In the Supreme Court of the United States
BANK OF GUAM, PETITIONER
UNITED STATES OF AMERICA
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
NEAL KUMAR KATYAL
Acting Solicitor General
Counsel of Record
Assistant Attorney General
JEANNE E. DAVIDSON
BRIAN A. MIZOGUCHI
Department of Justice
Washington, D.C. 20530-0001
Whether Treasury bonds and other United States government obligations held by petitioner included a promise by the United States that interest on the bonds would be exempt from the Guam Territorial Income Tax, 48 U.S.C. 1421i.
In the Supreme Court of the United States
BANK OF GUAM, PETITIONER
UNITED STATES OF AMERICA
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
BRIEF FOR THE UNITED STATES IN OPPOSITION
The opinion of the court of appeals (Pet. App. 1a-25a) is reported at 578 F.3d 1318. The opinion of the United States Court of Federal Claims (CFC) dismissing peti tioner's complaint (Pet. App. 26a-59a) is reported at 80 Fed. Cl. 739. The opinion of the CFC on petitioner's motion for reconsideration (App., infra, 1a-10a) is unre ported. In ruling on petitioner's motion for reconsidera tion, the CFC directed that its decision dismissing peti tioner's claims be "reissued nunc pro tunc May 9, 2008," with certain substantive changes not relevant in this Court. That reissued decision is unreported.
The judgment of the court of appeals was entered on August 12, 2009. A petition for rehearing was denied on
December 18, 2009 (Pet. App. 60a-61a). The petition for a writ of certiorari was filed on March 18, 2010. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).
STATUTES AND REGULATIONS INVOLVED
The relevant statutes and regulations are reproduced in an appendix to this brief. App., infra, 11a-13a.
1. a. As part of the Organic Act of Guam, ch. 512, 64 Stat. 384, Congress imposed the Guam Territorial Income Tax (GTIT) on residents of Guam, including pe titioner. See 48 U.S.C. 1421i. The GTIT follows the terms of the United States Internal Revenue Code, mu tatis mutandis. See Pet. App. 3a; 48 U.S.C. 1421i(a), (b) and (e); Gumataotao v. Director of Dep't of Rev. & Tax ation, 236 F.3d 1077, 1079-1081 (9th Cir. 2001) (discuss ing "mirroring" process for adapting provision of Inter nal Revenue Code to create the GTIT). The government of Guam collects and disburses the GTIT, relieving the Department of the Treasury of the need to collect and appropriate those proceeds. See Pet. App. 3a-4a; 48 U.S.C. 1421i(c). Correspondingly, Guamanians do not pay income tax to the federal government. See Guma taotao, 236 F.3d at 1079.1
b. The Department of the Treasury is authorized by statute to issue United States Treasury bills, bonds, and other government obligations (USGOs). Pet. App. 4a. Although USGOs are subject to taxes imposed by Con gress, see 31 C.F.R. 356.32(a), they are "exempt from taxation by a State or political subdivision of a State." 31 U.S.C. 3124(a). Cf. The Banks v. The Mayor, 74 U.S. (7 Wall.) 16 (1868) (holding USGOs not liable to state taxation absent congressional consent). Treasury regu lations restate this rule, providing that USGOs shall "be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States." 31 C.F.R. 309.4, 340.3. The regulations also define the term "State" to include a territory or possession of the United States, such as Guam. 31 C.F.R. 357.2. No statute or regula tion, however, has ever expressly exempted USGOs from the GTIT. Pet. App. 5a; see 48 U.S.C. 1421i.
2. In 1976, the United States Court of Appeals for the Ninth Circuit (which embraces Guam, see 28 U.S.C. 41) addressed the question whether the GTIT consti tutes "[t]he imposition by a State" of a tax for purposes of 12 U.S.C. 548. Bank of Am., Nat'l Trust & Sav. Ass'n v. Chaco, 539 F.2d 1226, 1226-1227 (per curiam).2 The Ninth Circuit held that, because the GTIT was enacted by Congress rather than by the government of Guam, it "is not a tax imposed by Guam," and therefore is not properly regarded as a tax imposed by a State. Id. at 1227-1228; see Pet. App. 18a, 23a-24a & n.7.
Starting two years after the Ninth Circuit issued its decision in Bank of America, petitioner purchased the USGOs whose taxation is at issue in this case. Until 1986, the USGOs were issued in paper form and were imprinted with the recital, taken verbatim from the Treasury regulations, that they are exempt from "taxa tion * * * imposed * * * by any State, or any of the possessions of the United States." Pet. App. 5a, 75a; see id. at 64a para. 7 (complaint alleging that the "same" exemption "covenant" shown on the USGOs is set forth in Treasury regulations). "Although USGOs purchased after 1986 were no longer issued in paper form and therefore could not include the printed statement, vari ous federal regulations maintained the language previ ously printed on the USGOs." Id. at 5a. Petitioner did not negotiate with the United States for a specific ex emption from the GTIT or pay consideration for such an exemption. Id. at 23a-24a. For several years, peti tioner's GTIT tax returns reported as taxable the in come received from the USGOs. See id. at 23a n.7. In later years, however, petitioner ceased payment of the GTIT on that income. Id. at 5a-6a.
In 2001, the Ninth Circuit held in Gumataotao that 31 U.S.C. 3124(a) does not render USGOs exempt from the GTIT. Consistent with its prior decision in Bank of America, the court explained that "Congress, not the local legislature of Guam, imposed the tax on interest from federal bonds." 236 F.3d at 1082. In the wake of Gumataotao, the government of Guam issued petitioner a notice of deficiency for tax years 1992-1994, and peti tioner contested its liability for the GTIT by filing suit in the District Court of Guam. Pet. App. 6a. In 2002, the district court held that Gumataotao was controlling, and it dismissed petitioner's claim that the GTIT could not be collected on USGOs. Bank of Guam v. Director of Dep't of Rev. & Taxation, No. 01-00016, 2002 U.S. Dist. LEXIS 9662 (D. Guam May 14, 2002); see Pet. App. 6a. Petitioner did not appeal but instead settled the case by agreeing to pay $5 million in back taxes un der the GTIT. Id. at 6a, 31a-32a.
3. In 2006, petitioner filed this suit against the Uni ted States in the United States Court of Federal Claims (CFC). Petitioner sued under the Tucker Act, 28 U.S.C. 1491(a), alleging that the United States had breached a contractual promise that petitioner's USGOs would not be subject to the GTIT. Pet. App. 62a-74a. Petitioner sought, inter alia, reimbursement of taxes it had paid under the GTIT, as well as reformation of its USGOs to oblige the United States to indemnify it against the GTIT. Id. at 7a, 67a-71a.
The CFC dismissed portions of petitioner's complaint as time-barred, and it dismissed the remainder of the complaint for failure to state a claim. Pet. App. 26a-59a. In dismissing petitioner's contract claim, the court un derstood petitioner's argument to be "that the United States government promised that income from the USGOs would be exempt from taxation imposed by any of the possessions of the United States." Id. at 52a. Relying on Bank of America and Gumataotao as per suasive authority, the CFC held that the government had not breached that promise because "the GTIT * * * is not imposed by Guam, but by Congress." Id. at 57a. The CFC likewise rejected petitioner's argument for reformation. The court held that the complaint did not adequately plead a mutual mistake because it did "not allege that the United States Government, at any time, has acted to exempt entirely income earned from USGOs from the GTIT." Id. at 58a.
Petitioner moved for reconsideration. The CFC granted that motion as it pertained to a preclusion issue not before this Court, but denied reconsideration in all other respects. App., infra, 1a-11a. In its reply brief in support of its motion for reconsideration, petitioner brought to the CFC's attention (for the first time) cer tain correspondence between the Internal Revenue Ser vice (IRS) and the governments of Guam and the United States Virgin Islands. In that correspondence, attor neys in the IRS's Office of Chief Counsel expressed the view that USGOs are not subject to tax under the GTIT or the GTIT's Virgin Islands counterpart, 48 U.S.C. 1397. See No. 07-32C, Mot. to Amend or Correct Filing App. Exhs. 2-11 (Fed. Cl. Apr. 23, 2008) (Sauers Decl.); Pet. App. 76a-97a (reproducing selected correspon dence). The CFC held that, because petitioner had failed to submit those documents in a timely fashion, "reliance on them has been waived." App., infra, 3a (cit ing Bluebonnet Sav. Bank, F.S.B. v. United States, 466 F.3d 1349, 1361 (Fed. Cir. 2006)).
4. The Court of Appeals for the Federal Circuit af firmed. Pet. App. 1a-25a. The court of appeals recog nized that the USGOs held by petitioner are express contracts with the United States, and that those con tracts "provide that the USGOs will be exempt 'from all taxation . . . imposed . . . by' Guam." Id. at 15a-16a (quoting 31 C.F.R. 309.4, 340.3). The court held that the application of the GTIT to the USGOs did not cause a breach of the government's promise because the GTIT is not a tax imposed by Guam. The court explained that, "[f]ocusing on the relevant question, it is quite clear that Congress, not Guam, enacted, authorized, or otherwise imposed the GTIT." Id. at 16a. The court based that conclusion on 48 U.S.C. 1421i (see Pet. App. 17a), on the Ninth Circuit's decisions in Bank of America and Guma taotao (see id. at 18a), and on petitioner's own complaint and statements in the litigation (see id. at 16a).
The court of appeals refused to consider "the various documents offered as parol evidence" to support peti tioner's interpretation of its contract with the United States. Pet. App. 19a. The court explained that, "[b]e cause the laws and regulations governing USGOs, and thus the terms of the Bank's express contract, clearly do not exempt USGOs from taxation by the GTIT, such parol evidence cannot be considered to interpret the Bank's contract with the United States." Ibid. The court of appeals did not address the CFC's holding- which the United States had stressed on appeal, see Gov't C.A. Br. 32-34-that petitioner had waived any ar gument based on those documents by failing to bring them to the CFC's attention in a timely manner.
The court of appeals also rejected petitioner's con tention that the government had breached an implied-in- fact contract to exempt the USGOs from the GTIT. Pet. App. 19a-21a. The court explained that "the existence of an express contract precludes the existence of an implied-in-fact contract dealing with the same subject matter." Id. at 20a (quoting Schism v. United States, 316 F.3d 1259, 1278 (Fed. Cir. 2002), cert. denied, 539 U.S. 910 (2003)). Finally, the court of appeals re jected on several grounds petitioner's argument that the contract between the parties should be reformed based on a theory of mutual mistake. Id. at 21a-24a. The court explained that petitioner had alleged (at most) a mistake of law, but that mistakes of law could not be the basis for reformation. Id. at 22a. The court further pointed out that because the USGOs were not negotiated agree ments, petitioner and the United States could not have "form[ed] a mistaken belief about a fact that was subject to negotiations." Id. at 22a-23a.3
Petitioner reads the court of appeals' decision to an nounce a broad rule that the United States may not be held liable for breaching its express promises when those promises go beyond the requirements of federal law. See, e.g., Pet. i, 3, 7, 10-12. The court of appeals issued no such holding. Rather, it simply held that, be cause the GTIT is imposed by Congress, application of the GTIT to petitioner's USGOs did not breach the gov ernment's promise that the USGOs would be exempt from any tax imposed by Guam (or any other posses sions). That holding is correct and raises no legal issue of broad importance.
Petitioner's effort to distinguish between the govern ment's contractual and statutory obligations is particu larly unavailing on the facts of this case. With respect to the taxability of petitioner's USGOs, the United States made no promise that referred specifically to the GTIT or otherwise went beyond the restrictions on taxa tion established by applicable laws. The USGOs that petitioner purchased before 1986 included a printed statement that simply tracked the pertinent regulatory language, to the effect that the USGOs were exempt from any tax "imposed by" a State or United States pos session. After that date, the USGOs were no longer is sued in printed form, and the terms under which they were purchased were set forth solely in the relevant statutes and regulations. The court of appeals' analysis of the government's contractual commitment therefore was inextricably linked to the court's construction of the statutory and regulatory provisions that identify the taxes from which USGOs are exempt. The core premise of petitioner's argument-i.e., that the government made contractual promises going significantly beyond its duties under applicable federal law-is thus miscon ceived.
The court of appeals' interpretation of petitioner's USGOs is correct and consistent with the Ninth Circuit's decisions in Bank of America, National Trust & Sav ings Ass'n v. Chaco, 539 F.2d 1266 (1976), and Gumataotao v. Director of Department of Revenue & Taxation, 236 F.3d 1077 (2001). In any event, the court of appeals' decision has little prospective significance, and its retrospective reach is limited to Guamanians who held USGOs and now seek to escape tax obligations on their income from those USGOs. Further review is not warranted.
1. Petitioner contends that the court of appeals con travened this Court's decision in United States v. Win star Corp., 518 U.S. 839 (1996), by "focus[ing] on the language of the statute creating the GTIT" rather than "looking to the terms of the agreement between [peti tioner] and the government." Pet. 12. That argument lacks merit. With respect to exemption from tax, the United States in issuing the USGOs made no contractual commitment going beyond the terms of the applicable statutes and regulations. In determining that petitioner received the tax exemption it was promised, the court of appeals therefore necessarily focused on the pertinent statutory and regulatory language. Because there is no disparity between the terms of petitioner's contracts and the requirements of applicable law, Winstar has no meaningful bearing on this case.
a. Petitioner argued in the court of appeals that 31 U.S.C. 3124 and 31 C.F.R. 309.4, 340.3 supply some of the terms of the contract governing a USGO. See Pet. C.A. Br. 21 ("[G]overnment bonds are viewed as con tracts between the Government and the owners, whose terms are fixed by statutes, regulations and offering circulars.") (quoting Zelman v. Gregg, 16 F. 3d 445, 446 (1st Cir. 1994)); id. at 22-23 ("The rights of any Person . . . against the United States and the Federal Reserve Bank[s] with respect to" USGOs "are governed solely by Treasury regulations.") (quoting 31 C.F.R. 357.10); id. at 23 ("When these regulations are read together as a whole, as they must be, it is clear that [petitioner's] con tract rights are defined by those regulations."). The court of appeals concluded that those provisions do not promise to exempt the USGOs from the GTIT, see Pet. App. 15a-19a, and that conclusion was correct, see pp. 16-17, infra.
The USGOs that petitioner purchased before 1986 were issued in paper form. See Pet. App. 5a. Petition er's complaint alleges that those USGOs are imprinted with the express recital that they are "exempt from all taxation now or hereafter imposed . . . by . . . any of the possessions of the United States." Ibid. (quoting Compl. para. 7); see id. at 75a (sample bond). That lan guage is taken verbatim from the Treasury regulations governing the tax status of USGOs. Id. at 5a; see, e.g., 31 C.F.R. 309.4 (USGOs "shall be exempt from all taxa tion * * * imposed * * * by any State, or any of the possessions of the United States"). The USGOs also expressly reference the statutory limitation on their tax- exempt status set forth in 31 U.S.C. 3124. See Pet. App. 75a (sample USGO is tax-exempt "except as provided in 31 U.S.C. 3124"). Thus, with respect to the tax-exempt status of the USGOs that petitioner purchased, the gov ernment's only contractual promise was that petitioner would receive the exemption accorded by applicable law.
Petitioner asserts (Pet. 2) that "the federal govern ment repeatedly declared that interest on the bonds would not be subject to the [GTIT]." Although this and similar statements in the petition are not accompanied by a citation, petitioner appears to refer to documents (some of which are reproduced at Pet. App. 76a-97a) that were attached to its reply brief in support of its motion for reconsideration in the CFC. Petitioner's reli ance on this material is misplaced for several reasons.
First, the CFC held that petitioner had waived reli ance on the documents it now appends to the petition by failing to bring them to the CFC's attention until its re ply brief in support of its post-judgment motion for re consideration. See App., infra, 3a (citing Bluebonnet Sav. Bank, F.S.B. v. United States, 466 F.3d 1349, 1361 (Fed. Cir. 2006)). Although the court of appeals rejec ted petitioner's reliance on those materials on other grounds, it identified no basis for concluding that the CFC's waiver holding was incorrect.
In any event, the materials do not reflect contractual promises to petitioner by the United States. On their face, the materials authored by the United States were directed to the governments of Guam and the Virgin Islands. None of the documents was directed to peti tioner, so it had no basis to believe they were contrac tual promises to it. Cf. 26 U.S.C. 6110(k)(3); Vons Cos. v. United States, 55 Fed. Cl. 709, 718 (2003) ("[T]he IRS 'positions' to which [the taxpayer] refers were never intended to be relied upon by any taxpayers except those to which the rulings were directed."). Indeed, the record in this case indicates that petitioner did not even possess these materials until after Gumataotao was de cided and the District Court of Guam had ruled against petitioner in the deficiency litigation. See Sauers Decl. Exh. 1 (Freedom of Information Act response letter dated Sept. 20, 2002). Because these materials were unknown to petitioner in the decades during which it purchased USGOs, they could not possibly embody terms of the contracts it agreed to.
Nor, as the court of appeals recognized, would the materials even be suitable as parol evidence. The con tractual terms of the USGOs are clearly set forth in the applicable statutes and regulations (and, with respect to the pre-1986 USGOs, in the written instruments that track the pertinent regulatory language), making resort to extrinsic evidence improper. See Pet. App. 19a (citing McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1435 (Fed. Cir. 1996)).
So far as tax exemption is concerned, there are con sequently no contractual terms besides what is in the statute and regulations. It was therefore accurate and comprehensive for the court of appeals to state that "the laws and regulations governing USGOs, and thus the terms of [petitioner's] express contract, clearly do not exempt USGOs from taxation by the GTIT." Pet. App. 19a. Petitioner construes this and similar statements (see, e.g., Pet. 14) as announcing a categorical rule that the United States may never be held liable for breaching a contractual promise that goes beyond the require ments of otherwise-applicable law. Taken in context, however, the court of appeals' claim is a modest one: it is a descriptive statement specific to the tax treatment of USGOs, not (as petitioner supposes, see Pet. 3, 9, 18) a prescriptive rule of law that applies to all government contracts.
b. Contrary to petitioner's contention (Pet. 1, 9-10), Winstar is largely irrelevant to the proper disposition of this case. In Winstar, two federal entities (the Bank Board and the FSLIC) were held to have entered into contracts with savings and loan institutions, promising certain treatment of goodwill as regulatory capital, but Congress then enacted legislation disallowing the prom ised regulatory accounting treatment. 518 U.S. at 843, 859-871 (plurality opinion). This Court held that the United States had breached its contracts with the sav ings and loan institutions, and that the United States was obliged to answer in damages. Id. at 843; id. at 919 (Scalia, J., concurring in the judgment). Inter alia, the Court rejected the United States' contention that any contractual restraint on the exercise of sovereign power (there, regulatory authority over banks) should be rec ognized only if expressed in unmistakable terms. Id. at 871-887 (plurality opinion) (holding that unmistakability doctrine did not apply); id. at 920-922 (Scalia, J., concur ring in the judgment) (holding that promised regulatory treatment was so central to the contract as to be unmis takable).
This case, by contrast, does not involve a situation in which subsequently-enacted legislation prevented the federal government from performing its contractual obligations. Congress enacted the GTIT in 1950, de cades before petitioner began to purchase USGOs, and the statutes and regulations providing tax exemption for USGOs have not changed in any material respect since those purchases began. See Pet. App. 2a, 5a-6a n.3. As the court of appeals correctly held, the United States never promised petitioner that the USGOs would be ex empt from the GTIT. The contracts between petitioner and the United States were executed within the frame work of preexisting statutory and regulatory provisions governing the taxation of USGOs. The terms of the con tracts explicitly incorporated those provisions and in cluded no other terms as to tax exemptions. Winstar has nothing to say about the proper interpretation of a government contract that is subject to preexisting fed eral laws and that expressly conforms to their terms.
c. To the extent that Winstar is relevant to this case, it further undermines petitioner's claims. First, the Court in Winstar noted that "where 'a contract has the effect of extinguishing pro tanto an undoubted power of government * * * the authority to make it must clearly and unmistakably appear.'" 518 U.S. at 889 (plurality opinion) (quoting Home Tel. & Tel. Co. v. Los Angeles, 211 U.S. 265, 273 (1908)); see id. at 923 (Scalia, J., concurring in the judgment). Petitioner acknowl edges that rule (at least in some form). Pet. 11 n.5. In Winstar, "the Bank Board and the FSLIC had ample statutory authority" to "make the contracts in issue." 518 U.S. at 890, 891 (plurality opinion); id. at 923 (Scalia, J., concurring in the judgment). Petitioner identifies no provision of law, however, that "clearly and unmistak ably" authorizes the Department of the Treasury to is sue USGOs that are exempt from the GTIT, in deroga tion of 31 U.S.C. 3124.
Indeed, because the GTIT and ordinary federal in come tax are materially identical-their terms are gen erally the same, see 48 U.S.C. 1421i(a), (b) and (e), and both taxes are imposed by Congress, see p. 16, infra- petitioner's argument logically implies that the Depart ment of the Treasury could in its discretion contractu ally exempt interest on any USGO from taxation under the Internal Revenue Code. But the Department has no such authority. "The tax status of interest on [USGOs] and the tax treatment of gain and loss from the disposi tion of those [USGOs] is decided under the Internal Revenue Code of 1986," 31 U.S.C. 3124(b), and the cur rent Code gives the Department of the Treasury no dis cretion to exempt USGOs from its terms.
Second, the plurality in Winstar recognized that the "unmistakability doctrine" applies to contractual waiv ers, through an exemption or otherwise, of the sovereign power to tax. To be effective, the tax power must be "specifically surrendered in terms which admit of no other reasonable interpretation." 518 U.S. at 875, 877 (plurality opinion) (quoting Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 148 (1982)). The plurality in Win star expressly distinguished the promise at issue there (compensation for withdrawal of promised regulatory treatment) from the sort of contractual promise peti tioner alleges here (indemnification against tax liability). See id. at 882 ("[A] damages award [to the Winstar plaintiffs would not] deprive the Government of money it would otherwise be entitled to receive (as a tax rebate would)."); see also id. at 880-883 & n.26. As the plurality explained, the former does not "bind the Government's exercise of * * * sovereign power," while "a request for rebate damages" does constrain sovereign power because it "would effectively * * * exempt [peti tioner] from the [tax] law by forcing the reimbursement of [its] tax payments." Id. at 881, 883 n.26.4
2. As the court of appeals correctly held, the GTIT is "imposed" by Congress rather than by the govern ment of Guam. The GTIT was enacted by Congress as part of the Organic Act of Guam, and 48 U.S.C. 1421i remains the authority under which the GTIT exists. For administrative convenience, the government of Guam collects and disburses the GTIT, but that fact does not logically imply that Guam "imposes" the tax.
Rather, as petitioner acknowledges, "[i]n collecting the tax, Guam was acting as a federal agency." Pet. 17. In Bank of America and again in Gumataotao, the Ninth Circuit held that the GTIT is imposed by Congress and therefore is not a tax imposed by Guam. See pp. 3-5, supra. The ruling in Gumataotao is particularly signifi cant because it involved the very statute and regulations that supply the terms of petitioner's USGOs. See 236 F.3d at 1082. And the District Court of Guam held that "the Gumataotao holding control[ed] the disposi tion" of petitioner's claim that USGOs are exempt from the GTIT. Bank of Guam v. Director of Dep't of Rev. & Taxation, No. 01-00016, 2002 U.S. Dist. LEXIS 9662, at *7 (May 14, 2002). We are aware of no decision to the contrary.
Petitioner attempts to distinguish Gumataotao by arguing that it involved a statute and regulations, not a contract. Pet. 13. But that distinction is immaterial when, as here, the contract's terms track the statute and regulations. Petitioner's contention that "Guam 'im poses' the tax" (Pet. 15) logically implies that USGOs are exempt from the GTIT under the correct reading of the applicable statute and regulations. But even if that theory were meritorious, it would provide no basis for holding the United States liable for breach of contract. Rather, petitioner's argument implies that the District Court of Guam (bound by the Ninth Circuit's prior rul ing in Gumataotao) erred in holding that petitioner's USGOs are subject to the GTIT. Petitioner identifies no contractual language, however, that could plausibly be construed as a promise by the United States to compen sate petitioner for losses incurred as a result of an alleg edly incorrect judicial ruling in a case to which the gov ernment was not a party.5
3. In any event, the court of appeals' decision has little prospective importance. At least since the Ninth Circuit's decision in Gumataotao in 2001, it has been clear that USGOs are not exempt from the GTIT. No one who purchased USGOs after that date could reason ably have believed that USGOs carry a contractual pro mise that they are not subject to the GTIT.
The retrospective significance of the decision below is slight, and perhaps limited to this case alone. The court of appeals spoke only to the terms of USGOs, not to other government contracts. The decision below af fects only residents of Guam (and perhaps certain other territories), not residents of the several States. And the Tucker Act's jurisdictional six-year limitations period, 28 U.S.C. 2501, further limits the class of potential plain tiffs. Indeed, petitioner's claim appears to be unique; we are aware of no other plaintiff who has asserted in the CFC that the United States contracted to exempt USGOs from the GTIT.
The petition for a writ of certiorari should be denied.
NEAL KUMAR KATYAL
Acting Solicitor General
Assistant Attorney General
JEANNE E. DAVIDSON
BRIAN A. MIZOGUCHI
1 See 26 U.S.C. 935(c)(3) (1982) ("[An individual resident of Guam] is hereby relieved of liability for income tax for such year [as he is a resident of Guam] to * * * the United States."). Although the current United States Code designates Section 935 as repealed, the reporter's note explains that repeal is effective under the conditions described in the Tax Reform Act of 1986, Pub. L. No. 99-514, § 1277, 100 Stat. 2600 (reprinted at 26 U.S.C. 931 (2006) note (Effective Date of 1986 Amend ment)). In particular, Section 1277(b) of the Tax Reform Act provides that 26 U.S.C. 935 is repealed "only if * * * an implementing agreement [regarding territorial taxation] under [Tax Reform Act § 1271, 100 Stat. 2591] is in effect between the United States and [Guam]." Because there is no such implementing agreement with Guam, 26 U.S.C. 935 remains in force with respect to Guam. Corporate taxation follows a different set of rules, but generally Guam corpora tions do not pay tax to the federal government on interest income. See 26 U.S.C. 881.
2 Section 548 of Title 12 allows States-defined by the statute to in clude Guam-"to tax the net income of a [national banking association] but once." Bank of America, 539 F.2d at 1227.
3 The court of appeals also reversed the CFC's dismissal of parts of petitioner's claims on statute-of-limitations grounds. Pet. App. 11a-13a. Although the Tucker Act's limitations period is jurisdictional, see John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008), the dis agreement on this issue between the courts below does not cast doubt on this Court's authority to hear the case, since both courts agreed that petitioner's claims are timely at least in part.
4 Petitioner suggests (Pet. 17) that the unmistakability doctrine does not apply to a tax assessed or collected in a territory. That is incorrect. The Court made no such territorial distinction in either Winstar or Ji carilla Apache Tribe, or in their precursors involving state government contracts. See Winstar, 518 U.S. at 873-877.
5 Petitioner is in substantially the same position as a person who (1) holds a corporate bond promising it is "taxable in accordance with law," (2) receives an adverse decision from the Tax Court about how the tax laws apply, and then (3) sues the bond issuer, arguing that the Tax Court's decision is incorrect and that the bondholder has been deprived of its contractual right to be taxed "in accordance with law." Both peti tioner and the hypothetical corporate bondholder may be disappointed by the relevant court's decision, but neither can fairly claim that its con tractual counterparty is in breach.
UNITED STATES COURT OF FEDERAL CLAIMS
BANK OF GUAM, PLAINTIFF
THE UNITED STATES, DEFENDANT
(Filed: May 9, 2008)
ORDER ON PLAINTIFF'S MOTION FOR
On March 12, 2008, the court issued its memorandum opinion and order granting defendant's motion to dis miss plaintiff's complaint with respect to all tax years prior to 2001 for lack of subject matter jurisdiction pur suant to RCFC 12(b)(1) as barred by the statute of limi tations, see Bank of Guam v. United States, 80 Fed. Cl. 739, 745-46 (2008) (citing John R. Sand & Gravel, __ U.S. __, 128 S. Ct. 750, 757 (2008) (reaffirming prece dent under principles of stare decisis that Tucker Act's statute of limitations is "jurisdictional")); the fourth count of plaintiff's complaint for lack of subject matter jurisdiction pursuant to RCFC 12(b)(1), see id. at 746- 47; and the first, second, and third counts of plaintiff's complaint for failure to state a claim pursuant to RCFC
12(b)(6). See id. at 751-53. On March 24, 2008, plaintiff filed its Motion for Reconsideration pursuant to RCFC 59. Defendant responded on April 10, 2008. Plaintiff moved for leave to reply on April 18, 2008, and on April 23, 2008, to amend its proffered reply brief. On April 30, 2008, the court granted plaintiff's motions for leave to reply and to amend, ordering that the reply brief was filed that date. Defendant moved on May 6, 2008, to file a surreply, which the court allowed to be filed on May 8, 2008.
A full explication of facts and background, set forth in the court's March 12, 2008 opinion, is unnecessary. See Bank of Guam, 80 Fed. Cl. at 741-44. Recitation of the facts germane to the parties' contentions is incorpo rated into the discussion.
1. Standard of review on motion for reconsideration
RCFC 59(a)(1) provides that the court may grant "[a] new trial or rehearing or reconsideration . . . to all or any of the parties and on all or part of the issues, for any of the reasons established by the rules of common law or equity applicable as between private parties in the courts of the United States." When presented with an RCFC 59 motion, the court may open a judgment en tered, take additional testimony, amend findings of fact and conclusions of law, and direct entry of a new judg ment. Id.
Granting an RCFC 59 motion lies within the discre tion of the court. Yuba Natural Res., Inc. v. United States, 904 F.2d 1577, 1583 (Fed. Cir. 1990); Stockton E. Water Dist. v. United States, 76 Fed. Cl. 497, 499 (2007). "Motions for reconsideration must be supported 'by a showing of extraordinary circumstances which justify relief.'" Caldwell v. United States, 391 F.3d 1226, 1235 (Fed. Cir. 2004) (quoting Fru-Con Constr. Corp. v. Uni ted States, 44 Fed. Cl. 298, 300 (1999), aff'd, 250 F.3d 762 (Fed. Cir. 2000) (unpubl. table)). To show entitle ment to relief a movant must establish a "manifest error of law, or mistake of fact," by showing "(1) that an inter vening change in the controlling law has occurred; (2) that previously unavailable evidence is now available; or (3) that the motion is necessary to prevent manifest in justice." Stockton E. Water Dist., 76 Fed. Cl. at 499 (in ternal quotations omitted).
Reviving unsuccessful arguments and/or making new arguments not previously presented is impermissible in a motion for reconsideration, as such a motion "'is not intended to give an unhappy litigant an additional chance to sway the court.'" Stockton E. Water Dist., 76 Fed. Cl. at 499-500 (quoting Bishop v. United States, 26 Cl. Ct. 281, 286 (1992)); see also White Mountain Apache Tribe v. United States, 9 Cl. Ct. 32, 35 (1985) ("'The reargument of cases cannot be permitted upon the sole ground that one side or the other is dissatisfied with the conclusions reached by the court.'" (quoting Roche v. Dist. of Columbia, 18 Ct. Cl. 289, 290 (1883))).
The court deflects the cache of documents in plain tiff's possession since 2002 that plaintiff submitted with its reply brief. To the extent that any of them may re late to a new argument or support one rejected previ ously, reliance on them has been waived. See Bluebon net Sav. Bank v. United States, 466 F.3d 1349, 1361 (Fed. Cir. 2006) ("[A]n argument made for the first time in a motion for reconsideration comes too late, and is ordinarily deemed waived and not preserved for ap peal.").
2. Plaintiff's motion for reconsideration
1) Statute of limitations
In its complaint plaintiff alleged contracts with the United States, including a promise that the United States Government obligations ("USGOs") purchased by plaintiff would be "'exempt from all taxation now or hereafter imposed . . . by . . . any of the possessions of the United States.'" Bank of Guam, 80 Fed. Cl. at 741 (alterations in original) (quoting Compl. in Bank of Guam, No. 07-32C, ¶ 7 (Fed. Cl. Jan. 17, 2007)). The court granted defendant's motion to dismiss plaintiff's complaint, ruling that "filing of the Notice of Deficiency in January 2001 . . . constituted an actual breach" trig gering the six-year statute of limitations. Bank of Guam, 80 Fed. Cl. at 746. Plaintiff contends that the court "erred when it ruled that Guam's Notice of Defi ciency was the point of the alleged breach, rather than the date of the actual payment of the tax which occurred in 2003." Pl.'s Br. filed Mar. 24, 2008, at 1. Plaintiff marshals a number of citations to statutes and cases relating to tax refund suits in support of its contention that the United States breached contracts with plaintiff only upon plaintiff's payment of tax. See id. at 1-3.
Plaintiff cites 26 U.S.C. ("I.R.C.") § 6213 (2000), for the proposition that "after a Notice of Deficiency is mailed, the taxpayer has stated periods of time within which to file a petition for redetermination of the defi ciency in the Tax Court." Pl.'s Br. filed Mar. 24, 2008, at 2. Arguing that "the filing of the Notice of Deficiency does not constitute a 'time fixed for performance' of the payment of the tax," plaintiff disqualifies this event as constituting a breach commencing the six-year statute of limitations. Id. Plaintiff suggests that, because "[y]ears of litigation may follow before any such tax is ultimately found to be owing and then paid[,]" and be cause "[t]he amount of tax paid may be redetermined . . . and may turn out to be quite different from that originally assessed[,]" the mere filing of the Notice of Deficiency does not establish a time fixed for perfor mance with sufficient particularity or definiteness to constitute breach. Id. Plaintiff also cites for support of this proposition I.R.C. § 6511; United States v. Broc kamp, 519 U.S. 347 (1997); Johnson v. United States, 54 Fed. Cl. 187, 193 (2002); and Purk v. United States, 30 Fed. Cl. 565, 570 (1994). None of the authorities cited substantiates plaintiff's argument.
Plaintiff confuses an action for a refund of taxes with the breach of contract action that it is pursuing in this case. I.R.C. § 6213 concerns tax refund suits and peti tions to the United States Tax Court. Plaintiff has taken pains to emphasize that its complaint alleges a contract between the United States and it. Plaintiff's complaint seeks damages for breach of this contract, not a refund for taxes that were unlawfully levied and paid, as in a tax refund action. Moreover, the United States Court of Federal Claims is not the United States Tax Court, nor does it share a common statutory jurisdictional grant. See Rocovich v. United States, 933 F.2d 991, 993-94 (Fed. Cir. 1991) (discussing jurisdictional requirements for tax refund suit in United States Court of Federal Claims); cf. 28 U.S.C. §§ 1346(a)(1), 1491 (2000).
Brockamp, according to plaintiff, suggests that "tax collecting requires very precise compliance with statu tory rules." Pl.'s Br. filed Mar. 24, 2008, at 2. The prop osition may not be arguable, but the holding of Broc kamp-that the statutory limitations period on tax re fund claims does not authorize equitable tolling, 519 U.S. at 354-does not relate to plaintiff's argument, let alone support it. Indeed, in Brockamp the United States Supreme Court highlighted the differences be tween tax refund suits and private suits for restitution, prefacing its analysis by "assum[ing], favorably to the taxpayers but only for argument's sake, that a tax re fund suit and a private suit for restitution are suffi ciently similar to warrant asking . . . [i]s there good reason to believe that Congress did not want the equita ble tolling doctrine to apply?" Id. at 350. A breach of contract claim against the United States prosecuted in the Court of Federal Claims is in the nature of a private suit for restitution. See AINS, Inc. v. United States, 365 F.3d 1333, 1344 ("'It is as much the duty of government to render prompt justice against itself, in favor of citi zens, as it is to administer the same, between private in dividuals.'" (quoting AINS, Inc. v. United States, 56 Fed. Cl. 522, 544 (quoting 62 Cong. Globe, 37th Cong., 2d Sess., App. at 2 (1862) (President Lincoln's 1861 An nual Message to Congress)))).
Plaintiff's citations to I.R.C. § 6511, Johnson, and Purk also are inapposite. I.R.C. § 6511(a) requires tax payers to file any tax refund suit "within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later." The language in Johnson and Purk that plaintiff cites stands only for the proposition that this statute of limitations applies and is jurisdictional in nature. See Johnson, 54 Fed. Cl. at 193 (holding that three-year tax refund limitations period applies to plaintiff attempting to obtain refund by asserting putatively contract-based claim); Purk, 30 Fed. Cl. at 570 (holding that filing tax- refund suit within limitations period is jurisdictional prerequisite).
Plaintiff's complaint alleged a contract whereby the United States promised to exempt USGOs from the im position of tax by a possession. Plaintiff characterized the imposition of the Guam Territorial Income Tax as such a tax. The Notice of Deficiency served as the mechanism by which the disputed tax was imposed. This imposition constituted breach of the contract that plain tiff alleges and began running the six-year statute of limitations applicable to contract claims. See Bank of Guam, 80 Fed. Cl. at 746.
Both plaintiff and defendant have expressed some confusion over the ordering language in the first para graph of the court's opinion, whereby the court granted "[d]efendant's motion to dismiss pursuant to RCFC 12(b)(1) . . . with respect to all tax years prior to 2001." Id. at 753. In the interest of clarity, the court restates its holding with respect to the statute of limita tions: The six-year statute of limitations on plaintiff's breach claims began running at the latest on January 24, 2001, with the filing of the Notice of Deficiency. Be cause plaintiff's complaint was filed on January 17, 2007, the court lacks subject matter jurisdiction over any tax years prior to 2001; defendant's 12(b)(1) motion with respect to all tax years prior to 2001 was granted on this predicate holding.
The foregoing discussion explains why plaintiff's con tention that the breach occurred only in 2003, upon pay ment of the tax, is incorrect. In the course of its motion to dismiss and again in its response to plaintiff's motion for reconsideration, defendant has suggested that the statute of limitations commenced upon passage of the Organic Act of Guam in 1950 that authorized the imposi tion of the Guam Territorial income tax, because that was the only action that the United States undertook that might have constituted the breach that plaintiff alleges. See Def.'s Br. filed Apr. 10, 2008, at 17 n.17; Def.'s Br. filed Apr. 18, 2007, at 12-14. Defendant's ar gument postulates a breach antecedent to a contract. Plaintiff did not purchase any USGOs and therefore did not enter into any alleged contract with the United States until 1978; a breach cannot occur before the for mation of a contract.
Given that the six-year statute of limitations began running, at the latest on January 24, 2001, the court lacks subject matter jurisdiction over plaintiff's claims for tax years prior to 2001.
2) Claim preclusion
The court's discussion concerning claim preclusion or res judicata for the tax years 1992, 1993, and 1994, was erroneous. The parties to the previous suit were not identical, i.e., the Director of the Guam Department of Revenue and Taxation cannot be treated as the United States, even if acting under authorization of U.S. stat ute. Therefore, the court reissues its opinion nunc pro tunc to March 12, 2008, deleting the discussion on slip. op. pages 12 and 15-16, which had no bearing on the grant of defendant's motion. See Bank of Guam, 80 Fed. Cl. at 748, 750.
3) The remainder of plaintiff's arguments
The remainder of plaintiff's motion is a digest of the arguments that it has made, defendant has met, and the court has not accepted. Plaintiff has not identified any intervening change in the controlling law, any previously unavailable evidence that is now available, or any ground that would counsel grant of its motion for recon sideration to prevent manifest injustice. Instead, plain tiff has used the motion for reconsideration as another opportunity to rehash its arguments at length. Plain tiff's arguments were not availing in response to defen dant's motion to dismiss, and motions for reconsidera tion are "'not intended to give an unhappy litigant an additional chance to sway the court.'" Stockton E. Wa ter Dist., 76 Fed. Cl. at 499 (quoting Bishop, 26 Cl. Ct. at 286).
Finally, based on plaintiff's record on reconsidera tion and the record before the court when defendant's dispositive motion was pending, defendant is correct that allowing plaintiff to amend the complaint would be futile. See Mitsui Foods, Inc. v. United States, 867 F.2d 1401, 1403-04 (Fed. Cir. 1989). Plaintiff's pastiche of re jected arguments and groundless accusations of foul briefing tactics levied at defendant militate against any further indulgence to plaintiff.
For the foregoing reasons,
IT IS ORDERED, as follows:
1. Plaintiff's motion for reconsideration is denied, except insofar as the court deletes all references to claim preclusion from the opinion issued March 12, 2008.
2. The court reissues its March 12, 2008, opinion this date, nunc pro tunc, deleting all references to claim preclusion.
IT IS SO ORDERED.
/s/ CHRISTINE O.C. MILLER
CHRISTINE ODELL COOK MILLER
6. APPENDIX B
1. 31 U.S.C. 3124 provides in pertinent part:
Exemption from taxation
(a) Stocks and obligations of the United States Gov ernment are exempt from taxation by a State or political subdivision of a State. * * *
* * * * *
(b) The tax status of interest on obligations and divi dends, earnings, or other income from evidences of own ership issued by the Government or an agency and the tax treatment of gain and loss from the disposition of those obligations and evidences of ownership is decided under the Internal Revenue Code of 1986. * * *
* * * * *
2. 48 U.S.C. 1421i provides in pertinent part:
(a) Applicability of Federal laws; separate tax
The income-tax laws in force in the United States of America and those which may hereafter be enacted shall be held to be likewise in force in Guam: Provided, That notwithstanding any other provision of law, the Legisla ture of Guam may levy a separate tax on all taxpayers in an amount not to exceed 10 per centum of their annual income tax obligation to the Government of Guam.
(b) Guam Territorial income tax
The income-tax laws in force in Guam pursuant to subsection (a) of this section shall be deemed to impose a separate Territorial income tax, payable to the govern ment of Guam, which tax is designated the "Guam Terri torial income tax".
* * * * *
3. 31 C.F.R. 309.4 provides in pertinent part:
The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special treatment, as such, under the Inter nal Revenue Code, or laws amendatory or supplemen tary thereto. The bills shall be subject to estate, inheri tance, gift or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or here after imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority. * * *
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4. 31 C.F.R. 340.3 provides:
The income derived from the bonds will be subject to all taxes imposed under the Internal Revenue Code of 1954. The bonds will be subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but will be exempt from all taxation now or hereafter im posed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority.
5. 31 C.F.R. 357.2 provides in pertinent part:
In this part, unless the context indicates otherwise:
* * * * *
State means any State of the United States, the Dis trict of Columbia, Puerto Rico, the Virgin Islands, or any other territory or possession of the United States.
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