       NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
              __________________________

         ENGLEWOOD TERRACE LIMITED
               PARTNERSHIP,
               Plaintiff-Appellant,
                           v.
                  UNITED STATES,
               Defendant-Cross Appellant.
              __________________________

                   2011-5072, -5073
              __________________________

    Appeal from the United States Court of Federal
Claims in case no. 03-CV-2209, Judge Marian Blank
Horn.
             ___________________________

                  Decided: May 2, 2012
              ___________________________

   BRIAN J. MURRAY, Jones Day, of Chicago, Illinois, ar-
gued for plaintiff-appellant. On the brief was DON S.
SAMUELSON, Law Offices of Don S. Samuelson, of Lake
Forest, Illinois.

    CHRISTOPHER A. BOWEN, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for defendant-
ENGLEWOOD TERRACE     v. US                            2


cross appellant. With him on the brief were TONY WEST,
Assistant Attorney General, JEANNE E. DAVIDSON, Direc-
tor, and BRIAN M. SIMKIN, Assistant Director. Of counsel
was DOUGLAS K. MICKLE, Senior Trial Counsel.         Of
counsel on the brief were GREGORY G. GUSTIN, MARIA T.
BAGUIO, LORRAINE C. SHOTO and JARET R. FISHMAN,
Department of Housing and Urban Development, of
Washington, DC.
               __________________________

    Before LOURIE, DYK, and MOORE, Circuit Judges.
DYK, Circuit Judge.
    Englewood Terrace Limited Partnership (“Engle-
wood”) and the United States Department of Housing and
Urban Development (“HUD”) entered into a housing
assistance payment (“HAP”) contract. The United States
Court of Federal Claims (“Claims Court”) held that HUD
breached the contract, Englewood Terrace Ltd. P’ship v.
United States (“Englewood II”), 79 Fed. Cl. 516 (2007),
and awarded damages, Englewood Terrace Ltd. P’ship v.
United States (“Englewood V”), 94 Fed. Cl. 116 (2010).
Englewood appeals, contending that it was entitled to a
larger damages award. HUD cross-appeals, contending
that the Claims Court erred in concluding that it
breached the HAP contract, and also erred in its damages
award. We affirm in part, reverse in part, and remand.
                        BACKGROUND
    Englewood owned South Pointe, a 303-unit apartment
building in Chicago, Illinois. In 1998, Englewood entered
into a HAP contract with HUD to receive housing assis-
tance payments on behalf of its low-income tenants. In
order to receive these subsidies, paragraph 6(a) of the
contract required Englewood “to provide decent, safe, and
sanitary housing including the provision of all the ser-
3                                ENGLEWOOD TERRACE   v. US


vices, maintenance and utilities.” Englewood II, 79 Fed.
Cl. at 518. The contract also provided that “[i]f HUD
notifies the Owner that it has failed to maintain a dwell-
ing unit in decent, safe, and sanitary condition and the
Owner fails to take corrective action within the time
prescribed in the notice,” HUD may take action under the
default clause of the contract. 1 Id.
    On October 16, 2000, Englewood and HUD renewed
the HAP contract for a one-year term with three auto-
matic one-year renewal terms. The term of the contract
began on October 1, 2000, and was thus set to expire on
September 30, 2004. The 2000 HAP contract renewed all
terms of the previous contracts, with the exception of
provisions relating to contract rents and rent adjust-
ments. An addendum to the 2000 HAP contract further
provided that
    in the event HUD’s Real Estate Assessment Cen-
    ter (REAC) issues a physical inspection report to

    1   The contract also provided that

    HUD shall inspect or cause to be inspected at such
    times as may be necessary to ensure that the Owner
    is meeting its obligation to maintain the units in de-
    cent, safe, and sanitary condition . . . .

Id. If an owner was in default, HUD was required to
notify the property owner of

    (i) The nature of the default,
    (ii) The actions required to be taken and the remedies
    to be applied on account of the default (including ac-
    tions by the Owner to cure the default), and
    (iii) The time within which the Owner shall respond
    with a showing that all the required actions have
    been taken.

    Id. at 519.
ENGLEWOOD TERRACE    v. US                                 4


    the Owner that has a score which evidences
    Owner failure to comply with HUD’s Uniform
    Physical Condition Standards and Physical In-
    spection Requirement, . . . HUD may terminate
    the Contract after the renewal providing the
    Owner a reasonable period, as determined by
    HUD, to correct deficiencies . . . .
Id. at 519.
    On March 2, 2001, REAC conducted an inspection of
25 of the 303 units at Englewood’s South Pointe property.
That same day, REAC provided Englewood an initial
report listing a number of exigent health and safety
deficiencies discovered during the inspection. This report
informed Englewood that it was required to correct all
such deficiencies within 72 hours of the inspection. On
March 6, Englewood certified to HUD that all exigent
health and safety deficiencies had been corrected on
March 2 and 3. On March 8, REAC issued a full physical
inspection report which indicated that South Pointe
received a failing score. This report identified a number
of other deficiencies, in addition to the exigent health and
safety violations, in the physical condition of the property.
The report stated that Englewood had 30 days to conduct
its own survey of the property to identify additional
deficiencies and to submit a Proposed Plan of Correction
for the deficiencies identified both by REAC and by its
own survey. The plan was to list the deficiencies Engle-
wood already corrected, the resources available to correct
the remaining deficiencies, and completion timeframe for
the remaining work. Englewood subsequently submitted
on April 5, within 30 days of the March 8 report, a Pro-
posed Plan of Correction to HUD stating the actions
already taken to correct any deficiencies, proposing a plan
of correction for the remaining items, and identifying the
source of funding for the proposed corrections.
5                                ENGLEWOOD TERRACE    v. US


    On April 9, HUD issued a notice of default. The no-
tice indicated that HUD had concluded that not all of the
exigent health and safety deficiencies identified in the
REAC report had been corrected. Furthermore, the notice
stated that South Pointe “suffers from ongoing serious
neglect, disrepair, and unsafe and unsanitary conditions.”
Englewood was notified that “if the foregoing events of
default are not corrected to the satisfaction of HUD
within 30 days from the date of this Notice, HUD may
seek any and all available remedies; including, without
limitation, suspending or abating the HAP contract.” J.A.
291. On May 16, HUD issued a Notice of Continuing
Default to Englewood, reiterating the basis in the April 9
Notice.
    On October 1, HUD e-mailed Englewood to inform it
that tenant-based vouchers were being issued to the
South Pointe residents as of that date, and that the HAP
contract would be terminated once all residents received
their vouchers. Tenant-based vouchers are subsidies paid
by HUD on behalf of tenants that can be used at a differ-
ent housing project if a particular tenant desires to relo-
cate. On November 30, HUD sent Englewood a Notice of
Abatement and Termination of the HAP contract, which
stated that “[t]o date, Owner has not cured the conditions
complained of in the notice of default issued on April 9,
2001 and as more fully described in HUD’s May 16, 2001
writing.” J.A. 327. The termination notice again stated
that “[t]he HAP Contract will be terminated when HUD
has . . . completed its voucher and relocation process for
all eligible residents at [South Pointe].” J.A. 328. The
HAP contract with Englewood was ultimately terminated
on September 30, 2002.
    On September 22, 2003, Englewood filed a breach-of-
contract action against HUD seeking damages for HUD’s
alleged breach of the 2000 HAP contract. HUD defended
ENGLEWOOD TERRACE   v. US                                6


on the ground that Englewood had defaulted on the
contract through its failure to maintain South Pointe in a
decent, safe, and sanitary condition. The Claims Court
rejected this argument and found that HUD “breached the
2000 HAP contract, and was not justified in doing so by
the claimed default on the part of Englewood.” Engle-
wood II, 79 Fed. Cl. at 551. The court found, and HUD
agrees, that HUD could not terminate the contract with-
out providing notice of a deficiency and giving Englewood
the opportunity to cure. The court found, and again HUD
agrees, that the only notice of deficiencies was contained
in the March 8, 2001, REAC inspection report. Id. at 540.
The court found that all of the exigent health and safety
violations had been remedied within the required 72
hours, id. at 540-41, and that most of the other deficien-
cies noted in the March 8 report had been corrected
within 30 days of the report, as reflected in Englewood’s
Proposed Plan of Correction, id. at 542. Furthermore, all
of the remaining items were in the process of being cor-
rected and had reasonable estimated completion dates,
and Englewood had identified an internal source of fund-
ing to correct these deficiencies. Id. at 542-43. Thus, the
court concluded that HUD breached the contract because
it “did not afford Englewood a fair and meaningful oppor-
tunity to respond to the March, 2001 REAC-identified
deficiencies.” Id. at 542.
    After further briefing, the Claims Court awarded
Englewood $3,272,217 in lost profits. Englewood V, 94
Fed. Cl. at 134. The court determined that Englewood’s
lost profits were reasonably foreseeable and caused by
HUD’s breach, id. at 123-25, and set July 1, 2002, as the
date of the breach for purposes of calculating damages
because that date was the date by which the voucher
process was complete and had a substantial effect on the
occupancy at Englewood, id. at 127. The court also found
7                                  ENGLEWOOD TERRACE     v. US


that, because a HUD-insured loan to Englewood would
require renovations on at least two floors of South Pointe
at a time, it would assume a 9.5% vacancy rate for most of
the breach period, id. at 128, and that Englewood had not
shown any entitlement to rent increases, id. at 126.
    The court awarded Englewood’s lost profits based on
the difference between the rent it was actually receiving
and the rent it would have received if HUD had not
breached the contract without deducting expenses that
Englewood would have incurred absent breach. See id.
Finally, the court concluded that Englewood’s claim for
lost equity damages (the asserted decline in value of the
property as a result of the breach) was “far too remote and
speculative to allow recovery,” id. at 132, finding that
Englewood was unable to prove that lost equity damages
were foreseeable; that the damages were caused by the
breach; or that they were established with reasonable
certainty, id. at 132-34. Englewood timely appealed, and
HUD cross-appealed. We have jurisdiction pursuant to 28
U.S.C. § 1295(a)(3).
                        DISCUSSION
    We review the Claims Court’s findings of fact under
the clearly erroneous standard, while we review its legal
holdings de novo. Bell BCI Co. v. United States, 570 F.3d
1337, 1340 (Fed. Cir. 2009).
    We see no error in the Claims Court’s determination
that HUD breached the 2000 HAP contract; that July 1,
2002, was an appropriate start of the damages period;
that a 9.5% vacancy rate was appropriately used in the
calculation of damages; that Englewood had not shown its
entitlement to rent increases; that Englewood was not
entitled to lost equity damages; and that Englewood was
entitled to lost profits as a result of HUD’s breach (if there
ENGLEWOOD TERRACE   v. US                                8


were any lost profits). However, we find that the Claims
Court erred in calculating lost profits.
    The Claims Court awarded Englewood all of the gross
revenue it would have received had HUD not breached
the HAP contract without concurrently subtracting vari-
ous costs or expenses that Englewood would have in-
curred absent breach. The Claims Court calculated
Englewood’s lost profits by simply subtracting the rent
revenue received by Englewood during the breach period
from the total potential revenue it could have received
during the same period if the contract had not been
breached. See Englewood V, 94 Fed. Cl. at 126. HUD
identified numerous costs saved by Englewood that it
urged should have offset the lost profits damages received
by Englewood. HUD asserts that if it had not breached
the contract, Englewood would have had to repay the
HUD-insured and IHDA loans that it took out in Decem-
ber 2002, along with the property taxes and liability
insurance for South Pointe, which HUD argues Engle-
wood did not pay during the breach period in 2003 and
2004. Moreover, HUD argues that had the contract not
been breached, Englewood would also have been required
to pay South Pointe’s operating expenses and to expend
money making repairs to South Pointe to maintain its
compliance with HUD standards. The Claims Court
made no findings as to the amount of costs saved by
Englewood, but simply held that there was no need to
deduct such costs from Englewood’s rent revenue.
    The Claims Court erred by failing to deduct costs and
expenses Englewood saved, i.e., did not pay, as a result of
the breach. An award of gross revenues is not appropri-
ate; this is not the measure of Englewood’s loss from
HUD’s breach. By failing to deduct avoided costs, the
Claims Court placed Englewood in a better position than
it would have been in had there been no breach. See
9                                    ENGLEWOOD TERRACE      v. US


Bluebonnet Sav. Bank, F.S.B. v. United States, 339 F.3d
1341, 1345 (Fed. Cir. 2003).
    As a matter of general contract law, an injured party
can collect as expectancy damages, i.e., lost profits, “the
loss in value to him of the other party’s performance
caused by its failure or deficiency, . . . less . . . any cost or
other loss that he has avoided by not having to perform.”
Restatement (Second) of Contracts § 347 (1981); see also
Rumsfeld v. Applied Companies, Inc., 325 F.3d 1328, 1344
(Fed. Cir. 2003) (Dyk, J., dissenting in part) (quoting
Restatement (First) of Contracts § 329 cmt. a (1932)
(“[C]ompensatory damages will be given for the net
amount of the losses caused and gains prevented, in
excess of savings made possible.”)). We have consistently
applied these principles in other breach of government
contract cases. See, e.g., Slattery v. United States, 583
F.3d 800, 817-18 (Fed. Cir. 2009); Bluebonnet Sav. Bank,
339 F.3d at 1345.
     Even the Claims Court recognized that in setting a
damages award “the costs resulting from the breach must
be reduced by any costs that the plaintiff would have
incurred absent the breach.” Englewood V, 94 Fed. Cl. at
122. But the court did not follow its own statement of the
law, declining to deduct expenses from the lost rental
revenue because “in its HAP contract damages claim
Englewood is not asking the government to reimburse it
for costs it incurred due to the breach, it is only asking for
the HAP revenue it lost.” Id. at 128. There is no support
for this approach in a breach-of-contract case of this kind,
and it is incorrect. It is well established that where a
plaintiff saved certain expenses as the result of the breach
of a contract, lost revenue alone is not an appropriate
measure of damages. e360 Insight, Inc. v. Spamhaus
Project, 658 F.3d 637, 647 (7th Cir. 2011) (“[G]ross reve-
nue is generally not an appropriate measure of damages
ENGLEWOOD TERRACE    v. US                               10


because revenue is calculated without regard to the costs
the plaintiff incurred in the course of making that reve-
nue.”); see also Eleven Line, Inc. v. N. Tex. State Soccer
Ass’n, 213 F.3d 198, 208 (5th Cir. 2000); Sure-Trip, Inc. v.
Westinghouse Eng’g, 47 F.3d 526, 532 (2d Cir. 1995);
Taylor v. Meirick, 712 F.2d 1112, 1121 (7th Cir. 1983).
    The Claims Court’s justification for its approach ap-
pears to be that because the expenses Englewood ex-
pended due to the breach may have been greater than
those it would have incurred absent the breach, the award
of contract damages did “not place [Englewood] in a better
position than it would have been without the breach.”
Englewood V, 94 Fed. Cl. at 128. There is, however, no
identification or support for such expenses Englewood
supposedly expended due to the breach in either the
Claims Court’s opinion or in Englewood’s briefs before
this court. The fact that Englewood may have failed to
assert a claim for additional damages is no justification
for using an erroneous lost profits calculation.
     A remand is necessary for the Claims Court to deter-
mine an appropriate reduction in the award to the plain-
tiff (a reduction that could entirely eliminate the lost
profits award). The Claims Court must reduce the award
by any operational costs or expenses Englewood did not
pay but would have been obligated to pay if HUD had not
breached the HAP contract. 2 These may include mort-
gage payments, liability insurance, property taxes, and
money for repairs and rehabilitation of South Pointe. We
make no determination as to which of these items should


   2    As HUD concedes, if Englewood retained legal ob-
ligations to repay these expenses they would not need to
be deducted. See Cross Appellant’s Reply Br. 19. But
HUD contends that it already largely paid these costs
itself.
11                              ENGLEWOOD TERRACE   v. US


be deducted, leaving that determination to the Claims
Court in the first instance.
    Thus, with respect to Englewood’s appeal we affirm.
With respect to HUD’s cross-appeal we affirm, except that
we reverse and remand to the Claims Court for recalcula-
tion of lost profits damages.
