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

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NO. 98-168C

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

NORTH STAR ALASKA HOUSING CORPORATION, Plaintiff, v. THE UNITED STATES, Defendant.

PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

Respectfully submitted, Of Counsel: JOHN SPENCER STEWART Stewart Sokol & Gray LLC 1500 Benjamin Franklin Plaza One SW Columbia Street Portland, OR 97258-2097 (503) 221-0699 PAUL W. KILLIAN Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Ave., N.W. Washington, D.C. 20036 (202) 887-4000

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TABLE OF CONTENTS TABLE OF CONTENTS ......................................................................................................... i - ii TABLE OF AUTHORITIES .......................................................................................................iii INDEX TO APPENDIX ..............................................................................................................iv QUESTIONS PRESENTED .........................................................................................................1 STATEMENT OF THE CASE ....................................................................................................2 ARGUMENT ................................................................................................................................9 I. The Court Should Enter Judgment In Favor of North Star on Count I .................9 A. The Plain Language of the Lease Requires the Government, Not North Star, to Pay for Occupant-Caused Fire Damage .....................................10 1. The Lease Distinguishes Between Act-of-God Type Fires and Fires Caused By Occupants ........................................................11 The Lease's Requirement that North Star Insure Against Fire Does Not Correspond to an Obligation to Pay for Fire Regardless of its Cause ...............................................................12

2.

B.

Even Assuming Arguendo That the Lease is Ambiguous, the Parties' Prior Course of Dealing Warrants Summary Judgment in Favor of North Star on Count I ..............................................................................13

II. III.

The Court Should Enter Judgment in Favor of North Star on Count II ..............14 The Court Should Enter Judgment in Favor of North Star on Count III . ...........17 A. The Plain Language of the Lease Supports North Star's Position on Downtime for Change of Occupancy Work ..............................18 Even Assuming Arguendo That the Lease is Ambiguous, the Parties' Prior Course of Dealing Warrants Summary Judgment in Favor of North Star on Count III .........................................................19

B.

IV.

The Court Should Enter Judgment in Favor of North Star on Count IV . . . . .. 20 A. The Plain Language of the Lease Supports North Star's Position on Carpet Replacement and Depreciation . . . . . . . . . . . . . . . . . . . . . . . 21

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B.

Even Assuming Arguendo That the Lease is Ambiguous, the Parties' Prior Course of Dealing Warrants Summary Judgment in Favor of North Star on Count IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

V.

The Court Should Enter Judgment in Favor of North Star on Count V . . . . . . .24

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

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TABLE OF AUTHORITIES CASES Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Brighton Village Assoc. v. United States, 31 Fed. Cl. 324 (1994), rev'd in part, 52 F.3d 1056 (Fed. Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 Crown Laundry & Dry Cleaners, Inc. v. United States, 29 Fed. Cl. 506 (1993) . . . . . . . 11, 19, 22 Baltimore Contractors, Inc. v. United States, 12 Cl. Ct. 328 (1987) . . . . . . . . . . . . . . . . . . . 13, 22 Hol-Gar Mfg. Corp. v. United States, 169 Ct. Cl. 384 (1965) . . . . . . . . . . . . . . . . . . . . . . . . 11, 19 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) . . . . . . . . . . . . . . . . . . . 9 Max Drill, Inc. v. United States, 427 F.2d 1233 (Fed. Cl. 1970) . . . . . . . . . . . . . . . . . . . . . 13, 22 Missouri Baptist Hosp. v. United States, 213 Ct. Cl. 505 (1977) . . . . . . . . . . . . . . . . . . . . . . . . 21 P.R. Burke Corp. v. United States, 47 Fed. Cl. 430 (Fed. Cl. 2000) . . . . . . . . . . . . . . . . 11, 19, 22 Unicon Mgmt. Corp. v. United States, 179 Ct. Cl. 534 (1967) . . . . . . . . . . . . . . . . . . . . . . .11, 19

RULES RCFC 56(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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INDEX TO APPENDIX Lease No. DACA85-5-88-17 Between the United States of America and North Star Alaska Housing Corporation, Nov. 6, 1987................................................................1 Excerpts from Defendant's Motion for Summary Judgment, Apr. 19, 2002 ........................62 Excerpts from Plaintiff's Opposition to Defendant's Motion for Summary Judgment, May 13, 2002.................................................................................................67 Contracting Officer's Decision, Oct. 28, 1997...........................................................75 Contracting Officer's Decision, Jan. 28, 1998............................................................83 Contracting Officer's Decision, Mar. 26,1998................................................... ......94 Memorandum from Karen K. Goodrich, Limited Real Estate COR, U.S. Army Alaska to Robert A. Welch, Corps of Engineers, Apr. 10, 1997.................................................................105 Electronic mail message from Dennis Klein to Tom Petersen, DPW Housing Chief, July 14, 1998 ..............................................................................................................................106 Order on Summary Judgment, July 3, 2002 ...........................................................108 Declaration of Thomas Petersen, May 21, 2002 ................................................ ....117 Memorandum from Thomas B. Petersen, Acting Deputy Director Public Works, to Commander, Alaska District/Attn: Chief, Real Estate Division, Aug. 12, 1996 ............ ...122 Transcript of Hearing Excerpt, North Star Alaska Housing Corp.v. United States, Case No. 98-168C, United States Court of Federal Claims (Bruggink, J.), Feb. 11, 1999 .............................................................................................................................123 Affidavit of Richard W. Fischer, March __, 2003 Settlement Agreement, North Star Alaska Housing Corp. v. United States, Case No. 98-168C, United States Court of Federal Claims (Bruggink, J.), September 13, 1995 ......................................................................................................Ex. 1 North Star Alaska Housing Corporation Incentive Bonus Summary ...........................Ex. 2 Letter from Col. Edwin R. Ruff, Director of Engineering and Housing to Richard W. Fischer, President of North Star, Mar. 1, 1991; Letter from Ronald E. Toombe, Director of Engineering and Housing to Richard W. Fischer, Jan. 27, 1992; Letter from Shannon R. Anderson, Director of Public Works to Richard W. Fischer, Jan. 13, 1993; Letter from Maj. Patrick L. Staffieri,

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Director of Public Works to Richard W. Fische r, Feb. 2, 1994 ...................................Ex. 3

Invoice from North Star Alaska Housing Corporation to Army Commander, Sept. 29, 1989; Director of Engineering and Housing Accounts Receivable, Jan. 1990 .......................................................................................................................Ex. 4 Work Authorization from Director of Engineering and Housing to North Star Alaska Housing Corporation, Jun. 15, 1990 .........................................................Ex. 5 Opinion and Order, North Star Alaska Housing Corp. v. United States, Case No. 93-88C, United States Court of Federal Claims (Futey, J.), Dec. 22, 1993 ..............................................................................................................Ex. 6 Incident Information Sheet of Assistant Fire Chief, Aug. 23, 1996 ...........................Ex. 7 Occupant Notice from North Star Alaska Housing Corporation to All Occupants at Birchwood Homes ...................................................................................................Ex. 8 Memorandum from Karen Goodrich, Chief of Housing to Director of Public Works, Nov. 22, 1995 ...................................................................................................Ex. 9 Memorandum from Col. Albert J. Kraus, Director of Public Works to Commander, U.S. Army Engineer District Alaska, Nov. 22, 1995 ...........................Ex. 10 Letter from Dennis E. Klein, Contracting Officer, to Dennis Wertz, North Star Alaska Housing Corporation, Dec. 1, 1995 ........................................................Ex. 11 Memorandum from Col. Albert J. Kraus, Director of Public Works to North Star Alaska Housing Corporation, Jan. 10, 1996 ............................................Ex. 12 Letter from Col. Wm. David Brown, Director of Public Works to Dick Fischer, President of North Star Alaska Housing Corporation, Apr. 16, 1997 ..............................................................................................................Ex. 13 Letter from Richard Fischer to Dennis Klein, May 6, 1997 .......................................Ex. 14 Draft Supplemental Agreement No. 19 to Lease No. DACA85-5-88-17 Between the United States of America and North Star Alaska Housing Corporation .................................................................................................................Ex. 15 Work Authorizations of North Star Alaska Housing Corporation between Apr. 1, 1994 and June 30, 1994; July 1, 1994 and September 30, 1994; Jan. 1, 1995 and Mar. 31, 1995 ..............................................................................................Ex. 16 U.S. Army Alaska Army Family Housing Policy, Jan. 1, 1998 .................................Ex. 17

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Letter from Col. Wm. David Brown to Billie Menefee, January 29, 1997............Ex. 18

Memorandum from W. Mae Harrell, Family Housing Manager to Housing Staff, July 9, 1997 .......................................................................................................Ex. 19 Letter from Richard W. Fischer, President of North Star Alaska Housing Corporation to Col. Wm. David Brown, Director of Public Works, July 11, 1997 ..............................................................................................................Ex. 20 Minutes of Quarterly Evaluation Meeting Excerpt, July, August, and September, 1997, Oct. 15, 1997 .................................................................................Ex. 21 Letter from Col. Mark C. Nelson, Director of Public Works to Eldon Wartes, Site Manager, North Star Alaska Housing Corporation, May 12, 1999 .....................Ex. 22 Affidavit of John Spencer Stewart, May 8, 2002 Memorandum from Karen Goodrich, Chief of Housing to Director of Public Works, Nov. 22, 1995 .................................................................................................Ex. 1 Handout on Landfill Issues, Birchwood Housing .......................................................Ex. 2 Transcript of Hearing Excerpt, North Star Alaska Housing Corp. v. United States, Case No. 98-168C, United States Court of Federal Claims (Bruggink, J.), Feb. 11, 1999 ..........................................................................Ex. 3 Affidavit of Lewis Migliore, May 8, 2002

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS NORTH STAR ALASKA HOUSING CORPORATION, ) ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES, ) ) Defendant. ) __________________________________________)

No. 98-168 C Judge Francis M. Allegra

PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT Pursuant to Rule 56 of the Rules of the United States Court of Federal Claims ("RCFC"), plaintiff North Star Alaska Housing Corporation ("North Star") hereby submit its motion for summary judgment on Count I (Fire Damage to 765 Bataan Court), Count II (Frequency of Refuse Collection), Count III (Turnaround Time for Units as a Result of Change of Occupancy), Count IV (Replacement and Depreciation), and Count VII (Incentive Fee) of its Second Amended Complaint. North Star respectfully requests that the Court enter judgment in favor of North Star on these claims. In support, North Star relies upon this brief, as well as North Star's Proposed Findings of Uncontroverted Fact and Appendix. 1 QUESTIONS PRESENTED 1. Whether the lease (Plaintiff's Appendix ("Pl. App.") at 1- 61) requires the

Government to bear the cost of fire damage caused by the conduct of occupants.

Pursuant to RCFC 5.2(b)(3), Plaintiff's Appendix includes portions of Defendant's Motion for Summary Judgment, dated April 19, 2002, and Plaintiff's Opposition to Defendant's Motion for Summary Judgment, dated May 13, 2002. There are 11 pertinent pages, excluding cover pages which are included for ease of reference.

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2.

Whether North Star is entitled to collect garbage once weekly with deposit at the

Fort Wainwright landfill. 3. Whether the lease allows North Star three work days multiplied by the number of

units released in a month to perform change of occupancy maintenance for the units turned over to North Star by the Government, and whether, when the Government releases more than eight units to North Star in a five-day work period, two additional work days per unit in excess of eight are permitted for change of occupancy maintenance. 4. Whether North Star must bear the cost of replacing carpet damaged by occupant

conduct, such as pet damage. 5. Whether the lease requires the Government to base incentive fee award decisions

on North Star's performance in the relevant evaluation period. STATEMENT OF THE CASE 1. This dispute arises out of North Star's contract with the United States Army

Corps of Engineers for the development, operation, and maintenance of a 400- unit military housing development called the Birchwood Homes at Fort Wainwright, Alaska. The relationship between North Star and the Army is governed by a nineteen-and-a-half- year lease agreement that has been in effect since November 6, 1987. 2. Pl. App. at 1.

The dispute at issue in this motion began following the parties' execution of a

settlement agreement in prior litigation, North Star Alaska Housing Corp. v. United States, No. 93-88, in the United States Court of Federal Claims (Futey, J.), in September, 1995. ("1995 Settlement Agreement"). After the parties settled that case, the Government changed its interpretation of the Lease to make performance substantially more difficult and costly for

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Plaintiff. The Government also asserted performance issues, which it had created, as the bases for reducing or denying incentive fees under the Lease. 3. Part of North Star's compensation under the lease is derived from incentive fee

awards of up to five percent of the annual maintenance rent that are determined by an incentive fee board "composed of three (Army) Officers or civilian personnel who will evaluate the Developer's performance over the preceding twelve month period . . . [and] make a determination within 60 days after the end of the period to grant all, some, or none of the incentive fee award." Pl. App. at 55 § H.4. The lease also states that "the Government, at its option, may pay the Developer an incentive fee . . . for the period of time for which the Developer's performance of the obligations and responsibilities contained herein are [sic] evaluated . . ." Pl. App. at 4 Art. VIII (emphasis added). 4. From the lease's inception in 1987 through 1994, the Government awarded North

Star all to nearly-all of the incentive fee award. Affidavit of Richard W. Fischer ("Fischer Aff.") ¶ 4. However, after the 1995 Settlement Agreement took effect, the Government changed its interpretation of the lease, and, based on that changed interpretation, reduced and ultimately eliminated incentive fee awards to North Star. The following chart sets forth the bonuses paid by the Government since the inception of the lease, and exemplifies the economic results of the defendant's wrongful actions against the plaintiff. The reasons given by the defendant to deny bonuses (to the extent any evaluations were held at all) are the subject of this action, i.e. turn around time, carpet replacement, and refuse collection. The bonus payments were as follows:

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Year 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 5.

5% of Annual Maintenance Rent (A) (Partial Year) 48,488.33 49,875.10 50,295.78 52,398.78 53,326.19 54,041.30 55,218.90 56,943.50 58,835.80 59,971.35 60,867.35 60,696.65 62,159.27 63,826.27

Bonus Paid (B) 13,236.09 42,921.00 56,113.93 50,295.78 52,398.78 53,326.19 54,041.30 55,225.00 46,268.35 39,000.00 21,272.00 3,730.00 0.00 0.00 0.00

Difference (A) ­ (B)

5,567.33 -6,238.83 0.00 0.00 0.00 0.00 -6.10 10,675.15 19,835.80 38,699.35 57,137.35 60,696.65 62,159.27 63,826.27

On August 23, 1996, a unit fire occurred at 765 Bataan Place that the Assistant

Fire Chief found to be caused by occupant negligence. Fischer Aff. ¶ 8, Ex. 7. The lease provides that with regard to "[d]amages . . . which are beyond normal wear and tear and are caused by the Government or an occupant, his dependents, or invited guests . . . [t]he cost of such repairs shall be billed to the Government." Pl. App. at 30 § C.1.(s). In the only two prior incidents, the Government paid for fire damage caused by the conduct of occupants. Fischer Aff. ¶ 6, Ex. 4-5. Although the Government previously paid for fire damage caused by occupants, it refused to pay the cost of the fire at 765 Bataan Place. On October 28, 1997, a contracting officer interpreted the lease to require North Star to pay for fire damage caused by the negligence of the occupant. Pl. App. at 75. 6. With respect to refuse collection, the 1995 Settlement Agreement stated that

North Star would "assume full responsibility for refuse collection and disposal for the remainder of the lease . . ." Fischer Aff. ¶ , Ex. 1. During negotiations, the Government represented to North Star that once-weekly refuse collection with disposal at the Fort Wainwright landfill was

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acceptable (as had been the Army's practice during the first seven years of the lease). Affidavit of John Spencer Stewart ("Stewart Aff.") ¶¶ 3-4. After the settlement, North Star implemented a refuse collection program that involved once-weekly refuse collection. Fischer Aff. ¶ 10, Ex. 8. The Army then claimed that North Star's one day per week refuse collection was unacceptable, and retaliated by reducing its 1995 incentive fee award to $10, 675.15 below the maximum amount. Id. ¶¶ 10-11, Ex. 12. In a letter dated January 10, 1996, the Government attributed the reduction in the 1995 incentive fee award to refuse collection and "between occupancy downtime". Prior to 1995, when the Army collected refuse once weekly, North Star received full to nearly- full incentive award amounts. Id. ¶ 9. The parties' agreement notwithstanding, the contracting officer issued a decision on January 23, 1998 requiring North Star to collect refuse twice weekly and in 1999, refused to allow the refuse to be deposited at the Forth Wainwright landfill. 7. The lease states that "[a]ll change of occupancy work must be completed within

three working days after the unit becomes available," Pl. App. 39 § D.7.d.(1), but when multiple units are released for cha nge of occupancy maintenance, the lease directs North Star to "ensure that down time . . . does not exceed . . . the number of move-outs (excluding move-outs for purposes of scheduled repairs or fires and acts of God) per month multiplied by 3 days." Pl. App. 36 § D.5.(a). The lease illustrates this scenario with the example of 10 move-outs in one month, in which case "the total allowable downtime for that months is 30 days." Id. In addition, the lease provides that "if [in] any 5-day work period, more than eight units are turned over to the Developer, two additional days will be allowed for each unit in excess of eight." Id. Moreover, under the lease, "downtime is measured in working days, vice calendar days." Pl. App. 23 § B.10.

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8.

For the first seven years that the lease was in effect, the parties' mutual

interpretation of the lease was that North Star had three work days times the number of units released within a month to complete change of occupancy maintenance, and that when the Government released more than eight units within a five-day work period, two additional workdays multiplied by the number of units over eight were added to complete the change of occupancy maintenance. Pl. App. at 36 § D.5.(a); Fischer Aff. ¶ 12. While North Star was performing under that proper lease interpretation, it received maximum incentive fee awards. North Start's receipt of these maximum incentive fees ended when the Government suddenly changed its position and demanded that when multiple units are released at once, change of occupancy maintenance on each unit must be accomplished in three work days regardless of the number of units released. Fischer Aff. ¶ 13. The Government awarded North Star an incentive fee award of $39,000 for its 1996 performance ($19, 835.80 below the maximum amount), which, in a letter dated April 16, 1997, it attributed to "between occupancy vacancy rates." Fischer Aff. ¶ 13 Ex. 13. 9. On January 28, 1998, a contracting officer interpreted the lease to require North

Star to complete change of occupancy maintenance on multiple units simultaneously turned over by the Government in three work-days total, with five days permitted for each unit in excess of eight when eight units or more are turned over within any five-day work period. Pl. App. at 83. Then, in its Motion for Summary Judgment, the Go vernment, for the first time, took the position that even when more than eight units are released at once, the total amount of turnaround time is limited to three days. See Defendant's Motion for Summary Judgment, at 13-14 (April 19, 2002), Pl. App. at 65-66.

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10.

From 1987 through 1997, both parties were in agreement that the Government

was financially responsible for replacing carpet damaged by occupants, including carpet damaged by the pets of occupants. Work authorizations from 1994 and 1995 illustrate that the Government paid North Star to replace occupant-damaged carpet. Fischer Aff. ¶ 15, Ex.16. Moreover, at all times relevant to this dispute, the U.S. Army Alaska Family Housing Policy has informed residents that "[p]et damage is never considered `fair wear and tear' and residents will be held financially liable for government efforts to reclean and/or replace carpeting, other building components, and areas outside damaged by pets." Id. ¶ 15, Ex. 17. The Army reversed its position in 1997, and unilaterally imposed a depreciation schedule for carpet requiring replacement due to occupant damage. Id. ¶ 16, Ex. 19. North Star did not acquiesce to the Army's imposition of a depreciation schedule, and received an incentive fee of only $21, 272.00 for its 1997 performance, $38, 699.35 below the maximum amount. Id. ¶ 15, Ex. 18. The Government's January 29, 1998 letter 2 respecting the 1997 incentive fee award attributed the reduction in award from North Star's alleged deviation from its "original proposed replacement cycle." Id. On March 26, 1998, a contracting officer supported imposition of a ten-year useful life depreciation schedule on carpet that required replacement due to occupant-caused pet damage despite the absence of a depreciation schedule from the lease agreement. Pl. App. at 94. 11. The incentive fee board's 1998 award was $3,730 out of a possible $60, 867.35.

In a letter dated May 12, 1999, the Army attributed the reduced 1998 award amount to turnover time for units. Fischer Aff. ¶ 19, Ex. 22. 12. North Star submitted claims to the contracting officer regarding the issues of fire

damage, refuse collection, change of occupancy, and carpet replacement and received adverse

2

This letter appears to bear the incorrect date stamp of January 29, 1997.

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final decisions. North Star submitted a claim regarding the incentive fee, but the contracting officer never issued a decision on that claim. Government documents show that Army personnel have specifically directed the contracting officer to issue decisions on carpet replacement and turnaround time that adopt the Government's changed interpretation of the lease. Pl. App. at 105-07. 13. On March 6, 1998, North Star filed a Complaint addressing fire damage, refuse

collection, downtime for change of occupancy maintenance, carpet depreciation, incentive fee awards, and breach of the duty of good faith and fair dealing. The crux of the bad faith argument was that the Government changed its interpretation of the lease following execution of the 1995 Settlement Agreement, and used this wrongfully-changed lease interpretation to reduce and ultimately eliminate incentive fee awards to North Star, which, according to the lease, are to be awarded based on North Star's performance. North Star filed a Second Amended Complaint on April 16, 2002 that includes, among the examples of the Government's bad faith, the Army's stockpiling of units and issuance of unfairly adverse contracting officer decisions regarding carpet replacement. 14. On April 19, 2002, the Government filed a motion for summary judgment on all

counts of North Star's Second Amended Complaint. North Star filed its Opposition on May 13, 2002, the Government filed its Reply on May 24, 2002, and North Star filed its Response to the Government's Reply on May 28, 2002. The Court held a hearing on May 30, 2002, at which it announced its intention to deny the Government's Motion for Summary Judgment on all grounds. 3 The Court issued its Order denying the Government's Motion for Summary Judgment on July 3, 2002. See North Star Alaska Housing Corp. v. United States, Case No. 98-168C in the
3

The Court denied summary judgment in favor of the Government on all grounds, except the maintenance rent adjustment issue, which the parties agreed was moot.

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United States Court of Federal Claims (Allegra, J.), Order on Summary Judgment ("Order") at 3, July 3, 2002, Pl. App. at 108. ARGUMENT Summary judgment may be entered when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See RCFC 56(c). Summary judgment enables disposition of claims so as to permit the just, speedy, and cost-saving resolution of matters. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Matsushita Elect. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986). As set forth herein, North Star is entitled to judgment as a matter of law on the issues of fire damage (Count I), refuse collection (Count II), turnaround time (Count III), carpet depreciation (Count IV), and incentive fee awards (Count VII). I. The Court Should Enter Judgment in Favor of North Star on Count I The parties' dispute about fire damage arises out of an October 28, 1997 contracting officer's decision upholding the Government's refusal to pay the cost of repairs to 765 Bataan Court, which sustained damages on August 23, 1996 in a fire that the Assistant Fire Chief attributed to the negligence of the unit occupant in leaving a stove burner switch in the "on" position. The contracting officer's decision violates the plain language of the lease, which requires the Government to bear the cost of fires caused by occupants. Indeed, this Court has already ruled that the plain language of the Lease does not require North Star to pay for fire damage resulting from occupant conduct. See Order on Summary Judgment ("Order"), at 3 (July 3, 2002), Pl. App. at 110. Moreover, the contracting officer's decision is inconsistent with the prior course of dealing between the parties pursuant to which the Government paid for occupantcaused fire damage. This Court should enter summary judgment in favor of North Star on the

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issue of fire damage because the plain language of the lease places the financial burden of occupant-caused fire damage on the Government. In the alternative, even if the Court deems the lease ambiguous with respect to fire damage, the Court should enter summary judgment in favor of North Star because the documentary evidence proves that in the prior course of dealing between the parties, the Government paid for damages resulting from occupant-caused fires. A. The Plain Language of the Lease Requires the Government, Not North Star, to Pay for Occupant -Caused Fire Damage

The lease provides that "[d]amages to a housing unit or to other improvements within the project which are beyond normal wear and tear and are caused by the Government or an occupant, his dependents, or invited guests, which are not corrected by the Government or occupant, shall be repaired by the Developer. The cost of such repairs shall be billed to the Government." Pl. App. at 30 § C.1.(s) (emphasis added). This provision ­ which requires the Government to pay for damages caused by occupants and North Star to pay for damages resulting from fair wear and tear ­ governs the relationship between the parties with respect to all aspects of maintaining Birchwood Homes. Although the Government asserts that fire-caused damage is excepted from the damage for which the Government must pay, there is no exception in the lease for fire damage which would require North Star to pay when occupants cause fires. Indeed, such a reading of the lease would permit occupants to escape responsibility for damages they cause by one method: causing fires. Thus, not surprisingly, none of the lease provisions dealing with fire damage alters the balance embodied in Section C.1.(s) that requires the Government to pay for occupant-caused damages and North Star to pay for fair wear and tear. Pursuant to well-established principles of contract interpretation, the lease must be read as a whole, with the provisions read harmoniously to avoid rendering any provision meaningless.

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See Hol-Gar Mfg. Corp. v. United States, 169 Ct. Cl. 384, 395 (1965); Unicon Mgmt. Corp. v. United States, 179 Ct. Cl. 534, 537-38 (1967). As set forth below, synthesis of all the lease provisions that implicate fire and the parties' respective financial responsibility for occupantcaused and fair wear and tear damages warrants entry of summary judgment in favor of North Star on Count I. Indeed, "[p]ure contract interpretation is a question of law which may be resolved by summary judgment." P.R. Burke Corp. v. United States., 47 Fed. Cl. 340, 345 (Fed. Cl. 2000) (quoting Crown Laundry & Dry Cleaners, Inc. v. United States, 29 Fed. Cl. 506, 515 (1993). 1. The Lease Distinguishes between Act-of-God Type Fires and Fires Caused by Occupants

In taking the position that fire damage, regardless of the cause, is North Star's responsibility, the Government ignores the distinction drawn throughout the lease between occupant-caused fire damage, for which the Government is financially liable, and major, unforeseen, act-of-God type fires, for which North Star bears the cost: · The lease makes North Star financially responsible for "major unforeseen, unscheduled work resulting from fires, acts of God, or structural, electrical or mechanical defects." Pl. App. at 31 § C.1.(w). The lease permits the Government to suspend rent payments on units damage or destroyed by fire or other casualty except in cases of "negligence on the part of the occupant." Pl. App. at 5, Art. X (emphasis added). The Lease obligates North Star to pay for "loss or damage by fire, lightning, storm, tempest, explosion, impact, aircraft, riot, civil commotion, bursting or overflowing of water tanks, apparatus or pipes, flood; labor disturbances, earthquake, malicious damage (other than Government-caused) or any other casualty or act of God" and directs that North Star obtain insurance coverage for such risks. Pl. App. at 5, Art. IX (emphasis added). The lease requires North Star to instruct its employees to "report . . . any occupant-caused fire or safety hazards . . . in need of maintenance or repair" and to "notify the Government in writing of any occupant-caused fire or safety hazard . . . in need of maintenance or repair . . . [or] which requires the

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Government's action." Pl. App. at 29 § C.1.(o)(1) (emphasis added). There is no parallel language in the lease requiring that North Star report fires resulting from non-occupant causes to the Government. The Government is then required to "[n]otify Developer via work authorization of occupant-caused damages or conditions requiring correction or cleaning and reimbursing Developer for accomplishment of same" Pl. App. at 32 § C.2.(c)(10). It is clear from these provisions that the Government's obligation to pay for occupant-caused damages is not changed when that damage results from occupant-caused fires, and that the portions of the lease that hold North Star financially responsible for fires do so only with respect for "act of God" type fires. Indeed, in the prior litigation between the parties regarding the Government's failure to pay for a 1992 fire caused by a child playing with matches, Judge Futey recognized that the lease distinguishes between occupant-caused and "act of God" type fires. North Star Alaska Housing Corp. v. United States, No. 93-88, in the United States Court of Federal Claims (Futey, J.), Order on Government's Motion for Summary Judgment ("Futey Order"), at 25 (Dec. 22, 1993), Fischer Aff. ¶ 7, Ex. 6. Accordingly, because the lease unquestionably holds the Government financially liable for occupant-caused fires, and because issues of contract interpretation raise purely legal questions, this Court should grant summary judgment in North Star's favor on Count I. 2. The Lease's Requirement that North Star Insure Against Fire Does Not Correspond to an Obligation to Pay for Fire Regardless of its Cause

In taking the position that occupant-caused fire damage is North Star's financial responsibility, the Government appears to be confusing North Star's obligation to insure against fire or acts of God and to correct damages resulting from fire or acts of God with an obligation to pay for fire damage caused by occupants. See Pl. App. at 31 § C.1.(x). Indeed, in Case No. 9388, Judge Futey ruled that "Plaintiff's obligation under the contract to carry insurance does not correspond to responsibility to pay for fire damage caused by occupant's negligence." Futey

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Order at 26, Fischer Aff. ¶ 7, Ex. 6. Moreover, it is an uncontroverted fact, supported by documentary evidence, that North Star has obtained the insurance required under the lease, and has and continues to correct damages that result from fires and acts of God, including the fire at 765 Bataan Court. There are no questions of fact regarding North Star's compliance with its obligation under Section C.1.(w) of the Lease to insure against and correct fire damage that preclude summary judgment on Count I. B. Even Assuming Arguendo That the Lease is Ambiguous, the Parties' Prior Course of Dealing Warrants Summary Judgment in Favor of North Star on Count I

As set forth above, it is clear from the four corners of the lease that the Government's responsibility to pay for occupant-caused damage includes occupant-caused fire damage, and thus summary judgment in North Star's favor should be entered on Count I. However, even assuming arguendo that the lease is ambiguous as to which party bears financial responsibility for occupant-caused fire damage, summary judgment is still appropriate in light of the parties' prior course of dealing and longstand ing interpretation of the lease. See Max Drill, Inc. v. United States, 427 F.2d 1233, 1240 (Fed. Cir. 1970) ("The interpretation of a contract by the parties to it before the contract becomes the subject of controversy is deemed by the courts to be of great, if not controlling, weight."); see also Baltimore Contractors, Inc. v. United States, 12 Cl. Ct. 328, 341 (1987). As the Court recognized in its Order on Summary Judgment, when contract terms are ambiguous, the parties' prior course of dealing and interpretation of the contract prior to the existence of a dispute are critical to resolving the dispute. See Order at 3, Pl. App. at 110. In its Opposition to the Government's Motion for Summary Judgment, North Star submitted conclusive documentary evidence establishing that for the first four years that the lease was in effect, the Government paid for occupant-caused fire damage, covering the cost of a

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June, 1989 fire caused by an unsupervised three-year old child playing with a lighter, and an August, 1990 fire caused by an occupant-caused range fire. See Plaintiff's Opposition to Defendant's Motion for Summary Judgment ("Plaintiff's Opposition"), at 12, (May 13, 2002), Pl. App. at 69; Fischer Aff. ¶ 6, Ex. 4-5. Moreover, in Case No. 93-88, Judge Futey stated in his denial of the Government's motion for summary judgment that "the best evidence of contract interpretation is how the parties act under the arrangement before the dispute." Futey Order, at 27; Fischer Aff. ¶ 7, Ex. 6. The Government has not ­ and indeed, cannot ­ dispute that for the first four years that the lease was in effect, it paid for damages resulting from occupant-caused fires (all the while awarding North Star the highest incentive fee performance evaluation awards). Accordingly, even assuming arguendo that the lease is ambiguous with respect to fire damage, in light of the parties' prior course of dealing and longstanding interpretation of the lease, the Court should enter a judgment that the Government is financially responsible for occupant-caused fire damage. II. The Court Should Enter Judgment in Favor of North Star on Count II As the Court acknowledged in its Order on Summary Judgment, the issue of the frequency of refuse collection turns on the 1995 Settlement Agreement and the parties' understanding with respect thereto, which supercedes the lease's requirement of twice weekly refuse collection. In its Opposition to the Government's Motion for Summary Judgment, North Star appended sworn testimony and conclusive documentary evidence that the parties agreed that North Star would collect garbage once per week. This evidence was not contradicted by the Government in its responsive briefing. Absent a showing of specific credible facts that contradict the evidence already offered by North Star, summary judgment in North Star's favor

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should be entered. Indeed, when a motion for summary judgment is made and supported by affidavit, as is the instant motion: an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided under the rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party. RCFC 56. The evidence already submitted by North Star, which is appended hereto, is discussed in detail below. In executing the 1995 Settlement Agreement, North Star agreed to "assume full responsibility for refuse collection and disposal for the remainder of the lease and any extensions of the lease." Fischer Aff. ¶ 9, Ex. 1. Although the Agreement itself is silent as to frequency of collection, during settlement negotiations, the parties specifically agreed that refuse would be collected once per week with deposit at the Fort Wainwright landfill, as the Government had done previously at Birchwood, and after execution of the 1995 Settlement Agreement, the Government took the position, in writing, that once weekly refuse collection was acceptable. Contrary to the parties' agreement respecting refuse collection, on December 1, 1995, the contracting officer ordered North Star to collect garbage twice weekly. Fischer Aff. ¶ 10, Ex. 11. As set forth in the affidavit of John Spencer Stewart, prior lead counsel to North Star in this litigation, he had multiple conversations with Government counsel wherein he and Government counsel specifically agreed that North Star's responsibility with respect to the 1995 Settlement Agreement would be satisfied by once-weekly refuse collection with deposit at the Fort Wainwright landfill. Affidavit of John Spencer Stewart ("Stewart Aff.") ¶ 4. This affidavit, which North Star submitted with its Opposition Brief, is submitted again herewith. Absent the Court's acceptance of sworn testimony from Government counsel directly to the

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contrary (which was conspicuously lacking from the Government's Reply to North Star's Opposition Brief), summary judgment should be entered in North Star's favor on Count II. In addition, as previously submitted by North Star with its Opposition Brief, Colonel Kraus, Director of Public Works, stated in a November 22, 1995 memorandum that "[t]he Army standard for adequa te housing is weekly curbside pickup." Fischer Aff. ¶ 10, Ex. 11. Although, as Mr. Petersen pointed out in his declaration in support of the Government's motion for summary judgment, this memorandum also attacks North Star for the "unanticipated, unfortunate and totally unsatisfactory elimination of services," this language refers to the method, as opposed to the frequency, of refuse collection. Declaration of Thomas Petersen ¶ 9, Pl. App. at 123. Absent contrary evidence from the Government with respect to the Government standard respecting the frequency of refuse collection, summary judgment should be entered in North Star's favor on Count II. The only documentary evidence provided by North Star that the Government has disputed thus far is a November 22, 1995 memorandum from Karen Goodrich stating that "[a]n out of court settlement was reached to allow the contractor to decrease pick-up from twice a week to once a week." Fischer Aff. ¶ 10 Ex. 9. The documentary evidence ­ Ms. Goodrich's statement regarding the parties' understanding ­ speaks for itself, and Mr. Petersen's only purported defense is that Ms. Goodrich made this statement in error. Moreove r, the sworn testimony advanced by North Star with respect to the parties' attorneys' conversations regarding garbage collection in itself warrants summary judgment in North Star's favor. Colonel Kraus's and Ms. Goodrich's memoranda serve to bolster the point that the parties' inked the 1995 Settlement Agreement with the understanding that once weekly garbage collection was acceptable. Based on the sworn testimony and documentary evidence provided by North Star,

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this Court should enter summary judgment in North Star's favor that permits once weekly trash collection, with deposit in the Fort Wainwright landfill. III. The Court Should Enter Judgment In Favor of North Star on Count III The number of downtime days permitted for North Star to perform change of occupancy maintenance on units became a subject of dispute nine years into the life of the lease, when the Government changed its interpretation of the lease. Under the clear terms of the lease and as illustrated by the parties' prior course of dealing, North Star has three work-days times the number of units released within a month to complete change of occupancy maintenance, and when more than eight units are released within a five day work period, two additional work-days multiplied by the number of units over eight are added to the permissible downtime days. On January 28, 1998, a contracting officer found that the lease requires North Star to complete change of occupancy maintenance on multiple units simultaneously turned over by the Government in three work days total, with five days permitted for each unit in excess of eight when eight units or more are turned over within any five-day work period. In its Motion for Summary Judgment, the Government, for the first time, took the position that North Star has three days to complete change of occupancy work on any given housing unit regardless of how many units are turned over at once. See Defendant's Motion for Summary Judgment, at 11-14 (April 19, 2002), Pl. App. at 63-66. Thus, according to the Government, even when more than eight units are released at once, the total amount of turnaround time is limited to three days. As set forth below, the Government's current position with respect to calculation of downtime days violates the lease and is inconsistent with the prior course of dealings between the parties. Moreover, this Court has already ruled that the plain language of the lease does not support the Government's position on downtime for change of occupancy work. See Order at 4-5, Pl. App.

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at 111-112. Accordingly, this Court should enter summary judgment in North Star's favor on Count III. A. The Plain Language of the Lease Supports North Star's Position on Downtime for Change of Occupancy Work

The lease states that "[a]ll change of occupancy work must be completed within three working days after the unit becomes available." Pl. App. at 39 § D.7.d.(1). 4 However, when multiple units are released for change of occupancy maintenance, the lease directs North Star to "ensure that down time . . . does not exceed . . . the number of move-outs (excluding move-outs for purposes of scheduled repairs or fires and acts of God) per month multiplied by 3 days." Pl. App. at 36 § D.5(a). For example, if there are 10 move-outs in one month, "the total allowable downtime for that month is 30 days." Id. In addition, "if [in] any 5-day work period, more than eight units are turned over to the Developer, two additional days will be allowed for each unit in excess of eight." Id. Moreover, pursuant to Section B.10. of the Maintenance Annex, "downtime is measured in working days, vice calendar days." Pl. App. at 23 § B.10. Notwithstanding the plain language of the lease, the Government takes the position that North Star has three days to complete change of occupancy work on any given housing unit regardless of how many housing units are turned over at once. The Government strains to support its position by claiming that the criteria for permissible downtime days are set forth exclusively in Section D.7, and that the monthly allowable downtime days set forth in Section D.5 serve only to trigger the Government's right to assess liquidated damages against North Star. However, the lease draws no such distinction, but rather directs North Star not to exceed the monthly "allowable downtime prescribed" in Section D.5(a). Pl. App. at 36 § D.5. The
The lease also distinguishes between change of occupancy maintenance and repair work for purposes of calculating downtime days. Pl. App. at 36 § D.5(b) ("Downtime for reasons of scheduled repair or renovation will be completed on the basis of the actual number of days any specific unit has been turned over to the Developer for such work.").
4

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Government's interpretation defies the maxim that contracts must be viewed as a whole, with the provisions read harmoniously to avoid rendering any term meaningless. See Hol-Gar, 169 Ct. Cl. at 395; Unicon Mgmt. Corp., 179 Ct. Cl. at 537-38. Because the Lease is only subject to one reasonable interpretation ­ the interpretation advanced by North Star ­ this Court should enter summary judgment in North Star's favor on the issue of downtime for change of occupancy maintenance, as contract interpretation is a question of law appropriate for resolution on summary judgment. See P.R. Burke Corp., 47 Fed. Cl. at 345; Crown Laundry, 29 Fed. Cl. at 515. B. Even Assuming Arguendo That the Lease is Ambiguous, the Parties' Prior Course of Dealing Warrants Summary Judgment in Favor of North Star on Count III

As set forth above, the only downtime interpretation supported by the plain language of the lease is the interpretation advanced by North Star, and thus summary judgment in North Star's favor should be entered on Count III. However, even assuming arguendo that the lease is ambiguous as to how downtime days for change of occupancy maintenance are calculated, summary judgment is still appropriate in light of the parties' prior course of dealing and longstanding interpretation of the lease. See Max Drill, Inc., 427 F.2d 1233 at 1240; Baltimore Contractors, 12 Cl. Ct. at 341; see also Order on Summary Judgment at 5, Pl. App. at 115. For approximately nine years, both parties embraced a harmonious read of Sections D.7 and D.5 such that: (1) change of occupancy maintenance when one unit is released must be completed in three work days; and (2) when multiple units up to eight are released within a five day work period, the permissible downtime is three work days times the number of released units. In its Opposition to the Government's Motion for Summary Judgment, North Star submitted conclusive documentary evidence showing that the Government previously interpreted

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the lease exactly like North Star (all the while awarding North Star the highest incentive fee performance evaluation awards), but then changed its position in late 1996/early 1997, claiming that the lease contained "ambiguities" as to downtime calculations and seeking to modify the lease to support its desired calculation of downtime days. See Plaintiff's Opposition at 16, Pl. App. at 72; Pl. App. at 105. North Star also provided documentary evidence showing that in early 1998, the Government presented North Star with a draft Supplemental Agreement seeking to amend the Lease to support the changed downtime interpretation. See Fischer Aff. ¶ 14 Ex. 15. Moreover, in its Reply to Opposition to Motion for Summary Judgment, the Government appended an August 12, 1996 memorandum from Thomas Petersen referring to the "contractually stipulated average downtime level of 3 days per unit." Pl. App. at 122. The Government has not ­ and indeed, cannot ­ dispute that for approximately the first nine years that the Lease was in effect, it interpreted the lease in this manner. Accordingly, even assuming arguendo that the lease is ambiguous with respect to downtime for change of occupancy work, in light of the parties' prior course of dealing and longstanding interpretation of the lease, the Court should enter judgment in favor of North Star on Count III. IV. The Court Should Enter Summary Judgment in Favor of North Star on Count IV The dispute regarding carpet replacement and depreciation arose when, nine years into the lease, the Government began to depreciate carpet despite the absence of a depreciation schedule from the lease. On March 26, 1998, the contracting officer issued a decision involving carpet that required replacement because an occupant's pet urinated upon it. The contracting officer found that the Government could depreciate the cost of carpet replacement such that North Star would pay a portion of the cost of replacing pet-damaged carpet. As set forth below, the Government's position violates the lease and runs contrary to the parties' prior course of

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dealing. Accordingly, the Court should enter summary judgment in North Star's favor on the issue of carpet replacement and depreciation. A. The Plain Language of the Lease Supports North Star's Position on Carpet Replacement and Depreciation

As established in the discussion of fire damage, the lease states that damages "which are beyond normal wear and tear and are caused by the Government or an occupant, his dependents, or invited guests, which are not corrected by the Government or occupant, shall be repaired by the Developer. The cost of such repairs shall be billed to the Government." Pl. App. at 30 § C.1.(s). Moreover, pursuant to the U.S. Army Alaska's Army Family Housing Policy,"[p]et damage is never considered `fair wear and tear' and residents will be held financially liable for government efforts to reclean and/or replace carpeting, other building components, and areas outside damaged by pets." Fischer Aff. ¶ 15, Ex. 17. Nowhere in the lease is there any mention of a depreciatio n schedule being applied to replacement items. Rather, when an item such as carpet requires replacement because an occupant's pet destroys it, the Government is contractually obligated to bear the entire cost of that replacement. Moreover, this Court has already found that the Government's imposition of a depreciation schedule is not supported by the plain language of the lease. 5 Order at 5-7, Pl. App. at 112-114. Because there is no question about the absence of a depreciation schedule from the lease, and because the lease clearly allocates the financial burden of occupant caused damages to

In its Order on Summary Judgment, the Court also dispensed with the Government's argument that Missouri Baptist Hospital v. United States, 555 F.2d 290 (Ct. Cl. 1977) is controlling in the case at bar. See Order at 5-6, Pl. App. at 114-115. Missouri Baptist and its progeny do not address situations, as here, where the contract itself resolves the issue of which party bears the cost of replacement or repair. Moreover, the Missouri Baptist line of cases deal with damages owed at the termination of the lease, where lessors could receive a windfall if they recovered the full cost of repair. In the case at bar, North Star is replacing carpet during the lease term with new carpet, and thus there is no windfall to North Star if the Government pays it the full cost of such replacement. The Court also dispensed with the Government's argument that WDC West Carthage Associates v. United States, Docket No. 00-622 (Fed. Cl. 2002) impacts the analysis here. See Order at 6-7, Pl. App. at 116-17.

5

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the Government, Count IV raises purely questions of law that should be resolved by summary judgment. See P.R. Burke Corp. 47 Fed. Cl. at 345; Crown Laundry, 29 Fed. Cl. at 515. B. Even Assuming Arguendo That the Lease is Ambiguous, the Parties' Prior Course of Dealing Warrants Summary Judgment in Favor of North Star on Count IV

As set forth above, the lease is silent as to depreciation, and clear that the Government must pay for occupant-caused damage, and thus the Government's unilateral imposition of a depreciation schedule violates the lease and warrants summary judgment in favor of North Star on Count IV. However, even assuming arguendo that the lease is ambiguous as to carpet depreciation, summary judgment is still appropriate in light of the parties' prior course of dealing and longstanding interpretation of the lease. See Max Drill, Inc., 427 F.2d 1233 at 1240; Baltimore Contractors, 12 Cl. Ct. at 341; see also Order on Summary Judgment at 7, Pl. App. 114. In its Opposition to the Government's Motion for Summary Judgment, North Star appended conclusive documentary evidence showing that imposition of a depreciation schedule constituted a change in Go vernment conduct, and that the Government previously paid the full cost of replacing occupant damaged carpet (all the while awarding maximum to near- maximum incentive fees to North Star). See Plaintiff's Opposition at 18, Pl. App. at 74. For example, North Star appended a July 9, 1997 memorandum from the Government stating that "[e]ffective immediately, all charges for damages to carpet will be figured using a ten (10) year life expectancy in ALL housing areas." Fischer Aff. ¶ 16, Ex. 19. This memorandum leaves no doubt that the depreciation of carpet requiring replacement due to occupant damage constituted a change in the Government's conduct that did not take effect until 1997, nine years after the effective date of the lease. Indeed, North Star's immediate response stated that the memo randum

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was that a "complete change in policy which has been in force since the project was complete many years ago." Fischer Aff. ¶ 16, Ex. 20. North Star also included part of a transcript from an evaluation meeting he ld on October 15, 1997 in which Colonel Brown, on behalf of the Government, stated that he and his attorneys were "going to come up with a depreciated schedule" and would "figure out some way to deduct that from [North Star's] pay." Id. ¶ 17, Ex. 21. In addition, North Star's Opposition Brief included portions of work authorization spreadsheets from 1994 and 1995 that North Star maintains in the ordinary course of business showing that the Government issued work authorizations for the replacement of pet and occupant-damaged carpet. Id. ¶ 15, Ex. 16; Plaintiff's Opposition at 18, Pl. App. at 74. Moreover, North Star append ed a transcript from a prior hearing in this case in which Government counsel admits on the record that the Army is required to pay the full cost of replacing pet-damaged carpet when the carpet otherwise has a remaining useful life. Pl. App. at 123-126. The Opposition Brief also included an affidavit from carpet expert, Lewis Migliore, attesting to the fact that properly- maintained carpet of the type used at Birchwood Homes has an indefinite useful life. Affidavit of Lewis Migliore ¶ 5; Plaintiff's Opposition at 17, Pl. App. at 73.6 Nowhere in any of its reply briefing did the Government refute Mr. Migliore's testimony. The Government has not ­ and indeed, cannot ­ dispute that for the first nine years that the Lease was in effect, it did not interpret the lease to include a depreciation schedule, and did not depreciate items requiring replacement. Accordingly, even assuming arguendo that the lease is ambiguous with respect to depreciation of carpet, in light of the parties' prior course of dealing

6

The identical affidavit of Mr. Migliore is submitted herewith in support of the instant motion for summary

judgment.

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and longstanding interpretation of the lease, the Court should enter judgment in favor of North Star on Count IV. V. The Court Should Enter Judgment in Favor of North Star on Count VII Under the lease, incentive fee award decisions "will be determined on an annual basis by a board composed of three (Army) Officers or civilian personnel who will evaluate the Developer's performance over the preceding twelve month period . . . [and] make a determination within 60 days after the end of the period to grant all, some, or none of the incentive fee award." Pl. App. at 55 § H.4 (emphasis added). As illustrated by the incentive fee chart, supra at 4, related correspondence, and facts presented herein, the Army's incentive fee award decisions for the year 1995 through the year 1998 were based on its own changed and unsupportable interpretations of the lease and not on North Star's performance, which has not changed from the previous years in which it received maximum incentive fee awards. 7 Indeed, the Government's own letters to North Star respecting incentive fee awards attribute the 1995 reduction to refuse collection and downtime issues, the 1996 reduction to downtime, the 1997 reduction to replacement and depreciation, and the 1998 reduction to downtime. Fischer Aff. ¶ ¶ 11, 13, 15, 19, Ex. 12, 13, 18, 22. The Government takes the position that the lease gives it unfettered discretion in making incentive fee determinations, based on language that "the Government, at its option, may pay the Developer an incentive fee . . . for the period of time for which the Developer's performance of
7

The incentive fees awarded by the Army began to decline after the 1995 Settlement Agreement and continued to decline in subsequent years when the Army unilaterally imposed a depreciation schedule for petdestroyed carpet, refused to pay for occupant-caused fire damage, and demanded that North Star perform change of occupancy maintenance in three days regardless of the number of units requiring maintenance. From 1990 until 1994, while the Government was paying for pet-damaged carpet and calculating turnaround time to provide North Star with three working days to perform change of occupancy maintenance multiplied by the number of units released, it awarded North Star 100 % incentive fee awards. In addition, the Government previously paid for occupant-caused fire damage while awarding North Star maximum incentive fee awards. Fischer Aff. ¶ 6, Ex. 4-5.

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the obligations and responsibilities contained herein are [sic] evaluated . . ." Pl. App. at 4 Art. VIII (emphasis added); Government's Motion for Summary Judgment at 22, Pl. App. at 67. The Court has already questioned the wisdom of this interpretation, finding that "it is less than clear whether the contract affords the Army unbridled discretion in awarding incentive fees." Order at 8, Pl. App. at 115. Moreover, the case relied on by the Government in which the court interpreted contract language that "rents shall be adjusted, at the Government's option, either [by one of two methods]" to give the Government unbridled discretion with respect to rent adjustments was reversed by the Federal Circuit, which found that the contract gave the Government an option on how to make a rent adjustment, but not on whether to make an adjustment at all. See Brighton Village Assoc. v. United States, 31 Fed. Cl. 324 (1994), rev'd in part, 52 F.3d 1056 (Fed. Cir. 1995); Pl. App. at 67. Here, too, the contract clearly constrains the Government's conduct with respect to incentive fee awards, and designates North Star's performance, and not the Government's whim, as the barometer for incentive fee decisions. See Pl. App. at 4, 55, Art. VIII, § H.4. The lease does not permit the incentive fee board to reduce and eliminate payme nts based on wholesale and erroneous changes in the Government's lease interpretations, particularly when a portion of North Star's compensation over the nineteen-and-a-half- year lease term is derived from performance-based annual incentive fee awards of up to five percent of the annual maintenance rent. Pl. App. at 55 § H.4. Accordingly, this Court should enter summary judgment in favor of North Star, declaring that the lease requires incentive fee award decisions to be based upon North Star's performance during the evaluation period, as accurately measured in accordance with the requirements and terms of the lease. 8

To the extent this Court enters judgment in North Star's favor on the issues of fire damage, refuse collection, turnaround time, and/or carpet depreciation, such judgment will be predicated on a finding that North

8

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CONCLUSION For all the reasons stated above, North Star seeks a declaration and summary judgment that (1) the Government is financially responsible for occupant-caused fire damage, and reimbursement of all costs North Star has incurred in repairing occupant-caused fire damage, plus interest, and costs, attorneys' fees, and such other relief as the Court deems necessary; (2) North Star may collect refuse once weekly, with deposit at the Fort Wainwright landfi