[00:00:02] Speaker 00: Good morning. [00:00:03] Speaker 00: Our last case for today is Park Property Associates versus the U.S. [00:00:08] Speaker 00: Appeal Number 172279. [00:00:09] Speaker 00: Mr. Toder, you can begin. [00:00:31] Speaker 03: And may it please the Court, the trial court committed three principal errors in this case. [00:00:37] Speaker 03: First, the trial court erroneously concluded that HUD was in privity with the owners of the property. [00:00:44] Speaker 03: The renewal contract, which is, while it's called a renewal, is actually a new contract, as is specified in Section 512 of the MARA statute. [00:00:55] Speaker 03: It says it defines a renewal contract as a new contract. [00:00:59] Speaker 03: That new contract had [00:01:01] Speaker 03: as the counterparty for the owner, Park Properties, the New York State Housing Agency, which is a State agency. [00:01:09] Speaker 03: It's not a Federal agency. [00:01:11] Speaker 05: Was this different from the original HAP contracts in this case? [00:01:16] Speaker 03: Yes, it is different. [00:01:18] Speaker 03: The original HAP contracts were between the owners and HUD. [00:01:21] Speaker 05: Directly? [00:01:22] Speaker 03: Directly. [00:01:22] Speaker 03: There was an intervening statute, the MARA statute, of 1997, Multifamily Assisted Housing Reform Act. [00:01:29] Speaker 03: One of the purposes of that statute, as is listed in Section 511A12, was to permit HUD to delegate certain of its administration functions to state agencies. [00:01:38] Speaker 03: And that's what happened here. [00:01:39] Speaker 03: And one of the provisions allowed HUD to offer renewal contracts under Section 524A1 under such terms as HUD deems appropriate. [00:01:48] Speaker 05: Are you saying that before that statute, the contract always had to be between directly with HUD? [00:01:56] Speaker 03: I don't know in all cases, but I know that the contract in this case was directly with HUD. [00:02:00] Speaker 03: So there was an original contract from 1978 to 2008, a 30-year term. [00:02:04] Speaker 03: There was a new contract entered into short-term bridge contracts in 2009, 2010, full 20-year renewals in 2011. [00:02:12] Speaker 03: In between them, you had this MARA statute, different legal structure. [00:02:17] Speaker 03: Also in the middle, you had the 1994 amendments to the Housing Act, which lowered the rate of annual rent increases. [00:02:25] Speaker 03: in the Park Properties 1 litigation, earlier litigation in the Court of Federal Claims. [00:02:31] Speaker 03: The Court had found that those 1994 amendments that slowed the rate of rent increases constituted a breach of the original HAP contracts awarded an award of money damages, which was entered in 2014. [00:02:46] Speaker 03: Plaintiff's theory, and which largely adopted by the trial court, was that HUD's contract, the renewal contract, should have been reformed [00:02:56] Speaker 03: to be the rent that would have been in existence had there been no breach of the original HAP contract. [00:03:03] Speaker 03: The problem with that theory is that, first, the trial court in the Park Properties 1 litigation did not order any change to the terms of the original HAP contract. [00:03:13] Speaker 03: All it did was order money damages. [00:03:16] Speaker 03: In fact, it couldn't have done anything else under the Tucker Act. [00:03:18] Speaker 03: That's not the court's jurisdiction to change those terms. [00:03:22] Speaker 03: Second, the trial court in the Park Properties 1 litigation [00:03:26] Speaker 03: specifically considered a claim by the plaintiffs in that case that, hey, we have a breach of the original contracts. [00:03:31] Speaker 03: We should expand that to breaches damages for the lower rent under these renewal contracts that we just signed. [00:03:38] Speaker 03: And the trial court rejected that claim. [00:03:39] Speaker 03: The trial court said, oh, no, that would not be foreseeable because this voluntary signature of the renewal contract as an independent intervening cause would not have been foreseeable at the time of the execution of the original HAP contracts. [00:03:52] Speaker 03: Also, it wasn't before the trial court. [00:03:53] Speaker 03: They hadn't pled that. [00:03:55] Speaker 03: Trial Court in Park Properties 1 rejected any claim for damages on the renewal contracts. [00:03:58] Speaker 03: However, plaintiffs then came for 2015, filed suit in the Court of Federal Claims in the Park Properties 2 litigation. [00:04:05] Speaker 05: I don't know if it was a claim before the Court of Federal Claims, but there seems to be this suggestion in the briefing that there was some sort of coercion or force majeure, if you will, pursuant to which [00:04:25] Speaker 05: the parties had to enter into these renewal contracts, that they were sort of pressured and they were under pressure. [00:04:34] Speaker 05: Is that in the briefs? [00:04:35] Speaker 05: Is there something to that effect? [00:04:36] Speaker 03: Plaintiffs make that suggestion. [00:04:38] Speaker 03: However, that would only come into play as a defense to – we had filed a motion to dismiss, saying this was a voluntary renewal. [00:04:46] Speaker 03: There is no causation. [00:04:48] Speaker 03: Even if this rent is lower, then it would have been but for an original – breach of the original [00:04:53] Speaker 03: contracts and the issue of the new contracts, you voluntarily entered into these renewal contracts and therefore there's a breaking shell causation, no foreseeability. [00:05:03] Speaker 03: Their defense to that would be, oh, we signed that contract under duress. [00:05:06] Speaker 03: We had no economic choice but to enter into the renewal contracts. [00:05:10] Speaker 03: The Court of Federal Claims did not take any evidence on that claim. [00:05:13] Speaker 03: The Court of Federal Claims did something different. [00:05:15] Speaker 03: The Court of Federal Claims said, I'm just going to reform the renewal contracts. [00:05:20] Speaker 03: I'm not even going to reach the issue [00:05:22] Speaker 03: of whether there was duress into entering into the renewal contracts, which would be a defense to our motion to dismiss on the grounds that the renewal was voluntary. [00:05:31] Speaker 03: The court didn't even reach that question. [00:05:33] Speaker 03: All the court did was simply reform or award damages for breach. [00:05:36] Speaker 03: It described it variously in different points of the opinion. [00:05:41] Speaker 03: So it didn't reach that question. [00:05:42] Speaker 03: It should have had to reach that question, but it didn't. [00:05:46] Speaker 00: Going back to the privity issue, the trial court made much of the fact that the government had signed the contract and that HUD had taken action in enforcing and was involved in the contract. [00:05:59] Speaker 00: How do you respond to that? [00:06:01] Speaker 03: OK, so we respond first that the contract, plain language, [00:06:06] Speaker 03: states very explicitly who the parties are, and the contract administrator is this New York State Housing Agency, not HUD. [00:06:12] Speaker 03: HUD signed it for, HUD's signature was for a very specific purpose, which is under paragraph two of the contract. [00:06:18] Speaker 03: HUD is the one obligating the federal funds. [00:06:20] Speaker 03: Obviously, you can't have a state agency obligating the federal funds. [00:06:23] Speaker 03: That was the purpose of HUD's signature. [00:06:25] Speaker 03: Also in paragraph 11 of the contract, it states there is a [00:06:30] Speaker 03: annual contributions contract between HUD and the state agency. [00:06:33] Speaker 03: So if the state agency fails to meet its obligations to the owner, HUD, at its discretion, could step in to cure default. [00:06:41] Speaker 03: But it does not create any direct privity between HUD and the owner. [00:06:48] Speaker 03: And in fact, other places in the contract make that even more explicit. [00:06:51] Speaker 03: For example, the signature block. [00:06:53] Speaker 03: For the contract administrator, it says, [00:06:56] Speaker 03: Contract administrator, this is a page 49 of the appendix. [00:06:59] Speaker 03: It says contract administrator parenthesis, HUD or PHA, public housing agency. [00:07:06] Speaker 03: It's signed by the public housing agency. [00:07:07] Speaker 03: It's signed by the New York state agency. [00:07:10] Speaker 03: So on the plain language of the contract, HUD is defined as not being the administrator. [00:07:15] Speaker 03: Then the question becomes, well, it should be implied somehow that HUD is assumed privity, even though the plain language of the contract said otherwise. [00:07:24] Speaker 03: Based on our citations to this court's decisions in the Sienega Gardens, Housing Corporation of America, that's also not the case. [00:07:33] Speaker 03: Those cases say that for the United States to have probity of contracting must assume direct unavoidable liability language in those decisions. [00:07:40] Speaker 03: HUD has not done that here. [00:07:41] Speaker 03: It has done quite the opposite. [00:07:43] Speaker 03: The trial court's reasoning to distinguish that is unavailing. [00:07:47] Speaker 03: So the trial court cites, I believe, 24 CFR 402.5, talking about HUD's [00:07:54] Speaker 03: renewal. [00:07:55] Speaker 03: It says, well, the public housing agency didn't initiate the renewal, therefore HUD is in privity. [00:08:03] Speaker 03: The problem is that neither the MARA statute nor the regulations say anything about the public housing agency being able to initiate the contract. [00:08:10] Speaker 03: And that would not make sense as a result, since you'd be in a position of a state housing agency initiating an award of federal funds. [00:08:17] Speaker 03: That doesn't make sense. [00:08:19] Speaker 03: Also, MARA itself, 524A1, says, [00:08:23] Speaker 03: that the renewal of the contract is at the request of the owner, and then HUD shall offer. [00:08:28] Speaker 03: Well, if it's at the request of the owner, again, it's not the public housing agency initiating the process. [00:08:34] Speaker 03: So that reasoning from the trial court was an error. [00:08:40] Speaker 03: The same language in 524A1 says that HUD may issue the contract in terms it [00:08:47] Speaker 03: finds to be appropriate. [00:08:48] Speaker 03: It does not say that HUD has to be the party in interest in the contract. [00:08:52] Speaker 03: It just says HUD can make the contract. [00:08:55] Speaker 03: Now, this Section 8 contract is a form of contract. [00:08:58] Speaker 03: That's the standard language. [00:08:59] Speaker 03: But it also has language that makes the public housing agency, the party, not HUD. [00:09:10] Speaker 03: Plaintiffs have not shown the trial court's reasoning does not support a conclusion that HUD was obligated to make itself a party. [00:09:16] Speaker 03: The trial court relied on paragraph 4A2 of the renewal contract that said, if HUD is the contract administrator, it may designate a public housing agency to fill those functions. [00:09:29] Speaker 03: And the trial court said, well, that must mean that HUD is really in privity. [00:09:34] Speaker 03: That reasoning is, again, incorrect because that assumes an incorrect premise that HUD ever was the contract administrator. [00:09:41] Speaker 03: HUD never was the contract administrator for the renewal contract. [00:09:45] Speaker 03: It was the contract administrator originally under the original contract, but the renewal contract, even though it's called a renewal, is a new contract as defined in Mara Section 512, Subsection 12. [00:09:58] Speaker 03: And one of those terms in this contract was a different contract administrator, the New York State Agency. [00:10:04] Speaker 03: Therefore, the trial court's decision regarding privity was an error. [00:10:10] Speaker 03: The contracts, even if the court were to find jurisdiction, find privity, the trial court's decision regarding breach was also an error. [00:10:17] Speaker 03: The foundation of that was the principle that the, because there was an award of damages for the original contract, that the but-for rents for that needed to carry over to the renewal contract, and there's no basis for that. [00:10:29] Speaker 03: Paragraph 5B of the renewal contracts explicitly rejects any rent term from the prior contracts as being applicable. [00:10:37] Speaker 03: Furthermore, there was no modification of the rent levels under the original contracts, even in the park properties one decision. [00:10:43] Speaker 03: Also, the Park Properties 1 judgment did not become final, I believe, until 2014. [00:10:48] Speaker 03: Those renewal contracts were entered into between 2009 and 2011. [00:10:53] Speaker 03: Therefore, there cannot have been a mutual mistake as to an existing fact at the time those contracts were entered. [00:10:59] Speaker 03: There was no stipulation. [00:11:01] Speaker 03: There was no final judgment as to what the poor rent levels would have been. [00:11:05] Speaker 03: All there was that the plaintiff's point to is a 2006 decision finding summary judgment as to liability in the Park Properties 1 litigation [00:11:14] Speaker 03: As to the original contract, by definition, that wasn't a final decision, did not set forth any, but for rent level, did not apply to any renewal contract, and the Park Properties 1 court actually specifically denied that there would be any applicability to a renewal contract. [00:11:32] Speaker 03: Lastly, even if the trial court were to reach the issue of damages, the trial court's measure of damages was incorrect. [00:11:39] Speaker 03: There's two components to the damages component. [00:11:43] Speaker 03: One is the baseline level of rent. [00:11:45] Speaker 03: That's wrong. [00:11:46] Speaker 03: Even if you assume that the trial court was correct that the baseline levels from the prior original HAP contract should have carried over, they're too high because MARA emplaces caps on the original rent. [00:12:01] Speaker 03: For renewals under 524A, which is what they did in the real world, it would be a market rate. [00:12:06] Speaker 03: The BUD 4 levels would have been above market rate. [00:12:08] Speaker 03: That's too high. [00:12:09] Speaker 03: For renewals under 524B, what plaintiffs say they would have been in the but-for world, there's a cap based on the budget for the unit, for the building. [00:12:18] Speaker 03: The problem is, plaintiffs never submitted any evidence as to what the budget was for the building. [00:12:22] Speaker 03: We noted that before damages briefing for a trial court. [00:12:25] Speaker 03: The trial court noted that we said that, but still awarded plaintiffs everything without imposing any cap. [00:12:30] Speaker 03: That's a windfall. [00:12:30] Speaker 03: That's beyond what is permitted, even under the standards of summary judgment. [00:12:35] Speaker 03: I see them in my rebuttal time, and I will wait for them. [00:12:45] Speaker 00: Mr. Gentile, is that how you pronounce your name? [00:12:47] Speaker 00: Yes. [00:12:48] Speaker 04: Thank you, Your Honor. [00:12:49] Speaker 04: And may it please this honorable court. [00:12:53] Speaker 04: To hear the government tell it, this is a mundane case. [00:12:56] Speaker 04: The government would have this case. [00:12:58] Speaker 04: This court believe that this case is about commonplace legal issues like privity or mutual mistake. [00:13:04] Speaker 04: But the reality is exactly the opposite. [00:13:07] Speaker 04: This is a tremendously important case. [00:13:10] Speaker 04: And it's not just because of the number of dollars at issue. [00:13:14] Speaker 04: At stake in this case is the very reason for the existence of the United States Court of Federal Claims and for this court's oversight of the Court of Federal Claims. [00:13:24] Speaker 04: Can HUD get away with simply ignoring binding orders of the Court of Federal Claims? [00:13:30] Speaker 04: That's exactly what HUD did. [00:13:33] Speaker 04: For eight years, HUD simply refused to apply to my client's contracts the proper rents as the Court of Federal Claims ordered in 2006. [00:13:42] Speaker 04: Then in [00:13:44] Speaker 04: a later date HUD imposed on my clients, yes, under dress, renewal contracts that blatantly violated that 2006 order. [00:13:53] Speaker 04: Specifically, those renewal contracts used as the pre-existing rents numbers that HUD calculated using the exact same methodology that the Court of Federal Claims in 2006 found to be illegal. [00:14:07] Speaker 04: So in the proceedings below in this action, none other than the former Chief Judge of the Court of Federal Claims, now Senior Judge Lauren A. Smith, saw this case for what it really is. [00:14:17] Speaker 04: Senior Judge Smith recognized, I'm going to quote now, HUD is relying on the fact that it did not effectuate the judicially required rent adjustments prior to entering into the renewal contracts to argue that those adjustments are not required for the current contracts it issued. [00:14:35] Speaker 04: HUD disregarded a court order from the Court of Federal Claims in 2006, and Senior Judge Smith said things right. [00:14:42] Speaker 04: He did so in an exercise for the Court of Federal Claims powers in equity incidental to a claim for money damages, which goes all the way back to Oliver Wendell Holmes. [00:14:51] Speaker 04: And that's where this case begins and ends. [00:14:54] Speaker 04: Now, remarkably, our Justice Department, in its opening brief and now in its opening argument, completely ignores Senior Judge Smith's holdings. [00:15:02] Speaker 04: The government goes back to making hyper-technical, legally formalistic arguments about things like privity and breach of contract. [00:15:10] Speaker 00: I want to interrupt you on the privity issue. [00:15:13] Speaker 00: Our court has some very strongly worded cases that involve situations, or appear to be contracts that are similar to the renewal contract here. [00:15:26] Speaker 00: Cases like Katz. [00:15:27] Speaker 00: and some of the other cases. [00:15:29] Speaker 00: How do you address those? [00:15:31] Speaker 00: How do I distinguish those cases? [00:15:37] Speaker 04: There's privity in this case between HUD and my clients for two big reasons. [00:15:44] Speaker 04: First reason is that this case exists only because of the previous case in which privity was never disputed. [00:15:54] Speaker 04: Senior Judge Smith's [00:15:56] Speaker 05: There was a different situation in the previous case where I think the HUD was a direct contractual arrangement, whereas here you had the PHA in the picture. [00:16:12] Speaker 04: Judge Schall, I posit that that fact actually supports my client's position. [00:16:18] Speaker 04: If you look at section 4D1 of the renewal contract, it says, and I'm quoting again, [00:16:25] Speaker 04: The purpose of the renewal contract is to renew the expiring contract. [00:16:42] Speaker 04: The purpose of the renewal contract is to renew the expiring contract for an additional term. [00:16:49] Speaker 04: So the renewal contract would not exist. [00:16:52] Speaker 04: but for the existence of the previous contract. [00:16:55] Speaker 04: And in that previous contract, there's undisputed privity between HUD and my clients. [00:17:01] Speaker 04: This litigation would not exist. [00:17:04] Speaker 05: You're saying that because, even though there were different parties in the previous contract, you're saying that because this was a renewal contract, the privity from the previous contract flowed into this one? [00:17:15] Speaker 04: Without question. [00:17:17] Speaker 04: And that's just the beginning. [00:17:19] Speaker 04: The next part is that by statute, [00:17:22] Speaker 04: By regulation and by a plethora of terms of the renewal contract, there exists privity between the United States and my clients. [00:17:33] Speaker 04: We can go one at a time. [00:17:34] Speaker 04: It's in our brief on pages 28 through 30 in the red brief. [00:17:38] Speaker 04: But the statutes authorize only the Secretary of Housing and Urban Development to execute the contracts. [00:17:44] Speaker 04: That's 42 USC 1437 F. The Secretary is authorized to enter into such contracts. [00:17:52] Speaker 04: Second, there's regulations that speak on this point. [00:17:55] Speaker 04: 24 CFR 402.5A says that HUD will offer to renew project-based assistance. [00:18:03] Speaker 04: Third, the terms of the contract, there's multiple terms of the contract itself that speak to this. [00:18:09] Speaker 04: If the PHA breaches the contract, HUD will step in and correct the default. [00:18:16] Speaker 04: Section 482 of the contract, that's 137 in the appendix, states that HUD shall remain a party to the contract. [00:18:24] Speaker 04: That's stated again in paragraph 4 of the renewal contract, Section 2, called Parties. [00:18:31] Speaker 04: Privity is not about who signs on which dotted line. [00:18:37] Speaker 04: We don't look at, oh, there's a signature block and it says this. [00:18:41] Speaker 04: We look at the nature of the relationship between the parties. [00:18:45] Speaker 04: And that's spelled out by HUD's active role in governing these contracts, for which you do not even need to look at the facts as a matter of law based on the statutes, the regulations, and the contractual provisions that I've cited. [00:19:01] Speaker 04: HUD has privity with the United States. [00:19:10] Speaker 04: This is a straightforward case. [00:19:12] Speaker 04: And Senior Judge Smith expected that the quantification of damages would be straightforward as well. [00:19:19] Speaker 04: So Senior Judge Smith ordered the parties to stipulate as to the amount of damages. [00:19:24] Speaker 04: We tried to stipulate with the government that didn't work out. [00:19:28] Speaker 04: So we filed with the Court of Federal Claims our straightforward mathematical calculation of the damages. [00:19:35] Speaker 00: Go ahead, please. [00:19:36] Speaker 00: I was thinking, as you were talking about, the National Leased Housing Association case, which is a 1997 decision by this court. [00:19:44] Speaker 00: And there, when they talk about privity of contract, there's three requirements, the third of which is the contract stated that the government would be directly liable to the vendors for the purchase price. [00:19:56] Speaker 00: How does that factor in? [00:19:57] Speaker 04: We have a provision that I've just cited, which is [00:20:06] Speaker 04: paragraph 11 of the contract, which states that if the PHA breaches the contract, whatever the role of the PHA might be, in this case it's extremely limited, HUD agrees to correct any default by the PHA and to continue the housing assistant payments. [00:20:22] Speaker 04: HUD steps in. [00:20:23] Speaker 04: HUD will be liable. [00:20:24] Speaker 04: Whatever front the PHA is carrying out for HUD's purposes, HUD is there to make the payments. [00:20:30] Speaker 04: And that's the foundation [00:20:32] Speaker 04: of the Section 8 program. [00:20:33] Speaker 05: He's not talking, Mr. Gentile, about the situation where if the PHA defaults or is unable to perform, HUD will step in to the shoes of the PHA. [00:20:44] Speaker 04: That sounds like assuming liability to me. [00:20:47] Speaker 04: Well, yeah, but that didn't happen here. [00:20:50] Speaker 04: It didn't happen here, but contractually they're obligated. [00:20:53] Speaker 04: Contractually, HUD is on the hook, and HUD knows it, and this is in HUD's budgets, and this is the very foundation of the Section 8 housing [00:21:02] Speaker 04: program, which is the very foundation for how low-income people get housing in this country. [00:21:08] Speaker 04: That there's a guarantee from HUD that HUD is there to make sure that these people can stay in housing. [00:21:14] Speaker 05: But isn't that directed to a situation where, in your words, HUD would be on the hook if something happened which didn't happen here? [00:21:25] Speaker 04: It doesn't matter whether or not it happened in this particular case. [00:21:28] Speaker 04: What matters is that HUD is liable, that HUD has that liability. [00:21:31] Speaker 04: and I believe that satisfies the prong of the case that Judge Stoltz cited. [00:21:35] Speaker 00: The third element, though, in this National East Housing case doesn't have a condition predicate. [00:21:41] Speaker 00: It just says the contract states the government is liable. [00:21:44] Speaker 00: And I believe that this contract does, Your Honor. [00:21:45] Speaker 00: It doesn't say in the event of something happening, the government is liable. [00:21:49] Speaker 04: You don't see a distinction between that at all. [00:21:51] Speaker 04: I think that HUD is on the hook here. [00:21:55] Speaker 04: And who knows what could happen in this case or in many, many other similar cases. [00:21:59] Speaker 04: Understand that [00:22:01] Speaker 04: We're here today because these clients, Park Property and Valentine, had the wherewithal to withstand what HUD was doing. [00:22:10] Speaker 04: There were countless other property owners in the same situation who just folded and gave into whatever HUD wanted because they didn't have the wherewithal to withstand this. [00:22:22] Speaker 04: So I believe that's important to keep in mind as well. [00:22:30] Speaker 04: Understand that the issues that my honorable adversary is discussing concerning mutual mistake, breach of contract, are all alternative holdings. [00:22:41] Speaker 04: They are alternative holdings to Senior Judge Smith's primary holding in equity that HUD disregarded a court order and that Senior Judge Smith was going to set it straight. [00:22:55] Speaker 04: Yes, the issues are intertwined, and the reason for that is because HUD's having disregarded [00:23:00] Speaker 04: The Court of Federal Claims 2006 order permeates this entire case. [00:23:03] Speaker 01: Where does the Court of Federal Claims get the authority to act in equity? [00:23:10] Speaker 04: The Court of Federal Claims has a long-standing authority to act in equity, incidental to a claim for money damages, which is what this is. [00:23:23] Speaker 04: The Court of Federal Claims can't do things like issue an injunction. [00:23:27] Speaker 04: But the ability of the Court of Federal Claims to reform a contract, incidental to a claim for money damages, is well established. [00:23:35] Speaker 04: And we go through that in our brief, and it goes all the way back to Oliver Wendell Holmes. [00:23:42] Speaker 04: I'm happy to discuss issues regarding damages. [00:23:49] Speaker 04: Senior Judge Smith wanted a straightforward mathematical calculation of damages. [00:23:54] Speaker 02: What is the case that gives them the authority [00:23:57] Speaker 04: The authority and equity that we were discussing, Your Honor? [00:24:00] Speaker 04: Okay, I can take a look at a few cases on that point. [00:24:05] Speaker 04: Let's talk about United States versus Milliken imprinting from 1906 by Oliver Wendell Holmes, Jr. [00:24:18] Speaker 04: That's from the United States Supreme Court held at the predecessor courts to the Court of Federal Claims as to trial jurisdiction [00:24:25] Speaker 04: jurisdiction and equity, and it could exercise its powers and equity to reform a contract. [00:24:30] Speaker 04: That was affirmed again by the Court of Claims in 1979 en banc, affirming the Court of Claims' jurisdiction and equity and its power to exercise equitable remedies, including reformation of a contract. [00:24:42] Speaker 04: And in Ambase Corp v. United States, that's from 2004. [00:24:47] Speaker 04: That's Ambase Corp v. United States, 61, Fed claim, 794. [00:24:55] Speaker 04: These are all on page 21 of our red brief. [00:24:57] Speaker 04: And in that case, it was held that the Court of Federal Claims and its predecessor courts have always possessed the power to assert jurisdiction over claims which sound inequity, but which are claims for money damages against the government rather than a claim for non-monetary relief. [00:25:12] Speaker 04: Thus, the court has relied on reformation of contract as the basis for a money judgment. [00:25:24] Speaker 04: When Senior Judge Smith asked the parties to stipulate as to damages, we presented a straightforward mathematical calculation to the court. [00:25:31] Speaker 04: The government replied with a legal brief. [00:25:34] Speaker 04: This legal brief raised a grab bag of legal arguments that had never been raised before and were not properly before the court at that time because Senior Judge Smith never asked for a straightforward mathematical calculation of damages. [00:25:46] Speaker 04: I feel we need to address two of those arguments right off the bat. [00:25:51] Speaker 04: The government attempted to argue that these renewal contracts were not exception contracts under Section 524B1 of MARA. [00:25:59] Speaker 04: The government seems to think that if these renewal contracts fall under Section 524A of MARA, then HUD would be free to apply the 1994 amendments to these contracts. [00:26:08] Speaker 04: Even that assertion is wrong because the original contracts that were renewed in this case themselves predated the 1994 amendments, but we don't even need to go there. [00:26:17] Speaker 04: because Senior Judge Smith correctly found that under MARA, these renewal contracts could only be exception contracts under Section 524B1 of MARA. [00:26:27] Speaker 04: It's undisputed that these projects were not financed by a mortgage, insured by HUD under the National Housing Act, and that means that these projects are not eligible multifamily housing projects under Section 5122C of MARA. [00:26:41] Speaker 04: The only way they could be treated as such is if the [00:26:46] Speaker 04: Plaintiffs requested that and they never did. [00:26:48] Speaker 04: So they could only be renewed. [00:26:50] Speaker 04: These renewal contracts could only be renewed as exception projects under Section 524B1 of MARA. [00:26:56] Speaker 04: Second issue raised as to damages was the applicability of the OCAFs to the portion of the rent attributable to debt service. [00:27:04] Speaker 04: The government argued that it should be applied only to operating costs. [00:27:08] Speaker 04: That was wrong once again because these are exception projects under MARA. [00:27:13] Speaker 04: We've got a section of MARA 524G3A, which explicitly includes death service in the OCAS in the case of exception projects. [00:27:25] Speaker 04: Senior Judge Smith justly enforced against HUD the orders of the Court of Federal Claims that HUD disregarded. [00:27:33] Speaker 04: Abraham Lincoln's vision of justice against the government in favor of citizens requires not only that the Court of Federal Claims issues orders [00:27:42] Speaker 04: but also that the government obeys and be bound by these orders. [00:27:45] Speaker 04: There's no question that Senior Judge Smith acted properly when he forced against HUD court orders that HUD chose to ignore. [00:27:53] Speaker 04: As I run out of time, one administrative matter. [00:27:56] Speaker 04: There is a cross-appeal here. [00:27:58] Speaker 04: We, of course, assert that cross-appeal, but we do rest on the briefs as to that cross-appeal, and I have reserved no rebuttal time as to it. [00:28:05] Speaker 04: Thank you, Your Honor. [00:28:10] Speaker 00: Mr. Toder, you have three minutes for rebuttal. [00:28:13] Speaker 03: Thank you, Your Honor. [00:28:16] Speaker 03: So I'll start with the contract. [00:28:17] Speaker 03: So the plaintiffs are relying on paragraph 11 as claiming that this puts HUD on the hook for contractual liability. [00:28:26] Speaker 03: That's wrong. [00:28:27] Speaker 03: Paragraph 11 says that in the event of the default by the public housing agency, [00:28:34] Speaker 03: HUD shall take any action HUD determines necessary for the continuation of housing assistance payments to the owner in accordance with the renewal contract. [00:28:41] Speaker 03: That gives HUD the option of whether to step in. [00:28:44] Speaker 03: It doesn't obligate HUD to be, to assume any kind of liability at all. [00:28:48] Speaker 03: It just gives HUD that option, that directly contradicts claims claim that that provision makes HUD directly liable. [00:28:57] Speaker 03: With respect to the Court of Federal Claims. [00:29:00] Speaker 05: But if HUD did step into the shoes of the PHA, [00:29:04] Speaker 05: In that situation, you would say there was privity. [00:29:07] Speaker 03: If they chose to act by stepping in as contract administrator, they could also act by just giving more money to the state agency. [00:29:14] Speaker 03: It doesn't say how HUD would take action. [00:29:17] Speaker 05: But if HUD did affirmably step into the shoes of the PHA and do what the PHA would do and then contract directly, then you'd be like in the first... Yeah, if they chose to do that, then they would. [00:29:29] Speaker 03: Nothing like that happened here. [00:29:30] Speaker 03: They could if they wanted, but there was no default. [00:29:32] Speaker 03: That didn't happen. [00:29:33] Speaker 03: with respect to the Court of Federal Claims' equitable jurisdiction. [00:29:38] Speaker 03: The case they're relying to Milliken printing from the Supreme Court from 1906, I believe that ultimately dealt with, I don't think Justice Holden even found a contract, but in the Hercules case from the Supreme Court in 1996, the Supreme Court made quite clear, as this Court also found in the Lumberman's decision that we cite in our papers, that implying in law contracts are not within the jurisdiction of the Court of Federal Claims. [00:30:03] Speaker 03: the kinds of cases such as Ambas they're talking about are reformations for mutual mistake, for existing fact under the [00:30:10] Speaker 03: which is, this court is recognized under Dairyland Power Co-op. [00:30:14] Speaker 03: Yes, you can do that for mutual mistake. [00:30:16] Speaker 03: That's not what happened here. [00:30:17] Speaker 03: This isn't any mutual mistake. [00:30:19] Speaker 03: Everyone knew what the rent being offered was. [00:30:22] Speaker 03: There wasn't any mistake as to what the offer was or why it was being made. [00:30:27] Speaker 03: So mutual mistake, in fact, doesn't apply here. [00:30:30] Speaker 03: This, if anything, this would be mutual, this would be [00:30:34] Speaker 03: implied in law contract, if that's what basis the court's decision was, as opposed to breach of contract or reformation for mutual mistake. [00:30:40] Speaker 03: In any case, implied in law is not within the court's jurisdiction. [00:30:44] Speaker 03: Plaintiff's claim we waive that. [00:30:45] Speaker 03: You can't waive subject matter jurisdiction, of course. [00:30:48] Speaker 03: And we're, again, interpreting the court's opinion as to things the court could actually do, breach or reformation for mutual mistake. [00:30:55] Speaker 03: None of those were satisfied. [00:30:57] Speaker 03: As for [00:30:59] Speaker 03: Mara, they cite Section 514G. [00:31:02] Speaker 03: Again, that assumes it's an exception contract. [00:31:05] Speaker 03: Plaintiffs in the real world renewed under 524A. [00:31:08] Speaker 03: Even if they had renewed under 514, under 524B, 514G is a budget-based production, not what plaintiffs reduced. [00:31:16] Speaker 03: They introduced no evidence on that score. [00:31:18] Speaker 03: For those reasons, we respectfully request that the Court reverse the decision of the Court of Federal Claims denying our motion to dismiss and granting the plaintiffs' motion for summary judgment. [00:31:26] Speaker 00: Thank you. [00:31:27] Speaker 00: The case is submitted. [00:31:28] Speaker 00: We thank both counsel for their argument.