CBCA 6093

GRANTED IN PART: July 15, 2020 CBCA 6093 HPI/GSA-4C, L.P., Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Maureen C. McDonald, Scott M. Heimberg, and Elise A. Farrell of Akin Gump Strauss Hauer & Feld, LLP, Washington, DC, counsel for Appellant. Alexander C. Vincent, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Judges VERGILIO, KULLBERG, and RUSSELL. RUSSELL, Board Judge. Appellant, HPI/GSA-4C, L.P. (HPI), appealed the contracting officer’s decision denying its claim for unpaid rent under a lease agreement between appellant and respondent, the General Services Administration (GSA or agency). HPI claimed that GSA did not provide proper notice to terminate the lease agreement and seeks rental payment for the period of August 20, 2016, through March 6, 2017, and other costs. The parties filed cross- motions for summary judgment. By decision dated March 31, 2020, the Board granted HPI’s motion on entitlement. Based upon the plain language of the lease, we found that GSA failed CBCA 6093 2 to provide proper notice as required under the termination provision of the lease and remained obligated to pay rent for the disputed period. HPI/GSA-4C, L.P. v. General Services Administration, CBCA 6093, 20-1 BCA ¶ 37,567. The parties subsequently submitted a joint report on damages addressing three issues: (1) mitigation—specifically, whether the sale price of the leased property in a condemnation action included an amount covering the damages at issue in this appeal such that HPI has already been fully compensated for the loss of rental income from GSA; (2) calculation of damages and interest under the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109 (2018); and (3) HPI’s entitlement to interest under the Prompt Payment Act, 31 U.S.C. §§ 3901- 3907. Each of these issues is addressed in turn. Mitigation This appeal relates to a property that HPI leased to GSA and that was the subject of a condemnation action filed by California in October 2015. GSA and California subsequently entered into a stipulation in February 2016 pursuant to GSA’s decision not to oppose California’s use of the property. HPI opposed the condemnation action separately and did not sign the stipulation. GSA’s tenant agency, the Internal Revenue Service, vacated the property on August 19, 2016. GSA stopped making rental payments after that date. HPI, its lender, the owner of the land on which the property sat, and the owner’s lender entered into a separate settlement agreement with California, and the state took possession of the property on March 7, 2017. In April 2018, HPI appealed to the Board GSA’s denial of its claim for rent for the period August 20, 2016, through March 6, 2017. As indicated above, we found that GSA failed to provide proper notice that it was terminating the lease as required by the terms of the lease and, thus, remained obligated to pay the rent for this period. Although GSA does not dispute that HPI received nothing from the sale proceeds, the agency nevertheless wants the Board to infer that HPI received a benefit because California considered various factors, including future rental income stream, in settling the condemnation action based on the state’s assessment of the property’s value. However, GSA was not a party to that action and did not alter its contract with HPI to change its contractual obligations. While the above permits the Board to conclude that GSA remained obligated to pay rent, further arguments by GSA are unavailing. GSA has offered no evidence that a purpose of the settlement agreement and California’s payment under the agreement was to compensate HPI for its loss of rental income under the lease at issue in this appeal, or to CBCA 6093 3 extinguish GSA’s obligation to pay HPI amounts due under the lease. Indeed, California’s representative in the action provided deposition testimony that, with an unsegregated offer, the state leaves it up to the landlord and tenant to resolve matters of amounts due under a lease, between themselves or with the assistance of a court. HPI’s vice-president and secretary provided deposition testimony that “[a]t no time did HPI believe or agree that the $10.9 million payment to HPI’s lender included any rent that GSA owed HPI, or would come to owe HPI, . .