Stromness Mpo, LLC v. United States

In the United States Court of Federal Claims

No. 14-711C

Filed: September 8, 2017

* * * * * * * * * * * * * * * * ** *

*

STROMNESS MPO, LLC, *

* Trial; Lease Agreement; Fifth

Plaintiff,

* Amendment Taking; Holdover

v. * Tenancy; Contract Interpretation;

* Breach of Contract; United States

UNITED STATES, * Postal Service; Reformation.

Defendant. *

*

* * * * * * * * * * * * * * * * ** *

Stephen B. Hurlbut, Akerman LLP, Washington, D.C., for plaintiff. With him was

Harold J. Hughes, Ford and Hugh, LLC, Lehi, UT.

Anand R. Sambhwani, Trial Attorney, Commercial Litigation Branch, Civil

Division, Department of Justice, Washington, D.C., for defendant. With him were Jessica

L. Cole, Trial Attorney, Commercial Litigation Branch, Meen-Geu Oh, Trial Attorney,

Commercial Litigation Branch, Martin F. Hockey, Jr., Assistant Director, Robert E.

Kirschman, Jr., Director, Commercial Litigation Branch, and Chad A. Readler, Acting

Assistant Attorney General, Civil Division, Department of Justice, Washington, D.C. Of

counsel was Shoshana O. Epstein, Office of the General Counsel, United States Postal

Service.

OPINION

HORN, J.

Plaintiff, Stromness MPO, LLC (Stromness MPO), filed a complaint in the United

States Court of Federal Claims alleging that the United States Postal Service (USPS)

breached the terms of two lease agreements between the parties, violated the duty of

good faith and fair dealing, and effected a taking of plaintiff’s property in violation of the

Fifth Amendment to the United States Constitution. In its complaint, plaintiff appeals two

USPS contracting officers’ final decisions denying plaintiff’s certified claim and a

supplemental certified claim. Plaintiff seeks declaratory and monetary relief, including

reformation of the leases, the fair market rental value of the leased property,

reimbursement of real property taxes, and compensation to restore and remediate the

leased property. A trial was held and post-trial briefings on the legal and factual issues

raised in the case were filed by both parties. After a review of the trial testimony, the

exhibits entered into the record, and the submissions filed by the parties, the court makes

the following findings of fact.

FINDINGS OF FACT

The dispute between the parties in the above-captioned case revolves around a

postal facility in Magna, Utah, which was constructed by plaintiff and leased by the

USPS. 1 Plaintiff, Stromness MPO, is one of several businesses owned by members of

the Stromness family. For several decades, the Stromness family businesses have

constructed and leased buildings for the USPS and other entities within the United States

federal government, including the Magna postal facility located in Magna, Utah, which is

at issue in this case. At the trial conducted in the above-captioned case, the court heard

testimony from two members of the Stromness family, Frederick (“Freddie”) Stromness,

the managing member of Stromness MPO and President of Build Inc., another Stromness

family business, and Richard (“Richie”) Daniel Stromness, the Director of Real Estate and

Facilities for Stromness MPO, who is the son of Frederick Stromness.

In February 1996, the USPS determined that it needed a new postal facility in

Magna, Utah, after the USPS Salt Lake District Office requested a new construction lease

project. The Salt Lake District Office initially requested a postal facility that was

approximately 16,000 square feet in size, however, the District did not meet the criteria

to justify a building of that size. The USPS Denver Facilities Service Office supported the

Districts in their facility needs, including the construction and leasing of new postal

facilities for the Salt Lake District Office. Based on a site visit, the Denver Facilities Service

Office determined that the postal “facility project would not rank high enough on the Area’s

NCO Priority List to justify a facility of this size,” and, as a result, the Salt Lake District

Office chose to build a smaller facility in order to meet the immediate space deficiencies. 2

To address the District’s request for a postal facility, the USPS created a building plan for

the facility that contemplated an expandable building, which could be built in phases,

1 In addition to plaintiff, the Stromness family businesses relevant to the above-captioned

case include Build Inc. and MPO Leasing, because these two businesses were

Stromness MPO’s predecessors-in-interest related to the Magna postal facility. In

response to questions posed by the court, defendant acknowledged in its submission to

the court on February 3, 2016 that Build Inc. and MPO Leasing each assigned its lease

to Stromness MPO. Defendant stated, “we possess no evidence that calls into question

the legitimacy of the assignments,” “the assignments provided by Stromness appear to

pre-date the filing of this case,” and, “Stromness has established privity of contract as of

the filing of this case.”

2 Contracting officer Edward Bavouset explained at trial:

All new leases and real estate acquisitions and major construction projects

were administered by the facility service office. The functional level at the

district office, which would have been referred to as administrative support

offices, typically only held and handled what was called repair and alteration

projects at the local level to manage and maintain their existing facilities.

2

specifically Phases I, II, and III, depending on the future needs of the USPS. 3 During the

trial, the parties jointly moved to admit into evidence drawings that illustrate the phases

of the expandable building plan, including the following “MASTER PLAN”:

Joint Exhibit 67, page 399

(capitalization in original). The drawing indicated that Phase I would measure 16,640

square feet in size, including 8,250 square feet of enclosed space and 8,390 square feet

of covered parking. Phase II would measure 16,359 square feet in size, including 8,390

square feet of enclosed space and 7,969 square feet of covered parking. Phase III would

3 At trial contracting officer Edward Bavouset explained, “the expandable building was

just kind of a pilot-type program that was being tried by this particular district. But it was

a building that could be expanded at a later date should the Postal Service desire to

pursue that option.” The Salt Lake District Office requested the expandable building

concept be used on the Magna postal facility so that, if growth projections did materialize,

the building then could be expanded, as needed.

3

measure 9,626 square feet in size, including 4,992 square feet of enclosed space and

4,634 square feet of covered parking.

On December 16, 1996, to satisfy the Salt Lake District’s request for a facility, the

USPS issued a solicitation for the construction and lease of a post office in Magna, Utah.

The solicitation requested offerors “to provide bids for both Phase I and Phase I & II

combined” of the expandable building plan, even though at the time the USPS only

intended to award a contract for the construction and lease of Phase I. 4 The contracting

officer for the Magna Main Post Office, Edward Bavouset, testified at trial that “Phase 1

would have been for the project that was approved through the appropriate approving

authorities for a new construction lease facility of approximately 6,500 square feet. Phase

2 was the expandable building portion of that,” such that “when the Postal Service asked

for both Phase 1 and Phase 2, Phase 1 proposal was based on what was approved.

Phase 2 was anticipation of whether or not any future approval would come for that.”5

The solicitation provided that “the successful offeror providing the best Phase I offer was

considered” for the contract award because funding had only been approved to complete

Phase I of the project. Contracting officer Edward Bavouset explained at trial that “[t]he

combination of Phase 1 and Phase 2 proposals was informational only, so the Postal

Service had that information should they decide to pursue that option at a later date.”

In soliciting proposals, the USPS described Phase I and Phase I and II, combined,

as follows:

Phase I consists of 6,498 sq. ft. of useable workspace/lobby space; 1,338

sq. ft. of useable dock space; and 8,171 sq. ft. of useable covered parking

and grounds. Phase I & II combined consists of 14,668 sq. ft. of useable

workspace/lobby/ground storage; 1,338 sq. ft. useable dock space; and

7,212 sq. ft. useable covered parking space.

4At trial Frederick Stromness testified that the building plans were incorporated into the

Magna Main Post Office solicitation and the Magna Main Post Office lease.

5 The trial transcript refers to the building phases with Arabic numerals 1 and 2, as well

as Roman numerals I and II, while the documentary evidence submitted to the court and

the parties’ filings identify the phases with Roman numerals I and II. To align with the

documentary evidence and the parties’ written references in their submissions to the

court, the court utilizes Roman numerals to identify the phases, unless quoting directly

from the parties’ submissions or exhibits or trial testimony.

4

The drawings submitted to the court included the following depiction of the Phase

I space:

Joint Exhibit 67, page 388

As the above drawing indicates, Phase I included the Phase I enclosed building and the

adjacent Phase I covered parking Sheet A-1, as referred to in the drawing above and

depicted on page 397 of Joint Exhibit 67, illustrated a more detailed floor plan of the Phase

I space:

5

Joint Exhibit 67, page 387

According to the Phase I floor plan, the front area of the building would include the

counter, an office, and a work area, and the back area of the building would include the

women’s restrooms, the men’s restrooms, and a work room.

Plaintiff’s predecessor-in-interest, Build Inc., submitted two proposals in response

to the solicitation, one for Phase I of the project, as well as one for Phases I and II,

combined. In the evaluation of proposals, the USPS explained:

Build Inc. has built many post offices for the USPS and has always provided

very satisfactory buildings in a timely manner. . . . According to Charlie

Hubbert, the construction Project Manager, the builder is easy to work with

and responsive to any instructions which are given. The project manager

has worked with this particular builder for over ten years on NCL [New

Construction Lease] projects in Idaho and Utah and feels he is “fair and

ethical”.

6

After reviewing the six proposals received in response to the solicitation, the USPS

determined that Build Inc. “provided the most acceptable, Best and Final offer” for Phase

I.

Magna Main Post Office Lease

On January 27, 1997, the USPS and Build Inc. executed a contract for the

construction and lease of the “Magna – Main Post Office,” or the Phase I space, for a

base terms of 20 years, beginning on April 1, 1998 and continuing until March 31, 2018.

Joint Exhibit 1 indicates that Richard John Stromness, 6 the president of Build Inc. at the

time, signed the Magna Main Post Office contract on January 21, 1997, but contracting

officer Edward Bavouset signed the contract on January 27, 1997. The Magna Main Post

Office lease was identified as “SALT LAKE COUNTY Project: E20321,” and designated

by a specific finance number, “495270-002.” The parties generally both refer to the lease

for the “Magna – Main Post Office” executed on January 27, 1997 as the “Phase I” lease. 7

(capitalization in original).

The Magna Main Post Office lease award was only for the construction of Phase I

and the building plan awarded under the lease was the Phase I plan, as depicted above

and in Joint Exhibit 67 on page 388. At trial, Frederick Stromness, the current President

of Build Inc., testified that the USPS only awarded a lease for Phase I:

Q. And the Postal Service only awarded Phase I, correct?

A. [Frederick Stromness] That’s correct, just Phase I.

According to the terms of the Magna Main Post Office lease, the lessor, Build Inc.,

agreed to lease to the USPS the following premises: “[t]he Westerly most 115,486 Square

Foot Parcel of Land identified as Salt Lake County Parcel No. 14-20-379-004. . . .

Together with the Southwest ½ of the Vacated County Road consisting of a 9,805 Square

6 Richard John Stromness, who was the President of Build Inc. at the time the Phase I

lease was signed, is now deceased and was the father of Frederick Stromness and the

grandfather of Richard Daniel Stromness. At the time the amended complaint was filed in

this case, Frederick Stromness was the President of Build Inc.

7 Throughout their submissions to the court and during the trial proceedings, the parties

have used various names and labels to refer to the Magna Main Post Office lease

executed on January 27, 1997, including “MPO Lease” and “Phase I Lease.” Similarly,

the parties have used differing titles with regard to the lease for the District Training Center

space, which was executed on January 18, 2000, as discussed in more detail below. The

parties generally have referred to the District Training Center lease as the “Phase II

Lease.” In order to maintain consistency, uniformity, and clarity, the court refers to each

of these two lease agreements using the titles identified in the separate lease agreement

documents, specifically, the court will refer to the Magna Main Post Office lease and the

District Training Center lease.

7

Foot Parcel of Land.” The Magna Main Post Office lease stated that upon the described

premises:

[I]s a SINGLE STORY FRAME BUILDING and which property contains

areas, spaces, improvements, and appurtenances as follows:

AREA SQ. FEET

Net Floor Space 6,498

Platform 1,338

Parking and Maneuvering 13,860

Other:

Driveway 50,047

Landscaping 43,085

Sidewalks 5,030

Enclosed Cvd. Pkg. 8,171

Total Site Area: 134,553

(emphasis and capitalization in original). The USPS agreed to pay Build Inc. an annual

rent of $199,488.00 for the space. The lease provided that, as part of the rental

consideration, Build Inc. was required to furnish the heating system, air conditioning

equipment, light fixtures, sewerage system, electrical system, and water system.

The Magna Main Post Office lease included “General Conditions,” such as Section

A.21, “ALTERATIONS,” which stated, in pertinent part:

The Postal Service shall have the right to make alterations, attach fixtures

and erect additions, structures or signs in or upon the premises hereby

leased (provided such alterations, additions, structures, or signs shall not

be detrimental to or inconsistent with the rights granted to other tenants on

the property or in the building in which said premises are located); which

fixtures, additions or structures so placed in, upon or attached to the said

premises shall be and remain the property of the Postal Service and may

be removed or otherwise disposed of by the Postal Service.

(capitalization in original). Section A.22, “APPLICABLE CODES AND ORDINANCES”

was another provision identified in the “General Conditions” of the Magna Main Post

Office lease, which stated:

The Lessor, as part of the rental consideration, agrees to comply with all

codes and ordinances applicable to the ownership and operation of the

8

building in which the rented space is situated and to obtain all necessary

permits and related items at no cost to the Postal Service.

(capitalization in original). At trial, Frederick Stromness testified that Section A.22 required

Build Inc. to meet all codes and ordinances as of the time of construction:

[Q]. As of the time of construction, it’s you’re understanding that the building

has to meet all codes and ordinances, correct?

A. [Frederick Stromness] Yes, sir.

Q. And that includes all local codes and ordinances, correct?

A. Yes, sir.

Q. And by signing the lease, you agreed to Section A.22, correct?

A. Yes, sir.

Contracting officer Edward Bavouset testified:

[I]n this situation, the Postal Service was only a tenant here and not the

owner of the facility, so the owner of this facility does not have any immunity

from noncompliance. Yes, they have to comply with all local building codes.

And we placed that responsibility on them in the general conditions of the

lease under the previous paragraph you cited, A22.

Additionally, the construction was to comply with the requirements of the USPS

handbook “RE-5,” which contained security requirements for the facility. At trial,

contracting officer Edward Bavouset explained that the RE-5 handbook, “covers security

requirements for all postal facilities, and basically to meet Postal Service security

requirements as identified by the Postal Service inspection service.” Contracting officer

Edward Bavouset testified that security is necessary to maintain the integrity of the United

States mail “in order for the general public to be secure when they place any piece of mail

in the United States Postal Service . . . .” According to the trial testimony, the USPS

expects that all mail types will be secured from public access.

The Magna Main Post Office lease also included a “Construction Rider,”

“Maintenance Rider,” “Tax Rider Reimbursement of Paid Taxes,” and an “Option to

Purchase Rider.” The Construction Rider provided that “[n]o changes will be allowed in

the building plan.” Frederick Stromness confirmed, at trial, that the terms of the Magna

Main Post Office lease disallowed changes to the building plan:

Q. And the building plan that was awarded under this lease was the Phase

I plan, correct?

A. [Frederick Stromness] That’s correct.

9

Q. So read in context, it would be fair to say that no changes will be allowed

in the building -- the Phase I building plan, correct?

A. That’s correct.

The Construction Rider stated that “[c]hanges or modifications which may be required

during construction must be approved in writing by the contracting officer prior to

proceeding with such changes.” The Construction Rider identified Charlie Hubbert, as the

“A/E Project Manager” and the contact person for any questions regarding the

construction plans and specifications.

The Construction Rider included an attachment, which stated:

DOCUMENTS FOR THIS PROJECT HAS [SIC] BEEN 100% DESIGNED.

Within thirty (30) days after having received a copy of the accepted Lease,

the lessor shall submit four (4) sets of the plans and specifications. These

construction documents must be reviewed, stamped, and signed by an

architect/engineer (A/E)-firm, licensed to practice in the State of Utah, and

hired and paid for by the Lessor. . . . No changes will be allowed in the

building plan.

(emphasis and capitalization in original). At trial, Keith LaShier, the manager of the

Denver Facilities Service Office at the time the Magna Main Post Office lease was

executed, explained the requirement for stamped drawings. He testified that stamped

drawings are intended to demonstrate that a facility meets code requirements and that

“[s]tamped drawing are provided by an architect who is involved or an

architect/engineering firm involved in the preparation of the detailed drawings for a

particular building, that could get licensed and certified.”

The Tax Rider for the Reimbursement of Paid Taxes stated:

The Lessor agrees to pay all general real estate taxes levied on the land

and buildings hereby demised. Upon final payment of the annual taxes due,

the Postal Service will reimburse the Lessor, as additional rent, for all

general real estate taxes applicable to any period of time within the term of

this Lease.

The Tax Rider defined general real estate taxes as “those which are assessed on an ad

valorem basis, against all taxable real property in the taxing authority’s jurisdiction without

regard to benefit to the property, and for the purpose of funding general government

services.”

At the time the Magna Main Post Office lease was executed, the USPS was the

only anticipated tenant of the facility. During the trial, defendant’s counsel asked Frederick

Stromness about the intended use of the postal facility:

10

Q. Mr. Stromness, as of January ’97 when this lease was executed, who

were the expected tenants of the facility?

A. [Frederick Stromness] US Postal Service.

Q. Anybody else?

A. Not anticipated at that time.

Q. So if the Postal Service was the only tenant, the Postal Service would

have exclusive right to the bathrooms, correct?

A. Yes, sir, at that time.

Q. And if the Postal Service is the only tenant, the Postal Service would

have exclusive right to the parking, correct?

A. Yes, sir.

...

Q. And if the Postal Service is the only tenant, it’s your understanding the

Postal Service would have exclusive rights to the hallways, correct?

A. Correct.

As depicted in the Phase I floor plan included above, the planned Phase I space included

the men’s and women’s restrooms as well as covered parking.

After the parties executed the Magna Main Post Office lease and a pre-

construction meeting was held, in May 1997, Build Inc. began a four-month period of

surcharging the soil on which the postal facility would be built. 8 At the trial held in the

8 During the trial in the above-captioned case, Frederick Stromness explained

“surcharging”:

[E]xtra-weight surcharge, if you will, in the form of imported soil is placed

over the existing site where buildings are going to be. Prior to that soil --

extra soil surcharge being placed, you would put a settlement plate . . . . So

what you’re doing is squeezing the water out of the soils. And you do this

because what you’re trying to do with this surcharge is mimic the weight of

the building. So when you remove the surcharge, then you construct the

building. And it -- it does eliminate settlement in the building, and, of course,

that’s important because nobody wants a building to have settlement

cracks.

Frederick Stromness also testified that “[i]t was a requirement to surcharge for both

phases, for both Phase I and Phase II.”

11

above-captioned case, Frederick Stromness testified that, during the four-month

surcharging process, the Manager of the Administrative Services Office for the Postal

Service’s Salt Lake District Office, Wayne Christensen, told Build Inc. to “[b]uild Phase

II,” in addition to Phase I, and stated that he would “find the funding.” 9 In response to

defendant’s interrogatories during discovery in this case, Frederick Stromness stated,

Wayne Christensen, the Manager, Administrative Services, for the Postal

Service’s Salt Lake District told Dick [Richard John] Stromness (now

deceased) in the presence of Frederick Stromness, his son and the

managing member of Stromness MPO, LLC, Plaintiff in this matter, that he

wanted Phase II constructed, that he would have funding for Phase II, and

that if Dick Stromness built Phase II, Mr. Christensen would find a way for

the Postal Service to pay for it.

Build Inc. proceeded to construct the Phase I and II combined space between May

1997 and January 1998, at Wayne Christensen’s alleged agreement. The parties have

stipulated that Build Inc. “proceeded to build Phase I and II combined as opposed to

Phase I only,” even though the Magna Main Post Office lease was for the construction

and lease of Phase I only. According to the testimony of the contracting officer, Edward

Bavouset, during construction of the Magna Main Post Office, Mr. Bavouset asked the

Salt Lake City Administrative Services Manager, Wayne Christensen, if Build Inc. was

constructing Phase II, and Wayne Christensen explained that, to his knowledge, only

Phase I was being built.

Frederick Stromness testified during the trial that he believed Wayne Christensen

had contracting authority to authorize the construction of Phase II, however, Frederick

Stromness later realized that belief was erroneous:

I felt at the time that reasonably Wayne had the authority -- the authority,

and I didn’t question it again. But I obviously understand that I’m not going

to prevail on anything that Wayne’s direction gave me, but I’d just say that I

believed it to be reasonable that if Wayne was giving that direction, he was

working with others in the Postal Service to gain the approval he needed or

was needed from the Postal Service as a whole. I -- I’m not-- I’m not trying

to argue with you, sir, the course of action was the correct course of action.

It was not.

...

9 Although the court was never informed why, neither party elected to have Wayne

Christensen, who apparently was alive at the time of the trial, testify during the trial in the

above-captioned case. Based on testimony received at trial, it appears that Wayne

Christensen was a USPS employee at the time the Magna Main Post Office lease was

executed, and that, subsequently, he became an employee of the Stromness family

entities.

12

As we’ve established in the record, that myself and the Stromness group

took Wayne’s -- Christensen’s direction and accepted it as valid. I also

acknowledged that that direction was not a commitment from the Postal

Service.

Frederick Stromness explained in his testimony:

In the early ’97 time frame, we relied on Wayne Christensen and the

direction we received. By later in 1997, Mr. Bavouset, Mr. Long and even

others had ‘well informed’ us, is the term I’m using, that Mr. Christensen

didn’t have the authority and what we did was a mistake and an error. I

acknowledge that.[10]

Similarly, during the trial, defendant’s counsel asked Keith LaShier, the Manager

of the Denver Facilities Service Office, about Wayne Christensen’s role with regard to the

Magna Main Post Office lease:

Q. Could he [Wayne Christensen] make modifications to the contract?

A. [Keith LaShier] No.

Q. Could he expand the facility to double the size?

A. No.

Q. And he could not do so because he did not have contracting authority,

correct?

A. Correct.

The contracting officer for the Magna Main Post Office lease, Edward Bavouset, also

testified that Wayne Christensen did not have the authority to direct the construction of

Phase II:

[Q.] Assuming Wayne Christensen had informed Build, Inc. to proceed with

Phase 2 construction, based on your experience as a contracting officer,

would that be considered a contract modification to the Phase 1 lease?

10 According to the trial testimony of Keith LaShier, the manager of the USPS Denver

Facilities Service Office between 1992 and 2007, it appears that, “at some point while he

was in Salt Lake city,” Wayne Christensen had contracting officer authority up to $2.5

million, however, Wayne Christensen did not have contracting officer authority to execute

a lease for the construction and leaseback for a postal service facility.

13

A. [Edward Bavouset] No, it would not, for a number of reasons, but

primarily Mr. Christensen did not have contracting authority in this matter to

make any changes on behalf of the United States Postal Service.

Q. But Build, Inc., what if Build, Inc. doesn’t know whether Wayne

Christensen had contracting officer authority or not?

A. Well, it’s my understanding they know who the contracting officer was on

this, they had been informed who the contracting officer is on this project,

and they had substantial experience in dealing with the Postal Service

before. So I think they had a pretty good understanding.

Q. And based on your understanding as a contracting officer, could there

by a contract modification to the Phase 1 lease that was not written? Or let

me restate that because that may be construed as leading. I don’t mean to

do that. Based on your understanding as a contracting officer, did contract

modifications have to be in a particular form?

A. Yes, it would have had to have been written and executed by both parties.

Q. Does the Postal Service enter into oral contracts or modifications?

A. No.

Based on the testimony offered at trial, including the testimony of Frederick

Stromness who identified that Stromness MPO erred in following Wayne Christensen’s

alleged “direction,” a term chosen by Frederick Stromness, the court finds that Wayne

Christensen did not have contracting officer authority to authorize construction or to

authorize any changes to the existing Magna Main Post Office lease on behalf of the

USPS, including the alleged “direction” to construct Phase II. Thus, because there was

not an authorized change in the contract, or any other contractual document between

plaintiff and the USPS authorizing the construction of the Phase II space, Build Inc. did

not have authorization to construct Phase II.

As construction of the Magna Main Post Office was underway, on November 14,

1997, USPS project manager Charlie Hubbert held a meeting with Richard John

Stromness regarding the construction of the Magna Main Post Office, during which Mr.

Hubbert learned about changes to the building plans that Richard John Stromness was

carrying out, including the construction of the Phase II space. During the trial, Frederick

Stromness testified that, as of November 24, 1997, plaintiff was “taking steps to build out

Phase II” even though Build Inc. “had not received authorization from Ed Bavouset [the

contracting officer] or anybody in the Denver FSO [Facilities Service Office] to build out

that Phase II” space. On November 24, 1997, Charlie Hubbert, wrote a letter to Build Inc.

indicating his awareness that the contractor had taken steps to build Phase II and

directing Build Inc. to complete Phase I as specified in the contract. The letter stated:

I realize that you have taken steps to build a shell on phase II, that you have

expended additional money to do that. What I’m telling you is phase I must

14

be completed as specified and short-cuts in phase I will not be allowed to

make up for the short fall you have in constructing phase II.

In the letter Mr. Hubbert also wrote: “You have said on numerous occasions that you are

going to build and it will be safe and up to code. They are not the only requirements. The

requirements that you have are to build this building as per plans and specifications.” Mr.

Hubbert explained that it was imperative for Build Inc. to “construct the building as per the

plans and specifications,” in order “[t]o protect the integrity of the competitive bid process

and to be fair to other bidders.” Mr. Hubbert wrote in the letter that he would “have on site

a contract architect, mechanical engineer, structural engineer, civil engineer, and

electrical engineer to ensure that the project is built per the plans and specifications.”

In December 1997, a different USPS project manager, Michael Long, visited the

Magna Main Post Office construction site and confirmed that Build Inc. was constructing

Phase II. Contracting officer Edward Bavouset stated at trial that, when Michael Long

reported that Phase II actually was being built, it caused him “to question everything about

the project.” Upon learning and confirming that Build Inc. had started construction on

Phase II of the postal facility, on December 30, 1997, contracting officer Edward Bavouset

visited the construction site and advised Build Inc. that it was not in compliance with the

contract and was not authorized to build Phase II.

In a letter to Build Inc. on January 2, 1998, contracting officer Edward Bavouset

stated that he had “concerns that the project is not being developed according to the

terms and conditions of the lease awarded to you [Build Inc.] on January 21, 1997.”

Contracting officer Edward Bavouset further wrote:

As you acknowledged during our on-site meeting, any deviations you have

taken from the requirements of your contract are at your own risk and are

not contractual commitments of the Postal Service. These deviations were

not requested, nor authorized by the contracting officer. Furthermore, I want

to clearly relay to you that the only person authorized to make changes to

the subject contract is me, as contracting officer.

At trial, contracting officer Edward Bavouset was asked about the January 2, 1998 letter

and explained that, during his onsite meeting with Build Inc., “[t]hey [Build Inc.] basically

told me they took those deviations for their own benefit. They had on-site crews, and Mr.

[Richard John] Stromness stated he did not want to have to go through remobilization.”

Frederick Stromness also was asked about the January 2, 1998 letter at trial, and he

testified that the letter accurately described that Build Inc. had deviated from the

requirements of the Magna Main Post Office lease and that those deviations were at its

own risk:

Q. Now, I want to point your attention to the third paragraph of this letter. It

reads: As you acknowledged during our on-site meeting, any deviations you

have taken from the requirements of your contract are at your own risk and

are not contractual commitments of the Postal Service. Did I read that

correctly?

15

A. [Frederick Stromness] You did.

Q. And your understanding was this was a true statement, correct?

A. Yes, sir.

Q. And in other words, Build Inc. had acknowledged that the deviations in

proceeding with Phase II construction were at its own risk, right?

A. Yes, sir.

The January 2, 1998 letter also provided that the project manager, Charlie Hubbert, was

being replaced by contracting officer representative Michael Long. A letter on January 12,

1998 later explained: “Michael Long is the Project Manager designated on January 2,

1998 for this project and he will serve as the single-point-of-contact between the lessor

and the USPS during the remainder of the construction of the facility.”

On January 12, 1998, the USPS sent another letter to Build Inc. directing it to stop

work on the Magna Main Post Office project. The letter to Build Inc. stated that only the

contracting officer could make changes to the contract and that “[t]here have been no

contract modifications made to the agreement to lease to date.” (emphasis in

original). The letter stated that “the building configuration being constructed is Phase

II/Alternate Bid 1 in lieu of Phase I as contracted to be constructed by the agreement to

lease.” Contracting officer Edward Bavouset testified that the construction of Phase II

“changed the layout of the floor plan.” The January 12, 1998 letter instructed Build Inc. to

“provide a preliminary revised floor plan by January 16, 1998 showing your [Build Inc.’s]

recommendation to implement the intent of the Phase I drawings into the Phase II shell

presently constructed.” The letter directed that “[n]o further work shall proceed until the

revised floor plan has been submitted and approved by the Contracting Officer.”

(emphasis in original).

At trial, defendant’s counsel questioned contracting officer Edward Bavouset about

the intent of the phase I drawings, as referred to in the January 12, 1998 letter:

Q. I’d like to talk to you about your use of the phrase “intent of Phase 1

drawings.” What was the intent of the Phase 1 drawings with respect to the

use of the bathrooms?

A. [Edward Bavouset] They were there for exclusive use of the United

States Postal Service.

Q. What was the intent of the Phase 1 drawings with respect to the use of

the hallways?

A. The same, for the United States Postal Service.

Q. And what was the intent of the Phase 1 drawings with respect to the use

of the parking?

16

A. Once again, it would have been for the benefit of the United States Postal

Service.

Following the issuance of a stop work order on January 12, 1998, Build Inc. and

the USPS worked towards a resolution to address the unauthorized construction of the

Phase II space. At trial, contracting officer Edward Bavouset testified that he “was making

efforts to negotiate terms and conditions with Mr. Stromness . . . to hopefully see a

successful completion of this project so we could turn over a functioning post office to our

operational client.” Contracting officer Edward Bavouset stated that, “as a result of Build,

Inc. proceeding with Phase 2 without authorization, it impacted what we actually had

contracted for. So we needed to make sure that the Postal Service could be made whole

on what we contracted for, and Build, Inc. is representing here that that would not be a

problem.”

Build Inc. and the USPS exchanged correspondence between January 1998 and

October 1998 to address the future of the Magna Main Post Office project. As part of

these discussions and at the request of the USPS, on March 27, 1998, Build Inc.

submitted two alternative price proposals, the first for a modified Magna Main Post Office

lease, and the second for an annual lease of the entire Phase II space:

1. Revised annual lease on Phase I. This price is inclusive of:

• Concrete paving in place of asphalt paving

• Fencing

• Investigative Mezzanine Office

• CCTV System Based on $175,000.00

• Approximately 1,500 Sf of additional space

Total = $234,851.00 Annual Rent

2. Annual lease on Phase 2 complete. This price is also inclusive of:

• Concrete paving in place of asphalt paving

• Additional Fencing

• Investigative Mezzanine Office

• CCTV System Based on $175,000.00

Total = $323,231.00 Annual Rent

(emphasis in original). In a letter sent on March 30, 1998 from Build Inc. to the USPS

regarding the two price proposals, Build Inc. explained:

17

Pursuant to your request to explain the monetary difference between Phase

II pricing at bid time and the Phase II pricing currently being requested, Build

Inc. offers the following comments:

...

Build Inc. solely elected to construct the Phase II portion of the Magna, Utah

facility to permit more efficient construction based on economy of scale and

to avoid demolition to a portion of the Phase I structure, landscaping,

sitework and drainage features at a later date. It was Build Inc.’s intent to

either utilize the Phase II portion of the structure as additional office space

for its expanding construction operations or to lease all or a portion out as

a professional office space or storage space.

When Frederick Stromness was asked about the March 30, 1998 letter at trial, he

explained:

So now, by the time we get to the March 30th, 1998, we’re-- we’re in the

position of no longer claiming that Mr. Christensen directed this work, even

though that was true in ’97, in early ’97. We learned of our mistake. So now

we’ve constructed Phase II. Stromness has constructed Phase II. The post

office is aware of it, and we’re having a conversation with Mr. Bavouset and

explaining to him what we’re going to do with this space.

...

And I think our purpose in sending this to Mr. Bavouset is -- particularly that

paragraph, is to tell him, We [sic] want to use the space ourselves. We want

to be able to lease it to others. You know, we made a mistake. Let’s work

through this, which we did.

On June 3, 1998, approximately six months after the USPS issued the stop work

order, the USPS sent a letter to Build Inc. indicating that it was considering four options

as to how to proceed with the Magna postal facility including, (1) approval of the project

as originally awarded with no changes; (2) approval of the Magna Main Post Office space,

as modified; (3) approval of Phase II; or (4) termination of the Magna Main Post Office

lease for default.

While the stop work order was in place and the USPS was considering how to

proceed with the Magna Main Post Office lease, the USPS determined that it needed

additional space in the Magna postal facility. In a memorandum dated June 8, 1998, Keith

LaShier, the manager of the Denver Facilities Service Office at the time, explained the

need for additional space at the Magna postal facility:

The District had requested a closed merchandising Postal Store on their

original DAR [Decision Analysis Report]. Subsequently, it was determined

that there was sufficient revenue to justify an open merchandising concept.

Approval has been obtained from HQ Retail to provide for the open

18

merchandising layout. By converting from “closed” to “open” merchandising

additional square footage in the building is needed.

…

Initially it was believed it was not necessary to have a CCTV [Closed Circuit

Television] system and Inspection Service surveillance rooom [sic]. Later,

instructions from the Inspection Service indicated this system was required

to be built into the original building structure. This requirement further added

to the additional space requirements.

A subsequent memorandum, dated June 19, 1998, also signed by Keith LaShier, stated

that “having Lessor/contractor perform according to the original contract award will not

accommodate postal requirements. Floor space necessary for open merchandising

negatively impacts workroom space.” The memorandum described a “modified Phase I,”

which would include “an additional 1,500 square feet to accommodate space

requirements” for a revised annual rent of $234,851.00, and stated “the modified Phase I

(additional annual rent of $35,451) proposal would meet operational requirements.” Keith

LaShier explained that the additional 1,500 square feet would be located in “what would

have previously been considered Phase II space.” The USPS approved “Amendment No.

1” to the Magna Main Post Office lease to include an additional 1,500 square feet of space

and increased annual rent of $234,851.00.

Having determined that additional square footage would be used in the Magna

Main Post Office, the USPS and Build Inc. negotiated “Amendment No. 1” to the Magna

Main Post Office lease. During these negotiations, the USPS notified Build Inc. that there

was no approval or funding to lease the entire Phase II space, but that the USPS would

be amenable to discussing Build Inc.’s ability to lease the unused portion of Phase II to

another tenant. Contracting officer Edward Bavouset and Build Inc. negotiated various

terms of “Amendment No. 1,” including the square footage to include in the Magna Main

Post Office modified space, as well as rental amounts for the modified Magna Main Post

Office space and for the new Phase II space. During these negotiations, in a letter dated

September 25, 1998 and signed by Frederick Stromness, Build Inc. explained:

Build Inc. constructed the phase II portion of the project for site settlement

reasons based upon generally accepted engineering principles, which were

reviewed with the geotechnical consultant. Build Inc. was very clear at all

times that the USPS had no obligations to lease the space available in

phase II. Build Inc. was also very clear at all times that there would be no

difficulty implementing phase I into the phase II shell. On January 12, 1998,

the USPS requested a floor plan indicating how phase I would be

implemented into the phase II building as constructed. Build Inc.

immediately complied and the submitted floor plan was and still is

acceptable to all of the parties involved.

(emphasis in original). Ultimately, these negotiations resulted in “Amendment No. 1” to

the Magna Main Post Office lease. According to Frederick Stromness, the amendment to

19

the Magna Main Post Office lease was the result of discussions between Frederick

Stromness and the USPS, specifically contracting officer Edward Bavouset, “over the

course of a number of months.” Exhibits submitted as evidence during trial demonstrate

that, during these negotiations, the USPS and Build Inc. both contributed to the language

of the final Magna Main Post Office lease amendment for the additional space.

On October 26, 1998, ten months after the USPS issued the stop work order on

January 12, 1998, the USPS and Build Inc. executed “Amendment No. 1” to the Magna

Main Post Office lease, which the parties refer to as the “Phase I Lease Amendment.” On

August 25, 1998, the USPS issued a Notice to Proceed letter to Build Inc. for the Magna

Main Post Office.

The Magna Main Post Office Lease Amendment

“Amendment No. 1” to the Magna Main Post Office lease was signed by Mr. Keith

LaShier, on behalf of the USPS. At trial, Mr. LaShier explained that he signed the

amendment, instead of contracting officer Edward Bavouset, because “Mr. Bavouset was

negotiating directly with the contractor to resolve the disputes. And since he was

negotiating, it would be inappropriate for him also to be the contracting officer, so we had

to have a separation of duties.” Contracting officer Edward Bavouset stated that “it would

not be fair and reasonable for me to sign something I negotiated that was involved in the

negotiations as a contracting officer.”

According to the parties, there is not a true and original version of the Magna Main

Post Office lease document as it existed before “Amendment No. 1” to the Magna Main

Post Office lease. The Magna Main Post Office lease amendment was executed on the

same document as the original Magna Main Post Office lease, such that the same, single

document represents the Magna Main Post Office lease, as originally executed in 1997,

and the subsequent Magna Main Post Office lease amendment, which was executed in

1998. At trial, the parties agreed, and plaintiff’s counsel explained, that, when MPO

Leasing and the USPS amended the Magna Main Post Office lease, “they made changes

on the Phase I Lease, so we don’t have the Phase I Lease as it existed separately and

then the Phase II Lease Amendment. They appear together in the same document with -

- with sequential agreement.” The parties agree “that [Joint Exhibit] JX 1 is a complete

Phase I Lease and Phase I Lease Amendment.”

The Magna Main Post Office lease amendment explained that, “[a]s a result of the

USPS requiring additional net interior space, and the Lessor proceeding with Phase II

construction, without authorization, a situation was created that requires amending said

lease. Lessor has acknowledged that he proceeded with Phase II construction without

authorization.” “Amendment No. 1” provided that “[t]he additional net interior square

footage provided under this lease amendment shall be 1,500 square feet.”

The lease amendment stated the following:

WHEREAS the Postal Service desires and Lessor is willing to: Amend the

original lease to include additional square footage, and the following

20

improvements; perimeter security fencing, change from asphalt to concrete

in all paved areas, and CCTV Inspection Service system and Criminal

Investigation Room (Lessor’s lease cost for the CCTV & Criminal

Investigation Room are based on $175,000, which is included in the new

amortized lease rate.)

The original square footage, as awarded was 6,498 net square feet floor

space, 1,338 net square feet platform, and 8,171 net square feet enclosed

covered parking, for a total of 16,007 net square feet under roof and

available for postal use.

(capitalization in original). The lease amendment included “Exhibits ‘A’ & ‘B’.” Exhibit A

identified the revised square footage and space, and the additional 1,500 square feet of

net interior space was “identified on the attached floor plan (exhibit ‘A’) as ‘new area.’”

The lease amendment described the additional 1,500 square footage: “This additional

finished square footage (1,500) is located in the area that was originally identified as

covered enclosed parking (8,171 net sq.ft.) and was covered in the original lease.” In

addition to the 1,500 of “new area,” the lease amendment stated, “[t]he Lessor shall

provide approximately 255 net sq.ft. of space identified as ‘corridor’ on the attached floor

plan (exhibit ‘A’). This space was also part of the original lease, and identified as covered

enclosed parking.” 11

The lease amendment described the new net interior square footage of the

modified Magna Main Post Office space:

The new net interior sq. ft. will reflect the original number of 6,498, plus

1,500 sq. ft. (additional required footage for postal operations) and 255 sq.

ft. (corridor space) for a total net interior square footage of 8,253. It is

specifically noted that the net interior square footage available for postal

operations is 7,998 net interior square feet. The additional 255 (corridor

space) is necessary for the functional use of the facility.

The lease amendment continued:

Additionally, the Lessor shall provide use of the women’s bathroom and

locker room (661 sq. ft.), and carrier vestibule (425 sq. ft) and maintenance

storage area east of the carrier vestibule. This use is necessary due to

Lessor proceeding with Phase II construction, and the fact that the Postal

Service has agreed to allow the Lessor to lease the previous controlled

enclosed carrier parking, and, is structured to minimize modifications by

11 Exhibit B to the lease amendment identified certain items that would be “compensated

in a lump sum amount of $51,000.00.”

21

Lessor. Furthermore, it is noted that this space was included in the original

lease and identified as covered enclosed parking.

At trial, Keith LaShier discussed use of the restrooms, carrier vestibule, and the

maintenance storage area according to the lease amendment:

Q. And when you signed this lease amendment, it was typically the case

that the Postal Service would require exclusive use of the restrooms,

correct?

A. [Keith LaShier] Yes.

Q. And this Lease Amendment did not change the previous understanding

of the original Phase I Lease that the restrooms were for the US -- use of

the Postal Service, correct?

A. No change.

Q. So to clarify, yes, there was no change to the previous understanding

that their restrooms were for the use of the Postal Service, correct?

A. That’s correct.

Q. And are you familiar with the carrier vestibule?

A. Yes.

Q. The carrier vestibule in the Magna facility was for the intended use of --

intended exclusive use of the Postal Service, correct?

A. Yes.

Q. And the maintenance storage area was for the exclusive use of the

Postal Service, correct?

A. Yes.

“Amendment No. 1” also stated that covered parking on the East and West side of the

facility was available for postal use. Pursuant to the lease amendment, “[o]ther modified

space as a result of the Phase II work, including the site, covered parking, men’s

restrooms, platform, carrier loading, covered parking, etc., is included under this lease

and amendment.”

The revised annual rent amount for the modified Magna Main Post Office space

was $234,851.00, and “Amendment No. 1” provided for starting rental payments

retroactive to April 1, 1998. According to the testimony of Frederick Stromness at trial:

The higher rent of [$]234,851 is a result of the negotiation between Mr.

Bavouset and myself where -- you know, if we read the lease, you’ll see

22

where they required additional space and different things, and we

incorporated some of those items into the -- amortized over the lease

period; and other items there was a lump sum payment. So there was some

give-and-take on how we -- the Postal Service got everything it wanted, and

the lease amount is [$]234,851.

Exhibit A of the Magna Main Post Office lease, as amended, depicted the revised

floor plan: 12

12When viewed in its color version, the floorplan diagram in Exhibit A to the Magna Main

Post Office lease, as amended, depicts certain areas colored yellow and blue, as well as

two red “X” areas. There was no contemporaneous explanation in the Magna Main Post

Office lease amendment for the use of yellow and blue on certain areas of the diagram,

and other contemporaneous evidence does not provide any guidance. Although Frederick

Stromness testified at trial that the yellow and blue areas on the diagram depict “shared”

space that could be leased to a non-postal tenant, there is no other evidence before the

court to explain the meaning of these colors, and, as a result, the purpose of the yellow

and blue colors remains unclear. With regard to the red “X” areas, the Magna Main Post

Office lease amendment explains that this area depicts the square footage that was not

available for use by the USPS when the Magna Main Post Office lease amendment was

executed by the parties. As such, the court understands that the red “X” area is

designated as space that was not available for postal use at the time the Magna Main

Post Office lease was amended on October 26, 1998.

23

Joint Exhibit 73, page 484

The revised floor plan was different than the Phase I floor plan contemplated in the original

Magna Main Post Office lease, as depicted above and illustrated in Joint Exhibit 67 at

page 388, because of the additional unauthorized construction carried out by Build Inc.

In constructing the Phase II space, Build Inc. did not adhere to the original Phase I building

plan. As a result, the location of various rooms and utilities differed from the Phase I

building plan. As Exhibit A illustrates, the women’s restroom and locker room is located

in the area that was intended to be covered parking under the Phase I building plan.

Similarly, the carrier vestibule and the maintenance storage areas also are located in the

area that was intended to be covered parking under the Phase I building plan.

24

“Amendment No. 1” described the area in the building that would “not be available

for postal use,” which was estimated to be “approximately 5,000 net sq. ft.” Contracting

officer Edward Bavouset explained at trial that, under the original Magna Main Post Office

lease, “the Postal Service solicited for and contracted for exclusive space of the entire

location,” however, because Build Inc. also constructed the entire Phase II area, and the

USPS could not justify leasing the entire Phase I and II area combined, the USPS would

not occupy the entire space. Pursuant to the lease amendment, the USPS would not

occupy the space marked with the red “X”s in Exhibit A, which, under the original Magna

Main Post Office lease, was designated as covered parking space.

The area located above the “new area”, and identified by “red x” on the

attached floor plan (exhibit “A”) will not be available for postal use. This area

is approximately 5,000 net sq. ft. Even though this area was included in the

original lease, identified as covered enclosed parking, it will not be available

since the Lessor proceeded with Phase II construction.

The lease amendment prescribed: “[t]he Lessor shall secure the unoccupied space in any

manner he deems appropriate.” At the time the lease amendment was executed, there

was not an approved project for the USPS to rent the additional, unoccupied space.

Although this specific portion of the building would not be available for postal use, the

lease amendment stated: “However, it is specifically noted that the Postal Service will not

be deprived of use as intended in the original lease.”

After the execution of “Amendment No. 1,” the parties referred to the “red ‘x’” space

that was not leased by the USPS as the “Phase II” space. Mr. LaShier testified that the

use of the term “Phase II” in the lease amendment was different than the “Phase II”

referred to in the solicitation and the original building floor plan.

At trial, contracting officer Edward Bavouset explained the difference between the

space contracted for in the original Magna Main Post Office lease and the space as

modified by the lease amendment:

Well, under the original lease and solicitation, the Postal Service solicited

for and contracted for exclusive space of the entire location. As a result of

the lessor’s actions proceeding with Phase 2, which was not authorized, it

created some problems for us. So as a result of this lease amendment, we

took off what has previously been identified in Exhibit JX-73 as identified by

the red Xs on the right side, space that the Postal Service would not occupy.

And that’s what was covered under this lease addendum.

Frederick Stromness explained the square footage included in the Magna Main Post

Office lease, as amended:

[T]he bigger yellow box is definitely leased by the Postal Service, and it [the

lease] lists two of the other areas. I might be able to tell just by looking at

the square footages. But in the actual lease, there’s language that states

that Stromness is going to provide that area in order that functional use of

25

Phase I can be obtained by the Postal Service in the Phase I-Phase II

combined building. So this was part of the negotiation that Mr. Bavouset

and I had, that we agreed to provide space that wasn’t included specifically

in their square foot rental. And I believe the way it turned in the lease --

. . . but that’s in exchange for allowing Stromness to lease the Phase II

space.

When Frederick Stromness was questioned further about his understanding of the square

footage included in the Magna Main Post Office lease, as amended, he testified that the

USPS was leasing the additional 1,500 square feet of new area but that Build Inc. was

“donating” the use of the women’s restroom, the carrier vestibule, and the corridor area:

Q. Are you saying, in effect that they [the USPS] were leasing the big yellow

box, but you were donating the two blue boxes and the smaller yellow box?

A. That’s my -- that’s my testimony.

In addition to modifying the square footage of the Magna Main Post Office, the

lease amendment explained that the lessor would be able to lease the “‘Phase II’ space”

subject to the following conditions:

a) Lease use shall be compatible with postal use and shall not be

considered a competing business;

b) any lease shall contain a termination clause (nine months notice) to

the Postal Service’s benefit, in the event the Postal Service requires

said space;

c) Postal Service shall have right of first refusal for subject space, right

of first refusal shall be exercised by Postal Service within 60 days

upon notification by Lessor of lease for subject space;

d) In the event said space is leased, Lessor shall install a demising wall

separating postal and leased space, said wall shall be constructed

to RE5 security requirements, tenants shall not have any access to

postal space, including secured parking and maneuvering area;

e) Up to 10 parking spaces shall be available for tenant in public

customer parking area;

f) Postal Service shall not have any liability concerning legal actions,

claims, and torts as a result of tenant’s and/or tenant’s customer’s

use of leased space.

All systems, utilities, and access supporting the unoccupied postal space

shall not affect, or be a part of this lease.

26

At trial, Keith LaShier was asked about the reference in paragraph d) to “postal

space”:

Q. The reference to the portion of (d) in the last paragraph on page 6, it

states: Tenant shall not have any access to postal space. Do you see that?

A. [Keith LaShier] I do.

Q. The reference to “postal space” refers to all space that the post office is

renting, correct?

A. Yes.

Q. And the bathrooms constitute postal space, correct?

A. Right.

Q. And the maintenance area, new area and corridor would all be postal

space, correct?

A. Correct.

Q. And in your understanding, is the space -- if the space was rented to a

third party, they would not have access to the bathrooms, correct?

A. Based on this language, yes.

Q. And you signed this language, right?

A. I did.

Frederick Stromness testified that the lease amendment permitted Build Inc. to lease the

Phase II space and contemplated “shared space”:

So we’ve been granted the right by the agreement to lease the entire Phase

II space, which includes some space the Postal Service is using in Phase I

and other space that Stromness has given. And I’m saying that I believe --

my interpretation is that the Phase I Magna Main Post Office lease, with its

addenda, anticipates shared space.

Additionally, the lease amendment referred to a Closed Circuit Television (CCTV)

system. After the execution of the original Magna Main Post Office lease, the USPS

Inspection Service determined that a CCTV system was required to be built into the

original building structure. This requirement further added to the additional space

requirements. At trial, Frederick Stromness explained that the USPS determined it

needed CCTV installed throughout the facility and the CCTV cameras were “included in

the lease. We had to amortize that, I believe.” Defendant’s counsel questioned Frederick

Stromness about the payment for the CCTV system:

27

Q. Do you see the "whereas" clause references a CCTV and criminal

investigation room? Do you see that?

A. [Frederick Stromness] I do.

Q. And the C -- this CCTV was baked into the rent that the Postal Service

was paying to Build Inc.; is that correct?

A. Yes, sir.

Q. And the Postal Service is continuing to pay amounts under the Phase I

Lease Amendment; is that correct?

A. Yes, sir.

Q. And Stromness is claiming damages for some CCT cameras -- some

CCTV cameras; is that correct?

A. Yes, sir.

Q. And those are the same CCTV cameras that are promised under this

lease agreement, correct?

A. Yes, sir.

The lease amendment also modified the Tax Rider attached to the original Magna

Main Post Office lease. The lease amendment explained that, if the unoccupied space

was leased by the lessor, as permitted by the lease, than the reimbursement of taxes for

the property would be prorated according to the following formula:

tenant leased space (5,000 net sq. ft.) divided by 16,007 net sq. ft. = 31

percent of tax bill that the Lessor shall be responsible. Additionally, since

the Postal Service has the benefit of the additional Phase II items, as stated

above, the Lessor percentage responsibility shall be reduced an additional

10 percent to reflect this benefit.

At the time the lease amendment was executed, there was no visible separation,

such as a wall or partition, between the modified Magna Main Post Office space and the

unoccupied space. According to Frederick Stromness, “[t]he space was open between

the space the post office was leasing and utilizing and the space that the Postal Service

determined they did not want to lease at the time the Phase I lease was signed, which is

October of ’98.” Referring to Exhibit A, attached to JX 73, Frederick Stromness stated:

The walls did not exist at the time of the lease. And I will clarify by stating

that below the left side of the larger yellow box that has the words “new

area” upside down in them, specifically more below the area -- the word

“area,” you will see four office spaces. Those walls were in place, but the

other half of the yellow box below “new,” there was no wall.

28

Three days after the lease amendment was executed, a “Design

Variation/Clarification Request” (DVCR) was issued to Build Inc. This DVCR stated: “The

‘extra’ space not leased by the USPS, must be enclosed – this can be done with an 8’

high chain-link fence.” 13 According to contracting officer representative Michael Long, the

United States Inspection Service requested the construction of the fence “to ensure the

safety of the mail,” and “Build Inc. constructed the fence” as “part of their modified

contract.”

On February 2, 1999, contracting officer representative Michael Long inspected

the modified Magna Main Post Office space. Contracting officer representative Michael

Long explained that, when he was conducting the inspection, he saw a “chain-link fence

erected that was about 12 feet high that delineated the Phase I modified space from the

Phase II space.” Mr. Long stated that he did not inspect the unoccupied Phase II area on

the other side of the fence because “[t]here wasn’t any way for us to actually access that

space because the chain-link fence,” and “it was not really relevant to the acceptance of

the Phase I modified space” to inspect the Phase II space. At trial, Frederick Stromness,

however, had no recollection about a fence separating the Magna Main Post Office space

from the remaining Phase II space: “I never saw a fence, nor did I see any indication of a

permanent-type separation being fastened to the floor with any bolts. There’s no damage

to the floor in that area, as I routinely visited the space for maintenance or other reasons.”

The USPS “accepted” the modified Magna Main Post Office space and took

“beneficial occupancy” of the space identified in the Magna Main Post Office lease, as

amended, on February 6, 1999. Thereafter, “[o]n or around October 1, 1999, Defendant

agreed to a name change for lessor under the Phase I Lease from Build, Inc. to MPO

Leasing,” such that, after October 1, 1999, the lessor was MPO Leasing.

On January 10, 2001, the USPS and MPO Leasing executed “Amendment No. 2”

to the Magna Main Post Office lease, as amended. 14 This amendment was intended to

“[c]hange the existing Reimbursement Tax Rider to a Percentage Reimbursement Rider,

to more accurately reflect Main Office occupancy of Parcel #14-20-379-006-000.”

“Amendment No. 2” changed the property tax percentage for the Magna Main Post Office

to 66.5%. The amendment stated: “The Postal Service will reimburse Lessor 66.50% of

the total paid Real Property Taxes . . . .”

13At trial, contracting officer representative Michael Long explained that the architectural

engineering firm Frank Murdock & Associates issued the DVCR, and that the firm was

contracted by the USPS to “look after . . . the design of this project as well as the

construction.”

14Contracting officer Edward Bavouset signed lease “Amendment No. 2” on January 11,

2001.

29

District Training Center Lease

In November 1999, approximately eight months after the USPS took beneficial

occupancy of the modified Magna Main Post Office space, the Salt Lake District

requested a training center space to support their employees and staff throughout the

entire District. Subsequently, in order to fulfill this request, the USPS decided to lease the

unoccupied Phase II space at the Magna postal facility. In a memorandum dated

December 14, 1999, the USPS acknowledged that “[t]he Salt Lake City District is in dire

need of a training facility to provide the ongoing and incidental Postal training required,”

and determined that “[i]n reviewing available space throughout the Salt Lake City area . .

. the space available for lease at 8574 W. 2700 S. in Magna, Utah would most suit our

training needs; is available at fair market value; and could be ready expeditiously.” The

December 14, 1999 memorandum explained that the USPS needed the “facility to be

functional as close to January 10th as possible.”

The USPS and MPO Leasing negotiated a lease for the District Training Center

space between December 1999 and January 2000, and, on January 18, 2000, contracting

officer Edward Bavouset and MPO Leasing executed a lease. The parties refer to the

District Training Center lease as the “Phase II” lease. 15 The lease agreement identified

the “Facility Name/Location” as “SALT LAKE CITY – DISTRICT TRAINING CENTER,”

and the agreement also indicates that it was labeled “Project: E35434.” (capitalization in

original). The District Training Center lease provided that “[t]he Lessor hereby leases to

the Postal Service and the Postal Service leases from the Lessor the following premises,

hereinafter legally described in paragraph 8.” Paragraph 8 provided the legal description

of the premises as:

A portion of the Westerly most 115,486 square foot Parcel of Land identified

as Salt Lake County Parcel No. 14-20-379-004 together with the Southwest

1/2 of the vacated County Road consisting of a 9,805 square foot parcel of

land. Located in Salt Lake County, UT. Also know [sic] as 8450 W 2700

South, Magna, UT. 84044-9998.

During the lease negotiations, MPO Leasing sent a fax identifying the square

footage for the training center as “5,143.5.” At trial, Frederick Stromness was asked about

this fax and the square footage calculation:

Q. And you would agree that the calculation, for what appears to be the

district training space, adds up to 5143, setting aside the partial feet or

inches; is that correct?

A. I’ll agree with that.

15As discussed above, the court notes that the way in which the parties referred to the

amendments and the Phase I and Phase II leases was not always consistent. To bring

uniformity, and in reliance on the actual lease document, the court refers to this

agreement as the District Training Center lease.

30

...

Q. And regardless of who prepared these specific calculations, you sent

them to the Postal Service to represent the calculation for the Magna

facility, correct?

A. Yes.

Q. And you would not provide the Postal Service inaccurate information

regarding calculations at the Magna facility, correct?

A. Correct.

As executed, however, the District Training Center lease stated that, upon this land

parcel, was a “one story brick/block building” described as follows:

AREA SQ. FEET

Net Floor Space 5,374

Platform

Parking and Maneuvering 2,000

Other:

Driveway

Landscaping

Sidewalks

Hallways, restrooms, parking shared by tenants.

Total Site Area: 7,374

(capitalization and emphasis in original). When Frederick Stromness was asked about

the discrepancy in the square footage numbers at trial and why the District Training

Center lease described the space as 5,374 square feet and not 5,143 square feet, he was

unable to offer an explanation. Nor did defendant offer any witnesses to explain the basis

for the 5,374 square foot measurement in the executed District Training Center lease.

Attached to the District Training Center lease was Exhibit A, admitted as Joint

Exhibit 2 page 43, which depicted the floor plan for the District Training Center space:

31

Joint Exhibit 2, page 43

The District Training Center lease had a base period of five years, from January

1, 2000 to December 31, 2004. The annual lease rental rate was $108,149.00 per year.

The terms of the lease provided that the lessor, MPO Leasing, would “reimburse

Postmaster of Magna MPO for prorata share of utilities,” including “Heating System, Air

Conditioning Equipment, Light Fixtures, Sewerage System, Electrical System, Water

System,” and explained that the percentage of usage for the District Training Center

space was 33.5%.

32

Like the Magna Main Post Office lease, as amended, the District Training Space

lease was subject to “General Conditions,” which included clauses regarding alterations

and applicable codes and ordinances. Clause “A.21 ALTERATIONS,” stated, in pertinent

part:

The Postal Service shall have the right to make alterations, attach fixtures

and erect additions, structures or signs in or upon the premises hereby

leased (provided such alterations, additions, structures, or signs shall not

be detrimental to or inconsistent with the rights granted to other tenants on

the property or in the building in which said premises are located) . . .

(capitalization in original). Clause “A.22 APPLICABLE CODES AND ORDINANCES,”

stated:

The Lessor, as part of the rental consideration, agrees to comply with all

codes and ordinances applicable to the ownership and operation of the

building in which the rented space is situated and to obtain all necessary

permits and related items at no cost to the Postal Service.

(capitalization in original). Additionally, attached to the District Training Center lease was

a Tax Rider, which explained that the USPS was required to reimburse MPO Leasing

33.5% of the total paid real property taxes.

After the District Training Center lease was executed on January 18, 2000, the

fence erected between the Magna Main Post Office space and the previously unoccupied

space was removed. As defendant’s expert Kenneth Downes explained at trial, “the space

was opened up so that the training space had access to the exits and the phase 1 portion

of the lease.” The parties have stipulated that, once the District Training Center lease was

executed, the USPS built out the District Training Center space and constructed walls,

including walls intended to partially, but not entirely, separate the Magna Main Post Office

space from the District Training Center space. The USPS also constructed the walls that

separated the training rooms and offices within the District Training Center space. None

of these walls completely separated the Magna Main Post Office space from the District

Training Center space. Frederick Stromness stated that the area between the Magna

Main Post Office space and the District Training Center space “remained open after the

training center occupied the space, with unfettered access” between the spaces.

On July 31, 2002, the USPS and MPO Leasing executed “Lease Amendment No.

1” to the District Training Center lease in order to extend the terms of the lease for a term

beginning January 1, 2006 and continuing until December 31, 2012, at an annual rental

rate of $108,149.00. As a result, the contract expiration date for the District Training

Center lease was extended eight years, from December 31, 2004 to December 31, 2012.

Approximately 10 years after the USPS and MPO Leasing executed the District

Training Center lease, in February 2010, the Magna Main Post Office lease, as amended,

and the District Training Center lease, as amended, were both assigned to plaintiff,

Stromness MPO.

33

In 2010, two years before the District Training Center lease, as amended, would

expire, the USPS began considering whether to renew the District Training Center lease,

as amended, upon the expiration of the base period on December 31, 2012. On

September 8, 2010, the USPS offered to renew the District Training Center lease with

plaintiff for a reduced rental rate of $50,000.00, which would be effective on January 1,

2013, the day after the expiration of the base period. Plaintiff rejected the USPS’s offer.

On December 23, 2010, the USPS completed a “node study” concerning the

District Training Center. According to trial testimony, a “node study” is an internal USPS

study “basically for cost savings. They look at consolidation of facilities to either reduce

lease costs or to move people out of lease space into a postal-owned [s]pace. Sometimes

it’s about downsizing, so it’s really all about cost savings.” The “node study”

recommended termination of the District Training Center lease, as amended, upon its

expiration on December 31, 2012 and that the training center be relocated to Draper,

Utah. As a result of the “node study,” the USPS intended to vacate the District Training

Center space when the base period of the lease expired on December 31, 2012, and to

relocate the training center to the postal facility in Draper, Utah.

On September 4, 2012, more than two months before the District Training Center

lease, as amended, was scheduled to expire, the USPS issued a notice of termination to

plaintiff regarding the “MAGNA – DISTRICT TRAINING CENTER,” or the Phase II lease

agreement. (capitalization in original). The notice explained that “the [District Training

Center] Lease will terminate upon its expiration date, 12/31/2012.” The notice of

termination stated: “[T]he Postmaster will arrange to have the meters read and the utilities

disconnected. All postal equipment will be removed by the above date, and the keys will

be mailed or delivered to you.”

After plaintiff received the notice of termination, plaintiff made efforts to continue

the District Training Center lease, as amended, beyond the expiration of the base term.

On December 6, 2012, Real Estate Asset Counseling, Inc. (REAC), a consulting firm hired

by plaintiff, sent a letter to then USPS contracting officer Candace Kinne offering the

space for $70,000.00 a year for a five-year term. 16 In the letter, REAC stated that

“[s]eparating the space proposed for termination is a costly venture” and that “[t]he

Lessor’s architect has developed a cost estimate of $290,590” to divide the training space

from the main post office space. The USPS rejected plaintiff’s offer.

On December 20, 2012, plaintiff’s counsel, Mr. Hughes, wrote to contracting officer

Candace Kinne and requested that the USPS reconsider and withdraw its notice of

termination or postpone the termination for 90 days so that the parties could “discuss a

resolution.” In this letter to the contracting officer, plaintiff’s counsel alleged that the

District Training Center lease, as amended, was created merely to “paper over” a problem

created during construction at the Magna Post Office facility. The letter stated that the

Magna Post Office facility is “one unitary entity,” that “the Phase II lease is not an

16Contracting officer Candace Kinne was the contracting officer for the termination of the

District Training Center lease, as amended.

34

integrated document,” and that “the legal description of the premises to be covered by the

Phase I and Phase II leases is substantially identical.” In the letter, plaintiff’s counsel

stated that “the Postal Service, which has complete control of the entire facility, has taken

no action to separate the Main Post Office from the space it wishes to vacate by

December 31, 2012.” The letter asserts that “[b]y proposing to terminate the Training

Center lease, the Postal Service leaves the lessor with a landlocked, unusable,

uneconomic remnant which, in effect, deprives the lessors of all reasonable use of their

property, and amounts to a compensable inverse condemnation.”

Plaintiff’s efforts to continue leasing the District Training Center space to the USPS

were not successful, and the USPS began vacating the District Training Center space on

September 26, 2012. The USPS vacated the District Training Center space on or before

December 28, 2012.

At trial, the parties jointly submitted into evidence a notice to the Magna Main Post

Office Postmaster written “to advise that the Lease for the subject location has been

terminated effective Close of Business 12/31/2012.” The notice requests that the

Postmaster at the Magna facility complete certain actions, including:

(1) Remove or plug the mail drop slot, if any, located in the door of the

vacated building; remove all mail drop boxes on the property.

(2) Arrange for removal of all signs which may lead customers to believe

the building is still occupied by the post office. Signs owned by the

Landlord should be left in the building.

(3) Have all utilities that are metered in the name of the U.S. Postal Service

read and disconnected on the effective date of termination.

(4) Leave the existing facility broom cleaned with all debris and postal

equipment removed from the premises, consistent with the requirements

of the Lease; make all necessary repairs, beyond reasonable and

ordinary wear and tear.

(5) Return the keys to the Landlord as directed in the Notice of Termination

Letter to the Landlord and attached to this document. Prompt return of

the keys is required to avoid additional rent.

The Acting Postmaster at the time the District Training Center lease, as amended, expired

was James Kenyon, who testified at the trial. Neither party established at trial whether

Mr. Kenyon, the Acting Postmaster at the time the USPS vacated the training center

space, received the aforementioned notice intended for the Postmaster. In an e-mail sent

on December 28, 2012, James Kenyon confirmed that the District Training Center space

was “broom clean” when it was vacated. At trial, Postmaster Kenyon explained that, after

ensuring that the vacated space was broom clean, he “put an office divider up” so that

the space between the Magna Main Post Office was closed off from the vacated training

center space and no one would be able to enter the vacated space from the Magna Main

35

Post Office. Postmaster Kenyon explained that the partitions he erected were “about 5-

and-a-half, 6 feet tall, about 8 feet wide, somewhere around there, 8, 10 feet wide.”

Postmaster Kenyon also described three instances that occurred when he was the

Acting Postmaster at the Magna Main Post Office, between January 2013 and June 2013,

when members of the Stromness family visited the Magna postal facility and asked to see

the vacated space. According to Postmaster Kenyon’s testimony at trial, he always

accommodated requests from the Stromness family with regard to the vacated space and

he escorted them through the secure main post office space to the vacated, former

training center space, but did not accompany them into the vacated space. At trial,

Postmaster Kenyon testified about one occasion on which plaintiff attempted to enter the

vacated, former training center space:

Q. So the customer -- the Stromnesses came through the customer lobby

and someone knocked on your door?

A. [Postmaster Kenyon] Yes.

Q. And then what happened?

A. I opened the door, and then they wanted to go back to the back area

there, so I walked them over so I could move the partition back and they

could get back to that other area.

Q. Okay, so you’re saying you walked to your office onto the workroom

floor?

A. Yes.

Q. Did you walk with them?

A. Yeah, I did. Walked over to the partition there, yes.

Q. So after you walked into the partitions through the workroom floor, what

did you do next?

A. Moved the partitions so they could get back to that area.

Q. Did you follow them in?

A. No.

Q. Why not?

A. I would have had no reason to go back in that area.

Q. Why did you walk them through the workroom floor, though?

36

A. It’s a secured facility. Like, when we have anybody there, we don’t just

let them, you know, walk around. It’s – the federal mails, everything you got

back there, it’s a secure location.

Postmaster Kenyon also explained that, during each of these visits to the vacated space,

the partitions separating the Magna Main Post Office space and the vacated District

Training Center space were in place.

In May 2013, Roland Dalton became the Postmaster at the Magna Main Post

Office. At trial, Postmaster Dalton stated that he had been instructed by his predecessor,

Postmaster Kenyon, not to access the vacated training center space: “I was briefed by

James Kenyon that the phase 2 part of the building was -- we were not to access that,

that there was possible pending litigation, and we have it blocked off with two -- they are

basically office barriers, cubicle walls that we have blocking the hallway to prevent entry.”

Similar to Postmaster Kenyon, Postmaster Dalton stated that members of the Stromness

family visited the postal facility to see the vacated space. In his testimony, Postmaster

Dalton explained an instance in which members of the Stromness family came to the

Magna facility to visit the former, vacated training center space. Postmaster Dalton

testified that he “brought them [the Stromnesses] into the building,” “took them up to

where they needed to be,” and did not follow them into the vacated training center space.

Postmaster Dalton explained that he did not tell the Stromnesses that they could not

access their space without a USPS escort and that he never denied them access to their

space.

At trial, Frederick Stromness testified that each time he visited the Magna postal

facility he was able to visit the vacated space with a postal escort. Frederick Stromness

testified:

[T]o gain access to the space, we would show up to the site -- and this is --

we don’t think too much about this because we do maintenance on any of

our facilities. We show up; they let us in. But this was a little more rigid in

that we went – go in the postal lobby, we wait in line to get up to a clerk and

say, We want to access this space, and . . . generally the clerk wouldn’t

escort us, but he would notify whoever had the higher authority at the Postal

Service. Sometimes it would be the postmaster; other times it would be a

temporary postmaster. Or, if the postmaster wasn’t there, just one of the

other employees would let us in, and they would stand there with us while

we were in the training center space . . . .

Similarly, Richard Daniel Stromness testified that after the District Training Center lease,

as amended, expired he had to be escorted to the vacated training center space by USPS

personnel. Richard Daniel Stromness testified that, according to his understanding, the

USPS required that he be escorted into the vacated training center space because “the

postal service felt that we could compromise their sanctity to the mail.”

After the USPS notified plaintiff that it intended to vacate the District Training

Center space, the USPS and MPO Leasing began considering how the Magna Main Post

37

Office space would be separated from the vacated District Training Center space. On

September 19, 2012, approximately two weeks after plaintiff received the termination

notice, Richard Daniel Stromness sent an e-mail to Wayne Christensen, who was

previously a USPS employee:

I want to specifically ask Wayne what the Post Offices [sic] responsibility is

when moving out? As you know Wayne, there is the Post Masters [sic]

Office and a break room that are in the training center portion of the building.

Will the Post Office be required to construct the dividing wall. [sic] The

training center also included 2,000 square feet of parking and I would like

to know if we can just take that from the front. What items in the building

belong to the landlord and what belong [sic] to the tenant?

Additionally, in October 2012, plaintiff requested quotes from a contractor

regarding a possible remodel of the District Training Center space to include a new

demising wall and new restrooms. E-mail exchanges admitted into evidence during the

trial demonstrate that, in October and November 2012, Richard Daniel Stromness

corresponded with an architect to receive an estimate for remodeling the District Training

Center space. On May 15, 2013, plaintiff asserted in a letter to the USPS that “if the Postal

Services wishes to exclude the lessor from its space, it [USPS] needs to build a wall under

its Alterations clause” unless “the lessor subleases the Phase II space.” According to

plaintiff, Stromness MPO was not required to construct a demising wall unless the former

training center space was leased because “that [Magna Main Post Office] lease provides

that the lessor [plaintiff] is responsible for installing a demising wall only ‘in the event said

space is [sub]leased. . . .’” (emphasis in original). In response to plaintiff, the USPS

explained that the USPS would build the demising wall. The contracting officer explained

that “[n]otwithstanding the Postal Service’s belief that the Landlord should have erected

the demising wall once the District Training Center Lease expired, the Postal Service

plans to erect a demising wall to ensure the security of the Main Office lease space.”17 In

an e-mail dated June 14, 2013, from Jeffrey Davis, 18 an architect-engineer, to contracting

officer Shirley Wheeler, 19 Mr. Davis explained that to separate the electrical and heating

systems between the Magna Main Post Office space and the District Training Center

space could cost “between $60k and $80k” and an additional “$40-50K to bring in a

17The “node study” did not account for any funding to separate or divide the training

center space from the Magna Main Post Office after the USPS vacated the space.

18Jeffery Davis was an architect engineer who worked for the Salt Lake City Facility

Service Office.

19While Candace Kinne was the contracting officer who issued the termination notice to

Stromness MPO at the expiration of the District Training Center lease, as amended,

Shirley Wheeler was the USPS contracting officer who issued a final decision denying

plaintiff’s supplemental certified claim.

38

separate water line and put in a restroom in the returned space.”20 Based on testimony

received at trial, and the exhibits admitted into evidence, it appears that, while plaintiff

and the USPS were contemplating how to separate the Magna Main Post Office and the

vacated space, the two areas were separated, for approximately nine months, by the

temporary partitions put in place by Postmaster Kenyon in December 2012. It is also

evident that, during this nine-month time period, plaintiff was only permitted to access the

former, vacated training center space with a USPS escort during USPS business hours.

According to trial testimony, on September 9, 2013, approximately nine months

after the USPS vacated the District Training Center space, a demising wall was erected

permanently separating the Magna Post Office space from the space that was previously

leased for the District Training Center. Postmaster Dalton, who was the Postmaster of the

Magna Main Post Office in September 2013, explained that the temporary partitions put

in place by Postmaster Kenyon were removed and the demising wall was installed in their

place. Postmaster Dalton stated that, in order to secure the Magna Main Post Office

space, the USPS had to build the demising wall. According to Postmaster Dalton, during

the construction of the demising wall, a member of the Stromness family came to look at

the construction and advised Postmaster Dalton that “the wall was in the wrong spot.” At

trial, Postmaster Dalton explained that when he was told that the demising wall was being

constructed in the wrong place he informed the Salt Lake City District Finance Manager,

Steven Black, who had previously been in contact with Postmaster Dalton regarding the

Magna Main Post Office. Postmaster Dalton testified at trial that he did not talk to anyone

at the Denver Facilities Service Office about the statement from plaintiff that the demising

wall was in the wrong spot.

The location of the demising wall separating the two areas of the Magna postal

facility was discussed at length at trial, and it is undisputed by the parties that the demising

wall was not constructed in the correct spot. The parties have stipulated that, “[b]ased on

the location of the demising wall and other interior walls, Defendant has retained

possession and control over a certain amount of square footage that was included as part

of the Phase II Lease.” The parties, however, dispute the amount of square footage

retained by defendant. At trial, the parties proffered expert witnesses and other evidence

to establish the amount of square footage retained by defendant as a result of the

demising wall constructed between the Magna Main Post Office and the former training

space. According to the report of plaintiff’s expert, Birk Larsen, the USPS is retaining 683

square feet. Mr. Larsen explained that he measured the vacated, former training center

space to be 4,691 net interior square feet, which is less than the 5,374 net interior square

feet identified in the District Training Center lease. Mr. Larsen testified that the difference

between the 5,374 net interior square footage identified in the District Training Center

lease, and the 4,691 net interior space that he measured, is 683 square feet, thus, he

concluded that, by operation of the demising wall being in the wrong location, the USPS

20 The discussions between Shirley Wheeler and Jeffrey Davis concerning the separation

of the two spaces continued through March 2014.

39

was retaining 683 square feet. In contrast, according to defendant’s expert, Kenneth

Downes, the USPS “is occupying 371 sf of space that was formerly leased under the

Training Space lease.” At trial, Mr. Downes testified that he measured the entire Magna

facility and determined that the actual size of the former training center space was 5,082

square feet, and not 5,374 square feet, as identified in the District Training Center lease,

as amended. After measuring the entire size of the facility, Mr. Downes concluded that,

following the expiration of the District Training Center lease, as amended, the USPS

returned 4,711 square feet of space and is, therefore, continuing to occupy 371 square

feet of the training center space.

Evidence received at trial establishes that, as a result of the demising wall

constructed between the Magna Main Post Office space and the vacated, former training

center space, the vacated space is not compliant with local codes and ordinances

because it does not have access to restrooms, electrical panels, or a second means of

ingress or egress. The government’s expert witness, Kenneth Downes, explained that the

demising wall resulted in three deficiencies that rendered the vacated space not code

complaint:

Q. I’d like to talk about code compliance with the district training space.

Generally you agree that the district training space as-is is not code

compliant, correct?

A. [Kenneth Downes] I do.

Q. Why do you believe that? Why is that your opinion?

A. It’s basically three deficiencies. One is the exiting, the two exits are

required. To be occupied it needs toilets, and the third issue is the -- any

tenant need [sic] to have access to their electrical panels, which all the

electrical panels are currently within the postal service, and they don’t have

free access to that.

Similarly, plaintiff’s expert, Birk Larsen, concluded that “[m]odification of the vacant suite

within the subject property will be required to make leasable and usable by another

tenant.” Mr. Larsen stated that the vacated space is not code compliant:

A. The primary way -- there are two primary ways I see they did not: One

is it only contains one egress point; and the other is that it’s missing

restrooms for any sort of tenant.

...

The other code issue I know is that there would need to be electrical

separation or at least access to an electrical subpanel for that tenant. Right

now the US Postal Service tenant controls access to the electrical for the

building.

40

Additionally, trial testimony established that, after the USPS vacated the District

Training Center space on December 31, 2012, it did not deliver keys to the space to

plaintiff, notwithstanding the language in the termination notice that the keys would be

delivered to plaintiff. At trial, Richard Daniel Stromness explained that the USPS did not

provide keys to plaintiff after the termination:

Q. Now, when -- after -- on or after December 31, 2012, did the postal

service ever mail the keys to Stromness?

A. [Richard Stromness] They did not.

Q. Did they ever provide them to you personally?

A. They did not.

Q. Did anyone ever explain to you why they weren’t doing that?

A. No. There was no explanation.

Plaintiff obtained the key to the vacated space on September 9, 2013, the same

day that the wall was constructed, when plaintiff changed the lock to the exterior door that

provided access to the vacated District Training Center space. Plaintiff changed the lock

to the exterior door after the USPS informed plaintiff that maintenance personnel would

be removing the lock cylinders on September 9, 2013. Postmaster Dalton explained:

So after the wall was constructed and the construction was complete, the

postal service had their maintenance people come out and they pulled all

the cylinders, which is the actual lock, out of the doorknob. They said those

belong to us and so they pulled those all out. I was told that somebody from

the Stromness family had a locksmith coming and that they would change -

- that they would key -- put their lock into that slot so that they had access

to that building.

Frederick Stromness testified:

So, in September of 2013, I became aware that the Postal Service was

closing off the Phase II space from the Magna main post office space, and

I became aware of that because my recollection is that I got a phone call on

my cell phone from Magna Post Office. I don’t believe it was the postmaster,

but it was a postal employee that identified themselves and informed me

the Postal Service was removing the cores out of the locks.

...

And in this phone call, I wasn’t informed about the demising wall, but I was

informed that the postal service was removing those cores and, if I wanted

to secure the space, we needed to take steps to secure it ourselves, at

which point I called my son, Richy, and said, Well, we’ve got to run out there

41

and get a locksmith. He called the locksmith, and he proceeded to the site

and then observed the construction.

Testimony received at trial from Postmaster James Kenyon and Postmaster Roland

Dalton indicated that the Postmaster of the Magna Post Office facility had control over

keys to the District Training Center space prior to the lease termination and continuing

after the lease terminated on December 31, 2012, until the locks were changed on

September 9, 2013. Postmaster Kenyon testified that, while he was Acting Postmaster at

the Magna Main Post Office, he never had a conversation about a key. Postmaster

Kenyon explained that he did not know whether he possessed a key that would access

the front door to the former training center space. He also testified that he never sent

anyone a key to the front door of the former training space and he never refused to turn

over the keys to plaintiff.

Q. But you never sent them [Stromness] a key to the front door?

A. [James Kenyon] I never sent anybody a key to the front door.

Q. Did anybody suggest to you that you should send them a key?

A. No, I’ve never had a conversation about a key.

Q. So nobody from the district ever contacted you and said, “Hey, you need

to send the Stromnesses the key”?

A. No.

Postmaster Dalton explained at trial that he did not offer plaintiff the key to the vacated

space for security reasons:

The reason that I didn’t offer the key -- well, number one, they never did ask

for a key. But until our side of the building got secured, I have to provide

security for the post office side of the building. And so I did not offer to give

them a key because I had to be in control of all the keys for the building.

Postmaster Dalton stated that he was never instructed to return the keys to the former

District Training Center space to plaintiff.

Since the USPS vacated the District Training Center space on December 31, 2012,

the USPS has not reimbursed 33.5% of the taxes for the Magna postal facility for 2013 or

the following years.

Prior to the construction of the demising wall, on May 15, 2013, plaintiff submitted

a certified claim to the USPS seeking a contracting officer’s final decision. In the certified

claim, plaintiff alleged that the USPS was a holdover tenant keeping complete access

and control over the former training center space; that the USPS vacated the wrong

portion of the Magna postal facility; that the Magna Main Post Office lease, as amended,

and the District Training Center lease, as amended, were a unified lease; that the USPS’s

42

termination of the District Training Center lease deprived plaintiff of reasonable use of the

property; that the USPS was unjustly enriched; and that the USPS violated the covenant

of good faith and fair dealing. Plaintiff demanded that the USPS pay the annual rental rate

for the District Training Center space through 2019; that the USPS pay all heating, air

conditioning, lighting, sewage, electrical, and water expenses; and that the USPS

reimburse plaintiff for all taxes for the space.

Contracting officer Bradford Meador issued a final decision to plaintiff on August

15, 2013, which denied plaintiff’s claim in full. 21 In the final decision, the contracting officer

asserted that the “1997 Main Office Lease, as amended, and the 2000 District Training

Center Lease, as amended, are not one unified lease.” The contracting officer stated that

“[t]he two leases are distinct” because they were entered into at different times and with

different occupancy dates, that the leased premises were different, and that the leases

had separate rental obligations and tax reimbursement obligations. The contracting officer

asserted that “[f]rom January 2000 through December 2012, the Postal Service made

separate rental payments and tax reimbursements from separate finance numbers for the

Main Office and the District Training Center.” The contracting officer concluded that “[t]he

Postal Service properly terminated the District Training Center Lease and so the Postal

Service is not responsible for any further rent, taxes or utilities associated with this [District

Training Center] space.” Additionally, the contracting officer informed plaintiff that the

USPS “plans to erect a demising wall to ensure the security of the [Magna] Main [Post]

Office leased space.”

On January 21, 2015, plaintiff submitted a supplemental, certified claim to the

USPS seeking a contracting officer’s final decision. In addition to reasserting plaintiff’s

claims set forth in the May 15, 2013 certified claim, plaintiff’s supplemental certified claim

requested a declaration that the USPS be required to move the demising wall to the

correct location and to allow plaintiff access to restrooms, hallways, parking, and code-

compliant ingress and egress. Plaintiff’s supplemental certified claim requested payment

for the fair market rental value of the vacated district training center space and parking

area. Plaintiff also requested reimbursement of property taxes for 2006-2009 and 2012

and a declaration that plaintiff is entitled to receive property tax reimbursements for the

years in which the vacated training center spaced remains “uninhabitable.”

In response to plaintiff’s supplemental, certified claim, a different contracting

officer, Shirley Wheeler, issued a final decision, granting property tax reimbursement for

the District Training Center space for the years 2006-2009 and 2012, but denying, in full,

the remainder of plaintiff’s supplemental certified claim.

At the time the trial occurred in this case, the USPS continued to occupy the Magna

Main Post Office space, and the Magna Main Post Office lease, as amended, does not

expire until March 31, 2018. Since the USPS vacated the District Training Center space

on December 31, 2012, to the time of the trial, plaintiff has not leased the former, vacated

training center space to another tenant. Plaintiff has hired a real estate professional to

21 Bradford Meador was not called to testify at the trial held in this case.

43

market the property, however, plaintiff has been told “that the space is not able to be

occupied in its present condition.”

Procedural History

Plaintiff filed its complaint in the United States Court of Federal Claims on August

6, 2014, thereafter, plaintiff filed an amended complaint on May 18, 2015, appealing the

contracting officers’ final decisions on plaintiff’s original, certified claim and plaintiff’s

supplemental, certified claim. In the amended complaint, plaintiff alleges that the USPS

breached the Magna Main Post Office lease, as amended, and the District Training

Center lease, as amended; that the USPS is a holdover tenant owing holdover rent; that

the USPS effected a taking in violation of the Fifth Amendment to the United States

Constitution; that the two leases represent a single, unified agreement for the entire

Magna Post Office building and should be reformed to reflect the intent of the parties; and

that the USPS breached the covenant of good faith and fair dealing implied in both lease

agreements. Plaintiff seeks declaratory relief, including a declaration that the USPS’s

termination of the District Training Center lease, as amended, “was arbitrary, capricious,

wrongful, improper and in violation of the parties’ rights and obligations”; a declaration

“that the leases for the Magna premises be interpreted and/or reformed in conformance

with the agreement and intention of the parties”; a declaration that “the Postal Service

vacated the wrong portion of the facility;” a declaration that the hallways, restrooms, and

parking are to be shared by the USPS with other tenants in the facility; and a declaration

that the USPS is contractually obligated to move the walls it erected to the correct

location. Plaintiff seeks monetary damages “in an amount to be proven at trial

representing the fair market value currently estimated to be $18.00 per square foot” for

the USPS’s occupancy and use of the former training center space between January 1,

2013 through the date of judgment and continuing after the judgment until the USPS

relinquishes control of the former training center space, as well as “damages in the

amount of all unreimbursed real property taxes for the entire property up to the date of

judgment” and continuing after judgment until the USPS relinquishes control of the former

training center space. Plaintiff also seeks to recover monetary damages “for the cost to

remediate and restore the facility by removing detrimental alterations, additions or

structures” made by the USPS “and to restore the premises to as good condition that

existed at the time it entered the premises,” which, at the time the amended complaint

was filed, amounted to $56,675.00. Plaintiff also demands interest, costs, and attorneys’

fees. In response to the amended complaint, defendant filed a motion to dismiss plaintiff’s

complaint, and the court issued a decision denying defendant’s motion to dismiss on April

12, 2016. See Stromness MPO, LLC v. United States, Case No. 14-711C (Apr. 12, 2016).

A trial in the above-captioned case was held in Salt Lake City, Utah.

44

DISCUSSION

As a preliminary matter, the jurisdiction of this court is uncontested by the parties,

and this court independently concludes that it has jurisdiction over the above-captioned

case pursuant to 28 U.S.C. § 1491(a)(2) (2012).

In the instant case, plaintiff puts forth various breach of contract allegations against

the USPS, as well as allegations that the USPS violated the Takings Clause of the Fifth

Amendment to the United States Constitution. Plaintiff’s breach of contract allegations

are based on the same facts as those regarding plaintiff’s takings claims. Much of the

breach of contract and takings allegations arise from a disagreement about the location

of the demising wall constructed in September 2013 and the space within the Magna

facility over which the USPS has exclusive use and control pursuant to the terms of the

Magna Main Post Office lease, as amended, and the District Training Center lease, as

amended. Specifically, the parties dispute whether the USPS has the right to exclusive

use of the women’s bathroom and locker room, a vestibule, corridor space, and a

maintenance storage area within the Magna facility, all of which were retained for the

USPS’s exclusive use when the USPS constructed the demising wall inside the Magna

facility to separate the active main post office area from the former training space area.

Plaintiff’s principle breach of contract argument alleges that, when defendant

constructed the demising wall in the Magna facility and prevented access from the former

training space to the women’s bathroom and locker room, vestibule, corridor space, and

maintenance storage area, the USPS impeded plaintiff’s right to lease the former training

space to non-postal tenants, as allegedly granted to plaintiff in the Magna Main Post

Office lease, as amended. According to plaintiff, the demising wall is a “detrimental

alteration” in breach of the amended Magna Main Post Office lease because, as a result

of the demising wall, the former training center space is not compliant with local building

laws and plaintiff is unable to lease the space to a non-postal tenant. Plaintiff contends

that, despite the “written covenant” in the Magna Main Post Office lease, as amended,

granting plaintiff the right to lease the unoccupied, former training center space in the

Magna facility, the USPS “made that impossible by walling off all restrooms, shutting off

the circuit breakers for that space,” and “making alterations which render the space non-

Code compliant,” thereby breaching the Magna Main Post Office lease, as amended. In

addition to its allegations that defendant breached the Magna Main Post Office lease, as

amended, when it constructed the demising wall, plaintiff alleges that the USPS is liable

for a Fifth Amendment taking because the USPS’s action have left plaintiff with an

“uneconomic remnant,” an “isolated, desolate island of useless property, a landlocked

remnant lacking any necessities.” Additionally, plaintiff argues that “the Postal Service

constructed its original walls and the later demising wall in the wrong locations, walling

off approximately 400 square feet of the Phase II space. 22

22As discussed below, throughout the proceedings in this case, plaintiff has changed the

amount of square footage allegedly retained as a result of the incorrect location of the

45

Additionally, plaintiff argues that the USPS breached the District Training Center

lease, as amended, and effected a taking without just compensation by retaining

possession and control of the District Training Center space after the termination of the

District Training Center lease, as amended, on December 31, 2012, and by removing

CCTV equipment from the District Training Center space. Plaintiff also argues that the

USPS breached the Magna Main Post Office lease, as amended, by failing to properly

reimburse plaintiff for property taxes assessed against the former training center space.

Plaintiff also argues that the USPS breached the implied covenant of good faith

and fair dealing by: denying or making delinquent reimbursement payments for property

taxes; constructing the demising wall without the mandatory consultation with appropriate

State and local officials; constructing the demising wall without advance discussions with

plaintiff; disconnecting all utilities to the former training center space upon termination of

the District Training Center lease, as amended; blocking the former training center space

from necessary utilities and facilities; failing to provide sufficient notice of the USPS’s

intent to terminate the District Training Center lease, as amended; and failing to postpone

the termination of the District Training Center lease, as amended.

In response, defendant argues that plaintiff has failed to prove its allegations, with

the exception that the USPS concedes to erroneously retaining 371 square feet of space

within the Magna Main Post Office area, based on the measurements of the USPS’s

expert, as a result of constructing the demising wall in the wrong location, which should

have been returned to plaintiff with the former training center space on January 1, 2013. 23

Defendant argues that plaintiff failed to prove that the USPS breached the Magna Main

Post Office lease, as amended, or the District Training Center lease, as amended, by

building the demising wall and retaining exclusive use of the women’s bathroom and

locker room, vestibule, corridor space, and maintenance storage area. According to

defendant, the Magna Main Post Office lease, as amended, granted the USPS exclusive

right to the postal space in the Magna facility, which includes the women’s restroom,

vestibule, corridor space, and maintenance storage area. Defendant argues that the

USPS’s construction of the demising wall in September 2013 was in compliance with both

the Magna Main Post Office lease, as amended, and the District Training Center lease,

as amended, because the former training center space was required to be secured under

the amendment to the Magna Main Post Office lease and plaintiff asked the USPS to

install the wall pursuant to the Alterations clause in the District Training Center lease, as

amended. Moreover, defendant asserts that, under the terms of the District Training

Center lease, as amended, the USPS was required to return the former training center

space to plaintiff as it was received in January 2000, and, when the space was received,

there was a chain-link fence separating the main post office space, including the women’s

demising wall. Plaintiff has alleged that the USPS is improperly retaining 387.899 square

feet, 400 square feet, and 683 square feet.

23 As discussed, the parties both presented expert witnesses at trial to testify about the

amount of square footage improperly retained as a result of the demising wall’s incorrect

location. These expert witnesses had different conclusions, set forth in more detail below.

46

bathroom and locker room, vestibule, corridor space, and maintenance storage area, from

the space that would later become the training center. Furthermore, defendant argues

that, to the extent the court finds the USPS breached the lease agreements by

constructing the demising wall, the court should deny plaintiff’s request for monetary relief

because plaintiff has failed to prove damages.

Additionally, defendant argues that plaintiff’s other breach of contract allegations

also should be denied. Specifically, defendant argues that, other than the erroneously

retained space, the USPS did not improperly retain control over the training center space

after the District Training Center lease, as amended, terminated on December 31, 2012,

and that the USPS did not improperly remove the CCTV equipment from the former

training center space because the USPS continues to pay rent for the CCTV equipment.

Defendant also argues that it is not obligated to reimburse plaintiff for the property taxes

assessed against the vacated training center space since 2013 because that obligation

expired with the District Training Center lease, as amended, on December 31, 2012. To

the extent plaintiff seeks equitable relief, defendant argues that the court is without

jurisdiction to award such equitable relief because plaintiff is not entitled to monetary

damages, other than for the 371 square feet of improperly retained space, for which

plaintiff has failed to prove damages. 24

In response to plaintiff’s takings claims, defendant argues that plaintiff’s claims are

legally barred because the property rights at issue are governed by the District Training

Center lease, as amended, or the Magna Main Post Office lease, as amended, thus

plaintiff’s claims lie in contract alone. According to defendant, plaintiff’s alleged rights to

the women’s bathroom and locker room, vestibule, corridor space, and maintenance

storage area are based on the terms of the District Training Center lease, as amended,

thus “[b]ased on Stromness’ own admissions, the rights at issue” were voluntarily created

by contract. Defendant argues that, when a contract between a private party and the

government creates the property right subject to a takings claim, the proper remedy for

infringement lies in a contract claim, not in a taking claim. Furthermore, according to

defendant, because plaintiff leased away its rights to the women’s bathroom and locker

room, vestibule, corridor space, and maintenance storage area, plaintiff does not have a

present possessory interest in the space.

As a threshold issue, the court considers whether plaintiff’s claims are based on

rights created voluntarily by contract, so as to preclude plaintiff’s takings claims. Plaintiff

does not articulate whether its taking claims are independent or alternative allegations to

plaintiff’s breach of contract claims. Indeed, plaintiff did not submit any response to

defendant’s argument that plaintiff’s takings claims are legally barred.

As a general proposition, although a lease concerns property interests, a lease is

a contract. See Prudential Ins. Co. of Am. v. United States, 801 F.2d 1295, 1298 (Fed.

24Defendant asserts that, while plaintiff is entitled to recover for the improperly retained

371 square feet of space, plaintiff has ultimately failed to prove the amount of damages it

would be entitled to receive.

47

Cir. 1986); see also Keydata Corp. v. United States, 504 F.2d 1115, 1123 (Ct. Cl. 1974)

(“But though a lease may concern and convey a property interest, it is also very much a

contract. . . .”). Pursuant to the precedent established by the United States Court of

Appeals for the Federal Circuit, plaintiff is permitted to file a complaint pursuing relief

under its breach of contract theory as well as a Fifth Amendment takings theory. See

Stockton E. Water Dist. v. United States, 583 F.3d 1344, 1368 (Fed. Cir. 2009). If,

however, the court determines that the property rights alleged to have been taken were

solely created by the terms of the voluntary lease agreements between plaintiff and

defendant, then the proper remedy, if any, lies in contract. See Barlow & Haun, Inc. v.

United States, 87 Fed. Cl. 428, 438 (2009). Although plaintiffs are permitted to plead

alternative theories of breach of contract and a Fifth Amendment taking, “the concept of

a taking as a compensable claim theory has limited application to the relative rights of

party litigants when those rights have been voluntarily created by contract.” Sun Oil Co.

v. United States, 572 F.2d 786, 818 (Ct. Cl. 1978) (explaining that remedies for violation

of a lease right must be directed at the United States in its proprietary capacity and not in

its sovereign capacity).

While a plaintiff may simultaneously allege in its complaint breach of contract and

takings claims, interference with a right created by contract “generally gives rise to a

breach claim not a taking claim.” Id. at 818. “It is well established that, generally,

governmental interference with a contractual right does not give rise to a taking, but

instead entitles a plaintiff to seek compensation for breach of contract.” Bailey v. United

States, 53 Fed. Cl. 251, 256 (2002); see also Barlow & Haun, Inc. v. United States, 87

Fed. Cl. at 438 (“Ordinarily, the Government’s interference with contractual rights arising

under a contract with the Government will give rise to a breach of contract action, rather

than a taking claim.”). “[A] Fifth Amendment takings claim is not viable when the parties’

rights and obligations are governed by contract.” Sonoma Apartment Assocs. v. United

States, 124 Fed. Cl. 595, 600 (2015); see also Tamerlane, Ltd. v. United States, 80 Fed.

Cl. 724, 738 (2008) (“Although rights existing independently of a contract may be brought

pursuant to a takings claim, when a contract between a private party and the Government

creates the property right subject to a Fifth Amendment claim, the proper remedy for

infringement lies in contract, not taking.”); Allegre Villa v. United States, 60 Fed. Cl. 11,

18 (2004) (“When a contract between a private party and the Government creates the

property right subject to a Fifth Amendment claim, the proper remedy for infringement lies

in a contract claim, not one for a taking.”).

The United States Court of Appeals for the Federal Circuit has held “that when the

government itself breaches a contract, a party must seek compensation from the

government in contract rather than under a takings claim.” Piszel v. United States, 833

F.3d 1366, 1376 (Fed. Cir. 2016). “Taking claims rarely arise under government contracts

because the Government acts in its commercial or proprietary capacity in entering

contracts, rather than in its sovereign capacity. Accordingly, remedies arise from the

contracts themselves, rather than from the constitutional protection of private property

rights.” Hughes Commc’n Galaxy, Inc. v. United States, 271 F.3d 1060, 1070 (Fed. Cir.

2001) (internal citations omitted); see also A & D Auto Sales, Inc. v. United States, 748

F.3d 1142, 1156 (Fed. Cir. 2014) (explaining that remedies available under a breach of

contract theory make takings liability redundant); St. Christopher Assocs., L.P. v. United

48

States, 511 F.3d 1376, 1385 (Fed. Cir. 2008) (“In general, takings claims do not arise

under a government contract because, as stated by the Court of Federal Claims, the

government is acting in its proprietary rather than its sovereign capacity, and because

remedies are provided by the contract.”).

Additionally, when a plaintiff alleges a breach of contract claim and a takings claim,

the court first will consider whether a viable contract claim exists because “[i]t has long

been the policy of the courts to decide cases on non-constitutional grounds when that is

available, rather than reach out for the constitutional issue.” Stockton E. Water Dist. v.

United States, 583 F.3d at 1368; see also City Line Joint Venture v. United States, 503

F.3d 1319, 1323 (Fed. Cir. 2007) (“When a viable contract claim exists, we should not

reach out to decide the takings issue. Clearly, there should not be double recovery, we

should not commingle takings compensation and contract damages.”). “If the right at

issue is not governed by the terms of the parties’ contract, plaintiffs may pursue a takings

action.” Allegre Villa v. United States, 60 Fed. Cl. at 18.

In the instant case, the dispute between the parties arises from a disagreement

about the terms in the Magna Main Post Office lease, as amended, and the District

Training Center lease, as amended. Plaintiff’s claims revolve around the assertion that

the USPS breached the terms of the Magna Main Post Office lease, as amended, and

the District Training Center lease, as amended, and that the USPS interfered with

plaintiff’s rights in the facility as set forth in the terms of these lease agreements, including

the right to lease non-postal space to a non-postal tenant. Plaintiff’s takings claim that the

USPS has left Stromness with an “uneconomic remnant” is apparently based on the

language in the Magna Main Post Office lease, as amended, that grants Stromness the

right to lease unoccupied space in the Magna facility to a non-postal tenant, under certain

delineated conditions. Similarly, plaintiff’s takings claims that the USPS retained control

of the former training center space between January 1, 2013 and September 9, 2013,

that the USPS continues to retain control over 2,000 square feet of “parking and

maneuvering” space, and that the USPS continues to retain control over 683 square feet

of space as a result of the incorrectly placed demising wall are anchored in the rights and

obligations of the parties as set forth in the terms of the Magna Main Post Office lease,

as amended, and the District Training Center lease, as amended, governing the Magna

facility. Because plaintiff’s allegations are based on rights and obligations created

voluntarily by the parties in these lease agreements, the proper remedy for plaintiff, if any,

lies in contract and not pursuant to a takings theory. Accordingly, the court considers

plaintiff’s numerous breach of contract claims and does not consider plaintiff’s takings

claims.

It is well settled that “[t]o recover for breach of contract, a party must allege and

establish: (1) a valid contract between the parties, (2) an obligation or duty arising out of

the contract, (3) a breach of that duty, and (4) damages caused by the breach.” 25 San

25 As indicated by a Judge of the United States Court of Federal Claims, “[t]o satisfy this

fourth element, the plaintiff also must show that: ‘(1) the damages were reasonably

foreseeable by the breaching party at the time of contracting; (2) the breach is a

substantial causal factor in the damages; and (3) the damages are shown with reasonable

49

Carlos Irr. & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir.), reh’g denied

(Fed. Cir. 1989); see also Shell Oil v. United States, 130 Fed. Cl. 8, 34 (2017); Barlow &

Haun, Inc. v. United States, 118 Fed. Cl. 597, 620 (2014); Cooley v. United States, 76

Fed. Cl. 549, 555–56 (2007) (citing San Carlos Irr. & Drainage Dist. v. United States, 877

F.2d at 959).

The parties in this case do not dispute that the Magna Main Post Office lease, both

in its original form and as amended, and the District Training Center lease, in its original

form and as amended, are valid contracts between the parties. Instead, as identified

above, the dispute between the parties relates to the obligations and rights of the parties

pursuant to the original Magna Main Post Office lease, executed on January 27, 1997,

the amended Magna Main Post Office lease, executed on January 12, 1998, and the

District Training Center lease, executed on January 18, 2000 and amended on July 31,

2002 and, again, amended in February and April of 2010. The parties dispute whether

the USPS breached the terms of these lease agreements, how the provisions of these

lease agreements should be interpreted, and whether the leases represent a single

agreement between the USPS and plaintiff and should be interpreted together, or whether

each lease represents a separate and distinct agreement between the parties and should

be read independently. To determine if defendant breached the Magna Main Post Office

lease, as amended, and the District Training Center lease, as amended, the court must

look to the language of the contract documents and the rights, duties, and obligations of

the parties, as prescribed therein. Because the parties dispute the terms of the lease

agreement documents, the outcome of the above-captioned case turns on the

interpretation of the language in the Magna facility lease agreement documents entered

into by the USPS and plaintiff.

“Contract interpretation starts with the language of the contract.” SUFI Network

Servs., Inc. v. United States, 785 F.3d at 593 (Fed. Cir. 2015); see also Agility Pub.

Warehousing Co. KSCP v. Mattis, 852 F.3d 1370, 1380 (Fed. Cir. 2017); Bell/Heery v.

United States, 739 F.3d 1324, 1331 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir.

2014); Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 824 (Fed. Cir. 2010),

cert. denied, 562 U.S. 1178 (2011); LAI Servs., Inc. v. Gates, 573 F.3d 1306, 1314 (Fed.

Cir.), reh’g denied (Fed. Cir. 2009); Barron Bancshares, Inc. v. United States, 366 F.3d

1360, 1375 (Fed. Cir. 2004); Foley Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir.

1993); Nw. Title Agency, Inc. v. United States, 126 Fed. Cl. 55, 57-58 (2016) (citing Foley

Co. v. United States, 11 F.3d 1032, 1034 (Fed. Cir. 1993)) (“The starting point for any

contract interpretation is the plain language of the agreement.”); Beard v. United States,

125 Fed. Cl. 148, 158 (2016); Eden Isle Marina, Inc. v. United States, 113 Fed. Cl. 372,

483–84 (2013).

“‘“In contract interpretation, the plain and unambiguous meaning of a written

agreement controls.’”” Arko Exec. Servs., Inc. v. United States, 553 F.3d 1375, 1379 (Fed.

Cir. 2009) (quoting Hercules Inc. v. United States, 292 F.3d 1378, 1380–81 (Fed. Cir.),

certainty.’” Shell Oil v. United States, 130 Fed. Cl. at 34 (quoting Indiana Michigan Power

Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005)).

50

reh’g and reh’g en banc denied (Fed. Cir. 2002) (quoting Craft Mach. Works, Inc. v. United

States, 926 F.2d 1110, 1113 (Fed. Cir. 1991))). “Terms must be given their plain meaning

if the language of the contract is clear and unambiguous.” SUFI Network Servs., Inc. v.

United States, 785 F.3d at 593 (citing Coast Fed. Bank, FSB v. United States, 323 F.3d

1035, 1038 (Fed. Cir. 2003)); see also Nw. Title Agency, Inc. v. United States, 855 F.3d

1344, 1347 (Fed. Cir. 2017); CanPro Invs. Ltd. v. United States, 130 Fed. Cl. 320, 347

(2017); Beard v. United States, 125 Fed. Cl. at 158 (“If the contract language is

unambiguous, then it must be given its plain and ordinary meaning . . . .”). The United

States Court of Appeals for the Federal Circuit stated in Massie v. United States:

In interpreting a contract, “[w]e begin with the plain language.” “We give the

words of the agreement their ordinary meaning unless the parties mutually

intended and agreed to an alternative meaning.” In addition, “[w]e must

interpret the contract in a manner that gives meaning to all of its provisions

and makes sense.’”

Massie v. United States, 166 F.3d 1184, 1189 (Fed. Cir. 1999) (quoting McAbee Constr.,

Inc. v. United States, 97 F.3d 1431, 1435, reh’g denied and en banc suggestion declined

(Fed. Cir. 1996); (internal citations omitted)); Jowett, Inc. v. United States, 234 F.3d 1365,

1368 (Fed. Cir. 2000) (quoting McAbee Constr., Inc. v. United States, 97 F.3d at 1435

and Harris v. Dep’t of Veterans Affairs, 142 F.3d 1463, 1467 (Fed. Cir. 1998)); Harris v.

Dep’t of Veterans Affairs, 142 F.3d at 1467; see also Coast Professional, Inc. v. United

States, 828 F.3d 1349, 1354 (Fed. Cir. 2016); Shell Oil Co. v. United States, 751 F.3d

1282, 1305 (Fed. Cir.), reh’g en banc denied (Fed. Cir. 2014) (noting that a contract must

be interpreted in context, giving meaning to the document as a whole) (citing NVT Techs.,

Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004); Metric Constructors, Inc. v.

Nat’l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999)); McHugh v. DLT

Solutions, Inc., 618 F.3d 1375, 1380 (Fed. Cir. 2010); Giove v. Dep’t of Transp., 230 F.3d

1333, 1340-41 (Fed. Cir. 2000) (“In addition, we must interpret the contract in a manner

that gives meaning to all of its provisions and makes sense. Further, business contracts

must be construed with business sense, as they naturally would be understood by

intelligent men of affairs.”) (citations omitted); Gould, Inc. v. United States, 935 F.2d 1271,

1274 (Fed. Cir. 1991) (indicating that a preferable interpretation of a contract is one that

gives meaning to all parts of the contract rather than one that leaves a portion of the

contract “useless, inexplicable, void, or superfluous”). A Judge of the United States Court

of Federal Claims has explained:

“The words of a contract are deemed to have their ordinary meaning

appropriate to the subject matter, unless a special or unusual meaning of a

particular term or usage was intended, and was so understood by the

parties.” Lockheed Martin IR Imaging Sys., Inc. v. West, 108 F.3d 319, 322

(Fed. Cir. 1997). “Under general rules of contract law we are to interpret

provisions of a contract so as to make them consistent.” Abraham v.

Rockwell Int'l Corp., 326 F.3d 1242, 1251 (Fed. Cir. 2003). “[A]n agreement

is not to be read in a way that places its provisions in conflict, when it is

reasonable to read the provisions in harmony. . . . [T]he provisions must be

read together in order to implement the substance and purpose of the entire

51

agreement.” Air–Sea Forwarders, Inc. v. United States, 166 F.3d 1170,

1172 (Fed. Cir. 1999). “A reasonable interpretation must assure that no

contract provision is made inconsistent, superfluous, or redundant.” Medlin

Const. Group, Ltd. v. Harvey, 449 F.3d 1195, 1200 (Fed. Cir. 2006) (internal

quotation marks omitted).

Dynetics, Inc. v. United States, 121 Fed. Cl. 492, 512 (2015); see also Marquardt Co. v.

United States, 101 Fed. Cl. 265, 269 (2011) (“In interpreting contractual language, the

court must give reasonable meaning to all parts of the contract and avoid rendering

portions of the contract meaningless.” (citation omitted)).

The Federal Circuit also has indicated that “‘[t]he contract must be construed to

effectuate its spirit and purpose giving reasonable meaning to all parts of the contract.’”

Arko Exec. Servs., Inc. v. United States, 553 F.3d at 1379 (quoting Hercules Inc. v. United

States, 292 F.3d at 1380–81); see also Nw. Title Agency, Inc. v. United States, 855 F.3d

at 1347; LAI Servs., Inc. v. Gates, 573 F.3d at 1314; Gardiner, Kamya & Assocs., P.C. v.

Jackson, 467 F.3d 1348, 1353 (Fed. Cir. 2006) (citations omitted); Medlin Constr. Grp.,

Ltd. v. Harvey, 449 F.3d 1195, 1200 (Fed. Cir. 2006) (reviewing the contract as a whole

to determine the meaning of relevant provisions); Hunt Constr. Grp., Inc. v. United States,

281 F.3d 1369, 1372 (Fed. Cir. 2002) (“We begin with the plain language when

interpreting a contract . . . . The contract must be considered as a whole and interpreted

to effectuate its spirit and purpose, giving reasonable meaning to all parts.” (citations

omitted)); Beard v. United States, 125 Fed. Cl. at 158 (quoting Pac. Gas & Elec. Co. v.

United States, 536 F.3d 1282, 1288 (Fed. Cir. 2008)) (“In construing the meaning of a

contractual provision, the court does not interpret the disputed term or phrase in isolation,

but “construes contract terms in the context of the entire contract, avoiding any meaning

that renders some part of the contract inoperative.”).

It has been “‘a fundamental precept of common law that the intention of the parties

to a contract controls its interpretation.’” Tri-Star Elecs. Int'l, Inc. v. Preci-Dip Durtal SA,

619 F.3d 1364, 1367 (Fed. Cir. 2010) (quoting Beta Sys., Inc. v. United States, 838 F.2d

1179, 1185 (Fed. Cir. 1988) (quoting Firestone Tire & Rubber Co. v. United States, 195

Ct. Cl. 21, 30, 444 F.2d 547, 551 (1971))); Alvin, Ltd. v. United States Postal Serv., 816

F.2d 1562, 1565 (Fed. Cir. 1987) (“In the case of contracts, the avowed purpose and

primary function of the court is the ascertainment of the intent of the parties.”); see also

Flexfab, LLC v. United States, 424 F.3d 1254, 1262 (Fed. Cir. 2005) (“[I]ntent is

determined by looking to the contract and, if necessary, other objective evidence. In the

absence of clear guidance from the contract language, the requisite intent on the part of

the government can be inferred from the actions of the contracting officer. . . .”); see also

CanPro Invs. Ltd. v. United States, 130 Fed. Cl. at 347 (“Contract interpretation requires

determining the intention of the parties.”).

Exclusive Use and Plaintiff’s Right to Lease Unoccupied Space to a Non-Postal Tenant

According to plaintiff, the Magna Main Post Office lease, as amended, and the

District Training Center lease, as amended, granted plaintiff the right to lease the

unoccupied “Phase II” space within the Magna facility to non-postal tenants, but the USPS

52

“installed an incorrectly located demising wall and closed off doors which cut off all access

from the Phase II [former training center] space to bathrooms, circuit breakers, water,

sewer, gas, and Code-compliant egress, rendering the Phase II space unleasable to

anyone” other than the USPS because it is not Code-compliant space. Defendant does

not dispute plaintiff’s assertion that, pursuant to the Magna Main Post Office lease, as

amended, Stromness was permitted to lease unoccupied “Phase II” space within the

Magna facility to non-postal tenants. As defendant acknowledges, “Amendment No. 1” to

the Magna Main Post Office lease stated that “[t]he Salt Lake City District has approved

Lessor’s request to lease ‘Phase II’ space” subject to certain conditions. It is apparent

from the parties’ presentations at trial and their post-trial briefings, however, that the

parties disagree as to the definition of Phase II space within the facility that Stromness

was granted the right to lease and what space would remain under the exclusive control

of the USPS.

The court looks to the language in the lease documents and to the parties’

testimony to determine the meaning of “Phase II” space, which plaintiff was permitted to

lease to a non-postal tenant pursuant to the amended Magna Main Post Office lease. As

discussed above, the original expandable building floor plan contemplated a Phase I area,

a Phase II area, and a Phase III area, as depicted below:

53

Joint Exhibit 67, page 399

While the original Magna Main Post Office lease was for the construction of only the

Phase I space, plaintiff proceeded, without authorization, to build out the Phase I and

Phase II spaces.

There is nothing in the record to demonstrate a change in the construction plans

in the original Magna Main Post Office lease by an authorized contracting officer. In fact,

Frederick Stromness acknowledged that Build Inc. did not have authority to construct the

Phase II space. Because the United States can only be bound by contract changes

administered by an authorized agent, Build Inc. constructed the Phase II space entirely

at its own risk. 26 See Winter v. Cath-dr/Balti Jt. Venture, 497 F.3d 1339, 1344 (Fed. Cir.

2007); see also Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1326 (Fed. Cir. 1997)

26 Plaintiff does not put forth a constructive change argument.

54

(“Anyone entering into an agreement with the Government takes the risk of accurately

ascertaining the authority of the agents who purport to act for the Government . . .”); S&M

Mgmt. Inc. v. United States, 82 Fed. Cl. 240, 247 (2008) (“To modify a contract, a

contracting officer or his or her delegate must possess actual authority to bind the

government.”).

According to the floor plan in the original Magna Main Post Office lease, as

depicted in Joint Exhibit 67, page 387, the Phase I space included the entire postal

operations area, including the men’s and women’s restrooms, storage space, and utilities.

Following plaintiff’s unauthorized construction, however, the parties negotiated

“Amendment No. 1” to the original lease for the Magna Main Post Office, which resulted

in additional square footage to be leased to the USPS, changes to the floor plan, and

changes to the USPS’s use of space within the facility. At trial, contracting officer Edward

Bavouset testified that plaintiff’s unauthorized construction of the Phase II area “changed

the layout of the floor plan,” as it was designed and agreed to in the original Magna Main

Post Office lease. Specifically, the revised floor plan indicated that the women’s restroom

and locker room would be located in the space identified as covered parking in the original

Magna Main Post Office lease. As a result, the first amendment to the Magna Main Post

Office lease provided a new floor plan, depicted below:

55

Joint Exhibit 73, page 484

“Amendment No. 1” to the Magna Main Post Office lease described the square

footage as follows:

The new net interior sq.ft. will reflect the original number of 6,498, plus 1,500

sq. ft. (additional required footage for postal operations) and 255 sq. ft.

(corridor space) for a total net interior square footage of 8,253. It is

specifically noted that the net interior square footage available for postal

operations is 7,998 net interior square feet. The additional 255 (corridor

space) is necessary for the functional use of the facility. Additionally, the

Lessor shall provide use of the women’s bathroom and locker room (661

sq. ft.), and carrier vestibule (425 sq. ft) and maintenance storage area east

of the carrier vestibule. This use is necessary due to Lessor proceeding with

Phase II construction, and the fact that the Postal Service has agreed to

allow the Lessor to lease the previous controlled enclosed carrier parking,

and, is structured to minimize modifications by Lessor.

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In addition to describing the revised floor plan and square footage of the Magna Main

Post Office lease, “Amendment No. 1” explained that, due to plaintiff’s unauthorized

construction of the Phase II space, there would be a portion of the building left unoccupied

and “not available for postal use.” The amendment explained: “Even though this area was

included in the original lease, identified as covered enclosed parking, it will not be

available since the Lessor proceeded with Phase II construction. However, it is

specifically noted that the Postal Service will not be deprived of use as intended in the

original lease.” This unoccupied space was described in the amendment as

“approximately 5,000 net sq. ft.” The lease amendment explained that “[t]he area located

above the ‘new area’, and identified by ‘red x’ on the attached floor plan (exhibit ‘A’) will

not be available for postal use. This area is approximately 5,000 net sq. ft.”

As this language explains, at the time “Amendment No. 1” was entered into, after

the unauthorized construction of the Phase II space, it was designed to preserve the

USPS’s functional use of the facility as intended under the original Magna Main Post

Office lease, without requiring plaintiff, the lessor, to make significant modifications to the

building as constructed, to the benefit of the lessor. As contracting officer Edward

Bavouset explained, because plaintiff had constructed the Phase II portion of the building

without authorization and changed the floor plan as intended in the original Magna Main

Post Office lease, the USPS could have required plaintiff to de-construct the building and

re-construct the space so that it conformed to the original floor plan in the initial Magna

Main Post Office lease. Contracting officer Edward Bavouset testified: “I mean, because

if I wanted to, say, take it back to Phase 1, guess what? All this stuff would have had to

have been relocated.”

The language in “Amendment No. 1” is central to the parties’ dispute about the use

of the space within the Magna facility. Plaintiff argues that, according to the language in

the amendment, the USPS would be “permitted to use, without leasing it, an additional

1,341 net interior square feet, including the women’s bathroom and locker room, a

vestibule, corridor space, and a storage area,” and that the USPS only had “non-

exclusive” use of those four areas. Plaintiff argues that Stromness was “donating” these

areas for the USPS to use, but that the space could be “shared” with other non-postal

tenants. During the trial, Frederick Stromness testified that the women’s restroom was

“located in the space that Stromness is donating, for lack of another, better word . . . .”

According to plaintiff, “Amendment No. 1” “modified the Magna facility plans to include

the ‘men’s restrooms,’ but not the ‘women’s restroom’ within the space the Postal Service

was leasing,” and, instead, under the lease amendment, the women’s restroom and

locker room were moved to the “Phase II space,” which plaintiff was granted the right to

lease to a non-postal tenant. (internal quotations omitted). Plaintiff argues that, because

the USPS was granted “non-exclusive” use of the additional 1,341 net interior square feet,

under the terms of “Amendment No. 1,” plaintiff could lease the unoccupied space and

the areas of shared use, which included the restrooms, exit, and hallways, to a non-postal

tenant. According to plaintiff, its right to lease this “shared” space was confirmed in the

subsequent District Training Center lease with the USPS because that lease stated

“[h]allways, restrooms, parking” would be “shared by tenants.”

57

Defendant argues that the USPS maintained exclusive use of the additional 1,341

net interior square feet, including the women’s bathroom and locker room, vestibule,

corridor space, and storage area, under the terms of the original Magna Main Post Office

lease, “Amendment No. 1” to the Magna Main Post Office lease, and the District Training

Center lease. Defendant explains that the original Magna Main Post Office lease required

restrooms and a second egress point to be in the postal space. According to defendant,

plaintiff did not construct the Magna facility in accordance with the original plans, which

resulted in a change to the location of the restrooms and second egress point. Defendant

asserts that, when the USPS amended the Magna Main Post Office lease to

accommodate the unauthorized construction performed by plaintiff, the amendment

“specifically noted that the Postal Service will not be deprived of use as intended in the

original lease.” Defendant argues that, because the intent of the original Magna Main Post

Office lease “was that the Postal Service would have exclusive use of the bathrooms and

the second fire exit” and “Amendment No. 1” expressly preserved that intention, the USPS

maintained its right to the exclusive use of the restrooms and second egress point and

neither plaintiff, nor plaintiff’s non-postal tenant, was not permitted access to that area.

To further support its position, defendant points to language in “Amendment No. 1” which

contemplated how the USPS would retain exclusive use of its space in the event plaintiff

leased the unoccupied space to a non-postal tenant. The lease amendment stated: “in

the event said space is leased, Lessor shall install a demising wall separating postal and

leased space, said wall shall be constructed to RE5 security requirements, tenant shall

not have any access to postal space, including secured parking and maneuvering area.” 27

Defendant argues that this language establishes that plaintiff was required to secure and

separate the Magna Main Post Office space from the approximately 5,000 square feet of

space not available for postal use, and the USPS was entitled to deny access to the

restrooms and second egress point by separating the two spaces.

“Amendment No. 1” to the Magna Main Post Office lease describes the square

footage intended for the USPS’s exclusive use as “6,498, plus 1,500 sq. ft. (additional

required footage for postal operation) and 255 sq. ft. (corridor space)” and “the women’s

bathroom and locker room (661 sq. ft.),” “carrier vestibule (425 sq. ft),” and “maintenance

storage area east of the carrier vestibule.” The changes to the square footage from the

original Magna Main Post Office lease were “structured to minimize modifications by

Lessor,” in light of plaintiff’s unauthorized additional construction, and to preserve the

USPS’s use of the facility as a secure postal facility as intended under the original Magna

Main Post Office lease. At the time the Magna Main Post Office lease was executed in

1997 for the construction of the Phase I space, the USPS was the only anticipated tenant

of the facility, and the building plans contemplated a single occupant with exclusive use

of the entire space, including the restrooms and second egress point, as depicted in the

diagram below:

27 Contracting officer Edward Bavouset explained at trial that the “RE5 Handbook” sets

forth security requirements for all postal facilities.

58

Joint Exhibit 67, page 397

At trial, Frederick Stromness testified about the intended exclusive use of the

postal facility when the Magna Main Post Office lease was originally executed:

Q. Mr. Stromness, as of January ’97 when this lease was executed, who

were the expected tenants of the facility?

A. [Frederick Stromness] US Postal Service.

Q. Anybody else?

A. Not anticipated at that time.

Q. So if the Postal Service was the only tenant, the Postal Service would

have exclusive right to the bathrooms, correct?

A. Yes, sir, at that time.

Q. And if the Postal Service is the only tenant, the Postal Service would

have exclusive right to the parking, correct?

A. Yes, sir.

Q. And if the Postal Service is the only tenant, it’s your understanding the

Postal Service would have exclusive rights to the hallways, correct?

A. Correct.

With regard to the language in the amendment to the Magna Main Post Office

lease that stated “the Postal Service will not be deprived of use as intended in the original

59

lease,” contracting officer Edward Bavouset testified that the original lease terms intended

for the USPS to have exclusive use of the restrooms, parking, and hallways:

Q. “However, it is specifically noted that the Postal Service will not be

deprived of use as intended in the original lease.”

A. [Edward Bavouset] Yes.

Q. Did I read that correctly?

A. Yes, you did.

Q. What was your understanding of what the intention was for the use of

the bathrooms of the original lease?

A. They were for exclusive Postal Service use.

Q. What was your -- what was your understanding of the intention of the

use of parking and hallway [sic] in the original lease?

A. They were for exclusive Postal Service use.

In agreement with Edward Bavouset’s testimony, Frederick Stromness testified

that at the time the lease amendment to the Magna Main Post Office lease was executed

on October 26, 1998, the USPS agreed to retain exclusive use of the bathrooms, as

intended in the original lease:

Q. As of October ’98, the Postal Service agreed to retain the bathrooms as

part of the postal space, an exclusive use of those bathrooms, correct?

A. Yes, sir, as of October ’98.

This testimony explains the context in which the original Magna Main Post Office

lease and the subsequent lease amendment were executed, and unanimously confirms

that the USPS intended to have exclusive use of space within the Magna facility under

the original Magna Main Post Office lease, and that intention was reiterated and

preserved in the amendment to the Magna Main Post Office lease. There is no dispute

that the original Magna Main Post Office lease for the Phase I space contemplated a

single tenant, with the USPS to enjoy exclusive use of the facility as the only tenant. The

language in “Amendment No. 1” demonstrates that, although plaintiff’s unauthorized

additional construction resulted in changes to the building plan, when signing the

amendment, the parties intended to preserve this exclusive and secured use as intended

under the original Magna Main Post Office lease for the space to be occupied by USPS

operations, despite acknowledging the possibility that the USPS may not be the only

tenant in the Magna building.

The language in “Amendment No. 1” to the Magna Main Post Office lease

specifically identifies the space intended for postal use as “6,498, plus 1,500 sq. ft.

60

(additional required footage for postal operations) and 255 sq. ft. (corridor space)” and

“the women’s bathroom and locker room (661 sq. ft.),” “carrier vestibule (425 sq. ft),” and

“maintenance storage area east of the carrier vestibule.” Although the lease amendment

did not include the square footage for the women’s bathroom and locker room, the carrier

vestibule, or the maintenance storage area in the “total net interior square footage of

8,253,” the lease amendment requires “the Lessor” to “provide use” of this space and

notes that “this space was included in the original lease and identified as covered

enclosed parking.” In its efforts to accommodate plaintiff’s significant deviation from the

terms of the original Magna Main Post Office lease, it seems unlikely that the USPS would

have executed a lease amendment that made the USPS space unsecured or that

eliminated any of the rights or space that it enjoyed under the terms of the original Magna

Main Post Office lease. It is similarly implausible, notwithstanding plaintiff’s suggestion to

the contrary, that at the time “Amendment No. 1” was executed the USPS would have

intended to lose its exclusive use of the women’s restrooms, but continue to maintain

exclusive use of the men’s restrooms. The language in the amendment to the Magna

Main Post Office lease specifically ensures that the USPS would not be deprived of its

original bargain for use under the Magna Main Post Office lease.

The court also finds plaintiff’s offered testimony and argument that the USPS was

“donating” and not leasing the “additional 1,341 net interior square feet, including the

women’s bathroom and locker room, a vestibule, corridor space, and a storage area”

unpersuasive. “Amendment No. 1” to the Magna Main Post Office lease specifically

required plaintiff to provide use of the women’s restrooms and locker room, vestibule,

corridor space, and storage area, and explained that the use was “necessary due to

Lessor proceeding with Phase II construction.” Because the Magna Main Post Office

lease amendment modified and increased the square footage of the Magna Main Post

Office space, the USPS was paying approximately $35,000.00 in additional annual rent.

Plaintiff has not put forth any lease languag

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