CBCA 6506

MOTION TO DISMISS DENIED; MOTION FOR SUMMARY JUDGMENT GRANTED IN PART: July 6, 2020 CBCA 6506 1000-1100 WILSON OWNER, LLC, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Seamus Curley of Stroock & Stroock & Lavan LLP, Washington, DC, counsel for Appellant. James F. H. Scott and Jessica Gunzel, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges BEARDSLEY, ZISCHKAU, and CHADWICK. BEARDSLEY, Board Judge. Appellant, 1000-1100 Wilson Owner, LLC (Wilson), moved to dismiss the General Services Administration’s (GSA) complaint and moved for summary judgment. Wilson argues that GSA failed to assert a timely claim for reimbursement of erroneously paid taxes under the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109 (2018), and breached a lease by setting off the amount in dispute without a contracting officer’s decision. We deny the motion to dismiss and grant in part the motion for summary judgment. CBCA 6506 2 Background In July 2002, GSA entered into lease 11B-01534 (lease I) with Wilson for office space in Arlington, Virginia.1 Lease I included General Clause No. 9, GSAR 552.270-39, Mutuality of Obligation (AUG 1992), which provided: The obligations and covenants of the Lessor, and the Government’s obligation to pay rent and other Government obligations and covenants, arising under or related to this Lease, are interdependent. The Government may, upon issuance of and delivery to Lessor of a final decision asserting a claim against Lessor, set off such claim, in whole or in part, as against any payment or payments then or thereafter due the Lessor under this lease. No setoff pursuant to this clause shall constitute a breach by the Government of this lease. See Lease I at 5. The same language appears in lease 11P-LVA12618 (lease II), which was for essentially the same space and replaced lease I after lease I expired in November 2012.2 The U.S. Trade and Development Agency occupied the premises under both leases until March 2018. In 2012, GSA conducted an internal audit of existing leases in the National Capital Region and determined that GSA was improperly reimbursing Wilson for certain taxes assessed by Arlington County. On November 15, 2012, a GSA budget analyst informed Wilson and others by blanket notice that GSA had improperly reimbursed certain taxes under lease I. In December 2012, the contracting officer issued unilateral supplemental lease agreement (SLA) 23 withholding $34,518.55, an amount equal to the contested taxes, from the amount invoiced by Wilson under lease I. The contracting officer’s transmittal letter stated, “Enclosed, please find one copy of Supplemental Lease Agreements [sic] No. 23 which provides for real estate tax adjustment for Government-leased space located in the above referenced building. In accordance with the basic lease agreement, the Government has executed the enclosed SLA which reflects a one-time lump sum to be paid with your next monthly rent payment.” The contracting officer also stated in the SLA that the credit was “issued to reflect the annual real estate tax adjustment provided for in the basic lease agreement.” Wilson objected to GSA’s deduction but did not invoice for the taxes at issue for the remainder of lease I or lease II. 1 All facts are drawn from the parties’ joint stipulation of facts, the lease documents, or the claim exhibits, unless otherwise stated. 2 Lease II contained General Clause No. 8, GSAR 552.270-28, Mutuality of Obligation (SEP 1999), which contains the same language. CBCA 6506 3 From 2013 to 2016, GSA and Wilson had meetings and repeated communications about the tax issue and GSA’s intent to engage in unilateral setoffs. In July 2014, the Assistant Commissioner of GSA’s Public Building Service Office of Leasing advised Wilson that GSA was reviewing its policies on some of the taxes at issue. On October 29, 2014, GSA’s financial services division demanded payment of $110,874.47 by check to reimburse GSA for overpayment of taxes. The notice informed Wilson that “[o]ffsets will be taken from associated leases, if deemed possible.” In March 2016, the financial services division sent four claim letters to collect funds.