[00:00:01] Speaker 00:
You're reserving five?

[00:00:02] Speaker 04:
Reserving five, yes, your honor.

[00:00:04] Speaker 04:
Good morning, and may it please the court.

[00:00:06] Speaker 04:
Steve Obermeyer on behalf of the American Bankers Association of Washington Federal.

[00:00:11] Speaker 04:
This case involves Congress's decision to enact legislation, the FAST Act, permitting the government to renege on the terms of the stock subscription agreement with Washington Federal.

[00:00:21] Speaker 00:
I want to ask you to start out about the standing of the association.

[00:00:25] Speaker 00:
Sure, your honor.

[00:00:26] Speaker 00:
The government says that if the ABA was

[00:00:29] Speaker 00:
argument was meritorious.

[00:00:30] Speaker 00:
Each ABA member of bank would be entitled to different compensation or damage amounts depending on the claim vindicated, the number of shares owned, and possibly other considerations such as bank withdrawal.

[00:00:44] Speaker 00:
And that that would require individualized proof from the members, thus precluding associational standing.

[00:00:52] Speaker 00:
And I want your response to that.

[00:00:54] Speaker 04:
I guess we disagree with the characterization that the government makes.

[00:00:57] Speaker 04:
The only variable here is the number of shares of stock that each bank has.

[00:01:03] Speaker 04:
The government's in possession of that information, or at least should be.

[00:01:06] Speaker 04:
And so the difference in the dividend payment is the only damages.

[00:01:09] Speaker 04:
There's only one variable, and it's in the government's possession.

[00:01:11] Speaker 04:
So there's no participation of the individual members required.

[00:01:17] Speaker 00:
What's your best case to rebut the precedent in United Food and Commercial Workers?

[00:01:24] Speaker 00:
Your honor, is that Brown or Brock?

[00:01:26] Speaker 00:
I believe that's Brown.

[00:01:27] Speaker 04:
It's Brown, yes.

[00:01:29] Speaker 04:
So I guess the first one I would start with Brown.

[00:01:32] Speaker 04:
Two points about Brown.

[00:01:33] Speaker 04:
One is Brown says that the third prong of Hunt is prudential.

[00:01:36] Speaker 04:
And we're only talking about the third prong.

[00:01:38] Speaker 04:
The first two prongs aren't disputed.

[00:01:40] Speaker 04:
Second point is Brown specifically says in a footnote that it is not deciding whether simplified damages formula would be foreclosed in associational standing.

[00:01:49] Speaker 04:
We have about, I think, about five district court cases post-Brown where there are damages awarded in associational standing cases.

[00:01:56] Speaker 04:
The government admittedly cites a lot of circuit court cases, but almost all of them are pre-Brown, and almost every single one says they're not foreclosing damages.

[00:02:04] Speaker 00:
Has the Supreme Court ever endorsed associational standing where a plaintiff association seeks damages qua association?

[00:02:13] Speaker 04:
I would say Brock, Your Honor.

[00:02:14] Speaker 04:
So Brock was where I was going to go to next as our best case, as has been and always has been Brock, in terms of Supreme Court, not District Court cases post-Brown.

[00:02:22] Speaker 04:
So we would say Brock, Your Honor.

[00:02:23] Speaker 04:
In that case, you're talking about union damages, wages, that would have been calculated in a different way, depending on how the court ruled on the legal issue there.

[00:02:33] Speaker 04:
It's very similar here, actually, Your Honor.

[00:02:36] Speaker 04:
Thank you.

[00:02:38] Speaker 04:
Go to your merits.

[00:02:40] Speaker 04:
Happy to move to the merits, Your Honor.

[00:02:42] Speaker 04:
So the result of the FAST Act as it was intended is that the United States has been obtaining and will continue to obtain billions of dollars from the targeted banks that the statute targeted for entirely unrelated transportation expenses.

[00:02:57] Speaker 04:
And this is an immensely important case.

[00:02:59] Speaker 04:
There's a lot of money on the line here.

[00:03:01] Speaker 01:
Is there anything that prohibits Congress from taking money from

[00:03:06] Speaker 01:
you know, if they have fees or the like from one regulatory scheme and transferring it to appropriations on another scheme?

[00:03:13] Speaker 04:
The transferring of fees to a different scheme is not per se the problem here.

[00:03:17] Speaker 04:
It's evidence of two issues.

[00:03:19] Speaker 04:
One is, and the more important one, I think, for kind of how we briefed it, is that to the extent

[00:03:26] Speaker 04:
We're talking about the implied duty of good faith and fair dealing.

[00:03:29] Speaker 04:
That shows a lack of good faith.

[00:03:30] Speaker 01:
That still means you have to have a contract.

[00:03:32] Speaker 01:
There's nothing that would prohibit Congress from using money collected in one regulatory scheme for furthering other public interests.

[00:03:40] Speaker 04:
Understood, Your Honor, and I agree with that.

[00:03:44] Speaker 04:
Why not withdraw?

[00:03:47] Speaker 04:
Well, a couple of reasons, Your Honor.

[00:03:48] Speaker 04:
First of all, it's premature because this case is ongoing.

[00:03:51] Speaker 04:
For any of the banks not to withdraw at this point, it would be not the way to see how this ends up.

[00:03:56] Speaker 04:
The other thing is that there's a reality about withdrawing, which is this is a major kind of regulatory and business decision.

[00:04:03] Speaker 04:
And so it would take time, right?

[00:04:05] Speaker 04:
This is like an ocean liner.

[00:04:06] Speaker 04:
You can't just turn it around.

[00:04:07] Speaker 04:
It's only been two years since it's happened.

[00:04:09] Speaker 04:
Kind of the fallout of this is still being felt.

[00:04:12] Speaker 04:
So the fact that, OK, the law changes, snap my fingers, become recharger as a different, whether as a state bank or whatever,

[00:04:20] Speaker 04:
is not really realistic.

[00:04:22] Speaker 04:
And so I think it's important to understand that there are, and you can see that actually in how Washington Federal and how we pled this, the amount of time that went into the decision to move from the thrift and then to choose to be a national bank versus a state bank.

[00:04:35] Speaker 02:
Your breach of contract theory, it's with the Federal Reserve Bank?

[00:04:40] Speaker 02:
Well, it's with the United States, Your Honor, but the contract is with... The stock subscription is with the Federal Reserve Bank, right?

[00:04:46] Speaker 02:
Correct, Your Honor, per the direction of the statute.

[00:04:48] Speaker 02:
Right, so I'm just trying to understand if the stock subscription is issued by the Federal Reserve Bank, and the Federal Reserve Bank is a non-appropriated funds instrumentality, then maybe the right place to be suing the Federal Reserve Bank is not the Court of Federal Claims, because the Federal Reserve Bank doesn't receive any appropriated funds from Congress.

[00:05:11] Speaker 04:
So Your Honor, I would disagree with that it's not a federal instrumentality.

[00:05:14] Speaker 04:
It is a federal instrumentality.

[00:05:15] Speaker 04:
That hasn't actually been challenged by the government directly at any point in the case.

[00:05:19] Speaker 04:
This court has said it was.

[00:05:20] Speaker 04:
It's a case called Denkler.

[00:05:21] Speaker 04:
It's not cited in these briefs because it was addressed below, which I think we cited about 10 cases below that it was a federal instrumentality.

[00:05:28] Speaker 04:
DOJ has said, I have the language here, but.

[00:05:31] Speaker 02:
I thought Denkler says that the Federal Reserve is not an NAFI.

[00:05:38] Speaker 04:
Is a federal instrumentality.

[00:05:39] Speaker 04:
It's my recollection, Your Honor.

[00:05:41] Speaker 04:
But these are the cases we cited below.

[00:05:43] Speaker 04:
Again, this issue hasn't been raised on appeal by the government.

[00:05:46] Speaker 04:
The other thing is DOJ has said in an internal memo, or an Office of Legal Policy memo, I think it was, that basically said the Federal Reserve banks are federal instrumentalities.

[00:05:57] Speaker 04:
And the other thing is the reality is they're the operating arm of the board.

[00:06:00] Speaker 04:
They're the operating arm of the Federal Reserve system.

[00:06:03] Speaker 04:
And within a definition, they have authority to make contracts, to issue stocks.

[00:06:09] Speaker 04:
We've been kind of steadfast there in federal instrumentality from day one.

[00:06:12] Speaker 04:
And it really hasn't been challenged.

[00:06:14] Speaker 04:
Other than the occasional footnote, I think there's a footnote of the government's opposition.

[00:06:17] Speaker 04:
And then they've cited a District of Maryland case from 1982 multiple times.

[00:06:22] Speaker 04:
But that's the most they've ever said about it, Your Honor.

[00:06:28] Speaker 04:
I would also like to say, I was saying it's a very important case.

[00:06:30] Speaker 04:
It's also a unique case.

[00:06:32] Speaker 04:
Appellants are aware of no other government regime that's quite like the stock subscription regime that's at issue here.

[00:06:38] Speaker 04:
And the government hasn't cited any kind of regimes that are quite like this.

[00:06:43] Speaker 01:
I just want to get a little bit more into the defense of your theory of what the contract is here and who created the contractual terms.

[00:06:50] Speaker 01:
I mean, I know that there's a separate document signed by, issued by the board or the reserve banks that you accept and sign.

[00:07:00] Speaker 01:
But are the terms there separately negotiated or are they just based on

[00:07:07] Speaker 01:
the statutory requirements from the original Federal Reserve Act.

[00:07:11] Speaker 04:
So I guess maybe there's two questions.

[00:07:12] Speaker 04:
I guess the first question is, what is the contract?

[00:07:15] Speaker 04:
The contract, as we've said, is a combination of the statute, the stock subscription agreement, the letter, and the advice of holdings.

[00:07:23] Speaker 01:
The terms are... Right, let's focus on the statute then.

[00:07:26] Speaker 01:
Okay.

[00:07:26] Speaker 01:
Because I think you're aware, it's cited all over the place, that it's very unusual to consider legislation to be termed contracts rather than regulatory regimes.

[00:07:38] Speaker 01:
And so if we're looking at that and looking at the language in the statute, how do you get over the presumption that this wasn't intended to be a contractual arrangement, that it's just a regulatory regime?

[00:07:48] Speaker 04:
The express language of the statute.

[00:07:50] Speaker 01:
What's expressed?

[00:07:51] Speaker 01:
Where does it give anybody the authority to enter into contracts, rather than just requiring banks, if they want to be a national bank, to participate in a regulatory regime?

[00:08:02] Speaker 04:
It invites banks to subscribe to reserve bank stock.

[00:08:06] Speaker 01:
So that's all you've got?

[00:08:07] Speaker 04:
Well, subscribe is a synonym for contract, Your Honor.

[00:08:10] Speaker 04:
I mean, that goes back to Blacks 1910, which is just before the statute was enacted.

[00:08:14] Speaker 01:
What's your best case for the notion that when Congress uses language of this type,

[00:08:20] Speaker 01:
that they, and without anything further, that they intended to create a contractual relationship versus a regulatory relationship.

[00:08:29] Speaker 04:
Well, I guess it's Grav, but it's also a US trust.

[00:08:32] Speaker 01:
What are the facts of those cases?

[00:08:34] Speaker 04:
Well, so I guess we'll start with Grav.

[00:08:36] Speaker 04:
Grav was a statute about milk subsidies.

[00:08:39] Speaker 04:
And I don't have the language, I guess, directly in front of me, but it basically the secretary shall enter into a contract, or I think it was something on the table.

[00:08:44] Speaker 01:
Right.

[00:08:45] Speaker 01:
That's a little bit different, right, though.

[00:08:46] Speaker 01:
That's Congress directing somebody to enter a contractual relationship.

[00:08:50] Speaker 01:
That's a lot more like our more recent cases in this binocular fuel industry, where Congress directed energy to enter into contractual relationships, and they separately negotiated different contracts.

[00:09:02] Speaker 01:
You don't have that here.

[00:09:03] Speaker 04:
Well, Your Honor, respectfully, I disagree, because the word subscribe is what makes it directly analogous to those cases.

[00:09:09] Speaker 04:
They might as well have said, contract with the Federal Reserve Banks to buy stock regimes.

[00:09:13] Speaker 04:
Excuse me, to buy Federal Reserve Bank stock.

[00:09:16] Speaker 04:
And again,

[00:09:18] Speaker 04:
They're directing them to subscribe, meaning that the banks then purchase and own the stock in any kind of corporate setting.

[00:09:24] Speaker 04:
And that's what this is.

[00:09:25] Speaker 04:
It's a corporate stock.

[00:09:26] Speaker 04:
It's a corporate organization that the government's established.

[00:09:30] Speaker 04:
That stock relationship is a contract.

[00:09:33] Speaker 04:
We cite cases going back Hennevig, DuPay, other cases.

[00:09:36] Speaker 01:
But let me ask you this, then, hypothetically.

[00:09:38] Speaker 01:
If the government wanted to establish the same kind of regime and require national banks to participate,

[00:09:46] Speaker 01:
if they wanted to be termed a national bank and get all the benefits and privileges of that, and they wanted to, you know, make it entirely fee funded and they would issue stock and the like, how would they do that and how would they write the statute differently to make it a regulatory regime and not a contract regime?

[00:10:03] Speaker 04:
They could just, well, rather than saying that the banks were invited to subscribe to stock, they could, so let me step back for a second, Your Honor.

[00:10:14] Speaker 04:
The regime was set up as a voluntary regime, right?

[00:10:17] Speaker 01:
This is my question, just to be clear.

[00:10:20] Speaker 01:
I want the exact same voluntary regime with all the same requirements.

[00:10:25] Speaker 01:
What language would Congress have used to make it a regulatory regime rather than a contractual regime?

[00:10:31] Speaker 04:
Well, they wouldn't have used the word subscribe, I guess is the first thing I would say.

[00:10:34] Speaker 01:
Well, what would they have used?

[00:10:36] Speaker 04:
Well, Your Honor, I guess they could say to the extent you wish to be a member of the Federal Reserve Bank,

[00:10:44] Speaker 04:
You are required to purchase stock.

[00:10:47] Speaker 04:
I'm thinking on top of my head here, Your Honor, as best I can, but... It couldn't be a stock purchase.

[00:10:51] Speaker 04:
Pardon me?

[00:10:52] Speaker 00:
Under that hypothetical, I don't see how it could be a stock purchase.

[00:10:56] Speaker 04:
And I agree, Your Honor.

[00:10:57] Speaker 04:
I don't think it's a purchase.

[00:10:58] Speaker 01:
In that case, Your Honor... You're basically saying that there's no legal way for Congress to set up a regulatory regime to have banks in this capacity without making a contractual arrangement.

[00:11:11] Speaker 01:
that they would have had to have some other type of regulatory.

[00:11:13] Speaker 04:
Conceivably, I guess, they could say, OK, banks, you have to be in.

[00:11:18] Speaker 04:
You have to pay.

[00:11:19] Speaker 04:
You get nothing in response.

[00:11:20] Speaker 04:
You get nothing else.

[00:11:23] Speaker 01:
In this case, they're saying that they're saying in the fact that they actually understood that there were cause and effect or balances and whatever and offered to give you return on the investment.

[00:11:35] Speaker 01:
is what turned it into a contractual relationship.

[00:11:37] Speaker 01:
They could have made you do it for nothing, but once they gave you a return, that made it a contract rather than a regulation.

[00:11:44] Speaker 04:
Well, invited to subscribe, invited to join from the beginning to accept the terms of the statute.

[00:11:49] Speaker 04:
That's what the original statute said, even for national banks.

[00:11:52] Speaker 01:
Sure.

[00:11:52] Speaker 01:
But what if it was invited to join, but you get nothing in return?

[00:11:55] Speaker 01:
Would that be a contract?

[00:11:57] Speaker 04:
Well, it depends on the circumstances of Joinder.

[00:12:00] Speaker 04:
I mean, if you're paying to get something back, which is what happens here, they own the stock.

[00:12:04] Speaker 04:
The government said they own the stock.

[00:12:05] Speaker 04:
The statute says they own the stock.

[00:12:07] Speaker 04:
I mean, that's kind of fundamental to why this is a contract.

[00:12:09] Speaker 04:
So I'm trying to think of the hypothetical where they're not getting anything, but they're in the system.

[00:12:14] Speaker 01:
So they're in the system, then... Well, they're getting something because they belong to the system and are allowed to be a national bank.

[00:12:23] Speaker 04:
Understood, Your Honor, but the reality is the vast majority of banks are not members of the Federal Reserve System.

[00:12:27] Speaker 04:
They choose not to do it for all kinds of reasons.

[00:12:29] Speaker 01:
There are all kinds of regulatory regimes that Congress makes you apply to and join if you want to participate in that industry.

[00:12:38] Speaker 01:
And what you get is the privilege of operating under some kind of federal charter or federal permission.

[00:12:43] Speaker 01:
And what you get is the benefits of allowing to operate in that sphere.

[00:12:49] Speaker 01:
That's a classic regulatory scheme.

[00:12:51] Speaker 01:
What they've done here is added

[00:12:53] Speaker 01:
a return on the investment in the stock.

[00:12:55] Speaker 04:
Well, they've required a buy-in and a return for the security that's purchased.

[00:13:00] Speaker 01:
Sure, but they could have required a buy-in to be a registered bank under the national banking laws.

[00:13:07] Speaker 01:
A fee.

[00:13:07] Speaker 01:
A fee.

[00:13:08] Speaker 01:
Sure.

[00:13:09] Speaker 01:
This is not a fee, Ryan.

[00:13:10] Speaker 01:
Well, that's the question.

[00:13:12] Speaker 01:
Is the fact that they've used this language in 1913 sufficient to show that they intended to contract rather than to establish a national banking system?

[00:13:23] Speaker 04:
Well, again, I go back to the word subscribe because, yeah, it's from 1913, but also blacks now says subscribe means contract.

[00:13:30] Speaker 04:
They've kept the regime this way.

[00:13:32] Speaker 01:
Do they say it means subscribe in the terms of

[00:13:34] Speaker 01:
of the presumption that Congress doesn't intend to enact contractual regimes?

[00:13:41] Speaker 01:
I mean, this isn't a case where we're operating on a level playing field.

[00:13:44] Speaker 01:
You have the burden of showing that Congress intended specifically to contract.

[00:13:50] Speaker 04:
Understood, Your Honor.

[00:13:51] Speaker 04:
And I don't think knowing what the definition of subscribed is.

[00:13:54] Speaker 01:
If we can draw an inference that this is a regulatory regime rather than a contractual regime, you lose, don't you?

[00:14:01] Speaker 04:
I don't think you can draw that inference.

[00:14:03] Speaker 04:
I don't think you can draw that inference.

[00:14:03] Speaker 04:
Not when you're purchasing securities, which, by the way, as we say this in our reply brief, the president of the Kansas... Just be aware you're almost out of time.

[00:14:10] Speaker 04:
Understood, Your Honor, just real quickly.

[00:14:11] Speaker 04:
The president of the Kansas City Fed has even said these are like bonds.

[00:14:15] Speaker 04:
The government has said the bonds are clearly contracts.

[00:14:18] Speaker 04:
It's a security that these banks own, so it's very different from a regulatory regime where it's just a matter of participating to pay.

[00:14:25] Speaker 04:
That's why I'm saying it's a unique, distinct regime.

[00:14:28] Speaker 04:
Thank you.

[00:14:30] Speaker 00:
We ate up a lot of your time on LAF, two minutes.

[00:14:32] Speaker 04:
Okay, thank you.

[00:14:38] Speaker 03:
May it please the Court?

[00:14:41] Speaker 00:
Plaintiffs have not... Mr. Breskin, has the Federal, has any Federal Reserve Bank ever asserted sovereign immunity as a defense in any action?

[00:14:53] Speaker 03:
I am not aware of whether they've done so, but I can't say whether they have or they have not.

[00:14:58] Speaker 00:
I'm asking that question because of the

[00:15:00] Speaker 00:
sovereign entity question.

[00:15:03] Speaker 03:
Right.

[00:15:04] Speaker 03:
Mr. Obermeyer was correct.

[00:15:05] Speaker 03:
We did not contend below that they needed to go to district court in California because the Federal Reserve Bank in this instance was acting as a federal instrumentality in effectuating the requirements of the Federal Reserve Act at the behest of the board.

[00:15:22] Speaker 03:
I think we should start where you left off with Mr. Obermeyer.

[00:15:25] Speaker 01:
Can I just get one thing out of the way?

[00:15:27] Speaker 01:
I know that you argued this differently, and the trial court relied solely on the reservation of powers clause.

[00:15:33] Speaker 01:
And you argued that a little bit in the brief.

[00:15:35] Speaker 01:
But that wouldn't necessarily be inconsistent with the contractual theory, would it?

[00:15:40] Speaker 03:
Well, I think it would for two reasons, Your Honor.

[00:15:43] Speaker 03:
One is that the National Railroad case says that that reservation of power is hardly the language of contract.

[00:15:49] Speaker 01:
No, no, I get that.

[00:15:50] Speaker 01:
But that's in, I mean, if there were clear indication elsewhere, for instance, in the spent nuclear fuel cases, which I'm pretty sure you're familiar with, if Congress, which they clearly directed contractual arrangements there, if there had been a reservation of powers clause that says, we reserve the right to change this at any time, that wouldn't change it from a contractual to a regulatory regime if the rest of the act sounded in contract.

[00:16:17] Speaker 03:
Correct.

[00:16:18] Speaker 03:
But the plaintiffs would still lose under that hypothetical, because under Bowen, where there was no dispute that there was a contract, and the statute itself was titled Voluntary Agreements, the actual right at issue did not vest, because there was a reservation of rights in the contract.

[00:16:34] Speaker 03:
It was one of the provisions.

[00:16:35] Speaker 03:
And that is what the plaintiffs allege here, that the Federal Reserve Act makes up the terms and conditions of the alleged agreement.

[00:16:42] Speaker 03:
So that reservation of powers clause is part of this supposed agreement.

[00:16:45] Speaker 03:
And so even if there was a contract based on some other indication of the government's intent, that right to a 6% dividend would not be a vested right that's contractually guaranteed and for which they could seek damages, much like California could not seek to vindicate their right to terminate their participation in the Social Security Act.

[00:17:04] Speaker 03:
I think it's pretty telling that when you ask what the number one case is that they have to show that there was an intent to contract here, they cited Grav, which is the milk diversion program.

[00:17:15] Speaker 03:
where the court said the statute very clearly said, if you want to participate, you have to apply.

[00:17:21] Speaker 03:
And it directed the secretary of HHS to enter into agreements with cow farmers who were going to participate.

[00:17:28] Speaker 01:
Are you aware of any cases where courts have found that language in legislation by Congress itself formed the terms of the contract, rather than this milk case or the SNF cases or some other cases where Congress directed

[00:17:45] Speaker 01:
agencies to enter into contracts.

[00:17:49] Speaker 03:
I mean, the cases they cite, the plaintiffs cite, are Grav, Radium Mines, and New York Airways.

[00:17:55] Speaker 03:
Those Radium Mine and New York Airways cases sort of were an older theory that the statute could make a contractual offer that could be accepted through performance, although in both cases there were other indicia that there was clear intent to contract.

[00:18:11] Speaker 03:
I think what's clear is that there is no case where a single word

[00:18:15] Speaker 03:
like subscribe, in a contract was found sufficient to show that the government intended to contract.

[00:18:21] Speaker 03:
I think it's a little disingenuous to suggest that the Federal Reserve Act was a sort of free invitation for banks to sign up if they want.

[00:18:30] Speaker 03:
It does say that the national banks are invited to signify their acceptance.

[00:18:34] Speaker 03:
But if they don't, within a certain time period, they lose the right to be a national bank.

[00:18:39] Speaker 03:
And so, yes, it is voluntary to a point.

[00:18:42] Speaker 03:
But it is certainly not the same as a corporation

[00:18:45] Speaker 03:
offering its stock to the public for purchase.

[00:18:47] Speaker 03:
I think that brings us to the next point I'd like to make, which is that Mr. Obermeyer both said that this is a very unique situation, a very unique program, but then said, but we should treat it just like a private stock transaction.

[00:18:59] Speaker 03:
And for a number of reasons, that doesn't hold water.

[00:19:02] Speaker 03:
This is not like I go down and buy a share of Apple.

[00:19:07] Speaker 03:
They have to join once they're a national bank.

[00:19:09] Speaker 03:
They have to buy a certain set amount of stock at a certain set price.

[00:19:13] Speaker 03:
It never loses value.

[00:19:15] Speaker 03:
And if they so choose, they can go get a full return of the money that they've invested.

[00:19:19] Speaker 03:
So this is very much a unique situation that is not analogous to a private stock transaction.

[00:19:25] Speaker 03:
There's no intent shown in the Federal Reserve Act for Congress to make this akin to just another private stock transaction between a corporation and a shareholder.

[00:19:37] Speaker 03:
Just quickly to address the standing issue that Your Honor raised.

[00:19:41] Speaker 03:
I think, again, it's telling that the best case they cite to is Brock for the proposition that damages are recoverable.

[00:19:49] Speaker 03:
In that case, the court held that it was a statutory interpretation that was being challenged.

[00:19:54] Speaker 03:
And they said, as a result of the change in the statutory interpretation, I think it was union members may be entitled to damages, but they have to go seek that from the state authority.

[00:20:04] Speaker 03:
So the association there was not seeking damages in that litigation.

[00:20:09] Speaker 03:
And if that's the best case they can cite, I think it pales compared to the number of circuit court cases that we cited, many of which actually predate the Brown decision, that show that not only are damages, even where there's a relatively simple arithmetic, still require the individual participation.

[00:20:27] Speaker 03:
But I think plaintiffs sort of skip over the fact that if the claims themselves require individual participation, that the third prong

[00:20:35] Speaker 03:
is not satisfied for associational standing.

[00:20:37] Speaker 00:
Supposing instead of reducing the amount of interest paid, the government had said we're going to levy on all shareholders and we're taking an amount, you'll have to pay an amount equal to the value that you've already paid.

[00:20:59] Speaker 00:
What would that be?

[00:21:02] Speaker 03:
As long as it is authorized by the statute or the regulation, that would be an exercise of the Federal Reserve's power to do that.

[00:21:09] Speaker 03:
I mean, there are certain circumstances that plaintiffs rely on if there's a national emergency that they can rely on their shareholders, the members, to provide additional capital.

[00:21:20] Speaker 03:
So that would, again, just be an exercise of the regulatory or statutory power.

[00:21:24] Speaker 03:
And again, by joining the Federal Reserve, the banks take on the risk that the Federal Reserve will

[00:21:30] Speaker 03:
use any of the powers that it has given by statute, or that Congress will use the powers of its reserved amendment.

[00:21:37] Speaker 00:
So the stock doesn't necessarily maintain all its value?

[00:21:42] Speaker 03:
Well, the stock itself still does.

[00:21:43] Speaker 03:
Because if they came, if your hypothetical happened, Washington Federal could turn around tomorrow and say, we're going to effectuate a withdrawal.

[00:21:51] Speaker 03:
And they would still have to return $100 per share of the share that they.

[00:21:55] Speaker 03:
And so if we're focused just on that capital that they've invested here,

[00:21:59] Speaker 03:
they can get a full return if they withdraw.

[00:22:02] Speaker 02:
So is it the government's view that the Federal Reserve Banks here are a non-appropriated funds instrumentality or not?

[00:22:13] Speaker 03:
I know we decided not to challenge jurisdiction on that basis, on the basis of the fact that the banks are operating as federal instrumentalities as sort of agents of the Federal Reserve, but they are, you know, not funded by appropriations.

[00:22:28] Speaker 03:
I believe, from the federal government.

[00:22:31] Speaker 03:
So I don't know where that fits into the sort of naffy case law, but we certainly did not challenge jurisdiction on that basis.

[00:22:40] Speaker 03:
I mean, primarily because under 12b6, the claims here fall so short of establishing a contract or a taking that that was the focus of our briefing below, Your Honor.

[00:22:51] Speaker 00:
As a lawyer, I used to take the position representing GOKOs, the people who made the bombs,

[00:22:58] Speaker 00:
produce the nuclear waste, that they were functional equivalents of the United States and hence entitled to sovereign immunity.

[00:23:07] Speaker 03:
We didn't go that far.

[00:23:08] Speaker 03:
Although that does bring up, I think, a good point to end on, which is the authority piece that Judge Hughes, you touched on to some extent in that the intent of contract needs to show there's some authority.

[00:23:19] Speaker 03:
It's important to remember Mr. Cabral here is the Director of District Accounting for the Reserve Bank of San Francisco.

[00:23:24] Speaker 03:
He's not a federal employee.

[00:23:26] Speaker 03:
And so their claim here is that a non-federal employee who has no particular authority in any statute or regulation can actually buy in the United States to pay 600.

[00:23:35] Speaker 01:
Well, I think that would be true if that's the only thing they were relying on.

[00:23:38] Speaker 01:
But it seems like what they're really relying on is the Federal Reserve Act itself.

[00:23:44] Speaker 01:
And there clearly would be no question that if Congress had, in that statute, established a contractual scheme, they could probably still

[00:23:53] Speaker 01:
delegate that authority and say these non-federal people are entitled to implement the contracts we established.

[00:24:00] Speaker 03:
That's possible, though you would expect Congress to do so in far clearer language.

[00:24:05] Speaker 01:
Sure, it would have been a lot clearer than the language we have.

[00:24:07] Speaker 01:
But the fact that it was ultimately signed off on by a non-federal employee doesn't negate their theory.

[00:24:15] Speaker 01:
It would if they were basing it solely on the agreement, I think.

[00:24:18] Speaker 03:
Well, I mean, their theory sort of shifted to some extent below, and here they sort of

[00:24:23] Speaker 03:
throw up a bunch of things and point to and hope that it coagulates around a contract.

[00:24:30] Speaker 02:
So if Washington Federal had filed this lawsuit in ND Cal, would the government have resisted that?

[00:24:39] Speaker 03:
It's certainly possible that they would have.

[00:24:41] Speaker 03:
I think it depends on what allegations were made, if it was a contract or if they tried to allege takings.

[00:24:50] Speaker 03:
to analyze that particular claim.

[00:24:52] Speaker 03:
We did not challenge the jurisdiction on that basis here.

[00:24:57] Speaker 03:
Unless the court has any further questions, we'd ask the court to affirm the child court.

[00:25:01] Speaker 03:
Thank you.

[00:25:07] Speaker 04:
You've got two minutes.

[00:25:08] Speaker 04:
Thank you.

[00:25:08] Speaker 04:
I'll try to be brief, Your Honor.

[00:25:10] Speaker 04:
With respect to the contract and what is the contract, I do want to make clear that it's not all over the place.

[00:25:16] Speaker 04:
If the statute, if the application, the subscription,

[00:25:19] Speaker 04:
The Reserve Bank then sends a letter saying dividends are paid at 6%, and they give what's a stock certificate, an advice of holdings, saying how much stock is held and how much stock is paid for.

[00:25:29] Speaker 04:
The actual stock subscription says that they're subscribing to stock, but Washington Federal submitted, and it says they agree to pay this money.

[00:25:38] Speaker 04:
So the contract is evidenced by all of those things, not just the statute.

[00:25:41] Speaker 02:
Who's the offeror?

[00:25:43] Speaker 04:
The United States, Your Honor.

[00:25:44] Speaker 04:
I mean, the offeror is the United States, and it's saying,

[00:25:49] Speaker 04:
It's not that, I guess it's not unlike- It's not the Federal Reserve banks?

[00:25:53] Speaker 04:
Well, excuse me, but the Congress is directing the banks to subscribe to stock with their local Fed.

[00:26:02] Speaker 04:
So they're saying, go enter a stock subscription agreement.

[00:26:05] Speaker 04:
You could look at that offer as either a stock offer that would result in a unilateral implied and fact contract, or it's an invitation for Washington Fed to submit its offer as the offeror.

[00:26:17] Speaker 04:
It could be either one.

[00:26:19] Speaker 04:
It doesn't matter because the result is the same.

[00:26:21] Speaker 04:
So the offeror is either the government or it's Washington Federal.

[00:26:25] Speaker 04:
And all of those, all of the documents... If it's Washington Federal, then who's the one accepting?

[00:26:30] Speaker 04:
Then it'd be the San Francisco Fed, the United States still, Your Honor, at the direction of Congress.

[00:26:37] Speaker 04:
Because they've subscribed, or been told to subscribe.

[00:26:41] Speaker 04:
And we talked about Rob

[00:26:44] Speaker 04:
And we weren't able to mention the other cases.

[00:26:46] Speaker 04:
And Mr. Bruskin did mention the other cases we've relied on are New York Airways and Radium.

[00:26:51] Speaker 04:
But again, that's only under the theory of the statute being the offer, which is what Your Honor asked directly about.

[00:26:57] Speaker 04:
I mean, I think any of the cases that basically say that the rules of private contract rules apply to the government would apply here, because what's happening is you're purchasing the stock security.

[00:27:10] Speaker 04:
And that's all my time.

[00:27:12] Speaker 04:
Thank you, Your Honor.

[00:27:14] Speaker 00:
matter will stand so many.

[00:27:16] Speaker 00:
Thank you.