No. 99-677
In the Supreme Court of the United States
WATERVIEW MANAGEMENT COMPANY, PETITIONER
v.
FEDERAL DEPOSIT INSURANCE CORPORATION
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
BRIEF FOR THE
FEDERAL DEPOSIT INSURANCE CORPORATION
IN OPPOSITION
SETH P. WAXMAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
WILLIAM F. KROENER, III
General Counsel
JACK D. SMITH
Deputy General Counsel
ANN S. DUROSS
Assistant General Counsel
ROBERT D. MCGILLICUDDY
Supervisory Counsel
KATHLEEN V. GUNNING
Counsel
Federal Deposit Insurance
Corporation
Washington, D.C. 20429
QUESTIONS PRESENTED
1. Whether the proceedings before the district court violated petitioner's
right to due process and to a jury trial.
2. Whether the court of appeals erred in affirming the district court's
calculation of the damages owed petitioner for the Federal Deposit Insurance
Corporation's repudiation of petitioner's option to purchase one parcel
of land, where that calculation excluded alleged damages to an adjacent
parcel of land that petitioner did not own on the relevant date.
3. Whether alleged anomalies in the proceedings before the court of appeals
warrant exercise of this Court's "supervisory power."
In the Supreme Court of the United States
No. 99-677
WATERVIEW MANAGEMENT COMPANY, PETITIONER
v.
FEDERAL DEPOSIT INSURANCE CORPORATION
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
BRIEF FOR THE
FEDERAL DEPOSIT INSURANCE CORPORATION
IN OPPOSITION
OPINIONS BELOW
The memorandum of the court of appeals (Pet. App. 3a-5a) is unpublished,
but the decision is noted at 194 F.3d 175 (Table). The orders of the district
court (Pet. App. 54a-55a, 64a) are unreported.
JURISDICTION
The judgment of the court of appeals (Pet. App. 1a-2a) was entered on May
20, 1999. A petition for rehearing was denied on July 22, 1999 (Pet. App.
6a). The petition for a writ of certiorari was filed on October 19, 1999.
The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).
STATEMENT
1. This case arises out of the repudiation by the Federal Deposit Insurance
Corporation (FDIC)1 of an agreement containing a purchase option, held by
petitioner Waterview Management Company, relating to one of two separate
parcels of property that were to be included in a proposed real estate development
project know as PortAmerica. Pet. App. 3a.
One of the parcels, known as the Riverfront Tract, was owned by PortAmerica
Associates, a Maryland partnership, and was subject to a first trust note
held by HomeFed Bank, F.S.B. Waterview Mgmt. Co. v. FDIC, 105 F.3d 696,
698 (D.C. Cir. 1997). When the first trust loan went into default, a workout
agreement among the parties permitted HomeFed Bank to take title to the
Riverfront Tract through foreclosure, required the incorporation of petitioner,
and granted petitioner a three-year option, subject to certain conditions,
to purchase the Riverfront Tract for $17.5 million. Ibid. Petitioner and
PortAmerica Associates had principals in common but were separate legal
entities. Pet. App. 4a. The other parcel in the project, known as the Beltway
Tract, was separately owned by PortAmerica Associates and was subject to
a first trust note held by Signet Bank.
On July 6, 1992, the FDIC was appointed receiver for HomeFed Bank. Waterview,
105 F.3d at 698. Petitioner sued the FDIC after the FDIC advertised the
Riverfront Tract for sale in its 1993 Winter/Spring Land Catalogue. Ibid.
The district court dismissed the action. The court of appeals reversed,
holding that the FDIC had repudiated petitioner's purchase option on the
Riverfront Tract when it advertised the tract for public sale. The court
therefore remanded to the district court for a determination of whether
petitioner was owed "actual direct compensatory damages" under
12 U.S.C. 1821(e)(3)(A)(i) for the FDIC's repudiation of the purchase option.
Waterview, 105 F.3d at 702; see Pet. App. 3a-4a.
2. On remand, the district court determined that "actual direct compensatory
damages" would be measured by the difference between the purchase option
price and the fair market value of the Riverfront Tract as of the date of
receivership, July 6, 1992. Pet. App. 54a, 64a. The district court conducted
a jury trial to compute the damages owed to petitioner. Id. at 3a.
James T. Lewis, a principal of petitioner and PortAmerica Associates, testified
that on the date of receivership, petitioner owned the option to purchase
the Riverfront Tract, while PortAmerica Associates owned the Beltway Tract.
In testimony concerning the fair market value of the Riverfront Tract, the
FDIC appraisal expert valued the property as would an uninterested third
party purchaser, assuming that the separate owners of the Riverfront Tract
and Beltway Tract would cooperate with each other only if it was in each
owner's individual economic interest. Pet. App. 4a, 53a. Petitioner did
not object to the admission of the FDIC appraisal expert's testimony. At
the conclusion of the trial, the jury found the fair market value of the
Riverfront Tract to be $20 million. This figure was between the figures
offered by the FDIC's appraisal expert ($12 million) and petitioner's expert
($36 million). Pet. 9-10. After deducting the $17.5 million option price,
the district court entered judgment for petitioner in the amount of $2.5
million, plus interest. Pet. 10.
3. The court of appeals affirmed in an unpublished memorandum. Pet. App.
1a-5a. The court held that petitioner was not entitled to recover damages
for the loss of value to the Beltway Tract because petitioner "did
not own that property at the time of repudiation- another company did."2
Id. at 4a. Although the court recognized that petitioner and PortAmerica
Associates had principal investors in common, it held that the entities
were legally distinct and that petitioner could not recover damages for
the loss of value to property it did not own. Ibid. Similarly, the court
rejected petitioner's argument that the district court erred in "permitting
the jury to determine the value of the Waterfront Tract as if its owner
were unrelated to the owner of the Beltway Tract." Ibid. The court
held that the FDIC appraisal expert properly assumed that, under a fair
market value analysis, the owners of the two tracts would have dealt with
each other at arm's length. Ibid.
ARGUMENT
Petitioner contends that the proceedings before the district court violated
his rights under the Fifth and Seventh Amendments. Petitioner further argues
that the court of appeals erred in affirming the district court's determination
to exclude any alleged loss in value to the Beltway Tract when calculating
the damages owed as a result of the FDIC's repudiation of petitioner's option
to purchase the Riverfront Tract. Finally, petitioner contends that alleged
anomalies in the proceedings before the court of appeals warrant the exercise
of this Court's "supervisory power." Petitioner's claims are without
merit, and warrant no further review.
1. Prior to the commencement of the jury trial in this case, the district
court held that the damages petitioner was entitled to recover under 12
U.S.C. 1821(e)(3) would not include any alleged loss in value to the Beltway
Tract. Pet. App. 54a-55a, 64a-65a. Petitioner contends (Pet. 12-13, 15-16)
that the district court's ruling violated its rights to due process and
a jury trial. That claim has no merit. Petitioner and the FDIC both submitted
papers in the district court addressing the propriety of including alleged
damages to the Beltway Tract. After reviewing those submissions, the district
court held that under 12 U.S.C. 1821(e)(3), petitioner was entitled to recover
only "actual direct compensatory damages" caused by the FDIC's
repudiation of the purchase option, Pet. App. 54a (quoting 12 U.S.C. 1821(e)(3)(A)(i)),
and that such damages would be confined to the Riverfront Tract. Id. at
64a. Petitioner then reasserted its arguments on this point in its motion
for reconsideration, and the district court rejected them in denying the
motion. Nothing in that procedure violated petitioner's Fifth Amendment
right to due process.
Contrary to petitioner's assertions (Pet. 16), this case does not present
a conflict with the Fifth Circuit's decision in United States v. 8.41 Acres
of Land, More or Less, Situated in Orange County, 680 F.2d 388 (1982). That
case involved the calculation of constitutionally mandated just compensation
for a taking by the government, not the determination of statutory repudiation
damages under 12 U.S.C. 1821(e)(3).3 Moreover, 8.41 Acres held only that
"due process requires that the owners be given an opportunity to be
heard on the issue of compensation." 60 F.2d at 395. In this case,
the district court permitted petitioner to present arguments concerning
the propriety of including damages to the Beltway Tract. Thus, petitioner
was afforded an opportunity to be heard as required by 8.41 Acres. Moreover,
because the issue of whether 12 U.S.C. 1821(e)(3) permits the inclusion
of losses in value to the Beltway Tract is a question of law, it was appropriately
addressed by the district court and not by the jury. See Markman v. Westview
Instruments, Inc., 517 U.S. 370, 387 (1996) (noting that "it [is] for
the court to 'lay down to the jury the law which should govern them'")
(quoting Tucker v. Spalding, 80 U.S. 453, 455 (1871)).
2. a. Petitioner next contends (Pet. 17-22) that the district court's application
of the traditional measure of damages for the breach of an option to purchase
land-the difference between the option price for the Riverfront Tract and
the fair market value of that tract-conflicts with this Court's decision
in Olson v. United States, 292 U.S. 246 (1934). At bottom, petitioner's
argument is that, because it hoped to develop the Riverfront and Beltway
Tracts in tandem, Olson mandates that the district court should have ruled,
as a matter of law, that the jury was precluded from determining the fair
market value of the Riverfront Tract as if its owner were unrelated to the
owner of the Beltway Tract. Petitioner is incorrect.
Olson addressed the compensation owed to property owners after the United
States condemned their land for use as a reservoir. The Court held that
considerations of an individual owner's subjective expectations should be
excluded from a determination of the property's fair market value, which
it defined as the "amount that in all probability would have been arrived
at by fair negotiations between an owner willing to sell and a purchaser
desiring to buy." Olson, 292 U.S. at 257. Olson's description of fair
market value is entirely consistent with the application of the concept
in this case. Petitioner may have hoped to develop the Riverfront Tract
together with the Beltway Tract, but the FDIC repudiated petitioner's purchase
option only on the Riverfront Tract, and the district court properly permitted
the jury to rely on an objective assessment of the Riverfront Tract's "market
value" when determining petitioner's damages as a result of the repudiation.
Id. at 255.4
In contrast, petitioner's "subjective" approach to fair market
value is both unsupported and unworkable. As the court of appeals noted,
"[t]o compute value on [petitioner's] theory would require a determination
of the extent to which the Beltway owner would have been willing to bear
costs in excess of those a rational, self-interested owner would have borne.
There was no basis for the jury to make such a determination other than
speculation." Pet. App. 4a.
b. Petitioner also maintains (Pet. 24) that the court of appeals improperly
affirmed on a basis not addressed by the district court, namely that PortAmerica
owned the Beltway Tract on the date the receivership began, and that petitioner
and PortAmerica are separate business entities. An appellate court, however,
may affirm a lower court judgment on any ground supported by the law and
the record. Thigpen v. Roberts, 468 U.S. 27, 30 (1984); Schweiker v. Hogan,
457 U.S. 569, 585 n.24 (1982). Record evidence establishes that on July
6, 1992 (the date of the receivership), the option to purchase the Riverfront
Tract was owned by petitioner (a Virginia corporation), while the fee simple
interest in the Beltway Tract was held by PortAmerica (a Maryland partnership).5
See C.A. App. 46, 169, 177. Petitioner cites no authority for the proposition
that a claimant seeking "actual direct compensatory damages" pursuant
to 12 U.S.C. 1821(e)(3)(A)(i) may receive payment for alleged damages to
property the claimant does not own. Thus, the court of appeals correctly
held that petitioner could not "assert a claim for damages to the Beltway
Tract because it did not own that property" when the receivership of
the Riverfront Tract began. Pet. App. 4a.
Petitioner maintains (Pet. 16-17), however, that the court of appeals erred
in determining the ownership of the Beltway Tract on the date of receivership
rather than on the later date of repudiation. Petitioner claims that it
owned an option to purchase the Beltway Tract by the date of repudiation,
and implies that it should be eligible for damages to the Beltway Tract
as of that date. Petitioner is incorrect.
Assuming, arguendo, that petitioner did own an option to purchase the Beltway
Tract by the time the FDIC repudiated the option to purchase the Riverfront
Tract,6 the court of appeals was correct to hold that alleged damages to
the Beltway Tract were properly excluded. Under 12 U.S.C. 1821(e)(3)(A)(i),
the receiver's liability for the repudiation of a purchase option contract
is "determined as of * * * (I) the date of the appointment of the conservator
or receiver." See Office & Prof'l Employees Int'l Union v. FDIC,
27 F.3d 598, 601-602 (D.C. Cir. 1994) (OPEIU) (holding that the FDIC's repudiation
relates back to the date of receivership, and that repudiation damages are
assessed with reference to the receivership date). Section 1821(e)(3) preserves
the rights of property holders at the time of the receivership, and does
not recognize the acquisition of new rights after that time. See id. at
604-605. Petitioner acquired a purchase option on the Beltway Tract after
the receivership of the Riverfront Tract had begun, and was thus on notice
that the FDIC had statutory authority to repudiate the purchase option on
the Riverfront Tract. Petitioner should not now be heard to contend that
its own post-receivership actions increased the compensation it was owed
for the repudiation of the purchase option on the Riverfront Tract. See
FDIC v. Liberty Nat'l Bank & Trust Co., 806 F.2d 961, 965 (10th Cir.
1986) (recognizing that insolvency statutes such as 12 U.S.C. 1821(e) seek
to "prevent new rights from arising" after the date of insolvency).7
c. Petitioner focuses much of its argument (Pet. 19-22) on alleged infirmities
in the methods used by the FDIC's expert witness to determine the fair market
value of the Riverfront Tract. Petitioner's argument is misdirected.
It was the task of the district court, as "gatekeeper" in evidentiary
matters concerning expert testimony, to determine the admissibility of the
testimony of the FDIC's appraisal expert. See Kumho Tire Co. v. Carmichael,
526 U.S. 137, 147 (1999); Daubert v. Merrill Dow Pharm., Inc., 509 U.S.
579, 589 (1993). If petitioner believed that some of that testimony should
have been excluded, it should have raised those objections to the district
court. Having failed to make such an objection, petitioner has waived any
argument that the testimony was improperly admitted because based on "speculative
and conjectural assumptions." Pet. 20-22. See Fed. R. Evid. 103(a)(1);
Willoughby v. Potomac Elec. Power Co., 100 F.3d 999, 1002 (D.C. Cir. 1996),
cert. denied, 520 U.S. 1197 (1997); Anderson v. Group Hospitalization, Inc.,
820 F.2d 465, 469-470 (D.C. Cir. 1987); Passaic Daily News v. NLRB, 736
F.2d 1543, 1554 n.15 (D.C. Cir. 1984).8
Moreover, petitioner concedes (Pet. 10) that it was permitted to introduce
its own expert testimony regarding the fair market value of the Riverfront
Tract. The jury therefore heard expert testimony on the issue from both
sides. It was the jury's task to evaluate the relative persuasiveness of
the different experts' testimony and to arrive at a judgment as to the property's
fair market value. The jury arrived at such a judgment, assessing the fair
market value of the Riverfront Tract to be between the appraisals of the
FDIC's expert and petitioner's expert. See Pet. 9-10.
3. Finally, petitioner asks this Court to grant certiorari in order to exercise
its supervisory authority under Supreme Court Rule 10(a), contending that
the court of appeals failed to address all issues raised by petitioner,
demonstrated prejudice against petitioner in its remarks at oral argument,
and committed factual errors in rendering its decision. Pet. 22-25. None
of those assertions has merit.
First, this Court grants the courts of appeals "wide latitude in their
decisions of whether or how to write opinions. That is especially true with
respect to summary affirmances." Taylor v. McKeithen, 407 U.S. 191,
194 n.4 (1972). Cf. Fed. R. App. P. 36(a)(2) (recognizing that courts of
appeals may render decisions without publishing an opinion). Second, the
statement by one of the court of appeals judges during oral argument that
the project had gone "in the toilet" (Pet. App. 45a-46a) was merely
a colloquial reference to the admitted fact that the note on the Riverfront
Tract was in default at the time the parties entered into the workout agreement.
It does not establish prejudice on the part of the court of appeals. Third,
any factual error made by the court of appeals concerning the provision
in the purchase option agreement that petitioner could extend the option
by making $2 million payments had no impact on the outcome of the case.
The court of appeals upheld the district court's refusal of a jury instruction
regarding the discounting of the option price because petitioner had not
offered any evidence regarding the value of the asserted discount. Id. at
5a.9
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
SETH P. WAXMAN
Solicitor General
WILLIAM F. KROENER, III
General Counsel
JACK D. SMITH
Deputy General Counsel
ANN S. DUROSS
Assistant General Counsel
ROBERT D. MCGILLICUDDY
Supervisory Counsel
KATHLEEN V. GUNNING
Counsel
Federal Deposit Insurance
Corporation
FEBRUARY 2000
1 Although the Resolution Trust Corporation (RTC) was deemed to have repudiated
the agreement, the FDIC succeeded to the RTC's interest under 12 U.S.C.
1441a(m)(1). All references in this brief are to the FDIC.
2 Although the court of appeals referred to the "time of repudiation,"
the context of the reference confirms (and petitioner agrees, Pet. 17) that
the court meant to refer to-and based its decision on-the date receivership
commenced.
3 The decisions of this Court cited in 8.41 Acres (United States v. Reynolds,
397 U.S. 14 (1970), and Bragg v. Weaver, 251 U.S. 57 (1919)) are equally
inapplicable because they involve government takings.
4 Petitioner's argument (Pet. 13-14) that the district court erred in finding
that the statutory measure of damages does not include "consequential"
damages is not appropriate for this Court's review, as the argument was
neither raised nor decided in the court of appeals. See Breininger v. Sheet
Metal Workers Int'l Ass'n Local Union No. 6, 493 U.S. 67, 94 n.18 (1989);
Delta Air Lines, Inc. v. August, 450 U.S. 346, 362 (1981). Moreover, petitioner's
claim of consequential damages flowing from the lost opportunity to develop
the Riverfront and Beltway Tracts together is foreclosed by 12 U.S.C. 1821(e)(3)(B)(ii),
which excludes "damages for lost profits or opportunity" from
the "actual direct compensatory" damages that are payable under
12 U.S.C. 1821(e)(3)(A).
5 Relying on a state takings case, petitioner contends (Pet. 17) that the
court of appeals erred in finding that petitioner and PortAmerica Associates
were separate entities. Petitioner identifies no conflict among the federal
courts of appeals on the separate entity issue under 12 U.S.C. 1821(e)(3).
The fact that some States may have developed differing state law approaches
to the issue is not problematic, and certainly does not occasion this Court's
review.
6 Petitioner cites no record evidence establishing that it owned an option
to purchase the Beltway Tract at the precise time its option to purchase
the Riverfront Tract was repudiated.
7 We note that this case does not involve a repudiation of the purchase
option on the Beltway Tract. If the grantor of the purchase option on the
Beltway Tract had gone into receivership before petitioner acquired the
Beltway purchase option from PortAmerica, and if the FDIC later repudiated
that purchase option, then an issue might arise as to whether an entity
that acquires a purchase option to property after the date of receivership
also acquires the right to damages under 12 U.S.C. 1821(e)(3) in the event
of repudiation. This case, however, does not present that question.
8 In any event, the methods of the FDIC expert were unproblematic. The expert
determined the general fair market value of the property, on the assumption
that there was no relationship between the owner of the Beltway Tract and
the owner of the Riverfront Tract and that the owners of each tract would
cooperate with each other only to the extent it was in each owner's individual
economic interest to do so. Petitioner identifies no decision of any court
establishing that 12 U.S.C. 1821(e)(3)(A)(i) requires some other method
of appraisal.
9 Because the court of appeals based its decision on this point on the lack
of any evidence regarding the amount of the discount rather than the uncertainty
of the amount (see Pet. App. 5a), petitioner's assertion (Pet. 25) of a
conflict with the D.C. Circuit's decision in OPEIU is incorrect. See OPEIU,
27 F.3d at 602. Moreover, even if there were a conflict with OPEIU, such
intra-circuit conflicts are best resolved by the court of appeals concerned
and generally do not warrant this Court's review. See Wisniewski v. United
States, 353 U.S. 901, 902 (1957) ("It is primarily the task of a Court
of Appeals to reconcile its internal difficulties.").