Court Opinion

ID: 820887
Source: CourtListenerOpinion
Date Created: 2013-02-20 14:51:09.411561+00
Date Added: 2024-06-11T15:30:02.029085
License: Public Domain

In the United States Court of Federal Claims
                                                No. 93-655 C
                                         (Filed: February 19, 2013)

************************************
                                                    *
ANAHEIM GARDENS, et al.,                            *        Reconsideration; Low-Income Housing;
                                                    *        Preservation Statutes; ELIHPA; LIHPRHA;
                          Plaintiffs,               *        Summary Judgment; Affordability
                                                    *        Restrictions; Prepayment; Futility; Ripeness
        v.                                          *
                                                    *
THE UNITED STATES,                                  *
                                                    *
                          Defendant.                *
                                                    *
************************************

Harry J. Kelly, Nixon Peabody LLP, Washington, D.C., for Plaintiffs.

David A. Harrington, Commercial Litigation Branch, Civil Division, United States Department
of Justice, Washington, D.C., for Defendant.

                                                  OPINION

DAMICH, Judge:

       On cross-motions for summary judgment on ripeness regarding Plaintiffs‟ claim that the
Government has effected a taking of their claimed contractual right to prepay government-
insured mortgages on low-income housing, this Court, in September 2012, granted summary
judgment in part to Defendant and denied summary judgment to Plaintiffs. Anaheim Gardens v.
United States, 107 Fed. Cl. 404 (2012).1

        Plaintiffs have moved the Court to reconsider both actions.

       The Court finds in retrospect that it construed too narrowly the scope of the Proposed
Findings of Uncontroverted Fact that accompanied Plaintiffs‟ motion for summary judgment.
Having in fact proffered its expert‟s calculations to show that the properties in question could not
have been granted prepayment approval under the terms of the Preservation Statutes, Plaintiffs
properly made out a prima facie case for summary judgment. The burden of production

1
  See also Algonquin Heights v. United States, No. 97-582 C (Fed. Cl. Sept. 26, 2012) (order on summary
judgment).
therefore shifted to Defendant to “set forth specific facts to show that there was a genuine issue
of material fact in the case.” In Re Cygnus Telecommunications Tech., LLC, Patent Litigation,
536 F.3d 1343, 1356 (Fed. Cir. 2008). Because Defendant, however, failed to rebut or controvert
Plaintiffs‟ expert‟s calculations, the Court finds summary judgment warranted in favor of
Plaintiffs and accordingly grants Plaintiffs‟ motion for reconsideration.

       Plaintiffs also seek reconsideration of the Court‟s grant of partial summary judgment to
Defendant. Plaintiffs‟ expert employed three tests to demonstrate that the properties in question
were “prepayment ineligible.” The Court discounted the third test as “unproven” and
unconvincing (“lacking the indicia of facts of the kind that led the Federal Circuit to remand this
inquiry to the trial court,” Anaheim Gardens, 107 Fed. Cl. at 420). The Court, however, granted
summary judgment to Defendant with respect to whichever properties, if any, “which do not
meet either of the first two tests of” the expert‟s calculations. Id. at 422. Per a Joint Status
Report filed pursuant to a court order subsequent to the summary judgment opinion in this case,
the Government identified five such properties,2 that is, five properties as to which Plaintiffs‟
expert was unable to conclude were “prepayment ineligible.” The Court denies Plaintiffs‟
motion for reconsideration respecting these properties.

    I.       Standard for Reconsideration

        Pursuant to Rule 59(a)(1) of the Rules of the Court of Federal Claims (“RCFC”), a party
may file a motion to reconsider a prior decision by the Court. RCFC 59(a)(1). The decision to
grant the motion rests within the sound discretion of the Court. See Yuba Natural Res., Inc. v.
United States, 904 F.2d 1577, 1583 (Fed. Cir. 1990). The Court must exercise extreme care in
deciding such a motion. A.A.B. Joint Venture v. United States, 77 Fed. Cl. 702, 704 (2007).
“The moving party must support its motion for reconsideration by a showing of exceptional
circumstances justifying relief, based on a manifest error of law or mistake of fact.” Id.
Specifically, “[t]he motion must have one of the following bases: (1) an intervening change in
controlling law has occurred; (2) previously unavailable evidence is now available; or (3)
reconsideration is necessary to prevent manifest injustice.” Id. The Court will deny a motion for
reconsideration if a party uses it “merely as an opportunity to re-litigate issues already decided
by the court.” Shell Petroleum, Inc. v. United States, 47 Fed. Cl. 812, 814 (2000).

    II.      Discussion

        With their motion for summary judgment on ripeness, Plaintiffs had submitted deposition
testimony and declarations by the property owners attesting to their conclusions that it would
have been futile to have expended time and resources seeking prepayment approval. In addition,
Plaintiffs proffered the report of their expert, David A. Smith, to substantiate the owners‟
conclusions regarding futility. See Report on Prepayment Ineligibility Under the Emergency
Low Income Housing Preservation Act of 1987 and the Low Income Housing Preservation and
Resident Homeownership Act of 1990 (“Smith Report”), Pls.‟ App. 397.

2
  Three of the properties are featured in this case – Deanswood Apartments, Hardee Street Apartments, and Person
Court Apartments; two properties – Carriage House of Muskegon and Carriage House South – are found in the
companion case of Algonquin Heights v. United States, No. 97-582 C (see, e.g., Joint Status Report, docket # 154,
Oct. 16, 2012).

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       Using the “Windfall Profits Test” (“WPT”) developed in 1992 by the United States
Department of Housing and Urban Development (“HUD”) as a proxy for prepayment eligibility,
Mr. Smith presented data and calculations to show that none of the properties in question could
have been granted prepayment approval by HUD under the terms of the Preservation Statutes.

        Defendant raised three arguments against the Smith Report. First, it asserted that courts
should not accept expert testimony with respect to ripeness and that Mr. Smith was not qualified
to offer an opinion concerning prepayment under the statutes. This court, however, rejected
Defendant‟s challenge to Mr. Smith‟s qualifications to offer his expert opinion. Anaheim
Gardens, 107 Fed. Cl. at 416. “Accordingly, the court will thus examine Mr. Smith‟s report to
determine the extent to which it is based on facts and logical correlations that may serve as a
foundation for Plaintiff‟s burden to demonstrate futility to a reasonable certainty.” Id.

         The Government also objected to the Smith Report on the grounds that the WPT was
neither intended nor used by HUD to evaluate plans of action to prepay, but rather as a test for
eligibility for financial incentives for a property to forego prepayment and remain under the
affordability restrictions. Further, the Government argued that Mr. Smith did not even apply the
WPT specifically as promulgated by HUD.

         In its analysis, the court observed that “it is far from definitive that eligibility for
incentives and prepayment were mutually exclusive.” Id. at 421. Despite, however, Defendant‟s
challenge to “Plaintiffs‟ equating the WPT and prepayment criteria tests, Mr. Smith‟s
„replication‟ of the WPT tests, and the relevance of Mr. Smith‟s self-created third test,” the court
also noted that Defendant “ha[d] not disputed the accuracy of either the ratio per project of FMR
to income in test one of Mr. Smith‟s analysis or the ratio of market rent to (trended) affordable
rent in test two of his analysis.” Id. The court found, to the contrary, that Mr. Smith‟s data,
“although presented in the context of the WPT rather than directly as evidence regarding the
prepayment criteria, is strikingly akin to the data that was found by the Federal Circuit sufficient
to demonstrate futility in Cienega VI.”3 Id.

        The court denied summary judgment to Plaintiffs, however, even though Defendant had
not specifically controverted Mr. Smith‟s data, because it determined that Plaintiffs had “not
proffer[ed] these calculations themselves in their proposed findings of uncontroverted facts.” Id.
Thus, Defendant had “not been fully called upon to dispute them via responses to proposed
findings of uncontroverted fact.” Id.

       In their motion for reconsideration, Plaintiffs argue that the Court‟s determination that the
Smith Report calculations had not specifically been raised is both factually incorrect and leads to
a manifestly unjust conclusion.

       The Court then must review the manner in which, and extent to which, Plaintiffs raised
the Smith Report calculations in support of their futility/ripeness argument. An illustrative
example can be found in ¶ 11 of Plaintiffs‟ Proposed Findings of Uncontroverted Fact, Docket
No. 286. With respect to 100 Centre Plaza, Plaintiffs asserted: “The owners‟ conclusion that it
3
    Cienega Gardens v. United States, 265 F.3d 1237 (Fed. Cir. 2001).

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was futile to seek HUD‟s approval for a prepayment of 100 Centre Plaza‟s mortgage is
confirmed by Plaintiffs‟ expert. PA 0378-0410 at 0380, 0390, and 0392.” The citations were to
Plaintiffs‟ Appendix. The entire Smith Report comprised pages 378 to 410 of the Appendix.
The additional, individual page citations were to the Smith Report summary, Mr. Smith‟s
“Algorithmic Test # 2 (whether there was an excess of supply of affordable housing over
demand in the relevant housing market), and Mr. Smith‟s “Step 3” (“documentary evidence of
HUD‟s acceptance” regarding processing for financial incentives).

        In Response to that proposed finding of fact, Defendant contested Mr. Smith‟s
qualifications as an expert, termed Mr. Smith‟s approach utilizing the WPT as “fundamentally
flawed” (“The outcome of the Windfall Profits Test did not determine whether the project owner
would be allowed to prepay pursuant to either ELIHPA or LIHPRHA”), and critiqued Mr. Smith
for having devised “his own approach” (“Mr. Smith does not even apply the Windfall Profits
Test that HUD promulgated as an interim guideline in April 1992”). Docket No. 293.

        As Plaintiffs point out, however, on reconsideration, they did indeed proffer particular
calculations for their properties by specifically referencing the Smith Report in their proposed
finding of fact. The Court found the calculations persuasive: “strikingly akin to the data” that
passed muster at the appellate level in Cienega VI. Anaheim Gardens, 107 Fed. Cl. at 422.
Accordingly, Plaintiffs argue that “the Government not only had the opportunity to, but it had an
obligation to, respond to these calculations.” Pls.‟ Mot. for Recons. at 5.

         In opposing reconsideration, the Government asserts that Plaintiffs‟ proposed finding of
fact, i.e., that the owners‟ conclusion was “confirmed by Plaintiffs‟ expert,” was itself no more
than a conclusory assertion and did not constitute the proffer of specific calculations. Def.‟s
Resp. to Pls.‟ Mot. for Recons. at 3. “[T]he calculations were not set forth in plaintiffs‟ proposed
findings of fact.” Id. Defendant again questions the expert qualifications of Mr. Smith. In
addition, Defendant noted that it had submitted the declaration of Mr. Kevin J. East, former
Director of the Preservation Office of the Preservation Division, Office of Multifamily Housing
Preservation and Property Disposition, attesting that HUD‟s ultimate decision whether an owner
could prepay “would depend upon numerous factors” and was a complex analysis. It further
argued that it had challenged Mr. Smith‟s methodology, “which necessarily raises genuine issues
of material fact.” Id. at 5. Defendant also asserts that “[s]hortcomings in Mr. Smith‟s approach
would have been addressed in greater detail by the United States if plaintiffs‟ proposed findings
had not been stated in such conclusory terms.” Id. at 4. For example, in opposing
reconsideration, it indicates it would have challenged Mr. Smith‟s use of Metropolitan Statistical
Area (“MSA”) data (“Mr. Smith provides no basis for concluding that HUD would have used
unadjusted MSA data – to analyze whether to permit prepayment”). Id.

       The Court finds on reconsideration, contrary to its determination on the summary
judgment motions, that Plaintiffs‟ proposed finding of fact did indeed reference and thus proffer
the Smith Report and, in particular, calculations and data respecting prepayment eligibility.
Thus, in the context of Plaintiffs‟ motion for summary judgment under Rule 56 of the Rules of

                                                -4-
the Court of Federal Claims (“RCFC”),4 the Court further finds that Plaintiffs properly met their
prima facie burden of showing the absence of genuine issues of material fact and entitlement to
judgment as a matter of law.

        Under summary judgment, “[i]f a showing is made that would entitle the movant to
judgment unless contradicted,” the burden shifts to the nonmovant to set forth specific facts to
show that there is a genuine, material issue for trial. Cable Elec. Products, Inc. v. Genmark, Inc.,
770 F.2d 1015, 1022 (Fed. Cir. 1985), overruled on other grounds by Midwest Indus., Inc. v.
Karavan Trailers, Inc., 175 F.3d 1356, 1358-59 (Fed. Cir. 1999) (en banc). “Indeed, this „shift
of burden and the duty to come forward with possible contradiction of proof is the essence of”
summary judgment. Id. (quoting DeLong Corp. v. Raymond Int’l, Inc., 622 F.2d 1135, 1144 (3d
Cir. 1980)). If the opposing party fails to respond or properly address the moving party‟s
assertion of fact, the court may consider the fact undisputed or grant summary judgment “if the
motion and supporting materials – including the facts considered undisputed – show that the
movant is entitled to it.” RCFC 56(e)(2). See Macy Elevator, Inc. v. United States, 97 Fed. Cl.
708, 721 (2011).

         The question, then, is whether Defendant met its countervailing burden “to set forth
specific facts.” See, e.g., In Re Cygnus Telecommunications, 536 F.3d at 1356 (holding that,
once the movant presented evidence sufficient to an essential element of its case, “the burden of
production” fell on the nonmovant to set forth specific facts showing a genuine issue of material
fact in the case); Pine Ridge Coal v. Local 8377, United Mine Workers, 187 F.3d 415, 421 (4th
Cir. 1999) (affirming magistrate judge‟s grant of summary judgment to plaintiff where defendant
failed to offer evidence rebutting plaintiff‟s calculation of coal mine‟s daily fixed costs).

        Given this Court‟s determination that the data presented by Plaintiffs in the Smith Report
was comparable to the data found sufficient in Cienega VI, the burden of production therefore
shifted to Defendant to controvert that data by a showing of “specific facts.”

         Defendant vigorously contested Mr. Smith‟s use of the WPT as a proxy for prepayment
eligibility under the Preservation Statutes, and disputed that Mr. Smith had even accurately
employed the WPT in any event. In addition, Defendant presented the declaration of Mr. East
that HUD would conduct a complex analysis of a plan of action to prepay and its decision would
depend on “numerous factors.” Nevertheless, as the Court explicitly noted in its decision
denying summary judgment to Plaintiffs, what was lacking in Defendant‟s opposition was any
specific contradiction of the data in Mr. Smith‟s calculations. The arguments that Defendant
raised in opposition to Plaintiffs‟ motion for summary judgment are off-point, however, with
respect to the Smith Report calculations.

        It is less important whether the WPT was intended as a test for financial incentives rather
than for prepayment approval, than whether the calculations themselves that Mr. Smith
employed in the course of utilizing the WPT demonstrated that the properties did not meet the
conditions for prepayment under the criteria of the Preservation Statutes. The Federal Circuit

4
   The RCFC generally mirror the Federal Rules of Civil Procedure (“FRCP”) and the Court of Federal Claims may
therefore rely on precedent under the FRCP respecting the application of summary judgment. Grand Acadian, Inc.
v. United States, 97 Fed. Cl. 483, 488 n.6 (citing C. Sanchez & Son, Inc. v. United States, 6 F.3d 1539, 1541 n.2).

                                                        -5-
has already determined that HUD had no discretion to grant prepayment approval contrary to the
“strict numerical criteria” of the statutes. Cienega VI, 265 F.3d at 1243. Defendant needed to
rebut the calculations, not the applicability of the WPT. The same holds true even if Mr. Smith
did not even apply the WPT to a fault. Plaintiffs‟ proffered data and calculations were the issue,
not the WPT. Defendant challenged the “methodology” of the WPT, that is, as the framework of
Mr. Smith‟s report, but defaulted on presenting “specific facts” to challenge the calculations at
issue. As Plaintiffs argue, “the Government had a full and fair opportunity to examine Mr. Smith
about the test, the data, and the calculations themselves . . . Yet, it failed to offer any factual
evidence to rebut Plaintiffs‟ Uncontroverted Fact Statements.” Pls.‟ Mot. for Recons. at 8.

         It is not appropriate for the Government now to suggest how it might have taken issue
with Mr. Smith‟s calculations, such as his use of MSA data. Plaintiffs are correct in complaining
that allowing the Government a further opportunity to contest Mr. Smith‟s data “would give the
Government the proverbial second bite at the apple and let the Government do in a bench trial
what it was required to do, but opted not to do, in the summary judgment motions.” Id. at 9.

       Accordingly, the Court grants summary judgment for Plaintiffs as to the properties at
issue which Plaintiffs‟ expert, Mr. Smith, based on the calculations of his tests one and two,
concluded would have been “prepayment ineligible.”

        Plaintiffs also ask the Court to reconsider its grant of partial summary judgment in favor
of Defendant to the extent it would dismiss certain of Plaintiffs‟ properties solely on the basis of
Mr. Smith‟s test one and test two calculations. In this Court‟s September 26, 2012, decision on
summary judgment, although it had then denied Plaintiffs‟ motion, the Court granted partial
summary judgment to Defendant with respect to those properties, “if any, which fail to meet
either of Mr. Smith‟s calculations, as to his conclusion of „prepayment ineligible,‟ according to
these two tests (that is, not counting his third test at all). In a subsequent order, the Court
directed the parties to identify the properties that remained active in the case subsequent to its
rulings on summary judgment.

        Defendant accordingly identified three properties in this case – Deanswood Apartments
(“Deanswood”), Hardee Street Apartments (“Hardee Street”), and Person Court Apartments
(“Person Court”) – and two properties in the companion Algonquin Heights litigation – Carriage
House of Muskegon and Carriage House South – that Mr. Smith did not deem “prepayment
ineligible” in his expert report and which therefore it argues have been dismissed pursuant to the
Court‟s decision.

        Plaintiffs first object that these properties did not “fail” Mr. Smith‟s tests one and two,
only that they were found to be “indeterminate” under test one and that test two was not
performed due to “insufficient available data.” Pls.‟ Mot. for Recons. at 9-10. The Court,
however, was focusing on Mr. Smith‟s data and calculations. If Mr. Smith was not able to
proffer an expert conclusion that the properties were “prepayment ineligible” based on his
available data, then Plaintiffs have not shown their own specific facts to demonstrate a genuine
issue of material fact.

                                                 -6-
        In addition, however, Plaintiffs argue that “the disposition of these five properties in Mr.
Smith‟s report is not dispositive of whether they are dismissed.” They point out that Plaintiffs
also proffered, both in support of their own motion for summary judgment and in opposition to
the Government‟s motion for summary judgment, the declarations and/or deposition testimony of
the owners that it would have been futile to have sought prepayment approval. The Government
had argued that the owners‟ attestations were conclusory and were insufficient to raise genuine
issues of material fact. Indeed, the Court‟s discussion and analysis focused almost entirely on
the matter of the data and calculations in the Smith Report and its decision on summary
judgment was made solely on that basis.

        In the course of the Court‟s preliminary recitation of Plaintiffs‟ “case for futility,” the
Court overstated its initial observation that the owners‟ attestations seemed more than merely
conclusory and seemed to raise genuine issues of fact. That observation was intended solely in
the context of Plaintiffs‟ expert‟s report, which presented the data buttressing the owners‟
conclusions. The Court does not, and did not, find that, in the absence of test one and test two
data, the owners‟ declarations by themselves raised genuine issues of material fact sufficient to
deny summary judgment to Defendant respecting these five properties. Accordingly, the Court
denies Plaintiffs‟ motion for reconsideration of its grant of partial summary judgment to the
Government as it applies to these properties.

   III.    Conclusion

        For the reasons stated above, the Court grants Plaintiffs‟ motion for reconsideration in
part and denies it in part. Plaintiffs‟ motion for summary judgment on ripeness is granted with
respect to the properties which, per tests one and two of the Smith Report, Plaintiffs‟ expert
concluded were “prepayment ineligible.” Reconsideration is denied as to the Court‟s grant of
summary judgment in favor of Defendant respecting the handful of properties that were not
determined “prepayment ineligible” under tests one and two.

                                                       s/ Edward J. Damich
                                                       EDWARD J. DAMICH
                                                       Judge

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