[00:00:00] Speaker 01: The first case for argument this morning is 24-1167, Fisher v. United States. [00:00:07] Speaker 01: Mr. Valley? [00:00:08] Speaker 04: Yes, Your Honors. [00:00:09] Speaker 04: May I? [00:00:09] Speaker 01: Please proceed. [00:00:10] Speaker 04: Yes. [00:00:11] Speaker 04: Good morning, Your Honors. [00:00:12] Speaker 04: My name is Patrick Valley. [00:00:14] Speaker 04: I represent the appellants in this case. [00:00:16] Speaker 04: May it please the court? [00:00:18] Speaker 04: This court's decision in Fairholme does not control the outcome of this appeal for two reasons. [00:00:24] Speaker 04: First, the plaintiffs in Fairholme [00:00:27] Speaker 04: were not adequate representatives of the company because they made a strategic decision on appeal to abandon their derivative takings claims and instead advocate principally for their direct claims, which were more valuable to them. [00:00:42] Speaker 04: Given this history, such a history does not give rise to claim preclusion. [00:00:47] Speaker 04: It instead [00:00:47] Speaker 04: reflects a failure of the adversarial system, where you have a party in interest, the companies here, that were not adequately represented by the shareholders that purported to represent them. [00:00:59] Speaker 01: And you were amici in the Fair Home case, correct? [00:01:02] Speaker 04: That's correct. [00:01:03] Speaker 04: We did seek to participate in the appeal. [00:01:05] Speaker 04: That request was denied. [00:01:07] Speaker 04: And we were permitted to submit amicus briefs. [00:01:10] Speaker 04: But just to be clear, as I understand it, the government hasn't contended, because it's not the case that participation as an amicus supports claim preclusion or any kind of preclusion. [00:01:21] Speaker 04: In fact, the law is to the contrary on that point. [00:01:23] Speaker 04: So what's the standard? [00:01:26] Speaker 04: The standard for claim preclusion? [00:01:27] Speaker 01: Yeah. [00:01:28] Speaker 01: It's inadequate representation. [00:01:30] Speaker 01: Is it not that it is so grossly deficient as to be apparent to the opposing party? [00:01:35] Speaker 04: That's partly correct. [00:01:37] Speaker 04: I think the grossly deficient standard deals with a situation where a party or its council inadequately conduct the litigation in some way. [00:01:46] Speaker 04: I think here what we're dealing with is a situation that's beyond that. [00:01:49] Speaker 04: Our argument is not simply that they did a poor job arguing the appeal. [00:01:53] Speaker 04: Our argument is that they made a strategic decision having both direct and derivative claims among their plaintiffs to advocate for the direct claims to the exclusion of the derivative claims. [00:02:04] Speaker 04: And it's important in pointing out that distinction that those claims were mutually exclusive. [00:02:10] Speaker 04: Both the direct and derivative plaintiffs on that appeal sought compensation from essentially the same pot of money, if you will. [00:02:19] Speaker 04: The direct plaintiffs wanted it to be paid directly to them. [00:02:22] Speaker 04: The derivative plaintiffs asked for that same money to be restored to the enterprises. [00:02:26] Speaker 04: And in that respect, [00:02:29] Speaker 04: fair home plaintiffs abandonment of the derivative claims on appeal, fundamentally, if adequate representation is to mean anything, a party that abandons a claim and advocates for a completely contradictory competing claim cannot be an adequate representative. [00:02:46] Speaker 02: You've now said three times, by my count, that Barrett abandoned the derivative claim. [00:02:51] Speaker 02: I didn't see that. [00:02:53] Speaker 02: Do you simply mean, is that your inference from the fact that they didn't expressly brief it, that they, quote, abandoned it? [00:02:59] Speaker 04: Well, I think if you look at their briefing and their opening brief, pages 30 through 60 of their opening brief, they spend 30 pages detailing with citation to dozens of authorities the basis for their assertion that the shareholders had a direct property interest that supported a viable takings claim. [00:03:16] Speaker 04: They repeated similar arguments in their reply brief, a 25-page span of their [00:03:21] Speaker 04: Reply brief, again, advocating in detail why their direct claims stated a property interest that could be subject to a taking. [00:03:28] Speaker 04: They spent zero pages and cited zero authorities in any of their briefing describing or advocating for the merits of the derivative takings claim, explaining the property interests that could be taken. [00:03:40] Speaker 02: So I think I'm right. [00:03:41] Speaker 02: Your contention is that they effectively abandoned by not [00:03:46] Speaker 02: devoting any of their pages of their briefing to the derivative claim. [00:03:51] Speaker 02: But you can't point to anywhere where they said, Federal Circuit, we're no longer pressing our derivative claim. [00:03:58] Speaker 02: Please don't address it. [00:04:00] Speaker 02: We're dropping it. [00:04:00] Speaker 04: There was no express waiver. [00:04:02] Speaker 04: But beyond the lack of briefing, I think the assertion of the contrary position that these claims were direct claims, it also supports the inference of an abandonment. [00:04:12] Speaker 04: Because as I mentioned, those direct claims were fundamentally [00:04:16] Speaker 04: incompatible with the derivative claims. [00:04:18] Speaker 04: So by advancing the direct claims and arguing at length for those, that they're essentially arguing against their derivative claims. [00:04:25] Speaker 00: But the legal stand here requires that there be a gross deficiency of representation. [00:04:32] Speaker 00: Sounds to me that more like what you're arguing is that representation was not zealous enough. [00:04:38] Speaker 04: I respectfully disagree with that description. [00:04:41] Speaker 04: I think the gross deficiency standard deals with where essentially the attorneys do a poor job. [00:04:47] Speaker 04: I think there's other strands of this. [00:04:49] Speaker 00: You are arguing gross deficiency. [00:04:52] Speaker 04: I think I'm arguing it in the alternative, but it's not my principal argument. [00:04:57] Speaker 04: My principal argument is that the Fairholme plaintiffs were conflicted, and that conflict manifested itself [00:05:04] Speaker 04: in their failure to litigate the merits of the derivative takings claim. [00:05:08] Speaker 04: And I think that goes beyond gross deficiency. [00:05:11] Speaker 00: I think there's a different strand of... You have to show that that conflict had some sort of prejudice. [00:05:17] Speaker 00: And that's where you get into the gross misrepresentation claim. [00:05:23] Speaker 04: I respectfully disagree with that. [00:05:25] Speaker 04: I think the First Circuit's decision in Ray Sonis, which both parties cite, that develops the standard essentially creates two different branches. [00:05:34] Speaker 04: There's one where there's a... And the gross deficiency standard deals with essentially the quality of argumentation. [00:05:45] Speaker 04: I think a conflict, particularly a manifested conflict, [00:05:49] Speaker 04: impacts the parties of representation and articulation of the claim is a different prong and perhaps a simpler prong, I think. [00:05:58] Speaker 04: Or if you want to merge the two together, you could say that it is per se grossly deficient to openly advocate against the claim you're purporting to assert. [00:06:07] Speaker 01: Well, would a cert petition on an abandoned claim be frivolous? [00:06:14] Speaker 01: Because this was in the cert petition, correct, filed by Baird, as the government points out? [00:06:19] Speaker 04: That's correct. [00:06:20] Speaker 04: After they lost the appeal in this court, they did attempt to assert petition in which they, for the first time on appeal, started advocating for the merits of the derivative takings claim. [00:06:31] Speaker 04: But that subsequent action doesn't cure any deficiency they had to. [00:06:36] Speaker 01: Well, doesn't it kind of establish that it wasn't an abandoned claim? [00:06:42] Speaker 04: I don't think it touches upon the issue of whether the claim was functionally abandoned in this court. [00:06:50] Speaker 04: I think maybe later they decided to renew it and attempt it again, given that was their only option at that point. [00:06:57] Speaker 04: OK, your second issue. [00:06:58] Speaker 04: I'm sorry, just one more, if you don't mind. [00:07:00] Speaker 02: Yes, please. [00:07:00] Speaker 02: What's your best case on how we could find that this is inadequate representation [00:07:05] Speaker 02: sufficient to relieve a party of the effects of raised judicata. [00:07:10] Speaker 02: Because I'm not sure I saw any case like this. [00:07:13] Speaker 02: It's a narrow exception, and I just didn't see any like this. [00:07:17] Speaker 04: I think that the N. Ray Sonis case does a good job of setting out the standard. [00:07:21] Speaker 04: I think the Supreme Court's decision in Taylor v. Sturgill, which I think draws upon Mayer's Sonis, is important too. [00:07:31] Speaker 04: You might recall that's the case where the Supreme Court rejected the notion of virtual representation as a theory for rest judicata applying to a different plaintiff in a subsequent case. [00:07:42] Speaker 04: And the court there really underscored [00:07:45] Speaker 04: that this adequate representation issue is not just a jurisprudential rule. [00:07:49] Speaker 04: It's required by due process. [00:07:51] Speaker 02: Just to be clear, you're not a different plaintiff, right? [00:07:55] Speaker 02: Because it's a derivative claim, this claim is always brought on behalf of the enterprises. [00:08:00] Speaker 02: It wasn't fair home. [00:08:01] Speaker 02: It is now here. [00:08:02] Speaker 04: I respectfully disagree with that, because before you can reach the conclusion that we're the same party, the adequacy of representation prong comes first. [00:08:11] Speaker 04: And that's a threshold inquiry before you can [00:08:14] Speaker 04: before you can characterize a subsequent derivative plaintiff as the same plaintiff. [00:08:20] Speaker 04: And what Taylor v. Sturgell makes clear is that adequacy of representation is a requirement of due process, because the default as required by due process is that every litigant has its day in court. [00:08:31] Speaker 04: And the application of preclusion principles [00:08:36] Speaker 04: Subsequent plaintiff requires as a matter of due process that that party's interest or the party that they seek to represent in this case was adequately represented in the prior litigation. [00:08:48] Speaker 01: Your second argument on claim preclusion is change of law? [00:08:53] Speaker 04: Yes, your honor. [00:08:54] Speaker 04: I'd like to deal with that. [00:08:57] Speaker 04: So I recognize that [00:09:01] Speaker 04: claim preclusion and issue preclusion that courts, as a practical matter, have applied the change in law exception a bit differently between those two doctrines. [00:09:10] Speaker 04: But I think the same doctrine, ultimately, that's driven by due process applies in both cases. [00:09:17] Speaker 04: Isn't it a rare exception at best? [00:09:20] Speaker 04: I do agree it's a rare exception. [00:09:22] Speaker 04: And the government's [00:09:25] Speaker 04: itself admits, that's pointing to this court's decision in the Roche Palo Alto case, that even as to claim preclusion, where there's a change in an important constitutional right, that that potential change supports an exception to claim preclusion. [00:09:40] Speaker 01: And here, important fundamental constitutional rights. [00:09:44] Speaker 01: So there's an example of the Brown versus Board of Education. [00:09:46] Speaker 01: There's another Voting Rights Act, I think, or something. [00:09:51] Speaker 01: But there's not much more than that in the jurisprudence right. [00:09:55] Speaker 04: Well, correct. [00:09:56] Speaker 04: There aren't many decisions in which that exception has been applied. [00:09:59] Speaker 04: But I would respectfully submit, although the Takings Clause may not garner the same popular interest as other constitutional provisions, it's equally important and it's a fundamental restraint on government powers. [00:10:13] Speaker 04: I would respectfully submit that the Supreme Court's decision in Tyler meets that standard. [00:10:17] Speaker 04: But to be clear, the court need not even reach that change in law issue if it finds that the Fair Home Plaintiffs did not adequately represent the enterprises. [00:10:26] Speaker 04: I'd like to briefly turn to the merits in particular of the import of Tyler. [00:10:32] Speaker 04: If no preclusion applies, the court must follow Tyler. [00:10:36] Speaker 04: Tyler announced a rule that as part of the threshold inquiry of a takings analysis and defining property interests that are potentially subject to a takings requiring just compensation, courts may not rely exclusively on the statutory scheme that is said to authorize a taking [00:10:54] Speaker 04: to define those property interests and find that no property interests exist. [00:10:59] Speaker 04: On this point of law, the Eighth Circuit in Tyler and this court in Fairholm, respectively, made the exact same error by relying exclusively on the statute that's said to authorize the taking to define property interests and to ultimately conclude that no property rights exist. [00:11:16] Speaker 04: The Supreme Court makes clear in Tyler that you can't simply look at to the statute authorizing. [00:11:21] Speaker 02: Didn't we also in fairness rely on the history of heavily regulated institutions like the enterprises, that they were always subject to something like a conservatorship? [00:11:38] Speaker 04: Yes, but I think even if you recognize that a company is subject to a potential conservatorship, [00:11:46] Speaker 04: The actions that the conservator here took were entirely unprecedented. [00:11:51] Speaker 04: This is the first time in history where, well, first, taking a step back, the Supreme Court in Collins recognized that the conservatorship regime under HERA is fundamentally different than prior conservatorship regimes. [00:12:04] Speaker 04: The Supreme Court described the distinctive feature of the conservatorship as this new authorization to potentially act in the public interest, which may mean also against the company's interest. [00:12:16] Speaker 01: the case called out the fact that the enterprise agreed to the conservatorship, right? [00:12:24] Speaker 04: It agreed to conservatorship, but there's no evidence in the record, and I'm fairly confident that no evidence exists, that at the time the enterprises agreed to the conservatorship, there was no anticipation or foreseeability that the conservatorship would be used in the way it ultimately was. [00:12:43] Speaker 00: Why does that matter? [00:12:46] Speaker 00: Why does that matter, that there be foreseeability? [00:12:53] Speaker 04: I would submit it's the case that whenever there's an executive actor that has broad discretion to act, the executive actor's actions are always subject to constitutional constraints. [00:13:03] Speaker 04: The Supreme Court recognized this in Loretto, where it made clear that even [00:13:08] Speaker 04: where the conduct there, which was an exercise of police power permitting cable companies to run cable lines on rental properties. [00:13:18] Speaker 04: The Supreme Court said that even if we take as a given that that's within the broad police powers of the government. [00:13:24] Speaker 04: It's a separate question whether the exercise of that power implicates the Takings Clause. [00:13:30] Speaker 01: Are we to make anything of the fact that Tyler and Fairholme were kind of before the Supreme Court simultaneously, really close in time at least, within like a week, I think, if I'm right. [00:13:43] Speaker 04: I don't think so. [00:13:46] Speaker 04: I'm not sure. [00:13:46] Speaker 04: I don't think we can draw inferences from the Supreme Court's denial of cert and Tyler, or excuse me, denial of cert in this case. [00:13:53] Speaker 01: Grant to Tyler, and then within a week of time, it denies cert on Fairhall. [00:13:58] Speaker 04: Right? [00:13:59] Speaker 04: Yes. [00:13:59] Speaker 04: But I don't think you can infer from a denial of cert any kind of endorsement of the decision. [00:14:04] Speaker 04: Obviously, the Supreme Court, especially nowadays, takes a very limited volume of cases. [00:14:09] Speaker 01: It's not just the endorsement of the decision. [00:14:12] Speaker 01: You're saying how closely they were tied and that Tyler compels a different result here. [00:14:19] Speaker 01: That's the basis upon which one would have assumed maybe that the Supreme Court, if granting cert on one, would at least help the other. [00:14:27] Speaker 04: I respectfully disagree. [00:14:29] Speaker 04: I'm not sure. [00:14:30] Speaker 04: I can't speak to the court's internal reasoning for why it denies or accepts certs. [00:14:35] Speaker 04: But I would submit that the core holding of Tyler is fundamentally incompatible with this court's decision in Farrell. [00:14:43] Speaker 04: And I'd like to, if I could reserve the rest of my time for a while, I'd appreciate it. [00:14:47] Speaker 04: Thank you. [00:14:54] Speaker 03: Good morning. [00:14:55] Speaker 03: Good morning, Your Honors. [00:14:56] Speaker 03: May it please the Court? [00:14:57] Speaker 03: Jerry Sinczak, appearing on behalf of the United States. [00:15:00] Speaker 03: This Court can affirm on either of two grounds. [00:15:02] Speaker 03: It can certainly take the route the Court of Federal Claims took and simply affirm on the grounds that Fair Home funds controlling and precedent and hasn't been overruled expressly by this Court or by the Supreme Court. [00:15:14] Speaker 03: It could also rule in the alternative that plaintiffs are claim precluded from raising this identical derivative takings claim that was raised by plaintiffs in Fair Home. [00:15:24] Speaker 03: I'll just jump in, since there was questioning about the adequacy of representation. [00:15:28] Speaker 03: And I think the clearest evidence of why their representation was adequate here is plaintiffs themselves, as Your Honor has mentioned, filed an amicus brief in that case. [00:15:37] Speaker 01: Yeah, but if an issue has been abandoned in blue, they can't resurrect it as amici. [00:15:42] Speaker 03: Well, my point, Your Honor, I was going to make is they made the exact same arguments that the [00:15:49] Speaker 03: plaintiffs in the plaintiff Barrett in Fairholm made about the derivative claims. [00:15:53] Speaker 03: It was not an abandonment. [00:15:54] Speaker 03: There are arguments about the derivative claims. [00:15:56] Speaker 03: We cite the briefing. [00:15:57] Speaker 03: It was clear as day that there are arguments about the derivative claims brought by Barrett. [00:16:01] Speaker 03: And plaintiffs filed an amicus brief in support of Barrett and made all the same arguments. [00:16:05] Speaker 03: They didn't make the arguments here today that they're criticizing Barrett for not making. [00:16:10] Speaker 03: So I think that is perhaps the best evidence that what Barrett did there was perfectly adequate. [00:16:15] Speaker 03: And then, of course, as Your Honor mentioned, he sought [00:16:18] Speaker 03: assert once the Fair Home Fund's decision came out on these very same issues. [00:16:24] Speaker 03: So I think that satisfies that point in terms of whether Tyler overruled it. [00:16:30] Speaker 03: As we mentioned in claim conclusion, which differs from issue conclusion, there is no change of law exception, except perhaps in this momentous change, like Brown versus Board of Education or something along those lines. [00:16:41] Speaker 03: But Tyler, of course, was not a momentous change. [00:16:44] Speaker 03: I wasn't a change in the law at all. [00:16:46] Speaker 00: It simply... Do you agree with your colleague on the other side that Tyler's a bad law? [00:16:52] Speaker 03: No, not at all, Your Honor. [00:16:53] Speaker 03: I think Tyler... Well, I guess maybe I should take his foot back. [00:16:58] Speaker 03: Tyler is good law in terms of Supreme Court law. [00:17:01] Speaker 03: I don't think it had any bearing on this court's decision in fair home funds. [00:17:06] Speaker 03: This court applied the same motive analysis. [00:17:08] Speaker 03: It reviewed the relevant statutes. [00:17:11] Speaker 03: It revealed the relevant precedent. [00:17:12] Speaker 03: It revealed the relevant history. [00:17:14] Speaker 03: It made it, I think, quite straightforward determination that an enterprise that voluntarily agrees to a conservatorship or even is subject to a potential conservatorship, it doesn't have the same property interests. [00:17:25] Speaker 03: It agreed to the transfer of the enterprise's right to control its assets [00:17:31] Speaker 03: to the conservator. [00:17:32] Speaker 03: The conservator then, and it did so on the understanding that the conservator had the ability to act in the enterprise's own best interests or the interests of the public and the agency. [00:17:41] Speaker 03: And at one point I want to just make a minor point. [00:17:46] Speaker 03: HERA itself was modeled after previous statutes, FOREA for one, [00:17:50] Speaker 03: And FOREA itself also contains the same provision allowing the FDIC to act in the best interests of the FDIC, i.e. [00:17:59] Speaker 03: the public. [00:17:59] Speaker 03: So when the Supreme Court, I think, was referring to this being an unusual conservatorship, it meant compared to the typical conservatorship, where the Britney Spears conservatorship, where the conservator is acting on behalf at all times of the person in the conservatorship, [00:18:15] Speaker 03: But in the financial world, in the world of financial institutions and conservatorships and receiverships, it's different, but it's consistent across the law and the history of the law. [00:18:27] Speaker 02: Are there not portions of our Fair Home opinion that could be read as suggesting we were saying that only in or around 2008 with the passage of the HERA, [00:18:38] Speaker 02: Did the enterprises lose what may have been a property right previously to prevent the conservatorship? [00:18:44] Speaker 03: I mean, I think, Your Honor, this is perhaps an easier case than one in which they were just under the threat of conservatorship. [00:18:50] Speaker 03: Here, they actually voluntarily agreed to the conservatorship, as the court in Fairham mentioned. [00:18:54] Speaker 03: So I think that takes it even a step further. [00:18:57] Speaker 03: And plaintiffs here are challenging the imposition of the conservatorship. [00:18:59] Speaker 03: They're not challenging HERA itself. [00:19:01] Speaker 03: So here we have a situation where the enterprises who they're representing [00:19:06] Speaker 03: voluntarily agree to the conservatorship. [00:19:08] Speaker 03: They do so on the understanding that their interests will be transferred to FHFA. [00:19:12] Speaker 03: Their control over their assets will be transferred to FHFA, and FHFA will have the right to act in their own interest. [00:19:20] Speaker 02: OK, but I probably wasn't clear. [00:19:22] Speaker 02: I think my question goes to post Tyler. [00:19:26] Speaker 02: The question of whether or not Fairholme's analysis is the same mode of analysis that the Supreme Court told us now in Tyler we need to undertake. [00:19:36] Speaker 02: I think there's an argument that Fairholme is not consistent with the way Tyler now tells us to do things. [00:19:43] Speaker 02: Aren't there indications in Fairholme that perhaps we didn't [00:19:49] Speaker 02: adequately anticipate the Tyler motive analysis, because we suggest, at least, that maybe enterprises had a property right prior to Congress enacting HERA, and it's only the congressional action that took away that property right. [00:20:04] Speaker 02: And if that's what we meant, that wouldn't survive Tyler. [00:20:07] Speaker 03: I don't think that's correct, Your Honor, because I think what Tyler is fundamentally about, and this was nothing new, is you look at the rules and understandings that govern [00:20:17] Speaker 03: the particular context in which you're operating in. [00:20:20] Speaker 03: And here, the particular context, and this court did that in Fair Home. [00:20:24] Speaker 03: Of course, you have to start with the relevant statute that governs that context. [00:20:29] Speaker 03: And here we have HERA. [00:20:31] Speaker 03: But then it also looked at this court's precedent [00:20:34] Speaker 03: Golden Pacific, and again the statutes there were identical in relevant respects to HERA. [00:20:40] Speaker 03: This goes back to 1947 when in Fahy the Supreme Court noted that banking is one of the most highly regulated and closely scrutinized and long regulated industries. [00:20:50] Speaker 03: So I think that kind of analysis which informed this court's view in Fairholm [00:20:55] Speaker 03: is exactly the type of analysis that Tyler requires this court to look at. [00:21:01] Speaker 03: And these enterprises were operating under HERA. [00:21:04] Speaker 03: And again, plaintiffs don't contest that HERA. [00:21:09] Speaker 01: And nothing could be more straightforward than Tyler. [00:21:12] Speaker 01: what went down there. [00:21:14] Speaker 01: Yeah, exactly. [00:21:15] Speaker 01: The government taking the remainder of what the proceeds for the sale. [00:21:20] Speaker 03: Yeah, and it was an unusual statute. [00:21:23] Speaker 03: It was a minority rule. [00:21:25] Speaker 03: And here, I don't think plaintiffs point to a single case in which there's a financial institution involved or a financial institution, certainly not one in conservatorship, to explain how this is how it's worked for all of [00:21:40] Speaker 03: recent history in going back to the 30s and so forth. [00:21:47] Speaker 03: And of course, Your Honors, I think it's important to take the context in which this all arose. [00:21:52] Speaker 03: In 2008, these enterprises received [00:21:56] Speaker 03: underwent catastrophic losses. [00:21:57] Speaker 03: They were on the brink of failure. [00:21:59] Speaker 03: It was Treasury's $450 billion commitment of funds that was necessary to bail them out. [00:22:04] Speaker 03: Private investors weren't willing to provide them the funds they needed. [00:22:10] Speaker 03: So the conservatorship was imposed in light of that dire straits. [00:22:13] Speaker 03: And it's that Treasury's $450 billion capital commitment that [00:22:18] Speaker 03: prevented their insolvency, then it continues to prevent their insolvency. [00:22:21] Speaker 03: And the Third Amendment was designed to keep them functioning, as the Supreme Court explained in Collins, to make sure that capital commitment wasn't drawn down prematurely. [00:22:30] Speaker 02: Can I take you back to Estoppel just for a moment? [00:22:34] Speaker 02: Is there, in fact, a conflict, or was there a conflict between the derivative claim [00:22:38] Speaker 02: and the direct claims. [00:22:40] Speaker 02: Is that how we should understand what was going on with Mr. Barrett? [00:22:45] Speaker 03: Not at all, Your Honor. [00:22:45] Speaker 03: I mean, I think it's quite common, first of all, in shareholder suits to bring both direct and derivative claims. [00:22:52] Speaker 03: And I point out in the briefing, well, first of all, this court, as the court pointed out, in footnote 14 of the Fair Home Fund's opinion, the actual property interest analysis is identical between the two. [00:23:04] Speaker 03: And the court would have actually dismissed [00:23:06] Speaker 03: the direct derivative claims on the same ground that it dismissed the derivative takings claim if it hadn't reached that question. [00:23:16] Speaker 03: It didn't reach that question because it dismissed the direct claims on other grounds. [00:23:19] Speaker 03: But the legal theory as to the property interest is the same. [00:23:23] Speaker 03: The remedy might be different. [00:23:24] Speaker 03: It might flow to the shareholders if it's a direct claim. [00:23:26] Speaker 03: It might flow to the corporation. [00:23:27] Speaker 03: It would flow to the corporation if it's a derivative claim. [00:23:29] Speaker 03: But the actual legal theory and analysis [00:23:33] Speaker 03: overlapped but again even if they didn't overlap it's not uncommon at all to have [00:23:37] Speaker 03: to be arguing both direct and derivative. [00:23:40] Speaker 03: And here we have Barrett was clearly arguing, and we cite the portions of the brief filed by Barrett-Holman, which Barrett represented that claim and made all relevant arguments, the same arguments that plaintiffs made in their amicus brief. [00:23:54] Speaker 02: Have you cited any cases that do give weight to an amicus brief in assessing adequacy of representation for estoppel purposes? [00:24:03] Speaker 03: Well, I don't have a case here on that. [00:24:05] Speaker 03: My point being only that it's kind of rich for plaintiffs to be criticizing the adequacy of representation when they filed the brief making the exact same arguments and not making the arguments they're criticizing. [00:24:17] Speaker 01: Just taking us back to where we were on HERA, were the enterprises potentially subject to conservatorship even before HERA? [00:24:24] Speaker 01: Well, in a way simply financial institutions like in California housing and in Golden Pacific. [00:24:31] Speaker 03: I'm not sure, Your Honor. [00:24:33] Speaker 03: They were subject to HUD's oversight at the time. [00:24:36] Speaker 03: And I would have to check to see exactly whether that excluded a right to provide. [00:24:43] Speaker 03: I'm not sure about that. [00:24:45] Speaker 03: But certainly, obviously, many financial institutions are. [00:24:49] Speaker 00: So what makes the date, the 2008 date, so important here? [00:24:56] Speaker 03: Well, that was in the midst of the housing and financial crisis that was taking place, I think, at that point. [00:25:03] Speaker 03: It's long ago now. [00:25:05] Speaker 03: But the housing market was collapsing, and these enterprises were hemorrhaging money. [00:25:09] Speaker 03: As I mentioned, they lost more in that year than they had made in the previous 37 years combined. [00:25:14] Speaker 03: And so they were facing potential insolvency. [00:25:18] Speaker 03: And that was what led to the enactment of HERA, and that was what led eventually to the conservatorship a couple months later. [00:25:24] Speaker 00: Does any of the history, pre-2008 history, carry any weight any longer? [00:25:31] Speaker 00: Or are all these cases supposed to start right at 2008? [00:25:36] Speaker 03: No, I think, I mean, again, Harrah was modeled after Ferreira and the FDIC's laws, which ultimately date back to the 30s. [00:25:44] Speaker 03: I think Ferreira was from the late 80s. [00:25:47] Speaker 03: But these types of conservatorships of financial institutions that were at issue in Golden Pacific [00:25:52] Speaker 03: and after which Herod's model stayed back much longer than the 2008 decision. [00:26:01] Speaker 01: Your Honor, I said no further questions. [00:26:02] Speaker 01: Thank you. [00:26:02] Speaker 01: Thank you. [00:26:06] Speaker 01: OK, we'll restore two minutes of rebuttal. [00:26:15] Speaker 04: Your Honor, I'd like to first respond to the point about the consent to conservatorship. [00:26:21] Speaker 04: I think it's important to underscore here the truly unprecedented nature of how the conservatorship powers were used in this case. [00:26:29] Speaker 04: This was the first time that we're aware of in the history of this country that conservatorship powers were used on a solvent, profitable company to take the assets of that company to support the general fund. [00:26:42] Speaker 04: Even the case law that talks about broad conservatorship powers in the context of a takings claim recognizes that conservatorships don't completely eliminate property interests. [00:26:51] Speaker 04: They may constrain them, they may limit them, but they don't eliminate them. [00:26:56] Speaker 04: And if any remnant of property interest remains, which the law is clear that it does, it must protect against the use of conservatorship powers to take assets from a profitable solvent company. [00:27:07] Speaker 04: And that's what makes this case fundamentally different [00:27:10] Speaker 04: It's frankly why here and even the consent of conservatorship can't be seen as a consent to, four years later, the exercise of conservatorship powers to seize the assets of these companies in the way that they did. [00:27:23] Speaker 04: Focusing on the adequacy of representation issue, I do think there's a, I know the government has pointed in their briefs and referred again at arguments, to arguments the plaintiffs made. [00:27:34] Speaker 04: The only arguments they made were on the succession clause, the hearing succession clause. [00:27:38] Speaker 04: Nowhere in their briefs do they articulate any property interest that's held by the enterprises that could be subject to a takings clause claim. [00:27:47] Speaker 04: And that, and critically, that's fundamentally the issue that this court ruled upon in its decision in Faribault. [00:27:52] Speaker 04: The precise issue, this threshold issue of defining property interest, that was the basis for this court's decision. [00:27:58] Speaker 04: It's precisely the point that they decided not to argue, and instead to argue the completely contradictory and opposite claims that those funds should be returned to shareholders and not to the enterprises. [00:28:10] Speaker 04: I'm happy to respond to any questions. [00:28:12] Speaker 04: No. [00:28:13] Speaker 04: Thank you very much. [00:28:13] Speaker 04: Thank you. [00:28:14] Speaker 04: Thank both sides, and the case is submitted.