[00:00:35] Speaker 04:
Their final case this morning is number 15-5100, Peisel versus United States.

[00:00:43] Speaker 04:
Mr. Rella, is that how you pronounce it?

[00:00:49] Speaker 00:
Yes, Your Honor.

[00:00:58] Speaker 01:
Good afternoon, Your Honors.

[00:00:59] Speaker 01:
May it please the Court.

[00:01:01] Speaker 04:
I wonder if this case isn't

[00:01:03] Speaker 04:
somewhat simpler than the government makes it out to be.

[00:01:07] Speaker 04:
And let me tell you why I think that.

[00:01:11] Speaker 04:
At the time that your client entered into his employment contract, the statute provided for conservatorship of institutions that were insolvent.

[00:01:24] Speaker 04:
And as a general matter, when you go into conservatorship, as in bankruptcy, contracts can be repudiated

[00:01:33] Speaker 04:
giving rise to a breach of contract cause of action that can be asserted against the estate in conservatorship, correct?

[00:01:44] Speaker 01:
That may be correct, Your Honor.

[00:01:46] Speaker 01:
As a general matter, here, however, while there was the authority at the time Mr. Peisel entered into his appointment agreement

[00:01:54] Speaker 01:
for Ofeo to place Freddie Mac into a conservatorship, there was no express power once Freddie Mac was in a conservatorship for Ofeo to repudiate contracts.

[00:02:04] Speaker 04:
Okay, well it's true that there's no express provision in the contract, but I think that's in the nature of conservatorships.

[00:02:11] Speaker 04:
Let's at least assume for the moment that there was a general repudiation power.

[00:02:15] Speaker 04:
And under those circumstances there was a breach of contract claim.

[00:02:19] Speaker 04:
And so

[00:02:21] Speaker 04:
How can there be a takings claim if the breach of contract claim against the estate was preserved?

[00:02:29] Speaker 01:
Well, so there would be two separate claims, right, if you have a breach of contract claim and a takings claim against the government specifically.

[00:02:37] Speaker 01:
Here, the government was explicitly acting as regulator, not conservator.

[00:02:41] Speaker 04:
But wait, do you agree that the golden parachute provision didn't eliminate your client's breach of contract claim?

[00:02:50] Speaker 01:
I think that's right, Your Honor.

[00:02:51] Speaker 04:
Okay.

[00:02:52] Speaker 04:
So why, if that breach of contract claim was preserved, is there a taking here?

[00:02:58] Speaker 04:
I mean, there are plenty of cases that say that the fact that the government breaches a contract doesn't lead to a takings claim, it leads to a breach claim.

[00:03:09] Speaker 01:
I think that's right, Your Honor, but that is in a specific context where the government is the counterparty here to the contract.

[00:03:16] Speaker 01:
That's not the case here.

[00:03:17] Speaker 01:
So Freddie Mac was the counterparty.

[00:03:19] Speaker 01:
The government ordered Freddie Mac to terminate Mr. Peisel.

[00:03:23] Speaker 01:
So while Mr. Peisel may have a standard breach of contract claim against Freddie Mac as an institution, the government here was acting as a regulator, not as a contractual counterparty.

[00:03:34] Speaker 01:
And therefore, Mr. Peisel would also have a Fifth Amendment takings claim against the government.

[00:03:39] Speaker 04:
I'm not following that.

[00:03:40] Speaker 04:
The breach of contract claim is preserved.

[00:03:44] Speaker 04:
So why isn't

[00:03:46] Speaker 04:
that preserving his remedy.

[00:03:47] Speaker 04:
What's been taken here?

[00:03:49] Speaker 04:
How has he been injured?

[00:03:51] Speaker 01:
Well, he's been injured, Your Honor, because he hasn't received any of the termination benefits to which he was entitled.

[00:03:56] Speaker 01:
And that was only because the government ordered Freddie Mac not to pay them.

[00:04:01] Speaker 00:
No, I think what Judge Dyke is getting to, if I might add, is how has he been injured in a taking sense?

[00:04:09] Speaker 00:
In other words, what has been taken from him?

[00:04:11] Speaker 00:
I mean, when I picked up the briefs in this, I said,

[00:04:14] Speaker 00:
Basically, Freddie Mac was ordered to terminate him without cause.

[00:04:20] Speaker 00:
And number two, not to give him his termination benefits.

[00:04:25] Speaker 00:
I think breach of contract.

[00:04:28] Speaker 00:
And I'm trying to think, where has there been anything taken?

[00:04:32] Speaker 00:
No contract right has been taken, because as the colloquy you've had with Judge Dyke suggests, he has the right to a breach of contract claim.

[00:04:42] Speaker 00:
What has been taken here?

[00:04:44] Speaker 01:
Well, again, what I would say is, I mean, so there are two separate claims, right?

[00:04:48] Speaker 01:
And if you look at, there are certain cases that we cite in our brief where the government authorizes a third party to take a contractual interest, and that leads to a takings claim.

[00:04:59] Speaker 01:
And so it's not, again, I'm not saying that there is no separate claim against Freddie Mac for breach of contract.

[00:05:05] Speaker 01:
But at the same time, the government is responsible here.

[00:05:08] Speaker 01:
If we sued Freddie Mac, you would bet that Freddie Mac would point his finger at the government and say,

[00:05:13] Speaker 01:
We were ordered to do it by the government.

[00:05:14] Speaker 01:
We had to terminate Mr. Beisel, go after the government.

[00:05:17] Speaker 04:
And so while there may be a separate breach of contract... He was terminated by the conservator here, right, which was the government.

[00:05:23] Speaker 01:
He was terminated by Feffa acting as a regulator, not as conservator here.

[00:05:32] Speaker 01:
That's why our takings claim here has nothing to do with the imposition of the conservatorship.

[00:05:35] Speaker 04:
Well, suppose we consider this to have been an action to have been taken by the conservator.

[00:05:42] Speaker 04:
Okay.

[00:05:44] Speaker 04:
Is there a takings claim?

[00:05:46] Speaker 01:
I think there still is, because the government didn't have that power to take Mr. Peisel's termination benefits, even as conservator, at the time when Mr. Peisel... Well, how has it taken them?

[00:05:55] Speaker 04:
It's preserved his breach of contract claim, which he can assert against the estate.

[00:06:00] Speaker 01:
He could assert that as a separate claim, as a separate breach of contract claim.

[00:06:04] Speaker 01:
But a breach of contract claim does not preclude a separate takings claim against the government.

[00:06:09] Speaker 01:
There's two separate defendants in two separate cases with two different remedies.

[00:06:15] Speaker 01:
And so here, again, while he could potentially sue Freddie Mac for breach of contract, that would do no good because Freddie Mac would point at the government and say the government ordered us to do it.

[00:06:24] Speaker 01:
And when the government, and this is in the Loreto case, when the government in that case just authorized

[00:06:31] Speaker 01:
a third party to take a property interest.

[00:06:33] Speaker 01:
Here, the government can just authorize it.

[00:06:35] Speaker 01:
It ordered it.

[00:06:36] Speaker 01:
You mean there would be a sovereign acts defense or an impossibility defense?

[00:06:40] Speaker 04:
I'm sorry, Your Honor?

[00:06:41] Speaker 04:
There would be an impossibility defense?

[00:06:43] Speaker 01:
That's potentially a defense that Freddie Mac could assert.

[00:06:46] Speaker 04:
We could not comply with a contractual... I don't think under Winstar that that defense would be available.

[00:06:53] Speaker 01:
Well, under Winstar, again, Winstar dealt with

[00:06:57] Speaker 01:
the government acting as a contractual counterpart.

[00:07:00] Speaker 01:
The government contracted with the plaintiffs, the thrifts in those cases, to provide that.

[00:07:06] Speaker 01:
You can count certain capital towards your goodwill.

[00:07:08] Speaker 04:
But let's simplify this.

[00:07:10] Speaker 04:
Let's assume that we construe the golden parachute provision as saying you can't pay the golden parachute, but you still have a breach of contract.

[00:07:18] Speaker 04:
Let's assume that.

[00:07:20] Speaker 04:
And without a defense of impossibility or sovereign acts or whatever, they're not trying to create a defense to a breach of contract.

[00:07:27] Speaker 04:
Why do you have a takings claim if that's the case?

[00:07:31] Speaker 01:
Because the underlying breach of contract is because of the government's directive.

[00:07:37] Speaker 01:
And here, we're not aware of any case law that precludes a party from asserting a takings claim just because it may also have a breach of contract claim.

[00:07:45] Speaker 01:
Now, again, where the government is... But the taking you're describing is a taking of contract rights.

[00:07:51] Speaker 02:
And if you can enforce those contract rights for a breach of contract, why is that a taking?

[00:07:56] Speaker 01:
Well, because you don't have to enforce the action against Freddie Mac here.

[00:08:01] Speaker 01:
We effectively had a choice.

[00:08:03] Speaker 01:
We could sue Freddie Mac, we could sue the government, we could sue both.

[00:08:06] Speaker 01:
I'm not saying we could have a double recovery.

[00:08:07] Speaker 01:
I don't think that's the case at all.

[00:08:09] Speaker 02:
Did you file a breach of contract action?

[00:08:12] Speaker 01:
We did not.

[00:08:13] Speaker 01:
Why not?

[00:08:13] Speaker 01:
Well, again, the anticipation here was you go after Freddie Mac, and Freddie Mac points the finger at the government, and then we're in a jurisdiction where

[00:08:21] Speaker 01:
We can sue the government.

[00:08:22] Speaker 01:
We'd have to come to the Court of Claims to sue the government here on a takings claim.

[00:08:26] Speaker 01:
So we thought at the end of the day, it would just be a longer way of... Where would a suit against Freddie Mac have been brought?

[00:08:32] Speaker 01:
Not in the Court of Claims, in a different district court, perhaps in Virginia, where Freddie Mac is located.

[00:08:37] Speaker 01:
But obviously in Virginia, we would not have been able to bring a takings claim against the government.

[00:08:41] Speaker 01:
So at the end of the day, the way we looked at this, our hands are effectively tied.

[00:08:46] Speaker 01:
The government ordered Freddie Mac to do something.

[00:08:48] Speaker 01:
Freddie Mac complied.

[00:08:50] Speaker 01:
put Mr. Peisel out on the street, which had a devastating personal and professional impact on him that continues until today.

[00:08:56] Speaker 01:
And it's because of the government.

[00:08:59] Speaker 04:
Again, this is... So what case says that you can forego a breach of contract claim and sue the government instead on a takings claim?

[00:09:07] Speaker 04:
That seems extremely odd.

[00:09:08] Speaker 01:
Your Honor, in the briefs below, at the lower court level in the Court of Claims, the government raised this argument.

[00:09:15] Speaker 01:
The government said that Mr. Peisel has a breach of contract claim against Freddie Mac.

[00:09:20] Speaker 01:
And therefore, he effectively waives his takings claim.

[00:09:23] Speaker 01:
And we cited to plenty of authority in our lower court brief saying, that's not the case.

[00:09:27] Speaker 01:
What do you mean, that's not the case?

[00:09:29] Speaker 01:
It's not the case that a breach of contract claim precludes a takings claim against the government.

[00:09:34] Speaker 01:
There's no law saying that.

[00:09:36] Speaker 04:
Well, what case says that if you preserve the breach of contract claim, when you order the severance payments not to be made, that there's a takings claim?

[00:09:45] Speaker 04:
I mean, there are plenty of cases, Bailey and so on and so forth, that say,

[00:09:50] Speaker 04:
that if you preserve the breach of contract remedy, there's been no taking.

[00:09:53] Speaker 04:
Why isn't that line of cases applicable here?

[00:09:56] Speaker 01:
Well, again, and first of all, this is an argument the government waived.

[00:09:59] Speaker 01:
It didn't raise it here.

[00:10:00] Speaker 04:
But I think the relevant cases you're... Yeah, but I don't think the government can force us into addressing its grand theory when there's a narrower reason to decide the case, not narrow ground.

[00:10:14] Speaker 01:
I think what the relevant cases say, Your Honor, is

[00:10:17] Speaker 01:
If the government is acting as a contractual counterparty to a plaintiff and terminates that contract, the government is no longer acting as sovereign.

[00:10:26] Speaker 01:
When the government enters into a contract with a private party, it's no longer acting as sovereign.

[00:10:30] Speaker 01:
It's acting as a private party.

[00:10:31] Speaker 01:
You can sue the government for a breach of contract claim, which you normally can't do.

[00:10:36] Speaker 01:
Here, the government was not the counterparty here.

[00:10:39] Speaker 01:
Mr. Peisel has no contract with the government.

[00:10:41] Speaker 01:
Its contractual counterparty is Freddie Mac.

[00:10:43] Speaker 01:
So the only way it goes after the government, and here again we think that's really the party that's responsible because it issued this directive, is by asserting a takings claim.

[00:10:52] Speaker 04:
So but what case supports the notion that the government tells somebody to terminate a contract but preserves the breach of contract remedy, that there's been a taking?

[00:11:01] Speaker 01:
Well, I would assert, Your Honor, there's no case precluding that.

[00:11:04] Speaker 01:
Again, we dealt with this issue.

[00:11:06] Speaker 04:
So you have no case that says that that's a take?

[00:11:08] Speaker 01:
Well, Your Honor, on this appeal, again that this is not an issue

[00:11:12] Speaker 01:
we briefed and we addressed only because it wasn't raised by the government.

[00:11:16] Speaker 01:
But again, I can tell you that the government did assert the argument below that the breach of contract claim precluded the takings claim.

[00:11:23] Speaker 01:
We cited cases saying that's not the case.

[00:11:25] Speaker 01:
It may be the case where the government is the contractual counterparty, but not where the government is.

[00:11:29] Speaker 01:
What's the case that comes out the other way?

[00:11:31] Speaker 04:
We cited cases down below.

[00:11:32] Speaker 04:
What are those cases?

[00:11:34] Speaker 01:
I'm sorry, Your Honor.

[00:11:34] Speaker 01:
If you cited cases down below, what are those cases?

[00:11:38] Speaker 01:
I think one is called the Sun Galaxy case.

[00:11:41] Speaker 01:
Another one, I believe, Your Honor, is a Hughes case.

[00:11:44] Speaker 01:
And again, I'm citing these from memory in a briefing below.

[00:11:46] Speaker 01:
But these cases stand for the general proposition that you can't sue the government for a taking where it's acting as a contractual counterparty.

[00:11:55] Speaker 01:
It's not a sovereign.

[00:11:56] Speaker 01:
Your remedy is a breach of contract.

[00:11:58] Speaker 01:
But there's no case of saying when the government is acting as a sovereign, directing a third party to effectively breach a contract, that you can't sue the government.

[00:12:07] Speaker 01:
So there's no case one way or the other, is your view?

[00:12:10] Speaker 01:
I don't think there's any case that I can recall, Your Honor, that precludes going after the government.

[00:12:15] Speaker 01:
No case one way or the other.

[00:12:17] Speaker 01:
As far as I can recall right now, Your Honor, that's correct.

[00:12:20] Speaker 01:
This is not an issue that

[00:12:22] Speaker 01:
we brushed up on for this appeal because it's not, it's not an issue here today.

[00:12:26] Speaker 00:
Well, but it is an issue in the sense though, there are two issues that we have to decide.

[00:12:30] Speaker 00:
Is there a cognizable property interest, number one, and assuming there is, has that property interest been taken?

[00:12:38] Speaker 00:
Correct.

[00:12:38] Speaker 00:
And it seems to me that that second inquiry gets us squarely into the issue that we've been discussing here with you today.

[00:12:47] Speaker 00:
Was there a taking?

[00:12:48] Speaker 00:
And I come back to what I said, I think what Judge

[00:12:51] Speaker 00:
Dyke has been saying with you that it seemed to me that the contract right, namely the right to sue for breach of contract, wasn't taken.

[00:12:59] Speaker 00:
Now you, and correct me if I'm wrong, you seem to be saying that an action for breach of contract was not brought, not because you didn't think it was there, but rather because looking at the law, you felt it would not be successful.

[00:13:14] Speaker 00:
There'd be an insurmountable defense by Freddie Mac, is that correct?

[00:13:19] Speaker 01:
That's correct.

[00:13:20] Speaker 01:
We thought the most effective means here was to sue the government who ordered the taking, ordered Freddie Mac to terminate the contract.

[00:13:29] Speaker 01:
And again, we foresaw Freddie Mac pointing at the government.

[00:13:33] Speaker 00:
So again, if we believe here... But that doesn't mean that the cause of action for a breach of contract isn't there.

[00:13:38] Speaker 00:
That's correct.

[00:13:38] Speaker 00:
That means that Freddie Mac has a defense which you're going to have to work to overcome.

[00:13:44] Speaker 01:
That's correct.

[00:13:44] Speaker 01:
But it also doesn't mean that we don't have a separate claim against the government.

[00:13:48] Speaker 01:
Again, there is no authority that we're familiar with that says... But there we get into the question, has there been anything taken?

[00:13:56] Speaker 00:
And it seems to me the validity of a claim against the government, assuming there's a cognizable property interest, turns on whether something's been taken.

[00:14:05] Speaker 00:
And if the right to sue for breach of contract remains, no matter how difficult you think it might be to assert, that right remains, so nothing's been taken.

[00:14:16] Speaker 01:
Well, it is a right.

[00:14:18] Speaker 01:
You have a breach of contract, right?

[00:14:20] Speaker 01:
But that doesn't mean that there's no taking, right?

[00:14:22] Speaker 01:
It just means that there is a separate counterparty with a separate claim.

[00:14:26] Speaker 00:
But there has to be something taken.

[00:14:28] Speaker 01:
Right.

[00:14:28] Speaker 01:
And we would assert that here the contractual termination benefits were taken.

[00:14:32] Speaker 04:
What did you lose?

[00:14:35] Speaker 01:
What did your client lose?

[00:14:37] Speaker 01:
He lost a lump sum payment he was entitled to when he was terminated.

[00:14:41] Speaker 04:
If he still has a breach claim, he hasn't lost it.

[00:14:44] Speaker 02:
But it seems like you're saying what was taken was his right to receive these automatically without going through a breach of contract claim.

[00:14:53] Speaker 02:
But these are all still, he's entitled to these by contract.

[00:14:56] Speaker 02:
So the right is a contract right.

[00:14:59] Speaker 02:
And if you still have a contract right to super breach of contract,

[00:15:03] Speaker 02:
And what was taking?

[00:15:04] Speaker 01:
Well, again, Your Honor, in terms of the authority, as I recall it, there would be no takings claim if the government was the counterparty.

[00:15:13] Speaker 01:
Right there, we would have to sort of reach a contract claim.

[00:15:16] Speaker 01:
But just because there's a private breach of contract.

[00:15:18] Speaker 02:
But does it matter if the government was a party or not?

[00:15:21] Speaker 02:
If we're looking at the property right, did any action of the government take that property right?

[00:15:27] Speaker 02:
Or did it simply cancel it but still preserve his right to enforce it through a breach of contract action?

[00:15:34] Speaker 02:
What I would say to that, Your Honor, is just because... If they had said cancel these benefits and he can't sue for breach of contract, that seems to be a taking.

[00:15:44] Speaker 01:
But they didn't go that far.

[00:15:45] Speaker 01:
Well, but I mean, there is a wealth of authority saying that taking a contractual interest is a property interest.

[00:15:51] Speaker 01:
That is a taking.

[00:15:52] Speaker 01:
There is plenty of authority saying that.

[00:15:54] Speaker 04:
But the cases say that if you cause a breach of contract but preserve the contractual remedy, nothing's been taken.

[00:16:02] Speaker 01:
Your Honor, what I would say is there is nothing as far as we've seen, and we briefed this below, saying that when you have breach of contract action against a private party, that precludes a takings action against the government.

[00:16:15] Speaker 01:
There's simply no authority on that.

[00:16:16] Speaker 01:
The government expressly made a decision not to raise that argument here before the appellate court, and therefore I would argue that it's waived and it chose not to raise it.

[00:16:24] Speaker 04:
Well, they may have waived it in some sense, but that doesn't mean that we can't address it as a narrower ground for resolving this case.

[00:16:33] Speaker 01:
Your Honor, if that's what the court would like to do, again, I would just assert that it's not in their briefs.

[00:16:38] Speaker 01:
They didn't raise it.

[00:16:39] Speaker 01:
It's not an issue here today.

[00:16:41] Speaker 04:
Well, we may give you the opportunity to do supplemental briefing on this.

[00:16:46] Speaker 01:
Understood, Your Honor.

[00:16:46] Speaker 01:
And we would welcome that opportunity.

[00:16:48] Speaker 04:
OK.

[00:16:50] Speaker 04:
So we're out of time, but we'll give you two minutes for rebuttal.

[00:16:52] Speaker 04:
Thank you.

[00:16:54] Speaker 04:
Mr. Harrington.

[00:17:10] Speaker 03:
May it please the court?

[00:17:12] Speaker 03:
I'm going to take a slightly different avenue in light of the questions that Mitch was posing than I had originally thought.

[00:17:20] Speaker 03:
But let me run through my introduction first.

[00:17:22] Speaker 04:
Well, let's get right to the heart of it.

[00:17:25] Speaker 04:
Does the Golden Parachute provision eliminate the breach of contract remedy?

[00:17:29] Speaker 04:
No, it does not.

[00:17:31] Speaker 03:
And in fact, as counsel mentioned,

[00:17:34] Speaker 03:
We argued to the trial court, and you can see a reference to it in the trial court's decision, that what Mr. Pazell should have done as an initial matter was to sue Freddie Mac for breach of contract.

[00:17:48] Speaker 03:
If he got a recovery, well, he would get whatever recovery the law provided and that there would be no take.

[00:17:54] Speaker 03:
We argued that below.

[00:17:55] Speaker 03:
That argument was rejected and on appeal.

[00:17:59] Speaker 03:
The arguments in our brief are what you have seen.

[00:18:04] Speaker 03:
And those arguments are that Mr. Pazell into that.

[00:18:09] Speaker 04:
Would the HERA, I guess it's called, was enacted before he was terminated, if I recall correctly.

[00:18:20] Speaker 04:
And HERA limits recovery for breach of contract claim to compensatory damages.

[00:18:29] Speaker 04:
If that's the case, is that provision retroactive so that his reach of contract suit would be limited to compensatory damages?

[00:18:40] Speaker 03:
Your Honor, that provision would apply to the conservatorship.

[00:18:45] Speaker 03:
That was the provision that was in place when the conservatorship was imposed in 2008.

[00:18:51] Speaker 03:
So yes, that is the applicable law.

[00:18:53] Speaker 03:
As to all claims,

[00:18:55] Speaker 03:
in the conservatorship as it was imposed by FHFA.

[00:18:59] Speaker 04:
Okay, but there's a bit of a problem here because there's a there's the provision in the FDIC statute which is similar to this and there's been a lot of law interpreting that decisions of I think six circuits as to whether a claim for expectancy damages is barred by that or not barred by that.

[00:19:22] Speaker 04:
Does the government have a position as to whether the limit to compensatory damages bars a claim for termination benefits?

[00:19:31] Speaker 03:
That is something that we did not address in our briefs and that no, I do not have a position as I stand here today, Your Honor.

[00:19:43] Speaker 03:
OK.

[00:19:43] Speaker 03:
Touching briefly on the issues that we did raise in our briefs, recognizing that the court has identified another possible avenue for... I mean, do you agree that, I mean, there was a conservatorship provision before this gentleman entered into his contract, right?

[00:20:00] Speaker 03:
Absolutely.

[00:20:01] Speaker 04:
Right.

[00:20:01] Speaker 04:
And do you agree that under, and it's a very bare-bones statute, it didn't spell out a lot of these things, do you agree

[00:20:10] Speaker 04:
that the conservator under that provision had a right to repudiate the contract?

[00:20:16] Speaker 03:
I believe that's correct, Your Honor.

[00:20:18] Speaker 03:
Under the Safety and Soundness Act, which was in place when Mr. Pizell joined Freddie Mac, there was provision in that for a conservatorship, and I believe for the very sort of repudiation that we're talking about.

[00:20:33] Speaker 03:
I'd want to go back to, I have not directly compared and put side by side

[00:20:39] Speaker 03:
the two conservatorship provisions.

[00:20:44] Speaker 03:
But without question, that conservatorship provision was there before Mr. Pizell joined.

[00:20:50] Speaker 04:
So we could expect that if it went into conservatorship, he might have been terminated.

[00:20:55] Speaker 03:
Yes.

[00:20:57] Speaker 03:
Yes.

[00:20:59] Speaker 03:
And so in that sense, you know, it did not affect his investment-backed expectations.

[00:21:09] Speaker 03:
And also, the one other factor about Penn Central, if you're talking about, and I'm jumping over the whole property interest claim question here, jumping straight to a Penn Central analysis, one other aspect of the Penn Central analysis is economic impact, of course.

[00:21:27] Speaker 03:
And this court has held recently, in fact, in the A&D decision, that if you don't show an economic impact, there can be no taking.

[00:21:36] Speaker 03:
Here, if there is a remedy through contract, there can be no economic impact, and therefore there cannot on the merits, assuming that you have a property interest, there can be no take.

[00:21:47] Speaker 02:
Does the fact that the government's direction to repudiate these benefits came as a regulator versus as the conservator make any difference to whether he lost his property, i.e.

[00:22:03] Speaker 02:
the breach of contract claim?

[00:22:06] Speaker 03:
Your Honor, I don't believe.

[00:22:08] Speaker 03:
Well, one of the things we said below is that you should bring your breach of contract to see how it plays out.

[00:22:15] Speaker 03:
So one of the things we're disadvantaged by here is he didn't do that.

[00:22:19] Speaker 03:
And so we don't know how that would have been resolved.

[00:22:21] Speaker 03:
But there's no reason to believe that the action as regulator or the action as conservator affects the amount that could be recovered as a breach of contract remedy.

[00:22:33] Speaker 00:
And there's no question, Mr. Herring, that the time for a breach of contract suit has passed.

[00:22:38] Speaker 00:
Is that what you're saying?

[00:22:39] Speaker 00:
That has passed, Your Honor.

[00:22:40] Speaker 00:
Yes, it has.

[00:22:45] Speaker 03:
Your Honor, we also believe that there is no property right here for the reasons that we explained in our briefs.

[00:22:54] Speaker 03:
We believe that if you were to reach the takings claim, that apart from the property interest question,

[00:23:02] Speaker 03:
There were several independent grounds for dismissing it.

[00:23:07] Speaker 03:
You know, the pervasive regulation of Freddie Mac, the fact that there was no appropriation of the contract by the United States, and the fact that Mr. Basile had no investment-backed expectation.

[00:23:18] Speaker 03:
That was frustrating.

[00:23:19] Speaker 00:
And you would say there was no appropriation of the contract because of the fact that what we have is a direction to terminate number one and number two, not pay the termination benefits.

[00:23:31] Speaker 00:
the right to sue for breach remained.

[00:23:34] Speaker 00:
That's correct.

[00:23:35] Speaker 00:
So that's why you'd say there was no taking of the contract in the Fifth Amendment sense.

[00:23:41] Speaker 03:
That's correct.

[00:23:41] Speaker 03:
I mean, it was in some ways very closely akin to the Supreme Court's Omnia decision, where the government there directed a party not to perform a contract because it wanted the steal that was the subject of that contract.

[00:23:56] Speaker 00:
Of course, Omnia didn't get into whether, I guess, Omnia could have sued allegations.

[00:24:01] Speaker 03:
There is no discussion, and I have no idea what the history of that would have been.

[00:24:06] Speaker 03:
That was beyond the Supreme Court's decision.

[00:24:09] Speaker 03:
But as far as the takings aspect goes, putting that aside, the directive was very similar to the directive that we're talking here.

[00:24:17] Speaker 03:
There was a directive not to perform a private party contract between two nongovernmental entities.

[00:24:24] Speaker 03:
And at least in the context of Omnia, that was found not to be a taking.

[00:24:28] Speaker 03:
Here, as the Court has said,

[00:24:31] Speaker 03:
The situation is, if anything, even stronger because Mr. Pazell had a contractual opportunity to sue for breach of contract.

[00:24:42] Speaker 04:
It's a pretty broad theory, and there are other Supreme Court cases that call into question the breadth of that theory.

[00:24:50] Speaker 03:
There are certainly some cases from this court that have gone both ways in applying omnia, Your Honor.

[00:24:56] Speaker 03:
Palmyra Pacific applied Omnia to reject contract claims.

[00:25:00] Speaker 03:
You're probably familiar with the A&D decision that more recently did not.

[00:25:06] Speaker 03:
Since I wrote it, yeah.

[00:25:10] Speaker 03:
That would be a good reason to be familiar with it.

[00:25:14] Speaker 03:
But yes, so the application of Omnia has

[00:25:21] Speaker 03:
not always been easily discerned when it should be applied.

[00:25:25] Speaker 03:
I'd submit that in the A&D decision, as we explained in our briefs, there was no pervasive regulation by the federal government of auto dealerships.

[00:25:36] Speaker 03:
To the extent auto dealerships were regulated at all, it was a state matter, and so it was at least outside the area of some sort of pervasive regulation.

[00:25:47] Speaker 03:
So this case is at least distinguishable on that basis from AMD.

[00:25:57] Speaker 03:
Your Honor, if you have no further questions, we would ask that the decision of the trial court below be affirmed.

[00:26:05] Speaker 04:
Okay.

[00:26:05] Speaker 04:
Thank you, Mr. Harrington.

[00:26:21] Speaker 04:
Your honor, just hold on one second.

[00:26:24] Speaker 04:
I'm sorry.

[00:26:32] Speaker 01:
Okay, thank you.

[00:26:33] Speaker 01:
Okay, just two quick points for rebuttal here, and I'll try to stay within the two minutes.

[00:26:38] Speaker 01:
One is, again, there was no authority when the government was acting as conservator under SASA to repudiate contracts.

[00:26:45] Speaker 01:
If you look at 12 USC 4617 D3,

[00:26:49] Speaker 01:
That's one of the HERA amendments, which specifically gives the government that power to repudiate contracts.

[00:26:55] Speaker 01:
It knew how to do it under HERA.

[00:26:56] Speaker 01:
It didn't do it under Senate.

[00:26:57] Speaker 01:
When you say repudiate a contract, what do you mean?

[00:27:01] Speaker 01:
To terminate a contract.

[00:27:03] Speaker 01:
And interestingly, Your Honor... Wait, the contract wasn't terminated here.

[00:27:08] Speaker 01:
The contract was terminated.

[00:27:09] Speaker 00:
No, he was terminated from his position.

[00:27:14] Speaker 00:
Right, and his employment agreement was effectively ended.

[00:27:19] Speaker 00:
That gets to the question we've been discussing.

[00:27:21] Speaker 00:
The contract wasn't terminated.

[00:27:23] Speaker 00:
Mr. Pizell was terminated from his position, and Freddie Mac was told, don't honor the provisions in the contract relating to termination benefits when there's a termination without cause.

[00:27:40] Speaker 01:
Right.

[00:27:40] Speaker 01:
What I would say, Your Honor, is it was an employment agreement that guaranteed that- Which was breached.

[00:27:45] Speaker 01:
that which was breached.

[00:27:46] Speaker 01:
It was breached because he was terminated without being paid his termination benefits.

[00:27:51] Speaker 01:
He was an at-will employee.

[00:27:53] Speaker 01:
He was an at-will employee.

[00:27:54] Speaker 01:
That's correct.

[00:27:56] Speaker 01:
In terms of the argument about the breach of contract claim, as I recall, this was raised below.

[00:28:01] Speaker 01:
The lower court actually addresses this, and it's in a record at A11, and specifically finds that a breach of contract claim here against Freddie Mac would not preclude a takings claim against the government.

[00:28:12] Speaker 01:
And looking back at some of the cases in our lower court briefs,

[00:28:15] Speaker 01:
Again, the cases that talk about that specifically say if the government is acting as the counterparty, there's no takings claim.

[00:28:22] Speaker 01:
But if the government is a third party, is acting as sovereign, there is a takings claim even if there's a breach of contract claim.

[00:28:30] Speaker 01:
Your Honor's A&D decision, it's a perfect example from the Fed Circuit just in 2014.

[00:28:35] Speaker 01:
There, the government caused the cart dealerships to terminate franchise agreements.

[00:28:40] Speaker 01:
You had Chrysler and you had another car dealership company that had to terminate franchise agreements to receive TARP assistance.

[00:28:48] Speaker 01:
There, the franchisees could have sued the car companies easily, but they sued the government for a taking because it was the government's order that actually led to the breach of contract claim.

[00:28:59] Speaker 01:
In that case, Your Honor, a motion to dismiss was denied and allowed the parties to go forward on the takings claim.

[00:29:06] Speaker 01:
And there's no discussion whatsoever about

[00:29:08] Speaker 01:
Is there a separate breach claim against the car companies that precludes the takings claim?

[00:29:13] Speaker 01:
That's not in that case.

[00:29:14] Speaker 01:
It's also, and the government talked about Omnia.

[00:29:16] Speaker 01:
Omnia is another example.

[00:29:17] Speaker 01:
There the plaintiff had a breach of contract claim against Allegheny, the third party, but instead it pursued a takings claim against the government who ordered the third party to act as it acted.

[00:29:28] Speaker 01:
Omnia does not say anything about because there's a separate breach of contract claim, there's no takings claim against the government.

[00:29:34] Speaker 01:
So there we have the Supreme Court in Omnia.

[00:29:36] Speaker 01:
We have this court, A&D, allowing Taken's claims to go forward, even though there's a breach of contract claim against a third party, where the government causes that third party to breach the contract.

[00:29:48] Speaker 04:
I think we're out of time for the moment.

[00:29:50] Speaker 04:
But we will give you the opportunity to submit supplemental briefing.

[00:29:55] Speaker 04:
15 double-spaced pages each side.

[00:30:01] Speaker 04:
in three weeks and will issue a word to that effect.

[00:30:04] Speaker 04:
Does that give you enough time to do what you need to do?

[00:30:07] Speaker 01:
I think so, Your Honor.

[00:30:08] Speaker 01:
I think that should be sufficient.

[00:30:09] Speaker 01:
And I appreciate the opportunity to brief the issue.

[00:30:12] Speaker 04:
OK.

[00:30:12] Speaker 04:
Well, we'll do that then.

[00:30:14] Speaker 04:
And we thank both counsel and the cases submitted.

[00:30:18] Speaker 04:
And that concludes our session.

[00:30:19] Speaker 04:
Thank you very much.

[00:30:19] Speaker 04:
Thank you.

[00:30:20] Speaker 00:
All rise.