Respondents Brief — Franconia Associates v. United States

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No. 01-455

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In the Supreme Court of the United States

FRANCONIA ASSOCIATES, ET AL., PETITIONERS

Vv.

UNITED STATES OF AMERICA

GRASS VALLEY TERRACE, ET AL., PETITIONERS

UNITED STATES OF AMERICA

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES

PAUL D. CLEMENT

Acting Solicitor General

Counsel of Record

ROBERT D. MCCALLUM, JR.

Assistant Attorney General

JAMES A. FELDMAN

Assistant to the Solicitor

General

DAVID M. COHEN

MARK L. JOSEPHS

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTIONS PRESENTED

1. Whether a breach of contract claim accrues for

purposes of 28 U.S.C. 2501 when Congress enacts a

statute alleged to abridge a contractual right to free-

dom from regulatory covenants upon prepayment of

government mortgage loans.

2. Whether a Fifth Amendment takings claim

accrues for purposes of 28 U.S.C. 2501 when Congress

enacts a statute alleged to abridge a contractual right

to freedom from regulatory covenants upon prepay-

ment of government mortgage loans.

— — —

TABLE OF CONTENTS

I. Petitioner's contract claims accrued upon en-

actment of ELIHPA

Section 2501 requires that claims be brought

within six years after they first accrued ...........

The claims in this case first accrued when

Congress enacted the ELIHPA

ELIHPA was not an anticipatory repudia-

tion

The court of appeals’ result is supported

both by the purposes of the anticipatory

repudiation doctrine and by those of

Section 2501

This Court’s decision in Mobil does not

support petitioners’ claim that ELIHPA

was an anticipatory repudiation

Petitioners’ other arguments should be

rejected

II. Petitioners’ claims under the Just Compensa-

tion Clause also accrued upon enactment of

ELIHPA

Conclusion

Cases:

TABLE OF AUTHORITIES

Bay Area Laundry & Dry Cleaning Pension Trust

Fund v. Ferbar Corp., 522 U.S. 192 (1997)

Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998) ..............

(TID)

— te to =

Cases—Continued: Page

Block v. North Dakota, 461 U.S. 273 (1983) 15

Central Trust Co. v. Chicago Auditorium Ass'n,

240 U.S. 581 (1916) 23

Chardon v. Fernandez, 454 U.S. 6 (1981) 28

Delaware State Coll. v. Ricks, 449 U.S. 250 (1980) 28

Finn v. United States, 123 U.S. 227 (1887)

Frietsch v. Refco, Inc., 56 F.3d 825 (7th Cir. 1995)

Grass Valley Terrace v. United States, 51 Fed. Cl.

436 (2002) 18

Greenbrier v. United States, 193 F 3d 1348 (Fed. Cir.

1999), cert. denied, 530 U.S. 1274 (2000) 38-39

Hodel v. Virginia Surface Mining & Reclamation

Ass n., 452 U.S. 264 (1981) 37

Home Sav. of Am. v. United States, 51 Fed. Cl.

487 (2002) 35

Kimberly Assoc. v. United States, 261 F.3d 864

(9th Cir. 2001) 18

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

1988) 17, 26

Lane v. Pena, 518 U.S. 187 (1996) 15

Lujan v. G & G Fire Sprinklers, Inc., 582 U.S. 189

(2001) 35

Marathon Oil Co. v. United States, 16 Cl. Ct. 382

(1989) . 35

Market Co. v. Hoffman, 101 U.S. 112 (1879) 17

McMahon v. United States, 342 U.S. 25 (1951) 29

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

United States, 530 U.S. 604 (2000) 13, 30, 31

Office of Pers. Mgmt. v. Richmond, 496 U.S. 414

(1990) 15

Parkridge Investors Ltd. v. Farmers Home Admin.,

13 F.3d 1192 (8th Cir.), cert. denied, 511 U.S. 1142

(1994) 18

Raygor v. Regents of the Univ. of Minn, 122 S. Ct.

999 (2002) 15

Soriano v. United States, 352 U.S. 270 (1957). 15, 29

Case Continued: Page

Sun Oil Co. v. United States, 572 F. 2d 786 (Ct. Cl.

1978) 3⁵

TRW. Inc. v. Andrews, 122 S. Ct. 441 (2001) 17

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

269 (1992) 35

U.S. Phillips Corp. v. Sears Roebuck & Co., 55 F 3d

592 (Fed. Cir.), cert. denied, 516 U.S. 1010 (1995) 40

United States v. Campos-Serrano, 404 U.S. 293

(1971) 17

United States v. King, 395 U.S. 1 (1969) 15

United States v. Kubrick, 444 U.S. 111 (19790) 15

United States v. Mitchell, 445 U.S. 535 (1980) 15

United States v. Mottaz, 476 U.S. 834 (1986) 15

United States v. Riverside Bayview Homes, Inc.,

474 US. 121 (1985) 37

United States v. Testan, 424 U.S. 392 (1976) 15

White Mountain Apache Tribe v. United States,

9 Cl. Ct. 32 (1985) 25

Constitution, statutes and regulations:

U.S. Const. Amend. V (Just Compensation

Clause) — 14, 34, 35

Act of Mar. 3, 1863, ch. 92, 5 10, 12 Stat. 767 28

Act of Apr. 4, 1996, Pub. L. No. 104-127, Tit. VII,

110 Stat. 1108 : 2

§ 747(b)(3), 110 Stat. 1128 2

§ 753(b)(2), 110 Stat. 1131 2

Department of Agriculture Reorganization Act of

1994, Pub. L. No. 103-354, Tit. IT, § 233, 108 Stat.

3219 2

Emergency Low Income Housing Preservation Act of

1987, Pub. L. No. 100-242, 101 Stat. 1877 5

§ 202, 101 Stat. 1878 10

§ 241:

101 Stat. 1886 5, 21

101 Stat. 1886-1887 5

Statutes and regulations—Continued: Page

101 Stat. 1887 5

101 Stat. 1889

Housing Act of 1949, 42 U.S.C. 1441 et seg.

42 U.S. C. 1472(c) (1994 & Supp. V 1999) 6

42 U.S.C. 1472(c)(4)(A) 21

42 U.S.C. 1472(ce)(5)(A) 7

42 U.S.C. 1 Ai) 21, 39

42 U.S. C. 147i)

42 U.S.C. 1472(e5G)GiKID 21,

42 U.S.C. 1485 (§ 515) 2-3, 4, 5, 6, 7, 11, 18,

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

Housing and Community Development Act of 1980,

Pub. L. No. 96-399, 94 Stat. 1614 4

§ 514, 94 Stat. 1671-1672 4

Housing and Community Development Act of 1992,

Pub. L. No. 102-550, 106 Stat. 3672 (42 U.S.C. 5301

et seq.) 6

§ 712, 106 Stat. 3841 6

Housing and Community Development Amendments

of 1979, Pub. L. No. 96-153, 93 Stat. 1101 3-4

§ 503(b), 93 Stat. 1134-1135 4

Outer Banks Protection Act, Pub. L. No. 101-380,

§ 6003, 104 Stat. 555 30

Tucker Act, 28 U.S.C. 2501

42 US.C. 1437

7 C. F. R.:

Section 1965.90 (1989) 6

Section 1965.210 7

Section 1965.215 7, 26

Section 1965.215(a) 7

Miscellaneous:

4 A. Corbin, Corbin on Contracts (1951) 26, 27

C. Corman, Limitation of Actions (1991):

Vol. 1 17

Vol. 2 26

53 Fed. Reg. 13,245 (1988) 6

vil

Miscellaneous—Continued:

H.R. Rep. No. 34, 37th Cong., 2d Sess. (1862)

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

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

18 W. Jaeger, Williston on Contracts (3d ed. 1978)

3 Restatement (Second) of Contracts (1979)

88 2 4

In the Supreme Court of the United States

No. 01-455

FRANCONIA ASSOCIATES, ET AL., PETITIONERS

UNITED STATES OF AMERICA

GRASS VALLEY TERRACE, ET AL., PETITIONERS

UNITED STATES OF AMERICA

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES

OPINIONS BELOW

The opinion of the court of appeals in Franconia

Associates, et al. v. United States (Pet. App. Al-A16) is

reported at 240 F.3d 1358. The opinions of the Court of

Federal Claims in Franconia (Pet. App. Al7-A44) are

reported at 43 Fed. Cl. 702 and 44 Fed. Cl. 315

(reconsideration). No opinion was issued by the court of

appeals in Grass Valley, et al. v. United States. The

opinion of the Court of Federal Claims in Grass Valley

(Pet. App. A45-A68) is reported at 46 Fed. Cl. 629.

(1)

JURISDICTION

The judgment of the court of appeals in Franconia

was entered on February 15, 2001. A petition for

rehearing was denied on June 12, 2001 (Pet. App. A69-

A70). The judgment of the court of appeals in Grass

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

the Chief Justice extended the time within which to file

a petition for a writ of certiorari in Grass Valley to and

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

certiorari was filed on September 10, 2001. The petition

was granted on January 4, 2002. 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) makes 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.

Section 515 loans require the borrower, inter alia, to

execute various loan documents, including a loan agree-

ment, a promissory note, and a real estate mortgage.

Before December 21, 1979, each petitioner entered

into a loan agreement with the FmHA under Sections

1 Since 1994, the program has been entrusted to the Rural

Housing Service. See Pet. App. A2 n.1. The Secretary of Agricul-

ture was authorized to establish the Rural Housing and Commu-

nity Development Service by the Department of Agriculture Reor-

ganization Act of 1994, Pub. L. No. 103-354, Tit. II, § 233, 108 Stat.

3219; as amended by the Act of Apr. 4, 1996, Pub. L. No. 104-127,

Tit. VII, S 747(b\(3), 753(b)(2), 110 Stat. 1128, 1131. See also 7

C. F. R. 2003.18 (functional organization of RHS). For convenience,

references in this brief to the Farmers Home Administration

should be understood to refer to that agency and its successor.

515 and 521, “in order to provide rental housing and

related facilities for eligible occupants * in rural

areas.” Pet. App. Al65. In the loan agreements, each

petitioner certified that it was unable to obtain a

comparable loan in the commercial market. See id. at

A177. In addition, the loan agreements contained

various provisions designed to ensure that the projects

were affordable for persons and families with low

incomes. Those provisions included restrictions as to

eligible tenants, 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. See id. at A165-A174. Each

loan agreement also specified the length of the loan,

which was generally 40 or 50 years. Id. at A3.

The promissory notes executed by petitioners speci-

fied that petitioners must pay the principal on the

mortgage in scheduled installments, plus interest. See

Pet. App. Al76-177. Those notes also contained the

prepayment provision that has been affected by the

legislation in this case: “Prepayments of scheduled

installments, or any portion thereof, may be made at

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

No other provision of the loan documents addressed

prepayment.

2. In 1979, Congress found that many Section 515

participants had prepaid their mortgages, thus threat-

ening the continued availability of rural low- and

moderate-income 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

agreed to maintain the low-income use of the rental

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

date of the loan. § 503(b), 93 Stat. 1134-1135. That

requirement could be avoided if 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. Ibid.

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

December 21, 1979, the date of enactment of that

legislation. § 514, 94 Stat. 1671-1672. The 1980 Act

also required the Secretary of Agriculture to report to

Congress about any adverse effects of the repeal upon

the availability of low-income housing. Pub. L. No. 96-

399, § 514, 94 Stat. 1671-1672.

3. By 1987, Congress had again become concerned

about the dwindling supply of low- and moderate-in-

come rural housing in the face of increasing prepay-

ments of mortgages under Section 515.2. A House of

Representatives Committee found that owners were

2 In 1986, Congress had passed a temporary moratorium that

precluded Section 515 prepayments in most cases. The morato-

rium originally was to expire in 1987, but it was extended into 1988

by another temporary measure. See 42 U.S.C. 1487 note (citing

and quoting temporary measures).

“prepayling] or * * refinanc[ing] their FmHA loans,

without regard to the low income and elderly tenants in

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

Sess. 53 (1987).

In response, Congress passed the Emergency Low

Income Housing Preservation Act of 1987, Pub. L. No.

100-242, 101 Stat. 1877 (ELIHPA), which amended the

Housing Act of 1949 to impose permanent restrictions

upon prepayment of Section 515 mortgages that were

entered into before December 21, 1979. That legis-

lation, enacted on February 5, 1988, requires that

before FmHA can accept 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 for not less than the 20-year

period beginning on the date on which the agree-

ment is executed.

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

lation further provides that the FmHA may include

incentives in such an agreement, including an increase

in the rate of return on investment, reduction of the

interest rate on the loan, and an additional loan to the

borrower. § 241, 101 Stat. 1886-1887.

Under ELIHPA, if the FmHA determines after a

“reasonable period” that an agreement cannot be

reached, the FmHA must 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 to buy is not made by a

nonprofit organization or agency within 180 days, the

FmHA may accept the owner’s offer to prepay or

request refinancing. Jbid. The offer-for-sale

requirement does not apply if the owner agrees to

utilize the housing for the purposes set out in Section

515 for a period dex.gnated by the FmHA and then

offer to sell the housing to a nonprofit organization or

public agency. The offer-for-sale requirement also does

not apply if the FmHA determines that housing

opportunities for minorities “will not be materially

affected” by prepayment and either (1) the tenants will

not be displaced by prepayment or (2) there is an

“adequate supply” of “affordable” housing in the

market area and “sufficient actions have been taken to

ensure” that such housing “will be made available” to

displaced tenants. § 241, 101 Stat. 1889. After

ELIHPA, the FmHA may not allow prepayments

without following the detailed provisions of the Act.

The FmHA promulgated regulations to implement

ELIHPA on April 22, 1988, and the regulations became

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

codified-at 7 C. F. R. 1965.90 (1989).

In 1992, Congress passed the Housing and Commu-

nity Development Act of 1992. Pub. L. No. 102-550, 106

Stat. 3672 (codified in relevant part at 42 U.S.C. 1472(c)

(1994 & Supp. V. 1999)) (the “1992 legislation”). That

legislation had no effect whatever on petitioners’ loans.

See Pet. App. Al3. It did, however, extend ELIHPA’s

restrictions to loans that were made after those of peti-

tioners, i. e., loans made from December 21, 1979,

a 1989. Pub. L. No. 102-550, § 712, 106 Stat.

Current regulations governing Section 515 prepay-

ments establish a process by which the FmHA ad-

dresses prepayment requests, including detailed proce-

dures and requirements regarding whether housing

opportunities for minorities will be affected by pre-

payment and whether other housing has been made

available for tenants displaced by prepayment. 7

C.F.R. 1965.215. The regulations also provide that,

with respect to “develop[ing] an incentive offer,” that

Aa] reasonable effort must be made to enter into an

agreement with the borrower to maintain the housing

for low-income use that takes into consideration the

economic loss the borrower may suffer by foregoing

prepayment.” 7 C.F.R. 1965.210. In addition, the regu-

lations clarify that the determinations required by 42

U.S.C. 1472(c)(5)(A) before prepayment can be

accepted—regarding the effect on minority housing

opportunities, the displacement of tenants, and the

supply of affordable housing in the market—will not be

made unless and until the FmHA is unable to reach an

agreement with a borrower on extending the bor-

rower’s participation in the Section 515 program.

7 C. F. R. 1965.215(a).

4. Petitioners in Franconia filed this action in the

Court of Federal Claims on May 30, 1997. Plaintiffs in

the case included both petitioners—all of whom had

entered into loan agreements before December 21,

1979, and were therefore subject to ELIHPA—and

other plaintiffs, who had entered into loan agreements

after December 21, 1979, and were therefore unaffected

by ELIHPA. See Pet. App. A3 n.2. Petitioners’

complaint in Franconia alleged that the prepayment

provisions of their promissory notes gave them a

“contractual right * * * to terminate their contracts

by prepaying their [mortgages] at any time at their

option.” Id. at A126. They claimed that ELIHPA

“repudiated the contractual right of [petitioners] to

terminate their contracts at any time at their option.”

Ibid.

The Court of Federal Claims granted the govern-

ment’s motion to dismiss petitioners’ claims, on the

ground that they were barred by the six-year statute of

limitations in 28 U.S.C. 2501. Pet. App. A17-A44.

Section 2501 provides:

Every claim of which the United States Court of

Federal Claims has jurisdiction shall be barred

unless the petition thereon is filed within six years

after such claim first accrues.

The court held that petitioners’ contract claims accrued

on May 23, 1988, the effective date of regulations imple-

menting ELIHPA, and, because petitioners did not file

their action until 1997, their claims did not fall within

the six-year statute of limitations in 28 U.S.C. 2501.

Pet. App. A34.

The court rejected petitioners’ contention that the

relevant legislation should be treated as merely an

anticipatory repudiation, which does not trigger the

commencement of the limitations period unless the

owner chooses to treat it as a breach. Pet. App. A30.

The court reasoned that the prepayment provision in

the loan contracts by its terms promised petitioners an

“unfettered prepayment right,” that “[n]o conditions

[were] attached to this promise,” and that it extendls]

throughout the life of the loan agreements.” Jd. at A31-

A32 (emphasis in original). The court held that

ELIHPA “withdrew this promise” so that “borrowers

could no longer prepay their contracts without first

going through lengthy and onerous procedures.” Id. at

A31. Because “[w]ith the 1988 legislation, the

government broke its promise, ending its performance

under the contract,” the “breach * * * occurred at the

time of the legislation.” Jd. at A32.

— — —

The court also, sua sponte, dismissed petitioners’

taking claims. Pet. App. A34. The court noted that

petitioners asserted that the “[government’s] conduct

constitutes a taking of their property.” bid. The court

observed that “(tJhere is only one instance of [govern-

ment] conduct at issue—Congress’s change of the

prepayment option.” Ibid. Accordingly, “[a]s this

action is alleged to have constituted a taking, the claim

would have accrued at the time of the 1988 legislation,

which * * * was when Congress by law changed the

plaintiffs’ prepayment rights.” Jbid. The court

explained that It he discussion relevant to the

breach of contract claim * * * is equally applicable to

the takings claim.” Ibid.

5. The Federal Circuit affirmed the lower court’s

dismissal of the Franconia petitioners’ claims. Pet.

App. Al-Al4. The court agreed with the Court of

Federal Claims that the prepayment provision of peti-

tioners’ loan agreements “gave [petitioners] an unfet-

tered right to prepay their loans at any time.” Id. at

Al. It “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 linn.” Ibid. Accordingly, “[i}f that continuing

duty was breached, the breach occurred immediately

upon enactment of ELIHPA because, by its terms,

ELIHPA took away the borrowers’ unfettered right of

prepayment.” Ibid. Although the court of appeals thus

disagreed with the Court of Federal Claims’ conclusion

that petitioners’ action accrued upon the effective date

of the regulations implementing ELIHPA, see id. at

Al2 n.3, that disagreement was of no consequence,

because petitioners’ suit was time-barred when

measured against either ELIHPA’s effective date or

the effective date of the implementing regulations.

The court acknowledged the anticipatory breach

doctrine and its application to the government. The

court stated that “if the enact im it of ELIHPA was not

a breach, but simply an act of anticipatory repudiation,

then [petitioners’] claims did not accrue until some

subsequent action by the government brought about an

actual breach, although [petitioners] had the right to

bring suit immediately upon the government’s repudia-

tion of its obligation under the loan contracts.” Pet.

App. Al0. The court held, however, that “(t]he doctrine

of anticipatory repudiation does not apply in this case,

* * * because * * * [t]he government contracted to

allow borrowers the unfettered right to prepay their

loans and breached that promise, if at all, through the

enactment of ELIHPA.” Id. at AlO-All.

The court also rejected petitioners’ claim that the

action accrued only upon the enactment of the 1992

legislation. Petitioners argued that “language in

[ELIHPA] prohibits the 1988 legislation from serving

as the date of breach because the elimination of pre-

payment rights was only temporary.” Pet. App. A13.

The court explained, however, that although “parts of

ELIHPA were ‘interim measures,’ the section relating

to FmHA loans was wholly permanent.” bid. (quoting

ELIHPA, Pub. L. No. 100-242, § 202, 101 Stat. 1878).

The court noted that the 1992 legislation, on which

petitioners sought to rely, “impacted only post Decem-

ber 21, 1979 borrowers,” and thus had no effect on

them. Id. at Al3 n.4.

The court of appeals also affirmed the trial court’s

dismissal of petitioners’ taking claims. Pet. App. A13-

Al4. The court stated that It he government’s liability

for a takings claim becomes fixed when the property at

issue is taken,” and that ſe jontraet rights are a form of

property that may be appropriated by the govern-

ment.” Jd. at Al4. The court held, however, that

“(bjecause [petitioners] brought this suit in May of

1997, more than six years after ELIHPA effected an

appropriation of their contract right, their takings

claims are barred by the statute of limitations.” Ibid.

6. On September 16, 1998, the Grass Valley

petitioners—all of whom had entered into Section 515

loan agreements before December 21, 1979—and other

plaintiffs filed an action in the Court of Federal Claims

virtually identical to the Franconia action. On April 12,

2000, that court granted the government’s motion to

dismiss petitioners’ claims, essentially for the same rea-

sons that it had dismissed the claims of the Franconia

petitioners. Pet. App. A45-A68. On May 17, 2001, the

United States Court of Appeals for the Federal Circuit

affirmed without opinion. Pet. App. A15-A16.

SUMMARY OF ARGUMENT

I. This case concerns the application of the statute of

limitations in 28 U.S.C. 2501, which provides that any

claim in the Court of Federal Claims must be filed

“within six years after such claim first accrues,” to peti-

tioners’ claims that ELIHPA restricted their prepay-

ment rights in violation of their contracts. As a waiver

of sovereign immunity, Section 2501 must be strictly

construed in favor of the government. The emphasis on

promptness conveyed by the terms of the statute (“first

accrued”) is supported not only by the need to avoid

stale claims that supports any statute of limitations, but

also by the particular need of Congress to have rea-

sonably prompt notice if a statute breaches government

contracts.

It is settled law that claims first accrue when

plaintiffs are first able to file suit. Plaintiffs alleged that

their loan documents gave them an unfettered right to

prepay their loans at their option any time during the

40- or 50-year terms of their loans. The terms of

ELIHPA, however, eliminated that unfettered right,

replacing it with a substantially more limited and

uncertain possibility of prepayment, subject to what

petitioners describe as lengthy, cumbersome, and costly

procedures. Accordingly, as the Federal Circuit recog-

nized, the government breached its promise, if at all,

when ELIHPA eliminated petitioners’ unfettered pre-

payment right, and petitioners could have filed suit at

any time after ELIHPA was enacted. Because peti-

tioners instead waited nine or ten years after ELIHPA

to file suit, their claims are time-barred.

Petitioners invoke the doctrine of “anticipatory

repudiation,” under which a party’s mere statement of

intent to commit a breach in the future does not start

the statute of limitations running until such later time

as an actual breach occurs. The anticipatory breach

doctrine is inapplicable in this case, because ELIHPA is

not a mere statement of intent to commit a breach by a

private actor or government contracting officer. It is a

duly enacted law that immediately and permanently

prevented the FmHA from performing its alleged

contractual obligations. Moreover, the purpose of the

anticipatory breach doctrine is to permit the non-

breaching party to await the time of performance to file

suit, thereby giving the repudiating party the opportu-

nity to change its mind and comply with its contractual

obligations in the end. Treating ELIHPA as merely an

anticipatory breach would not serve that purpose.

After ELIHPA, no federal official could simply decide

to accept a tendered prepayment from petitioners.

Petitioners argue that Mobil Oil Exploration &

Producing Southeast, Inc. v. United States, 530 U.S.

604 (2000), established that ELIHPA was merely an

anticipatory repudiation, not an actual breach. That

case, however, had nothing to do with either the

distinction between an anticipatory repudiation and a

present breach or the date of accrual of a claim under a

statute of limitations. Accordingly, the Court in Mobil

had no occasion to—and did not—examine the differ-

ence between an anticipatory repudiation and a present

breach. To the contrary, the Court in Mobil referred to

the statute at issue there both as an anticipatory

statement of intent not to perform and as a present

breach, and nothing turned on which characterization

was correct.

More generally, petitioners err in asserting that the

court of appeals’ decision exempts the government from

standard contract law principles applicable to private

parties. An Act of Congress (such as ELIHPA) does

not have the same effect as a mere statement of intent

not to perform a contract. Moreover, an Act of Con-

gress could not constitute an anticipatory repudiation of

a non-government contract, so the search for an exact

parallel in contracts solely between private parties is

_ futile. In addition, the rules requiring strict construc-

tion of a statute of limitations that is a condition of a

waiver of sovereign immunity do not apply to statutes

of limitations governing private contracts. The court of

appeals based its decision not on a principle that

ordinary rules of contract law are inapplicable to the

government, but rather on the resolution of the particu-

lar issues that arise in interpreting ELIHPA and

applying Section 2501—a statute that has no application

to claims against private parties—to petitioners’ breach

II. The court of appeals correctly held that any

taking claims petitioners may have under the Just

Compensation Clause are time-barred for the same

reasons as their contract claims. Petitioners’ taking

claims are not independently viable in any event,

because damages for breach of their contracts would

eliminate any taking claims by providing sufficient

compensation for any property rights that could have

been taken. But even if that were not true, their taking

claims would be entirely parasitic on their contract

claims, in the sense that if there was no breach of

contract, there was also no taking; petitioners could not

complain that the government had imposed restrictions

on their properties that constituted a taking if they

themselves had agreed to those restrictions and

received (and continue to receive) consideration for that

agreement.

Because petitioners’ taking claims are, at best, com-

pletely dependent on petitioners’ contract claims, the

taking claims should be treated as having accrued at

the same time as the contract claims. Otherwise, those

in petitioners’ position would be able to plead them-

selves out of the time bar imposed by Section 2501

simply by reformulating their contract claims as taking

claims.

I. PETITIONERS’ CONTRACT CLAIMS ACCRUED

UPON ENACTMENT OF ELIHPA

A. Section 2501 Requires That Claims Be Brought

Within Six Years After They First Accrued

Under 28 U.S.C. 2501, “[e]very claim of which the

United States Court of Federal Claims has jurisdiction

shall be barred unless the petition thereon is filed

within six years after such claim first accrues.” The

principles requiring a strict construction of Section 2501

in favor of the sovereign are not in doubt and have been

repeatedly and recently reaffirmed by this Court.

Section 2501 “makes it a condition or qualification of

the right to a judgment against the United States that

* * * the claim must be put in suit * * * within six

years after suit could be commenced thereon against

the Government.” Finn v. United States, 123 U.S. 227,

232 (1887). Such provisions are “‘a central condition’ of

the sovereign’s waiver of immunity.” Raygor v.

Regents of the Univ. of Minn., 122 S. Ct. 999, 1005

(2002) (quoting United States v. Mottaz, 476 U.S. 834,

843 (1986)); see also Block v. North Dakota, 461 U.S.

273, 287 (1983). It is a fundamental principle that Ja]

waiver of sovereign immunity ‘cannot be implied but

must be unequivocally expressed. United States v.

Mitchell, 445 U.S. 535, 538 (1980) (quoting United

States v. King, 395 U.S. 1, 4 (1969)); see also United

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

“a waiver of the Government’s sovereign immunity will

be strictly construed, in terms of its scope, in favor of

the sovereign.” Lane v. Pena, 518 U.S. 187, 192 (1996);

see also Office of Pers. Mgmt. v. Richmond, 496 U.S.

414, 432 (1990) (noting “many precedents establishing

that authorizations for suits against the Government

must be strictly construed in its favor”); United States

v. Kubrick, 444 U.S. 111, 117-118 (1979) (applying

principle to statute of limitations). Almost fifty years

ago, Soriano v. United States, 352 U.S. 270, 276 (1957),

specifically applied that rule of construction to Section

2501, noting that the Court “has long decided that

limitations and conditions upon which the Government

consents to be sued must be strictly observed.”

Two related textual features of Section 2501

reinforce the conclusion that its limitations period must

be strictly construed. First, Congress provided in

Section 2501 for a generous six-year period in which to

bring claims. That is ample time for even the most

hesitant plaintiffs to learn of a governmental action that

may lead to a claim and to commence an action. More-

over, extending suits beyond that period would defeat

Congress’s strong interest in protecting the govern-

ment from stale claims, lost memories, and missing

documents. See Beach v. Ocwen Fed. Bank, 523 U.S.

410, 415-416 (1998).

Extending the six-year period also would interfere

with the government’s distinctive interest in preserv-

ing its ability to have reasonably prompt notice of the

fiscal implications of past enactments and to take into

account the costs of those past actions in making future

budgetary and programmatic decisions. In a case like

this, in which the claim is that a statute has caused.a

breach of contract, the rule of strict construction of

statutes of limitations has special force, because it

serves the salutary purpose of ensuring that a Congress

close to the one that enacted the statute—rather than a

Congress serving perhaps many decades later—may

and must address the consequences of the statute, by

increasing taxes, reducing spending, or revisiting the

wisdom of the enactment. A contrary rule in this case

could delay the final reckoning of the fiscal impact of

ELIHPA for 40 or more years. The government’s in-

terests in allowing a reasonably prompt accounting for

the consequences of government action make it particu-

larly important that limitations periods that are con-

ditions on waivers of sovereign immunity, such as the

six-year period in Section 2501, be strictly construed.

Second, the text of Section 2501 itself provides an

indication that Congress intended a strict construction

of its provisions. Section 2501 provides not merely that

a claim must be brought within six years of accrual, but

that it must be brought within six years of when the

claim “first” accrues. It is “a cardinal principle of statu-

tory construction” that “a statute ought, upon the

whole, to be so construed that, if it can be prevented, no

clause, sentence, or word shall be superfluous, void, or

insignificant.” TRW, Inc. v. Andrews, 122 S. Ct. 441,

449 (2001); United States v. Campos-Serrano, 404 U.S.

293, 301 n.14 (1971); Market Co. v. Hoffman, 101 U.S.

112, 115-116 (1879).- In Section 2501, the term “first”

serves the function of emphasizing Congress’s interest

in seeing to it that the commencement of the generous

six-year period for bringing claims must be the earliest

possible date on which the claim accrued.

B. The Claims In This Case First Accrued When Con-

gress Enacted ELIHPA

1. A claim accrues “when the plaintiff has ‘a com-

plete and present cause of action.“ Bay Area Laundry

& Dry Cleaning Pension Trust Fund v. Ferbar Corp.,

522 U.S. 192, 201 (1997). JA] cause of action does not

become ‘complete and present’ for limitations purposes

until the plaintiff can file suit and obtain relief.” Ibid.

For a breach of contract claim, that generally occurs at

the time of the alleged breach. 1 C. Corman, Limi-

tation of Actions § 7.2.1, at 485-486 (1991) (“The statute

of limitations for a breach of contract begins to run at

the time of such breach, even when the extent of actual

damages is not then ascertainable.”); see also Kinsey v.

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

of action accrues under Section 2501 “when all the

events have occurred which fix the liability of the

Government”). Accordingly, to determine when peti-

tioners’ claims accrued, it must be determined when the

alleged breach of contract occurred.

2. To determine when a breach of contract occurs, it

is essential to identify the promise that was breached.

For purposes of this case, it may be assumed that the

allegations of petitioners’ complaints—including the

allegations regarding the promises contained in their

contracts—are true. In ruling on claims of other plain-

tiffs in Franconia, the Court of Federal Claims found

that the Section 515 loan documents, when read as a

whole and in light of applicable canons of construction,

cannot be construed to include a promise to permit

other plaintiffs to prepay even in the face of a federal

statute modifying prepayment rights. See Pet. App.

A35-A43 (Franconia). At least one other court of

appeals has reached a similar conclusion. See, ¢.g.,

Parkridge Investors Ltd. v. Farmers Home Admin., 13

F.3d 1192, 1198 (8th Cir.), cert. denied, 511 U.S. 1142

(1994); but cf. Kimberly Assoc. v. United States, 261

F.3d 864, 869-870 (9th Cir. 2001) (disagreeing about

applicable contract interpretation principles). If that is

correct, then there was no breach of contract, and peti-

tioners would not prevail on the merits. Nonetheless,

for purposes of this case, it may be assumed that peti-

tioners obtained precisely the promise that they allege

—a promise that permits them an unfettered right to

prepay.

3. The promise allegedly at issue in this case there-

fore is, in the terms used by both courts below,

petitioners’ “unfettered right to prepay their loans at

any time” over the life of those loans. Pet. App. A10;

see id. at A31, A55. The prepayment provisions of their

The Court of Federal Claims in Grass Valley initially reached

the same conclusion. Pet. App. A58-A67. The court has subse-

quently reconsidered that ruling. Grass Valley Terrace v. United

States, 51 Fed. Cl. 436 (2002).

documents provided that Iplrepayments of scheduled

installments or any portion thereof, may be made at any

time at the option of Borrower.” Id. at A122 (Franco-

nia complaint); see id. at A176 (loan document). Peti-

tioners’ complaints alleged that under those provisions,

petitioners “were entitled * * * to terminate their

contracts by prepaying their mortgages at any time at

their option.” Id. at A123; see id. at A112 (“optional

termination rights could be exercised by [petitioners]

‘at any time’ prior to the termination of the forty (40) or

fifty (50) year terms of their contracts”); A137 (same).

Petitioners thus alleged that, before ELIHPA, when-

ever a borrower tendered the total amount due on the

loan, the encumbrance on that borrower’s property had

to be removed. In petitioners’ terms, they were “con-

tractually entitled to terminate their participation in

the Government’s housing program by exercising their

option to prepay at any time.” Pet. App. Al12. To be

sure, it is likely that the prepayment provision would

have required the borrower in each case to submit to

certain formalities designed to ensure that the correct

amount was in fact paid. But, aside from those formali-

ties, in petitioners’ view, the prepayment provision

gave the government no right whatever to refuse the

prepayment or to refuse to take reasonable steps to

remove the encumbrance on the borrower’s property.

As the court of appeals held, “ELIHPA took away

the borrowers’ unfettered right of prepayment.” Pet.

App. Al0. ELIHPA essentially precluded a borrower

from prepaying the loan at any time at the borrower’s

option. As the complaints alleged, ELIHPA provided

for “forced sales of * * * owners’ properties” under

“lengthy, cumbersome, and costly procedures” if the

owners wanted to prepay their loans. Jd. at A127.‘ The

complaints alleged that, when prepayments were

tendered, “[t]he Government has in every instance

refused to accept prepayment * * * pursuant to the

provisions of [the] contracts.” Id. at A129. As a result,

petitioners “have suffered * * * diminutions in the

fair market value of their properties asa * * * result

of * * * the extended restrictions on the profitable

use of their properties,” “the costs associated with con-

tinuing to operate under and comply with rules and

regulations associated with the Government’s housing

programs,” and “the lost opportunity costs associated

with investment and business opportunities [peti-

tioners] have been foreclosed from pursuing.” Id. at

A131. Petitioners alleged that ELIHPA “has deprived

and will deprive each [of petitioners] of its contractual

right to terminate its contract at any time at its option.”

Id. at A132.

Those allegations are based on the plain terms of

ELIHPA. Under ELIHPA, the FmHA cannot allow

prepayment until it has “ma[d]e 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

This and other allegations in the complaint referred to the

1992 legislation, not to ELIHPA itself, which was enacted in 1988.

The court of appeals correctly held, however, that the 1992 legis-

lation had no effect whatever on petitioners and imposed no new

restrictions on their prepayment or other rights. See Pet. App.

Als n.4. Petitioners have not challenged that ruling before this

Court. See p. 10, supra. Accordingly, for purposes of construing

petitioners’ complaint, this brief treats petitioners’ allegations

regarding the 1992 legislation as regarding ELIHPA, unless other-

—

“after a reasonable period,” no such agreement is

possible, FmHA must 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(e)(5)(A)@). Finally, if no agency accepts that offer

after 180 days, see 42 U.S.C. 1472(c)(5)(A)(ii), or if the

FmHA determines “that housing opportunities of

minorities will not be materially affected as a result of

the prepayment,” that “there is an adequate supply of

safe, decent, and affordable rental housing within the

market area,” and that “sufficient actions have been

taken to ensure that the rental housing will be made

available to each tenant upon displacement,” 42 U.S.C.

1472(c)(5)(G)Gi(ID, it may accept the offer to prepay.

In short, before ELIHPA, petitioners had an unfet-

tered legal right to prepay at any time, granted in their

loan documents. After ELIHPA, petitioners no longer

had that right, because Congress had eliminated it and

substituted a far more limited and uncertain possibility

of prepayment—subject to what petitioners describe as

“lengthy, cumbersome, and costly procedures” and the

possibility of losing their properties entirely through

what they allege would have been a “forced sale” at less

than a market-determined price. Accordingly,

ELIHPA “took away the borrowers’ unfettered right of

prepayment,” Pet. App. A10, and the government thus

“breached [its] promise, if at all, through the enactment

of ELIHPA.” Id. at All.

ELIHPA was enacted on February 5, 1988. See Pub.

L. No. 100-242, § 241, 101 Stat. 1886. As petitioners

themselves appear to concede (Br. 27), they could have

filed their claims on that date. Under Section 2501,

therefore, their claims “first accrued” on that date, and

petitioners had six years thereafter in which to bring

suit. Instead they waited nine years (in Franconia) and

ten years (in Grass Valley) to file their claims. Those

claims were therefore barred by Section 2501.

C. ELIHPA Was Not An Anticipatory Repudiation

Petitioners invoke the doctrine of “anticipatory

repudiation” to argue (Br. 27) that they had the option

of filing their claims either when ELIHPA was enacted

or at whatever later time each petitioner elected to

tender prepayment and was denied the right to prepay

its loan. The court of appeals, however, correctly held

that the enactment of ELIHPA was not an anticipatory

repudiation and did not therefore permit them to wait

as long as they wished before filing suit.

1. The court of appeals recognized the doctrine of

anticipatory repudiation and held that doctrine applica-

ble to the government. The court explained that

laln anticipatory repudiation occurs when an obligor

communicates to an obligee that he will commit a

breach in the future * * *. In such a situation, the

normal rule is that the statute of limitations begins

to run from the date of performance specified in the

contract unless the obligee elects to sue earlier for

anticipatory repudiation.

Pet. App. Al0. The court further noted that

if the enactment of ELIHPA was not a breach, but

simply an act of anticipatory repudiation, then ap-

pellants’ claims did not accrue until some subse-

quent action by the government brought about an

actual breach, although [petitioners] had the right to

bring suit immediately upon the government’s re-

pudiation of its obligation under the loan contracts.

Ibid.; see Central Trust Co. v. Chicago Auditorium

Association, 240 U.S. 581, 589 (1916). Petitioners do

not appear to disagree with that general statement of

the doctrine, its effect on the statute of limitations, or

its application to the government.

Petitioners may not take advantage of the anticipa-

tory breach doctrine in this case, because ELIHPA

effected a breach of their contract, not a mere repudia-

tion. Pet. App. Al0-All. To paraphrase the court of

appeals, ELIHPA did not merely “communicate[] that

[the government] will commit a breach in the future.”

Id. at Al0. Because ELIHPA was a statute duly

enacted by Congress, it eliminated, as a matter of law,

petitioners’ unfettered contractual right to prepay their

loans at any time. The answer to the question whether

petitioners had an unfettered right to prepay was

unambiguous immediately after ELIHPA’s enactment.

According to petitioners’ own allegations, ELIHPA

substituted for an unfettered right to prepay a much

different and inferior ability to seek to obtain govern-

ment permission to prepay under narrow conditions

after a substantial waiting period and subject to numer-

ous and burdensome conditions. Because it unambigu-

ously eliminated their unfettered legal right to pre-

payment, ELIHPA was a breach of their contract, not a

mere repudiation.

Petitioners attempt to rely (Br. 28) on the inapposite

principle “that a party’s statement that it will not honor

the terms of an option contained in a contract consti-

tutes an anticipatory repudiation, such that the option-

holder need not bring suit until after it attempts to

exercise the option and the repudiating party fails to

perform by accepting the tender.” The cases cited by

petitioners (see Br. 28) for that proposition all concern

private options contracts, in which one private party

simply manifested its intent not to perform. Those

cases presumably would apply in a government case as

well, if a contracting officer simply informed a private

contracting party that the government did not intend to

perform a future contractual obligation. Any such

statement by the contracting officer could not alter the

private party’s legal right under the contract to con-

tinuing performance, and the private party accordingly

could wait for the performance to come due before filing

suit. In this case, however, it is an Act of Congress that

affected (and allegedly eliminated) petitioners’ contrac-

tual rights, not a mere statement by a private individ-

ual or even by a federal contracting officer. The law

fundamentally altered the legal rights of the parties

and, according to petitioners, eliminated their unfet-

tered right to prepay at any time. Accordingly, under

petitioners’ view of the case, that law constituted a

breach of contract, not a mere statement of intent not

to perform in the future.

2. Petitioners argue extensively (Br. 32-37) that

ELIHPA in fact preserved their prepayment right in

some respects. Insofar as ELIHPA did so, that simply

limits the scope of the alleged breach. Petitioners’

complaints were based on the ways in which ELIHPA

allegedly breached their contractual rights, not the fact

that it honored their rights in some respects.’ They

5 In this regard, it is significant that petitioners did not allege

that they went through the entire ELIHPA process to determine

ultimately whether they would be permitted to prepay, and it is

not known on this record whether any of them would ultimately

have been permitted to prepay. Instead, petitioners simply al-

leged that some (but not all) of them tendered prepayment—with-

out going through the ELIHPA process—and it he Government

has in every instance refused to accept prepayment.” Pet. App.

A129. Thus, the gravamen of their complaint is that the very act of

being relegated to the process required by ELIHPA violates their

contractual rights.

alleged that ELIHPA “provides for forced sales of said

owners’ properties” and “required” them to follow

“lengthy, cumbersome, and costly procedures.” Pet.

App. A127. They also alleged that Ja lll plaintiffs have

suffered * * * damages,” including “diminutions in the

fair market value of their properties.” Jd. at A131.

Thus, because the only breach of which petitioners com-

plain is the requirement that they go through the

ELIHPA procedures—and because ELIHPA unambi-

guously imposed those procedures and unambiguously

eliminated any unfettered right to prepay—the fact

that ELIHPA to some degree preserves their ability to

prepay does not somehow make petitioners’ claims

timely.

In their motion for reconsideration in the Court of Federal

Claims, petitioners for the first time submitted the affidavit of

Phoebe Perri, upon which petitioners rely in their brief here. See

Pet. Br. 47-49. Neither court below adverted to that affidavit.

Because it was not offered until petitioners’ motion for recon-

sideration in the trial court, and there was no reason it could not

have been offered earlier, it should not be considered. See White

Mountain Apache Tribe v. United States, 9 Cl. Ct. 32, 34 (1985)

(“Courts are particularly unreceptive to factual assertions * * *

that were available during initial briefing, but which surface on

reconsideration.”); see also Frietsch v. Refco, Inc., 56 F.3d 825, 828

(7th Cir. 1995) (refusing to consider affidavit submitted for first

time with motion for reconsideration of decision granting motion to

dismiss). In any event, the affidavit simply states that the affiant

tendered prepayment and that it was denied; it does not assert

that the affiant went through the ELIHPA process, including

offering the property to nonprofit organizations.

Moreover, even the provision of ELIHPA permitting prepay-

ment on which petitioners place their primary reliance (Br. 34)

requires not merely that the FmHA make certain findings

regarding the adequacy of the stock of low-income housing before

permitting prepayment, but also that “sufficient actions have been

taken to ensure that the rental housing will be made available to

D. The Court Of Appeals’ Result Is Supported Both By

The Purposes Of The Anticipatory Repudiation

Doctrine And By Those Of Section 2501

1. The conclusion that petitioners’ claim accrued

when ELIHPA was enacted is reinforced by the

underlying purposes of the anticipatory repudiation

doctrine. Petitioners themselves explain (Pet. 23) that,

in the ordinary case in which a statement by a private

individual is treated as an anticipatory repudiation,

“{ajllowing the obligee to defer suit until the time for

performance arrives provides the obligor an opportu-

nity to retract its wrongful repudiation and perform as

promised, thereby eliminating the need for a lawsuit.”

Professor Corbin similarly explained that the doctrine

is based on the principle that It ſhe plaintiff should not

be penalized for leaving to the defendant an opportu-

nity to retract his wrongful repudiation; and he would

be so penalized if the statutory period of limitation is

held to begin to run against him immediately.” 4

Corbin on Contracts, supra, § 989, at 967; see Pet. Br.

each tenant upon displacement.” 42 U.S.C. 1472(c\5)\(G)GiID.

See also 7 C.F.R. 1965.215 (detailing procedures). There is no pro-

vision of ELIHPA that gives petitioners an unfettered right to

prepay. Moreover, even if ELIHPA is only a partial breach of the

government’s promise of unfettered prepayment rights, such a

partial breach commences the statutory limitation period. See 2 C.

Corman, Limitation of Actions § 6.1, at 376-377 (1991) (“Because a

cause of action subsists when the right exists to demand compen-

sation for injury done to person or property, no matter how slight

that injury, it is reasoned that the suit can be instituted at once

even though the full amount of damages is not yet apparent.”); see

also Kinsey, 852 F.2d at 558 (statute begins to run immediately if

“the breach is not wholly anticipatory because it involves some

contractual nonperformance“) (citing 18 W. Jaeger, Williston on

Contracts § 2027B, at 796 (3d ed. 1978)); 4 A. Corbin, Corbin on

Contracts § 989, at 967 (1951)).

24 (quoting Corbin). That is the correct rationale for

the doctrine.

That rationale, however, does not apply when Con-

gress, as here, enacts a law that precludes performance.

A repudiating party—whether a private individual or a

federal contracting officer—may have an opportunity to

reconsider when the alleged repudiation is simply a

communicated intent not to perform a contractual obli-

gation. Despite any such communication, the promisor

on the contract, whether private or governmental, re-

mains free to change its mind and render the requisite

performance. But when an intervening Act of Congress

precludes performance, the contracting officer is not

free to reconsider. The breach is unequivocal.

The terms of ELIHPA at issue here illustrate that

point. The provisions of ELIHPA applicable to FmHA

loans are the law of the land; they are not open to

reconsideration by FmHA. Nor are the provisions tem-

porary. Indeed, the court of appeals rejected peti-

tioners’ argument—not renewed in this Court—that no

final breach occurred until the 1992 legislation, because

congressional findings at the time ELIHPA was en-

acted in 1988 referred to “interim measures.” The court

of appeals correctly explained that, “while this lan-

guage indicates that parts of ELIHPA were ‘interim

measures,’ the section relating to FmHA loans was

wholly permanent.” Pet. App. Al3 (emphasis added).

In this respect, the provisions applicable to FmHA

loans contrasted with other ELIHPA provisions, appli-

cable to HUD-insured loans, that had a two-year sunset

provision. Ibid.; see id. at A5-A6 (discussing time limit

on HUD-insured loans). The enactment of ELIHPA

immediately and permanently prevented the FmHA

from performing its alleged obligations under the

contractual language at issue.’

2. The conclusion that petitioners had six years from

the enactment of ELIHPA in 1988 to file suit also is

supported by the purposes of Section 2501 and this

Court’s cases First, Section 2501 provides plaintiffs

with a generous six years from when the action “first

accrues.” Here, petitioners clearly could have sued

immediately after the passage of ELIHPA. Whatever

rights petitioners might have to sue long after an action

against a private party based on a non-legislative

statement of intent to repudiate would have “first

accrued,” the plain language of Section 2501 limits peti-

tioners to six years after the passage of ELIHPA under

the circumstances here.

The underlying purpose of Section 2501 and its role

as a waiver of sovereign immunity further support the

conclusion that petitioners had six years to bring their

challenge to ELIHPA. When Section 2501 was enacted

in 1863, see Act of Mar. 3, 1863, ch. 92, § 10, 12 Stat. 767,

the House Report emphasized not merely the substan-

tial importance of statutes of limitations generally, but

also the centrality of a strictly construed limitations

7 Other cases in related areas confirm that a statutory limita-

tions period may commence at the time a cause of action may first

be brought, even if that would prevent the plaintiff from waiting to

determine whether the defendant would change its mind before

filing suit. In Delaware State Coll. v. Ricks, 449 U.S. 250 (1980),

and Chardon v. Fernandez, 454 U.S. 6 (1981) (per curiam), public

employees were informed that they had been denied tenure and

that their employment would terminate at a particular date in the

future. The Court held in each case that the applicable limitation

periods on the plaintiffs’ civil rights claims ran from the date they

had been informed of the challenged action, not the date on which

their employment was actually to terminate.

period to the overall purpose of permitting claimants to

sue the government. The Report stated:

All claims against the government are barred unless

prosecuted in six years. We think this provision

highly important to the government. A man who

neglects his business for six years cannot complain

of the government for refusing his suit; and there is

no doubt that a statute of limitation is even more

demanded in justice to the government than it is to

private individuals.

H.R. Rep. No. 34, 37th Cong., 2d Sess. 3 (1862) (empha-

sis added). That is fully in accord with this Court’s

historic recognition that conditions on waivers of

sovereign immunity, specifically including those found

in statutes of limitations, must be construed strictly.

See p. 15, supra; Soriano v. United States, 352 U.S. 270,

276 (1957) (applying that principle to Section 2501).

Petitioners had an ample six-year period in which to

bring their claims. They waited, however, nine years or

more to do so, and now claim that they could have

waited decades longer. Having “neglected their busi-

ness for six years,” they “cannot complain of the gov-

ernment for refusing [their] suit.” H.R. Rep. No. 34,

supra, at 3.

Petitioners argue that they were entitled, at their

sole discretion, to wait as long as they wished—perhaps

for decades, until near the expiration of their 40-year or

50-year mortgages—to bring suit on their claim that

ELIHPA constituted a breach of their contract. In

McMahon v. United States, 342 U.S. 25 (1951), this

Court rejected a similar claim in the context of an

analogous statute of limitations applicable to actions

against the government. Under the claimant’s theory in

that case, “he would have it in his power, by delaying

* * * filing, to postpone indefinitely commencement of

the running of the statute of limitations and thus to

delay indefinitely knowledge by the Government that a

claim existed.” Jd. at 27. The Court rejected that

theory, stating that it “cannot construe the Act as

giving claimants an option as to when they will choose

to start the period of limitation of an action against the

United States.” Ibid. The same principle is applicable

here. As in McMahon, adoption of petitioners’ argu-

ment that their claims do not first accrue until they

subjectively decide to prepay would effectively cede the

jurisdiction of the Court of Federal Claims, and the

extent of the congressional waiver of sovereign immu-

nity, to petitioners.

E. This Court’s Decision In Mobil Does Not Support

Petitioners’ Claim That ELIHPA Was An

Anticipatory Repudiation

Contrary to petitioners’ claims (Br. 24-28), this

Court’s decision in Mobil Oil Exploration & Producing

Southeast, Inc. v. United States, 530 U.S. 604 (2000),

provides no support for their argument that ELIHPA

was an anticipatory repudiation, rather than a breach.

In Mobil, plaintiffs held leases with the government

under which they possessed certain qualified rights to

drill for oil and/or gas in the outer continental shelf. By

their terms, the leases were subject to certain statutes

and regulations requiring the lessees to obtain regu-

latory approvals before drilling. Jd. at 609. After

plaintiffs had executed the leases, Congress passed the

Outer Banks Protection Act (OBPA), Pub. L. No. 101-

380, § 6003, 104 Stat. 555, which added additional regu-

latory approval requirements beyond those set forth in

the statutes and regulations to which the lessees agreed

to be subject. 530 U.S. at 611. The Court accordingly

— ——— — — —-4 —

—

“eonclude[d] that the Government violated the con-

tracts.” Id. at 618.

Mobil has no relevance to this case. First, neither

the date of accrual of plaintiffs’ claims nor the statute of

limitations was at issue in Mobil. OBPA had been en-

acted in 1990, and the lawsuit was commenced in 1992.

See 530 U.S. at 611, 612. Accordingly, the plaintiffs’

claims were well within the statute of limitations, and

the Court had no occasion to consider the date on which

their action accrued or to apply the principle of strict

construction of waivers of sovereign immunity.

Second, the Court in Mobil did not in fact determine

whether there had been an anticipatory repudiation or

a present breach in that case, but instead referred to

the statute at issue disjunctively as either anticipatory

or a present breach. See 530 U.S. at 608 (IIlf the

Government said it would break, or did break, an

important contractual promise, * * * then * * * the

Government must give the companies their money back

[as restitution].”) (emphasis added); accord id. at 614

(noting that the government “concedes, 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”) (empha-

sis added). The Court interchangeably labeled the

statute a “violation,” a “breach,” and a “repudiation”

throughout its opinion. See, e. g., id. at 618 (“We con-

clude * * * that the Government violated the con-

tracts.”); id. at 621 (“The breach was ‘substantia[]],’ de-

priving the companies of the benefit of their bargain.”);

id. at 620 (referring to “repudiation”).

Third, and related to the above, the Court in Mobil

had no occasion to address the distinction between an

anticipatory repudiation and a present breach because

nothing in that case turned on the differences between

them. Petitioners argue in a footnote (Br. 25 n.29) that

t he Court’s conclusion [in Mobil] that the legislation

constituted a repudiation of the contracts at issue, as

opposed to a full breach, was key to its holding that

* * * restitution was available.” That contention is

wrong, because, as the Restatement of Contracts

explains, restitution “is available [to the injured party]

regardless of whether the breach is by non-perfor-

mance or by repudiation.” 3 Restatement (Second) of

Contracts § 373, Cmt. a (1979). Indeed, on the very

page of the Mobil opinion cited by petitioners, the

Court gave a single example of the circumstances when

restitution is available. That example—derived from

the Restatement—is clearly an example of present

breach, not repudiation; it provides that restitution is

available if “A contracts to sell a tract of land to B for

$100,000” and Halfter B has made a part payment of

$20,000, A wrongfully refuses to transfer title.” 530

USS. at 608.

Because either repudiation or a present breach would

support restitution, Mobil can be understood as con-

cluding that because there was at least a repudiation,

there was no reason to go further and inquire whether

the OBPA effected an outright breach. In short, Mobil

had to do with whether the government had fulfilled its

contractual commitments; it had nothing to do with—

and did not decide any question concerning —the date

of accrual of a claim or whether the statute in that case

was an actual breach or an anticipatory repudiation.

F. Petitioners’ Other Arguments Should Be Rejected

1. Petitioners argue (Br. 29-30) that the court of

appeals failed to recognize Ei. {HPA as an anticipatory

breach because that court erroneously held that

“FmHA’s only duty under the contracts was to

“eontinue to allow petitioners to prepay,” when, in fact,

“FmHA’s obligation was to accept prepayment re-

quests made by owners.” The court of appeals did not

distinguish between a duty to allow petitioners to

prepay and a duty to accept tendered prepayments, and

any such distinction would be without significance. The

language cited by petitioners, in context, simply made

the point that the prepayment clause did not require

any government performance besides permitting peti-

tioners to prepay at any time; it nowhere stated that

the government did not have a contractual duty to

accept a properly tendered prepayment and thereafter

take steps to remove any encumbrances on the

borrowers’ property.

In any event, petitioners’ reliance upon a duty to

accept prepayment misses the point. The language of

petitioners’ loan documents focused upon the bor-

rowers’ discretion, and the government’s duty under

this language was to allow that discretion throughout

the term of the contract, which, of course, included

permitting (and accepting) prepayment if tendered. By

imposing restrictions upon the prepayment option,

ELIHPA effected, under petitioners’ theory, an imme-

diate breach of the only relevant contractual term

—regardless of whether that is phrased in terms of

petitioners’ unfettered right to prepay or the govern-

ment’s obligation to accept any prepayment tendered.

2. Finally, petitioners argue (Br. 21) that the court

of appeals “exempted the government from standard

contract law principles.” For the reasons giver. above,

that is not correct. This Court has never held that a

statute enacted by Congress has the same effect as a

statement by an individual—governmental or private

—of an intent not to perform a contractual obligation.

Any such conclusion would be mistaken, for two

reasons.

First, this Court has never suggested that a statute

of limitations that is a condition of waiver of the

government’s sovereign immunity should be construed

under precisely the same principles as a statute of

limitations applicable to private parties. To the con-

trary, the Court has made quite clear that conditions on

waivers of sovereign immunity—including the specific

limitation provision found in Section 2501—must be

strictly construed, to ensure that it is Congress rather

than the courts that authorizes the government’s

liability.

Second, a statute simply cannot result in an anticipa-

tory breach of a contract not involving the government.

A statute can make performance of a private contract

impossible, but it cannot embody a private party’s

intent to repudiate a contract. Accordingly, the search

for an exact analogy in the law of private party con-

tracting is futile. This is a special situation that arises

only when the government is a contracting party. The

special considerations that underlie sovereign immunity

and the text of Section 2501 provide ample support for a

rule that does not allow a party to challenge an Act of

Congress at any time during a 40-50 year mortgage.

Il. PETITIONERS’ CLAIMS UNDER THE JUST

COMPENSATION CLAUSE ALSO ACCRUED

UPON ENACTMENT OF ELIHPA

Petitioners claim that the government has taken

their property without just compensation, in violation

of the Just Compensation Clause of the Fifth Amend-

ment. It is highly doubtful that any such claims are

viable, because such claims are not distinct from peti-

tioners’ contract claims and because compensation for

any breach would in any event provide sufficient “just

compensation.” But, even if petitioners had viable

claims for just compensation, those claims are at least

entirely parasitic on their claims of breach of contract,

in the sense that petitioners could show that there had

been a taking only if they could show that there was a

breach of contract as well. In those circumstances, the

constitutional claims, if any, must have accrued on the

same date as the contract claims. Both courts below

therefore properly held that petitioners’ taking claims

are time-barred for the same reasons as are their

contract claims.

1. Petitioners’ claims under the Just Compensation

Clause are entirely parasitic on their contract claims, in

the sense that the government could not be found to

have taken their property unless it breached their con-

tracts. In their contracts with the government,

8 The government’s failure to perform under a contract is a

breach, not a taking, even if the contract has to do with real prop-

erty. See, e. g., Sun Oil Co. v. United States, 572 F.2d 786, 818 (Ct.

Cl. 1978) (“{I]nterference with * * * contractual rights generally

gives rise to a breach claim not a taking claim.”); Transpace

Carriers, Inc. v. United States, 27 Fed. Cl. 269, 274 (1992) (same);

Marathon Oil Co. v. United States, 16 Cl. Ct. 332, 338 (1989) (“The

clear thrust of the authorities * * * is that where the government

possesses property under the color of legal right, as by an express

contract, there is seldom a taking in violation of the fifth amend-

ment.”). Even if that failure were a taking, however, the contract

damages available in the Court of Claims for breach of contract

would be sufficient to provide just compensation to petitioners.

Cf., ¢.g., Lujan v. G & G Fire Sprinklers, Inc., 582 U.S. 189, 196

(2001) (“Though we assume for purposes of decision here that G &

G has a property interest in its claim for payment, * * * itis an

interest * * * that can be fully protected by an ordinary breach-

of-contract suit.”); Home Sav. of Am. v. United States, 51 Fed. Cl.

487, 494-496 (2002).

petitioners agreed to encumber their property and to

use it in certain ways for so long as their loans were

outstanding. If the government did not breach their

contracts, then petitioners could have no taking claim;

they could not complain that the government has taken

their property when they themselves agreed to the

restrictions upon its use and received (and continue to

receive) consideration for that agreement.’ Thus, the

only conceivable taking claim that petitioners could

assert would be entirely dependent on a showing that

the government had breached their contracts.

Because the validity of any taking claims would be

entirely dependent on whether the government had

breached its contracts with petitioners, any taking

claim that was viable would have to accrue at the same

time—and be time-barred at the same time—as the

contract claim. Common sense and the interest in or-

derly proceedings support that result. To hold other-

wise would, in petitioners’ terms, create truly “unwork-

able and illogical rules.” Pet. Br. 46. A plaintiff who

failed to file a timely claim for breach of contract would

be able to revive the claim simply by pleading it as a

taking claim. In other words, petitioners are correct

(Br. 47) that requiring two suits to be brought at two

separate times “would generate immense judicial inef-

ficiencies by requiring courts to address the same facts

and issues in separate suits that could be brought years,

even decades, apart.” Thus, where a taking claim (if it

® Petitioners suggest (Br. 6-7) that they received virtually no

benefits from their participation in the Section 515 program. That

contention has nothing to do with the statute of limitations ques-

tion before the Court in this case. In addition, petitioners’ conten-

tion is incorrect. Petitioners concede that their loans are very

low effective interest rates. See Pet. Br. 7n.10. They also concede

that they received substantial tax benefits. See Pet. Br. 5 nB.

exists at all) is entirely parasitic on a contract claim, the

two should be held to first accrue at the same time.

2. The court of appeals’ holding that the contract

and taking claims accrued at the same time is consistent

with this Court’s precedent. Petitioners rely (Br. 39) on

regulatory taking cases in which this Court has held

that a taking claim “based on a statute or regulation

that allows for an agency decision on the scope of per-

missible use of the property at issue is not ripe for

review until the agency renders a decision.” None of

the cases on which petitioners rely, however, had any-

thing to do with a taking claim that was parasitic upon

—or, indeed, in any way related to—a breach of con-

tract claim.

Petitioners cite (Br. 40), for example, United States

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

In that case, the plaintiffs alleged that a federal statute,

if construed to limit the use of their land, would con-

stitute a taking. The Court stated that “(t]he mere

assertion of regulatory jurisdiction by a governmentai

body does not constitute a regulatory taking,” because

“(only when a permit is denied and the effect of the

denial is to prevent ‘economically viable’ use of the land

in question can it be said that a taking has occurred.”

Id. at 126, 127. In Riverside Bayview, however, the

plaintiffs had never agreed, in a contract or otherwise,

to the restrictions of which they complained, and the

viability of their taking claim thus had nothing to do

with any contract claim.

Similarly, in Hodel v. Virginia Surface Mining &

Reclamation Association, 452 U.S. 264 (1981), the

Court rejected a claim by owners of coal mining lands

that the mere enactmeat of a statute limiting their

mining activities constituted a taking of their property.

There was no allegation in /fodel that the plaintiffs had

ever agreed to the limitations embodied in the statute,

and, again, the viability of their taking claim had

nothing to do with any contract claim.

In short, each of the cases upon which petitioners

rely involved alleged takings of real estate interests

separate and apart from any contractual relationship

with the government. The rules applicable to the

accrual of such claims have little to do with the rules

applicable to accrual of taking claims such as those at

issue here, which—insofar as they are viable at all—

are at least entirely dependent on the breach of the

promises embodied in petitioners’ contracts.

3. Petitioners contend (Br. 44-45) that they have dis-

tinct taking claims that could have accrued indepen-

dently of their contract claims, because they did not

claim a taking of their contractual rights, but a taking

“of their state-created real estate interests.” They

identify (Br. 45 n.48) those “real estate interests” as

“the right to economically productive use and enjoy-

ment, the right to exclusive possession, and the rights

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

But ti precise terms in which petitioners pleaded their

claims make no difference for present purposes. Any

limits on the use of their properties were granted by

petitioners in their loan agreements. Thus, as noted

above, if the government has not breached those agree-

ments, there has been no taking. If the government has

breached those agreements, then any taking claim

remaining was likely eliminated by their opportunity to

obtain damages for breach of contract. In any event,

even if the taking claim were not eliminated, at the

very least it had to have accrued at the time of the

breach.

4. 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 held that the

claims of owners of HUD-insured (but not HUD-fi-

nanced) housing alleging that ELIHPA and other

legislation effected a taking were not ripe because

plaintiffs had not applied to the agency to prepay their

loans. Jd. at 1360. Unlike in this case, the plaintiffs in

Greenbrier “were not in privity of contract 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 prepayment rights to

some degree of government regulation. Because the

plaintiffs claimed a “regulatory taking,” see id. at 1357,

their claim that their contract rights had been subject

to a taking was not ripe until the precise restriction

imposed upon their prepayment rights by the gov-

ernment regulation became clear.”

10 Even if petitioners had viable taking claims and those claims

somehow did not have to be brought within six years of ELIHPA’s

enactment, they could not simply be brought at any time, without

exhausting ELIHPA’s procedures that may provide constitu-

tionally just compensation. As petitioners themselves have em-

phasized (Br. 32-87), ELIHPA substitutes for an unfettered right

to prepay a procedural mechanism that may result in the property

owner receiving “fair market value” for the property, 42 U.S.C.

1472(c\5(A)G), or being able to prepay. The procedures allegedly

interfered with petitioners’ alleged unfettered right to prepay, and

petitioners’ challenge therefore accrued upon enactment. But to

the extent that petitioners try to base a taking claim on something

beyond the very existence of those ELIHPA provisions, then

under settled law they would have to exhaust the ELIHPA proce-

dures before their claim is even ripe. Their complaints suggest

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-

sions. Unlike the plaintiffs in Greenbrier, petitioners

obtained a clause in a loan agreement with the govern-

ment granting them (in their view) an “unfettered right

to prepay.” That contract right differed substantially

from the private contract right at issue in Greenbrier."

Accordingly, while the regulatory taking claim in

Greenbrier was not ripe until the scope of the regula-

tory restriction on the private contract became clear,

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

government enacted ELIHPA, which itself eliminated

petitioners’ alleged contractual right to be free of

government-imposed conditions upon their prepay-

ments.

that they have not done so. See Pet. App. A129, A152; see also

note 4, supra.

u Petitioners’ estoppel argument (see Pet. Br. 42 n.44) must be

rejected, because the facts of Greenbrier (and therefore the gov-

ernment’s argument in that case) were substantially different from

those here. Judicial estoppel contemplates the existence of the

same parties and facts as the case in which the previous argument

was made. See U.S. Phillips Corp. v. Sears Roebuck & Co., 55

F.3d 592, 596 (Fed. Cir.), cert. denied, 516 U.S. 1010 (1995). Peti-

tioners do not cite a single case in which this theory has been

applied against the government,

CONCLUSION

The judgment of the court of appeals should be

affirmed.

Respectfully submitted.

PAUL D. CLEMENT

4 ti Soli it 2 *

ROBERT D. MCCALLUM, JR.

Assistant Attorney General

JAMES A. FELDMAN

Assistant to the Solicitor

General

DAVID M. COHEN

MARK L. JOSEPHS

Attorneys

MARCH 2002

* The Solicitor General is recused in this case.

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