Park Properties Associates, L.P. v. United States ( 2014 )

In The United States Court of Federal Claims
No. 04-1757C
This Opinion and Order Will Not Be Published in the U.S. Court of Federal Claims
Reporter Because It Does Not Add Significantly to the Body of Law.
(Filed: September 19, 2014)
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PARK PROPERTIES ASSOCIATES,
L.P., et al., *
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Plaintiffs, *
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v. *
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THE UNITED STATES, *
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Defendant. *
*
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OPINION and ORDER
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ALLEGRA, Judge:
This contract case is pending before the court on the parties’ cross-motions for partial
summary judgment on damages. Plaintiffs entered into rent subsidy agreements with the United
States Department of Housing and Urban Development (HUD), known as “Housing Assistance
Payment” (HAP) contracts. This court previously determined that defendant repudiated those
contracts in 1994, when Congress amended the controlling statute to alter the way in which rent
increases were to be determined. Park Props. Assocs., L.P. v. United States, 74 Fed. Cl. 264,
265-66 (2006) (Park Properties I). Later, the court held that a limitation found in the HAP
contracts could not be applied to limit the damages owed by defendant. Park Props. Assocs.,
L.P. v. United States, 82 Fed. Cl. 162, 176 (2008) (Park Properties II).
The court stayed resolution of the pending cross-motions until the Federal Circuit decided
Haddon Housing Associates Ltd. Partnership v. United States, 711 F.3d 1330 (Fed. Cir. 2013).
Following the issuance of that opinion, the parties have agreed that: (i) Departments of Veterans
Affairs and Housing and Urban Development, and Independent Agencies Appropriation Act of
1995, Pub. L. No. 103-327, 108 Stat. 2298, 2315 (1994) (the 1994 Act), as implemented by
HUD, breached provisions in plaintiffs’ HAP contracts; (ii) the Overall Limitation provision
found in plaintiffs’ HAP contracts cannot be applied to reduce plaintiffs’ rent adjustments for
purposes of calculating damages herein; and (iii) the provision of the 1994 Act that required a
deduction in adjustments for units that did not turnover cannot be applied to reduce plaintiffs’
rent adjustments for purposes of calculating their damages. As will be discussed below, three
issues remain in dispute.
A detailed recitation of the background facts in this case may be found in this court’s
prior opinions. See Park Properties II, 82 Fed. Cl. at 164-67; Park Properties I, 74 Fed. Cl. at
266-70. The court will not restate these facts, but instead hereby incorporates, by reference,
these prior recitations.
The first issue presented by the parties’ pending motions regards the applicability of the
six-year statute of limitations found in 28 U.S.C. § 2501 to plaintiffs’ claims. The question is
whether plaintiffs are entitled to recover damages for the so-called “stub period,” that is, the
period between December 10, 1998 (the date that is six years prior to the date they filed this
suit), and the immediately succeeding anniversary dates in the relevant HAP contracts.
Defendant argues that these damages should be barred because they relate back to an anniversary
date that falls outside the statute of limitations. Plaintiffs, however, rely on Pennsauken Senior
Towers Urban Renewal Associates, LLC v. United States, 83 Fed. Cl. 623, 629 (2008), in which
Judge Lettow concluded that such “stub period” damages were recoverable. Finding
Pennsauken (and its progeny) persuasive, the court hereby adopts the analysis therein and rules
in favor of plaintiffs on this issue. See Ocean View Towers Assocs., Ltd. P’ship, 88 Fed. Cl. 169,
175-78 (2009); Cathedral Square Partners Ltd. P’ship v. S.D. Hous. Dev. Auth., 2011 WL
43019, at *13 (D.S.D. Jan. 5, 2011); see also Haddon Hous. Assocs., 711 F.3d at 1340-41
(indicating that Pennsauken “provided a succinct analysis of [this] jurisdictional issue,” but
declining to reach the merits); cf. One & Ken Valley Hous. Grp. v. Main St. Hous. Auth., 2012
WL 1458202, at *25 (D. Me. Apr. 17, 2012), aff’d, 716 F.3d 218 (1st Cir. 2013), cert. denied,
134 S. Ct. 986 (2014); Greenleaf Ltd. P’ship v. Ill. Hous. Dev. Auth., 2010 WL 3894126, at *8
(N.D. Ill. Sept. 30, 2010).
The second issue focuses on whether plaintiffs can recover for payments due from HUD
on vacant units. While both parties agreed that HUD did not pay any of the eighty percent owed
on the vacant units, defendant argues that plaintiffs are not entitled to receive any damages for
vacant units because they failed to file monthly claims for contract rent subsidies for those units,
as required by HUD. Plaintiffs did not address this issue in their briefs. But, this was
understandable as defendant did not address this issue until the supplemental briefing in the
Haddon case – and then proceeded without any supporting affidavits. 1 In the court’s view,
defendant’s delay in pressing this argument waived this issue, leading to the conclusion that
1
In its supplemental brief, defendant stated: “[D]uring our discussions with plaintiffs,
we learned, for the first time, that plaintiffs have not received subsidy payments for vacant units
in the real world because plaintiffs have not filed monthly claims for contract rent subsidies for
their vacant units. In light of this fact, we question whether plaintiffs are entitled to receive any
damages for the days during which their units were vacant.” (Emphasis in original).
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plaintiffs are entitled to the payments in question. See Enzo Biochem, Inc. v. Gen-Probe, Inc.,
424 F.3d 1276, 1284 (Fed. Cir. 2005) (“Attorney argument is no substitute for evidence.”);
Johnston v. IVAC Corp., 885 F.2d 1574, 1581 (Fed. Cir. 1989) (“Attorneys’ argument is no
substitute for evidence.”); In re Budge Mfg. Co., 857 F.2d 773, 776 (Fed. Cir. 1988) (statements
of attorney are “no evidence”); Mel Williamson, Inc. v. United States, 229 Ct. Cl. 846, 848
(1982) (“Argument is not fact.”).
The final issue focuses on whether plaintiffs are entitled to lost profit damages associated
with the reduced rents in their renewal HAP contracts. However, a careful review of the
complaint and the other filings in this case reveals that plaintiffs did not raise this claim in their
complaint. As this claim was not properly raised, in the court’s view, this issue has been waived.
See Casa de Cambio Comdiv S.A., de C.V. v. United States, 291 F.3d 1356, 1366 (Fed. Cir.
2002), cert. denied, 538 U.S. 921 (2003) (rejecting claim that “was not properly raised” as “[n]o
mention of this theory appears in [the] complaint”); McVey Co. v. United States, 111 Fed. Cl.
387, 399 n.10 (2013); Englewood Terrace Ltd. P’ship v. United States, 86 Fed. Cl. 720, 728
(2009); see also Becton Dickinson & Co. v. C.R. Bard, Inc., 922 F.2d 792, 800 (Fed. Cir. 1990).
(As the old adage goes, “what is sauce for the goose is sauce for the gander.”)
Even if this claim were properly pled, there is a fundamental problem with plaintiffs’
claim in terms of foreseeability and, in particular, the notion that it was foreseeable that the
parties would renew their contracts based upon the rents under the original contract and the
extensions thereof. To recover lost profits, plaintiffs must show that the profits were reasonably
foreseeable or actually foreseen by the breaching party at the time of the contracting. See
Anchor Sav. Bank, FSB v. United States, 597 F.3d 1356, 1361 (Fed. Cir. 2010); Energy Capital
Corp. v. United States, 302 F.3d 1314, 1324-25 (Fed. Cir. 2002); see also Restatement (Second)
of Contracts § 351 (1981); Franconia Assocs. v. United States, 61 Fed Cl. 718, 746 (2004).
Plaintiffs cannot hope to make this showing primarily because the damages they seek relate not
to the original contract, but to subsequent renewal contracts – contracts that neither party
envisioned when the original contracts were signed, that no party was forced to sign and that
plaintiffs could have rejected. These renewal contracts, indeed, arose under a statutory regime
that was not adopted by Congress until 1997. See Multifamily Assisted Housing Reform and
Affordability Act of 1997 (MAHRA), Pub. L. No. 105-65, 111 Stat. 1344 (1997); 42 U.S.C. §
1437f note. 2 That plaintiffs chose to proceed on terms that they now view as unfavorable
provides no legal basis upon which they may predicate their request for lost profits. In other
words, the lost profits in question were not reasonably foreseeable and no recovery on this claim
is allowed.
2
In its supplemental brief, plaintiffs asserted that Congress’ adoption of MAHRA
effectively made the renewal of the contracts mandatory. They asserted that various criteria
(e.g., the availability of adequate and affordable housing) required this result. Plaintiffs,
however, did not provide any real details as to how the detailed provisions of MAHRA required
this result. See MAHRA, § 515. A review of the statute suggests that property owners, like
plaintiffs, had a choice – they could renew their contracts or provide tenants with notices of their
intent not to renew. MAHRA, §§ 514(d), 515(c); see also 24 C.F.R. § 402.8. That plaintiffs
eventually chose to renew their contracts does not alter this fact.
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Based on the foregoing, the court GRANTS, in part, and DENIES, in part, plaintiffs’
motion for summary judgment and GRANTS, in part, and DENIES, in part, defendant’s motion
for summary judgment. On or before October 15, 2014, the parties shall file a joint status report
indicating how this case should proceed.
IT IS SO ORDERED.
s/Francis M. Allegra
Francis M. Allegra
Judge
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