PALAFOX STREET ASSOCIATES, L.P. v. USA

Filing 36

REPORTED OPINION Notice of Compliance due by 7/30/2014. Signed by Chief Judge Patricia E. Campbell-Smith. (svw) Copy to parties.

In the United States Court of Federal Claims
No. 13-247C
(E-Filed: June 30, 2014)
PALAFOX STREET ASSOCIATES,
L.P.,
Plaintiff,
v.
THE UNITED STATES,
Defendant.

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Election Doctrine; Motion to Dismiss
for Lack of Jurisdiction, RCFC
12(b)(1)

Nick R. Hoogstraten, Washington, DC, for plaintiff. Frank M. Rapoport, New York, NY,
of counsel.
Joshua A. Mandlebaum, Trial Attorney, with whom were Stuart F. Delery, Assistant
Attorney General, Robert E. Kirschman, Director, and Patricia M. McCarthy, Assistant
Director, Commercial Litigation Branch, Civil Division, United States Department of
Justice, Washington, DC, for defendant. John S. Tobey, Assistant General Counsel,
Office of General Counsel, United States General Services Administration, Washington,
DC, of counsel.
OPINION AND ORDER
CAMPBELL-SMITH, Chief Judge
This is a contract case. The subject contract pertains to the construction and
subsequent lease of a federal courthouse. At issue is the parties’ conflicting interpretation
of a tax adjustment clause in the lease. See Compl., ECF No. 1, ¶¶ 3, 7, 19.
On July 22, 2013, defendant moved to dismiss plaintiff’s claim for lack of
jurisdiction. Defendant argued, inter alia, that the claim is barred by the election
doctrine. See Def.’s Mot., ECF No. 7. On February 12, 2014, the court granted-in-part
and stayed-in-part defendant’s motion; in its decision, the court requested supplemental

briefing from the parties. See Palafox St. Assocs., L.P. v. United States, 114 Fed. Cl. 773
(2014) (Palafox I or the court’s February decision).
Before the court is the Complaint, filed April 8, 2013; Defendant’s Motion to
Dismiss, attached to which is an appendix (Def.’s App’x), filed July 22, 2013; Plaintiff’s
Opposition to Defendant’s Motion to Dismiss (Pl.’s Opp’n), ECF No. 12, filed September
23, 2013; Defendant’s Reply to Plaintiff’s Response (Def.’s Reply), ECF No. 17, filed
October 29, 2013; Defendant’s Supplemental Brief (Def.’s Suppl. Br.), ECF No. 25, filed
March 6, 2014; Plaintiff’s Response to Defendant’s Supplemental Brief (Pl.’s Suppl.
Resp.), ECF No. 30, filed March 20, 2014; and Defendant’s Reply (Def.’s Suppl. Reply),
ECF No. 33, filed March 26, 2014.
For the reasons explained below, the portion of defendant’s motion not decided by
the Palafox I decision is STAYED pending further briefing by the parties.
I.

Background

The background facts and procedural history of this case are set out in detail in the
court’s February decision. Palafox I, 114 Fed. Cl. at 777–79. For ease of reference, the
court provides an abbreviated version of that background here.
Palafox is the successor in interest to Keating Development Company (Keating)
under a lease between Keating and the General Services Administration (GSA) for the
construction and lease of a federal courthouse. Compl. ¶ 3. The lease contains a tax
adjustment clause, which provides that “[t]he Government shall make an annual lump
sum adjustment, as additional payment to or deduction from, its share of any increase or
decrease in real estate taxes that are assessed over the agreed upon base year or
negotiated dollar amount,” and “the base year real estate taxes for purposes of
adjustments are hereby established as $250,000.” Def.’s App’x A84 ¶ 1.4, A86 ¶ B.
From August 1997 through December 2011, GSA paid plaintiff the yearly $250,000
adjustment. Compl. ¶ 15. In 2011, GSA conducted an audit of the lease and determined
that the real estate taxes actually paid by plaintiff were less than the $250,000 the
government had paid yearly. Id. ¶ 17.
On June 8, 2011, the contracting officer sent a letter to the trustee under the lease,
the Bank of New York, stating that the discrepancy between the annual real estate taxes
paid by plaintiff and the annual $250,000 paid by GSA to plaintiff “created an excess
obligation due the government in the amount of $824,416.01.” Compl. ¶¶ 14, 17
(internal quotation marks omitted); see also Def.’s App’x A1. On September 29, 2011,
Keating responded, also by letter, stating that “the $250,000 is an allowance and that [the
contracting officer’s] analysis of the lease language does not reflect the matter correctly.”
Def.’s App’x A3; see also Compl. ¶ 19. The contracting officer replied in an email on

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October 19, 2011, stating that GSA would likely withhold from future rental payment the
$824,416.01 allegedly owed to the government. Id. at A4–5.
From December 1, 2011 through May 1, 2012, GSA attempted to offset the
amount allegedly owed by sending half of the monthly rent payments due. Compl. ¶ 20.
The Bank of New York refused the partial rent payments, essentially effecting a setoff of
six full monthly rent payments, or $831,858. 1 Id. ¶¶ 20, 25. On February 7, 2012,
plaintiff again set forth, in a letter to the contracting officer, its disagreement with the
government’s interpretation of the tax adjustment clause in the lease. Def.’s App’x A7.
Plaintiff requested a meeting between the parties in an attempt to resolve the matter. Id.
On April 9, 2012, the contracting officer issued a decision (the April 2012
decision), 2 finding that “the government [was] entitled to a reimbursement for the
difference [between] what was paid and what [was] provided as part of annual and
monthly rent . . . and [confirming] the excess obligation due [to] GSA . . . as
$824,416.01.” Def.’s App’x A9–10.
Palafox appealed the April 2012 decision to the United States Civilian Board of
Contract Appeals (CBCA or the Board) on July 2, 2012. See Compl. ¶ 26. Defendant
filed a motion to dismiss for lack of jurisdiction at the Board, arguing that the CBCA
lacked jurisdiction because plaintiff had not submitted a certified claim to the contracting
officer. Def.’s App’x A26. The Board did not rule on the question of jurisdiction, but
issued an order directing plaintiff to “consider whether [its] correspondence with the
contracting officer rises to the level of a claim that was . . . properly certified,” and
suggesting that the parties should jointly request to withdraw the appeal “[i]f the answer
is no.” Id. at A37–38.
Plaintiff initially opposed the Board’s recommended course, asserting that
certification was unnecessary because Palafox was appealing a government claim. Id. at
A39–41. Nonetheless, plaintiff subsequently acquiesced, and the parties filed a joint
motion to dismiss without prejudice “so that Palafox [could] obtain a contracting officer’s
final decision on its claim.” Id. at A52.
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The parties agree that the amount withheld as a setoff exceeded the amount
allegedly owed to the government by $7,441.99. The parties also agree that the court has
jurisdiction over plaintiff’s claim for that amount. See Def.’s Suppl. Br. 1 (“We remain
unaware of a basis to challenge the Court’s jurisdiction to entertain Palafox’s remaining
claim for $7,441.99.”)
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In the earlier issued opinion in this case, the court determined that it did not have
jurisdiction over plaintiff’s appeal of the contracting officer’s April 9, 2012 decision.
Palafox St. Assocs., L.P. v. United States, 114 Fed. Cl. 773, 781–82 (2014) (Palafox I).
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The Board granted the parties’ joint motion on October 17, 2012, Def.’s App’x
A53, and five days later plaintiff submitted a certified claim to the contracting officer for
$831,858 withheld by the government as a setoff (the October 2012 certified claim).
Compl. ¶ 30; Def.’s App’x A54–80. Plaintiff advanced various arguments in support of
its position, including claims of breach of contract, estoppel, waiver, laches, and the
expiration of the statute of limitations. See Def.’s App’x A54–80.
The contracting officer issued a decision denying the certified claim on December
20, 2012 (the December 2012 decision). Def.’s App’x A81–83. The December 2012
decision, similar to the earlier April 2012 decision, identified as the issue in dispute
between the parties the government’s claimed entitlement to the $824,416.01 for which it
had withheld rent payments as an offset to the allegedly excessive amounts paid to
plaintiff. Compare id. at A9 with id. at A81. The December 2012 decision also
addressed the legal arguments set forth in plaintiff’s certified claim; the contracting
officer subsequently denied each argument in turn. Id. at A81–82. The December 2012
decision included stock language advising plaintiff of its right to appeal the decision to
the Board or “[i]n lieu of appealing to the Board of Contract Appeals, . . . [to] bring an
action directly to the U.S. Court of Federal Claims.” Id. at A83.
Plaintiff filed a complaint in this court on April 8, 2012. Defendant filed a motion
to dismiss, arguing inter alia, that the court lacked jurisdiction over plaintiff’s complaint
pursuant to the election doctrine. The court granted defendant’s motion in part, ruling
that because plaintiff elected to appeal the April 2012 decision to the Board, the court
lacked jurisdiction over plaintiff’s appeal of the April 2012 decision. Palafox I, 114 Fed.
Cl. at 782. In so holding, the court found that the Board had jurisdiction over Palafox’s
July 2, 2012 appeal of the government’s offset claim, and that the claim did not require
certification for the Board to exercise jurisdiction. 3 Id. at 782–84 (citing Placeway
Constr. Corp. v. United States, 920 F.2d 903 (Fed. Cir. 1990)).
However, as the court explained in its February decision, it was unclear from the
initial briefing on defendant’s motion to dismiss whether the election doctrine barred the
court from hearing plaintiff’s appeal of the contracting officer’s December 2012
decision—the second decision on plaintiff’s claim. Palafox I, 114 Fed. Cl. at 788–89.
Defendant conceded that it was “unaware of any jurisdictional hurdle to plaintiff’s
$7,441.99 claim,” an admission that, in the court’s view, suggested that there might be no
jurisdictional hurdle to plaintiff’s appeal of the entirety of the December 20, 2012
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Plaintiff has reserved the right to challenge the court’s earlier determination that
the subject claim in the April 2012 decision was the government’s. Pl.’s Suppl. Resp. 3
n.1.
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decision. Id. at 789. “[B]ecause neither party directly addresse[d] whether the court
possesses jurisdiction over plaintiff’s appeal of the contracting officer’s December 20,
2012 final decision, the court request[ed] supplemental briefing on this issue.” Id.
II.

Legal Standards

In considering a motion to dismiss for lack of jurisdiction, the court must “view
the alleged facts in the complaint as true, and if the facts reveal any reasonable basis upon
which the non-movant [might] prevail, dismissal is inappropriate.” Pixton v. B & B
Plastics, Inc., 291 F.3d 1324, 1326 (Fed. Cir. 2002). The plaintiff “bears the burden of
establishing subject matter jurisdiction by a preponderance of the evidence.” Reynolds v.
Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988) (citing Zunamon v.
Brown, 418 F.2d 883, 886 (8th Cir. 1969)). If the court determines that it lacks
jurisdiction, it must dismiss the claim. Rules of the United States Court of Federal
Claims (RCFC) 12(h)(3).
This court has jurisdiction over certain contract claims against the United States
pursuant to the Tucker Act, see 28 U.S.C. § 1491(a)(1)(2012) (affording the court
jurisdiction over “any claim against the United States founded either upon the
Constitution, or any Act of Congress or any regulation of an executive department, or
upon any express or implied contract with the United States, or for liquidated or
unliquidated damages in cases not sounding in tort”), and the Contract Disputes Act (the
CDA), 41 U.S.C. § 7102(a)(1); see 28 U.S.C. § 1491(a)(2).
III.

Discussion

Defendant has responded to the court’s request for supplemental briefing,
contending that the court does not have jurisdiction over plaintiff’s appeal of the
December 2012 decision. Defendant offers three arguments: (1) plaintiff’s October 2012
certified claim effectively sought reconsideration of the contracting officer’s April 2012
decision (and asserted a claim for the $7,441.99 difference); (2) because the election
doctrine does not permit a contractor to appeal the same claim to a different forum
through the use of a post-election request for reconsideration, plaintiff’s claim cannot
stand, and (3) plaintiff did not request timely reconsideration of the April 2012 decision
and thus, the finality of that decision cannot be suspended. See Def.’s Suppl. Br. 4–5.
Plaintiff responded to the court’s request for supplemental briefing, making five
arguments: (1) its October 2012 certified claim was not a request for reconsideration of
the April 2012 decision but a new claim; (2) even if a portion or all of its October 2012
certified claim constituted a request for reconsideration, it was timely presented; (3)
acceptance of the government’s position before the court—which is contrary to the one it
took before the Board—requires an invalidation of the Board’s dismissal without
prejudice because it denied plaintiff the right to pursue its claims—which were not
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included in the government’s claim; (4) plaintiff was prejudiced by the contracting
officer’s provision of erroneous notice to Palafox regarding its appeal rights; and (5)
should the court determine it lacks jurisdiction, it should transfer plaintiff’s appeal to the
Board. See Pl.s’ Suppl. Resp. passim.
A.

Whether Plaintiff’s October 2012 Certified Claim Was a Request for
Reconsideration

Defendant argues in its supplemental brief that plaintiff’s October 2012 certified
claim, which was filed at the urging of the government, constituted a new claim for
$7,441.99 and a request for reconsideration of the contracting officer’s April 2012
decision. Def.’s Suppl. Br. 5. Defendant contends that the request for reconsideration
was untimely and therefore, did not suspend the finality of the April 2012 decision. Id. at
11. The court does not find defendant’s efforts to characterize plaintiff’s certified claim
as a request for reconsideration to be availing.
Defendant acknowledged in its briefing that the CDA does not address requests for
reconsideration of a contracting officer’s final decision. Id. at 5. Defendant further
acknowledged that it was unaware of any controlling precedent supporting its argument.
Id. Instead, defendant pointed to decisions of the court that discuss reconsideration in an
attempt to apply the pertinent rules to the case at hand. Defendant offered the following
case excerpt:
If a contractor timely submits a request for reconsideration of a final CO
decision to the Contracting Officer, the time the Contracting Officer spends
reviewing the request suspends both the finality of the CO decision and the
time for appeal under the CDA. Suspension of the finality of a Contracting
Officer’s decision requires both a determination that the contractor had
actually sought reconsideration as well as a determination that the
Contracting Officer had recognized the request.
Envtl. Safety Consultants, Inc. v. United States, 95 Fed. Cl. 77, 94 (2010) (alterations in
original) (internal quotations and citations omitted); see also Def.’s Suppl. Br. 5 (quoting
same).
Defendant adds that correspondence with a contracting officer need not be labeled
a “‘request for reconsideration’ to constitute such a request.” Def.’s Suppl. Br. 6. It is
the substance of the request that determines its character. Id. (citing K & S Constr. v.
United States, 35 Fed. Cl. 270, 276 (1996)).
In Environmental Safety Consultants, plaintiffs submitted what they argued were
requests for reconsideration of certain aspects of a contracting officer’s final decision. 95
Fed. Cl. at 94. Plaintiffs’ correspondence with the contracting officer included a request
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that the contracting officer “convert the default termination to a ‘no cost termination
settlement,’” and a request that the contracting officer reconsider its denial of an
equitable adjustment. Id. The contracting officer “did not recognize or review the two
requests for reconsideration plaintiffs submitted.” Id. The court ruled that “[b]ecause the
Contracting Officer did not recognize the . . . requests for reconsideration, the time to
appeal . . . was not suspended.” Id.
In K & S Construction, a contractor sought additional compensation ten months
after a termination for default. K & S Constr., 35 Fed. Cl. at 272. The contracting
officer, however, did not issue a final decision on the later asserted claim. Id. at 272–73.
The court ruled that the statute of limitations was not tolled by the claims for additional
compensation where “plaintiff waited nearly ten months before asking the contracting
officer to reexamine the default decision.” Id. at 276. The court thus found that
plaintiffs’ request for reconsideration was an untimely one. Id.
In Metrotop Plaza Assocs. v. United States, 82 Fed. Cl. 598 (2008), another statute
of limitations case cited by defendant, the plaintiff argued that contacts it made with the
government following the issuance of a contracting officer’s final decision, “although not
formally identified as a request for reconsideration, were nevertheless intended for that
purpose.” Id. at 601. Plaintiff further argued that the contracting officer’s letter
proposing a settlement of a tax issue could be viewed as a decision on a request for
reconsideration as it contained a departure from the contracting officer’s previous views.
Id. The court agreed with plaintiff’s arguments for purposes of tolling the statute of
limitations in that instance, following the rule that “‘[w]here a plaintiff timely submits a
request for reconsideration, the time for appeal under the CDA does not commence until
the disposition of the request for reconsideration.’” Id. (quoting Arono, Inc. v. United
States, 49 Fed. Cl. 544, 549 (2010)).
These cases, and the rules derived therefrom, are inapposite on the facts of this
case. The cited cases reflect court consideration of contractors’ efforts to revive their
appeal rights as well as court examination of correspondence between contractors and
contracting officers to determine whether such correspondence qualified as
reconsideration and thus, tolled the running of the statute of limitations for appealing the
contracting officer’s decision. Evidence of similar consideration on examination in the
case at bar is wanting. Here, plaintiff filed a timely appeal of the contracting officer’s
April 2012 decision with the Board, and then filed a certified claim, as contemplated by
the parties, shortly after the joint dismissal.
Defendant has not pointed to a case construing a certified claim, like the one
Palafox filed, as a request for reconsideration, and the court has not identified one. Not
only did the contracting officer, in this case, recognize Palafox’s request as a certified
claim, but it also issued a new final decision on that claim. Correspondence between the
contracting officer and Palafox cannot be labeled properly as a request for
reconsideration—a process for which there is no provision under the statute—where it
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explicitly follows the process set out in the Contract Disputes Act for the filing of a
certified claim and the receipt of a contracting officer’s decision. See 41 U.S.C. §
7103(a)–(b).
The court finds that plaintiff’s certified claim to the contracting officer was
precisely that—a certified claim—that was filed at the government’s urging. Because the
court does not find that plaintiff’s claim was a request for reconsideration, it need not
decide whether such request was timely. 4 Cf. Def’s Suppl. Br. 11–14.
B.

The Court’s Request for Additional Supplemental Briefing

The court considers important the more straightforward question of whether
plaintiff’s appeal of the December 2012 decision was subject to plaintiff’s election to file
its initial claim with the Board. Because the parties’ supplemental briefing does not
squarely address this question, the court requests additional briefing. Counsel should
address the following:
1.

Plaintiff points to Kenney Orthopedic, LLC v. United States, 88 Fed.
Cl. 688 (2009) and Armour of Am. v. United States, 69 Fed. Cl. 587
(2006) in support of its contention that its certified claim is separate
and distinct from the government claim at issue in the April 2012
decision. In those cases, the court found that a claim for breach of
contract was separate and distinct from the government claim of
termination of a contract for default. Defendant should respond to
the potential relevance of this line of cases. Counsel may further
address implications, if any, of these cases on the court’s finding

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The court observes that there is no prescribed time period for requesting
reconsideration; the guidance is that such a request must be made within a reasonable
time period after the decision in question. See Cooley v. United States, 324 F.3d 1297,
1305–06 (Fed. Cir. 2003) (remanding to the trial court to determine whether a three year
period between an agency’s issuance of an initial permit and a provisional permit was
“reasonable under the circumstances of [the] case”); C.J. Langenfelder & Son, Inc. v.
United States, 341 F.2d 600, 604–05 (Fed. Cir. 1965) (ruling that an agency’s request for
a supplemental decision over a year after an original decision was “far too belated” where
there was no good cause for the delay and opining that “[t]hirty, or perhaps sixty, days is
the order of magnitude—unless a special need for a longer period is shown”). Here, six
months elapsed between the April 2012 final decision and the filing of plaintiff’s October
2012 certified claim. Most of this time period was spent in litigation at the Board, and
plaintiff filed its certified claim only five days after the Board’s dismissal without
prejudice of its claim. Under these circumstances, the span of time between the April
2012 decision and the October 2012 certified claim would appear to fall within the range
of “reasonable.”
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regarding the Board’s jurisdiction over plaintiff’s appeal of the April
2012 decision as described in the court’s February decision.
2.

IV.

Counsel should discuss whether a direct comparison of plaintiff’s
certified claim and the government claim supports a finding that
there are different factual and legal issues found in the claims and
whether the claims are therefore separate and distinct. Counsel
should link their arguments regarding whether the two claims are
separate and distinct to an election doctrine analysis.

Conclusion

The court invites the parties to consider an equitable resolution to this dispute. If
counsel are inclined to attempt mediation or another form of alternative dispute
resolution, one option available to the parties is the assignment of a settlement judge for
this purpose.
If the parties are not amenable to an equitable resolution of this matter, they
simultaneously shall file supplemental briefs, on or before July 30, 2014. Counsel then
shall file simultaneously response briefs, on or before August 14, 2014.
IT IS SO ORDERED.

s/ Patricia Campbell-Smith
PATRICIA CAMPBELL-SMITH
Chief Judge

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