Reply Brief — Mike Finnin Motors, Inc., et al., Petitioners v. United States, et al.

NO. 21-233

In the

Supreme Court of the United States

MIKE FINNIN MOTORS, INC., AND

GUETTERMAN MOTORS, INC.,

Petitioners,

v.

UNITED STATES,

Respondent.

__________________________

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Federal Circuit

REPLY BRIEF OF PETITIONERS

MIKE FINNIN MOTORS, INC., AND

GUETTERMAN MOTORS, INC.

RICHARD FAULKNER

12770 COIT RD., SUITE 720

DALLAS, TX 75251

(972) 972-1500

HARRY W. ZANVILLE

COUNSEL OF RECORD

JAMES H. ARENSON

ARENSON LAW GROUP, P.C.

10740 EL MARBEA LANE

LA MESA, CA 91941

(619) 400-7164

HWZLAW@GMAIL.COM

425 2ND ST., SE #900

CEDAR RAPIDS, IA 52401

(319) 220-5850

COUNSEL FOR PETITIONERS

NOVEMBER 16, 2021

SUPREME COURT PRESS

♦

(888) 958-5705

♦

BOSTON, MASSACHUSETTS

i

RULE 29.6 STATEMENT

Neither petitioner is a publicly held company,

and no publicly held company owns 10% or more of

petitioners’ stock.

ii

TABLE OF CONTENTS

Page

RULE 29.6 STATEMENT ........................................... i

TABLE OF AUTHORITIES ....................................... v

REPLY BRIEF OF PETITIONERS MIKE

FINNIN MOTORS, INC., AND GUETTERMAN

MOTORS, INC. ......................................... 1

I.

T HE G OVERNMENT D ID N OT D ISPUTE THE

PETITION’S STATEMENT OF FACTS, CORE

LEGAL P RINCIPLES , OR A NSWER THE

Q UESTIONS PRESENTED. ................................. 1

II. THE GOVERNMENT IS LIABLE FOR THESE

DIRECT TAKINGS. ............................................... 4

A. The Government Admits Not Defending

the Direct Takings Claim ........................... 4

B. The Government Cannot Be Excused

from Its Decision Not to Oppose the

Direct Takings Claim ................................ 4

III. THE GOVERNMENT DID NOT DENY THE

FEDERAL CIRCUIT’S INTERJECTION OF A

DIRECT TAKINGS DEFENSE FOR THE

GOVERNMENT AND RELATED DECISIONS

WERE UNLAWFUL .............................................. 7

IV. THE GOVERNMENT MADE NO ATTEMPT TO

DEFEND THE FEDERAL CIRCUIT’S ‘BUT FOR’

TEST................................................................... 7

V. THE GOVERNMENT MADE NO ATTEMPT TO

DENY THE ILLEGALITY OF APPLYING OF A

REGULATORY TAKINGS DEFENSE TO THIS

DIRECT TAKING CASE .......................................... 8

iii

TABLE OF CONTENTS – Continued

Page

VI. THE GOVERNMENT WAIVED ITS MISSION

PRODUCT ARGUMENT THAT THE DEALERS’

PROPERTY WAS WORTHLESS AND, EVEN IF IT

HAD NOT, ITS NEW THEORY IS WRONG AS A

MATTER OF LAW ................................................ 9

A. The Government Waived or Forfeited Its

Absurd Argument Concerning Mission

Product ........................................................ 9

B. The Government’s Mission Product Argument Is Ridiculous ...................................... 9

C. The Petition Properly Described the

Uncontroverted Evidence That the

Dealers Would Have Continued to Profit

from Using Their Franchisee Rights After

a Hypothetical Bankruptcy Rejection. ..... 10

D. The Government Simply Did Not Respond

to the Dealers’ Arguments That It Was

Clear Legal Error to Require Proof of

Fair Market Value and the Failures to

Make Historical and Subsidiary Fact

Findings. .................................................... 11

VII.

THE GOVERNMENT DID NOT DENY THAT

PUBLIC POLICY CONSIDERATIONS SUPPORT

REVIEW HERE .............................................. 11

VIII. EVEN AS THE GOVERNMENT CONCEDED

THAT THE LEGAL ISSUE OF WHETHER THE

GOVERNMENT COERCED CHRYSLER IS NOT

BEFORE THE COURT, IT CONCOMITANTLY

DID NOT DENY THAT ALL THE CONTRARY

CHRONOLOGIC FACTS ARE ACCURATE. ........ 12

iv

TABLE OF CONTENTS – Continued

Page

CONCLUSION.......................................................... 14

REPLY APPENDIX

Boston Consulting Group Report to

Government ...................................... Reply.App.1a

v

TABLE OF AUTHORITIES

Page

TABLE OF AUTHORITIES

CASES

Ark. Game & Fish Comm’n v. United States,

568 U.S. 23 (2012) .............................................. 8

Cedar Point Nursery v. Hassid,

141 S.Ct. 2063 (2021) ................................ 6, 8, 12

Horne v. Dept. of Agric.,

576 U.S. 351 (2015) .............................................. 8

International Paper Cop. v. United States,

282 U.S. 399 (1931) ............................................. 1

Loretto v. Teleprompter Manhattan Catv

Corp., 458 U.S. 419 (1982) .................................. 5

Mission Product Holdings Inc., v. Tempnology

LLC, 139 S.Ct. 1652 (2020) ................................. 9

Penn Cent. Transp. Co., v. City of New York,

438 U.S. 104 (1978) ............................................ 8

Ruckelshaus v. Monsanto Co.,

467 U.S. 986 (1984) .............................................. 5

Tahoe Tahoe-Sierra Pres. Council

v. Tahoe Reg’l Planning Agency,

535 U.S. 302 (2002) ............................................. 8

United States v. General Motors Corp.,

323 U.S. 373 (1945) .............................................. 5

Zoltec Corp. v. United States,

672 F.3d 1309 (Fed. Cir. 2012) ......................... 12

vi

TABLE OF AUTHORITIES – Continued

Page

CONSTITUTIONAL PROVISIONS

U.S. Const., amend. V ..................................... 5, 6, 7, 8

STATUTES

11 U.S.C. § 365 ............................................................. 9

REGULATIONS

Federal Register Volume 7 No.

(January 6, 1942) .............................................. 11

OTHER AUTHORITIES

Thomas Merrill,

Property and the Right to Exclude,

77 NEB. L. REV. 730 (1998) .................................. 6

1

REPLY BRIEF OF PETITIONERS

MIKE FINNIN MOTORS, INC., AND

GUETTERMAN MOTORS, INC.

I.

T HE G OVERNMENT D ID N OT D ISPUTE THE

PETITION’S STATEMENT OF FACTS, CORE LEGAL

P RINCIPLES , OR A NSWER THE Q UESTIONS

PRESENTED.

Even after 84 days of scrutiny, the Government

could not dispute any of the facts stated in the

Petition. It never disagreed with the legal predicate of

this case: that the Government must pay adequate

compensation to citizens whose private property1 it

took and diverted to others who it hoped would benefit

the public by using it more productively, contrary to

International Paper Cop. v. United States, 282 U.S.

399, 408 (1931). It made no attempt to address the

three questions presented for review in the Petition.

This Court can proceed with the confidence of

knowing that the Government did not disagree that:



The Government required the significant

reduction of Chrysler and GM franchised

dealers as a condition precedent to continued

performance of its duty to act as the lender of

last resort during the liquidity crisis it

helped cause and deepen. (Mike Finnin

Motors et al. Petition (“Pet.”) 3-5).



The Government acted on its belief that unless

it created a Plan B to circumvent state laws

1 The private property here included the exclusive right to sell

and service Chrysler-branded products within defined territories.

2

protecting franchised motor vehicle dealers

from involuntary termination, it would be

required to purchase the number of dealerships necessary to achieve its goal of reducing

the distribution network to the ‘right-size’.

(Pet.5).



The Government’s Plan B strategy was to

evade paying the dealers for their property by

using bankruptcy to preempt protective state

franchise laws. ATF Chief Steven Rattner

justified the refusal to pay the dealers for

their property as preventing “a waste of taxpayer resources.” (Pet.5-6).



Because the Government’s real-world valuation of the average dealership to be terminated

in 2008-09 was an estimated $1 million,

compelling termination of the Chrysler dealerships in bankruptcy rather than purchasing

them saved it nearly $1.5 billion (an amount

it later contextually admitted was “relatively

trivial”). (Pet.5).



President Obama’s official policy of “shared

sacrifice” was the coin of the rhetorical political

realm for wiping out the dealers’ property

rights for nothing. In the Government’s Plan B,

the terminated dealers did not share the

sacrifice: they were the sacrifice. (Pet.6).



This sacrifice was unnecessary: attrition and

cross dealer buyouts would have satisfied the

Government’s goal to reduce the number of

dealers without cost. (Pet.7).



Regardless of whether the Government was

right or wrong about the economic desirability

3

of terminating nearly 2,000 franchised dealers,

its desired dealership reduction could have

been accomplished without wiping out the

value of property owned by the dealers.

(Pet.7).



Only the Government demanded a plan whose

outcome was the involuntary termination of

dealers without compensation. (Pet.8).



The Government took the dealers’ exclusive

territorial rights to itself2 and gave them to

other dealers—for free—hoping the replacement dealers would operate their new

territories more profitably. (Pet.8).



It acted despite knowing that dealer buy/sells

and attrition already had eliminated underperforming dealers. (Pet.34). See, Appx. 1:

(Chrysler’s “Project Genesis to date has

already heavily rationalized low performing

dealers” and proposed new cuts would “largely

[be] eliminating additional good dealers”).

2 It does not deny “ . . . the Government required dealer terminations resulting in the involuntary transfer of those rights of

exclusivity to itself, as the judicially admitted controlling

shareholder and beneficial owner of Chrysler, which were

transferred later to other dealers for free.” (Pet. 23).

4

II. THE GOVERNMENT IS LIABLE FOR THESE DIRECT

TAKINGS.

A. The Government Admits Not Defending

the Direct Takings Claim.

The Government’s Brief in Opposition (“Opp.Br.”)

admits (Opp.Br.11, fn *) it did not defend the direct

takings claim below. (Pet.24).

B. The Government Cannot Be Excused from

Its Decision Not to Oppose the Direct

Takings Claim.

The Government airily floats the notion it should

be excused from its decision not to defend the direct

takings claims because “there was no need for the government to respond” to an “isolated and unsupported

direct takings claim”. Id.

1. The Government Waived and/or

Forfeited Its New Legal Arguments.

Its excuse is squarely contrary to the doctrines of

waiver and forfeiture. (Pet.27). The Government did

not deny the accuracy of the Petitioners’ comprehensive briefing of waiver and/or forfeiture doctrines.

Instead, it blithely ignored extant law that legal

arguments not raised below may not be considered.

The Court should refuse to consider them.

2. Regardless, the Government’s New

Legal Arguments Are Contrary

to Established Law.

The Government’s characterization of the direct

takings claim as being “isolated or unsupported” is

untrue. The dealers asserted their direct takings

5

claim3 in the pleadings, in pretrial disclosures of the

issues to be tried, in opening statement, through

unchallenged dealer and expert testimony, in closing

argument, and in multiple appellate briefs.

The argument that franchise contract rights cannot

be directly, physically, or taken per se by the Government is contrary to established law. The Government

asserts its actions cannot constitute a direct or per se

taking because its acts “did not amount to a right of

physical exclusion, enforceable against the general

public, that the government could physically appropriate.” (Opp.Br.9). No legal principles support that

argument.

It is black letter law that the Fifth Amendment

protects personal and intangible rights from being

taken without adequate compensation. “That intangible

property rights protected by state law are deserving of

the protection of the Taking Clause has long been

implicit in the thinking of this Court.” Ruckelshaus v.

Monsanto Co., 467 U.S. 986, 1003 (1984).4 The dealers’

franchise agreements contained a suite of personal

3 Variously described as a direct, physical or per se taking.

4 The Government’s actions here resulted in the dealers’ loss of

their rights of exclusion, possession, use, and disposition; the

three essential characteristics of property protected by this Court.

United States v. General Motors Corp., 323 U.S. 373, 378 (1945).

When the Government acquires or destroys the intangible property

of a citizen, it is liable. Id. In Loretto v. Teleprompter Manhattan

Catv Corp., 458 U.S. 419 (1982), this Court explained that “To

the extent that the government permanently occupies physical

property, it effectively destroys each of these rights.” Among

those, “[t]he power to exclude has traditionally been considered

one of the most treasured strands in an owner’s bundle of

property rights.” Id. at 435.

6

and intangible property rights protected by state and

federal law. (Pet.48, 51).5

The core of the dealers’ franchise agreements was

their exclusive right to sell and service Chryslerbranded products which enabled dealers to exclude

usurpation by the public. As this Court stressed, “We

cannot agree that the right to exclude is an empty

formality, subject to modification at the government’s

pleasure. On the contrary, it is a ‘fundamental element

of the property right,’ . . . ‘that cannot be balanced

away.’” Cedar Point Nursery v. Hassid, 141 S.Ct. 2063,

2077 (2021) (internal cite omitted). It cited with

approval Thomas Merrill, Property and the Right to

Exclude, 77 NEB. L. REV. 730 (1998) (calling the right

to exclude the “sine qua non” of property). 6 Id. at 2073.

The Government did not cite any legal principle

conditioning the protection of intangible personal

property rights on the ability to physically exclude

someone from violating those rights of exclusion.

Regardless of the semantics, the Government

actions constituted a direct, per se taking.

5 Government, six times, tried to substitute its definition of the

property that was taken. (Opp.Br.6-8) (the dealers complain of

the loss of their rights within the franchise agreement). The

Government does not deny that the Fifth Amendment protects

the property rights inhering in the franchise agreements. (Pet.30).

6 “The law with respect to intangible rights in intellectual property

is, if anything, even more striking in the degree to which the

property right and the right to exclude go hand-in-hand.

Copyrights, patents, trademarks, and trade secrets are all recognized as intangible forms of property. In each case, the core of

the property right is the right to exclude others from interfering

with or using the right in specified ways:” Id. at 749.

7

III. THE GOVERNMENT DID NOT DENY THE FEDERAL

CIRCUIT’S INTERJECTION OF A DIRECT TAKINGS

DEFENSE FOR THE GOVERNMENT AND R ELATED

D ECISIONS W ERE UNLAWFUL.

The Government did not deny the Federal Circuit’s

multiple abuses of discretion related to its raising

defenses for the Government:



The panel, sua sponte, interjected a direct

takings defense for the Government that it

relied upon to dismiss the direct takings

claim;



The panel violated the principle of party presentation;



The Federal Circuit’s refusal of supplemental

briefing after its own surprise injection of a

novel defense violated controlling precedent;



Controlling precedents forbid interposing a

waived or forfeited defense; and



The decisions below were contrary to controlling decisions mandating fairness and justice

in takings cases.

That the Government is utterly unconcerned

with clear abuses of judicial discretion emphasizes the

necessity for supervisory review.

IV. T HE G OVERNMENT M ADE N O A TTEMPT TO

DEFEND THE FEDERAL CIRCUIT’S ‘BUT FOR’

TEST.

The Petitioners detailed why the Federal Circuit’s

novel “but for” test is bad law and a growing threat to

viability of the Takings Clause of the Fifth Amendment. The Government’s response: complete silence.

8

The Government did not deny these dealers’ arguments are correct:



Horne v. Dept. of Agric., 576 U.S. 351 (2015)

precisely prohibits the kind of hypothetical

analysis required by and inherent in the

Federal Circuit’s ‘but for’ test. (Pet.17);

V.



Tahoe Tahoe-Sierra Pres. Council v. Tahoe

Reg’l Planning Agency, 535 U.S. 302 (2002)

and Cedar Point, supra, prohibit dismissal

of the direct takings claim for failing to

satisfy an element of a regulatory takings

case. (Pet.11);



Ark. Game & Fish Comm’n v. United States,

568 U.S. 23 (2012) prohibits carving out a

categorical exception to Takings Clause

liability. (Pet.15); and



Penn Cent. Transp. Co., v. City of New York,

438 U.S. 104 (1978) requires balancing, not

ignoring, crucial ad hoc factors. (Pet.15-16).

THE GOVERNMENT MADE NO ATTEMPT TO DENY

THE ILLEGALITY OF APPLYING OF A REGULATORY

TAKINGS DEFENSE TO THIS DIRECT TAKING CASE.

Even if the ‘but for’ test, arguendo, was valid in a

regulatory takings case, the Petition carefully applied

controlling law to demonstrate the prohibition of its

importation into direct takings case analyses. (Pet.1113). The Government’s response: complete silence.

9

VI. T HE G OVERNMENT W AIVED I TS M ISSION

PRODUCT ARGUMENT THAT THE DEALERS’

PROPERTY WAS WORTHLESS AND, EVEN IF IT

HAD NOT, ITS NEW THEORY IS WRONG AS A

MATTER OF LAW.

A. The Government Waived and/or Forfeited

Its Absurd Argument Concerning Mission

Product.

In opposing certiorari, the Government asserts—

for the first time—the dealers were required to appeal

the real-world bankruptcy rejection order in 2010 to

preserve their claims that the rejection of their

franchise contracts did not terminate their hypothetical

franchisee rights. The Government waived and/or

forfeited this defense on this issue.

B. The Government’s Mission Product

Argument Is Ridiculous.

The Government complains that the dealers

“identify no reason” that “they would have retained

greater rights had their franchise agreements been

rejected” “in the but for world than they did when”

they “were rejected” “in the real world.” (Opp.Br.13).

This Court held in Mission Product Holdings

Inc., v. Tempnology LLC, 139 S.Ct. 1652 (2020) that a

bankruptcy court rejection cannot terminate franchisee

rights (not franchisor rights) under the plain language

of 11 U.S.C. § 365. The Government’s own legal manuals

and arguments to this Court in Mission Product support the dealers position. (Pet.28-31).

The Federal Circuit’s requirement to evaluate what

would have occurred in a hypothetical bankruptcy

10

court cannot mean that the Federal Circuit (or any

court) could require the assumption a hypothetical

court would commit the same grievous error in violation of the statute that the bankruptcy court did in

2010. The converse is surely true: the CFC or Federal

Circuit must assume a hypothetical court will obey

the law–not disobey it. It is truly shocking that the

Government thinks it can fool this Court into assuming

a hypothetical bankruptcy court would violate black

letter law that distinguishes rejection from avoidance.

It is a legal certainty the dealers would have

retained their franchisee rights, including their

exclusivity rights, even after a rejection. Ipso facto,

that the Chrysler franchisee rights remained intact

negate the loss of all economic value of being a

branded Chrysler dealer.

C. The Petition Properly Described the

Uncontroverted Evidence That the

Dealers Would Have Continued to Profit

from Using Their Franchisee Rights After

a Hypothetical Bankruptcy Rejection.

The Government’s own analysis admitted that

the dealers would have remained in business and

profited even if Chrysler hypothetically liquidated.

The Government did not deny the accuracy of the

Petition’s quote of the Government’s own crucial admission that Chrysler’s “disappearance need not

completely destroy its dealers. Most of the jobs and

profits in a dealership come not from sales of new cars

but from service and used cars. Both would be needed

if Chrysler liquidated.” (Pet.8, 33) (emphasis added).

Government and dealer witnesses agreed that the

lifespan of nearly 31,000,000 Chrysler vehicles would

11

result in continued sales of service and parts for years

by these dealers who had the advantage of being

branded Chrysler repair facilities known and relied

upon by their loyal customers.

The dealers detailed a wide range of uncontested

facts supporting the likelihood of profitability even if

Chrysler liquidated. (Pet.33-34). As an example, they

detailed the non-warranty profits that would have

continued in the post-liquidation operation of Mike

Finnin Motors. That the dealers could have maintained

profitability solely based on sales of service and used

cars also was based on the historic fact that federal

regulations prohibited the manufacture and sales of

new vehicles to the public for several years during and

after World War II. See, e.g.: Federal Register Volume

7 No. (January 6, 1942).

D. The Government Simply Did Not Respond

to the Dealers’ Arguments That It Was

Clear Legal Error to Require Proof of

Fair Market Value and the Failures to

Make Historical and Subsidiary Fact

Findings.

The Government made no response to the lower

court’s failure to make required historic and subsidiary

fact findings. (Pet.32).

VII. THE GOVERNMENT DID NOT DENY THAT PUBLIC

POLICY CONSIDERATIONS SUPPORT REVIEW

HERE.

The Government did not deny that the last twenty

years of the Federal Circuit’s decisions disproportionately favor the Government and does not deny

that these one-sided outcomes are the product of

12

result-oriented reasoning which circumvent this Court’s

controlling precedents. The decision below continues

the expansion of the Federal Circuit’s ‘but for’ test and

side-stepping controlling precedents.

VIII. E VEN AS THE G OVERNMENT C ONCEDED

T HAT THE LEGAL ISSUE OF WHETHER THE

GOVERNMENT COERCED CHRYSLER IS NOT

BEFORE THE COURT, IT CONCOMITANTLY DID

NOT DENY THAT ALL THE CONTRARY

CHRONOLOGIC FACTS ARE ACCURATE.

The Government candidly admitted the issue of

whether it is responsible for seizing the dealer’s

property rights is not before the Court. (Opp.Br.7).

Nevertheless–seven times–it asserts the legal conclusion

that Chrysler was solely responsible for the dealers’

loss of property. (Opp.Br.5, 7, 8, 15).

The Government never denies targeting the

dealers’ rights to exclusivity of territory to benefit

itself—it merely points the finger at Chrysler with the

claim: ‘they did it, not us’.7

Although the Government repeats its conclusory

free will/no coercion mantra, it was unable to deny the

five key chronologic facts of the Petition proving Chrysler

was opposed to the uncompensated destruction of the

dealer’s property. (Pet.6-7):

7 Compare, Zoltec Corp. v. United States, 672 F.3d 1309 (Fed. Cir.

2012) (en banc), where the Government, through a third party,

used a patented process without permission or paying for it, it

did not conjure about such an outrageous theory. But there the

Government did not appropriate the rights to exclusively market

the invention—for if it had, it would have been a per se taking as

here. The Government is responsible for takings of third parties

in situations like this. Cedar Point, supra.

13



Chrysler responded to the Government

requirements by proposing to reduce the

dealer network by 25% within 18 months

through buy/sells and attrition without cost

to the Government or Chrysler.



The Government expert, Boston Consulting

Group, supported the credibility of Chrysler’s projections as did the history of

Project Genesis, Chrysler’s pre-existing voluntary dealer reduction program 95% of which

was financed by the dealers themselves.

(Reply.App.1a).



Chrysler executives informed the Government

the terminations were a “bad move” and its

Board of Managers denounced the use of bankruptcy to reduce the number of dealerships.



When the Government pressed again for acquiescence to its dealership reduction requirement, Chrysler refused to change its plan “one

iota”, rejected the Government bankruptcy

plan, and resisted the dealership network cuts

until immediately before the Government

deadline.

The dealers’ briefing of the law addressing the

coercion issue at the Federal Circuit remains unchallenged by the Government. The dealers are eager to

address the coercion issue if certiorari is granted and

its scope covers that issue. This is the perfect case for

that increasingly critical judicial discussion.

14

CONCLUSION

Petitioners respectfully request issuance of a writ

of certiorari.

Respectfully submitted,

HARRY W. ZANVILLE

COUNSEL OF RECORD

10740 EL MARBEA LANE

LA MESA, CA 91941

(619) 400-7164

HWZLAW@GMAIL.COM

RICHARD FAULKNER

12770 COIT RD., SUITE 720

DALLAS, TX 75251

(972) 427-1500

JAMES H. ARENSON

ARENSON LAW GROUP, P.C.

425 2ND ST., SE #900

CEDAR RAPIDS, IA 52401

(319) 220-5850

COUNSEL FOR PETITIONERS

NOVEMBER 16, 2021

Reply.App.1a

REPLY APPENDIX

BOSTON CONSULTING GROUP

REPORT TO GOVERNMENT

Reply.App.2a

Transcription:

OEMS START IN DIFFERENT POSITIONS

DRIVING DIFFERENT RESULTS

GM

Chrysler

Project Genesis to date

has already heavily

rationalized low

performing dealers

 Primarily attrition based

historically

Limited aggressive prior

consolidation of dealer

network

VP4 plan relies heavily

on forced dealer closures

which have higher share

loss

Viability plan relies more

heavily on consolidations

which has smaller share

loss

Significant elimination

of low-performing

dealers resulting in a

significant long-term

improvement in dealer

network quality

Largely eliminating

additional good dealers

given past project efforts

so limited upside

Larger near term share More limited near-term

losses

downside losses

Greater upside potential Limited upside potential

long-term