# Respondents Brief — Franconia Associates v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Respondents Brief
- **Published:** January 1, 2002
- **Citation:** 536 U.S. 129

## Text

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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
D.
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

A.

C.

F.

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 =

41

17
16

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

15
25

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

V
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

VI

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
21

26

36

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
D.
UNITED STATES OF AMERICA

GRASS VALLEY TERRACE, ET AL., PETITIONERS
V.
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)

2

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.

3

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

\

4

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).

5

“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

6

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.

1.

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

7

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.

8

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.

— — —

9

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

10

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

11

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.

12

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.

13

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

14

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

15

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

16

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

17

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.

18

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).

19

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

20

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-

—

21

“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

22

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

23

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

24

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.

25

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

26

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)).

27

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.

29

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

30

* * * 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 —

—

31

“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

32

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

33

“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.

34

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

35

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).

36

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.

37

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

38

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

39

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

40

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,

41

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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0505%3A07. Public record. Not legal advice.