Reply Brief — Martin v. United States (No. 05-1221)

8

needed not only because of harmful error on a fundamental

issue, but also because of doctrinal conflict.

B. The Second Question Should Be Reviewed

1. The Government begins its response on the second

question presented, as on the first, by trying to avoid the

issue. It says (without citation) that petitioners did not con-

tend in the Federal Circuit that the Board resolutions created

contract rights, but argued only for incorporation of the

resolutions in the Assistance Agreement. Opp. 22. That is

wrong. Petitioners argued at length that they had (express

and implied) contract rights from multiple sources, i.e., the

RCMA, the Board resolutions, and the Assistance Agreement

(Doumani e7 a/. Ct. App. Br. 15-19, 22-30 (May 25, 2004)),

and specifically denied that they were relying on incorpo-

ration of the Board resolutions by the Assistance Agreement.

Id. at 22 (Petitioners “do not sue for breach of the Assistance

Agreement. Instead, they sue for breach of the Overall Con-

tract, of which the Assistance Agreement was but one com-

ponent.”). Petitioners thus preserved the issue.

2. Even on the merits, the Government tries to divert atten-

tion from the actual issue. The question is not whether

Government resolutions, regulations, or statutes generally

give rise to contract rights. Opp. 24-25, discussing National

Railroad Passenger Corp. v. Atchison, Topeka & Santa Fe

Rv., 470 U.S. 451 (1985). It is whether certain types of reso-

lutions —-which are common-—-do. The Government cites no

authority whatever that denies such rights where, as here, the

resolutions approve particular persons’ financial transac-

tions with and for the benefit of the Government, address the

persons who made the offer to the Government, and impose

duties on those persons as part of the transaction.

As the Government recognizes, the Winstar plurality

treated the Board resolutions as sufficient to create contract

rights. Opp. 25-26. And contract law makes clear that they

9

are. Contrary to the Government's citation-less statement, the

absence of “agrees,” “contracts,” or “promises” language, let

alone of language separately “requiring payment of dam-

ages,” Opp. 23, in no way defeats contractual enforceability

where “the realities of the transaction favor[ ] reading those

documents as contractual commitments.” Winstar, 518 U.S.

at 863 (plurality). Contract enforceability depends not on the

form of words but on a common-sense understanding that the

actions are justifiably viewed as commitments. Restatement

§ 2 & Comment b; id. $$ 3, 4, 202: see Pet. 28. The Gov-

ernment does not identify a single one of the required

elements for contrac: ‘ormation that is somehow missing in

the Board resolutions.

When petitioners assumed the various dutics imposed on

them by the resolutions, they were justified in relying on the

resolutions’ assurances about capital regulatory treatment as

enforceable commitments, without which petitioners’ com-

mitments would have been economically irrational. The

presence of additional documents that serve various purposes

partially overlapping with the resolutions is not uncommon

‘and does not change the contractual nature of the resolutions.

And recognizing the resolutions as contracts does not un-

dermine the separate treatment of the institutions and the

individuals, who have different duties and benefits under the

various resolutions and separate agreements. Contra Opp.

24. The Assistance Agreement, providing for a monetary

infusion into the institutions, creates one set of duties and

rights; the RCMA, addressing other issues, creates others (for

petitioners and the institutions); and the resolutions create still

others (including duties for petitioners beyond those imposed

by the RCMA). See Pet. 6.

3. Other Federal Circuit decisions, notably Home Savings

of America v. United States, 399 F.3d 1341 (Fed. Cir. 2005),

and La Van, supra, have held that Board resolutions create

contract rights, without additional privately signed agree-

10

ments. See Pet. 28-29. The Government cannot distinguish —

those decisions, which it acknowledges held Board resolu-

tions to create contract rights. Opp. 26-28.

As to Home Savings, the Government focuses on the par-

ticular private duties imposed by the resolutions (“full

financial responsibility”)." Opp. 27 But the particulars of the

duty are immaterial: here, too, the resolutions imposed duties

on petitioners, which differ only in detail, not in their role as

defining a bargain that makes the Board resolutions enforce-

able. As to La Van, the Government notes aspects of the

opinion (¢.g., about state law regarding veil piercing), Opp.

27-28, that have nothing to do with the legal issue here:

whether Board resolutions just like the resolutions here create

enforceable contract rights. La Van, like Home Savings, but

contrary to the ruling in this case, squarely held that they do.

The second question should thus be taken along with the first.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

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

June 1, 2006