Free Proposed Findings of Uncontroverted Fact - District Court of Federal Claims - federal

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

No. 98-168 C Judge Francis M. Allegra

PLAINTIFF'S PROPOSED FINDINGS OF UNCONTROVERTED FACT Pursuant to Rule 56 of the Rules of the United States Court of Federal Claims ("RCFC"), and in support of its Motion for Summary Judgment, plaintiff North Star Alaska Housing Corporation ("North Star") submits the following proposed findings of uncontroverted fact: 1. On November 6, 1987, the Department of the Army entered into a lease

agreement whereby the Government leased 400 housing units from North Star Alaska Housing Corporation ("North Star") that North Star had developed on Fort Wainwright, Alaska. Plaintiff's Appendix ("Pl. App.") at 1. 2. The lease, in its maintenance annex, defines the term "Developer" as "[t]he party

who is conveying real property to the United States Government by lease." Pl. App. at 23 § B.9. 3. The lease provides:

Damage 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, or 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 . . . Repair of damages which occur to the units or other improvements that cannot be attributed to the Government, his agents, officers, occupants, their dependents, or invited guests shall be accomplished by the Developer at no cost to the Government. (Emphasis added.) Pl. App. at 30 § C.1.(s).

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4.

The lease provides that "[t]he Developer shall be responsible for all costs,

including those for relocating occupants, associated with major unforeseen unscheduled work resulting from fires, acts of God, or structural, electrical or mechanical defect." Pl. App. at 31 § C.1.(w). 5. The lease provides:

If any of the housing units or improvements are destroyed by fire or other casualty, except in the case of the negligence on the part of the occupant, the Government may, at its sole option, terminate this Lease immediately in respect to the destroyed housing unit or units, and if so terminated, no rent shall accrue to the Developer after the date of such destruction. Pl. App. at 5 Art. X. 6. The lease obligates North Star to pay and insure for "loss or damage by fire,

lightening, 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." Pl. App. at 5 Art. IX (emphasis added). 7. The lease requires North Star to "instruct his employees to report to him 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 Government's action." Pl. App. at 29 § C.1.(o)(1) (emphasis added). 8. The lease does not contain a parallel provision to Section C.1.(o)(1) the requires

the Developer to report a non-occupant caused fire to the Government.

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9.

The lease directs the Government 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). 10. The lease provides that "[t]he Developer is responsible for obtaining insurance to

protect leased facilities and equipment located within the housing site from fire and acts of God. The Developer is responsible for correcting damages resulting from fire or acts of God." Pl. App. at 31 § C.1.(x). 11. In June, 1989, when a unit fire occurred as a result of a three year old child

playing with a lighter, the Government paid the $44, 725.74 cost of repairing the unit. Affidavit of Richard W. Fischer ("Fischer Aff.") ¶ 6, Ex. 4. 12. In August, 1990, when an occupant-caused kitchen fire damaged a unit, the

Government paid the $6, 812.00 cost of repair. Fischer Aff. ¶ 6, Ex. 5. 13. In July, 1992, the Government refused to pay for a unit fire caused by a child

using matches. Fischer Aff. ¶ 7. The July, 1992 fire was the subject of a prior lawsuit between the parties, Case 93-88-C in the United States Court of Federal Claims, which was resolved by a Settlement Agreement in 1995. In that case, Judge Futey denied the Government's motion for summary judgment on the issue of fire damage because "issues of fact remain," noting that "the best evidence of contract interpretation is how the parties act under the arrangement before the dispute." Fischer Aff. ¶ 7, Ex. 6. 14. A fire occurred at 765 Bataan Court on August 23, 1996, which the Assistant Fire

Chief attributed to the occupant leaving the stove on the "on" position. Fischer Aff. ¶ 8, Ex. 7. The Government refused to reimburse North Star for the cost of repairing this unit, and the

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Contracting Officer upheld the Government's refusal in a Decision issued on October 28, 1997. Pl. App. at 75. 15. In September, 1995, North Star and the Government resolved Case No. 93-88C

through a Settlement Agreement in which North Star agreed to "assume full responsibility for refuse collection and disposal for the remainder of the lease and any extensions of the lease" with the express representation from Government counsel that North Star was required to collect trash once a week and that it was entitled to use the Fort Wainwright landfill, as the Government had done previously. Fischer Aff. ¶ 9 Ex. 1; Affidavit of John Spencer Stewart ("Stewart Aff.") ¶ 4. 16. A memorandum from Karen Goodrich, Chief of Housing at Fort Wainwright,

dated November 22, 1995, states 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." Stewart Aff. ¶ 7, Ex. 1; Fischer Aff. ¶ 10, Ex. 9. A November 22, 1995 memorandum from Colonel Kraus, the Director of Public Works, states "[t]he Army standard for adequate housing is weekly curbside trash pickup." Fischer Aff. ¶ 10, Ex. 10. However, a letter from the contracting officer, dated December 1, 1995, requires North Star to collect refuse twice weekly. Fischer Aff. ¶ 10, Ex. 11. At the Government's direction, North Star implemented twice weekly refuse collection. 17. The defendant prohibited tenants living in Birchwood Homes from depositing

bulk items at the Fort Wainwright landfill. Stewart Aff. ¶ 9. On July 7, 1997, an employee of defendant turned a Birchwood Homes resident away from the landfill, telling her to dump her bulk items on North Star's porch. All tenants were provided a three-page handout on refuse collection denigrating North Star's performance. Stewart Aff. ¶ 10 Ex. 2. 18. The lease provides that "[a]ll change of occupancy work must be completed

within three working days after the unit becomes available, which shall be determined from the

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date the unit is turned over to the Developer by the Government for change of occupancy work." Pl. App. at 39 ¶ D.7.d.(1). 19. The lease directs North Star to:

ensure that downtime while a unit has been turned over to him does not exceed the allowable down time described below . . . . (a) The total number of downtime days for units vacant for purposes of change of occupancy maintenance shall 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. For example, if there are 10 move-outs in 1 month, the total allowable downtime for that month is 30 days. Additionally, if any 5day 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. Pl. App. at 36 § § D.5 and D.5.(a). 20. The lease defines downtime as the "period of time during which a unit is vacant

and has been officially turned over to the Developer for accomplishment of required work" and states that "[f]or purposes of this lease agreement, downtime is measured in working days, vice [sic] calendar days." Pl. App. at 23 § B.10. 21. The lease provides:

Upon completion of all change of occupancy work, the developer will notify the Government of work completion and unit availability . . . The Government will conduct an acceptance inspection in accordance with C.2.(a). Upon written notification of the Government's acceptance, the time period calculated for downtime purposes will be concluded. Pl. App. at 38 § D.7.d. 22. The lease provides that "[i]f the downtime in any one month for units vacant for

purposes of change of occupancy work exceeds the allowable downtime for that month (established in accordance with clause D.5.(a)), the Government shall assess liquidated damages . . . ." Pl. App. at 55 § H.1.(d). 23. On January 28, 1998, a contracting officer interpreted the lease as providing "a

maximum occupancy downtime per unit of three days for completion after turnover by the

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Government to the Developer, if eight or less units are turned over within any given 5-day work period," contrary to years of prior practice. Pl. App. at 83. 24. In its Motion for Summary Judgment, dated April 19, 2002, the Government, 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. Pl. App. at 65-66, p. 13-14. 25. For the first nine years that the lease was in effect, turnaround time was calculated

by both North Star and the Government by totaling the number of released units and multiplying that total by three working days in order to arrive at the total available working days to perform the work; when more than eight units were released in a five work-day period, two additional days for completion times the number of units over eight were added for change of occupancy maintenance. Fischer Aff. ¶ 12. 26. An August 12, 1996 memorandum from Thomas B. Petersen, the Acting Deputy

Director of Public Works, refers to the "contractually stipulated average downtime level of 3 days per unit." Pl. App. at 122. 27. It was not until late 1996 or early 1997 that the Government informed North Star

that it had adopted a new interpretation of the provisions of the lease pertaining to downtime. Fischer Aff. ¶ 13. A memorandum from Karen Goodrich to the Corps of Army Engineers, dated April 10, 1997, requests that the Corps of Engineers office formally propose changes to the downtime provisions of the lease for, among other reasons, "clarifying other ambiguities." Pl. App. at 108. North Star's president wrote to Chief of the Real Estate Division on May 6, 1997, that the Government's newly- formed interpretation of downtime was contrary to years of prior practice. Fischer Aff. ¶ 13, Ex. 14.

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28.

In early 1998, the Government sought to modify the downtime provisions of the

lease, and presented North Star with a draft Supplemental Agreement pertaining to down time and repairs. Fischer Aff. ¶ 14, Ex. 15. North Star did not agree to execute the Supplemental Agreement. 29. The lease provides:

Damages 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). 30. U.S. Army Alaska Army Family Housing Policy states 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." Fischer Aff. ¶ 15, Ex. 17. 31. The lease defines a work authorization as an "official document issued by the

Government for the accomplishment of work by the Developer and which is used to verify entitlement for reimbur sement." Pl. App. at 26 § B.33. 32. 33. There is no depreciation schedule contained in the lease. The contracting officer issued a decision on March 26, 1998 imposing a ten year

depreciation schedule on carpet requiring replacement due to occupant-caused damage. Pl. App. at 94. 34. Work authorization spreadsheets from 1994 and 1995 show that the Government

previously issued work authorizations for the replacement of pet and occupant-damaged carpet. Fischer Aff. ¶ 15, Ex. 16.

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35.

North Star received a letter from the Government, dated July 9, 1997, 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. ¶ 15, Ex. 18. This letter reflected a complete change in policy from that which had been in force from the inception of the lease. 36. At a quarterly evaluation meeting on October 15, 1997, Colonel Brown told North

Star's President, Richard Fischer that he and his lawyers were "going to come up with a depreciated schedule" and "figure out some way to deduct that from your payments." Fischer Aff. ¶ 17, Ex. 21 37. At a hearing before Judge Bruggink on February 11, 1999, Government counsel,

Donald Kinner, stated on the record that: [i]f the primary reason to replace carpet is because of tenant damage, then it's the Army's responsibility . . . . if carpet has usable life left but for the tenant damage, well, then that would be on the Government's ­ and the Army understands that interpretation of the contract because that's what I think is the correct interpretation of the contract. Pl. App. at 123. 38. Absent excessive tenant abuse, ten-year old modern carpet such as that used at

North Star will last indefinitely if properly maintained. Affidavit of Lewis G. Migliore ("Migliore Aff.") ¶ 5. Also, pet damage, particularly pet urine on carpet, ruins carpet, regardless of the carpet's age. Migliore Aff. ¶ 6. 39. Section H.(4.) to the lease provides that: Incentive Fee Board: An incentive fee, for exceptional performance of standards contained in this annex, not to exceed 5 percent of the "Maintenance Rental", 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. The board will make a determination within 60 days after the end of the period to grant all, some, or none of the incentive award fee. The 5 percent incentive fee shall not be applied to work ordered by the Government for damages or caused by occupants as contained in C.1.(t). (Emphasis added).

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Pl. App. at 55 § H.(4.). 40. Article VIII of the lease provides that: In addition to rents stipulated in Article IV of this Lease, the Government, at its option, may pay the Developer an incentive fee not to exceed 5 percent (5%) of the maintenance rental for all housing units, for the period of time for which Developer's performance of the obligations and responsibilities contained herein are evaluated and found by the Government to substantially exceed the established standards. The amount of the incentive fee shall be determined by an Incentive Fee Board based upon the performance of the Developer in operating the Premises in accordance with its obligation. Exhibit "C" contains the provisions to establish the makeup of the Board and the procedures for determining such bonuses Pl. App. at 4 Art. VIII. 41. For the seven years prior to the 1995 settlement of Case 93-88-C, the Government

evaluated North Star's performance over the preceding 12 month period and granted North Star 100% of the available awards. Fischer Aff. ¶¶ 3-4, Ex. 2. During that time, the Government collected refuse once weekly, paid the cost of replacing occupant and pet-damaged carpet, paid the cost of repairing occupant-caused fire damage, and calculated downtime by totaling the number of released units and multiplying that total by three working days in order to arrive at the total available working days to perform the work, and when more than eight units were released in a five work-day period, two additional days for completion of change of occupancy maintenance were added for each unit in excess of eight. It was only after the Government changed its interpretation of the lease with respect to those issues that the incentive fees were diminished and then eliminated altogether. 42. A $56, 943.50 incentive fee award for North Star's 1995 performance was

$10, 674.15 below the maximum award amount because of the refuse collection and downtime issues. Fischer Aff. ¶ 11, Ex. 12. A $39, 000.00 incentive fee award for North Star's 1996

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performance was $19, 835.80 below the maximum amount, because of occupancy turn around time under the government interpretation. Fischer Aff. ¶ 13, Ex. 13. A $21, 272.00 incentive fee award for North Star's 1997 performance was $38, 699.35 below the maximum because, it is believed, of the carpet replacement issue. Fischer Aff. ¶ 15, Ex. 18. The incentive fee awarded by the Army in 1998 was $3, 730.00 out of a possible $60, 867.35, due to turnover time for units. Fischer Aff. ¶ 19, Ex. 22.

Respectfully submitted,

s/ Paul W. Killian ____________________________________ PAUL W. KILLIAN Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1333 New Hampshire Ave., N.W. Washington, D.C. 20036 (202) 887-4000

March 28, 2003

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CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing Plaintiff's Proposed Findings of Uncontroverted Fact was served electronically this 28th day of March, 2003, on:

Donald E. Kinner, Esq. Assistant Director Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Attorney for Defendant

s/ Paul W. Killian _________________________ Paul W. Killian

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