P.K. MANAGEMENT GROUP, INC. v. HUD
Oral Argument — 12/09/2020 · Case 20-1260 · 20:46
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Judge Prost
2020-1260, PK Management Group versus HUD.
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Mr. Solosky, ready to hear from you.
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Appellant Attorney (Nicholas Solosky)
Thank you, Your Honor.
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Good morning, and may it please the court.
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I'm here today representing PK Management Group, Inc.
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PK Management Group is a FSM contractor, and FSM stands for Field Service Management.
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PKMG, which is how I'll refer to PK Management Group today,
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is one of many FSM contractors doing work for HUD under the FSM 3.8 and 3.10 programs.
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So I just wanted to kind of set the table for the court that this is one of many contracts
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that's being affected by the issue presented to the court today.
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And, Your Honors, the issue that we are here to discuss is how HUD pays for
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–
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I think I understand that, Mr. Solosky.
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Judge Prost
Let me start by asking you if you agree that custodial properties are not HUD-owned.
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Appellant Attorney (Nicholas Solosky)
They are not HUD-owned vacant, Your Honor.
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I know that there's an issue raised in the government's brief about the term HUD properties,
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but I don't believe that those two things mean the same thing.
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I would agree they're not HUD-owned vacant properties.
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But they are a type of HUD property that has to be serviced under the FSM contract.
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Judge Prost
Well, how do you get around the fact that the CLIN, the 005AA,
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specifically refers to HUD-owned vacant?
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And shouldn't we take that to mean that it applies only to HUD-owned vacant
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and not to custodial properties?
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Appellant Attorney (Nicholas Solosky)
Well, I don't – Your Honor, I don't believe so.
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And there's a couple of reasons why.
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The first being that that exact question, or a very similar question, was asked during the Q&A.
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One of the offerors asked HUD, what is CLIN 5AA?
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And the answer was routine inspections.
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And that answer, Your Honor, aligns very closely with Section B of the contract in which HUD told the offerors,
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what routine inspections were and where they fell.
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I'm looking specifically at page 125 of the appendix,
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and it says that routine inspections – it doesn't say for HUD-owned vacant.
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It says routine inspections are paid under CLIN 5AA.
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And that is different than the ongoing –
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Judge Prost
Well, no one just viewed that the 5AA refers to routine inspections.
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The question is whether it refers to routine inspections for all property types.
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And this Q&A –
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The Q&A didn't bear on what – that seems to be the critical issue.
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And I'm not clear on how this Q&A bore on that.
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Appellant Attorney (Nicholas Solosky)
Well, Your Honor, I believe that if HUD in that answer had said routine inspections for HUD-owned vacant properties,
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that would have been the answer that you are implying.
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But it didn't.
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It said routine inspections broadly for – and I think that you can read into that for all properties.
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The other issue, Your Honor –
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Judge Lourie
Councilman, this is Judge Lurie.
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Yes, Your Honor.
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Why isn't this case solved by the simple law of numbers and letters?
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5AA is obviously a subset of 5, and therefore it applies to 5 but not to 6.
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Isn't it that simple?
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Appellant Attorney (Nicholas Solosky)
It's not, Your Honor, because then you start to run into interpretation problems where you say,
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okay, well, then what does 6 pay for?
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And you look at –
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6, and it has a monthly payment in the chart you're looking at,
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but routine inspections are paid for biweekly.
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And then you start to get into the issues that the –
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Wait a minute.
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I'm sorry.
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Judge Prost
To be clear, 6, it says they're monthly, right?
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Under 6, I'm looking at the chart.
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Judge Hughes
Yes.
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Appellant Attorney (Nicholas Solosky)
But routine inspections are paid biweekly or performed biweekly.
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And that – and the PWS says that you get – you get – you get a monthly payment under 6, right?
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You get credit for performing each routine inspection, indicating it's not a monthly payment.
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It's paid based on each – performing each routine inspection.
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There's nothing in the contract that says anywhere that routine inspections are bundled in to CLIN 6.
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As a matter of fact, CLIN 6 clearly – and again, back to page 125 of the appendix –
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says that that is for routine ongoing property management fees.
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The contract tells you what's in CLIN 6, and it doesn't say,
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it includes routine inspections.
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Where it tells you routine inspections are is CLIN 5AA.
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And then, Your Honor, you run into the same problem, then, that the board did,
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where the board said, well, look, CLIN 6 tells me it includes inspection.
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But, again, what the board did was it took the word inspection
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and read in the plural form of routine inspections,
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which the government has acknowledged is not correct in its brief.
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It agrees with PKMG that the word inspection there does not mean routine.
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Judge Lourie
But doesn't 5AA an add-on to 5, and you want it to be an add-on to 6 as well?
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Appellant Attorney (Nicholas Solosky)
It's not, Your Honor.
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It's its own thing.
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It exists as its own thing.
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And what the board did was it said, well, I'm looking at sub-CLIN 5AA.
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It never says sub-CLIN with 5AA.
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It's CLIN 5AA is its own CLIN, and the contract tells us that it covers –
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Routine inspections.
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Judge Prost
Just getting back to your point about the misstep by the board,
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the government seems to persuasively, in my view,
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talk about the inspection referred to in 6 is not a routine inspection.
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That's not what it says.
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It says initial inspection, initial services that had to be done.
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So why isn't that at least an adequate explanation,
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even though it might dislodge?
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That's one of the things the board said.
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Appellant Attorney (Nicholas Solosky)
Well, Your Honor, I think that we agree on that with regard to CLIN 6.
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The point is that the board looked at the contract and said,
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here's the only possible explanation of this language,
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the only possible explanation,
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and the reason that I'm granting a motion to dismiss is the only possible reading
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is that CLIN 6 does exactly what it says it does.
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And it turned the word inspection, and it said, well,
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then it must be that.
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But the inspections are under CLIN 6.
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There was no other evidence anywhere in the contract that the board pointed to
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to tell you that inspections fall under CLIN 6.
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So if that doesn't mean that.
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But it's not the only evidence.
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Judge Prost
We have the evidence of the document,
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which says not inspection full stop,
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but inspection for initial services.
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So the board can opine about how it reads it,
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but we can read it too.
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And it says inspection, initial services.
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Appellant Attorney (Nicholas Solosky)
Yes.
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I hope that we're saying the same thing.
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Everybody, I think, except for the CBCA,
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agrees that the word inspection there does not mean routine inspections.
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My point is that the board used that as evidence that routine inspections fall
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under CLIN 6, which we don't believe they do.
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And so, Your Honor, and again, that kind of goes back to the point that we make in our brief
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that, you know, assuming the board does not, or excuse me,
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that the panel does not believe that.
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The panel does not believe that the language unambiguously requires HUD to pay my client
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in the way that we've presented, it becomes an issue of ambiguity,
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like the Kimco case that we presented.
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The board has said there's only one possible way to read this contract.
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And that includes the word inspection, meaning routine inspections.
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If that isn't the case, then there's more than one reasonable interpretation.
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And this should be remanded back to the board for a trial.
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And, Your Honor, that's not the only, I'll continue to point out as we do in our brief,
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that that's not the only problem with the board's interpretation.
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If you were to look at the board's interpretation, it limited it to the three CLINs,
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5, 5AA, and 6.
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It does not examine CLIN 7.
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CLIN 7 is the third property type that's at issue in this contract in terms of routine inspections.
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Everyone agrees you have to perform routine inspections.
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You have to perform routine inspections on CLIN 7.
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And what the board did was it said, again, if you look at CLIN 6,
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its title tells you exactly what services you have to perform under it.
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When you look at CLIN 7, CLIN 7 is exactly the same as CLIN 5.
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And the court said that, well, under CLIN 5, you only have that ongoing property management fee.
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Well, if that's the case, then where do the routine inspections for CLIN 7 go?
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The board's reading.
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Read it.
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Read those out of CLIN 7.
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The only logical place for them to go is to CLIN 5AA, which, again,
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the contract tells us covers all routine inspections.
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That's why I pointed out the problematic parts of the board's decision,
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and specifically the fact that you have to read a singular word as plural.
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The CLIN versus sub-CLIN, they read that into the contract.
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It's problematic.
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And, again, I would, again, look back to Kimco.
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If the panel finds that the board's interpretation was reasonable,
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well, then we've already established that the board agrees with the government
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that the word inspection doesn't mean that in CLIN 6,
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so we're now dealing with multiple reasonable interpretations of a contract.
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It becomes a question of ambiguity,
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and it should go back down to the board to resolve those ambiguities through a trial.
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All right.
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All right.
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Last point I'll make, Your Honors, just talking about the Q&A.
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We believe it was also error for the board to not consider that Q&A.
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It's something that the government has continued to argue here,
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which is that the Q&A somehow was not incorporated into the contract,
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and that's an issue we'd like you to instruct, if you were to remand to the board,
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for them to consider the Q&A as part of the contract.
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It was entered into the contract through an amendment to the solicitation,
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and the SF-33 form at the end of the contract,
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the cover of the contract, incorporates the solicitation.
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So, Your Honors, we believe that the board absolutely...
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Judge Prost
Well, let me ask you about that, because in your brief, as I recall,
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what you cite for support is A-115,
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but I don't see that that says anything about this incorporation.
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So what else can you cite us in the record to support your view?
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Appellant Attorney (Nicholas Solosky)
Your Honor, we would be looking at Amendment 2,
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which is on page...
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32 of the appendix, which is where the Q&A is incorporated through the amendment.
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And then if you look at the fully...
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Judge Prost
Give me a second to look to find.
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You're pointing us to A-32?
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Appellant Attorney (Nicholas Solosky)
Well, that's where the amendment is, Your Honor.
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And then if you were to look at Appendix 115, which is where we've led you,
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that's the SF-33 form.
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It's the first page of the contract, and there's a table.
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And it tells you, and there are boxes checked on the left-hand side of the table
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that tell you what is incorporated, and the very first of those is the solicitation.
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Judge Prost
Anything further?
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Would you like to...
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You want to reserve your rebuttal, or...
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Appellant Attorney (Nicholas Solosky)
I'd like to reserve my rebuttal time.
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Thank you, Your Honor.
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Okay.
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Judge Prost
Thank you.
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Let's hear from the other side.
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Mr. Long?
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Appellee Attorney (Geoffrey Martin Long)
Thank you, Your Honor, and may it please the court.
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PKMG simply can't overcome the plain shortcoming of its position,
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which I think the court hit on in the course of my friend's presentation,
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the issue is that PKMG is seeking payment for properties that HUD does not own,
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the custodial properties, under a line item titled HUD-owned.
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I think Your Honor asked about whether HUD-owned properties includes custodial properties.
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If you look to Appendix 137, the definition of custodial properties states
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that a custodial property is a borrower-owned property.
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It is not owned by HUD.
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And so returning back to Appendix 116, the CLIN schedule, I'm sorry, 119, the CLIN schedule,
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it is obvious that CLIN 5AA only captures HUD-owned property maintenance,
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but there's just a touch on two of...
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Judge Prost
Land, you're talking about the seven, number seven.
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Yes, Your Honor.
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Appellee Attorney (Geoffrey Martin Long)
Addressed somewhat differently, the definition of HUD-owned properties states that unless otherwise indicated,
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the term HUD-owned properties includes vacant land.
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PKMG's obligations with respect to vacant land generally falls within HUD-owned properties
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so that the inaction fee of the contract, scope of work requirement,
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the obligation...
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...to do routine inspections of lots, because there is an obligation to do routine inspections of all.
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The CLIN sheet does the vacant lots differently.
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Property management, generally speaking, the routine inspection requirement for vacant lots
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is associated with the owned properties.
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So there's no inconsistency there is the upshot at that point.
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With respect to the Q&A, I suspect Q&A in any contract is unambiguous.
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The contract only applies to routine inspections.
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Thank you.
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Judge Prost
We'll turn to the other side for his remainder rebuttal.
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Thank you.
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Appellant Attorney (Nicholas Solosky)
Thank you.
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Your Honor, and I listened very closely during Mr. Long's presentation,
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and while I obviously understand the position he's taking,
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I hope that the panel listened very clearly.
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What Mr. Long is relying on is inferences and negative assumptions based on certain language.
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He was never able to look that the contract tells you CLIN six are treated differently.
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The CLIN doesn't say...
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...routine inspections that he's making as well.
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The contract differentiates between CLIN, between HUD purposes and routine inspections.
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That's the vacant lot problem.
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What the counsel just told you is that, oh, well, vacant lots are HUD properties,
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but we're not going to group them under 5AA because the contract treats them differently.
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But he never tells you where it says that.
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The fact of the matter is the contract does not say that.
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The contract on Appendix page 125 tells you that...
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...that the ongoing PM services are grouped under CLINs 5, 6, and 7,
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and routine inspections are grouped under 5AA.
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And that's where we get back to the ambiguity.
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There's no question that the contract treats vacant properties and custodial properties different.
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There's also nowhere in the contract that it tells you that we're going to pay
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for routine inspections for those properties.
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So what the contract tells you is we are going to pay for ongoing PM services under 5, 6, and 7,
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on a monthly basis, and we are going to pay for routine inspections by, you know,
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that must be performed biweekly under CLIN 5AA.
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And to get where the government wants you to go on this, you have to make a lot of assumptions.
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You have to, for one, you have to assume that the word routine inspections appears
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in the CLIN headings for CLIN 6 and 7, which is .
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And particularly with respect to CLIN 7, you have to say, without it saying anywhere in the contract,
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that even though it's not a contract, it's a contract.
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It's HUD-owned.
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It gets treated differently from routine inspections for HUD-owned vacant and custodial.
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That's its own thing.
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It's a HUD-owned, and you have to do the routine inspections,
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but we're not going to pay you the same way we pay you for the other HUD-owned properties.
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The contract doesn't say that.
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At a minimum, it's ambiguous, and we ask that the Board remand to the CBCA for further proceedings.
20:40
Thank you.
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Judge Prost
Thank both sides, and the case is submitted.