Debris Removal Costs

Appeal Brief Appeal Letter

Appeal Brief

DisasterFEMA-1604-DR
ApplicantJackson County Port Authority
Appeal TypeSecond
PA ID#045-78200-00
PW ID#10965
Date Signed2010-01-25T05:00:00

SECOND APPEAL BRIEF

FEMA-1604-DR-MS

Jackson County Port Authority, PA ID 045-78200-00

Project Worksheet (PW) 10965

 

Citation:         FEMA-1604-DR-MS; Jackson County Port Authority (Applicant), PW 10965

                              

Cross

Reference:      General Eligibility; Legal Responsibility; Debris Removal

 

Summary:      On December 4, 1995, the Applicant entered into a lease with Gulf Coast Cold Storage, Inc (GCCS), a private-for-profit company, which leased a cold-storage facility located at the Port of Pascagoula.  The lease placed responsibility for major repairs of the facility on the Applicant, but not the removal of contents within the facility.  Following Hurricane Katrina, GCCS, at its own initiative and expense, hired contractors to remove and depose of decomposing poultry from the storage facility.  At the request of the Applicant, FEMA prepared PW 10965 to reimburse those costs totaling $340,499.  On November 30, 2007, FEMA determined that the debris removal costs were not eligible for reimbursement because the lease did not specify that the Applicant had legal responsibility to remove GCCS’s contents from the storage facility and because GCCS’s insurance covered these costs.  

 

                        The Applicant submitted its first appeal on March 3, 2008, asserting that it was legally responsible for repairs to the facility, to remove the contents because of threats to public health and safety, and that FEMA incorrectly interpreted the lease by assigning responsibility for debris removal to GCCS.  FEMA denied the appeal concluding that the cost to dispose of the poultry was not incurred by the Applicant, but by GCCS.  The Applicant did not provide documentation to demonstrate it had any legal obligation to reimburse GCCS for costs incurred by GCCS or that an insurance claim had been filed by either party.  A second appeal was submitted by the Applicant on October 20, 2008, and reiterates its position presented in the first appeal.  The Applicant did not present new information to support its second appeal.

                           

Issues:             1) Is GCCS an eligible applicant?

2) Did the Applicant establish that it had legal responsibility for the work?

                        3) Is the cost to remove the contents from the facility eligible?

 

Finding:          1) No.  GCCS is a private-for-profit company and therefore, is not eligible for FEMA Public Assistance.

2) No.  The lease between the Applicant and GCCS does not specify that the Applicant has legal responsibility to remove product entrusted to GCCS from the storage facility.

3) No.  FEMA does not provide assistance to an eligible applicant to reimburse a private entity for its cost to remove debris or its property.  

                       

Rationale:       44 CFR §206.222, Applicant eligibility; 44 CFR §206.223(a)(3), General work eligibility, General; 44 CFR §206.224(c), Debris removal, Assistance to individuals and private organizations

Appeal Letter

January 25, 2010

 

Thomas M. “Mike” Womack
Governor’s Authorized Representative
Mississippi Emergency Management Agency
Post Office Box 5644
Pearl, Mississippi  39208

Re:  Second Appeal–Jackson County Port Authority, PA ID 045-78200-00, Debris Removal Costs, FEMA-1604-DR-MS, Project Worksheets (PW) 10965

Dear Mr. Womack:

This is in response to your letter dated December 15, 2008, which transmitted the referenced second appeal on behalf of the Jackson County Port Authority (Applicant).  The Applicant is
appealing the Department of Homeland Security’s Federal Emergency Management Agency’s(FEMA) denial of costs totaling $340,499 to remove debris from a cold storage facility it leased from the Port of Pascagoula to Gulf Coast Cold Storage, Inc (GCCS).

Background

On December 4, 1995, the Applicant leased a cold-storage facility at the Port of Pascagoula to GCCS, a private-for-profit company.  GCCS operates the facility as a cold storage transit warehouse.  The lease places responsibility for major repairs of the storage facility on the Applicant.  Following Hurricane Katrina, GCCS, at its own initiative and expense, hired contractors to remove and depose of decomposing poultry from the leased facility that the Applicant owned and from a private cold-storage facility that GCCS was also using when the disaster occurred.  At the request of the Applicant, FEMA prepared PW 10965 to document the Applicant’s request for $340,499 to pay GCCS for removing the decomposing poultry (debris) from the leased facility.  On   November 30, 2007, FEMA determined that the cost to remove the decomposing poultry was not eligible for reimbursement because the lease did not specify that the Applicant had legal responsibility to remove contents or other debris from the cold-storage facility and because GCCS’s insurance should cover the cost. The Director of the Mississippi Transitional Recovery Office confirmed this determination in a January 7, 2008, letter to the Applicant.

First Appeal

The Applicant submitted its first appeal on March 3, 2008, asserting that it was legally responsible for repairs to the facility and that neither it nor GCCS owned the poultry.  The Applicant argued that where the lease does not assign responsibility for product stored at the facility, it was reasonable for the Applicant to be responsible for disposal based on public health considerations.
On August 14, 2008, the Regional Administrator denied the first appeal.  The Regional Administrator did not dispute the Applicant’s responsibility for repairs to the cold-storage facility, but concluded the Applicant did not provide documentation to demonstrate it had a legal obligation to reimburse GCCS for cost that GCCS incurred outside the terms of the lease.
In addition, lease section 19, Environmental Clause, places the responsibility on GCCS to remediate, at its sole expense, any condition that results in present or future damage to the environment, property, or port area.

Second Appeal

The Applicant submitted its second appeal on October 20, 2008, and reiterates its position presented in the first appeal.  Specifically, it challenges FEMA’s interpretation of the lease that GCCS has the legal responsibility to remove the contents from the cold-storage facility.  The State supports the appeal and argues that the Applicant’s primary concern was the health and public safety of the community and that these concerns were the Applicant’s to address.  The Applicant did not present new information to support its second appeal.

Discussion

The crux of the issue is which party, the Applicant or GCCS, had the legal responsibility for removal of the poultry.  GCCS unilaterally removed the poultry but the Applicant claims the legal responsibility for removal belongs to it.  The operative legal document is the lease agreement executed by the parties in 1995.  The Applicant states, and FEMA agrees, that the lease agreement makes the Applicant legally responsible for major repairs to the facility.  Further, FEMA agrees that the lease agreement does not explicitly provide for responsibility for product stored at the facility.  The Applicant argues that in such circumstances, it has the legal responsibility for removal of the poultry as a necessary and integral part of repairing disaster damage to the facility and to address public health and safety considerations.  This is not a compelling argument.
GCCS was the operator of this facility, utilizing it as a place of business for the purpose of serving as a cold storage transit warehouse predominantly serving the export poultry market.  The nature of this business quite clearly made GCCS responsible for the product stored at the facility, the storage of product being the core of the operation.  There is no language in the lease agreement between the parties to suggest that the Applicant would ever be responsible for the operation of the facility.  Indeed, section 10 of the lease provides that GCCS will use the facility for “the receiving, handling, processing, storage, and warehousing of inbound and/or outbound waterborne refrigerated cargo.”  Other relevant sections of the lease agreement include section 7 which requires GCCS to keep the premises in a neat and orderly appearance, and section 19 which mandates that GCCS operate the facility “in as environmentally [a] sound manner as possible.”  While these sections do not address directly the disposal of product destroyed or rendered dangerous due to an act of God, they together make clear that GCCS was responsible for the operation of the facility and its business of processing and handling the cold-storage product entrusted to it.  Product entrusted to GCCS does not become the responsibility of the Applicant lessor merely because it is adulterated or made dangerous by the impact of a hurricane. 
The Applicant and GCCS also signed a Memorandum of Understanding (MOU) on November 21, 2006, wherein the parties agreed that GCCS would rebuild the cold-storage facility.  This MOU makes no mention of the poultry previously removed by GCCS.  While removal of the poultry was surely necessary to complete repairs to the facility, the MOU’s execution of section 16 of the lease (Destruction of Premises) establishing agreement on the scope and cost of “rebuilding” cannot be interpreted as intending to include the previous removal of poultry, especially where the MOU explicitly requires the Applicant provide approval of plans and contracts prior to the commencement of repairs.  More importantly, the MOU does not affect the legal responsibility fixed as of the date of the disaster event by the lease agreement and the nature of the business operated by GCCS which made it responsible for the product entrusted to it.

Conclusion

I have reviewed the information submitted with the appeal and have determined that the Regional Administrator’s decision in the first appeal is consistent with Public Assistance regulations and policy.  Accordingly, I am denying the second appeal.
Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.

Sincerely,
/s/
Elizabeth A. Zimmerman
Assistant Administrator
Disaster Assistance Directorate
cc:  Major P. May
       Regional Administrator
       FEMA Region IV 

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