Free Order on Motion for Summary Judgment - District Court of Federal Claims - federal

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In the United States Court of Federal Claims
No. 98-168C (Filed: October 4, 2004) This order will not be published as it does not add significantly to the body of case law. ___________ NORTH STAR ALASKA HOUSING CORPORATION, Plaintiff, v. THE UNITED STATES, Defendant. __________ ORDER ON SUMMARY JUDGMENT __________ This government contract case is before the court on plaintiff's motion for summary judgment, which is, in fact, a motion for partial summary judgment. For the reasons that follow, this court GRANTS, IN PART, and DENIES, IN PART, plaintiff's motion. I. Background1 * * * * * * * * * *

After a competitive bidding process, North Star Alaska Housing Corporation (North Star) was awarded a contract to design and build a 400-unit housing project at Fort Wainwright, Alaska. The award resulted in a long-term relationship between North Star and the Army Corps of Engineers (Army), the terms of which are outlined in a series of contracts between the two parties. Contract No. DACA85-1-86-11 requires North Star to lease property on Fort Wainwright for thirty-two years, through June 26, 2018. Contract No. DACA85-9-86-27 requires North Star to lease the same property with residential buildings and other improvements back to the government. Contract No. DACA85-5-88-17 is the lease of the improved property

This statement draws heavily from a summary of the facts in this case originally included in this court's order of July 3, 2002, which resolved the prior summary judgment motion in this case.

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from North Star to the Army for a term of nineteen years and six months, through May 5, 2007. According to the lease, the Army pays shelter rent for the use of the housing and pays maintenance rent for maintenance and operational services. The residential development resulting from this project is referred to as Birchwood Estates. See generally, North Star Alaska Housing Corp. v. United States, 30 Fed. Cl. 259, 265 (1993). The administration of the leaseback phase of the Birchwood project has been difficult and contentious, to say the least. Prior to the initiation of this action, the parties agreed to settle a prior suit filed by North Star involving various claims arising out of the leaseback. Subsequent to that settlement, problems with the leaseback continued and North Star contested various actions taken by the Army's representatives in the administration of the contract. Ultimately, North Star filed claims regarding a number of these matters, which have either been denied or deemed denied. After some procedural machinations, various of these claims were incorporated into the First Amended Complaint filed in this case by North Star on August 23, 1999. This amended complaint contained seven counts relating to claims involving the maintenance and operation of Birchwood Estates. Following settlement negotiations and an extended debate regarding whether a binding settlement had occurred, plaintiff filed a Second Amended Complaint in this case on April 16, 2002, which included essentially the same seven counts in the First Amended Complaint, but expanded somewhat on plaintiffs' prior allegations of bad faith. In their simplest form, the seven issues presented by North Star's most recent amended complaint involve: (i) the responsibility for repairing fire damage caused by an occupant (count I); (ii) the frequency of refuse collection (count II); (iii) the turnaround time allotted for change of occupancy work (count III); (iv) carpet replacement and depreciation (count IV); (v) allegations of bad faith by the government in administering the contract (count V); (vi) the calculation of annual maintenance rent adjustments (count VI); and (vii) the issuance of annual incentive fees (count VII). On April 19, 2002, defendant filed a motion for summary judgment on all seven counts of the complaint, which the court granted, but only as to count VI of the complaint. The court denied defendant's motion as to counts I through V of the complaint, finding that factual questions precluded the granting of summary judgment, and deferred resolution of the motion as to count VII of the complaint, pending trial in this matter. On March 28, 2003, plaintiff filed a motion for summary judgment, which, as mentioned, is actually a motion for partial summary judgment. On April 3, 2003, this court stayed this case, pending completion of a Justice Department investigation. The case was later restored to the active docket and briefing was completed on the pending motion. The court has since determined that oral argument on the motion is unnecessary. II. Discussion

Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. RCFC 56(c); Hunt v. Cromartie, 526 U.S. 541, 549 (1999); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247- 48 (1986). Disputes -2-

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over facts that are not outcome-determinative under the governing law will not preclude the entry of summary judgment. Anderson, 477 U.S. at 248. However, summary judgment will not be granted if "the dispute about a material fact is `genuine,' that is, if the evidence is such that a reasonable [trier of fact] could return a verdict for the nonmoving party." Id; see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Walcek v. United States, 44 Fed. Cl. 462, 465 (1999). When reaching a summary judgment determination, a judge's function is not to weigh the evidence, but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249; see also Agosto v. INS, 436 U.S. 748, 756 (1978) ("[A] [trial] court generally cannot grant summary judgment based on its assessment of the credibility of the evidence presented."). The judge must determine whether the evidence presents a disagreement sufficient to require submission to fact finding, or whether it is so one-sided that one party must prevail as a matter of law. Anderson, 477 U.S. at 251-52. In doing this, all facts, as well as all inferences drawn from the evidence, must be construed in a light most favorable to the nonmoving party. Matsushita, 475 U.S. at 587. The court will address these summary judgment principles as they apply to each of the issues raised by plaintiff in its motion for partial summary judgment. A. Count I -- Fire Damage to 765 Bataan Court

In Count I, plaintiff seeks reimbursement for costs incurred repairing fire damage attributed to the negligence of an occupant. The dispute does not center on the cause of the fire, but over who, under the contract, is responsible for the costs of repair, with plaintiff's Second Amended Complaint asserting that defendant is responsible for those costs. In its July 3, 2002, order, this court concluded that the lease was ambiguous on this point and that an examination of the course of prior dealings could be relevant in construing the agreement. In its motion for partial summary judgment, plaintiff describes that course of dealings as indicating that, in similar circumstances, defendant has borne the costs of such repairs. Defendant's entire response to this argument is as follows: "The United States does not dispute that, prior to the August 23, 1996, fire at 765 Bataan Court, the Army reimbursed North Star Alaska Housing Corp. for fire damage, to two apartments, that was caused by occupant negligence." In the court's view, this statement concedes the accuracy of plaintiff's description of the parties' prior course of dealings. As previously noted in this case, a course of prior dealings that suggests a common understanding of the contract may be relevant in construing the agreement. See Macke Co. v. United States, 467 F.2d 1323, 1325 (Ct. Cl. 1972); Cross Petroleum v. United States, 51 Fed. Cl. 549, 553 (2002); Boyd Int'l Ltd. v. United States, 10 Cl. Ct. 204, 206 (1986); see also Restatement (Second) of Contracts § 223 (1981). The court believes that this rule is applicable in the case sub judice, where it appears that "`a course of dealing can reasonably be construed as indicative of the parties' intentions.'" United Computer Supplies, Inc. v. United States, 43 Fed. Cl. 351, 357-58 (1999) (quoting Sperry Flt. Sys. Div. of Sperry Rand Corp. v. United States, 548 F.2d 915, 923 (Ct. Cl. 1977)). Since prior to this litigation, the parties apparently had a common understanding that defendant was responsible for fire attributed to the negligence of an occupant, -3-

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the court concludes that the lease should be construed in this fashion. Accordingly, it finds that plaintiff is entitled to summary judgment as to liability on this issue. The exact amount of damages owed on this matter is yet to be determined and the court expects that the parties will attempt to resolve that issue via stipulation. B. Count II -- Frequency of Refuse Collection

On this count, plaintiff seeks both a declaration of the current requirements for the frequency of refuse collection at Birchwood Estates and damages for costs incurred by it in complying with the Army's request for performance allegedly in excess of those requirements. Again, this is not a new issue. North Star raised questions relating to refuse collection in its 1993 complaint, but those issues involved who was responsible for paying for or providing this service, rather than the frequency thereof. In his summary judgment ruling, Judge Futey construed the contract and held that North Star, rather than the Army, was responsible for this task and had to pay for the service. See North Star Alaska v. United States, 30 Fed. Cl. at 26769. Subsequently, the parties settled the 1993 dispute, and allegedly resolved the refuse collection claim by agreeing that North Star would perform that service. After the settlement, however, a dispute arose as to how often refuse had to be collected. Plaintiff argues that, prior to 1995, the Army had provided refuse collection at the Birchwood Estates on a weekly basis and asserts that the 1995 settlement agreement incorporated that periodicity. It contends that when the Army later insisted that collection be done semi-weekly, it was required to incur additional cost beyond the requirements of the settlement, for which reimbursement is now owed. In its motion for summary judgment, defendant argued that plaintiff's claim was barred by the doctrine of collateral estoppel, but the court rejected that argument in its July 3, 2002, order. At that time, the court also concluded that the contract provisions at issue were ambiguous, paving the way for the introduction of parol evidence regarding the parties' intentions at the time of the settlement. The court ultimately concluded that ­ "As Claim II thus cannot be resolved without a further factual exploration of the development of the 1995 settlement agreement, defendant's motion for summary judgment on this claim is denied." A review of the parties' current submissions, including the affidavits attached thereto, does not alter the court's prior conclusion ­ summary judgment on Count II is still inappropriate because questions of material fact remain. C. Count III -- Downtime for Change of Occupancy Work

In Count III, plaintiff challenges the government's assertion that the contract allows no more than three days of change of occupancy downtime per unit, regardless of the number of units turned over (or any other circumstances). Defendant bases its position on language in Exhibit C § D.7.(d)(1) of the contract, which provides: "All change of occupancy work must be

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completed within three working days after the unit becomes available." For its part, plaintiff contends that this provision is modified by two other provisions in the contract: (i) Exhibit C § D.5.(a), which contains an exception to the three-day standard during times of excessive turnover; and (ii) Exhibit C § H.1.(d), which incorporates the exception of § D.5.(a) in calculating liquidated damages. In further support of its argument, plaintiff cites a 1998 contracting officer decision that allowed North Star "five days . . . for each unit in excess of eight when eight units or more are turned over within any five-day work period." It also alleges that defendant's interpretation flies in the face of nine years of an established course of performance. In its order denying defendant's motion for summary judgment, this court concluded, as to this issue, that ­ "As with Count I, evidence of a prior course of dealing may shed light on what these provisions mean and exploration of these factual issues, in turn, will also inform the court's resolution of the bad faith claims addressed in Count V." Again, a review of the briefs and the accompanying appendices suggests that the basic posture of this issue has not changed and that summary judgment on Count III is still inappropriate because questions of material fact remain. D. Count IV ­ Carpet Replacement and Depreciation

In Count IV, plaintiff challenges defendant's 1997 decision to implement unilaterally a 10-year depreciation schedule for carpeting and to adjust reimbursements for carpeting damaged due to occupant negligence to reflect the remaining useful life of the carpeting replaced. For example, under this scheme, if occupant damage caused carpeting to be replaced five years after its installation, the Army would reimburse North Star only for 50 percent of the cost of the new carpeting; if a carpet were more than 10 years old when so damaged, no reimbursement would be provided. Plaintiff claims that, on its face, defendant's treatment of carpet replacement costs is inconsistent with the contract terms that expressly assign to the Army costs for repairing occupant-caused damages beyond normal wear and tear. See Exhibit C - § C.1(s). In rejecting defendant's motion for summary judgment on this issue, this court rejected defendant's reliance on WDC West Carthage Associates v. United States, No. 00-622C (Fed. Cl. May 3, 2002), which involved contract provisions very similar to those at issue. That case has since been reversed by the Federal Circuit, see WDC West Carthage Associates v. United States, 324 F.3d 1359, 1364 (Fed. Cir. 2003), leading defendant to conclude that "the Government is responsible for reimbursing North Star the full costs of replacing carpeting due to damages which are caused by the Government and are `beyond normal wear and tear,' without regard to depreciation of the replaced carpet." Based on this concession, the court concludes that plaintiff is entitled to summary judgment as to liability on this issue. Again, the exact amount of damages owed on this matter is yet to be determined and the court expects that the parties will attempt to resolve that issue via stipulation.

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E.

Count VII ­ Failure to Award Incentive Fees

Finally, North Star claims that the reduction in its incentive fees after 1995 resulted from what it alleges were unlawful modifications in the way defendant interpreted the lease. Prior to 1995, North Star regularly received such bonuses, but, since then, has been denied all or a portion of these awards ­ according to plaintiff, because of, inter alia, defendant's reliance on erroneous interpretations of the contract. By comparison, defendant claims that differences in the incentive fees received by plaintiff relate to a proper exercise of its discretion under the contract. In considering this issue in its July 3, 2002, order, this court observed that "it is less than clear whether the contract affords the Army unbridled discretion in awarding incentive fees" and that "additional evidence might provide a better indication as to whether the exercise of discretion here is reviewable for abuse of discretion, including the failure to award an incentive fee based upon a misinterpretation of the contract." The court reserved judgment on defendant's summary judgment motion as to this count until after trial and, after reading the parties' submissions on the pending motion, concludes that this course still is required. III. Conclusion

For the foregoing reasons, defendant's motion for summary judgment is GRANTED, in part, and DENIED, in part. Specifically: 1. Summary judgment is granted, as to liability, for counts I and IV of plaintiff's second amended complaint. Plaintiff's motion is denied for counts II and III of its second amended complaint. Judgment on plaintiff's motion for count VII of its second amended complaint is reserved until after trial.

2. 3.

The court's pretrial scheduling order of September 3, 2004, remains unchanged. IT IS SO ORDERED.

s/ Francis M. Allegra Francis M. Allegra Judge

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