Opposition Brief — Franconia Associates v. United States

NOV tu 200

No. 01-455 ,

— EA A

In the Supreme Court of the United States

GRASS VALLEY TERRACE, ET AL., PETITIONERS

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

THEODORE B. OLSON

Solicitor General

Counsel of Record

ROBERT D. MCCALLUM, JR.

Assistant Attorney General

- DAVID M. COHEN

MARK L. JOSEPHS

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTIONS PRESENTED

1. Whether, for purposes of the six-year statute of

limitations under 28 U.S.C. 2501 for actions in the Court

of Federal Claims, a breach of contract action based

upon the effect of the Emergency Low Income Housing

Preservation Act of 1987, Pub. L. No. 100-242, Tit. II,

101 Stat. 1877, first accrued when that statute was

enacted

2. Whether, for purposes of the six-year statute of

limitations under 28 U.S.C. 2501 for actions in the Court

of Federal Claims, a Fifth Amendment taking action

based upon the effect of the Emergency Low Income

Housing Preservation Act of 1987, Pub. L. No. 100-242,

Tit. II, 101 Stat. 1877, first accrued when that statute

was enacted.

(1)

TABLE OF CONTENTS

TABLE OF AUTHORITIES

Cases:

Chardon v. Fernandez, 454 U.S. 6 (1981)

Delaware State College v. Ricks, 449 U.S. 250

(1980)

Greenbrier v. United States, 198 F.3d 1348 (Fed.

Cir. 1999), cert. denied, 530 U.S. 274 (2000)

Hart v. United States, 910 F 2d 815 (Fed. Cir.

1998)

Hodel v. Virginia Surface Mining & Reclamation

Ass'n, 452 U.S. 264 (1981)

Kimberly Assocs. v. United States, 261 F.3d

864 (2001)

Kinsey v. United States, 852 F 2d 556 (Fed. Cir.

1988)

Marathon Oil Co. v. United States, 16 Cl. Ct. 332

(1989)

Mobil Oil Exploration & Producing S.E., Inc.

b

18

17

v. United States, 530 U.S. 604 (2000) 13, 14, 15

Schism v. United States, 239 F.3d 1280, opinion with-

drawn and vacated on reh’g, 252 F.3d 1354 (Fed. Cir.

2001)

Seldovia Native Ass'n, v. United States, 144 F.3d 769

(Fed. Cir. 1998)

Sun Oil Co. v. United States, 572 F 2d 786 (1978)

Trunspace Carriers, Inc. v. United States, 27 Fed. Cl.

269 (1992)

(III)

IV

Cases—Continued: Page

United States v. Mitchell, 445 U.S. 585 (1980) —

United States v. Riverside Bayview Homes, Inc.,

474 U.S. 121 (1985) 17

United States v. Testan, 424 U.S. 392 (1976) 8

United States v. Winstar, 518 U.S. 839 (1998) 13

United States Trust Co. v. New Jersey, 431 U.S. 1

(1977) 16

U.S. Const. Amend. V 6, 16

Emergency Low Income Housing Preservation Act of,

1987, Pub. L. No. 100-242, Tit. II, 101 Stat. 1877 ............. 4

§ 241:

101 Stat. 1877 4

101 Stat. 1886-1887 4

101 Stat. 1887 4

101 Stat. 1889 5

Housing and Community Development Amendments

of 1979, Pub. L. No. 96-153, 98 Stat. 1101

) 502(b), 98 Stat. 1134-1135

Housing and Community Development Act of 1980,

Pub. L. No. 96-399, 94 Stat. 1614

§ 514, 94 Stat. 1671-1672

Housing and Community Development Act of 1992,

Pub. L. No. 102-550, 106 Stat. 3772

§ 502(c), 42 U.S.C. 1472(c)

§ 502(c4)(A), 42 U.S.C. 1472(c)(4)(A)

§ 502(cK 5X AXA), 42 U.S.C. 17e NAH)

§ 502(c5 Ail), 2 U.S.C. 1472(eX 5 AMI) «...........-. 7

SONS), 42 U.S.C. 1472(e (5G)

§ 515, 42 U.S.C. 1485 2, 3, 4, 5

§ 521, 42 U.S.C. 1490a (1994 & Supp. V 1999) .............. 2

§ 712, 106 Stat. 3841 5

28 U.S.C. 2501 6, 8, 10, 13, 15

7 C. F. R. 1965.90 (1989) 5

oo

4 ©

ovvowuouu

Miscellaneous:

A. Corbin, Corbin on Contracts (1964)

53 Fed. Reg. 13,245 (1988)

H.R. Rep. No. 154, 96th Cong., Ist Sess. (1979)

H.R. Rep. No. 122, 100th Cong., Ist Sess. Pt. 1 (1987) ......

24

K

In the Supreme Court of the United States

No. 01-455

GRASS VALLEY TERRACE, ET AL., PETITIONERS

U.

UNITED STATES OF AMERICA

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals in Franconia

Associates v. United States is reported at 240 F.3d

1358. The opinions of the Court of Federal Claims in

Franconia Associates are reported at 43 Fed. Cl. 702

and 44 Fed. Cl. 315. No opinion was issued by the court

of appeals in Grass Valley Terrace v. United States.

The opinion of the Court of Federal Claims in Grass

Valley Terrace v. United States is reported at 46 Fed.

Cl. 629 (2000).

JURISDICTION

The judgment of the court of appeals in Franconia

Associates was entered on February 15, 2001. A

petition for rehearing was denied on June 19, 2001. The

judgment of the court of appeals in Grass Valley

(1)

2

Terrace was entered on May 17, 2001. On July 31, 2001,

the Chief Justice extended the time for filing a petition

for a writ of certiorari in Grass Valley Terrace to and

including September 14, 2001. The petition for a writ of

certiorari was filed on September 10, 2001. This

Court’s jurisdiction is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. Under Sections 515 and 521 of the Housing Act of

1949, 42 U.S.C. 1485, 1490a (1994 & Supp. V 1999), the

Farmers Home Administration (FmHA) made direct

loans to private, non-profit entities to develop and/or

construct rural housing designed to serve the elderly

and low- or middle-income individuals and families.

Each petitioner entered into a loan agreement with the

FmHA under Sections 515 and 521, “in order to provide

rental housing and related facilities for eligible occu-

pants in rural areas.” Pet. App. Al65. The loan

agreements contained various provisions designed to

ensure that the projects would be affordable for low-

income tenants. Those provisions included restrictions

as to the tenants to whom the petitioners could rent,

the rents petitioners could charge, and the rate of

return petitioners could realize, as well as requirements

regarding the maintenance and financial operations of

each project. Id. at A165-A174. Petitioners all entered

into their loan agreements before December 21, 1979.

Id. at A3.

In connection with the loan agreements, each peti-

tioner also executed a promissory note and a security

instrument, ordinarily a mortgage. Those loan docu-

ments specified that petitioners must pay the principal

on the mortgage in scheduled installments, plus inter-

est. Pet. App. Al76-A177. According to petitioners,

those documents also provided petitioners with the

3

option of prepaying their mortgages and thereby

discontinuing the low-income affordability restrictions,

at any time. Id. at All2, A176. The note term upon

which petitioners rely stated: Iplrepayments of sched-

uled installments, or any portion thereof, may be made

at any time at the option of the Borrower.” Id. at A176.

2. By 1979, many Section 515 participants had

started to prepay their mortgages, thus threatening the

continued availability of rural low- and moderate-in-

come housing. Finding that it had been “the clear

intent of Congress that these projects be available to

low and moderate income families for the entire original

term of the loan,” Congress amended the National

Housing Act to preclude the loss of low-cost rural

housing due to prepayments. H.R. Rep. No. 154, 96th

Cong., Ist Sess. 43 (1979). In the Housing and

Community Development Amendments of 1979, Pub. L.

No. 96-153, 93 Stat. 1101, Congress prohibited the

FmHA from accepting prepayment of any loan made

before or after the date of enactment unless the owner

committed to maintaining the low-income features of

the rental housing for either a 15-year or 20-year period

from the date of the loan. § 502(b), 93 Stat. 1134-1135.

The Act included an exception to that requirement for

cases in which the FmHA determined that there was no

longer a need for the low-cost housing or if federal or

other financial assistance provided to residents would

no longer be provided. bid.

In 1980, Congress further amended the National

Housing Act to eliminate retroactive application of the

Section 515 prepayment changes enacted in the 1979

legislation. The Housing and Community Development

Act of 1980, Pub. L. No. 96-399, 94 Stat. 1614, provided

that the prepayment restrictions included in the 1979

legislation would apply only to loans entered into after

4

the date of enactment of that legislation, December 21,

1979. § 514, 94 Stat. 1671-1672.

8. In 1987, Congress again became concerned about

the availability of low-and moderate-income rural hous-

ing in the face of increasing prepayments of mortgages

under Section 515. A House of Representatives Com-

mittee found that the exhaustion of many of the tax

benefits available to Section 515 participants was “driv-

ing owners to prepay or to refinance their FmHA loans,

without regard to the low income and elderly tenants in

these projects.” H.R. Rep. No. 122, 100th Cong., Ist

Sess. Pt. 1, at 53 (1987).

In response, Congress passed the Emergency Low

Income Housing Preservation Act of 1987 (ELIHPA),

Pub. L. No. 100-242, Tit. II, 101 Stat. 1877, which, inter

alia, amended the Housing Act of 1949 to impose

restrictions upon prepayment of Section 515 mortgages

that were entered into before December 21, 1979. This

legislation, enacted on February 5, 1988, required that

before FmHA accepted an offer to prepay a mortgage

entered into before December 21, 1979:

the [FmHA] shall make reasonable efforts to enter

into an agreement with the borrower under which

the borrower will make a binding commitment to

extend the low income use of the assisted housing

and related facilities involved for not less than the

20-year period beginning on the date on which the

agreement is executed.

Pub. L. No. 100-242, § 241, 101 Stat. 1886. The legisla-

tion further provided that the FmHA could include a

number of enumerated incentives in such an agreement,

including an increase in the rate of return on invest-

ment, reduction of the interest rate on the loan, and an

equity loan. Pub. L. No. 100-242, § 241, 101 Stat. 1886-

1887.

5

Under ELIHPA, if the FmHA determined after a

“reasonable period” that an agreement would not be

entered into, the FmHA would require the owner to

offer to sell the housing to “any qualified nonprofit

organization or public agency at a fair market value

determined by 2 independent appraisers.” Pub. L. No.

100-242, § 241, 101 Stat. 1887. If an offer was not made

within 180 days, the FmHA could accept the offer to

prepay or request refinancing. Jbid. The offer for sale

requirement would not apply if (1) the owner agreed to

utilize the housing for the purposes set out in Section

515 for a period designated by the FmHA and then

offer to sell the housing to a nonprofit organization or

public agency, or (2) the FmHA determined that hous-

ing opportunities for minorities “will not be materially

affected” by prepayment and the housing tenants either

will not be displaced by prepayment or there is an

“adequate supply” of “affordable” housing in the mar-

ket area available to displaced tenants. Pub. L. No.

100-242, § 241, 101 Stat. 1889.

The FmHA promulgated regulations to implement

ELIHPA on April 22, 1988, and those regulations

became effective on May 23, 1988. 53 Fed. Reg. 13,245

(1988) (7 C.F.R. 1965.90 (1989)).

4. In 1992, Congress passed the Housing and Com-

munity Development Act of 1992, Pub. L. No. 102-550,

106 Stat. 3672 (codified in relevant part at 42 U.S.C.

1472(c) (1994)) (the “1992 legislation”). That legislation

amended the Housing Act of 1949 to apply the pre-

payment restrictions imposed upon pre-1979 Section

515 loans in ELIHPA to Section 515 loans made from

December 21, 1979, until enactment of the 1989 legisla-

tion. Pub. L. No. 102-550, § 712, 106 Stat. 3841. In

other words, after that statute was enacted, loans made

after December 21, 1979 but before 1989 were subject

6

to the same provisions as those applied under ELIHPA

to pre-1979 loans, such as those of petitioners.

5. Petitioners in Franconia Associates filed this

action in the Court of Federal Claims on May 30, 1997.

Petitioners alleged that ELIHPA and the 1992 legisla-

tion repudiated their loan contracts and effected a

taking under the Fifth Amendment. The Court of

Federal Claims granted the government’s motion to

dismiss the complaints on grounds that they were filed

more than six years after they first accrue[d]” and

were therefore filed beyond the limitations period

provided for by 28 U.S.C. 2501. Pet. App. A23. The

court held that petitioners’ contract claims first accrued

on May 23, 1988, the effective date of regulations

implementing ELIHPA. The court reasoned that “as of

[that date], * * * borrowers could no longer prepay

their contracts without first going through lengthy and

onerous procedures,” a result that “was clearly in

contravention of the government’s clear promise to

allow an unfettered prepayment right.” Id. at A29, A31.

Because petitioners had not filed their action until 1997,

their claims did not fall within the six-year statute of

limitations under 28 U.S.C. 2501. Pet. App. A34. The

court also, sua sponte, dismissed petitioners’ taking

claims, holding that those claims also accrued upon the

effective date of regulations implementing ELIHPA.

Ibid.

6. On February 15, 2001, the United States Court of

Appeals for the Federal Circuit affirmed the lower

court’s dismissal of the Franconia Associates peti-

tioners’ claims. Pet. App. Al. The court of appeals

explained that “FmHA’s contractual duty in this case

was to continue to allow borrowers the unfettered right

to prepay their loans at any time.” /d. at Al0. The

court found that, if that continuing duty was

7

breached, the breach occurred immediately upon enact-

ment of ELIHPA, because, by its terms, ELIHPA took

away the borrowers’ unfettered right of prepayment.”

Ibid. Accordingly, plaintiffs’ contract claims were

barred because they had not been filed within six years

of the enactment of ELIHPA. Id. at A9. The court of

appeals also affirmed the trial court’s dismissal of

petitioners’ taking claims, holding that ELIHPA “took

away and conclusively abolished a material contract

right”—“[petitioners’] unfettered right to prepay their

FmHA loans at any time.” Id. at Al4. The alleged

taking of which petitioners complained, therefore,

occurred upon the enactment of ELIHPA. Id. at A14.'

7. Meanwhile, on September 16, 1998, the Gruss

Valley Terrace petitioners filed an action virtually

identical to the Franconia Associates action in the

Court of Federal Claims. On April 12, 2000, the Court

of Federal Claims granted the government’s motion to

dismiss the claims of those petitioners. Pet. App. A45.

The court reasoned that the “performance required of

the Government was to allow the pre-1979 Plaintiffs the

option to prepay at any time,” and “the enactment of

ELIHPA constituted an actual breach rather than an

anticipatory repudiation because it immediately altered

the right of [petitioners] to prepay at any time at their

option.” Id. at A55. Accordingly, the court held that

the petitioners’ claims accrued upon the enactment of

The court of appeals held that the district court had erred in

holding that the cause of action accrued on the date the regulations

took effect (May 23, 1988), rather than the date ELIHPA was

enacted (Feb. 5, 1988). Pet. App. Al2 n.3. Nothing in this case

turns on that distinction, however, since petitioners took far more

than six years to file their claims, regardless of which date is used.

8

ELIHPA, more than six years before petitioners filed

their action. Jd. at A58.

8. On May 17, 2001, the United States Court of

Appeals for the Federal Circuit affirmed the lower

court’s dismissal of the Grass Valley Terrace peti-

tioners’ claims, in a brief per curiam order without

opinion. Pet. App. A15.

ARGUMENT

The decisions of the court of appeals are correct and

do not conflict with any decision of this Court or any

other court of appeals. Further review is therefore

unwarranted.

1. a. Under 28 U.S.C. 2501, “{e]very claim of which

the United States Court of Federal Claims has jurisdic-

tion shall be barred unless the petition thereon is filed

within six years after such claim first accrues.” That

provision is “an express limitation on the Tucker Act’s

waiver of sovereign immunity.” Pet. App. A8 (quoting

Hart v. United States, 910 F.2d 815, 817 (Fed. Cir.

1998)). Accordingly, it must be strictly construed.

United States v. Mitchell, 445 U.S. 535, 538 (1980);

United States v. Testan, 424 U.S. 392, 399 (1976). As

the court of appeals explained, a cause of action first

“accrues” for purposes of the Section 2501 statute of

limitations “when all events have occurred which fix the

government’s liability.” Pet. App. A8 (quoting Kinsey

v. United States, 852 F.2d 556, 557 (Fed. Cir. 1988)).

In this case, all such events had occurred by Febru-

ary 5, 1988, the date that ELIHPA was enacted.

Before that date, petitioners had entered into contracts

that included an “unconditional promise on the part of

FmHA to allow borrowers to prepay their loans * * *

at any time.” Pet. App. Al0. By petitioners’ own

account (see Pet. 8), ELIHPA itself eliminated that

9

“unfettered” right, because it “drastically limited the

circumstances under which the agency could accept”

prepayments. After the enactment of ELIHPA, the

law prohibited FmHA from “accepting any offer to

prepay” until it had mald le reasonable efforts to enter

into an agreement with the borrower under which the

borrower will make a binding commitment to extend

the low income use of the assisted housing” for at least

20 years. 42 U.S.C. 1472(c)(4)(A). Moreover, if “after a

reasonable period,” no such agreement is possible,

FmHA “shall require the borrower * * * to offer to

sell the assisted housing” to “any qualified nonprofit

organization or public agency at a fair market value

determined by 2 independent appraisers.” 42 U.S.C.

1472(c)(5)(A)(i). Finally, if no offer is made after 180

days, see 42 U.S.C. 1472(c)(5)(A)(ii), or if, regardless of

the above process, FmHA determines “that housing

opportunities of minorities will not be materially af-

fected as a result of the prepayment” and certain other

conditions are met, 42 U.S.C. 1472(c)(5)(G)(ii), it may

accept the offer to prepay.

In light of the significant restrictions imposed by

ELIHPA on petitioners’ hitherto alleged “unfettered”

right to prepay, their cause of action for a breach of

contract accrued on February 5, 1988, the date on which

ELIHPA was enacted. As of that date, the law elimi-

nated their unfettered right to prepay and FmHA’s

ability to accept any tendered prepayment.’ Peti-

tioners had a full six years from that date in which to

2 Cf. Delaware State College v. Ricks, 449 U.S. 250 (1980)

(limitations period under Title VII dates from time that plaintiff

was told he would be denied tenure, not date on which his employ-

ment was actually terminated); see also Chardon v. Fernandez,

454 U.S. 6 (1981) (per curiam) (applying Ricks).

10

file their claim for breach of contract. Because peti-

tioners brought their actions more than nine years after

that date, however, both courts below correctly con-

cluded that they were barred by Section 2501’s statute

of limitations.

b. Petitioners contend (Pet. 15) that “(t]he Federal

Circuit’s decision in this case * * * rejects contract

claims against the government as time-barred when

indistinguishable claims brought against a private

party would be deemed timely and heard on their

merits.” First, there is no reason that results under

Section 2501 necessarily must mirror results in cases

applying statutes of limitations to private parties.

Section 2501 is a statute of limitations that applies

solely to claims “of which the United States Court of

Federal Claims has jurisdiction,” 28 U.S.C. 2501, and it

therefore applies only to claims against the govern-

ment. Unlike statutes of limitations applicable to

private parties, Section 2501 is a waiver of sovereign

immunity, and thus it must be strictly construed. For

those reasons, there can be no direct comparison be-

tween the limitations period applicable to the govern-

ment under Section 2501 and the limitations period

applicable to a private party.

In any event, the Federal Circuit simply applied

settled principles governing the limitation of actions to

the particular context of this case, in which a law had

the effect of breaching a particular contractual term.

Petitioners focus on the doctrine of anticipatory

repudiation, which they claim (Pet. 17-21) the court of

appeals misapplied. The court of appeals, however, did

not misstate the legal principles relevant to the doc-

trine of anticipatory repudiation. The court of appeals

expressly recognized the doctrine of anticipatory

repudiation, see Pet. App. Al0 (“An anticipatory repu-

11

diation occurs when an obligor communicates to an

obligee that he will commit a breach in the future.”),

correctly stated its effect on statutes of limitations, see

ibid. (“(Tjhe normal rule is that the statute of limita-

tions begins to run from the date of performance speci-

fied in the contract unless the obligee elects to sue

earlier for anticipatory repudiation.”), and acknowl-

edged its general applicability to the government, see

ibid. (IIlf the enactment of ELIHPA was not a breach,

* * * then [petitioners’) claims did not accrue until

some subsequent action by the government brought

about an actual breach.”). However, although it recog-

nized the principles of law governing an anticipatory

repudiation and their application to the government,

the court of appeals simply found that ELIHPA did not

constitute an anticipatory repudiation.

The court of appeals held that the doctrine of

anticipatory repudiation does not apply in this case

“because[] the enactment of ELIHPA constituted an

alleged breach, rather than just a repudiation, of the

obligation to allow prepayment of the FmHA loans at

any time.” Pet. App. Al0-All. This was not a case,

analogous to most private anticipatory repudiation

cases, in which a government official or agency simply

announced that it was not going to honor a contractual

obligation. In a case like that, the anticipatory repudia-

tion doctrine has full force, because It Ihe plaintiff

should not be penalized for leaving to the defendant an

opportunity to retract his wrongful repudiation.” A.

Corbin, Corbin on Contracts § 989 (1964). The enact-

ment of ELIHPA, however, differed substantially from

an anticipatory repudiation.’ After the enactment of

* Petitioners contend (Pet. 21) that the court of appeals “found

that, although Petitioners had the right to prepay their mortgages

12

ELIHPA, the law no longer permitted petitioners to

exercise an “unfettered right to pay their loans at any

time.” Pet. App. Al0. Nor was it possible for the

FmHA to change its mind and decide to accept pre-

payment, because any such action would have been

illegal under ELIHPA. Because ELIHPA itself “took

away the borrowers’ unfettered right of prepayment,”

ibid., the alleged breach took place when ELIHPA was

enacted.‘ The court of appeals’ rejection of petitioners’

at any time, the government had no reciprocal duty to accept such

prepayments when tendered by owners.” The court of appeals did

not make such a finding. The court did note that “the note’s pre-

payment provision did not require any performance on the part of

the government because it constituted an unconditional promise on

the part of FmHA to allow borrowers to prepay their loans, an

obligation which extended for the life of the loan.” Pet. App. A10.

In context, that statement simply made the point that the

prepayment clause did not require any government performance

aside from permitting petitioners to prepay their note. The court

of appeals clearly recognized that, under the prepayment clause,

petitioners “were allowed to prepay their indebtedness at any

time,” id. at AlO, and that the government “breached that promise,

if at all, through the enactment of ELIHPA,” id. at All. Indeed, if

the court had believed that the government was under no

contractual obligation to accept petitioners’ prepayments, then the

court would have had to hold that ELIHPA had no effect at all on

petitioners’ contractual rights.

* Citing the Ninth Circuit’s decision in Kimberly Associates v.

United States, 261 F.3d 864 (2001), petitioners argue that “the

government was not acting in its capacity as the sovereign when it

enacted ELIHPA,” and what they term “the government’s repu-

diation of Petitioners’ contracts should not be afforded any special

status simply because it came in the form of legislation.” Pet. 16.

Kimberly Associates concerned application of the “unimistakabil-

ity doctrine,” and in that context the Ninth Circuit believed it

significant that the government “was not acting in a ‘public and

general’ capacity” when it enacted ELIHPA. 261 F.3d at 870.

This case, however, is not about the “unmistakability doctrine.”

13

anticipatory repudiation theory, accordingly, was

correct. Moreover, even if the court below mischar-

acterized the effect of ELIHPA, that particular appli-

cation of law to fact would not warrant this Court’s

review.

e. Petitioners contend that the decision of the court

of appeals is inconsistent with this Court’s decision in

Mobil Oil Exploration & Producing Southeast, Inc. v.

United States, 530 U.S. 604 (2000). In that case, plain-

tiffs paid the government more than $156 million for

mineral drilling leases that permitted them to drill

“provided that [the plaintiffs] received exploration and

development permissions in accordance with various

statutes and regulations to which the lease contracts

were made subject.“ Id. at 609. After plaintiffs had

submitted drilling plans to the relevant government

agencies, Congress passed a statute that added addi-

tional regulatory approval requirements. Id. at 611-

612. The Court held that plaintiffs were entitled to

restitution of the money they paid the government

under the leases.

Petitioners argue (Pet. 18-19) that the Court in Mobil

“recognized the critical distinction between the

Nor does it concern the “sovereign acts” doctrine to which

petitioners refer and which generally applies only when the

government acts in a “public and general” capacity. See Pet. 16

n.12; see generally United States v. Winstar, 518 U.S. 839, 891-910

(1996) (plurality opinion). Instead, this case concerns the date of

“first accrual” of a cause of action under 28 U.S.C. 2501. For that

purpose, the court of appeals correctly recognized that there is an

important distinction between a statute that itself breaches a

contract by eliminating a contractual right and a government

action that amounts merely to an anticipatory repudiation of the

government’s obligation to perform a contract. That remains true

regardless of whether the statute or contract at issue satisfy the

requirements of the unmistakability or sovereign acts doctrines.

14

enactment of legislation by Congress, which amounts to

only an anticipatory repudiation of affected contracts,

and the later implementation of that legislation by the

contracting agency, which can result in an actual

breach.” Pet. 18-19. This Court, however, made no

such distinction in Mobil. Mobil did not involve the

application of a statute of limitations, and nothing in

Mobil turned on whether the statute at issue there was

an anticipatory repudiation or an actual breach of the

government’s contract. To the contrary, the Court

explained that the controlling legal principle in Mobil

was that “(iJf the Government said it would break, or

did break, an important contractual promise, * * *

then * * * the Government must give the companies

their money back.” 530 U.S. at 608 (emphasis added).

Accord id. at 614 (noting that the government “con-

cedes, as it must, that relevant contract law entitles a

contracting party to restitution if the other party

‘substantially’ breached a contract or communicated its

intent to do so”) (emphasis added).

Because the governing legal standard in Mobil did

not turn on whether the government had merely “said

it would break” the contract or instead “did break” it,

the Court had no occasion to examine the differences

between an anticipatory repudiation and a breach.

Accordingly, in the balance of the Court’s discussion,

the Court referred to “repudiation” and “breach”

interchangeably. See, e.g., 530 U.S. at 607 (“We agree

that the Government broke its promise; it

the contracts.”); id. at 618 (statute “made clear * * *

that the United States had to violate the contracts’

terms and would continue to do so”). Similarly,

although the Court in some places referred to the

statute in Mobil as a “repudiation,” see e. g., id. at 620,

621, the Court in other places referred to the statute as

15

itself constituting a “breach” of the contract. Mobil did

not address the question presented by petitioners and

provides no support for petitioners’ claim here.

2. The court of appeals correctly determined that

petitioners’ taking claims also accrued upon enactment

of ELIHPA. As recognized by the court of appeals,

liability for a taking “first accrues” under 28 U.S.C.

2501 when the property at issue is taken. Seldovia

Native Ass'n v. United States, 144 F.3d 769, 774 (Fed.

Cir. 1998). Here, the only “property” that could have

been taken was petitioners’ contractual prepayment

right.

5 See, e. g., 530 U.S. at 618 (“We conclude * * * that the Gov-

ernment violated the contracts.”); id. at 621 (stating that the

government does not deny “that the United States repudiated the

contracts if (as we have found) [the statute's] changes amounted to

a substantial breach”) (emphasis added); id. at 621 (“The breach

was ‘substantia{l],’ depriving the companies of the benefit of their

bargain.”).

* Similarly, none of the other appellate cases on which peti-

tioners rely (Pet. 19) concerned application of a statute of limita-

tions, and the legal questions in each case concerned contract and

statutory terms that differed substantially from those in this case.

We note that one of the cases cited by petitioners, Schism v.

United States, 239 F.3d 1280, 1290 (Fed. Cir. 2001), has been

vacated pending en banc review. See Schism v. United States, 252

F.3d 1354 (Fed. Cir. 2001).

’ Petitioners assert (Pet. 29) that they did not claim a taking of

their contractual rights, but “a taking of their state-created real

estate interests.” By signing their contracts with the government,

however, petitioners contracted away those “real estate interests.”

See Pet. 29 n.28 (referring to “the right to economically productive

use and enjoyment, the right to exclusive possession, and the

rights to transfer, devise, and dispose of their properties”).

ELIHPA itself had no effect on petitioners’ “real estate” interests;

instead, it simply limited petitioners’ contractual prepayment

rights. It is not the case that every government violation of a con-

16

Leaving aside whether such a right necessarily

constitutes property under the Fifth Amendment, but

cf. United States Trust Co. v. New Jersey, 431 U.S. 1, 19

n.16 (1977), the contractual right at issue could have

been taken only when the contract was breached. Be-

cause the contractual breach occurred when ELIHPA

was enacted, it follows that any taking occurred

simultaneously.

a. As an antecedent matter, petitioners’ taking and

contract claims are not distinct from each other, and

accordingly, insofar as taking claims may be brought in

this context at all, such claims necessarily “first

acerueſ]“ at the same time as the contract claims. Cf.

Sun Oil Co. v. United States, 572 F.2d 786, 818 (1978).

Insofar as the government breached the contracts with

petitioners, they had no independent takings claims

because they had available a remedy in damages that

was sufficient to provide “just compensation” under the

Fifth Amendment. Insofar as the government did not

breach the contracts with petitioners, they had no

independent takings claims because their only rights

were to the contractual performance that was in fact

rendered by the government. See Sun Oil Co., 572

F. ad at 818; see also Transpace Carriers, Inc. v. United

States, 27 Fed. Cl. 269, 274 (1992); Marathon Oil Co. v.

United States, 16 Cl. Ct. 332, 338-339 (1989). Because

petitioners’ taking claims are thus entirely parasitic on

their contract claims, their taking claims necessarily

“first accrued” at the same time as the contract claims

did.

b. Petitioners contend (Pet. 24) that the court of

appeals’ holding is inconsistent with decisions in which,

tract involving real estate is a “taking” of the underlying “real

estate interest,” as petitioners’ contention would suggest.

17

according to petitioners, this Court has held “that a

taking claim based on a statute or regulation that

allows for a discretionary agency decision on the scope

of permissible use of the property at issue is not ripe for

review until the agency renders such a decision.” As

the cases cited by petitioners demonstrate, however,

that rule applies to takings claims involving real prop-

erty. See Pet. 25 (citing United States v. Riverside

Bayview Homes, Inc., 474 U.S. 121 (1985) (alleged

taking of real property containing wetlands); Hodel v.

Virginia Surface Mining & Reclamation Ass’n, 452

U.S. 264 (1981) (alleged taking of property rights in coal

mines)). In such cases, the right at issue is not the right

to be free of government restrictions, but the right to

engage in the owner’s desired use. Accordingly, the

question whether that right has been taken cannot be

determined until the agency has ruled on whether—and

the extent to which—the owner may engage in the

desired use of the property.

By contrast, this case arises in the entirely different

context of an alleged taking of the contractual right

consisting of the “unfettered right to prepay [petition-

ers’) FmHA loans at any time” as provided for in the

prepayment clause, Pet. App. Alt e., the right to be

free of regulatory restrictions on prepayment alto-

gether. As the court of appeals correctly held, if it took

anything, ELIHPA “took away and conclusively abol-

ished” that right because ELIHPA “prohibited FmHA

from allowing unrestricted prepayments.” Id. at Al4.'

* Petitioners contend (Pet. 25) that ELIHPA did not take their

contract right because it permits owners to prepay if FmHA deter-

mines that several conditions are satisfied concerning housing

opportunities of minorities and the availability of replacement

housing for tenants. Petitioners err (Pet. 27) in characterizing that

limited ability of FmHA to accept a prepayment as an ability “to

18

Accordingly, petitioners’ taking claims accrued when

ELIHPA became law. Because petitioners waited

more than six years from that date before filing their

claims, they were time-barred.

c. Contrary to petitioners’ contention (Pet. 26-27),

the court of appeals’ decision does not conflict with its

own prior decision in Greenbrier v. United States, 193

F.3d 1348 (Fed. Cir. 1999), cert. denied, 530 U.S. 1274

(2000). In Greenbrier, the court of appeals held that the

claims of HUD-insured housing owners alleging that

ELIHPA and other legislation effected a taking were

not ripe because plaintiffs had not applied to the agency

to prepay their loans. Id. at 1360. Unlike in this case,

the plaintiffs in Greenbrier “were not in privity of con-

tract with respect to the notes’ prepayment,” because

the government was not a party to the prepayment

provisions of the notes. Jd. at 1355. Whatever private

contracts they had signed concerning their prepayment

rights were thus necessarily conditioned by the

possibility of legislation that subjected their pre-

payment rights to some degree of government regula-

tion. Because the plaintiffs claimed a “regulatory tak-

ing,” see id. at 1357, their claim that their contract

rights had been subject to such a taking was not ripe

until the precise restriction imposed on their prepay-

ment rights by government regulation became clear.

This case arises in the very different setting in which

both petitioners and the government were parties to

the contracts at issue, including the prepayment provi-

accept prepayment requests without restriction.” After ELIHPA,

there are always restrictions on prepayments rights; one of them is

a restriction on the right to prepay unless the specified statutory

findings have been made. Accordingly, as the court of appeals

recognized, ELIHPA eliminated their “unfettered right to prepay

their FmHA loans at any time.” Pet. App. Al4.

19

sions. Unlike the plaintiffs in Greenbrier, petitioners

obtained a clause granting them what they claim to

have been an “unfettered right to prepay,” Pet. App.

Al4—e., a government promise not to impose any

regulatory restrictions on their ability to prepay at any

time, at their option. See Pet. 20 (“Petitioners’ con-

tracts granted them the option to prepay their mort-

gages at any time that they desired during their fifty-

year mortgage terms.”). That contract right differed

substantially from the contract right at issue in Green-

brier, where no such promise by the government could

be found. Accordingly, while the regulatory taking

claim in Greenbrier was not ripe until the scope of the

regulatory restriction on the private contract became

clear, the taking claim in this case became ripe as soon

as the government enacted ELIHPA, which itself

allegedly eliminated petitioners’ alleged contractual

right to be free of government-imposed conditions on

their prepayments.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

THEODORE B. OLSON

Solicitor General

ROBERT D. MCCALLUM, JR.

Assistant Attorney General

DAVID M. COHEN

MARK L. JOSEPHS

Attorneys

NOVEMBER 2001