Court Opinion

ID: 4368930
Source: CourtListenerOpinion
Date Created: 2019-02-19 17:00:44.895274+00
Date Added: 2024-06-11T11:49:56.664059
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                 ______________________

    PARK PROPERTIES ASSOCIATES, L.P.,
  VALENTINE PROPERTIES ASSOCIATES, L.P.,
          Plaintiffs-Cross-Appellants

                            v.

                   UNITED STATES,
                  Defendant-Appellant
                 ______________________

                  2017-2279, 2017-2344
                 ______________________

    Appeals from the United States Court of Federal
Claims in No. 1:15-cv-00554-LAS, Senior Judge Loren A.
Smith.
                ______________________

               Decided: February 19, 2019
                ______________________

    THOMAS A. GENTILE, Wilson Elser Moskowitz Edelman
& Dicker LLP, Florham Park, NJ, argued for plaintiffs-
cross-appellants.

    JOHN JACOB TODOR, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellant. Also repre-
sented by KENNETH DINTZER, ROBERT EDWARD KIRSCHMAN,
JR., JOSEPH H. HUNT.
                  ______________________
2                       PARK PROPS. ASSOCS. v. UNITED STATES

    Before STOLL, MAYER, and SCHALL, Circuit Judges.
STOLL, Circuit Judge.
    The government appeals the United States Court of
Federal Claims’s denial of its motion to dismiss and grant
of summary judgment in favor of landlord-plaintiffs Park
Properties Associates, L.P. and Valentine Properties Asso-
ciates, L.P. 1 Landlord-plaintiffs cross-appeal the trial
court’s denial of vacancy damages. We reverse the trial
court’s denial of the government’s motion to dismiss. Ac-
cordingly, we vacate the trial court’s grant of summary
judgment regarding liability and damages, and remand for
proceedings consistent with this opinion. 2
                        BACKGROUND
    This appeal concerns jurisdiction over a contract dis-
pute. The United States Department of Housing and Ur-
ban Development (“HUD”) administers the project-based
Section 8 housing program using Housing Assistance Pay-
ments (“HAP”) renewal contracts. Park and Valentine own
publicly assisted housing in Yonkers, New York. They al-
lege that the government breached the renewal contracts,
resulting in money damages. The trial court determined
that it had jurisdiction, found the government liable for

    1    Park Props. Assocs., L.P. v. United States,
128 Fed. Cl. 493 (2016).
    2    Landlord-plaintiffs move to strike portions of the
government’s reply brief as nonconforming for allegedly
raising the new issue of an “implied-in-law” contract. Mot.
of Pls.-Cross-Appellants to Strike Appellant’s Nonconform-
ing Reply Br. 4, ECF No. 51 (particularly citing Reply and
Resp. Br. of Def.-Appellant United States, ECF No. 39 at 7,
14–16, 23–24). Because we do not reach the trial court’s
reformation of the renewed contracts below, we deny the
motion to strike as moot.
PARK PROPS. ASSOCS. v. UNITED STATES                        3

breach of contract, and awarded $7.9 million in total dam-
ages to Park and Valentine.
    We focus on jurisdiction, the threshold issue. The par-
ties agree that the trial court has jurisdiction only if the
parties were in privity of contract. The salient facts regard-
ing jurisdiction are as follows. The contracts at issue were
executed in a two-tiered system. First, the government,
through HUD, contracted with a public housing agency
(“PHA”) (here, the New York State Housing Trust Fund
Corporation (“NYSHTFC”)). Second, the PHA contracted
with the private owners of rental housing (here, landlord-
plaintiffs). Neither contract explicitly named both the gov-
ernment and the landlord-plaintiffs as directly contracting
parties, but the trial court held that the renewal contracts
created privity between them.
    Section 1 of each renewal contract specifically identi-
fied the parties. For example, the Park renewal contract
specifically identified the two parties as NYSHTFC and
Park:
    1     CONTRACT INFORMATION
    ...
    PARTIES TO RENEWAL CONTRACT
    Name of Contract Administrator
    New York State Housing Trust Fund Corporation
    ...
    Name of Owner
    Park Properties Associates, LP
J.A. 41–42 (footnotes omitted). Notably, Section 1 did not
identify the government or HUD as a party to the contract.
    Section 4(a)(1) of each Park and Valentine renewal con-
tract reiterated that the contract was between the Contract
Administrator and the Owner of the Project—as identified
4                      PARK PROPS. ASSOCS. v. UNITED STATES

in Section 1, discussed above. However, Section 4(a)(2) fur-
ther specified that, if HUD was the Contract Administra-
tor, HUD would remain a party to the renewal contract
even if HUD assigned the renewal contract to a PHA:
    4   RENEWAL CONTRACT
        a   Parties
            (1) The Renewal Contract is a housing as-
    sistance payments contract (“HAP Contract”) be-
    tween the Contract Administrator and the Owner
    of the Project (see section 1).
             (2) If HUD is the Contract Administrator,
    HUD may assign the Renewal Contract to a public
    housing agency (“PHA”) for the purpose of PHA ad-
    ministration of the Renewal Contract, as Contract
    Administrator, in accordance with the Renewal
    Contract (during the term of the annual contribu-
    tions contract (“ACC”) between HUD and the
    PHA). Notwithstanding such assignment, HUD
    shall remain a party to the provisions of the Re-
    newal Contract that specify HUD’s role pursuant
    to the Renewal Contract, including such provisions
    of section 9 (HUD requirements), section 10 (statu-
    tory changes during term) and section 11 (PHA de-
    fault), of the Renewal Contract.
J.A. 44. Furthermore, Section 11 of each contract laid out
conditions that would apply if the Contract Administrator
was a PHA that defaulted, in which case HUD would be
able to take action under the terms of the contract:
    11 PHA DEFAULT
        a This section 11 of the Renewal Contract
    applies if the Contract Administrator is a PHA act-
    ing as Contract Administrator pursuant to an an-
    nual contributions contract (“ACC”) between the
    PHA and HUD. This includes a case where HUD
PARK PROPS. ASSOCS. v. UNITED STATES                    5

    has assigned the Renewal Contract to a PHA Con-
    tract Administrator, for the purpose of PHA ad-
    ministration of the Renewal Contract.
        b If HUD determines that the PHA has com-
    mitted a material and substantial breach of the
    PHA’s obligation, as Contract Administrator, to
    make housing assistance payments to the Owner
    in accordance with the provisions of the Renewal
    Contract, and that the Owner is not in default of
    its obligations under the Renewal Contract, HUD
    shall take any action HUD determines necessary
    for the continuation of housing assistance pay-
    ments to the Owner in accordance with the Re-
    newal Contract.
J.A. 47. HUD also signed each renewal contract, even
though it was not named as a party in Section 1. For ex-
ample, the signature page of the June 2009 Park renewal
contract includes the signature of an authorized HUD rep-
resentative, as shown below:
6                      PARK PROPS. ASSOCS. v. UNITED STATES

J.A. 49.
    After considering the above, the trial court found that
the terms of the contract created privity between the land-
lord-plaintiffs and HUD:
        The terms of the contract create privity be-
    tween the owners and HUD. Section 4(a)(2) of the
    contract provides that HUD is party to provisions
    of the renewal contract. One of these provisions is
PARK PROPS. ASSOCS. v. UNITED STATES                        7

    in [Section] 11, in which HUD agrees to correct any
    default if the Public Housing Agency (“PHA”)
    breaches the contract, as well as agrees to continue
    assistance payments to the owners. Furthermore,
    although the NYSHTFC is listed as the Contract
    Administrator, HUD is a signatory to this contract.
Park Props., 128 Fed. Cl. at 497 (citations omitted). Next,
the trial court found the government liable for breach of
contract and awarded rent underpayment damages to Park
and Valentine. Id. at 498–99. The government appeals
those determinations. In calculating damages, the trial
court denied Park and Valentine’s request for vacancy
damages, see Park Props. Assocs., L.P. v. United States,
2017 WL 1718751, at *3 (Fed. Cl. May 2, 2017), and Park
and Valentine cross-appeal. We have jurisdiction pursuant
to 28 U.S.C. § 1295(a)(3).
                        DISCUSSION
                              I
     We review a trial court’s determination of its subject
matter jurisdiction de novo. See Abbas v. United States,
842 F.3d 1371, 1375 (Fed. Cir. 2016); see also Litecubes,
LLC v. N. Light Prods., Inc., 523 F.3d 1353, 1360 (Fed. Cir.
2008). Plaintiff bears the burden of establishing jurisdic-
tion by a preponderance of the evidence. See McNutt v.
Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936).
Under the Tucker Act, the Court of Federal Claims has ju-
risdiction only if there is privity of contract between plain-
tiffs and the government. See Cienega Gardens v. United
States, 194 F.3d 1231, 1239 (Fed. Cir. 1998). Whether a
contract exists is a mixed question of law and fact. See
Ransom v. United States, 900 F.2d 242, 244 (Fed. Cir.
1990). We review jurisdictional findings of fact for clear
error. See Banks v. United States, 314 F.3d 1304, 1308
(Fed. Cir. 2003). “A finding is ‘clearly erroneous’ when alt-
hough there is evidence to support it, the reviewing court
on the entire evidence is left with the definite and firm
8                       PARK PROPS. ASSOCS. v. UNITED STATES

conviction that a mistake has been committed.” United
States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948).
    Where the government contracts indirectly with a
plaintiff, our predecessor court and our court have held
that there is generally no privity. In D. R. Smalley, for ex-
ample, the United States Court of Claims held that there
was no express privity of contract because there was no ex-
press contract between the Federal Government and the
contractor. D. R. Smalley & Sons, Inc. v. United States,
372 F.2d 505, 508 (Ct. Cl. 1967). Furthermore, the court
held that there was no implied privity because the acts and
omissions of the State of Ohio did not impose liability on
the federal government. Instead, the contracts were be-
tween the State of Ohio and the contractor. Id. Thus, the
court concluded, there was no express or implied privity of
contract, and therefore the federal government was not li-
able in contract for the claimed damages. Id.
    In Housing Corp., the Court of Claims applied the D. R.
Smalley doctrine to privity issues involving government
contracts under the United States Housing Act of 1937. 3
Hous. Corp. of Am. v. United States, 468 F.2d 922, 923–24
(Ct. Cl. 1972). There, the court considered a contract of
sale between the plaintiff and a local authority. Plaintiff
entered into the contract of sale with the local authority for
the development, construction, and sale of the project. Id.
at 923. Though the government was not expressly a party
to the contract, it was significantly involved in the project.
For example, the government approved the contract be-
tween the local authority and plaintiff, approved drawings,
plans, and specifications, and made direct demands on the
plaintiff for contract changes and agreed to pay for them.
Id. at 923, 925. Plaintiff sued the government for unpaid
costs resulting from those changes. In response, the

    3   The predecessor to the United States Housing Act
of 1974.
PARK PROPS. ASSOCS. v. UNITED STATES                        9

government argued that the court lacked jurisdiction be-
cause the government was not in privity of contract and
had not waived sovereign immunity.
    The court determined that the government was not a
party to the contract. Instead, the government obligated
itself by separate agreements to local authorities for the
funding of approved projects. Ultimately, the court held
that this did not create an express or implied contract be-
tween plaintiff and the government, nor did it make the
local authority the government’s agent through HUD. In-
stead, HUD’s actions were performed in the government’s
capacity as a sovereign. Thus, the Court of Claims deter-
mined that the government’s actions were sovereign acts
that did not subject the government to liability.
    The Court of Claims later applied the same logic in
Aetna. Aetna Cas. and Sur. v. United States, 655 F.2d 1047
(Ct. Cl. 1981). There, a construction company and its
surety sued the government for alleged losses in complet-
ing a federally insured housing project. Id. at 1049. The
parties executed separate agreements between the con-
struction company, the private corporation created to own
the resulting low-income housing, and the government. Id.
at 1050. There was no written contract directly between
the plaintiffs and the government. Nevertheless, HUD was
“intimately involved with all details of the project from its
inception,” including drafting all relevant documents, ap-
proving all mortgage advances, and requiring all work to
be of a certain quality. Id. at 1050, 1052. According to
plaintiffs, the private corporation created to own the result-
ing low-income housing was a creature of HUD. Plaintiffs
further argued that HUD provided all financing, drafted all
contracts, and conceived, implemented, and supervised the
project. The court nonetheless determined that this was
not sufficient to establish privity between plaintiffs and the
government. The court held that where the United States
does not make itself a party to the contracts that imple-
ment important national policies, no express or implied
10                     PARK PROPS. ASSOCS. v. UNITED STATES

contacts result between the United States and those who
perform the work. Id. at 1052–53 (first citing D. R.
Smalley, 372 F.2d at 508; then citing Hous. Corp. of Am.,
468 F.2d at 924). Accordingly, the court concluded that
there was no privity of contract, express or implied.
    Our court followed a similar line of analysis in Katz.
Katz v. Cisneros, 16 F.3d 1204, 1207 (Fed. Cir. 1994). Like
this case, Katz concerned a Section 8 program under the
Housing Act of 1937. HUD administered the program by
contracting with local PHAs, which in turn contracted with
a private developer. HUD approved of one such contract
between Housing Allowance and Hollywood Associates (a
private developer). Following an audit, HUD ordered
Housing Allowance to reduce contract rents paid to Holly-
wood Associates, concluding that they were too high. The
court acknowledged that, to succeed in its subsequent suit
against HUD, Hollywood Associates had to show that the
district court had subject matter jurisdiction and that HUD
waived its sovereign immunity to be sued. Id. We noted
that there was no contract between Hollywood Associates
and HUD; rather, the contract was between Housing Al-
lowance and Hollywood Associates. We further reasoned
that HUD’s grant of benefits and subsequent oversight was
insufficient to create a contractual obligation between Hol-
lywood Associates and the government. Thus, the court
concluded, there was no privity.
    In National Leased Housing Ass’n, we similarly held
that Section 8 landlords who entered into HAP contracts
with PHAs instead of directly with HUD were not in privity
of contract with the United States. Nat’l Leased Hous.
Ass’n v. United States, 105 F.3d 1423, 1435–37 (Fed. Cir.
1997) (citing Katz, 16 F.3d at 1210). To show privity, we
held that a party must establish that: (1) the prime con-
tractor was acting as a purchasing agent for the govern-
ment; (2) the agency relationship between the prime
contractor and the government was established by clear
contractual consent; and (3) the contract stated that the
PARK PROPS. ASSOCS. v. UNITED STATES                      11

government would be directly liable to the vendors for the
purchase price. Id. at 1436. After considering the facts and
contracts at issue, we held that the third element was not
satisfied. The contract had the following provision: “HUD
shall assume the [PHA’s] rights and obligations under the
[ACC] and/or [HAP] Contract . . . .” Id. The appellants, in
making their argument, omitted the rest of the provision,
which allowed HUD to assume rights and obligations only
in a particular circumstance: “HUD may, if it determines
the [PHA] is in default, assume the [PHA’s] rights and ob-
ligations . . . .” Id. We held that this was not the kind of
direct, unavoidable contractual liability that establishes
privity and thereby waives sovereign immunity.
    In D. R. Smalley, Housing Corp., Aetna, Katz, and Na-
tional Leased Housing Ass’n, our court and our predecessor
court consistently held that plaintiffs that had not directly
contracted with the government for housing projects did
not have privity. In each case, the court carefully reviewed
the government’s liability imposed by the text of the con-
tract and the relationship between the parties, but none-
theless determined that there was no privity of contract.
    Based on these cases, we are compelled to conclude that
there is likewise no privity here. Section 1 of each contract
clearly identifies the parties as the “Contract Administra-
tor” and “Owner” of each project. The contracts name the
parties in Section 4a: “The Renewal Contract is a [HAP
contract] between the Contract Administrator and the
Owner of the Project (see section 1).” J.A. 44 (Park);
J.A. 89 (Valentine). Here, every contract identifies the
Contract Administrator as the NYSHTFC and the Owners
as either Park or Valentine. And, the instructions for list-
ing the “Name of Contract Administrator” appear at foot-
note 4 of the contract: “Enter the name of the Contract
Administrator that executes the Renewal Contract. If
HUD is the Contract Administrator, enter [HUD]. If the
Contract Administrator is a [PHA], enter the full legal
name of the PHA.” J.A. 51 n.4. HUD is not listed in that
12                      PARK PROPS. ASSOCS. v. UNITED STATES

field, and therefore it is not the Contract Administrator.
We also conclude that the Contract Administrator is a
PHA: NYSHTFC. In Katz, we held on similar facts—where
HUD contracted with a PHA who in turn contracted with
an Owner with HUD’s approval—that the plaintiff did not
have privity of contract. Katz, 16 F.3d at 1206, 1210. That
same conclusion applies here.
                              II
    The trial court’s decision in this case conflicts with our
precedent. The trial court and landlord-plaintiffs provide
four reasons for rejecting the government’s jurisdiction ar-
gument. We address each argument in turn.
    First, the trial court held and landlord-plaintiffs argue
that the statute authorized only HUD to execute the re-
newal contacts. The statute reads:
     The Secretary is authorized to enter into annual
     contributions contracts with [PHAs] pursuant to
     which such [PHAs] may enter into contracts to
     make assistance payments to owners of existing
     dwelling units in accordance with this section. In
     areas where no [PHA] has been organized or where
     the Secretary determines that a [PHA] is unable to
     implement the provisions of this section, the Secre-
     tary is authorized to enter into such contracts and
     to perform the other functions assigned to a [PHA]
     by this section.
42 U.S.C. § 1437f(b)(1). Contrary to the trial court and
plaintiffs’ assertion, the statute does not restrict authority
to execute the renewal contracts to HUD. Instead, the stat-
ute simply provides that the Secretary is authorized to en-
ter such contracts. It does not limit that authorization to
the Secretary or HUD.
   Second, the trial court reasoned and landlord-plaintiffs
argue that NYSHTFC is a mere contract administrator, not
a PHA, because NYSHTFC did not initiate, negotiate, or
PARK PROPS. ASSOCS. v. UNITED STATES                          13

administer the renewal contracts. See Park Props.,
128 Fed. Cl. at 497; Cross-Appellants’ Br. 29 n.7, ECF
No. 36. We disagree because the contracts clearly state
that NYSHTFC is the PHA and that NYSHTFC and the
plaintiffs are the only parties to the contract. We also dis-
agree because there is nothing in the statute that supports
the trial court’s conclusion that “the PHA must initiate,
contract, and administer the contract” to avoid privity.
Park Props., 128 Fed. Cl. at 497. Instead, the statute al-
lows HUD to provide assistance through annual contribu-
tions contracts with PHAs in accordance with the terms of
the statute. See 42 U.S.C. § 1437f(b)(1). Nor is there any
dispute that NYSHTFC fits HUD’s definition of PHA.
24 C.F.R. § 5.100 (defining PHA to mean “any State,
county, municipality, or other governmental entity or pub-
lic body, or agency or instrumentality of these entities, that
is authorized to engage or assist in the development or op-
eration of low-income housing under the 1937 Act”). We
decline to read additional requirements into the statute’s
plain language.
    Third, the trial court and landlord-plaintiffs argue that
regulations implementing the Multifamily Assisted Hous-
ing Reform and Affordability Act of 1997 (“MAHRA”) re-
quire that HUD be the party that renews the contract.
Specifically, they point to 24 C.F.R. § 402.5(a), which reads
in relevant part:
    Contract renewals under section 524(b) or (e) of
    MAHRA.
    (a) Renewal of projects eligible for exception rents
    at owner’s request. HUD will offer to renew pro-
    ject-based assistance for a project eligible for excep-
    tion rents under section 524(b) of MAHRA at rent
    levels determined under this section . . . but the
    owner of a project other than a project with assis-
    tance under the Section 8 moderate rehabilitation
    program may request renewal under § 402.4.
14                      PARK PROPS. ASSOCS. v. UNITED STATES

Id. § 402.5(a) (emphasis added). According to the court and
plaintiffs, this regulation requires that HUD be the party
that renews the contract, and accordingly requires that
there be privity between the government and landlord-
plaintiffs in this case. We disagree. The regulations simply
indicate that HUD can be a party to the renewal contracts.
Permission is not the same as a mandate. And, the regu-
lation, taken in context with its citation to 24 C.F.R.
§ 402.4, relates more clearly to specifying the rental rates
that apply to potential contract renewals. Compare
24 C.F.R. § 402.5(a) (“HUD will offer to renew . . . at rent
levels determined under this section”), with 24 C.F.R.
§ 402.4 (“HUD may renew . . . at initial rents that do not
exceed comparable market rents.”).
     Fourth, landlord-plaintiffs argue that the terms of the
contract create privity between the government and the
plaintiffs. They argue that Section 11 of the contract states
that if the PHA breaches the contract, HUD agrees to cor-
rect any default by the PHA and to continue the housing
assistance payments. They also cite Section 4(a)(2) of the
Contract as stating that HUD should remain a Party to the
contract. Finally, they submit that Section 2(c) of the con-
tract required HUD to provide the funds necessary under
the contract. We disagree. Section 11 gives HUD tremen-
dous discretion, but it does not obligate HUD. Section 11
is similar to the paragraph that our court addressed in Na-
tional Leased Housing Ass’n, which we discussed above.
There, the provision required HUD to assume certain
rights and obligations in accordance with a provision that
“HUD may, if it determines the [PHA] is in default, assume
the [PHA’s] rights and obligations.” Nat’l Leased Hous.
Ass’n, 105 F.3d at 1436 (alterations in original). Because
the condition was predicated on HUD’s discretion to as-
sume the PHA’s rights and obligations, the court reasoned
that HUD’s liability, if any, was completely within its dis-
cretion. Because this was “not the type of direct, unavoid-
able contractual liability necessary to trigger a waiver of
PARK PROPS. ASSOCS. v. UNITED STATES                       15

sovereign immunity,” the court concluded that there was
no privity. Id. Here, too, the liability of the government, if
any, is contingent upon the government’s acquiescence
through Section 11, which permits HUD to correct any de-
fault by the PHA, but only at HUD’s discretion. The con-
tractual liability does not rise to the level necessary to
trigger a waiver of sovereign immunity. The same logic ap-
plies to Sections 4(a)(2) and 2(c) of the contract. Thus, we
conclude that the terms of the contract do not create privity
between the government and the landlord-plaintiffs.
                        CONCLUSION
    For the reasons above, we reverse the trial court’s de-
termination that it had subject matter jurisdiction and va-
cate the trial court’s decision regarding liability and
damages. We have considered the parties’ remaining ar-
guments and find them unpersuasive. Accordingly, we re-
mand for entry of judgment consistent with this opinion.
     REVERSED-IN-PART, VACATED-IN-PART,
              AND REMANDED
                           COSTS
    No costs.