ALTA WIND I OWNER LESSOR C et al v. USA

Filing 87

REPORTED OPINION granting 75 Motion to Amend Pleadings - Rule 15(b). Signed by Judge Thomas C. Wheeler. (hm) Copy to parties.

In the United States Court of Federal Claims
Nos. 13-402T, 13-917T, 13-935T, 13-972T, 14-47T, 14-93T, 14-174T, 14-175T
(Filed: February 8, 2016)
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ALTA WIND I OWNER-LESSOR C, and *
ALTA WIND I OWNER-LESSOR D, et al., *
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Plaintiffs,
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v.
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THE UNITED STATES,
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Defendant.
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Section 1603 Recovery Act Claim
for 30 Percent Energy Cash Grants;
Defendant’s Motion for Leave to
Assert Counterclaims Based Upon
Expert’s Analysis; Effect on Scope
of Issues at Trial.

Steven J. Rosenbaum, with whom were Dennis B. Auerbach, Thomas R. Brugato, and Isaac
Belfer, Covington & Burling LLP, Washington, D.C., for Plaintiffs.
Michael J. Ronickher, with whom were Caroline D. Ciraolo, Acting Assistant Attorney
General, David I. Pincus, Chief, G. Robson Stewart, Assistant Chief, Miranda Bureau and
Margaret E. Sheer, Trial Attorneys, U.S. Department of Justice, Tax Division, Court of
Federal Claims Section, Washington, D.C., for Defendant.
OPINION AND ORDER ON DEFENDANT’S MOTION
TO AMEND PLEADINGS TO ASSERT COUNTERCLAIMS
WHEELER, Judge.
These consolidated cases involve the determination of the cash grants due Plaintiffs
for investing in wind power facilities in California. Under Section 1603 of the American
Recovery and Reinvestment Act of 2009 (“Recovery Act”), Pub. L. No. 111-5, 123 Stat.
115, Plaintiffs are entitled to a 30 percent cash grant of the reasonable and allowable cost
basis for the grant-eligible assets. The disputes center on establishing the proper cost basis
for these assets. Plaintiffs’ claims are for more than $200 million, which Plaintiffs say is

the cash shortfall between the actual cash basis of the power facilities and the amount that
the U.S. Department of the Treasury (“Treasury”) paid to them.
On December 16, 2015, Defendant filed a motion for leave to amend its answers by
adding counterclaims based upon facts allegedly developed during discovery. Defendant
attached each counterclaim to its motion for leave. In total, Defendant seeks almost $59
million in payments previously made to Plaintiffs. Defendant asserts that, not only should
Plaintiffs’ claims for $200 million in additional payments be denied, but also that the
Treasury paid Plaintiffs $59 million too much which must be returned. Prior to filing the
motion for leave, Defendant had contested Plaintiffs’ claims for $200 million, but had not
demanded the return of any funds previously paid.
On January 11, 2016, Plaintiffs opposed Defendant’s motion, asserting that the
purported counterclaims are untimely and prejudicial. Plaintiffs state that the facts on
which Defendant’s counterclaims are based were known to the Treasury in 2011 before the
lawsuits were even filed, and were not learned for the first time during discovery. Fact
discovery is now closed, expert reports have been exchanged, and a three-week trial is set
to begin on May 9, 2016.
On January 27, 2016, Defendant filed a reply in support of its motion for leave.
Defendant pointed out that it could not file any counterclaims until its expert witness, Dr.
John Parsons, had completed his expert analysis and report. Dr. Parsons issued his expert
report on October 23, 2015, and the parties exchanged rebuttal expert reports on December
4, 2015. Plaintiffs took Dr. Parsons’ deposition after receiving notice of Defendant’s
counterclaims in the motion for leave. Defendant also asserts that the scope and issues of
this case do not change because of the counterclaims. The Court must determine de novo
the proper cost basis for the wind power facilities, regardless of whether the 30 percent
cash grant is more or less than the amount Treasury previously paid to Plaintiffs.
A brief summary of the facts leading to these lawsuits is useful.1 A company called
Terra-Gen developed and constructed the Alta Wind facilities, and then sold them to
Plaintiffs between December 2010 and May 2012. As allowed by law, Plaintiffs filed cash
grant applications with the Treasury seeking payments of 30 percent of the amounts they
paid to acquire the property from Terra-Gen. Plaintiffs supplemented their applications
with thousands of pages of supporting documents, many of them requested by the Treasury
to facilitate review. Each application contained an analysis certified by the KPMG
accounting firm, allocating the purchase prices of the Alta Wind facilities between eligible
and ineligible property.
The Treasury reviewed Plaintiffs’ applications, and paid substantially less than what
Plaintiffs had requested. Instead of basing the cash grant awards on Plaintiffs’ purchase
The facts described herein are taken from the parties’ briefs on Defendant’s motion for leave to amend,
and are not in dispute.
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prices to acquire eligible property from Terra-Gen, the Treasury based the awards on 30
percent of how much it had cost Terra-Gen to construct the eligible property. The Treasury
retained the National Renewable Energy Laboratory (“NREL”) of the U.S. Department of
Energy to review Plaintiffs’ grant applications (as well as many other Section 1603
applications) and to make recommendations on the appropriate cost basis of eligible
property. For the Alta Wind I facility, for example, NREL prepared a 20-page Appraisal
Review dated July 18, 2011, which was intended to be used by the Treasury in making a
decision on the application for Section 1603 cash payments.
The NREL took the position in the Appraisal Review that three categories of indirect
costs incurred by the seller in developing the facilities should be excluded. The Treasury
adopted the NREL’s view that the seller’s costs of construction should be the basis of the
grant-eligible property, but it did not exclude the three categories of indirect costs in
establishing the grant-eligible property.
The lawsuits began in June 2013, when Plaintiffs Alta Wind Owner-Lessor C and
D filed a complaint alleging that the Government did not make the full payments owed to
them under the Recovery Act. Thereafter, from June 2013 through early March 2014,
Plaintiffs’ counsel filed seven similar complaints on behalf of other Alta Wind entities, and
an entity called Mustang Hills, LLC. In total, there are twenty Plaintiffs in these suits, and
all of them acquired their ownership interests through sale-leaseback arrangements. When
Defendant filed answers to these complaints, it opposed Plaintiffs’ claims, but did not assert
any counterclaims. Fact discovery occurred during a fourteen-month period from July 25,
2014 through September 18, 2015. Expert discovery followed.
On October 23, 2015, the Government’s expert, Dr. Parsons, issued his report which
Plaintiffs say followed the NREL’s July 2011 Appraisal Review. However, Dr. Parsons
concluded that the eligible cost bases for the Alta Wind facilities are lower than what the
Treasury used in making its grant awards. In effect, the three categories of indirect costs
questioned in the NREL Appraisal Review now form the basis of Defendant’s
counterclaims. As noted, Plaintiffs had the opportunity to depose Dr. Parsons after
Defendant had provided notice of its intent to file counterclaims.
Having carefully considered the positions of the parties, and heard oral argument
from counsel on February 4, 2016, the Court will grant Defendant’s motion for leave and
allow the counterclaims to be filed. Rule 15 of the Court’s rules provides that a party may
amend its pleadings after an initial 21-day window “with the opposing party’s consent or
with the court’s leave,” RCFC 15(a)(1), and that the Court “should give leave when justice
so requires,” RCFC 15(a)(2).
Applicable case law holds that a motion for leave to amend may be denied where
there has been undue delay in asserting the counterclaims. The timeliness of an amendment
“is not decided in an absolute sense, but in light of the particular facts and history of the
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case.” King v. United States, 119 Fed. Cl. 51, 55 (2014). “[A] motion to amend should be
made as soon as the necessity for altering the pleading becomes apparent.” 6 Charles A.
Wright & Arthur R. Miller et al., Federal Practice & Procedure § 1488 (3d ed.); accord
Brunner v. United States, No. 98-554C, 2007 WL 5177408 at *2 (Fed. Cl. Apr. 5, 2007)
(leave to amend should be sought “at the earliest opportunity”). The Court also should
consider whether there is any prejudice to the plaintiffs or the Court by the filing of the
counterclaims. King, 119 Fed. Cl. at 53 (“to support a finding of prejudice, ‘the delay must
be undue, i.e., it must prejudice the nonmoving party or impose unwarranted burdens on
the court’”), citing Mayeaux v. La. Health Servs. & Indem. Co., 376 F.3d 420, 427 (5th
Cir. 2004); see also Foman v. Davis, 371 U.S. 178, 182 (1962) (“In the absence of any
apparent or declared reason, such as undue delay, bad faith or dilatory motive on the part
of the movant . . . the leave sought to amend . . . should, as the rules require, be freely
given.”).
Here, in these de novo proceedings, Plaintiffs are faced with the rather obvious
proposition that the Court’s ultimate resolution of the cost basis issues could be greater
than or less than the amount paid by the Treasury. If 30 percent of the cost basis is less
than the Treasury’s original determination, then Plaintiffs would be required to refund the
amount of the overpayment. The fact that Defendant waited to assert counterclaims until
its expert had completed his analysis was not an unreasonable approach. The Court will
not impose upon Defendant an obligation to file protective counterclaims as a placeholder
early in the case before it had formulated its overall position.
As importantly, the scope of the trial has not materially changed because of
Defendant’s filing of counterclaims after the close of discovery. The issue still to be
decided is the proper amount of the cost basis of the wind power facilities. This was the
issue before the assertion of the counterclaims, and it remains the issue after the assertion
of the counterclaims. There is little if any prejudice to Plaintiffs resulting from the
counterclaims, except to say that the stakes are raised somewhat because Plaintiffs have no
guarantee of keeping the amounts that Treasury paid them. However, a refund always was
a possibility given a proper understanding of the issues.
In order to eliminate any prejudice to Plaintiffs in now having to litigate the three
categories of indirect costs that form the basis of Defendant’s counterclaims, the Court will
not permit Defendant to offer any document or related testimony into evidence to prove its
counterclaims unless the document previously has been furnished to Plaintiffs. This
restriction during trial should assure that the playing field is level even though Defendant
moved to file its counterclaims after the close of discovery.
Accordingly, Defendant’s motion for leave to amend its answers to assert
counterclaims is GRANTED, and the Clerk shall allow the counterclaims attached to
Defendant’s motion to be filed.

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IT IS SO ORDERED.
s/ Thomas C. Wheeler
THOMAS C. WHEELER
Judge

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