% methane, it would ruin your machinery, and that that can't have been what the contract meant, that they would deliver something that would be unworkable, right?

[00:02:46] Speaker 00:
Well, that's true in part.

[00:02:48] Speaker 00:
The primary allegation, though, is that the breach of the contract.

[00:02:53] Speaker 03:
Let's stick with what maybe calls the non-primary allegation.

[00:02:58] Speaker 03:
You're saying that they couldn't deliver something that had more than 3% methane.

[00:03:05] Speaker 03:
That would be contrary to industry practice because it would ruin the machinery, right?

[00:03:10] Speaker 00:
That is correct, Your Honor.

[00:03:12] Speaker 00:
The methane is what caused the damage in this case.

[00:03:16] Speaker 00:
But the underlying contract, the underlying obligation for the United States to deliver the helium gas.

[00:03:22] Speaker 03:
When you're saying that we should read the contract is not allowing them to deliver something that would ruin the operation.

[00:03:30] Speaker 00:
No, Your Honor, we're asking that this court read that that provision contained within 2.3a.

[00:03:36] Speaker 00:
is a mandatory obligation for a certain gas composition.

[00:03:40] Speaker 00:
And the primary function of that gas delivery, the predominant composition, is about helium.

[00:03:47] Speaker 00:
And when the helium dropped below that 50% threshold, it allowed the opportunity for some other gas to make up the remainder of it.

[00:03:54] Speaker 00:
And it just so happened to be in this case that methane was that other gas.

[00:03:58] Speaker 00:
Now, there's been a hypothetical that's been postulated that if it was nitrogen,

[00:04:03] Speaker 00:
70% nitrogen that somehow got through the acceptance and delivery point, that we wouldn't be here today.

[00:04:09] Speaker 00:
But it's not because it wouldn't be a breach of the agreement.

[00:04:13] Speaker 00:
It's because that nitrogen is inherently an inert gas, and it wouldn't have caused the issues that methane being introduced into that compressor system would have caused.

[00:04:22] Speaker 00:
And that's what the fundamental core is here.

[00:04:25] Speaker 00:
It's still a breach of contract.

[00:04:28] Speaker 00:
There just is no actual damages or a causal nexus to tie that breach

[00:04:33] Speaker 00:
to any property damage associated with the helium refinery.

[00:04:37] Speaker 00:
So that is the core ruling on Appendix 11 on the Court of Claims, is the focus on the duty to monitor methane.

[00:04:47] Speaker 00:
And the Court of Claims based its holding, reading that obligation into the agreement.

[00:04:53] Speaker 00:
Whereas on Appendix 28, paragraph 42, and Appendix 30, paragraphs 51 and 55, the appellants in this case have specifically pled

[00:05:03] Speaker 00:
2.3a.

[00:05:04] Speaker 00:
It's when you read, the court of claims read 2.3b and 4.1d of the contract to impose a non-payment obligation and a duty to, or the question of whether the duty to monitor methane existed.

[00:05:21] Speaker 00:
But 4.1d is actually a penalty against the person that is delivering helium to the system.

[00:05:29] Speaker 00:
So if the person fails to meet the obligation to deliver helium at least 65%, then the credit doesn't get applied to their system on the injection of that helium and to the overall circuit.

[00:05:42] Speaker 00:
So the contract in and of itself is bidirectional in nature, meaning that there are ongoing obligations between a person and the US government.

[00:05:52] Speaker 00:
But the duties and obligations on that delivery condition change.

[00:05:57] Speaker 00:
Under 2.3a, the government's minimum obligation is 50%.

[00:06:04] Speaker 00:
And under 4.1d, the person's minimum delivery obligation is 65%.

[00:06:13] Speaker 05:
You say the duty changed, what, it changed you into an implied duty at that point?

[00:06:18] Speaker 00:
No, Your Honor, it doesn't change to an implied duty.

[00:06:20] Speaker 00:
It is the same obligation on the delivery condition.

[00:06:27] Speaker 00:
But each party has a different minimum obligation under the express wording of the agreement.

[00:06:32] Speaker 00:
So the person has a heightened obligation, which effectively is controlled by 2.1, Article 2, and Article 4 of the agreement.

[00:06:42] Speaker 02:
Counselor, you're about out of time.

[00:06:45] Speaker 02:
Didn't allow for much, so do you want to continue or save it?

[00:06:50] Speaker 00:
Well, Your Honor, I'll save it.

[00:06:51] Speaker 00:
I just want to leave this court.

[00:06:53] Speaker 02:
You allocated, you made your bid.

[00:06:55] Speaker 00:
Absolutely.

[00:06:57] Speaker 00:
For those reasons, Your Honor, we believe that the court of claim should be reversed and amended.

[00:07:04] Speaker 02:
All right.

[00:07:04] Speaker 02:
Mr. Sumner.

[00:07:07] Speaker 02:
You've got seven minutes.

[00:07:08] Speaker 02:
You want to save two, so you've got five.

[00:07:10] Speaker 01:
Yes, Your Honor.

[00:07:12] Speaker 01:
I appreciate it.

[00:07:13] Speaker 01:
May it please the court.

[00:07:14] Speaker 01:
I'd like to approach this case from a slightly different angle to try to create a structure and framework in which we can work through and delineate these claims.

[00:07:22] Speaker 01:
And I'd like to start with the tort claim, the lower court error

[00:07:27] Speaker 01:
in dismissing the tort claim, essentially creating a marriage ruling that we cannot pursue an independent claim under Texas common law for a breach of negligent performance of exercise in the contract.

[00:07:39] Speaker 01:
As we alleged in our complaint as an alternative claim, identifying the Northern District of Texas as the appropriate venue, in Texas common law, if the injury extends to property outside of the contract, then the plaintiff can plead an independent tort claim

[00:07:56] Speaker 01:
for negligent performance of that contract and failure to exercise duty of care.

[00:08:00] Speaker 01:
For example, if I was to contract with the plumber to fix a water leak in my house, and in trying to fix that water leak, the plumber hit a gas line and blew my house up.

[00:08:09] Speaker 05:
This is your takings argument?

[00:08:11] Speaker 01:
No, this is my tort claim argument, Your Honor.

[00:08:13] Speaker 03:
I think that's not a great argument, because there's no such thing as liability for negligent performance of a contract.

[00:08:24] Speaker 03:
Why don't you turn?

[00:08:26] Speaker 03:
to the good faith and fair dealing.

[00:08:29] Speaker 01:
Well, Your Honor, I think the lower court though did err in not looking at whether or not there was an independent tort claim under Texas common law.

[00:08:36] Speaker 01:
If there was, the case could have been transferred to the northern district of Texas.

[00:08:40] Speaker 01:
But if we don't look at the tort claim and we look at the independent

[00:08:43] Speaker 01:
implied duties claim, we look at the implied duties claim, Your Honor.

[00:08:46] Speaker 01:
Then we have to look at BLM did have an express duty to deliver compliant volumes of helium.

[00:08:53] Speaker 01:
Within that express duty are the specific implied duties that BLM is going to safely manage and operate that helium facility.

[00:09:00] Speaker 03:
What you're saying is there's an implied duty not to supply helium, which would ruin the facility, right?

[00:09:05] Speaker 01:
Correct, Your Honor.

[00:09:06] Speaker 01:
I mean.

[00:09:06] Speaker 03:
Yes, right?

[00:09:11] Speaker 03:
And there isn't any dispute since we're dealing with the face of the complaint that that's what would have happened, right?

[00:09:19] Speaker 01:
If they did not safely maintain and manage and operate by introducing that methane level in, that was reasonably foreseeable that it was going to destroy the helium refinery.

[00:09:29] Speaker 01:
Methane kills helium refineries.

[00:09:32] Speaker 01:
And on the 3% standard, that's an industry standard.

[00:09:35] Speaker 01:
At the end of the day, that's a fact issue.

[00:09:37] Speaker 01:
And the lower court erred in not accepting that fact as alleged as true for purposes of examining the- Why aren't you arguing a simple breach?

[00:09:46] Speaker 02:
They delivered at least twice helium at less than 50%, contrary to 23A.

[00:09:55] Speaker 02:
Isn't that a breach?

[00:09:57] Speaker 01:
That is a breach.

[00:09:58] Speaker 01:
By them not delivering those vines, that is a breach of contract.

[00:10:01] Speaker 02:
Period.

[00:10:02] Speaker 01:
Well, not period, Your Honor, because if you look, what that delivery caused was a domino effect in terms of that non-compliant delivery with more than 60% methane, which is combustible, slamming into the helium refinery caused additional damages.

[00:10:16] Speaker 02:
That's the second ground.

[00:10:17] Speaker 02:
If it was 60% methane, by definition, there was less than 50% helium.

[00:10:24] Speaker 01:
That's correct, Your Honor.

[00:10:25] Speaker 01:
And we believe that is a straightforward breach.

[00:10:27] Speaker 01:
And we believe that the lower court erred in dismissing that breach of contract claim.

[00:10:31] Speaker 03:
OK, but you have two breach claims, as I understand.

[00:10:34] Speaker 03:
One is they delivered something which was less than 50% helium.

[00:10:39] Speaker 03:
And second, you say there was a breach because they delivered a product which would ruin our machinery because it had more than 3% methane, right?

[00:10:48] Speaker 01:
Yes, Your Honor.

[00:10:49] Speaker 01:
That's exactly right.

[00:10:51] Speaker 03:
Okay, and you're saying that industry practice is read into contracts and that industry practice would be that you don't deliver it with more than 3% methane.

[00:11:05] Speaker 01:
Yes, Your Honor, that's exactly right.

[00:11:07] Speaker 01:
Methane is totally combustible.

[00:11:09] Speaker 01:
Helium is inert.

[00:11:10] Speaker 01:
Nitrogen is inert.

[00:11:11] Speaker 01:
As we allege in our complaint, BLM sets that standard in what the normal commercial volumes of helium are at and provides those percentages.

[00:11:19] Speaker 01:
And even by BLM's definition, commercial volumes of helium have less than 1% methane.

[00:11:25] Speaker 01:
And while it doesn't expressly state that there is a limit on the methane, I think it's common practice and understood for purposes

[00:11:32] Speaker 01:
of the helium business that methane destroys helium refineries.

[00:11:36] Speaker 01:
I think the lower court erred in so narrowly construing the complaint that not to look at that.

[00:11:40] Speaker 01:
And I think the lower court erred in not accepting those facts as true to support our claims that in motion to dismiss state.

[00:11:46] Speaker 03:
The court of federal claims says nothing about industry practice, right?

[00:11:50] Speaker 01:
The contract itself does not, but I think there's a reasonable.

[00:11:53] Speaker 03:
Wait, the court of federal claims did not address the industry practice argument, as I understand it, right?

[00:11:59] Speaker 01:
No, they did not.

[00:12:00] Speaker 01:
They dismissed outright on a motion to dismiss.

[00:12:03] Speaker 01:
We had no opportunity for discovery to better further support and delineate our claims.

[00:12:07] Speaker 01:
But the court was supposed to take our allegations as true at the motion to dismiss stage under rules 8 and rule 12.

[00:12:13] Speaker 01:
And we believe the court erred in not doing so.

[00:12:17] Speaker 02:
Counsel, do you want to save your two minutes or continue?

[00:12:20] Speaker 01:
I would like to save my two minutes, Your Honors, if that's OK.

[00:12:23] Speaker 01:
Thank you.

[00:12:25] Speaker 02:
Mr. Tully.

[00:12:35] Speaker 04:
Good morning.

[00:12:36] Speaker 04:
May it please the court?

[00:12:38] Speaker 04:
My understanding is similar to yours, Judge Dyke, about the two claims that are being asserted in this case.

[00:12:43] Speaker 04:
The first being to deliver helium that was at least 50% helium.

[00:12:48] Speaker 04:
And the second would be to not deliver more than 3% methane.

[00:12:54] Speaker 02:
So there was a breach.

[00:12:56] Speaker 04:
It's not a breach because the contract contemplates that individual deliveries of gas may not meet the specifications provided in the contract.

[00:13:07] Speaker 02:
Where does that say?

[00:13:09] Speaker 04:
Well, it's because.

[00:13:11] Speaker 02:
It says helium will be delivered in a mixture not less than 50% and at least twice that didn't occur.

[00:13:20] Speaker 04:
That's the allegation.

[00:13:22] Speaker 04:
I think it's helpful.

[00:13:23] Speaker 02:
Isn't that a fact?

[00:13:24] Speaker 04:
For the purposes of the motion to dismiss it is, because that's what they allege, and I think that's appropriate to take that as true at the motion to dismiss stage.

[00:13:33] Speaker 04:
But looking at the contract holistically, it contemplates that deliveries may not always be at least 50% healing.

[00:13:42] Speaker 04:
The deliveries from Keys to the United States

[00:13:46] Speaker 04:
do not have to always be fifty percent helium.

[00:13:49] Speaker 04:
Okay, but we're talking about deliveries from the United States to Keats.

[00:13:52] Speaker 04:
I agree.

[00:13:53] Speaker 04:
I agree.

[00:13:53] Speaker 04:
And the point I was just trying to make there is that the contract contemplates that deliveries from both parties may not always be at least fifty percent helium.

[00:14:03] Speaker 04:
I think it helps inform the section that Judge Laurie identified where it describes the specifications for deliveries from the United States.

[00:14:11] Speaker 04:
So if I could just elaborate on that.

[00:14:14] Speaker 04:
If Keyes delivers less than 50% helium to the United States, the United States does not credit Keyes' storage account.

[00:14:23] Speaker 04:
There's a storage account for Keyes' deliveries.

[00:14:25] Speaker 04:
If they're not at least 50% helium, Keyes does not get credit for that.

[00:14:29] Speaker 04:
If the United States delivers helium to Keyes, that's not at least 50% helium.

[00:14:35] Speaker 04:
And I say helium.

[00:14:36] Speaker 04:
I mean the helium gas mixture.

[00:14:37] Speaker 04:
It's transported in a mixture with other gases.

[00:14:39] Speaker 04:
If the United States delivers a helium gas mixture,

[00:14:42] Speaker 04:
that's not at least 50% helium, there's three things that happen.

[00:14:46] Speaker 04:
First, Keyes does not have to pay transportation costs.

[00:14:49] Speaker 04:
And this is in section 2.3, the same section that you identified.

[00:14:52] Speaker 04:
Keyes gets title to all of the constituent gases.

[00:14:55] Speaker 04:
And the United States does not debit from Keyes' storage cap.

[00:14:58] Speaker 03:
OK, but there's no preclusion of a claim for breach of contract, right?

[00:15:01] Speaker 03:
I'm sorry.

[00:15:02] Speaker 03:
There's no preclusion in the contract for a breach of contract for failure to deliver 50% or more helium.

[00:15:11] Speaker 04:
There's no express preclusion to that effect.

[00:15:14] Speaker 04:
I agree with you, but in our view, I think the contract- Is it an implied covenant?

[00:15:19] Speaker 04:
An implied covenant?

[00:15:21] Speaker 05:
Yes.

[00:15:21] Speaker 05:
To do what?

[00:15:22] Speaker 05:
Well, that the storage facility does not contain more than 3% water that you won't deliver.

[00:15:30] Speaker 04:
The 3% methane.

[00:15:31] Speaker 04:
Methane.

[00:15:32] Speaker 04:
Yes.

[00:15:33] Speaker 04:
So on that point,

[00:15:36] Speaker 04:
there is an express provision in the section of the contract that discusses the

[00:15:43] Speaker 04:
Keys's obligation to deliver helium to the United States, and it expressly says that Keys will not deliver more than 3% methane.

[00:15:50] Speaker 04:
That's, I believe, in section 2.1.

[00:15:52] Speaker 04:
There is no corresponding provision in the section of the contract that describes the specifications of the United States to deliver to Keys.

[00:16:00] Speaker 03:
Okay, that's true, but what their argument is that industry practice is that you would have a helium gas mixture sold under these circumstances.

[00:16:10] Speaker 03:
would contain less than 3% methane.

[00:16:12] Speaker 03:
We have cases, metric contractors, unfortunately not cited in the briefs, that say that industry practice is highly relevant in interpreting a term of a contract.

[00:16:25] Speaker 03:
And I don't know, we don't know at this point whether their allegation of industry practice is correct or not correct, but on the face of the complaint they said it should be read in accordance with industry practice.

[00:16:38] Speaker 03:
So why isn't that sufficient?

[00:16:40] Speaker 04:
I think it's insufficient for two reasons.

[00:16:46] Speaker 04:
First, my understanding is that industry practice can be relevant if there is an ambiguity in the contract to help inform what that ambiguity means.

[00:16:56] Speaker 03:
No, I don't think that's quite true.

[00:16:57] Speaker 03:
I think metric in the other cases make clear that if there's a term in the contract that has an industry meaning that regardless of

[00:17:06] Speaker 03:
ambiguity, you can read it in accordance with the industry meaning.

[00:17:11] Speaker 04:
And in that case, what I would say in response about why industry practice is not relevant

[00:17:16] Speaker 04:
is when you look at this particular contract and you have an express limitation on one party that appears in one section of the contract that governs the obligation of keys to deliver gas to the United States.

[00:17:29] Speaker 04:
And that same provision is absent from the section that governs the United States' deliveries.

[00:17:36] Speaker 04:
And it's true, there is no express obligation related to the percent of methane in the section for the United States' deliveries.

[00:17:43] Speaker 04:
it would be improper to import through implication, whether by industry practice or the duty of good faith and fair dealings, a provision that the parties knew how to express and did so in one section of the contract, but chose not to do so in the other section.

[00:18:03] Speaker 04:
Just to provide a little bit of background that I think could help understand why the contract was set up.

[00:18:07] Speaker 05:
Before we go there, let me understand something.

[00:18:15] Speaker 05:
that Keyes was obligated to not store helium gas mixes of more than 3% methane, right?

[00:18:25] Speaker 04:
Keyes had that obligation as to deliveries from Keyes to the United States.

[00:18:29] Speaker 05:
Yes, and you're saying there's no similar obligation on the government to deliver that.

[00:18:36] Speaker 04:
That's correct.

[00:18:37] Speaker 04:
And that's because the Keyes' obligation is expressed in the study.

[00:18:40] Speaker 05:
Why is that not an implied covenant

[00:18:44] Speaker 05:
Good faith in fair dealing.

[00:18:47] Speaker 04:
For the same reason that I was trying to explain why industry standards we don't think are important are applicable here is because where you have an express provision in the contract that governs the obligations of one party.

[00:18:59] Speaker 04:
And it's expressly identified as the methane limits of no more than 3% in the section that governs deliveries from heat.

[00:19:05] Speaker 04:
And that's for safety reasons.

[00:19:09] Speaker 05:
The 3%?

[00:19:11] Speaker 04:
I think that is what they're alleging.

[00:19:12] Speaker 05:
I think methane is highly volatile.

[00:19:14] Speaker 04:
I think that is what they're alleging.

[00:19:17] Speaker 05:
So how is it then that the government imposes its obligation on keys to not deliver helium with a mixture more than 3% methane, but yet it's not the obligation of the government to deliver two keys

[00:19:39] Speaker 05:
as far as the volume by methane.

[00:19:43] Speaker 04:
I think to help understand why that is the case, it's important to have a better understanding of how this helium system works.

[00:19:50] Speaker 04:
Keyes is not the only entity on the pipeline.

[00:19:54] Speaker 04:
The United States operates a reservoir, but there are other private entities.

[00:19:58] Speaker 05:
I'm looking at this more in the contract interpretation.

[00:20:02] Speaker 05:
Right.

[00:20:03] Speaker 05:
It just seems to me that there is an implied covenant of good faith and fear dealing on your part.

[00:20:08] Speaker 05:
with respect to the volume of methane you're going to deliver back to your customers.

[00:20:13] Speaker 04:
And I understand the concern on that point.

[00:20:16] Speaker 04:
Do you agree with it?

[00:20:17] Speaker 04:
I don't agree with it, because where you have an express term that governs the obligations of one party and that's clearly written into the contract, I think it's improper to import that same obligation onto another party where they didn't bargain for that same duty.

[00:20:34] Speaker 05:
Well, that's how implied duties are created in a contract.

[00:20:38] Speaker 04:
I don't think that's how they're created when the parties chose to impose a duty on one party and expressly did so, but omitted that same duty from the other party, just reading the plain language of the contract.

[00:20:50] Speaker 03:
I think part of the reason for that... How could it possibly make sense that the government can deliver helium that's going to destroy the refinery?

[00:21:00] Speaker 03:
I mean, contract interpretation is in large part

[00:21:04] Speaker 03:
trying to make sense out of badly drafted agreements.

[00:21:08] Speaker 03:
And there are in the Universal Commercial Code, which we've looked to for government contract purposes, implied duties of merchant ability, implied duties of fitness for a particular purpose.

[00:21:21] Speaker 03:
And the whole of contract law recognizes that if you're buying something from somebody, it ought to work for the purpose that you get it.

[00:21:29] Speaker 03:
And so it just doesn't seem to make any sense.

[00:21:32] Speaker 03:
to construe a contract that says the United States can send them garbage that will destroy the refinery.

[00:21:40] Speaker 04:
How do you deal with that?

[00:21:42] Speaker 04:
Perhaps this is not prohibited.

[00:21:45] Speaker 04:
Let me just take a step back.

[00:21:46] Speaker 04:
There are additional entities along the pipeline that put gas into the pipeline and withdraw from the pipeline.

[00:21:52] Speaker 04:
There's going to be variation on the composition of the gas in the pipeline.

[00:21:57] Speaker 04:
And I think the contract allowed for that variation.

[00:22:00] Speaker 04:
And if Keyes was unable to process high methane levels that are alleged in this case by venting or otherwise, then the monitoring obligation is on Keyes at the orifice where the gas enters their pipeline.

[00:22:13] Speaker 04:
That's where the monitoring obligation exists.

[00:22:15] Speaker 04:
If they were unable to sufficiently monitor and vent the gas that had high elevated levels of methane, they could have bargained for that in the contract.

[00:22:25] Speaker 04:
There's no such express provision.

[00:22:27] Speaker 04:
There is on deliveries from Keyes, but not the United States.

[00:22:30] Speaker 04:
So I think that's how I would respond to the concern there.

[00:22:36] Speaker 04:
And there could be other bodies of law that govern the conduct of the parties that are not derived simply from the contract, because the contract perhaps does not prohibit something, does not necessarily mean that it's permitted.

[00:22:49] Speaker 04:
There could be other bodies of law, and they have brought a tort case

[00:22:53] Speaker 04:
in the Northern District of Texas asserting that there's been tort law violations.

[00:22:56] Speaker 05:
So would you agree with me that if you lose with respect to the breach of an implying coming up, if you lose on that issue, you lose your case entirely.

[00:23:07] Speaker 05:
You also lose a breach of contract with failure of state of claim.

[00:23:11] Speaker 05:
You also lose your alternative tort claim.

[00:23:17] Speaker 04:
I'm losing the alternative court.

[00:23:19] Speaker 04:
The ruling on the alternative tort claims?

[00:23:21] Speaker 04:
The ruling on the alternative court claims, if I could just take for a second.

[00:23:25] Speaker 04:
There's no jurisdiction in the Court of Federal Claims to adjudicate tort claims, period.

[00:23:29] Speaker 04:
The FDCA provides that exclusive jurisdiction over tort claims is in federal district courts.

[00:23:34] Speaker 04:
That's where Keyes brought their tort claims.

[00:23:36] Speaker 04:
That's where they belong.

[00:23:38] Speaker 04:
Whatever this court does, it should not remand the tort claims to the Court of Federal Claims.

[00:23:42] Speaker 04:
There is no jurisdiction there over tort claims.

[00:23:46] Speaker 05:
What about a tort claim that arises as a result of a breach of a contract?

[00:23:52] Speaker 05:
Well, in that case... The Court of Federal Claims has jurisdiction over that claim, doesn't it?

[00:23:57] Speaker 04:
It doesn't.

[00:23:58] Speaker 04:
I respect that.

[00:23:58] Speaker 04:
I do not believe it does.

[00:24:00] Speaker 04:
No, it does not.

[00:24:01] Speaker 04:
It would have jurisdiction over the contract dispute.

[00:24:05] Speaker 04:
And what we sometimes see in the case law is talk about nominal tort claims.

[00:24:09] Speaker 04:
And this often comes up in the, say, context where a party might allege that there was

[00:24:13] Speaker 04:
negligent infliction of emotional distress because of a breach of a contract.

[00:24:17] Speaker 04:
In that case, the Court of Federal Claims would say that the action sounds in contract.

[00:24:21] Speaker 04:
It's not a tort case that belongs in district court.

[00:24:23] Speaker 04:
It belongs in the Court of Federal Claims.

[00:24:26] Speaker 04:
And the Court of Federal Claims would adjudicate the contract dispute.

[00:24:28] Speaker 04:
But it doesn't apply state tort law on a negligence issue.

[00:24:32] Speaker 04:
It does not.

[00:24:33] Speaker 04:
That is the exclusive jurisdiction of federal district courts under the FTCA.

[00:24:40] Speaker 04:
I do think the law is clear on that.

[00:24:45] Speaker 04:
If there's any further questions on the implied duty of fair dealings, I'm happy to address them.

[00:24:53] Speaker 04:
I think it's an important issue for the reasons I explained earlier, where there's an express duty on one party.

[00:24:58] Speaker 04:
We don't believe that that should be imported to another party, especially under the way that this program works, where there's multiple entities putting gas into the pipeline.

[00:25:07] Speaker 04:
Keys has more control over the gas that goes into the pipeline from the Keys plant than the United States has over the gas that is extracted.

[00:25:16] Speaker 04:
You're saying this could have been the fault of a third party?

[00:25:18] Speaker 04:
As to the allegations, there's no such allegations.

[00:25:21] Speaker 05:
Is it a fact question that takes you beyond the 12b6 stage?

[00:25:24] Speaker 04:
It just explains why the contract is structured the way it does that allows for individual variations in specific deliveries.

[00:25:33] Speaker 04:
I believe that there is an overarching obligation in the contract for the United States to deliver gas that meets the specifications over the period of performance.

[00:25:42] Speaker 04:
In aggregate, what the contract does allow for individual incidents to not meet those specifications provides for what happens in those circumstances.

[00:25:52] Speaker 04:
Keys does not have to pay transportation costs.

[00:25:55] Speaker 04:
It gets title to all of the constituent gases.

[00:26:00] Speaker 04:
And its storage account does not get debited.

[00:26:02] Speaker 04:
That's what happened there.

[00:26:03] Speaker 04:
And there's no dispute that those steps happened in this case.

[00:26:11] Speaker 04:
On the takings claims, in our view, they have not been adequately pleaded.

[00:26:17] Speaker 04:
The way I understand it is that there's essentially two takings claims.

[00:26:22] Speaker 04:
The first is that the United States delivered gas to them that had, in their view, too much methane.

[00:26:28] Speaker 04:
They couldn't use it.

[00:26:29] Speaker 04:
It went to waste tanks.

[00:26:31] Speaker 04:
and it got debited from the Keyes' helium storage account.

[00:26:35] Speaker 04:
Because almost all of that gas was at least 50% helium.

[00:26:39] Speaker 04:
The real problem was the methane levels.

[00:26:41] Speaker 04:
That's what they're alleging.

[00:26:43] Speaker 04:
The United States debited the delivery, and about 0.0002% of that delivery was less than 50% helium.

[00:26:52] Speaker 04:
The United States credited that back to Keyes' storage account.

[00:26:56] Speaker 04:
That's not a taking.

[00:26:57] Speaker 04:
That's a deliverable to Keyes.

[00:27:00] Speaker 04:
There's been no taking for public use.

[00:27:02] Speaker 04:
The second part of their takings claim is damage to their facility.

[00:27:06] Speaker 04:
There's no allegation that that was done for public use.

[00:27:08] Speaker 04:
The government didn't take anything from their facility.

[00:27:11] Speaker 04:
What they've alleged there is a tort.

[00:27:13] Speaker 04:
It interferes with property.

[00:27:14] Speaker 03:
That's... Well, they've alleged it's a breach of contract.

[00:27:16] Speaker 03:
In our cases, say, if it's a breach theory, that precludes a takings theory.

[00:27:21] Speaker 03:
I agree with that, too.

[00:27:23] Speaker 05:
Does the government... It runs this as a private facility, right?

[00:27:27] Speaker 05:
The storage facility?

[00:27:30] Speaker 04:
It's actually, government sold it.

[00:27:32] Speaker 04:
It's no longer running this storage facility.

[00:27:34] Speaker 05:
At the time, I think it was in the commercial capacity.

[00:27:37] Speaker 05:
And it was competing in the open market for storage services.

[00:27:41] Speaker 04:
I think it did have private agreement with private entities for the storage and transportation.

[00:27:46] Speaker 05:
So there are other storage facilities in competition with this one?

[00:27:49] Speaker 04:
With Keys, yes.

[00:27:50] Speaker 04:
Yes, there were several along the pipeline, which is why the composition of the gas changes, because different entities are putting gas in and taking it up.

[00:27:58] Speaker 02:
Counsel, you have consumed your time.

[00:28:00] Speaker 02:
Mr. Dolan, you've got 1.22.

[00:28:06] Speaker 02:
That's not much time.

[00:28:11] Speaker 02:
If your colleague wants to see his remaining two minutes to you, that's up to the two of you.

[00:28:18] Speaker 01:
Can I give him 45 seconds, Your Honor?

[00:28:21] Speaker 02:
Well, stick with what you've got.

[00:28:24] Speaker 02:
You've got 1.22.

[00:28:27] Speaker 00:
Uh, your honors, there is a couple aspects that was just raised that I want to bring to the attention is this contract is for the storage and delivery of helium.

[00:28:37] Speaker 00:
It's not just the storage or gas composition in the pipeline.

[00:28:40] Speaker 00:
There's also an underground reservoir that the government at the time of this incident controlled and would withdraw gas and process that gas and monitor and measure that gas and inject that gas into the pipeline.

[00:28:52] Speaker 00:
And Keys just so happened to be the very first plant.

[00:28:55] Speaker 00:
on that pipeline.

[00:28:56] Speaker 00:
So if whatever gas they were receiving has an issue, it came from the cliffside enrichment plant directly in the control of the U.S.

[00:29:04] Speaker 00:
government.

[00:29:05] Speaker 00:
Another aspect about this is that the breach, methane is not the breach.

[00:29:11] Speaker 00:
Again, methane is the causation that caused the property damage.

[00:29:14] Speaker 00:
The breach was the failure to deliver the helium at a certain composition.

[00:29:19] Speaker 00:
I think in order to kind of reconcile the issues between the contract, the implied duty and the tort, we have to look at the underlying purpose of the contract and what it is for.

[00:29:30] Speaker 00:
And what that purpose is, is to take gas and deliver it to private entities on this pipeline.

[00:29:37] Speaker 00:
An incumbent within any party, whether accepting or delivering gas, is the obligation to monitor and ensure

[00:29:43] Speaker 00:
that the purpose of that contract isn't frustrated in the obligations to deliver that product.

[00:29:49] Speaker 00:
And it's for those reasons that the court of claims erred, and this matter should be reversed and demanded.

[00:29:56] Speaker 02:
Thank you, counsel.

[00:29:57] Speaker 02:
Mr. Sumner has two minutes.

[00:30:04] Speaker 01:
Your Honor, just three quick points.

[00:30:06] Speaker 01:
One, regarding the implied duties.

[00:30:08] Speaker 01:
A key fact here is that BLM controls the processing plant.

[00:30:13] Speaker 01:
In our reply brief, we have a diagram that shows the facilities.

[00:30:17] Speaker 01:
BLM has 100% control over the storage facility.

[00:30:19] Speaker 01:
They have 100% control of what goes in and out of the storage facility.

[00:30:24] Speaker 01:
Next to the storage facility, you've got the processing plant.

[00:30:26] Speaker 01:
What's processed when it goes into the storage facility has to be processed

[00:30:30] Speaker 01:
What goes out of the storage facility has to be processed to meet compliant volumes of helium.

[00:30:34] Speaker 01:
BLM 100% controls the pipeline.

[00:30:37] Speaker 01:
BLM 100% controls what goes into that pipeline.

[00:30:41] Speaker 01:
As in terms of the implied duties, when you look at the contract as a whole, when you look at the storage facilities as a whole, when you look at the entire federal helium system as a whole, it was entirely reasonable for Keyes to expect that BLM was going to safely maintain and operate all those facilities to deliver

[00:30:58] Speaker 01:
compliant volumes of helium.

[00:31:01] Speaker 01:
Regarding the takings claim, in terms of public use, just like they do with the breach of contract claim, the government narrowly, narrowly construes what that right is and what that volumes are.

[00:31:11] Speaker 01:
It's not just the 0.2% as it relates to what they allege is just the methane component of it.

[00:31:20] Speaker 01:
Well, I mean, I think there is a separate independent takings claim, because the volumes that were not reimbursed to Keyes were used for public use, as we allege in our complaint.

[00:31:29] Speaker 01:
We allege all the facts for that independent taking claims separate and apart from the contract.

[00:31:34] Speaker 01:
We're going to have the breach of the contract in terms of the delivery.

[00:31:38] Speaker 01:
There's still the damage to the facilities.

[00:31:40] Speaker 01:
There's still the fact that they couldn't accept any of the other helium volumes, and the fact that those helium volumes were never subsequently delivered back to Keyes once the refinery was finally repaired.

[00:31:50] Speaker 01:
and back up and running.

[00:31:51] Speaker 01:
And as we say in our complaint,

[00:31:53] Speaker 01:
There are public users, such as the Department of Defense and NASA, that use those helium volumes.

[00:31:58] Speaker 01:
Those are allocated between those public users and federal agencies and between the private parties.

[00:32:03] Speaker 01:
We had a good faith basis to allege that those helium volumes that we were never reimbursed for were used for a public use without any just compensation.

[00:32:12] Speaker 01:
My last point, and not to dry the ire of this court in terms of the tort claim.

[00:32:16] Speaker 02:
Your last point is beyond your time.

[00:32:20] Speaker 02:
So we will take the case under submission.

[00:32:22] Speaker 01:
Thank you, Your Honors.

[00:32:22] Speaker 01:
We appreciate it.