[00:00:57] Speaker 04:
Our next case is Anaheim Gardens et al.

[00:01:01] Speaker 04:
versus the United States, 2019, 12, 77, 89, 80, 81, and 82.

[00:01:07] Speaker 04:
Mr. Kelly.

[00:01:15] Speaker 05:
Thank you, Your Honor.

[00:01:16] Speaker 05:
Good morning.

[00:01:16] Speaker 05:
May it please the Court, my name is Harry Kelly.

[00:01:19] Speaker 05:
I'm counsel for the first wave plaintiffs who are the appellants in this case.

[00:01:22] Speaker 05:
And I'm joined today by my colleague, Brian Whitaker.

[00:01:26] Speaker 05:
Your Honours, for almost 30 years, the first wave of plaintiffs, and the plaintiffs similarly situated in the Court of Federal Claims matter, have laboured to demonstrate that the preservation statutes here caused a compensable taking of their right to prepay their mortgages and to subsequently operate their properties as market rate rental properties.

[00:01:44] Speaker 05:
The only way that the Court of Federal Claims could have denied them their day in court is to adopt inflexible rules of law that we believe are inconsistent with the rules of this court and with the Supreme Court.

[00:01:54] Speaker 05:
And on the basis of those per se rules, made it impossible to consider the abundant factual record which we presented on summary judgment and which was available to the court.

[00:02:04] Speaker 05:
There were a couple of per se rules that we want to point out that we think the court erred in adopting.

[00:02:09] Speaker 05:
The first was that it made a determination that the takings in this case were permanent

[00:02:12] Speaker 05:
rather than temporary in nature.

[00:02:15] Speaker 05:
The second rule, and the consequence following from the first, was that the only way to prove a permanent taking was to consider the change in market value that resulted from the taking.

[00:02:25] Speaker 05:
And the third, per se, rule that we believe was an error was to determine that the claimant who acquired its property after the enactment of LIPRA, which is the statute that caused the taking in this particular case.

[00:02:37] Speaker 04:
Well, that's true for the SUCASA properties, isn't it?

[00:02:41] Speaker 05:
That's for the Tsukasa property, Your Honor.

[00:02:43] Speaker 04:
The court... And that means there was no reasonable expectation of prepaying because of the mackerel of the statute.

[00:02:52] Speaker 05:
That's correct, Your Honor.

[00:02:53] Speaker 05:
And for the record, the court did correctly conclude that for five of the six first wave plaintiffs, they had demonstrated sufficient investment-backed expectations in order to prepay their mortgages.

[00:03:05] Speaker 05:
With respect to the Tsukasa property,

[00:03:10] Speaker 05:
We think that this rule is inconsistent with cases such as the Palazzola decision from the Supreme Court, the more recent Muir case, both of which have held that the mere enactment of a statute does not thereby deprive a person who acquires property after the enactment.

[00:03:28] Speaker 05:
of the necessary investment back to expectations.

[00:03:31] Speaker 05:
Palazzo said, for example, that if you follow that rule, you end up with a situation where nobody can assert a taking because the current owner prior to the acquisition of the property may not be in a position, as the owner in this situation was, to assert a claim because the taking had not occurred.

[00:03:49] Speaker 05:
But if the acquiring party is

[00:03:53] Speaker 05:
prohibited from asserting a taken claim, then essentially nobody can assert a taken claim.

[00:03:58] Speaker 05:
And the court in Palo Zulu said that essentially was working a terrific change in the nature of the property laws in this country.

[00:04:08] Speaker 01:
I seem to recall that the discussion by the court of federal claims was a little bit more than just a per se rule.

[00:04:16] Speaker 01:
Wasn't there some deposition testimony or something?

[00:04:20] Speaker 01:
that showed that, you know, that Sucasa, you know, was aware of the fact that it would have some difficulty and that it would have to get HUD's approval in order to be able to sell the property.

[00:04:34] Speaker 05:
There's a lot of deposition testimony with respect to SUCASA.

[00:04:38] Speaker 05:
And I think most of it, if you, well, among other things, the general partner of SUCASA was the general partner of a number of other HUD-insured properties who had acquired those properties long prior to the enactment of LEPRA.

[00:04:51] Speaker 05:
He knew what was in these agreements.

[00:04:53] Speaker 05:
He knew what these agreements said.

[00:04:55] Speaker 05:
And he understood that essentially the mortgages read the same way and conveyed the same contract rights.

[00:05:02] Speaker 05:
But it's also clear that

[00:05:04] Speaker 05:
At the time, SUCASA acquired its property in 1991.

[00:05:09] Speaker 05:
HUD had not issued its regulations.

[00:05:11] Speaker 05:
HUD didn't issue its regulations explaining what was actually going to happen until the following year, 1992.

[00:05:16] Speaker 05:
And the prepayment eligibility date was a year later, in 1993.

[00:05:20] Speaker 05:
So I think that we would consider the owner of SUCASA to be a sophisticated investor, but not clairvoyant.

[00:05:29] Speaker 05:
And this court has previously said,

[00:05:32] Speaker 05:
And I believe it is the law of the case here in the Biafora case that owners would have to come forward at the time that this court was considering the issue of rightness and introduce expert evidence with respect to the ability to prepay their mortgages.

[00:05:49] Speaker 04:
What about the holding of the claims court that you need to show fair market value, loss of fair market value, not just rental value?

[00:06:00] Speaker 05:
Well, we have not found a single case, Your Honor, in this court or in the Supreme Court decision.

[00:06:08] Speaker 05:
And I don't believe the government has cited any such case either.

[00:06:12] Speaker 05:
It supports the proposition that the only way, if you assume that a permanent taking did take place there,

[00:06:16] Speaker 05:
But the only way to prove that a permanent taking occurred is by introducing evidence of fair market value.

[00:06:23] Speaker 05:
Excuse me.

[00:06:25] Speaker 05:
The cases on the contrary repeatedly cite US versus Miller, for example, a good decision.

[00:06:30] Speaker 05:
says that there isn't a general formula that should be applied and that you really have to look at the nature of the alleged injury and tailor measure of damages to the kind of injury that's being accrued here.

[00:06:44] Speaker 05:
And what our plaintiffs are looking at, what they lost, the right they lost was the use of their property.

[00:06:50] Speaker 05:
Previously, this court has described that, the take in this case, as the equivalent of a physical invasion of property.

[00:06:57] Speaker 05:
They were precluded from operating their property as market rate rentals, as they had intended to operate.

[00:07:02] Speaker 05:
So the question becomes, what is the correct measure of damages?

[00:07:05] Speaker 05:
And it seems to me that the correct measure of lost income is lost income.

[00:07:09] Speaker 05:
And that's what our experts think.

[00:07:10] Speaker 04:
Court cited the Ninth Circuit case, Colony Cove.

[00:07:14] Speaker 04:
and Independence Park, which I think is our case.

[00:07:17] Speaker 05:
Yes, Your Honor.

[00:07:18] Speaker 05:
And actually, I think our analysis of Independence Park, the court, went on a great length looking at Independence Park.

[00:07:24] Speaker 05:
But our analysis of Independence Park, we feel, very strongly supports our approach.

[00:07:30] Speaker 05:
Because in Independence Park, the court said that the proper method

[00:07:33] Speaker 05:
for assessing damages suffered by plaintiffs in a similar situation is to start with the damages they would have been assessed for a permanent taking and then to reduce the amount by the value of whatever it was that they received.

[00:07:44] Speaker 05:
That's exactly what our expert did.

[00:07:46] Speaker 05:
He looked at the income that they would have received and his report's quite lengthy and very voluminous, but it's meticulous in terms of- What about colony code?

[00:07:55] Speaker 05:
Well, I think, Your Honor, that we are concerned about the presence in this court.

[00:08:01] Speaker 05:
And I think that to the extent that, for example, this court said in C-negative 10 that there were two ways to look at the calculation of

[00:08:13] Speaker 05:
economic impact, one being change in fair market value, the other being... Is there a way for you to distinguish Collin and Cove?

[00:08:20] Speaker 03:
It sounds like the answer is no, except for the fact that it's a Ninth Circuit case.

[00:08:25] Speaker 05:
Well, it is a Ninth Circuit case, Your Honor, and I'd say that I think that... Anything else?

[00:08:29] Speaker 05:
Standing here this morning, Your Honor, I don't have an immediate response.

[00:08:33] Speaker 05:
But I'll consider that in connection with the reply.

[00:08:38] Speaker 01:
What about the court's determination that you used – your expert used the wrong denominator in its calculation of expert injury – economic injury?

[00:08:51] Speaker 01:
by looking at the equity?

[00:08:54] Speaker 05:
Well, I don't think that there's an error in using equity, because if you accept the basic validity of an income-based approach, which I think that, according to seeing the intensive, is a perfectly appropriate approach, then looking at issues such as the relationship between the anticipated income that they would have received over the remaining

[00:09:17] Speaker 05:
term of the mortgage, and looking at the owner's equity was entirely appropriate.

[00:09:23] Speaker 03:
Again, Dr. Can you break that down very carefully, because we already said in CM210, a return on equity kind of analysis, as occurred there, would be no good.

[00:09:36] Speaker 03:
So you can't use return on equity.

[00:09:40] Speaker 05:
Well, what we did, Your Honor, I think, quite frankly, what C-neg.

[00:09:44] Speaker 05:
10 said is it looked at the issue of equity in terms of the issue of the parcel as a whole.

[00:09:50] Speaker 05:
In C-neg.

[00:09:51] Speaker 05:
10, it said that what the owners had done in that case was to, according to what the expert had done in that case, was to temporally divide the owner's return and therefore break down rules with respect to

[00:10:04] Speaker 05:
the parcel as a whole there.

[00:10:07] Speaker 05:
Dr. Wade did not do that.

[00:10:08] Speaker 05:
He looked at the entire stream of income and then calculated, including an analysis, calculated as part of that lost income calculation what the owner's investment was.

[00:10:21] Speaker 01:
I don't think you can read... There's three different methods, it seems, disclosed in the report.

[00:10:27] Speaker 01:
Am I right in understanding that?

[00:10:29] Speaker 05:
I believe that the

[00:10:31] Speaker 05:
The primary calculation was simply a numerical calculation of the total damages that these plaintiffs individually suffered.

[00:10:39] Speaker 01:
Take the rental income that they would have received without the regulation and subtract the rental income that they would have received with the regulation, both of them at present value.

[00:10:49] Speaker 05:
That's correct.

[00:10:51] Speaker 01:
And then the denominator that was used, what was the denominator that was used?

[00:10:55] Speaker 01:
It wasn't just equity, was it?

[00:10:57] Speaker 01:
No, no.

[00:10:57] Speaker 01:
It was at page 3811.

[00:10:59] Speaker 05:
No, it wasn't, Your Honor.

[00:11:01] Speaker 05:
Essentially, he only used the equity as a way of essentially making sure that what he was looking at was the actual amount that an owner would have received through market rate conversion versus what they did receive through the ALIPRA process.

[00:11:19] Speaker 05:
And those numbers were deducted.

[00:11:21] Speaker 05:
And so you ended up with two numbers that were then compared.

[00:11:23] Speaker 03:
I guess based on my limited understanding of Dr. Wade's formula,

[00:11:28] Speaker 03:
I don't understand why the equity amount was introduced into the formula.

[00:11:34] Speaker 03:
I mean, there's some razzle-dazzle notion that, well, what we're looking for is some kind of net present value.

[00:11:42] Speaker 03:
And so because we're looking for that, therefore, we must back out the equity from the denominator.

[00:11:50] Speaker 03:
And obviously, that

[00:11:52] Speaker 03:
results in shrinking the denominator in a way that thereby improves the plaintiff's presentation on how large of an impact this change in law was.

[00:12:06] Speaker 03:
But I don't understand logically why it's necessary to do that.

[00:12:11] Speaker 03:
Why can't you just figure out the amount of lost rental income due to this change in law and then divide that by the amount of income

[00:12:22] Speaker 03:
you would have had if the change of law had never happened.

[00:12:24] Speaker 03:
And that's your percentage of economic injury, period.

[00:12:30] Speaker 03:
And in fact, what I just described, as I understand it, is option number two, expressed in Sienega 10.

[00:12:39] Speaker 05:
Well, I think that Dr. Wood was trying to be very meticulous, and I believe what he was trying to do is to understand what was the net amount.

[00:12:47] Speaker 05:
The net present value is what his analysis looks at, and the formulas that were set forth in his report indicate that to get at that net value, to be able to have two numbers which you can really compare,

[00:13:00] Speaker 05:
That's why he deducted the equity.

[00:13:02] Speaker 03:
I assume for the moment we don't understand what he's talking about.

[00:13:05] Speaker 03:
And you're here serving as his translator, and you've got 40 seconds to tell us what is actually going on there.

[00:13:12] Speaker 05:
And I think that is essentially, Your Honor, the answer.

[00:13:16] Speaker 05:
What he is doing is trying to resolve the number two numbers that can be compared.

[00:13:20] Speaker 01:
I have a very specific question for you.

[00:13:22] Speaker 01:
Do you mind looking at page A3811?

[00:13:25] Speaker 05:
I'm sorry.

[00:13:25] Speaker 01:
Do you mind looking at page a 3811 of the record?

[00:13:30] Speaker 01:
I want to ask you a specific question about his formula, which is on that page.

[00:13:56] Speaker 05:
Thank you, Your Honor.

[00:13:57] Speaker 01:
So on page A3811, it does have economic loss equals.

[00:14:04] Speaker 01:
Do you see where I'm looking at?

[00:14:06] Speaker 01:
It has a number one in brackets to the right, and it says PV market conversion less TPE minus PV actual income less TPE.

[00:14:17] Speaker 02:
That's correct.

[00:14:17] Speaker 01:
So I think the first one, PV market conversion, is defined as the

[00:14:24] Speaker 01:
That is, let me see, I think that's had they actually not had the regulation in effect, minus PV actual income, what they actually got with the regulation in effect.

[00:14:37] Speaker 01:
Now here, see this on both of them?

[00:14:39] Speaker 01:
This is in the numerator of the formula.

[00:14:42] Speaker 01:
For each of those things, you've got less TPE.

[00:14:46] Speaker 01:
My question to you, and you might not know the answer,

[00:14:49] Speaker 01:
But my question is, when it says less TPE there, which is the amount of equity that the owner has put into the property, is it the same number?

[00:15:02] Speaker 01:
Is TPE for the PV market conversion the same number as PV for actual outcome?

[00:15:10] Speaker 01:
I think they could be different, but I don't know.

[00:15:13] Speaker 05:
As a financial matter, Your Honor, they are the same.

[00:15:15] Speaker 05:
And if you look at the subsequent charts that are presented here, you'll see that number coming out in both the with conversion and the without conversion number.

[00:15:26] Speaker 05:
And these were derived from the HUD prepared LIPRA appraisals that were part of the record.

[00:15:34] Speaker 03:
So the introduction of equity into the formula has zero impact on the numerator?

[00:15:41] Speaker 05:
I believe that's correct, Your Honor.

[00:15:42] Speaker 05:
And I think that the actual

[00:15:44] Speaker 05:
comparisons, if you look at the tables that are later, several pages later, you'll see how he looked at, he removed the equity so that we were looking at the actual net outcomes for both the with restriction and the without restriction calculations and that just gives you a net number and then you look, the comparison becomes a comparison between the amount

[00:16:12] Speaker 03:
uh... that they would have received within the amount that would have received without uh... let me just try one more time this is my third and last time can you explain exactly why he has this need to back out the equity from the denominator because right now

[00:16:30] Speaker 03:
what he's doing looks different from option two in Siena Geten.

[00:16:35] Speaker 03:
It's a modification to it.

[00:16:37] Speaker 03:
It's an obvious modification that results in a more inflated economic impact percentage.

[00:16:44] Speaker 03:
So I get that there's a motive to do it, but what's the justification for it?

[00:16:49] Speaker 05:
The justification, Your Honor, and I believe Dr. Wade was, I know Dr. Wade was not attempting to in any way manipulate the data, his attempt was to get at the question of what did they actually receive as a result of the LIPR process.

[00:17:08] Speaker 05:
It is quite clear if you look at the Penn Central case.

[00:17:10] Speaker 05:
An owner is entitled to a reasonable rate of return.

[00:17:12] Speaker 05:
Penn Central says that over and over again.

[00:17:14] Speaker 05:
So he was trying to assess, if you take out the equity, if you assume the owners got their equity back, what is the net number that they received under both scenarios?

[00:17:23] Speaker 01:
So this gives you the net present value.

[00:17:25] Speaker 01:
Yes.

[00:17:26] Speaker 01:
As opposed to the present value.

[00:17:29] Speaker 05:
That's right.

[00:17:29] Speaker 05:
And if you go back to page 8311,

[00:17:33] Speaker 05:
you'll see that the two formulas that he's expressing there are present value minus the TPE, or will and without.

[00:17:41] Speaker 05:
And then his second statement of that is the net value.

[00:17:44] Speaker 05:
And that's how he was referring to the net value.

[00:17:46] Speaker 01:
Do you think that is, again, this is probably a question for someone else other than us, but do you think that's a traditional or conventional way to calculate that present value?

[00:17:57] Speaker 05:
Absolutely, Your Honor.

[00:17:59] Speaker 05:
Dr. Wade's report is

[00:18:00] Speaker 05:
replete with references to that.

[00:18:02] Speaker 05:
And all I would say is that these are excellent – all excellent questions.

[00:18:05] Speaker 05:
These are the questions that should have been heard by the trial court, so the trial court would have been able to resolve any questions of this kind that it may have had rather than essentially summarily deciding that his report was not significant.

[00:18:17] Speaker 04:
I'm not sure you have well exceeded your time, but we've asked a lot of questions.

[00:18:21] Speaker 04:
I'll give you three minutes for a bottle.

[00:18:22] Speaker 04:
We'll hear from the government.

[00:18:24] Speaker 05:
Thank you, Your Honor.

[00:18:31] Speaker 04:
Miss Rose.

[00:18:33] Speaker 00:
Thank you, Your Honors.

[00:18:35] Speaker 00:
May it please the Court, the Court of the Federal, excuse me, the Court of the Federal Claims should be affirmed here because the Court properly applied the law of this circuit and of the

[00:18:48] Speaker 00:
Supreme Court in finding that the evidence proffered by the plaintiffs was not sufficient to show economic injury and regarding SUCASA there as well the court correctly determined that the plaintiff had not shown reasonable investment-backed expectations.

[00:19:05] Speaker 00:
Starting with SUCASA very briefly there was no per se rule there the court considered the Supreme Court's rulings in Palazolo as well as Muir but what it found was that this was

[00:19:16] Speaker 00:
an arms-length transaction by a sophisticated purchaser who acknowledged that he followed the low-income housing statutes and was aware of LEPRA, including LEPRA's restriction, which was in the statute, you didn't need the regs for this, on prepayment without approval from HUD, and there was no reasonable expectation for a

[00:19:35] Speaker 00:
a buyer in that circumstance to expect that he would be able to sell the property and convert to market rate housing.

[00:19:44] Speaker 04:
Where is the holding that only fair market value is probative evidence?

[00:19:50] Speaker 00:
I don't think that what the court has held is that only fair market value is probative evidence.

[00:19:55] Speaker 00:
However,

[00:19:57] Speaker 00:
In order to show what Sienega 10 held is that while there might be different ways to show the loss, it was bounded in important respects.

[00:20:08] Speaker 00:
It was bounded by the evaluation being based on the property as a whole, and then as well.

[00:20:14] Speaker 01:
On that second method in Sienega 10, what would be the government's view on what the denominator should be so that it's valued as a whole?

[00:20:22] Speaker 00:
It should be the total value of the property.

[00:20:26] Speaker 01:
The total value of the property or the total value of the rental income that was lost.

[00:20:30] Speaker 00:
Well, the way that this can be thought of is that fair market value for income generating properties, as this court has recognized in decisions like first federal Lincoln and others, is that the fair market value of an income generating property includes within it the anticipated income that the property would generate.

[00:20:51] Speaker 00:
So we don't have a problem.

[00:20:53] Speaker 00:
necessarily with the use of a discounted cash flow model, and in fact the appraisals that were in the record here used discounted cash flow models.

[00:21:00] Speaker 00:
However, it has to be done based on the total value of the property, and it has to be done ex ante.

[00:21:05] Speaker 00:
You have to use the information that would be available.

[00:21:08] Speaker 03:
I'm sorry, you're losing me a little bit.

[00:21:10] Speaker 03:
I can't tell if you're... Cienega 10 said there's two different ways that we can measure economic impact.

[00:21:17] Speaker 03:
Judge Stoll was talking about way number two.

[00:21:21] Speaker 03:
Which is the loss of income?

[00:21:23] Speaker 03:
You seem to be talking more about the first way.

[00:21:26] Speaker 01:
No, a discounted cash flow analysis can be used, but it still must be based on the total property value and what the... So you would say that you would take the rental income that would have been received without the regulation, subtract out the rental income that would have been received

[00:21:43] Speaker 01:
with the regulation, and on your denominator, you would have the fair market value, which you're not okay with.

[00:21:49] Speaker 00:
No, the total property value, not just equity, would be based on total property value.

[00:21:53] Speaker 01:
But again- Wait, wait.

[00:21:54] Speaker 01:
What's total property value?

[00:21:56] Speaker 00:
Well, here, the owners own the properties fee simple.

[00:21:59] Speaker 00:
They own the properties outright.

[00:22:01] Speaker 00:
So whatever the value of the property, it can't be done on a portion of the value.

[00:22:07] Speaker 00:
But the second piece that I want to- No, I'm sorry.

[00:22:10] Speaker 03:
We need to get this understood.

[00:22:13] Speaker 03:
Why wouldn't option two in Santa Catena be in the numerator the amount of rental income that would have been earned at market rates minus the amount of rental income that would have been earned under the LIPRA rates divided by the amount of rental income that would have been earned under the market rates?

[00:22:40] Speaker 03:
Why wouldn't that be the way to figure out the degree of economic impact under option two in Sienega 10?

[00:22:50] Speaker 00:
It could be, Your Honor.

[00:22:50] Speaker 00:
However, the

[00:22:53] Speaker 00:
the data that needs to be used would need to be done on an ex ante basis standing in the shoes of a prospective buyer as of the date of the taking.

[00:23:03] Speaker 00:
And there's no dispute here that what Dr. Wade did was take data that exceeded the, that went, excuse me, that post-dated the taking by up to 20 years.

[00:23:14] Speaker 00:
And so in decisions like Olson, the Supreme Court has- Can I just make sure I'm following what you're saying?

[00:23:21] Speaker 01:
You're complaining about the fact that he discounted at the prepayment date?

[00:23:27] Speaker 00:
No, no.

[00:23:27] Speaker 00:
Discounting is entirely appropriate.

[00:23:29] Speaker 00:
What Dr. Wade did was to use data from 2011, 2012 to build his calculation of value.

[00:23:38] Speaker 00:
But the Supreme Court has been very clear, and I think this court has been clear, that when you're valuing

[00:23:43] Speaker 00:
a taking, you do it on an ex ante basis, standing in the shoes of what a reasonable buyer or seller would have known at the time of the taking.

[00:23:52] Speaker 00:
And so again, there's done properly a change in value assessment and a change in income assessment should yield the same result.

[00:24:02] Speaker 00:
Because again, for income generating properties, market value is routinely

[00:24:10] Speaker 00:
developed using discounted cash flow analysis.

[00:24:12] Speaker 00:
So there's no problem using a discounted cash flow analysis.

[00:24:15] Speaker 00:
The problem becomes when you're not using data that was known at the time of the taking.

[00:24:21] Speaker 00:
The Supreme Court in cases like Olson has been clear that that just compensation

[00:24:26] Speaker 00:
It shouldn't involve all of the factors that give value to the property, but it doesn't exceed the market value fairly determined.

[00:24:34] Speaker 01:
You're saying you can't use actual future data in order to speculate as to what somebody knew at the time of the taking.

[00:24:43] Speaker 01:
Right, because you're not – What's your best case for that position?

[00:24:48] Speaker 00:
I would say that the Supreme Court's decision in Olson makes that point very clearly, that you don't use anything that post-state the date of the taking in determining value.

[00:25:00] Speaker 01:
Are you aware of any cases where a court has actually gone beyond that and considered actual data that post-dated

[00:25:12] Speaker 01:
taking in order to calculate the value.

[00:25:15] Speaker 01:
I mean, sometimes, you know, what actually happens is what was predicted.

[00:25:20] Speaker 01:
Well, it could be, but what the federal circuit... I'm sorry.

[00:25:24] Speaker 00:
It seems surprising to me.

[00:25:26] Speaker 04:
It's best not to talk over the judge.

[00:25:27] Speaker 01:
I apologize.

[00:25:28] Speaker 01:
And so I'm wondering if you know of any cases that would violate this per se rule.

[00:25:33] Speaker 00:
Again, it's not a per se rule, but the only case that I'm aware of

[00:25:41] Speaker 00:
in which the Supreme Court has talked about using data that post-state the time of the alleged taking is a case cited by plaintiff.

[00:25:51] Speaker 00:
However, there that was the Westinghouse electric case.

[00:25:58] Speaker 00:
There the Supreme Court wasn't looking at

[00:26:02] Speaker 00:
exposed data to determine the market rental value.

[00:26:08] Speaker 00:
It was only looking at removal costs, so I don't think that that's comparable here.

[00:26:12] Speaker 00:
And as this court recognized in Roseacre 6, when the Supreme Court has talked about value in taking these cases, it has focused almost exclusively on market value and not on lost profits.

[00:26:24] Speaker 00:
which is what plaintiffs are trying to do here.

[00:26:28] Speaker 00:
And the decision of the court in Siena Geten reinforces that the court did not have in mind a method of calculating compensation that would exceed fair market value.

[00:26:41] Speaker 00:
If you look at the footnote in footnote 13, it says, we note, however, that the court of federal claims awarded Chancellor Manor $10.5 million in damages significantly more than the property's appraised value of $7 million.

[00:26:54] Speaker 00:
Logically speaking, the government cannot take more than what the plaintiffs actually possess.

[00:26:59] Speaker 00:
So market value does have a binding effect.

[00:27:03] Speaker 00:
Market value determined on an ex-ante basis.

[00:27:07] Speaker 00:
We're not saying that there couldn't be other ways to bring this in, but at the end of the day, it is the plaintiff's burden to present evidence that allows the court to compare what was taken with what remained.

[00:27:19] Speaker 01:
Can I ask you another question?

[00:27:21] Speaker 01:
As I understand it, this severe economic injury prong isn't necessarily a measure of the damages that will later be awarded.

[00:27:32] Speaker 01:
That could be something different.

[00:27:33] Speaker 01:
This is just to see, hey, has the taking, this regulatory taking, been significant enough

[00:27:39] Speaker 01:
that we're going to continue the analysis.

[00:27:44] Speaker 01:
Is that correct?

[00:27:45] Speaker 00:
Well, I think that that is not correct in the sense that it would allow a plaintiff to clear the hurdle of summary judgment without showing how the alleged taking affected the value of the property.

[00:28:05] Speaker 01:
And while you can get at that... I was just asking if the analysis here is different, if this prong, economic harm,

[00:28:15] Speaker 01:
is different than a analysis in a takings case of the actual damages after it's already been established that there's been a taking.

[00:28:23] Speaker 01:
That's all my question is.

[00:28:23] Speaker 00:
There could be in some circumstances.

[00:28:25] Speaker 00:
Here there would not be.

[00:28:26] Speaker 00:
And I believe that Dr. Wade has a portion of his opinion where he states that he believes that the just compensation is essentially equal to his calculations on economic impact.

[00:28:41] Speaker 00:
Just again, very, very

[00:28:44] Speaker 00:
We recognize that this court in Sienega discussed two ways in which this could be evaluated.

[00:28:51] Speaker 03:
Again, however... And then in CCA, we reinforced that, right?

[00:28:54] Speaker 03:
We said Sienega 10 is the way to go.

[00:28:57] Speaker 03:
We're bound by Sienega 10.

[00:28:58] Speaker 00:
Yes.

[00:28:59] Speaker 00:
Again, however, when those calculations are done correctly, there will be two sides of the same coin, and they shouldn't result in wildly different numbers, which is what plaintiff's expert has done here.

[00:29:10] Speaker 00:
And going back to that point in footnote 13 in Sienega 10,

[00:29:13] Speaker 00:
The court correctly noted that Dr. Wade's calculations resulted in alleged lost value just of the property right that exceeded the entire fire market value of the property for three of the properties.

[00:29:34] Speaker 00:
As she used Buffman Gardens as an example, the total appraised value of the property was

[00:29:55] Speaker 00:
The total appraised value, I don't remember the exact number, but it was under $7 million.

[00:29:59] Speaker 00:
And Dr. Wade calculated the loss of the lost property interest as $9 million.

[00:30:06] Speaker 00:
So he said that it exceeded the total value of the property by more than $2 million.

[00:30:10] Speaker 03:
Is that $9 million based on the difference between the expected income at market rates versus the expected income under LIPRA rates?

[00:30:23] Speaker 00:
Yes, it's based on his net present value calculations, which again are based on ex post data, as there's no dispute here that he folded in ex post data.

[00:30:37] Speaker 03:
Did the claims court say anything about ex post data?

[00:30:40] Speaker 00:
She did not reach that, but she did not need to.

[00:30:45] Speaker 00:
she correctly determined that these should be analyzed as permanent takings because again, this was a statute that where Congress and this court has recognized that since Yanaga was balancing the needs of the low income housing against the nothing in Siena get 10 that limits the use of either of those two ways, right?

[00:31:08] Speaker 00:
I would disagree with that, because the Cienega X says that the opportunity for a fair market value sell precludes the finding of a taking.

[00:31:17] Speaker 00:
And it's an interesting evolution of plaintiff's positions here, because in Cienega X, the plaintiffs actually agreed with that point.

[00:31:24] Speaker 00:
But here, you had five plaintiffs who took advantage of Lippert's opportunity.

[00:31:29] Speaker 03:
I thought you argued below it doesn't matter whether this is regarded as a temporary or permanent taking.

[00:31:34] Speaker 01:
It doesn't, but the just competition cannot see the fair market value on the... Isn't also... I understand your point that you're making about the composition being larger than the fair market value, but...

[00:31:47] Speaker 01:
I also note that Dr. Wade, didn't he challenge the validity of HUD's fair market value appraisal?

[00:31:54] Speaker 01:
So that means that maybe, you know, they'll try to show that it's a different amount.

[00:31:59] Speaker 01:
And so that ratio you're talking about might be different.

[00:32:03] Speaker 01:
I mean, we're not supposed to sit here and say, oh yeah, that's good enough of a reason to automatically assume that Dr. Wade's testimony is per se wrong.

[00:32:13] Speaker 01:
I mean, he's challenged HUD's fair market value.

[00:32:15] Speaker 00:
He's only challenged them based on not by presenting an alternative calculation of what he thinks that fair market value should have been as of the date of the alleged taking.

[00:32:27] Speaker 00:
He's only taken issue with whether or not the process could yield a fair market value assessment.

[00:32:34] Speaker 00:
As the court recognized in Cienega, the fair market value sale option was given to plaintiffs at the highest and best use of the property with the prepayment right intact.

[00:32:47] Speaker 00:
So assuming that an owner would be able to immediately convert to market rate housing or to develop the property as condominiums, there was no restriction on the

[00:32:56] Speaker 00:
on the fair market value under the LEPRA sale option, and it was determined by at least two independent appraisers, one of which was selected by the property owners.

[00:33:07] Speaker 00:
Here there's no evidence presented by plaintiffs, and they won't be able to point to any that shows that those calculations were incorrect.

[00:33:14] Speaker 00:
And if they had put forward evidence that showed

[00:33:17] Speaker 00:
that the fair market values that were calculated under the Lippersell process did not fully capture the fair market value as of the date of the alleged taking.

[00:33:27] Speaker 03:
You're almost out of time, and I'd like to just try to stick to the analyses the court below actually relied on, rather than these extraneous things.

[00:33:39] Speaker 03:
The court below also said something about Dr. Wade's model being flawed because he relied on the return on equity theory.

[00:33:49] Speaker 03:
Could you talk a little bit about that and your understanding of what Dr. Wade actually did?

[00:33:54] Speaker 00:
Right.

[00:33:54] Speaker 00:
So Mr. Dr. Wade, he benchmarked, that's what he calls it, instead of using the term denominator, he benchmarked his calculations to equity.

[00:34:04] Speaker 00:
And as the court found, there is no way to translate what he's done into usable data for the court to determine whether or not there's been economic harm here.

[00:34:16] Speaker 01:
Is that true even for, you know, I think that might be true for at least one of his methods.

[00:34:21] Speaker 01:
But for the method on page A3811 of the record, I don't see that, that equity is the sole thing in the denominator.

[00:34:31] Speaker 01:
And so I want to know your response to that.

[00:34:36] Speaker 00:
Well, for all of his calculations, they are benchmarked to the transfer preservation equity, but we also, the court had questions for plaintiffs about why these cash flows of

[00:34:52] Speaker 00:
of the transfer preservation equity were removed, and he, Dr. Wade, isn't doing just the type of income analysis that... So, I'm gonna make sure I understand your answer.

[00:35:04] Speaker 01:
Your answer is that you think that the formula used by, and the method used by Dr. Wade at page 3811 has equity only as the denominator.

[00:35:14] Speaker 01:
Is that correct?

[00:35:16] Speaker 00:
No.

[00:35:16] Speaker 00:
However,

[00:35:19] Speaker 00:
It is not the method that the court contemplated in Santa Catena for two reasons.

[00:35:24] Speaker 00:
First of all.

[00:35:25] Speaker 01:
But that's an issue for the court below, right?

[00:35:27] Speaker 01:
I mean, your argument, the court below said that the denominator in all was equity, right?

[00:35:36] Speaker 01:
That it's benchmarked to equity, right?

[00:35:39] Speaker 01:
And you're disagreeing with that, at least for the method at page 838.11, right?

[00:35:50] Speaker 00:
This, what is shown here on 3811 does not comport with what this court said was an available method under Siena Geten.

[00:36:03] Speaker 00:
And there are two ways in which this deviates.

[00:36:07] Speaker 00:
First of all, the court, when they were looking at using income, lost income, there was no taking out of the transfer preservation equity.

[00:36:17] Speaker 00:
But again, under

[00:36:19] Speaker 00:
holdings of this court and Cienega and other decisions and the Supreme Court, the loss that a plaintiff suffers as an alleged taking cannot exceed the market value fairly determined.

[00:36:34] Speaker 00:
And Dr. Wade is brazen about not adhering to that.

[00:36:42] Speaker 00:
He does not

[00:36:44] Speaker 00:
He did not consider himself bound by that at all.

[00:36:46] Speaker 00:
The reason that... Please finish your thought, counsel.

[00:36:53] Speaker 04:
Your time has expired.

[00:36:58] Speaker 00:
In short, Your Honor, the plaintiff must present evidence that permits the court to compare the value of the property on the date of the alleged taking with and without the restriction.

[00:37:09] Speaker 00:
And while different evidence might be used, the evidence must be bounded by the fair market value, fairly determined as of the date of the alleged taking, and it must be based on the total property value.

[00:37:26] Speaker 04:
Thank you, counsel.

[00:37:28] Speaker 04:
Mr. Kelly, three minutes.

[00:37:31] Speaker 05:
Thank you, Your Honor.

[00:37:33] Speaker 05:
I'd like to begin by apologizing to Judge Chen with respect to the colony code decision, which, when you posed your question, I perhaps did not understand it.

[00:37:44] Speaker 05:
Does I read the colony code decision?

[00:37:47] Speaker 05:
The United Circuit said that sale value there is not only the only permissible basis to consider economic loss.

[00:37:53] Speaker 05:
the court agreed is that discounted future cash flows produced by an income-producing property can provide an appropriate valuation methodology.

[00:38:01] Speaker 05:
In that instance, the court said that the plaintiffs had not produced evidence of that kind.

[00:38:05] Speaker 05:
So I believe that colony cove is essentially consistent with the position that we've taken.

[00:38:14] Speaker 05:
Final points I'd like to make here today.

[00:38:17] Speaker 05:
Listening to the government's argument, it appears the government's now acknowledging that, in fact, if this were a permanent taking, that there is, in fact, more than one way to calculate economic loss, that fair market value was not the only possible alternative and something else was allowed.

[00:38:35] Speaker 05:
If that is the case, then we really do need to send this case back to the Court of Federal Claims, because that was not what the judge concluded.

[00:38:40] Speaker 05:
She said the only way to do this was fair market value.

[00:38:42] Speaker 05:
And essentially, she threw out and concluded Dr. Wade's analysis was unhelpful because it didn't address fair market value.

[00:38:48] Speaker 05:
So by getting off on that wrong step, I believe the Court of Federal Claims made a series of cascading errors that led to the opinion and the conclusion that she reached.

[00:38:58] Speaker 05:
So I think that there is very strong reason to return this case to the Court of Federal Claims.

[00:39:04] Speaker 05:
On the issue of appraisals, I just want to point out that in my mind, an appraisal, if you're trying to get at the issue of lost income, an appraisal is an extreme, and changes in property value as evidenced by an appraisal, an appraisal is a very foggy proxy for the loss that we are claiming here.

[00:39:23] Speaker 05:
There are a lot of other factors besides income.

[00:39:27] Speaker 05:
that are included in an appraisal, comparable properties, other factors that may influence the decision of what a property is worth.

[00:39:37] Speaker 05:
They have absolutely nothing to do with the lifting mechanism.

[00:39:40] Speaker 05:
And we did, in fact, dispute those matters.

[00:39:43] Speaker 05:
Our witnesses did introduce testimony.

[00:39:46] Speaker 05:
It isn't in the record.

[00:39:47] Speaker 05:
It's even cited on footnote 12 of the Court of Federal Claims' opinion, where she acknowledges that Dr. Wade disputed components of

[00:39:56] Speaker 05:
the appraisals as a valid measure.

[00:39:59] Speaker 05:
Again, that's a fact question.

[00:40:01] Speaker 05:
That should have been decided at trial by the Court of Federal Claims.

[00:40:05] Speaker 05:
On this issue about ex post and ex ante information, the Court of Federal Claims didn't think it was important enough to even address.

[00:40:11] Speaker 05:
I will simply say that our position is that the Sinclair refining case makes it very clear that when we are now

[00:40:19] Speaker 05:
30 years almost from the effective date of the taking, there's a book of wisdom, there's knowledge that we have gained, and to contend that we all who are litigating these cases must constrain ourselves to the data which was available only at the time when the taking occurred is not required by the court.

[00:40:37] Speaker 05:
I conclude by saying, Your Honours, as I began, these plaintiffs have waited decades, decades to have their day in court.

[00:40:44] Speaker 05:
They presented evidence and legal arguments to support their claims that are completely consistent with the controlling precedents of this Court and more than sufficient to survive summary judgment.

[00:40:53] Speaker 05:
We believe the Court of Federal Claims in many respects acted improperly, and we've presented absolutely abundant evidence that they suffered a severe economic injury as a result of their taking.

[00:41:03] Speaker 05:
After almost 30 years, please give them their day in court.

[00:41:06] Speaker 04:
Thank you, counsel.