Biafora v. United States, No, 2013-5130 (Dec. 10, 2014), is one of those opinions that you don't really look forward to reading. Something about the Federal Circuit seems to attract these type of takings cases, where the parties are many, the alphabet-soup regulatory environment is byzantine, and the effort of understanding the context often takes more time than figuring out what the court did, and why.
But fret not, that's why we're here with the high points, so you don't have to.
This is another case involving the federal government's legislative efforts to encourage private developers to build and manage low-income housing projects (see this post for an earlier iteration). Congress adopted statutes insuring mortgages on these projects in return for "a 40-year mortgage term, an agreement to maintain affordability restrictions on the housing for the duration of the mortgage, and prepayment limiations or prohibitions on the mortgage." Slip op. at 4. In a series of later statutes, Congress modified these rules and made it harder if not impossible for the owners of these projects to pre-pay mortgages and thus escape the affordabe rent requirements.
The owners sued "claiming that the [statutes] effected an as-applied taking of their righ to prepay mortgages." Slip op. at 5. The Court of Federal Claims granted the government summary judgment on several bases, against certain classes of plaintiffs. The grounds included Williamson County ripeness, lack of a property interest in the alleged right to prepay, and collateral estoppel.
The Federal Circuit affirmed the Williamson County dismissal, on the grounds that there had not been a final decision from HUD because the plaintiffs had not exhausted their administrative remedies under the statutes. The plaintiffs acknowledged that they had not received the final word from HUD regarding prepayment, but asserted that it would have been futile to do so. They supported the claim with lay testimony that in the witness's experience, HUD would not have approved of prepayment, and with an expert's opinion that HUD could not have approved prepayment because the plaintiffs were ineligible. Slip op. at 8.
The court rejected the argument, concluding that the lay testimony "amounted to little more than an assertion that their advisors told them it would be pointless to request prepayment." Id. at 8-9. It also concluded that the expert witness
provided insufficient foundation for his opinion that because HUD started the process, it had decided that the Ripeness Properties were prepayment ineligible. Mr. Smith never worked for HUD and was not involved in processing applications for prepayment or other relief under the Preservation Statutes such that he would be able to testify as to normal internal HUD processes. There is no evidence that establishes, for instance, that HUD begins processing only after it determines ineligibility for prepayment. Mr. Smith’s claim that HUD would not have begun to process the properties unless it determined that they were not eligible for prepayment is too speculative to create a dispute of fact over futility.Id. at 9.
The court also rejected the claim that the plaintiffs had a property interest in the right to repay. The plaintiffs acknowledged that their contracts with HUD expressly "stated that the note[s] could not be prepaid for the 40 year term of the mortgage," id. at 10, but argued that HUD's practice and policy over the years showed that it accepted prepayment, at least until the statutes prohibiting it were adopted, and HUD had opined that its implementing regulations, which allowed prepayment, superceded any contrary contractual language. The Federal Circuit concluded that in the absence of a contractual right, the plaintiffs did not have a property interest, and that whatever rights the plaintiffs might have had under the regulations were not vested interests, since there is no right to have a regulatory regime remain unchanged.
Finally, the Federal Circuit concluded that the CFC's dismissal of several plaintiffs' claims on collateral estoppel grounds was in error, because the issue in an earlier district court case was not the same as in the CFC. The district court action was a facial challenge to the statute on due process grounds, and the Federal Circuit held that the issues, while similar, were not the same.
See, that wasn't so bad, was it?
Biafora v. United States, No. 2013-5130 (Fed. Cir. Dec. 10, 2014)
