Free Motion to Strike - District Court of Federal Claims - federal

Case 1:01-cv-00046-FMA

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

) ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. )

CUYAHOGA METROPOLITAN HOUSING AUTHORITY,

CONSOLIDATED CASE NOS. 01-46C, 01-251C AND 01-416C JUDGE ALLEGRA

MOTION TO STRIKE DECLARATION OF DENNIS G. MORTON

Plaintiff, the Cuyahoga Metropolitan Housing Authority, respectfully moves the Court to strike the Declaration of Dennis G. Morton pursuant to RCFC 56(e). As more fully explained in the attached Memorandum in Support, Morton's Declaration is not based on personal knowledge, is speculative, and renders conclusions on matters outside of his perception.

Dated: March 5, 2004

/s/ Fred J. Livingstone____________ Fred J. Livingstone (0009528) [email protected] TAFT, STETTINIUS & HOLLISTER LLP 3500 BP Tower 200 Public Square Cleveland, Ohio 44114-2302 (216) 241-2838 (216) 241-3707 (facsimile) Attorney for Plaintiff

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Of Counsel: Mark J. Valponi (0009527) Majeed G. Makhlouf (Ohio No. 0073853; District of Columbia No. 481643) TAFT, STETTINIUS & HOLLISTER LLP 3500 BP Tower 200 Public Square Cleveland, Ohio 44114-2302 (216) 241-2838 LaVerne Nichols Boyd (0009279) CUYAHOGA METROPOLITAN HOUSING AUTHORITY 1441 West 25th Street Cleveland, Ohio 44113-3101 (216) 348-5000 (216) 348-4925 (facsimile)

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS CUYAHOGA METROPOLITAN HOUSING AUTHORITY, ) ) ) Plaintiff, ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. ) CONSOLIDATED CASE NOS. 01-46C, 01-251C AND 01-416C JUDGE ALLEGRA

MEMORANDUM IN SUPPORT OF MOTION TO STRIKE

The Court should strike the Declaration of Dennis G. Morton in its entirety. RCFC 56(e) unequivocally provides that any affidavit submitted in support or opposition to a motion for summary judgment "shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Here, Morton's

Declaration is not based on personal knowledge, is speculative, and renders conclusions on matters outside of his perception. Morton admits that he did not obtain or even review the other HUD-assisted projects in the Cleveland metropolitan area; instead, he reviewed a list of nine HUDassisted projects in the "Cleveland metropolitan area" that were exclusively selected by an undisclosed number of his colleagues. (Morton Decl., ¶ 5.) In fact, although Morton may have provided his colleagues with factors (building type, size, date of completion and location) to consider in selecting the buildings, he failed to specify the acceptable deviations that would make a building comparable and entirely left that determination to the unfettered discretion of his colleagues. (Id.)

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Although Evid.R. 701 permits a lay witness to render an opinion or inference, it expressly limits such opinions and inferences to those which are "(a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702." In Sowell v. Butcher & Singer, Inc., 926 F.2d 289 (3d Cir. 1991)--a class action securities litigation action--the plaintiff bore the burden of proving the difference between the price at which the class members purchased IGE stock and the "true value" of the same stock. The plaintiff ("Sowell") failed to put forth direct evidence of the purchase price paid by each individual shareholder, and instead obtained his information from the IGE transfer reports and the Butcher & Singer quarterly reports, which "summarized the quantity of the IGE stock sold through Butcher & Singer and the price paid on a particular day." Id. at 298. Sowell explained his methodology as follows: Well, it's a common sense approach because what you want to do is to go through the documents that are the stock transfer ledger which represents shares being transferred on the ledger books. You want to eliminate every possible person that you can identify and eliminate as not a member of the class. Now, I have to get, you know, my attorneys and different people to help me in order to do this properly, but I personally did this. I went through every ledger entry in these two documents and made this determination. Id. Although Sowell was personally involved in every single determination, the Court of Appeals affirmed the district court's exclusion of his testimony because the opinions and inferences that Sowell drew from the IGE transfer records were based on more than his own perceptions--i.e., assistance received from his attorneys in making the exclusion determinations. Id. at 299. Here, Morton did not merely seek assistance

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from his unnamed colleagues in selecting the "comparable" buildings.

Instead, he

completely delegated the entire selection task to their unfettered discretion. (Morton Decl., ¶ 3.) Morton's opinion is therefore inadmissible as it is not based on his own personal perceptions and must be stricken by the Court. See Hartzell Mfg., Inc. v. Am. Chem. Tech., Inc., 899 F. Supp. 405, 409 (D.Minn. 1995) (a lay witness's opinion testimony "must be based upon his or her personal perceptions and, unavoidably, those perceptions must be a type that are admissible in evidence"). As a lay witness, Morton cannot testify to hypothetical facts or circumstances, and he cannot be shown records upon which he can formulate an opinion. Hartzell Mfg., Inc., 899 F. Supp. at 409. Morton, nonetheless, unequivocally admits that the survey upon which he relies in rendering his opinion was conducted exclusively for the purposes of this litigation and that HUD did not perform a market analysis during the relevant time period. (Morton Decl., ¶ 3.) Morton's Declaration is therefore nothing more than an act of conjecture upon which the Court cannot rely in considering the parties' respective motions for summary judgment. This Court and the U.S. Court of Appeals for the Federal Circuit have repeatedly reaffirmed that conclusory and speculative affidavits/declarations do not raise an issue of fact and cannot be relied upon in ruling on motions for summary judgment. See, e.g., Young-Montenay, Inc. v. United States, 15 F.3d 1040, 1043 (Fed.Cir. 1994); Myers Investigative and Security Serv., Inc. v. United States, 47 Fed. Cl. 605, 617 (Ct. Cl. 2000). In fact, one of the buildings selected by Morton's colleagues is in Akron in Summit County and another one is in Canton in Stark County. (Morton Decl., ¶ 3) As HUD itself has always recognized, Cleveland, Akron, and Canton are separate markets

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for purposes of Section 8 Housing, with divergent fair market rents.

In fact, each year

HUD issues a final rule in the Code of Federal Regulations pertaining to the fair market rents (FMRs) for the Section 8 Housing Assistance Payments Program. See 24 CFR Part 888 (copies of which attached hereto as Exhibit A for the years 1995-2001). For the Court's convenience, the table below is extracted from the attached CFR sections for the years 1995-2001--the years utilized in Morton's Declaration (Morton Decl., ¶ 9): Year Cleveland Akron Canton (1 BR) (1 (1 BR) BR) 405 390 338 412 397 346 422 406 354 434 418 363 480 432 370 500 450 375 555 469 380 Difference between Cleveland and Akron 15 15 16 16 48 50 86 Difference between Cleveland and Canton 67 66 68 71 110 125 175

1995 1996 1997 1998 1999 2000 2001

According to HUD's own published calculations, the difference between the Cleveland and Canton FMRs ranged between $67 and $175 in the years 1995 and 2001, and the difference between the Cleveland and Akron FMRs ranged between $15 to $86 for the same years. Morton conveniently ignores this fact in arbitrarily averaging the numbers between Cleveland, Cleveland Heights, Akron, and Canton in his declaration and utilizing the arbitrary average as a standard to use against CMHA's numbers in Cuyahoga County. (Morton Decl., ¶ 5.) More strikingly, HUD's own figures unequivocally show the existence of substantial annual increases in rents within the same locality. In Cleveland, the FMR for one bedroom increased from $405 in 1995 to $555 in 2001, a difference of $150 per apartment. Morton, nonetheless, failed to perform a market analysis for each year in question. Instead, he averaged figures from the other projects for the years 1995-2001,

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and then compared this average figure against CMHA's figures for a particular year. (Morton Decl., ¶ 8.) 1 As such, even if the Court were to presume, solely for the sake of argument, that Morton's Declaration is not deficient on the grounds stated above, the Declaration is clearly irrelevant and has no probative value since it utilizes the wrong test. The question would not have been whether there was a material difference

between CMHA's figures for a particular year and an abstract average figure, but whether such a material difference existed for a particular year in question. Had HUD conducted a market analysis in 1996 in accordance with the 1986 Memorandum, for instance, it simply could not have utilized the figures for the years 1997-2001, which were nonexistent a t the time. Clearly, the Morton Declaration presents a hypothetical description of how the 1986 Memorandum would have been interpreted and implemented from 1995-2001 with respect to the three projects at issue. There is no testimony that the 1986

Memorandum, and particularly the operating expense aspect of it, was ever implemented on any project in the Cleveland area during that time frame. If in fact the 1986 Memorandum operating expense methodology had been used as described on dozens of other requests for rent increases, then certainly the methodology used would be relevant. No such testimony has been provided as to how HUD has implemented the 1986 Memorandum in the real world. Clearly, the Morton Declaration contains hypothetical and, therefore, inadmissible statements as to the 1986 Memorandum.

1

If that were not enough, Morton admits that he failed to use actual operating expenses in his Declaration. Instead, Morton invented an "imputed expense" by subtracting the debt service on a project from the total rental revenues. (Morton Decl., ¶ 8.)
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The Morton Declaration also gives no explanation of how the Plaintiff's Contract Rents were increased from 1986 through 1994. Review of the Plaintiff's records for those anniversary y ears reveals that Plaintiff received AAAF increases for every year and for each project 2 except for Quarrytown in 1988. For the 1988 anniversary year HUD denied the full adjustment for Quarrytown for the reason that the fully adjusted rent would materially exceed comparable rents for unassisted units in the area. See Exhibit B attached. The explanatory attachments show that HUD never utilized the operating expense calculation, but limited the rent to the sum of comparable rent plus the initial difference. Id. No material difference factor was applied. Id. In any case, it is clear that the operating expense aspect of the 1986 Memorandum was not used by HUD in connection with the Plaintiff's 1986 through 1994 rent adjustments. For all of the foregoing reasons, the Court should strike Morton's Declaration in its entirety. Respectfully submitted, Dated: March 5, 2004 /s/ Fred J. Livingstone______________ Fred J. Livingstone (0009528) [email protected] TAFT, STETTINIUS & HOLLISTER LLP 3500 BP Tower 200 Public Square Cleveland, Ohio 44114-2302 (216) 241-2838 (216) 241-3707 (facsimile) Attorney for Plaintiff
2

Not all letters from the HUD Cleveland Office notifying the Plaintiff of the applicable factor and the rent increase for each project for each year were available. However, where there were gaps, the HUD advised Contract Rent before the gap multiplied by the appropriate AAAFs for the missing years arrived at the HUD advised Contract Rent on the other side of the gap.
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Of Counsel: Mark J. Valponi (0009527) Majeed G. Makhlouf (Ohio No. 0073853; District of Columbia No. 481643) TAFT, STETTINIUS & HOLLISTER LLP 3500 BP Tower 200 Public Square Cleveland, Ohio 44114-2302 (216) 241-2838 LaVerne Nichols Boyd (0009279) CUYAHOGA METROPOLITAN HOUSING AUTHORITY 1441 West 25th Street Cleveland, Ohio 44113-3101 (216) 348-5000 (216) 348-4925 (facsimile)

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CERTIFICATE OF SERVICE The foregoing Motion to Strike Declaration of Dennis G. Morton was filed electronically with the Court on March 5th, 2004, with notice of this filing being sent to all parties by operation of the Court's electronic filing system.

/s/ Fred J. Livingstone______________ Fred J. Livingstone

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