# Prologue — Martin v. United States (No. 05-1221)

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0615%3A0

## Record

- **Collection:** Supreme Court brief
- **Document type:** Prologue
- **Published:** January 1, 2005

## Text

—No-5-—0 51 2¢ 1H. 21 200
OFFICE OF THE CLERK

IN THE

Supreme Court of the Anited States

PRESTON MARTIN, ROY DOUMANI, BEVERLY W. THRALL
(Successor to the Claims of Larry B. Thrall), ARBUR, INC..,
WILLIAM E, SIMON, JR., J. PETER SIMON, AND GEORGE J.
GILLESPIE, Ill (Executors of the Estate of William E.

Simon, Sr.),
Petitioners,

¥.

UNITED STATES, et ai.,
Respondents,

Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI.

DAVID B. BERGMAN RICHARD G. TARANTO

MELVIN C. GARBOW (Counsel of Record)
HOWARD N. CAYNE H. BARTOW FARR III

MICHAEL A. JOHNSON FARR & TARANTO

ARNOLD & PORTER, LLP 1220 19th Street, NW, Suite.800
555 Twelfth Street, NW Washington, DC 20036

Washington, DC 20004-1202 (202) 775-0184
(202) 942-5000

DAVID S. COHEN
MILBANK, TWEED, HADLEY,
& MCCLOY
1850 K Street, NW, Suite 1100
Washington, DC 20006
(202) 835-7517

WiLSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

a
2
.

QUESTIONS PRESENTED
1. Whether recovery for losses caused by breach of a
Government contract, even when the losses are foreseeable as
a factual matter, is barred as a legal matter unless the contract
itself specifically obliged the harmed party to incur those
losses upon breach or the loss is of property the contract
obliged the harmed party to acquire.

2. Whether Government resolutions that approve a finan-
cial transaction with the Government, address particular per-
sons who made the offer to the Government, and impose
obligations on such persons as a condition of approval create
a contract enforceable by those persons.

(1)

ii
PARTIES TO THE PROCEEDING AND
RULE 29.6 STATEMENT

Besides the named petitioners and respondent, two cor-
porations were parties to the proceedings below: Southern
California Federal Savings Loan Association (“SoCal”) and
SoCal Holdings, Inc. (“SCH”), which in 1997 changed their
names to People’s Bank of California and PBOC Holdings,
Inc., respectively. In 2001, the People’s Bank of California
merged into California National Bank, which became the
successor in interest to SoCal. The foregoing institutions,
whose rights are not at issue in this petition, have settled their
claims in this case.

Of the named petitioners, only one is a corporation,
namely, Arbur, Inc. It is a closely held Simon-family corpo-
ration with no parent corporations and no publicly held com-
pany holding 10% or more of its stock. See S. Ct. Rule 29.6.

TABLE OF CONTENTS

CORFEe EERE Wee CUR ESINSE ES LIED wasiccsnessvevicanssesisoccsnsseciionnores

PARTIES TO THE PROCEEDING AND RULE 29.6
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C. The Court of Appeals Decision ................:000
REASONS FOR GRANTING THE PETITION...........

1. THE FEDERAL CIRCUIT’S RESTRICTION
OF CONTRACT REMEDIES TO DENY
RECOVERY FOR FOGRESEEABLE LOSS
CAUSED BY BREACH SHOULD BE
(po + Ras eb ets aac ae

A. The Decision Is Inconsistent With The
Governing Law Of Contract Remedies .......

B. The Decision Creates Lower Court Doc-
I Te vaniiancerninie ated cee caicounss

C. It Is Important To Correct This Decision
By The Appellate Court With Special
Authority Over Government Contracts .......

ll. THE FEDERAL CIRCUIT’S REJECTION
OF CONTRACT RIGHTS BASED ON THE
BANK BOARD’S APPROVAL RESOLU-
TIONS SHOULD BE REVIEWED ..................

(111)

25

iV

TABLE OF CONTENTS—Continued

Page
CIF RNY -cenpensietintiordeininiitnsainrcinuennetneaasoaianit 30
APPENDICES

APPENDIX A: Federal Circuit Opinion .................. la
APPENDIX B: Court of Federal_Claims Damages

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APPENDIX C: Court of Federal Claims Liability

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APPENDIX D: Federal Circuit Rehearing Denial... 176a
APPENDIX E: Regulatory Capital Maintenance

PIII 5 cictaciiassavitvinangunsaibcaaicaakion weedeat 178a
APPENDIX F: FHLBB Resolutions and Forbear-
OT TE in ae ee 197a
\ a

Vv

TABLE OF AUTHORITIES
CASES Pages
Bluebonnet Savings Bank, F.S.B. vy. United

States, 266 F.3d 1348 (Fed. Cir. 2001).......... 10, 22-23
Cain v. United States, 350 F.3d 1309 (Fed. Cir.

PRD actinsucstniekibiaisicisasanalsesiadelapipacancubantadbabtacessis 29
California Fed. Bank, FSB vy. United States, 245

Pe TG CEOs AR. BED asrcenscccesissvehinpaneescenes 29
Data Enters. of the Northwest v. GSA, 2004 WL

SOURS CIS BCA PHO, ESGET) ccsccscscsssesesssscceseces 24
Fidelity & Deposit Co. v. Krebs Engineers, 859

cde ee CH as 8 OED sissintiseanbndacnceninasnasata 20
Home Savings of America v. United States, 399

Be Te CER. SCRE, BUDD snticcrcsndsericavsaresnecs’ 24, 28-29
Indiana Michigan Power Co. v. United States,

REE Tae 1IP OG. CU, DARDS) sesckcessisersinvensnins 24
Landmark Land Co. v. FDIC, 256 F.3d 1365

FRR sts EA FP sahacsdnsvocsiisansanhibaangceaisationantunnnsess 24
La Van v. United States, 382 F.3d 1340 (Fed. Cir.

MRED isius canicehaounn cong iad penidicidinadencaseasanted santhbe 10, 23-24, 29
Lynch v. United States, 292 U.S. 571 (1934) ....... 18
Massie v. United States, 166 F.3d 1184 (Fed. Cir.

FS aT Asx iesduidnnins sg deeRansobaapenieadeiesaeriviaiaceatanieaaaaains 29
Mobil Oil Exploration & Producing Southeast,

Inc. v. United States, 530 U.S. 604 (2000) ........ passim
Northern Helex Co. v. United States, 524 F.2d

FE GAGE, A Ee chia ibekbisicakehihads tmlahedeihciekanns 24
Perry v. United States, 294 U.S. 330 (1935)......... 18
Prudential Ins. Co. of America v. United States,

ead: PR: C29 CR, Cir. FRBB) vo sscncanssssossnonsssann 24
Strougo v. Bassini, 282 F.3d 162 (2d Cir. 2002)... 10
Trauma Serv. Group v. United States, 104 F. ctl

Pa ee oso OPE The FHLBB initially called the new thrift “New Association,” using
“SoCal” for the old thrift. Because the thrift’s name remained essentially
unchanged, however, throughout this litigation “SoCal” has been used to
name the new thrift, and this petition follows suit.

SCH was formed two months earlier—after the FHLBB had accepted
petitioners’ bid in principle—for the sole purpose of acquiring SoCal, as
stated in its application to the FHLBB (JX 1381 p. 2) and the main
FHLBB approval resolution (App. 197a). App. 130a.

4

capital,” the amount of capital that the thrift is legally re-
quired to have in its possession, App. Sa. In this case, the
Government’s approval resolutions themselves promised to
allow the counting of almost $300 million in “capital credits”
($217.5 million) and “supervisory goodwill” ($79 million) as
regulatory capital, without which the thrift would have been
severely undercapitalized. App. 132a, 133a, 210a, 217a;
App. 224a-26a (“Forbearance Letter” to petitioner Martin,
chairman and CEO of SCH); see Winstar, 518 U.S. at 847-56
(principal opinion). In return, the Government, relying on the
personal credentials of petitioners, secured various personal
promises from petitioners as part of the bargain, again re-
flected in the approval resolutions. App. 5a; App. 42a (“The
experience and reputation of Secretary Simon’s investment
group was considered an important intangible asset in the
rejuvenation of the thrift.”’).

The contract between the Government and petitioners had
two components that are at issue here. One is a Regulatory
Capital Maintenance Agreement (RCMA), App. 178a-96a,
which the Government entered into with petitioners, as well
as with SoCal and SCH, as signatory parties. App. 5a, 132a;
see App. 19a (“the Individual Plaintiffs . . . were in con-
tractual privity with the government under the RCMA”). The
other is the FHLBB approval resolutions themselves. The
RCMA, the FHLBB approval, and SCH’s purchase of SoCal
all occurred on April 30, 1987. App. 180a (“Stock Purchase
Agreement of even date herewith”). The overall transaction
thus had several simultaneous, interdependent parts.”

* The Government also entered into an Assistance Agreement that was
signed only by SoCal, SCH, and FSLIC, under which the FHLBB fur-
nished certain financial assistance to the new thrift. See App. Sa. This
petition does not rely on that agreement.

5

The RCMA shows the Government’s reliance on petition-
ers personally and the key regulatory-capital guarantee:

e “First, Recital A indicates that ‘the [Individual Plain-
tiffs] collectively own 97.5 percent of the outstanding
voting securities of [SCH] and control [SCH].’” App.
19a, quoting App. 180a.

* “Second, Recital G and § | include the government’s
promise that SCH and SoCal will be able to account
for $217.5 million in capital credits as part of its
regulatory capital.” App. 19a. (The separate good-
will guarantee, set out in the main FHLBB approval
resolution, was not mentioned in the RCMA.) Section
1 also requires the thrift and its holding company to
meet prescribed regulatory-capital levels. See App.
Sa, 181a-83a.

¢ “Third, the RCMA states that ‘so long as [SCH] shall
be obligated pursuant to § 1, the [Individual Plain-
tiffs], severally in proportion to their initial ownership
of the common stock of [SCH] . . ., hereby guarantee
the performance of [SCH] and [SoCal] under § 1,’” up
to an aggregate limit of $5 million. App. 19a; see
Arp. 5a-6a, 41a, 132a, 183a-84a.

¢ Fourth, “the RCMA requires that the Individual Plain-
tiffs, or their successors who have assumed their
shares of the guarantee and have not been objected to
by the FSLIC, shall ‘collectively own not less than a
majority of the outstanding voting power of [SCH].”
App. 19a-20a; see App. 184a-85a. The RCMA also
details the remedy for violation of that promise: peti-
tioners forfeit their stock to the Government, which
repossesses the thrift and its holding company. See
App. 186a-89a.

¢ Finally, the RCMA specifies that the just-described
provision for forfeiture and repossession applies also
if SoCal’s regulatory capital falls below 3% of its
Total Liabilities. App. 187a-89a; see App. 42a, 132a;

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386008_0615%3A0. Public record. Not legal advice.