             United States Court of Appeals
                        For the First Circuit


No. 12-1952

               ONE AND KEN VALLEY HOUSING GROUP, ET AL.,

                        Plaintiffs, Appellants,

                                  v.

                    MAINE STATE HOUSING AUTHORITY,

              Defendant/Third-Party Plaintiff, Appellee,

                                  v.

     SHAUN DONOVAN, Secretary, U.S. Department of Housing &
                       Urban Development,

                   Third-Party Defendant, Appellee.


             APPEAL FROM THE UNITED STATES DISTRICT COURT

                       FOR THE DISTRICT OF MAINE

              [Hon. D. Brock Hornby, U.S. District Judge]



                                Before

                           Lynch, Chief Judge,
                         Howard, Circuit Judge,
                      and Casper,* District Judge.



     Harry J. Kelly, III, with whom W. Daniel Deane and Nixon
Peabody LLP were on brief, for appellants.
     Robert A. Jaffe, with whom Barry P. Steinberg, Kutak Rock LLP,


     *
         Of the District of Massachusetts, sitting by designation.
and John Bobrowiecki, Maine State Housing Authority, were on brief,
for appellee Maine State Housing Authority.
     Kyle A. Forsyth, Attorney, with whom Stuart F. Delery, Acting
Principal Deputy Assistant Attorney General, J. Christopher Kohn,
Director and Ruth A. Harvey, Assistant Director, Commercial
Litigation Branch, Civil Division, were on brief for appellee U.S.
Department of Housing and Urban Development.
     Carl A.S. Coan, III, Raymond K. James and Coan & Lyons on
brief for National Association of Home Builders, National Leased
Housing Association, National Apartment Association, National Multi
Housing   Council,    National   Affordable   Housing    Management
Association, Institute of Real Estate Management, Council for
Affordable and Rural Housing, and Leading Age, amici curiae in
support of appellants.



                           May 14, 2013
               HOWARD, Circuit Judge.         The Section 8 program is a vast

effort on the part of federal, state, and local authorities to

provide decent, safe, and sanitary housing to low-income families,

the elderly, and the disabled.          The program is administered by the

U.S.       Department   of   Housing   and    Urban   Development    ("HUD")   in

conjunction with state and local public housing agencies across the

country.       Under the part of the program at issue here,1 state and

local agencies enter into housing assistance payments ("HAP")

contracts with private landlords, and the landlords agree to make

units available to Section 8-assisted households.                   The assisted

households, in turn, pay 30 percent of their monthly adjusted

income to their landlords in rent; the landlords receive the

remainder of the rent from the relevant public housing agency; and

the public housing agencies are fully reimbursed by HUD.2                      The

payments from the state and local agencies to the Section 8




       1
       Section 8 assistance may be either "project-based" or
"tenant-based." Park Vill. Apt. Tenants Ass'n v. Mortimer Howard
Trust, 636 F.3d 1150, 1152 (9th Cir. 2011). This suit involves the
project-based component of the program.         According to HUD
estimates, approximately 1.2 million low-income families live in
units that receive project-based aid, and another 2.2 million
families receive tenant-based assistance. U.S. Dep't of Hous. &
Urban Dev., FY 2013 Budget: Housing and Communities Built to Last
17, 43 (2012).
       2
       Where no public housing agency is able to implement the
program, the Section 8 statute authorizes the HUD Secretary to
enter into contracts with landlords directly.     42 U.S.C. §
1437f(b)(1) (2006).

                                        -3-
landlords    are   adjusted   periodically   according   to   guidelines

promulgated by HUD.

            Plaintiffs-appellants are five limited partnerships that

own multifamily housing rental projects in southern and central

Maine.   All of the partnerships have entered into HAP contracts

with the Maine State Housing Authority ("MaineHousing") in order to

participate in the Section 8 program.          In December 2009, the

partnerships sued MaineHousing in federal district court for breach

of contract, alleging that MaineHousing had wrongfully refused to

grant them certain annual increases in their Section 8 payments

(although MaineHousing has allowed some upward adjustments).

MaineHousing, while denying the plaintiffs' allegations, impleaded

HUD as a third-party defendant, arguing that if MaineHousing had

breached its contracts with the partnerships, then it had done so

only at HUD's direction.      All parties sought summary judgment; a

magistrate judge recommended judgment for MaineHousing and HUD on

the grounds that no material breach of contract had occurred; and

the district court adopted the magistrate's recommended decision.

The partnerships appeal, and we affirm.



                                   I.

            Although this case ultimately turns on a narrow question

of contract law, it arises in the context of a complex web of

statutes and regulations governing federal housing aid.        In 1974,


                                   -4-
Congress amended the New Deal-era Housing Act to add the provision

commonly known as "Section 8"; this provision authorized the HUD

Secretary "to enter into annual contributions contracts with public

housing agencies pursuant to which such agencies may enter into

contracts    to   make    assistance    payments      to    owners   of    existing

dwelling units."        Housing and Community Development Act of 1974,

Pub. L. No. 93-383, § 201(a), 88 Stat. 633, 662 (codified as

amended at 42 U.S.C. § 1437f(b)(1)) (amending United States Housing

Act of 1937, Pub. L. No. 75-412, 50 Stat. 888).                       While these

"annual contributions        contracts"      make    reference      to particular

projects, the only parties to the annual contributions contracts

are HUD and the public housing agencies administering the Section

8 program.    Between 1975 and 1978, HUD and MaineHousing entered

into annual contributions contracts covering each of the five sites

at issue in the present litigation.

            The original Section 8 statute provided that rents paid

to landlords at program sites would be adjusted on at least an

annual basis      "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."         88 Stat. at 663 (codified at 42 U.S.C. §

1437f(c)(2)(A)). To guard against these rent adjustments producing

a windfall for Section 8 landlords, the statute added the caveat

that   automatic        adjustments    "shall       not    result    in    material


                                       -5-
differences between the rents charged for assisted and comparable

unassisted units, as determined by the         Secretary."   Id. (codified

at 42 U.S.C. § 1437f(c)(2)(C)).        These statutory provisions remain

in force today.

          Pursuant to Section 8, HUD publishes "automatic annual

adjustment factors" for specific Census regions and metropolitan

areas that reflect changes in the Consumer Price Index for rent and

utilities over the previous year.           See 24 C.F.R. §§ 888.201-.204

(2012); 77 Fed. Reg. 22,340, 22,340-43 (Apr. 13, 2012).                   HUD

regulations state that Section 8 rents should be calculated by

multiplying   the   applicable    annual     adjustment   factor    for   the

appropriate   Census   region    or    metropolitan   area   by    the    rent

stipulated by contract for each unit.          24 C.F.R. § 888.203.

          HUD has also drafted a standard form contract for state

and local agencies to use when entering into agreements with

Section 8 landlords.    Once HUD and MaineHousing had entered into

annual contributions contracts covering the five sites in question,

MaineHousing entered into housing assistance payments contracts

with owners of the five properties.           The HAP contracts varied in

duration, with the longest providing for renewals over the course

of 40 years, until 2018.        All of the HAP contracts contained a

provision, section 1.9(b)(2), stating that each year, "the Contract

Rents shall be adjusted by applying the applicable Automatic Annual

Adjustment Factor most recently published by the Government."              All


                                      -6-
of the contracts also included an "overall limitation clause"

(section 1.9(d)), which states that:

          Notwithstanding any other provisions of this
          Contract, adjustments as provided in this
          Section   shall   not  result   in   material
          differences between the rents charged for
          assisted and comparable unassisted units, as
          determined by the [housing authority] . . . ;
          provided, that this limitation shall not be
          construed to prohibit differences in rents
          between assisted and comparable unassisted
          units to the extent that such differences may
          have existed with respect to the initial
          Contract Rents.

          At the outset of the Section 8 program's existence,

public housing agencies applied the automatic annual adjustment

factors published by HUD and granted regular rent increases to

Section 8 landlords; HUD, for its part, funded these rent increases

through its annual contributions to the public housing agencies.

In the early 1980s, however, officials at HUD became concerned that

the automatic annual adjustments were pushing rents at some Section

8 sites well above the market rates for comparable unsubsidized

units.   In 1983, when HUD and a local housing authority sought to

prevent an automatic annual adjustment from taking effect at a

Section 8 site in Bremerton, Washington, the affected landlord

filed a federal suit.   The Ninth Circuit held that--despite the

overall limitation clause in the HAP contract between the Section

8 landlord and the local housing agency--the landlord was still

entitled to automatic annual adjustments in rental payments.

Rainier View Assocs. v. United States, 848 F.2d 988, 990-91 (9th

                                -7-
Cir. 1988), cert. denied, 490 U.S. 1066 (1989).        HUD refused to

apply the Rainier View decision outside of the Ninth Circuit, and

other courts disapproved of Rainier View's holding.          See, e.g.,

Carmichaels Arbors Assocs. v. United States, 789 F. Supp. 683, 685,

688-89 (W.D. Pa. 1992); Sheridan Square P'ship v. United States,

761 F. Supp. 738, 743-44 (D. Colo. 1991); Nat'l Leased Hous. Ass'n

v. United States, 22 Cl. Ct. 649, 652, 659-60 (Cl. Ct. 1991).

             With litigation over the HAP contracts pending in various

federal courts, Congress passed a series of amendments addressing

HUD's efforts to rein in rent increases.       The first two of these

amendments, enacted in 1988 and 1989, clarified the process by

which the HUD Secretary could deny automatic annual adjustments at

Section 8 sites.      Under the amendments, HUD or a public housing

agency could deny an automatic annual adjustment at a Section 8

site by submitting a "comparability study" to the project owner at

least sixty days before the annual adjustment was set to take

effect. See Housing and Community Development Act of 1987, Pub. L.

100-242, § 142(c)(2), 101 Stat. 1815, 1850 (1988) (codified at 42

U.S.C.   §    1437f(c)(2)(C));   Department   of   Housing   and   Urban

Development Reform Act of 1989, Pub. L. No. 101-235, § 801(c), 103

Stat. 1987, 2058 (same).

             After the 1988 and 1989 amendments, Section 8 landlords

in Washington and California brought suit again, claiming that

their HAP contracts entitled them to automatic annual adjustments


                                  -8-
without regard to the results of comparability studies conducted by

HUD.    The Ninth Circuit reiterated its holding in Rainier View and

"rejected HUD's argument that an 'Overall Limitation' provision in

the contracts permitted HUD to use market rates to cap rent

adjustments."       Alpine Ridge Grp. v. Kemp, 955 F.2d 1382, 1383-84

(9th Cir. 1992) (citing Rainier View, 848 F.2d at 990-91).                       The

Supreme Court granted certiorari and reversed the Ninth Circuit's

decision.     As Justice White wrote for a unanimous Court, "the

contract    language       is    plain    that   no   project   owner     may   claim

entitlement    to    formula-based        rent   adjustments     that   materially

exceed market rents for comparable units."                    Cisneros v. Alpine

Ridge Grp., 508 U.S. 10, 21 (1993).                    The Alpine Ridge Court

concluded     that    the       overall     limitation    clause    affords      HUD

"sufficient discretion" to design and implement a method for

ensuring that contract rents do not rise above market rates.                     Id.

            One     year   after    the    Alpine     Ridge   decision,    Congress

amended the Section 8 statute to place further limits on automatic

annual adjustments.             The 1994 law provided, in pertinent part,

that:

            [W]here 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.

                                          -9-
Pub. L. No. 103-327, 108 Stat. 2298, 2315 (codified at 42 U.S.C. §

1437f(c)(2)(A)).3

          Whereas the 1988 and 1989 amendments saddled HUD with the

burden of producing a "comparability study" whenever it sought to

withhold an automatic adjustment, the 1994 amendment seemed to

shift the onus onto landlords to demonstrate that adjusted rents

would not exceed the market rent for comparable units.          See

Greenleaf Ltd. P’ship v. Ill. Hous. Dev. Auth., No. 08 C 2480, 2009

U.S. Dist. LEXIS 119375, at *11-14 (N.D. Ill. Dec. 23, 2009).    HUD

addressed this apparent tension in 1995 with the promulgation of

Notice H 95-12, which provided state and local housing authorities

with detailed guidelines for implementing the previous year's

statutory changes.   Notice H 95-12 directed housing authorities to

consult a document published annually by HUD that lists "fair

market rents" for different unit types on a regional basis.4   Where

the rent for a Section 8 unit that would result from the automatic

adjustment is higher than the corresponding fair market rent listed

in the HUD-published tables, Notice H 95-12 instructs the public


     3
       Although the 1994 amendment only applied to rent adjustments
for fiscal year 1995, Congress subsequently made the provision
permanent. See Balanced Budget Act of 1997, Pub. L. No. 105-33, §
2003, 111 Stat. 251, 257 (codified at 42 U.S.C. § 1437f(c)(2)(A)).
     4
       For the State of Maine, HUD publishes fair market rents for
zero-, one-, two-, three-, and four-bedroom units in eight
metropolitan areas and eleven non-metropolitan counties.      U.S.
Dep't of Hous. & Urban Dev., Schedule B: FY 2013 Fair Market Rents
for   Existing    Housing,   at   18-21   (2012),   available   at
http://www.huduser.org/portal/datasets/fmr.html.

                                -10-
housing authority to presume that the contract rent is above-

market. See U.S. Dep't of Hous. & Urban Dev., Notice H 95-12 (Mar.

7, 1995); see also U.S. Dep't of Hous. & Urban Dev., Notice H 2002-

10 (May 17, 2002) (carrying forward Notice H 95-12 method); 77 Fed.

Reg. 22,340, 22,341 (Apr. 13, 2012) (carrying forward Notice H

2002-10).

              In promulgating Notice H 95-12, HUD was aware that most

Section   8    sites   were   subject   to   the   same   standard    form   HAP

contracts, and HUD was likewise aware that under the overall

limitation clause in those contracts, Section 8 landlords were

entitled to receive above-market rents to the extent that such

differences existed at the outset of their contracts.                See Notice

H 95-12, at 3 ("need to assure that the initial difference which

existed in the initial contract rents is protected, as required by

the [HAP] contract").         Accordingly, Notice H 95-12 prescribed a

formula for calculating this "initial difference":             0.1 times the

initial Section 8 contract rent.         Put differently, 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 is less 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


                                    -11-
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 underpriced relative to

comparable unsubsidized units in the area.

               Up until the publication of Notice H 95-12, MaineHousing

made    rent    adjustments    at   all   five    properties    every    year   in

accordance with the automatic annual adjustment factors published

by HUD. For the first decade after Notice H 95-12 was promulgated,

MaineHousing denied the landlords' requests for further upward

adjustments, citing the limitations imposed by the HUD notice. In

2005, all five landlords submitted rent comparability studies to

MaineHousing in an effort to show that the 10 percent formula

underestimated the "initial difference" at their sites.                  Based on

these studies, and at the urging of MaineHousing, HUD agreed to let

the five landlords use an alternative method for calculating the

initial differences at their sites.              Rents rose at all five sites

in 2005, with increases of up to $1,092 per unit per year (although

the amount of the increase varied from unit to unit and site to

site).     Rents at three of the five sites have remained at 2005


                                       -12-
levels, while HUD has allowed further upward adjustments at the two

other sites in subsequent years.



                                  II.

          Despite the 2005 rent adjustments for all five sites and

additional increases at two of the five sites in subsequent years,

owners of the five sites filed a complaint against MaineHousing in

federal district court in December 2009 alleging three counts of

breach of contract. Before addressing the merits of the landlords'

complaint, we pause to consider whether the suit belongs in federal

court at all.     Although none of the parties raise the issue on

appeal, we have an obligation to inquire into our subject matter

jurisdiction sua sponte.   Liu v. Amerco, 677 F.3d 489, 492-93 (1st

Cir. 2012).

          In their complaint, the plaintiffs invoke federal subject

matter jurisdiction pursuant to 28 U.S.C. § 1331, which grants

district courts "original jurisdiction of all civil actions arising

under the Constitution, laws, or treaties of the United States."

Yet their only claims are for breach of contract, and they appear

to acknowledge that their breach-of-contract claims arise under the

laws of the State of Maine.   As a general rule, federal courts lack

subject matter    jurisdiction   over   state   law   breach-of-contract

actions where, as here, the plaintiffs and the defendant hail from

the same state.    See Mass. Universalist Convention v. Hildreth &


                                 -13-
Rogers Co., 183 F.2d 497, 499 (1st Cir. 1950) (per curiam).

Federal courts allow an exception to this rule only in the rare

instance where the contract is governed by state law but a "federal

issue   is      decisive"       to    the     dispute   and     "the    federal

ingredient . . . is sufficiently substantial to confer the arising

under jurisdiction."        E.g., W. 14th St. Commercial Corp. v. 5 W.

14th Owners Corp., 815 F.2d 188, 196 (2d Cir. 1987).

             The federal ingredient doctrine applies in a "special and

small category of cases" where a "state-law claim necessarily

raise[s] a stated federal issue, actually disputed and substantial,

which   a   federal     forum   may   entertain     without   disturbing   any

congressionally approved balance of federal and state judicial

responsibilities."       Gunn v. Minton, 133 S. Ct. 1059, 1065 (2013)

(internal quotation marks omitted); see also Rosselló-González v.

Calderón-Serra, 398 F.3d 1, 12-13 (1st Cir. 2004).                The Supreme

Court recently reaffirmed the doctrine's vitality in Grable & Sons

Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S.

308   (2005).     And    although     we    have   emphasized    that   federal

ingredient jurisdiction "should be applied with caution," Metheny

v. Becker, 352 F.3d 458, 460 (1st Cir. 2003) (internal quotation

marks omitted), this is one of the few cases that fits squarely

within the federal ingredient exception.

             The dispute in this case involves a federal contractor's

implementation of a federal program; the contracts at issue were


                                       -14-
drafted and approved by a federal agency and signed by a federal

official; and the plaintiffs allege that the contractor (here,

MaineHousing)     was    in      breach     of   the    agreement   by    following    a

guideline promulgated by a federal agency pursuant to a federal

statute.      Singly, none of these "federal ingredients"--a claim

against a federal contractor; an agreement drafted and approved by

a   federal    agency;       a    defense     based    on   a   federal   statute     or

guideline--would        be       sufficient      to    establish    "arising   under"

jurisdiction.      See, e.g., Empire Healthchoice Assur., Inc. v.

McVeigh, 547 U.S. 677, 699-701 (2006); Louisville & Nashville R.R.

Co. v. Mottley, 211 U.S. 149, 152-153 (1908); Lindy v. Lynn, 501

F.2d 1367, 1369 (3d Cir. 1974); Ippolito-Lutz, Inc. v. Harris, 473

F. Supp. 255, 259 (S.D.N.Y. 1979).                      Yet the scope of federal

ingredient jurisdiction is determined by the totality of the

circumstances, not by a single-factor test.                     See Grable, 545 U.S.

at 313-14.      Based on the totality of the circumstances, we find

that the federal ingredients of the case predominate.

              It is of particular significance here that "[f]ederal

jurisdiction is favored in cases that present 'a nearly pure issue

of law that could be settled once and for all and thereafter would

govern numerous cases.'"             Bender v. Jordan, 623 F.3d 1128, 1130

(D.C. Cir. 2010) (quoting Empire Healthchoice, 547 U.S. at 700)

(alterations and some internal quotation marks omitted).                       We note

that other Section 8 landlords have brought almost identical


                                            -15-
actions elsewhere.5          The outcomes of the legal questions in these

cases will dictate whether HUD and/or the public housing agencies

that       administer    Section    8   must    pay   millions    of    dollars   in

additional rents to landlords, which--in turn--could require the

agencies to scale back the scope of the Section 8 program.                       "The

issue is potentially so important to the success of the [Section 8]

program--since          on   its   resolution     may   turn      the   amount    of

lower-income      housing      actually    provided--that        we   believe    that

Congress, had it thought about the matter, would have wanted the

question to       be    decided    by   federal   courts applying        a   uniform

principle."       Price v. Pierce, 823 F.2d 1114, 1119-20 (7th Cir.

1987) (Posner, J.); see also Almond v. Cap. Props., Inc., 212 F.3d

20, 24 (1st Cir. 2000) (First Circuit is "content to follow Price

pending further enlightenment from the Supreme Court").                  Moreover,

"there is no discernable state interest in a state forum" that

would outweigh the federal interest in uniformity. See Bender, 623

F.3d at 1131; see also R.I. Fishermen's Alliance, Inc. v. R.I.

Dep't of Envtl. Mgmt., 585 F.3d 42, 51-52 (1st Cir. 2009).

               The decision to apply the federal ingredient doctrine in

a particular case is necessarily fact-bound.                See Gully v. First

Nat'l Bank in Meridian, 299 U.S. 109, 117 (1936) (Cardozo, J.)


       5
       See, e.g., Cathedral Square Partners Ltd. P'ship v. S.D.
Hous. Dev. Auth., No. 07-4001, 2011 U.S. Dist. LEXIS 1703 (D.S.D.
Jan. 5, 2011); Greenleaf Ltd. P’ship, 2009 U.S. Dist. LEXIS 119375;
Arlington Hous. Partners, Inc. v. Ohio Hous. Fin. Agency, 2012 Ohio
1412 (Ohio Ct. App. 2012).

                                         -16-
(federal ingredient doctrine requires "common-sense accommodation

of judgment to kaleidoscopic situations"). In the circumstances of

this case, we conclude that federal question jurisdiction exists,

as (1) "[t]he imposition of liability on Government contractors

will directly affect the terms of Government contracts," Boyle v.

United     Techs.       Corp.   487     U.S.    500,   507   (1988);      (2)   the

"dispute    .   .   .    turn[s]   on   the     interpretation   of   a   contract

provision approved by a federal agency pursuant to a federal

statutory scheme," Almond, 212 F.3d at 25; (3) the alleged breach

occurred only because the contractor was following the federal

agency's explicit instructions, see Corr. Servs. Corp., 534 U.S. at

74 n.6; (4) the case presents a pure question of law that will

govern numerous cases nationwide, see Bender, 623 F.3d at 1130; (5)

the federal government has an overwhelming interest in seeing the

issue decided according to a uniform principle, see Price, 823 F.2d

at 1119-20; and (6) there is no countervailing state interest in

having the dispute adjudicated in a state forum, see Bender, 623

F.3d at 1131; R.I. Fishermen's Alliance, Inc., 585 F.3d at 51-52.

Having satisfied ourselves that we have jurisdiction over the

claims that remain live in this case, we move on to the merits.6


     6
       We need not address the propriety of federal jurisdiction
over any claims against HUD. MaineHousing has not appealed from
the district court's dismissal of its third-party complaint, and
the landlords have waived any possible claims against HUD by not
addressing those claims in their brief on appeal. See Decaro v.
Hasbro, Inc., 580 F.3d 55, 64 (1st Cir. 2009) ("contentions not
advanced in an appellant's opening brief are deemed waived").

                                         -17-
                                  III.

             The merits issues that we must decide are (1) whether the

HAP contracts allow MaineHousing to invoke the overall limitation

clause to limit payments to the plaintiffs and (2) if so, whether

MaineHousing properly invoked the overall limitation by employing

the Notice H 95-12 method to calculate the difference between the

plaintiffs' contract rents and those of comparable unassisted

units.7   We are the first federal appellate court to reach this

question.8    Although some federal trial courts in other circuits


     7
       The magistrate judge's recommended decision noted that, if
MaineHousing did not breach the HAP contracts by applying the
Notice H 95-12 method, then there is no need to reach the
additional question of whether the HAP contracts prohibit
MaineHousing from applying a so-called "nonturnover deduction" to
reduce the automatic annual adjustment by 1 percentage point at
units that have not changed tenants. On appeal, the landlords have
not argued that their nonturnover deduction argument remains
relevant if the magistrate judge's primary recommendation is
affirmed. See Decaro, 580 F.3d at 64.
     The landlords do devote a portion of their reply brief to the
argument that "participation in the Section 8 program does not
automatically constitute consent . . . to whatever terms Congress
or HUD may come up with in the future." But the magistrate judge's
recommended decision did not state that the landlords had consented
to whatever terms Congress or HUD might conjure up. Rather, the
magistrate concluded that the landlords had in fact consented to
the overall limitation clause in the original HAP contracts and
that MaineHousing properly invoked the overall limitation clause in
denying further rent adjustments. Accordingly, we need not reach
the question of when--if ever--subsequent changes to the Section 8
statute would excuse MaineHousing from its obligations under its
contracts with the landlords.
     The landlords' additional arguments address the calculation of
damages and thus need not be addressed if we conclude that no
material breach has occurred.
     8
       After oral argument, the landlords and MaineHousing both
filed letters directing our attention to the Federal Circuit's

                                  -18-
have answered this question in the negative,9 we ultimately take

our guidance from the Supreme Court's Alpine Ridge decision.

There, a unanimous Court concluded that the terms of the overall

limitation   clause--which    apply    "notwithstanding   any   other

provisions" of the HAP contract--"override conflicting provisions

of any other section."       Alpine Ridge, 508 U.S. at 18.       That

conclusion survives the 1994 amendment to the Section 8 statute and

controls our analysis here.

          As we have noted, the overall limitation clause allows

MaineHousing to withhold the otherwise-automatic annual adjustments

in rental payments so long as MaineHousing has "determined" that

the adjustments would "result in material differences between the



recent decision in Haddon Housing Associates, L.P. v. United
States, 711 F.3d 1330 (Fed. Cir. 2013). In that case, the Federal
Circuit expressed no view regarding the impact of the overall
limitation clause in the landlord's HAP contract, as the issue was
not preserved for appeal. Id. at 1335-36 & nn. 1-2.
     9
       See, e.g., Haddon Hous. Assocs., LLC v. United States, 99
Fed. Cl. 311, 340 (2011) ("the overall-limitation clause did not
survive the 1994 Amendments"), aff'd in part on other grounds and
rev'd in part, 711 F.3d 1330 (Fed. Cir. 2013); Park Props. Assocs.,
L.P. v. United States, 82 Fed. Cl. 162, 176 (2008) ("the effect of
the repudiation of the pricing mechanism in the HAP contracts was
to deprive the overall limitation of any continuing vitality");
Cuyahoga Metro. Hous. Auth. v. United States, 57 Fed. Cl. 751,
759-60 & n.13 (2003) (Cuyahoga I) (HUD can only invoke overall
limitation clause by conducting comparability study); see also
Cathedral Square Partners Ltd. P'ship, 2011 U.S. Dist. LEXIS 1703,
at *37-38. But cf. Cuyahoga Metro. Hous. Auth. v. United States,
65 Fed. Cl. 534, 560 (2005) (Cuyahoga II) (HUD's calculation of
"material difference" under Notice H 95-12 is "reasonable, given
the language of the HAP contracts, as amplified by the statute as
it existed at the time those contract were executed").

                                -19-
rents charged for assisted and comparable unassisted units."              The

one caveat is that the overall limitation clause preserves the

landlord's right to receive above-market rental payments to the

extent of the initial difference between the contract rent and the

market rate.    MaineHousing argues that it has used the method set

forth in Notice H 95-12 to "determine" that further automatic

adjustments would result in "material differences" between contract

rents and market rates.       That method relies on the tables of fair

market rents published annually by HUD:           If the contract rent is

higher than the corresponding fair market rent for comparable units

in the region (and if the difference is more than 10 percent of the

initial contract rent), then a Section 8 landlord cannot receive a

further rent increase unless the landlord can show--based on "at

least three examples of unassisted housing in the same market area

of similar age, type and quality"--that the resulting rent level

after application of the automatic annual adjustment will still be

below the market rate.    Notice H 95-12, at 3.

          The     landlords     maintain       that   MaineHousing      never

"determined" that automatic adjustments would result in material

differences between contract rents and market rates because the

verb "determine" means "to reach a decision after thought and

investigation,"   Webster's     New    World   Dictionary   (2d   ed.   1986)

(emphasis added), whereas MaineHousing rotely applied the Notice H

95-12 formula without any independent inquiry.          But to "determine"


                                      -20-
also means to "ascertain definitely by . . . calculation."                        Oxford

English     Dictionary    (Online    ed.    2013);        see    also    The    American

Heritage Dictionary (2d College ed. 1982) ("ascertain definitely,

as after . . . calculation").           MaineHousing certainly calculated

that the adjusted rents at assisted units would rise above the fair

market rents for comparable units, and it based this calculation on

a HUD-prescribed formula and HUD-published data.                        The landlords'

cherry-picked    dictionary      definitions         do    not    convince      us   that

MaineHousing's      act     of      calculation           was    anything        but    a

"determination."10

             The landlords also argue that the fair market rents

published by HUD cannot be used as a measure of "the rents charged

for . . . comparable unassisted units." The landlords suggest that

unassisted units are only "comparable" to Section 8 units if they

are    in    a   similar     neighborhood        and        share       other    common

characteristics     such    as      size,     age,    physical          configuration,


      10
       To support their position that the only way MaineHousing can
invoke the overall limitation clause is by performing a site-
specific rent comparability study, the landlords point to the 1988
amendment to the Section 8 statute--and, in particular, to a clause
in that amendment that states:       "If the [HUD] Secretary or
appropriate State agency does not complete and submit to the
project owner a comparability study not later than 60 days before
the anniversary date of the assistance contract . . . , the
automatic annual adjustment factor shall be applied." Pub. L. No.
100-242, § 142(c)(2), 101 Stat. at 1850 (codified as amended at 42
U.S.C. § 1437f(c)(2)(C)). But the sixty-day rule is not in the HAP
contracts, which all state that automatic annual adjustments should
not go forward if MaineHousing determines that the adjustments
would lead to material differences between contract rents and
market rates notwithstanding any other provision.

                                       -21-
amenities, and utilities.     HUD's fair market rent figures, by

contrast, are calculated on a county-wide or metropolitan-area-wide

basis.    HUD reports 40th-percentile rents for zero-, one-, two-,

three-, and four-bedroom units in each area, but the fair market

rent figures do not include a more fine-grained breakdown by unit

type.

           MaineHousing and HUD counter that the fair market rent

figures are designed to reflect "the rent, including the cost of

utilities (except telephone) . . . , that must be paid in the

market area to rent privately owned, existing, decent, safe and

sanitary rental housing of modest (non-luxury) nature with suitable

amenities."   24 C.F.R. § 888.111(b).   The figures are adjusted to

"exclude public housing units, newly built units and substandard

units."   Id. § 888.113(a).   Thus, the fair market rent figures do

provide a basis for comparing rents at privately owned Section 8

sites to rents for other units in the general vicinity, taking

account of unit quality, amenities, utilities, and (to some extent)

age. Since HUD reports rents at the 40th percentile in each county

or metropolitan area, this means that contract rents will only be

deemed above-market for purposes of Notice H 95-12 if rents at the

Section 8 site are more expensive than rents for four out of ten

existing decent, safe, and sanitary units in the area with the same

number of bedrooms, same ownership status, and roughly the same

amenities. Moreover, HUD has established a procedural mechanism by


                                -22-
which landlords can challenge the results of the Notice H 95-12

calculation:         by     submitting        an     appraiser's      market     rent

estimates--based on at least three comparable units--showing that

adjusted rents would be consistent with prevailing market rates.

See Notice H 95-12, at 5-6; see also U.S. Dep't of Hous. & Urban

Dev., Estimates of Market Rent by Comparison (Form HUD-92273) (July

2003). Indeed, the plaintiffs all took advantage of this mechanism

when they submitted their own comparability studies to MaineHousing

and HUD in the mid-2000s, and HUD responded by approving upward

adjustments at all five sites.

              Ultimately, we need not decide whether the Notice H 95-12

method   is    the   best   way    to   calculate       rents   for    "comparable

unassisted units" under the HAP contracts. The contracts construed

by the Supreme Court in Alpine Ridge are in all relevant respects

identical to the contracts at issue here, and consistent with

Alpine Ridge, we read the overall limitation clause as "expressly

assign[ing] to [the agency] the determination of whether there

exist material differences between the rents charged for assisted

and comparable unassisted units."              See Alpine Ridge, 508 U.S. at

21.     Thus, our role is not to determine de novo whether this

calculation was correct.          Rather, our role is to determine whether

the Notice H 95-12 method represents a "reasonable means" of making

the comparison.       Id.; accord Carmichaels Arbors Assocs., 789 F.

Supp.    at    689   n.6    ("Under     our        interpretation     of   the   HAP


                                        -23-
contract, . . . any reasonable means of ascertaining whether

material differences in rents exist is authorized under the terms

of the contract."); Nat'l Leased Hous. Ass'n, 22 Cl. Ct. at 659

("the HAP contracts do not contain any provision limiting HUD to

any    particular    methodology    for    making     its   comparability

determination").11    We have already explained that MaineHousing's

reliance on the Notice H 95-12 method--while not the same as the

site-specific   studies    that    the    landlords    seek--still   does

incorporate   important   considerations     of   comparability.     This

method, combined with the procedural safeguards which we described

above (and which were actually utilized in this case), certainly

qualifies as "reasonable."     We do not read the contracts of the

Alpine Ridge decision to demand more than that.




      11
        The Alpine Ridge Court did say that "rent adjustments
indicated by the automatic adjustment factors remain the
presumptive adjustment called for under the contract," and that
automatic annual adjustments would be withheld "only in those
presumably exceptional cases where the Secretary has reason to
suspect that the adjustment factors are resulting in materially
inflated rents." 508 U.S. at 19-20. But the Alpine Ridge Court
was not asked to decide what would happen if HUD and the state and
local housing agencies--applying HUD-mandated methods--found
"materially inflated rents" to be not "exceptional" but rather
quite common. And the Alpine Ridge Court certainly did not say
that in such a scenario, HUD or the state and local housing
agencies would be contractually obligated to grant automatic annual
adjustments even after finding that the resulting rents would be
materially above the calculated market rates.

                                   -24-
                                    IV.

             In sum, we hold that the overall limitation clauses in

each   of    the   housing   assistance    payments   contracts    allow

MaineHousing to withhold otherwise-automatic annual adjustments in

contract rents where MaineHousing determines--based on the formula

prescribed by HUD in Notice H 95-12 and the fair market rent data

published by HUD--that further adjustments would result in material

differences between contract rents and market rates.        The district

court's     decision   granting   MaineHousing's   motion   for   summary

judgment with respect to the plaintiffs' complaint is affirmed.




                                   -25-
