Evergreen Square of Cudahy (“Evergreen Square”), Grant Park Square Apartments Company (“Grant Park”), and Washington Square Apartments Company (“Washington Square”) are property owners (collectively, “Owners”) who participated in the federal rental assistance program commonly known as “Section 8.” They sued the Wisconsin Housing and Economic Development Authority (‘Wisconsin Housing” or the “Authority”) for allegedly breaching the contracts that governed payments to the Owners under the program. Because Wisconsin Housing receives all of its Section 8 funding from the United States Department of Housing and Urban Development (“HUD”), the Authority filed a third-party breach of contract claim against HUD. The district court granted summary judgment in favor of Wisconsin Housing and dismissed the claims against HUD as moot. The Owners appeal and we affirm.
I.
The Section 8 program provides housing assistance payments “[f]or the purpose of aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing[.]” 42 U.S.C. § 1437f(a). See also Cisneros v. Alpine Ridge Group,
Section 8 provides that the HAP contracts will establish the maximum monthly rent which property owners are entitled to receive for each dwelling unit. 42 U.S.C. § 1437f(c)(l)(A). In addition to setting standards for the initial rent for subsidized units, Section 8 also dictates how rents may be adjusted in order to reflect changes in fair market rental values over time. The statute provides that a HAP contract “shall provide for adjustment annually or more frequently in the maximum monthly rents for units covered by the contract to reflect changes in the fair market rentals established in the housing area for similar types and sizes of dwelling units or, if the Secretary determines, on the basis of a reasonable formula.” 42 U.S.C. § 1437f(e)(2)(A). But Congress also imposed an overall limit on any increases, providing that rent adjustments “shall not result in material differences between the rents charged for assisted units and unassisted units of similar quality, type, and age in the same market area, as determined by the Secretary.” 42 U.S.C. § 1437f(c)(2)(C).
In 1994, one year after the Alpine Ridge decision, Congress amended Section 8 again:
[WJhere the maximum monthly rent ... to be adjusted using an annual adjustment factor exceeds the fair market rental for an existing dwelling unit in the market area, the Secretary shall adjust the rent only to the extent that the owner demonstrates that the adjusted rent would not exceed the rent for an unassisted unit of similar quality, type, and age in the same market area, as determined by the Secretary.
42 U.S.C. § 1437f(c)(2)(A). Under the 1988 provision, HUD had the burden of producing a comparability study whenever it sought to withhold an automatic adjustment. The 1994 amendment shifted to the property owners the burden of demonstrating that adjusted rents would not exceed the market rent for comparable unassisted units. One & Ken Valley,
In 1995, HUD issued Notice H 95-12 (“1995 Notice”) in order to provide housing authorities with guidelines for implementing the statutory changes. The 1995 Notice directed public housing authorities to consult HUD’s annual fair market rent charts for different unit types
HUD adopted an assumption that, from the outset, public housing agencies were paying Section 8 landlords 10 percent more than the fair market rents for comparable units.
As long as the difference between the adjusted rent and the fair market rent isless than this “initial difference,” Notice H 95-12 allows state and local housing agencies to continue to grant rent increases based on the automatic annual adjustment factors. However, if the difference between the adjusted rent and the HUD-published fair market rate rises to more than 10 percent of the initial contract rent, Notice H 95-12 instructs ■ housing authorities to deny further upward adjustments to Section 8 landlords. A Section 8 landlord can only escape from under this ceiling by submitting its own rent comparability study showing that, despite the discrepancy with HUD’s published fair market rents, the Section 8 unit is actually under-priced relative to comparable unsubsidized • units in the area.
One & Ken Valley,
As part of the Section 8 program, each year, HUD publishes “annual adjustment factors” for specific geographic areas that reflect changes in the Consumer Price Index for rents and utilities over the prior year. See 24 C.F.R. §§ 888.201-204 (2012). Prior to the 1994 amendments, HUD published a single table to apply to all housing stock. After the 1994 amendments, HUD began publishing two tables each year, one for “turnover units,” and one for “non-turnover units.” The turnover rates apply to units occupied by a new tenant since the last annual contract anniversary date. The non-turnover rates apply to units occupied by the same tenant as the last contract anniversary date. The tables presume that the costs to landlords are lower when the same tenant stays in the unit, and so the non-turnover rates are one percent (.01) lower than the turnover rates.
To this point, we have described the general provisions at play in all Section 8 HAP contracts, and we now turn to the facts specific to this case. Evergreen Square owns a 105-unit housing project in Cudahy, Wisconsin. Evergreen Square’s HAP contract term began with a five-year term on April 1, 1977. The contract has been renewed seven times (in five year increments) and is set to expire on March 31, 2017. Grant Park owns a 153-unit project in South Milwaukee, Wisconsin. Grant Park’s initial five-year contract commenced on July 1, 1980 and was then renewed for five additional five-year terms, expiring on June 30, 2010. Washington Square owns an 88-unit project in Cudahy, Wisconsin. Washington Square’s initial twenty-year HAP contract went into effect on December 1, 1982, was renewed twice for five-year terms, and expired on November 30, 2012. Both the Evergreen Square and Grant Park HAP contracts provide that, on the anniversary daté, the contract rents “shall be adjusted by applying the applicable Automatic Annual Adjustment Factor most recently published by the Government.” Washington Square’s contract is slightly different. It provides that, “[u]pon request from the Owner to [Wisconsin Housing], Contract Rents will be adjusted on the anniversary date” of the HAP Contract “in accordance with 24 CFR Part 888 and this Contract. See, however, paragraph (d).” Paragraph (d) implemented the overall limitation provision of the- statute. A similar overall limitation paragraph appears in the contracts for Evergreen Square and Grant Park, but only Washington Square was required to ask for the automatic annual increase. From 2006 until the contract expired in 2012, Wisconsin Housing approved adjustments to Washington Square’s rents only
The Owners sued Wisconsin Housing in federal court for breaching the HAP contracts by failing to approve automatic rent increases for certain years, by requiring the Owners to submit comparability studies in order to receive increases, and by arbitrarily reducing the increases for non-turnover units by one percent. Wisconsin Housing filed a third-party suit against HUD, which provides all of the funding for the program. After the district court dismissed the suit for lack of federal jurisdiction, we reversed and remanded with instructions to reinstate the plaintiffs’ complaint. See Evergreen Square of Cudahy v. Wisconsin Housing & Econ. Dev. Auth.,
On remand, the plaintiffs proceeded with three primary claims against Wisconsin Housing: (1) breach of Washington Square’s HAP contract for failing to automatically adjust contract rents on an annual basis; (2) breach of all the Owners’ HAP contracts for employing a one percent reduction on the rent adjustments for non-turnover units; and (3) declaratory judgment to determine whether Wisconsin Housing could require, under Evergreen Square’s HAP contract, rent comparability studies as a prerequisite to receiving rent adjustments or employ a one percent reduction for rent adjustments on non-turnover units. For the third-party claims against HUD, the court allowed Wisconsin Housing to proceed on claims for breach of the annual contributions contracts and declaratory judgment to determine Wisconsin Housing’s rights and obligations under the 1994 amendments. After all parties moved for summary judgment, the district court granted judgment in favor of Wisconsin Housing on all of the Owners’ claims, and dismissed the third party claims against HUD as moot. The Owners appeal.
II.
On appeal, the Owners contend that Washington Square should not be held to the contract provision requiring it to request an annual adjustment before receiving one. They contend that Washington Square should be excused from complying with this contract term because: (1) enforcing the provision would result in a disproportionate forfeiture; and (2) Wisconsin Housing breached the Washington Square HAP contract by requiring a rent comparability study as a prerequisite to receiving an increase. The Owners also argue that the district court erred in upholding the one percent reduction for rent increases in non-turnover units, maintaining that the adjustments must be made on a reasonable basis and the one percent reduction is arbitrary. Our review ⅝ of the district court’s grant of summary judgment is de novo. Anderson v. Liberty Lobby, Inc.,
A.
The district court noted that “[t]he parties do not dispute the application of Wis
■ But HUD took another view. In its response brief, HUD asserts that the enforcement of Section 8 HAP contracts is a question of nationwide applicability that must be governed by federal common law. In a footnote, HUD cited United States v. Kimbell Foods, Inc.,
Controversies directly affecting the operations of federal programs, although governed by federal law, do not inevitably require resort to uniform federal rules. Whether to adopt state law or to fashion a nationwide federal rule is a matter of judicial policy dependent upon a variety of considerations always relevant to the nature of the specific governmental interests and to the effects upon them of applying state law.
Kimbell Foods,
In Price, we considered a suit brought by prospective tenants of Section 8 housing against a property owner that had a contract with the Illinois Housing Development Authority. The would-be tenants were turned away.by the property owner, allegedly in violation of a contract between the owner and the housing authority to reserve a percentage of units for low-income tenants in exchange for mortgage
The argument for a federal rule is particularly strong in these housing cases; as we suggested earlier, it would be odd to think that a suit by tenants and applicants for federally subsidized housing against developers of such housing for breach of contracts approved by HUD and fundamental to the achievement of HUD’s objectives under section 1437f would have to be brought in state court and decided in accordance with state contract law.
Price,
Although HUD clearly relied on Kimbell Foods and Price, two arguably controlling cases, in their reply, the Owners chastise HUD for “[cjiting no authority for its position.” Reply Brief at 3 n.2. In this undeveloped, footnoted argument, the Owners ton to Texas Industries, Inc. v. Radcliff Materials, Inc.,
federal common law exists only in such narrow areas as those concerned with the rights and obligations of the United States, interstate and international disputes implicating the conflicting rights of States or our relations with foreign nations, and admiralty cases. In these instances, our federal system does not permit the controversy to be resolved under state law, either because the authority and duties of the United States as sovereign are intimately involved or because the interstate or international nature of the controversy makes it inappropriate for state law to control.
So after the district court thought the choice-of-law matter resolved, we are left on appeal with a war waged in footnotes on a complex issue. A party may waive an argument by presenting it only in an undeveloped footnote. United States v. Warner,
B.
We begin with Washington Square’s claim that it should not be held to the language in its HAP contract providing that rents would be adjusted annually “upon request from the Owner.” From 2006 to 2012, Wisconsin Housing adjusted Washington Square’s rents only when Washington Square submitted a rent adjustment request to the Authority. Washington Square contends that it should be excused from the requirement of requesting the annual adjustment because holding it to this term would result in a “disproportionate forfeiture.” Washington Square cites Restatement (Second) of Contracts § 229 (Excuse of a Condition to Avoid Forfeiture) in support of this argument:
To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the nonoccurrence of that condition unless its occurrence was a material part of the agreed exchange.
Washington Square asserts that if the court holds it to the contract term requiring it to ask for a rent adjustment before receiving one, it will lose some $400,000 in revenue, a result it characterizes as a “disproportionate forfeiture.” Washington Square argues that adherence to this term of the contract may be excused because it is not a material term of the agreement and it provides no pecuniary benefit to Wisconsin Housing.
In making this argument, the Owners (who insist that Wisconsin law applies) concede that the “doctrine of disproportionate forfeiture is not well-developed in Wisconsin.” That is an understatement: none of the parties were able to find a case where a Wisconsin court relied on section 229 to decide an issue. Nor is there any indication in the case law that this section of the Restatement has been adopted into the federal common law of contracts. In any case, as the district court explained, section 229 of the Restatement does not apply here, and cannot be used to excuse Washington Square’s failure to perform under the HAP contract.
First, application of section 229 is discretionary and so Washington Square would have to demonstrate on appeal that the court abused its discretion in refusing to apply the doctrine. See Restatement (Second) of Contracts § 229, cmt. b (noting that the rule is a flexible one and stating that “its application is within the sound discretion of the court.”). The district court declined to apply section 229 here because the court concluded that the HAP contract’s “request” provision was a material term. The court noted that the language of the contract requiring Washington Square to request an adjustment was an unambiguous condition precedent, and Washington Square failed to fulfill this requirement in the pertinent years. See Haddon Housing Assocs., L.P. v. United States,
Section 229 also does not apply because there is no forfeiture in play here. “ ‘[Forfeiture’ is used to refer to the denial of compensation that results when the obligee loses his right to the agreed exchange after he has relied substantially, as by preparation or performance on the expectation of that exchange.” Restatement (Second) of Contracts, § 229, cmt. b. Washington Square does not point to any evidence that it took any action in substantial reliance on the expectation of rent increases. As is apparent from the consistent practice of the parties, Washington Square knew it would not receive an increase unless, as required by the HAP contract, it requested one. Reliance on an unrequested increase would not have been reasonable under the circumstances.
Washington Square also asserts that it was excused from the condition precedent of requesting an increase because Wisconsin Housing breached the contract by requiring rent comparability studies prior to receiving an increase. Relying on the Federal Circuit’s opinion in Haddon, Washington Square asserts that Wisconsin Housing’s implementation of the 1994 amendments is a breach of the HAP contract. But the HAP contract in Haddon was executed in 1981 with a thirty-year term.
But assuming for the sake of argument that the implementation of the 1994 amendments was a breach of Washington Square’s HAP contract, even Haddon does not support Washington Square’s contention that the breach excused it from complying with the condition precedent. Haddon,
Finally, the district court found it unnecessary to decide Washington Square’s argument that the Authority repudiated the HAP contract by requiring rent comparability studies. The court concluded that the argument was unsupported by the record because Washington Square had conceded that it did not submit any rent comparability studies to Wisconsin Housing during the limitations period, and yet received certain rent adjustments nonetheless. Washington Square’s argument was thus reduced to a claim that, if it had submitted a request for a rent increase, it may have been denied the increase absent a rent comparability study, if gross rents exceeded fair market value. The district court, noting the many uncertainties and gaps in the record, characterized this as a skeletal argument that need not be decided. See United States v. Dunkel,
C.
Finally, all of the Owners challenge the district court’s determination that Wisconsin Housing did not breach any HAP contracts by applying a one percent reduction for non-turnover units when calculating rent adjustments. The Evergreen Square and Grant Park HAP contracts provide that contract rents “shall be adjusted by applying the applicable Automatic Annual Adjustment Factor most recently published by the Government.” The Washington Square HAP contract specifies that rents will be adjusted “in accordance with 24 C.F.R. Part 888 and this Contract.” Prior to 1995, HUD published one table each year in the Federal Register, listing adjustment factors used to determine rent increases. The same rate was applied to turnover and non-turnover units. But with the 1994 amendments, Congress implemented a mandatory one percent reduction in the annual adjustment factor for non-turnover units:
for any unit occupied by the same family at the time of the last annual rental adjustment, where the assistance contract provides for the adjustment of the maximum monthly rent by applying an annual adjustment factor and where the rent for a unit is otherwise eligible for an adjustment based on the full amount of the factor, 0.01 shall be subtracted from the amount of the factor, except that the factor shall not be reduced to less than 1.0.
42 U.S.C. § 1437f(c)(2)(A). At the time each Owners’ HAP contract was initially executed, the statute provided only that the adjustments reflect fair market rents in the housing area for similar types and sizes of dwelling units, or that the new rents be calculated on the basis of a reasonable formula. The Owners assert that the later-implemented one percent reduction for non-turnover units is not based on fair market rents and is not calculated on the basis of a reasonable formula. Rather, they characterize the reduction as arbitrary and in breach of the HAP contracts.
As with the other arguments regarding breach of contract, the Owners do not take into account that, although a different version of the statute was in place at the time the HAP contracts were originally executed, all of the original contracts expired and were renewed before the time period for which they are now claiming damages. In particular, Evergreen Square entered into its first HAP contract on April 1, 1977 for a term of five years. The contract was then renewed for seven additional five-year terms, with an expiration date of March 31, 2017. Grant Park’s initial HAP contract became effective July 1, 1980, with an initial contract term of five years. It was subsequently renewed for five additional five-year terms. And Washington Square’s HAP initial contract became effective December 1, 1982, with a term of twenty years. It was then renewed for two additional five year terms. The Owners filed suit in June 2013, and the statute of limitations is six years. The 1994 amendments went into effect in 1995, and therefore each owner renewed its HAP contract after the 1994 amendments and before the first date for damages under the statute of limitations. Because laws which exist at the time of the making of a contract enter into and form a part of it as fully as if they had been expressly referred to or incorporated in its terms, the 1994
The district court rejected the Owners’ challenge to the one percent reduction for a slightly different reason. The district court found that Wisconsin Housing was required by the HAP contracts and by law to use the tables published by HUD. It was HUD, not Wisconsin Housing, that published the table reflecting the one percent reduction for non-turnover units. The HAP contracts for Evergreen Square and Grant Park stated that annual rent adjustments must be calculated “by applying the applicable Automatic Annual Adjustment Factor most recently published by the Government.” The HAP contracts make clear that it is HUD’s responsibility to determine the applicable adjustment factors. For Washington Square, the HAP contract provided that rents would be adjusted “in accordance with 24 C.F.R. Part 888 and this Contract.” Under 24 C.F.R. Part 888, HUD is charged with the duty of creating and publishing the applicable adjustment factors. Wisconsin Housing had no role in setting the adjustment rates and no discretion to override HUD’s published numbers. The district court concluded that Wisconsin Housing’s reliance on HUD’s published table for non-turnover units was not only permissible, it was obligatory under the language of the contracts. District courts deciding whether a state housing agency breached a HAP contract by applying the one percent reduction for non-turnover units have uniformly rejected the property owners’ claims. Cathedral Square Partners Ltd. P’ship v. South Dakota Housing Dev. Auth.,
III.
In sum, Washington Square was not excused from complying with the HAP contract condition precedent requiring it to
AFFIRMED.
Notes
. “Unit type” refers to the size of the housing unit. Unit types include efficiency, one-bedroom, two-bedroom, three-bedroom and four-bedroom units.
. Since 1995, successive HUD publications have carried forward the implementation of these policies. As of the time the district court ruled, Notice H 2002-10 ("2002 Notice”) was the most recent of the notices.
. Specifically, the district court cited Justice Thomas's concurrence, where he stated, ”[t]he Court faithfully applies our precedents interpreting 28 U.S.C. § 1331 to authorize federal-court jurisdiction over some cases in which state law creates the cause of action but requires determination of an issue of federal law[.]" Grable & Sons,
. Although we characterized, the plaintiffs’ complaint as presenting "state-law breach-of-contract claims,” we did not address whether Wisconsin law should be applied.
. Washington Square asserts that the procedures set forth in the 2002 Notice could not fairly apply to a contract executed in 1982. But Washington Square fails to note that the original term of the contract was twenty years, expiring in 2002. The agreement was then renewed twice for two additional five year terms, until its expiration in 2012. Washington Square is suing for rent increases during the extended term, when the 2002 Notice was in effect. Moreover, Washington Square’s claims for damages are cabined by the statute of limitations. The date of the earliest breach for which Washington Square may recover is December 1, 2007, which is well after the 2002 contract renewal. Norfolk & Western Ry. Co. v. American Train Dispatchers Ass’n,
. In Haddon, the Federal Circuit characterized the length of the HAP contract as "for a maximum term of 30 years.” See also Haddon Housing Assocs., LLC v. United States,
. The Federal Circuit concluded that HUD's implementation of the 1994 amendments constituted a breach of the Haddon HAP contract.
. We note again that Haddon is further distinguishable because the HAP contract was executed in 1981 for a thirty-year term. Congress amended Section 8 during the term of the contract to require the one percent reduction for non-turnover units, changing the terms of the deal in the middle of the contract term. In the instant case, the contracts were renewed after Congress amended the statute, and the amendments were thereby swept into the contracts.