CBCA 3860

GRANTED IN PART: March 6, 2017 CBCA 3860 1441 L ASSOCIATES, LLC, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Brett D. Orlove, Matthew S. Kirsch, and Nicholas J. Larson of Grossberg, Yochelson, Fox & Beyda, LLP, Washington, DC, and Benjamin A. Klopman of Benjamin A. Klopman, Chartered, Rockville, MD, counsel for Appellant. Elyssa Tanenbaum and Justin Hawkins, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges VERGILIO, DRUMMOND, and ZISCHKAU. VERGILIO, Board Judge. On May 16, 2014, the Board received a notice of appeal from 1441 L Associates, LLC (lessor) (the successor to 9th & D Joint Venture; “lessor” denotes the appropriate entity as distinctions between the original and successor are not material) concerning its lease contract, GS-11B-20810, with the General Services Administration (agency or GSA). The parties entered into a three-year lease extension of a twenty-year lease. The extension agreement specifies that the annual rent shall be $7,394,982 (or $616,248.50 per month) “plus accrued operating costs.” After noting that the current annual escalated operating costs amount is $1,696,355.10, the agreement provides that the Government shall continue to pay to the lessor the cumulative operating expense adjustments over the original base year; that is, annual adjustments to operating costs based upon changes in price indexes. The agreement does not contain a dollar figure for those adjustments. CBCA 3860 2 At issue in this dispute is the interpretation of the extension agreement as it relates to the cumulative operating costs to be paid by the agency. The plain language of the agreement supports the general position of the lessor. The monthly rental payment is to include the basic rental rate ($616,248.50 per month) plus the cumulative operating expense adjustments over the original base year. That monthly adjustment amount was $52,470.97 in the first year of the extension. The agency concludes that the monthly adjustment amount was $31,691.24, as it looks to operating costs established ten years into the underlying lease as the base; that position is inconsistent with the plain language. The agreement requires the agency, in the initial year, to pay more than the basic rental rate. The reference to the original base year clearly does not reference adjustments accumulated from a different time period. Contrary to the position of the agency, parol evidence is consistent with the plain language of the extension agreement. The record reveals that the lessor rejected agency attempts to alter the base for calculating adjustments to the operating costs. The contracting officer was unable to obtain lessor agreement with attempts of the agency to change the operating costs base; thus, that the contracting officer put forward a per square foot figure to reflect operating costs and taxes does not evidence an interpretation to be imputed to the lessor when the lessor rejected such an approach. Moreover, a draft of the extension agreement specified that the basic rent included the new operating costs base; that language did not survive the negotiation process. After its initial claim, the lessor has altered the amount sought, in part based on amounts paid (or to be paid) by the agency, the passage of time with indexed increases definitized, and a reduction in rental space. The lessor now seeks $249,356.63 for each of the three years, plus accrued interest. The lessor is entitled to this amount for the first year (less amounts already paid for the initial months of year one of the extension); for the second and third year, the lessor is entitled to this amount less any necessary adjustments because of a space reduction. Given the dispute over payment, the lessor has not discussed or shown entitlement to recover interest under the Prompt Payment Act, 31 U.S.C. § 3901(d)(5) (2012). The lessor is to recover interest under the Contract Disputes Act, 41 U.S.C. § 7109, calculated from April 8, 2014. The Board grants in part the appeal to this extent. Findings of Fact Terms of the contract relevant to the positions of the parties 1. On October 30, 1992, the parties entered into a lease contract for a fixed ten- year period. Exhibit 3 at 1 (all exhibits are in the appeal file). The annual rent was $3,777,857.06 (or a monthly rent of $314,821.42), with options available for the agency to increase the rental space.