Keydata Corporation v. United States
504 F. 2d 1115 (1974)
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Rule of Law:
When the Federal Government leases property, there is an implied covenant that the landlord must deliver actual, physical possession of the premises at the beginning of the lease term, establishing a uniform federal standard that overrides contrary state law.
Facts:
- Keydata Corporation and the National Aeronautics and Space Administration (NASA) leased space in the same office building owned by Wyman Street Trust in Massachusetts.
- In early 1968, NASA, represented by the General Services Administration (GSA), agreed to lease a computer room then occupied by Keydata, which was planning to move.
- On March 11, 1968, the Government, Keydata, and Wyman executed lease amendments formalizing the arrangement.
- Under the amendments, the Government would pay Wyman $39,000 for air conditioning equipment Keydata had installed, and Wyman would then pay that sum to Keydata.
- The parties subsequently agreed that the Government would take possession of the computer room on January 1, 1969.
- Keydata failed to vacate the premises by the January 1, 1969 deadline.
- On January 2, 1969, the GSA sent a letter canceling the lease acquisition because the space was not available for occupancy, and the Government subsequently refused to pay the $39,000 for the equipment.
Procedural Posture:
- Keydata Corporation sued Wyman Street Trust in the Superior Court of Suffolk County, Massachusetts.
- The Massachusetts Superior Court ordered Wyman Street Trust to assign its claim against the United States for $39,000 to Keydata.
- Wyman Street Trust executed the assignment to Keydata on April 21, 1971.
- Keydata, as Wyman's assignee, filed a petition against the United States in the U.S. Court of Claims.
- In the Court of Claims, Keydata moved for summary judgment on its first claim, and the United States moved for summary judgment on both of Keydata's claims.
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Issue:
Does a landlord leasing property to the Federal Government have an implied duty to deliver actual, physical possession of the premises at the start of the lease term, even if the applicable state law (the 'American rule') only requires delivery of the legal right to possession?
Opinions:
Majority - Davis, Judge
Yes, a landlord leasing to the Federal Government has an implied duty to deliver actual possession. The court first held that the court-ordered assignment of the claim from Wyman to Keydata was a valid exception to the Assignment of Claims Act, as it did not present the risks of fraud or multiple litigation the act was designed to prevent. The court also rejected the government's argument that Wyman had no standing, finding an implied duty for Wyman to pursue the claim for Keydata. On the central issue, the court acknowledged the split between the 'American' rule (followed in Massachusetts), which only requires the landlord to deliver the legal right to possession, and the 'English' rule, which requires delivery of actual possession. It adopted the 'English' rule as the uniform federal standard for government leases, reasoning that federal contracts are governed by federal common law, not state law. The court found the 'English' rule to be the superior modern rule, as it aligns with the practical expectation that a tenant is contracting for physical space, not just the right to sue for it.
Analysis:
This case establishes a significant principle of federal common law in the context of government contracts, specifically for real property leases. By adopting the 'English' rule as a uniform federal standard, the court prioritized the federal government's need for consistency and predictability over deference to state property law. This decision places a higher burden on landlords in 'American rule' jurisdictions who contract with the federal government, requiring them to guarantee actual, physical possession at the start of a lease. The ruling reinforces the doctrine that federal contracts are governed by a distinct body of federal law, ensuring the government operates under a single set of rules nationwide, regardless of where its facilities are located.
