All rise. The United States Port of Appeals for the Federal Circuit is now open. And in session, God second the United States, and its honorable court. Please be seated. Morning ladies and gentlemen, we have four cases this morning from four different tribunals. Climbs court case, a trade court case, a veterans court case, an employee case, a ladder, being submitted on the briefs and may it be argued. First case is 065037 Carabette that enterprises versus the United States and his venement. May it please the court. There are two liability issues and two breach damages issues before the court. With respect to the contact liability issue, I have provided the direct capital loans to seven of the Carabette properties, not because of the repayment agreement. But because each qualified as a Carabette property under the 1996 appropriations bill, the 1997 and each was at the top of HUD's pre-existing queue for that category of Carabette properties. What the appropriations bill did was to completely restructure HUD's low income housing programs among other things and provide appropriations for it. Why is this different from WinStar? Here, well among other things, there was no, with respect to seven acts, there was no targeting of Carabette's contract. In fact, what the legislation did was in changing HUD's programs and really cutting back on the preservation programs of the LIPPA and LIPPA, carved out certain properties, three categories that have been delayed and processing for HUD to use in its discretion to find. But why wasn't that targeting in the sense that, yeah, they say we're setting aside a little bit of money for three programs. We know there's not enough there for all three programs to be fully funded. So why haven't they targeted those three programs to get slashed contrary to their earlier obligations? Actually what Congress did was repeal HUD's authority to provide the equity takeout loans, the capital of 241 loans. I'm in the old program but provide HUD authority under a completely different and new program. And the legislation really did not target any existing 241F projects. It prevented HUD from rewarding future ones. But with respect to Carabette did not target them specifically. There was no reference in the legislative history of Carabette whereas Congress knew how to reference that
. Tell me with the record here, there was Carabette and only one other person involved in these equity loans, wasn't there? I mean it's a pretty... The ones with contracts. Yeah. That already had contracts in place. Contracts in place, equity loan contracts. This isn't a... We're not talking about... It's not a farmer's program where there are thousands of people involved across the country. The equity loans that Congress abrogated really applied to only Carabette and if I read the record right one other, right? It applied to future loans. It appears that Carabette was the only... The only property owner that had a repayment agreement pursuing to which HUD had agreed to process the 241F. But when Congress enacted the legislation to repeal that authority, the other property that was mentioned in the legislative history, nothing to do with the 241F loan, it's just that Congress knew how to mention specific projects and it approved a transaction involving a property where.
.. But why... Back to the point, why isn't that targeting really? You know it. Carabette is the only one you've got the repayment agreement with and you're the one and you're not going to pay them. Well, there's unlike other cases that this Court has addressed where there was targeting like a syntax where there was a lot of legislative history and legislative language that the Court could look to that it clearly affected them, the government was trying to get it in place. Oh, so as long as Congress does it without... With silently they can do it. That's not really the test, but this is different than syntax in that. I'm looking for a real distinction why this isn't targeting. The legislation was global. It was part of a major appropriation bill. Understand that. Properation bills always are. But this provision was... Bingo, gotcha, isn't it? No, there really
... There wasn't the purpose on the face of the legislation. It wasn't anywhere in the legislative history of the legislation that Congress was trying to get out of this deal or anything like that. It simply precluded HUD from Entry Meendonu to 41. And as a kind of a phase in what Congress did said, well, there are some properties that have approved plans of action. There have been delays for various reasons. We'll allow 75 million out of six billion for HUD to use in its discretion to fund some of these of HUD decides to do that. I'm not really hearing much of a reassuring answer for why we identify what's targeting and what isn't. One of the tests, I think it was too financial as well, was that just an incidental effect on some contracts. And here, that's it, unlike syntax 3D, where it targeted and affected a wide range of people or entities with the form of tax deductions. It seems to me that there are two different ways to look at this that are both present difficulties for the government's position. And maybe there's a third way to look at it that doesn't. But the problem I have is, on the one hand, you can say, to pursue Judge Raider's line of questioning, you can say that what Congress did was to say with respect to Carabetta, who had this repayment agreement, and a contractual right to the 241F loans. You can say, well, Congress simply by allocating only 75 million and presumably only 25 of that to the contracts basically said, we're going to let you get the equivalent, rough equivalent of these equity loans through the capital loan program, but only to the extent of 25 million dollars. And therefore, it seems to me if that's right, it's no different from canceling, let's say, a contract for a weapon system and saying, well, we'll continue the contract, but we're going to cut back on the amount you're going to get on the contract by half or two-thirds. And clearly be a breach. Congress can't simply modify a contract by that kind of declaration, I assume you agree with that. Yes, and in this case, Congress did not modify the contract. Okay, but if, in fact, the other way you look at it is to say, well, what Congress really did is to say, we specifically don't want to target Carabetta, we want to protect Carabetta. And their contract rights in general by saying, we're going to substitute a root essentially equivalent program
. And we're going to throw enough money into the pot so that their new loans, the capital loans, will be able to be fully funded. And if Congress was not targeting them, that's why they weren't targeting. It seems to me. But then the question is, when HUD decides not to use the full 75 million for Carabetta, but instead to give Carabetta only 25 million, why isn't HUD on the hook for effectively breaching rights that Carabetta had under the contract or the equivalent rights that they would have had under the statute that it had been applied in full force? So there are two different ways to look at it. One is, Congress does something which constitutes targeting along the lines that Judge Raider was asking. Or HUD does something which constitutes a cutting back of what Congress has made available by way of relief to people to Carabetta specifically. Well, HUD had the discretion on the appropriations bill to decide how, whether to use all 75 million, how to use it, you know, and allocate it before March 1. And they have a contract. And why isn't the exercise of that discretion to the extent that it cuts back on Carabetta's remedies under its contract rights, a breach of the contract? It's not a breach because given that I was a sovereign act, Congress had the right to repeal the authority for 241 loans. And the direct capital loans were a totally different beast than the 241. They were not equivalent. They were 100 pursuing to different authority. They were just different vehicles altogether. So that once Congress repealed HUD's authority under 241F, and it was up to HUD to decide how, if it all used to 75 million, and Carabetta had no rights at that point. And what happened was that since seven of the properties were already had previously approved plans of action. So they were eligible for a card out, for example, in the Lexus for Park, and they were at the top of the queue. They were funded. But HUD, by agreeing to do that, did not express any contemporaneous intent to fund all of the properties or made no offer to fund all of them for soon as a repayment agreement, or was there any unequivocal acceptance of that? There wasn't any consideration exchange. So we disagreed with the travel courts conclusion that there was a modification to repaying the agreement by HUD. So assuming Congress didn't redo the contract, our position is a HUD, did not breach any modified repayment agreement either. I'm struggling to understand what you're saying to us
. I appreciate Judge Bryson's dichotomy. It's either targeting on windstar or HUD, exercising its discretion has breached its contract. And I'm wondering, what happens to this contract? Are you saying it has ceased to exist by some act of Congress? Why isn't that targeting? Or the alternative, why isn't the discretion? I'm struggling with your answer to Judge Bryson's question, which I haven't understood. With respect to targeting, it was not targeting because it's distinguishable from any of the other cases. Okay, let's go beyond that one. Why isn't the other one? The why HUD? Yeah, why hasn't HUD breached it? HUD had discretion once. Congress repealed its authority on a 241F. It could no longer comply with the repayment agreement that it would process 241F. And what it did was with its discretion, it decided to use 25 million, the 75 to fund the... So are you telling us that in the weapons systems example or in any other example of a contract, the government could always avoid it by having Congress in an appropriations bill, abrogate the contract, and then give a little discretion to the agency which the agency would then decline to extra summits. And so we're out of any contract we want to get out of. That's the prescription. Here there was much more than that because Congress completely restructured the program. It eliminated future 241F loans and allowed property hours to prepay and changed the way it was going to provide subsidies. And we understand that that hit Caravetta right between the eyes, abrogating their repayment agreements. They're the ones that lost out on something they thought they had an obligation to receive. That's true. Let me ask you. Well, I'm willing to give you time
. Let me see what... The government's position is with respect to an issue that seems to me to be not so far as I can see very different from this. I mean, suppose that Congress decides that the Marine Corps is not very good at contracting for a weapon system. It's just... it's watched the Army, the Navy, the Air Force, and the Marine Corps contracting. It doesn't like the way the Marine Corps's contracting operation works. So they say, henceforth, no more Marine Corps contracts. Now, we know that there is one contract in existence, which is the Osprey contract for the Osprey weapon system. Now, for the Osprey weapon system, we will allow the Army to take over the arrangements for the continued production of that subject to putting a cap of $25 million on the program. Well, the contract was for $100 million, but the Army has given authority to spend up to $25 million. Does the maker of the Osprey, who has a contract with the Marine Corps, have a claim for breach of contract, or would the government be able successfully to argue that, well, this is a very large program in which what we've done is to change the whole way military contracts are led, particularly just to say there's no more Marine Corps contracts at all. So you have no rights to your original contract. All you get is whatever the Army decides to give you up to $25 million. Well, there are two things. It was..
. well, the evidence... How does that case come out? What's the government's position with respect to that? Does the Osprey maker win or lose? Do you understand the hype? I'm sorry, I was focusing on distinguishing it from this case. Well, first before you distinguish it, tell me whether you think you need to distinguish it. Do you win that case? Does the government win that case? I'm not sure. That case might have a hard time because there was a contract here. Once Congress repealed Huds Authority in the 2141, there essentially was no more contract. Well, in my case, the Marine Corps's authority has been repealed. The government has said no more contracts passed present or future in involving the Marine Corps. The authority was transferred to another government entity. Another government entity was given a new right to enter into new contracts up to $25 million for the Osprey. That is possibly more targeting than was here because there was really no evidence in the record that Congress knew that it was Carabetta. That was the only one that had the repayment agreement. Congress simply carved out three general categories of priority projects. And it turns out that it appears that Carabetta may have been known in one, but there's nothing in the legislative history to indicate that Congress knew that it was aware of that or anything else of that. So in my hypothetical, if the statute said any pending Marine Corps contracts are hereby terminated, it would be okay. But if it said the Osprey contract, which is pending, is terminated, it would be liability. Much more likely than yes or no. The gentleman will charge that time to Judge Bryce, and we'll give you five minutes back. Mr
. Rosenbaum, we've got for Carabetta. Thank you. May it please the court. Our view is that the dichotomy that was focused upon in the questioning asked the government council has it exactly right. And under either circumstance, we win liability. One way to view the situation is that Congress tardily Carabetta in a protective manner providing sufficient funds with $75 million to make sure that it wasn't a position to get the money. The fund needed a promise and the repayment agreement. 75 million dollars more than enough to fund all the Carabetta. The court of claims didn't really reason it that way, though. It said there was a modified contract and there was reliance. Is there enough evidence in the record to support the consideration, the bargain for modification of the contract? Yes, and let me start by focusing on congressional action. Consideration can be supplied by a modification of each of each party's rights and obligations and the pre-existing contract. And that's exactly what happened here. The substitution of capital alone for the 241F loans have benefits for both sides. But there's no real evidence in the record one way or another that anybody is bargaining for and giving consideration for a modification in a contract. Well, the consideration does not have to be separate funds transferred as part of the modification. So long as the modification itself provides... But the record doesn't have any letters saying exchanged saying, well, then we can pursue this alternative way and that'll substitute for your obligations and the government saying, yes, we'll meet our earlier obligations through this new program. We don't see any of that, do we? We don't see it back and forth in the matter you described
. Our principle argument here, and this is if you will, one of the two dichotomies, but our principle argument here is that it was the congressional action itself, which Carabetta was certainly to accept that it self-modified the agreement that Congress made the substitution of capital. What evidence is there that the government felt they were still acting under the contract? Well, under our view of things, Congress itself is the government, of course, and therefore that action represents the government's views as to how the Carabetta agreement should go forward thereafter. And as I say, Carabetta, of course, acquiesced in that way. My question was more directed to HUD, of course. I appreciate that, Your Honor, and I'm simply pointing out that there are two ways to view the contract as having been modified in one way as being the 1997 appropriations act itself. In which case, you don't need subject with conduct by HUD showing an intent to modify. And that is, we think of a very legitimate and appropriate way to view the situation, and one we have forwarded. And the other view is that we have to grapple with the targeting thing. Well, under this approach, the targeting was, if you will, protective targeting, that is to say, Congress said, we know there are these repayment agreements out there, and they use the phrase repayment agreement, pretty unusual phrase, obviously, but apply to us. And here's $75 million to fund those programs. That was protective targeting. We think that's the most appropriate way to view this situation. And the $75 million, as I say, being more than enough to fund the Carabetta Properties, with money left over for the other properties that are listed among the three alternative uses of the $75 million, they're certainly what was money left over for the other ones as well. So you say it's a modification as opposed to an abrogation. We think, under this, obviously, Congress can, under some circumstances, I abrogate for existing contracts. The wind star was such a case, or the oil was such a case. But under this particular circumstance, where they say, we are providing $75 million, and we are substituting capital loans for $241, which from our perspective was just as good. But that's a modification. It doesn't matter. It's a condition. But if there was a modification, where was the modification accepted by Carabetta? What were the terms of the accepted modification? The terms of the accepted modification were that the capital loans that are now being provided are acceptable to us, and we are perfectly willing to go forward into the circumstances now, go ahead and fund our problems
. All of our bridge, sir. And there's no bridge in other conditions. But where in did you accept? I mean, that's the only citation, I can say maybe there's something else in the record, but the only citation I could find to the assertion that there was acceptance was to your trial document that said 807, which is part of a declaration in which you say these contract modifications were accepted by the Carabetta group. Well, what other than the statement of the... I would refer you to the... It takes 13 and 5 of the joint appendices you're on or you're looking for a specific document. That's the October 10, 1996, 100 by Carabetta that said... Two weeks after the appropriations act has been enacted, the basic is said, all right, we've got money now, but we've fulfilled a retainer, we've fund the problems. 13 or 5? Yes. So that in terms of indication by Carabetta that they were happy to go forward and in the new regime, that's the document. That's the document we'll get back for evidence of that, you're on. Of course, if someone or somehow review the appropriateness of appropriateness as a bridge, then of course it is a target bridge. And judge Raiders and Judge Price's questions to government council are absolutely right. It targeted us, it's not different than when it started, one wants to look at things in that matter. And then of course one has a breach in the library. So where does the result? Of course, the problem there is, where did Congress indicate it all? Either that it was abrogating your contract by doing away with the equity loan program or substituting something for your project by the 75 million new capital loan program. Well, I think the indication is the fact that it's all, of course, in one act, it's appropriations act and in the appropriations act, Congress on technically did several things. It specifically funded $75 million in name, the repayment agreement by name as a recipient of the 75 million dollars. And it said they're going forward. Yeah, but the 75 million dollars was given to HUD to be used at its discretion and it was to be spread over three separate categories, only one of which is you. Well, but how can you say that's your money? Because HUD's discretion is caverned by its contractual obligations. HUD had no contractual obligations to the other entities to which it provided money. In that sense, it's no different than anyone else who, if I enter into contract with Person A to sell in my house and instead I sell the half to Person B, I have breached the contract. I mean HUD in this circumstance had an agreement with us that obligated us to provide us certain funding and had obligations to no one else to provide it to those funds. To give to them not to us was breached and that was the breached in January 1997 when HUD said we're not going to give you the money necessary to fund the property listed in the repayment agreement. What is the practical, you know, and I say practical, I really mean dollars and cents for all practical purposes, a difference between the benefits that you enjoy. So you're going to enjoy it under 241 F and the benefits that you would have enjoyed under a fully funded capital loans program. Where I'm going with that question is it seems to be your position now and perhaps it has been all the way through that you were perfectly happy to accept the capital loans program as long as it was fully funded. That is to say all of the properties covered. Is there in fact no real significant dollar difference between the benefits under the two programs? I got kind of lost in the footnotes over that question. They are very, very similar to answer your question. The dollar amounts are very, very similar and I can tell you, I can explain why. The 241 F program provided the loan, which the government guaranteed, but the government then provided additional rent subsidies to your tenants to pay off the loan. So in effect, the loan money was yours to do with it. So Congress wanted to get rid of the root Goldberg aspects of that program and just say, look, we make one transaction, there's the money. Exactly
. So where does the result? Of course, the problem there is, where did Congress indicate it all? Either that it was abrogating your contract by doing away with the equity loan program or substituting something for your project by the 75 million new capital loan program. Well, I think the indication is the fact that it's all, of course, in one act, it's appropriations act and in the appropriations act, Congress on technically did several things. It specifically funded $75 million in name, the repayment agreement by name as a recipient of the 75 million dollars. And it said they're going forward. Yeah, but the 75 million dollars was given to HUD to be used at its discretion and it was to be spread over three separate categories, only one of which is you. Well, but how can you say that's your money? Because HUD's discretion is caverned by its contractual obligations. HUD had no contractual obligations to the other entities to which it provided money. In that sense, it's no different than anyone else who, if I enter into contract with Person A to sell in my house and instead I sell the half to Person B, I have breached the contract. I mean HUD in this circumstance had an agreement with us that obligated us to provide us certain funding and had obligations to no one else to provide it to those funds. To give to them not to us was breached and that was the breached in January 1997 when HUD said we're not going to give you the money necessary to fund the property listed in the repayment agreement. What is the practical, you know, and I say practical, I really mean dollars and cents for all practical purposes, a difference between the benefits that you enjoy. So you're going to enjoy it under 241 F and the benefits that you would have enjoyed under a fully funded capital loans program. Where I'm going with that question is it seems to be your position now and perhaps it has been all the way through that you were perfectly happy to accept the capital loans program as long as it was fully funded. That is to say all of the properties covered. Is there in fact no real significant dollar difference between the benefits under the two programs? I got kind of lost in the footnotes over that question. They are very, very similar to answer your question. The dollar amounts are very, very similar and I can tell you, I can explain why. The 241 F program provided the loan, which the government guaranteed, but the government then provided additional rent subsidies to your tenants to pay off the loan. So in effect, the loan money was yours to do with it. So Congress wanted to get rid of the root Goldberg aspects of that program and just say, look, we make one transaction, there's the money. Exactly. It was a very inefficient system and didn't really, wasn't very logically, such as the direct loan program, but from a dollar perspective, from the perspective of a recipient like you are better, they were very, very similar. Thank you. Your honor, if I may, we have across appeal as to three issues. The tax grosser repairs and a software car, if I can turn it in briefly. Respect to tax grosser, this court has held in two decisions now, the Sol and Home Savings, that if the monies that were to have been received under a contract would have been tax-free. But the damage to the word will be taxable. Then the plaintiff is entitled to a tax grosser of the damage to the word, put it in the same situation that would have been in the contract before. In this circumstance, it is stipulated that the capital loans that my client should have received would have been tax-free. It is stipulated that the damage to the word will be taxable. But the court of federal claim says that the benefits you received from that are all going to be taxable. The court of federal claim said correctly is that any investment income we earn will be taxable. We agree with that proposition, but it is not quite the inquiry. Because any time you receive tax-free money, and we use the example of life insurance proceeds, which are tax-free. If I am a beneficiary of a life insurance policy on someone else, I know a person dies and I get the money. That is a tax-free event. Now, let's say I have gotten half a million dollars. Once I start to invest that money, I will pay taxes on it. But the money received is a tax-free. But it seems to me the difference there is that you don't have to pay back the life insurance. In other words, suppose your life insurance deal was we are going to give you a $500,000 loan interest-free for 10 years. Then it seems to me in that situation, which is analogous to this one, we essentially cross out the principle
. It was a very inefficient system and didn't really, wasn't very logically, such as the direct loan program, but from a dollar perspective, from the perspective of a recipient like you are better, they were very, very similar. Thank you. Your honor, if I may, we have across appeal as to three issues. The tax grosser repairs and a software car, if I can turn it in briefly. Respect to tax grosser, this court has held in two decisions now, the Sol and Home Savings, that if the monies that were to have been received under a contract would have been tax-free. But the damage to the word will be taxable. Then the plaintiff is entitled to a tax grosser of the damage to the word, put it in the same situation that would have been in the contract before. In this circumstance, it is stipulated that the capital loans that my client should have received would have been tax-free. It is stipulated that the damage to the word will be taxable. But the court of federal claim says that the benefits you received from that are all going to be taxable. The court of federal claim said correctly is that any investment income we earn will be taxable. We agree with that proposition, but it is not quite the inquiry. Because any time you receive tax-free money, and we use the example of life insurance proceeds, which are tax-free. If I am a beneficiary of a life insurance policy on someone else, I know a person dies and I get the money. That is a tax-free event. Now, let's say I have gotten half a million dollars. Once I start to invest that money, I will pay taxes on it. But the money received is a tax-free. But it seems to me the difference there is that you don't have to pay back the life insurance. In other words, suppose your life insurance deal was we are going to give you a $500,000 loan interest-free for 10 years. Then it seems to me in that situation, which is analogous to this one, we essentially cross out the principle. And we look only at the investment earnings, which is the total amount that you really get. The key here, of course, is that the future repayment obligation, which was far in the future, was at zero interest. What is critical is that we deduct from the capital loans the present value of that repayment obligation. And the net is our claim in this case. But what is the net? The net is really, when you do that subtraction, what you are really saying is that comparison of present value and ultimate payback is the difference is what you are going to earn on the money. No, I just don't agree with that. But if you could do nothing, if the universe was such that you knew that that money would not increase in value at all, then there wouldn't be any reduced present value. You just hold on to money. If you were told that you couldn't invest it, you would just hold it on to it for 10 years and then turn it back. Yes, but of course we can invest it. The way to conceptualize this, though, is to say, let's assume that the repayment obligation is 50 years in the future at zero interest, which it was. It meant for many of the properties. And let's assume I only have to put aside $25,000, which will in interest grow to be the $500,000 to repay the loan in the future. To value what I'm getting is I take the $500,000 loan. I deduct the $25,000 that I have to set aside. And there are many important $75,000 that just appear cash to me. But that's because of the interest rate. If the interest rate went down to 0.0, and banks just said, you can drop your money off, but you're not going to get a thing. And there would no place you could put the money, then the present value of that $500,000 would be $500,000. Agreed? Well, yes, but of course that's not the case
. And we look only at the investment earnings, which is the total amount that you really get. The key here, of course, is that the future repayment obligation, which was far in the future, was at zero interest. What is critical is that we deduct from the capital loans the present value of that repayment obligation. And the net is our claim in this case. But what is the net? The net is really, when you do that subtraction, what you are really saying is that comparison of present value and ultimate payback is the difference is what you are going to earn on the money. No, I just don't agree with that. But if you could do nothing, if the universe was such that you knew that that money would not increase in value at all, then there wouldn't be any reduced present value. You just hold on to money. If you were told that you couldn't invest it, you would just hold it on to it for 10 years and then turn it back. Yes, but of course we can invest it. The way to conceptualize this, though, is to say, let's assume that the repayment obligation is 50 years in the future at zero interest, which it was. It meant for many of the properties. And let's assume I only have to put aside $25,000, which will in interest grow to be the $500,000 to repay the loan in the future. To value what I'm getting is I take the $500,000 loan. I deduct the $25,000 that I have to set aside. And there are many important $75,000 that just appear cash to me. But that's because of the interest rate. If the interest rate went down to 0.0, and banks just said, you can drop your money off, but you're not going to get a thing. And there would no place you could put the money, then the present value of that $500,000 would be $500,000. Agreed? Well, yes, but of course that's not the case. No, and the reason is because of the value of the investments, which are taxable. But any investment of tax-free money is taxable. I mean, this court did not say, in the will solve case or the home savings case, what income can be earned from money those people who received? And what would the tax rate have been? What, of course there's it is, how much money should those entities have received, period? And that's the question. I'd like to look at the rest of my time. You may do that, and we will give you five extra minutes. But I should tell you that that is for dealing with a cross-peel for a bottle. And of course, if she doesn't deal with a cross-peel issue, you lose that. That's the nature of the game. But we'll listen to Miss Raniman, who has five minutes left. Thank you. Let's respect to the appendix 1305 that was cited. This was a letter from Carabetta written in October 1996, shortly after the appropriations bill before the alleged breach in January 1997. And HUD never agreed with Carabetta's interpretation of Carabetta's rights. And in none of the other subsequent documents that HUD executed with Carabetta with respect to the properties on which it closed or other correspondence, or the praises or anything else that HUD ever agreed with. Well, Carabetta was a little bit in acquiesce to something under the principles of what a contract is. There was no offer by HUD to substitute, so to speak, the capital loans for the acquies loans. There was no acceptance. There was no consideration. But I don't understand your position to depend on whether there was a letter from Carabetta that said, you know, now we notice that this statute has been enacted. And we see that there's $75 million, as long as you commit any amount that's necessary to cover our loans up to $75 million, we're delighted and happy and we accept. Your position doesn't depend on the presence or absence of such a letter, correct? No, that's only support for the fact that there was no contract modification that HUD agreed to modify the repayment agreement
. No, and the reason is because of the value of the investments, which are taxable. But any investment of tax-free money is taxable. I mean, this court did not say, in the will solve case or the home savings case, what income can be earned from money those people who received? And what would the tax rate have been? What, of course there's it is, how much money should those entities have received, period? And that's the question. I'd like to look at the rest of my time. You may do that, and we will give you five extra minutes. But I should tell you that that is for dealing with a cross-peel for a bottle. And of course, if she doesn't deal with a cross-peel issue, you lose that. That's the nature of the game. But we'll listen to Miss Raniman, who has five minutes left. Thank you. Let's respect to the appendix 1305 that was cited. This was a letter from Carabetta written in October 1996, shortly after the appropriations bill before the alleged breach in January 1997. And HUD never agreed with Carabetta's interpretation of Carabetta's rights. And in none of the other subsequent documents that HUD executed with Carabetta with respect to the properties on which it closed or other correspondence, or the praises or anything else that HUD ever agreed with. Well, Carabetta was a little bit in acquiesce to something under the principles of what a contract is. There was no offer by HUD to substitute, so to speak, the capital loans for the acquies loans. There was no acceptance. There was no consideration. But I don't understand your position to depend on whether there was a letter from Carabetta that said, you know, now we notice that this statute has been enacted. And we see that there's $75 million, as long as you commit any amount that's necessary to cover our loans up to $75 million, we're delighted and happy and we accept. Your position doesn't depend on the presence or absence of such a letter, correct? No, that's only support for the fact that there was no contract modification that HUD agreed to modify the repayment agreement. And in fact, with respect to another point, the programs were very different. The direct capital loans were direct from HUD with no private lender. There was no debt service on the takeout equity because there was no interest under the new program, you know, Carabetta would pay the principles at the very end. They eliminated all the complexities of the former program in terms of rent subsidies and rent amounts and administrative concentrated programs. So Carabetta's case depends on the fact that this was like a substitute, it was easy to substitute and it's not the case because the programs were so very different. I don't see anything in the record that supports your side either. I don't see any instance of you saying, well, the equity loans are dead, everything is over with. And so clearly we're not continuing on with the contract at all. Whatever happens from here on else is something very different. I don't see any instance of you indicating that from your part, you were acting separately from the repayment agreement. You're on in a volume one of the appendix, the preservation letter 973, dated January 24, 1997, is the letter on which the trap were relied to conclude that there was a breach of contract because in that letter, yes, I'm sorry, appendix 59, HUD basically said, this is how we're going to implement the appropriations bill. But that looks like an internal memorandum. I don't see that as being sent to Carabetta, at least not initially. This is memorandum for directors of housing, multi-family housing directors, et cetera. I believe that was a public document because it announced which properties would be funded under the Carabell provision because it attached schedules of the properties on HUD Q and the different areas and set out the processing instructions. When was the first time for a better was told that they wouldn't get all of their properties funded? I mean, was there some point at which, obviously some point before now, because they know it now. Was there any finding as to what happened after January 24, 1997, when this memo was sent to internally to HUD, as to what was the nature of the communication to Carabetta that would have told Carabetta, they're sorry, you're not getting what you thought. You were going to get under your agreement. I'm sorry, I don't know in the record. I don't have a major in document. I'm not sure
. And in fact, with respect to another point, the programs were very different. The direct capital loans were direct from HUD with no private lender. There was no debt service on the takeout equity because there was no interest under the new program, you know, Carabetta would pay the principles at the very end. They eliminated all the complexities of the former program in terms of rent subsidies and rent amounts and administrative concentrated programs. So Carabetta's case depends on the fact that this was like a substitute, it was easy to substitute and it's not the case because the programs were so very different. I don't see anything in the record that supports your side either. I don't see any instance of you saying, well, the equity loans are dead, everything is over with. And so clearly we're not continuing on with the contract at all. Whatever happens from here on else is something very different. I don't see any instance of you indicating that from your part, you were acting separately from the repayment agreement. You're on in a volume one of the appendix, the preservation letter 973, dated January 24, 1997, is the letter on which the trap were relied to conclude that there was a breach of contract because in that letter, yes, I'm sorry, appendix 59, HUD basically said, this is how we're going to implement the appropriations bill. But that looks like an internal memorandum. I don't see that as being sent to Carabetta, at least not initially. This is memorandum for directors of housing, multi-family housing directors, et cetera. I believe that was a public document because it announced which properties would be funded under the Carabell provision because it attached schedules of the properties on HUD Q and the different areas and set out the processing instructions. When was the first time for a better was told that they wouldn't get all of their properties funded? I mean, was there some point at which, obviously some point before now, because they know it now. Was there any finding as to what happened after January 24, 1997, when this memo was sent to internally to HUD, as to what was the nature of the communication to Carabetta that would have told Carabetta, they're sorry, you're not getting what you thought. You were going to get under your agreement. I'm sorry, I don't know in the record. I don't have a major in document. I'm not sure. So that's the point, though, is that the record doesn't support you anymore and it supports them. And yet, things seem to go forward with you giving them some share of what they had coming under the repayment program, under the guise of this new capital loan program. Well, under HUD's interpretation, the repayment agreement was gone and they funded the seven properties because they were on the Carabetta and on the bank. But that again, that's your interpretation. There's nothing in the records that we are here by notifying you that the repayment agreement is gone, right? And henceforth, you're going to have to take your chances on the capital loan program. Right, but there's also nothing that HUD said. We're substituting the capital loans for the effort. We went over that with Mr. Rosenbaum a minute ago. And on the tax issue, I would care about his whole damages claim was based upon the expectation theory of damages, a lost investment income theory. And the trial court correctly concluded, as really a matter of common sense and economic reality, that the whole point of the equity take out was so that Carabetta would invest. And the reason we return on that investment would have been taxable. And in fact, Carabetta's proof that trial with respect to the tax brackets of the dozens of partners in the enterprise was that they were in the 35% plus tax bracket. And so that denying the tax gross up was consistent with the whole theory on which the damages case was tried, the discounted cash flow methodology. And the net amount to which Carabetta refers still was an amount of money that... What's the dollar amount on this? It's approximately 10 million on this tax gross up. The tax gross up. It would have been higher around 14 million had cared better for bail on some of the preservation value issues that trial, which I mean, they're side appeal. Right now, at the end of the trial court's decision, he listed out the deductions for each element of damages
. So that's the point, though, is that the record doesn't support you anymore and it supports them. And yet, things seem to go forward with you giving them some share of what they had coming under the repayment program, under the guise of this new capital loan program. Well, under HUD's interpretation, the repayment agreement was gone and they funded the seven properties because they were on the Carabetta and on the bank. But that again, that's your interpretation. There's nothing in the records that we are here by notifying you that the repayment agreement is gone, right? And henceforth, you're going to have to take your chances on the capital loan program. Right, but there's also nothing that HUD said. We're substituting the capital loans for the effort. We went over that with Mr. Rosenbaum a minute ago. And on the tax issue, I would care about his whole damages claim was based upon the expectation theory of damages, a lost investment income theory. And the trial court correctly concluded, as really a matter of common sense and economic reality, that the whole point of the equity take out was so that Carabetta would invest. And the reason we return on that investment would have been taxable. And in fact, Carabetta's proof that trial with respect to the tax brackets of the dozens of partners in the enterprise was that they were in the 35% plus tax bracket. And so that denying the tax gross up was consistent with the whole theory on which the damages case was tried, the discounted cash flow methodology. And the net amount to which Carabetta refers still was an amount of money that... What's the dollar amount on this? It's approximately 10 million on this tax gross up. The tax gross up. It would have been higher around 14 million had cared better for bail on some of the preservation value issues that trial, which I mean, they're side appeal. Right now, at the end of the trial court's decision, he listed out the deductions for each element of damages. Similarly, the Southford Park was about 9 million. That's a high dollar item. And on Southford Park, basically what's at issue there is an interpretation of promises that Southford Park had made in the 1983 use agreement when it accepted the flexible subsidy assistance loan for a trouble project at that time. And by 7 of the appendix and the beginning pages is a handbook that kind of explains that program, but essentially the flexible subsidy loan program, the Carabetta accepted, and this is the only property. It's in the unique category. At that time, Carabetta committed to stay in the loan from housing program through year 2000. And it had already received essentially the incentives that HUD was offering at that time. Essentially what Carabetta wanted later was, you know, they saw other incentives and wanted a better deal. But there's a track where this random and you are well over using extended time. You want to just make a concluding statement. Well, essentially the Carabetta had the trial court correctly held that HUD considered Carabetta's request to exit the program, which Southford Park and gave reasons for denying it. Thank you. Thank you. Mr. Rosenbaum, your closing party has given you an opportunity for a bottle on the tax and the Southford Park. Thank you, Your Honor. First, a judge rateer to give you more precise numbers as to what's at stake for those two matters. For the tax gross of the $7.7 million as a standalone issue. And Southford Park for the standalone issue is $5.1 million
. Similarly, the Southford Park was about 9 million. That's a high dollar item. And on Southford Park, basically what's at issue there is an interpretation of promises that Southford Park had made in the 1983 use agreement when it accepted the flexible subsidy assistance loan for a trouble project at that time. And by 7 of the appendix and the beginning pages is a handbook that kind of explains that program, but essentially the flexible subsidy loan program, the Carabetta accepted, and this is the only property. It's in the unique category. At that time, Carabetta committed to stay in the loan from housing program through year 2000. And it had already received essentially the incentives that HUD was offering at that time. Essentially what Carabetta wanted later was, you know, they saw other incentives and wanted a better deal. But there's a track where this random and you are well over using extended time. You want to just make a concluding statement. Well, essentially the Carabetta had the trial court correctly held that HUD considered Carabetta's request to exit the program, which Southford Park and gave reasons for denying it. Thank you. Thank you. Mr. Rosenbaum, your closing party has given you an opportunity for a bottle on the tax and the Southford Park. Thank you, Your Honor. First, a judge rateer to give you more precise numbers as to what's at stake for those two matters. For the tax gross of the $7.7 million as a standalone issue. And Southford Park for the standalone issue is $5.1 million. The Court may be aware that the parties join the submitted date. You will calculate it and allow all these things to be worked through. Now, those are the standalone issues. There's some synergy. But as standalone matters, that's how much it would stay with these matters. Well, respect that the tax gross of we would submit that any time a party was to receive money on a tax rebassage almost inevitably that money investment of that money would produce taxable income. And that would be true for the South-Hellman situation or the homesteading situation. But nonetheless, this Court has properly found that one isn't tied to a tax gross of in that circumstance because if one is awarded this damages, that same amount of money that one would have received tax free. And yet must immediately pay, for example, 35% taxes on it. The remaining amount of money which you now have to invest is 35% less than it would have been had the contract been performed. The fact that the money you should have received and the money you're selling now is even the damages will, when invested, produce taxable income really has no bearing on the matter. Those who wash each other out. The key is that the plaintiff be awarded an amount of money that will put him or her in the same situation that would have been had the contract been performed to begin with. So the only question then is does the fact that our clients have the obligation to repay the one at Sunport in the future somehow cause what would otherwise be we think of very simple application of the rules does that somehow change. And our view is it doesn't. The reason it doesn't is because we have accounted separately already for the repayment obligation. We have done that by figuring out the present value of that future repayment obligation and deducting that from our claim from the get go. And so to use so that the $500,000 loan required us to put aside $50,000 because 50 years later when you were $500,000. Then we put aside that $50,000 and our claim that was only for $450,000 and that's our damages claim. At that point we view the $450,000 as being the same as any other sum of money that should have been paid at their account drive. But it would have been tax-worthy for the reason we described
. The Court may be aware that the parties join the submitted date. You will calculate it and allow all these things to be worked through. Now, those are the standalone issues. There's some synergy. But as standalone matters, that's how much it would stay with these matters. Well, respect that the tax gross of we would submit that any time a party was to receive money on a tax rebassage almost inevitably that money investment of that money would produce taxable income. And that would be true for the South-Hellman situation or the homesteading situation. But nonetheless, this Court has properly found that one isn't tied to a tax gross of in that circumstance because if one is awarded this damages, that same amount of money that one would have received tax free. And yet must immediately pay, for example, 35% taxes on it. The remaining amount of money which you now have to invest is 35% less than it would have been had the contract been performed. The fact that the money you should have received and the money you're selling now is even the damages will, when invested, produce taxable income really has no bearing on the matter. Those who wash each other out. The key is that the plaintiff be awarded an amount of money that will put him or her in the same situation that would have been had the contract been performed to begin with. So the only question then is does the fact that our clients have the obligation to repay the one at Sunport in the future somehow cause what would otherwise be we think of very simple application of the rules does that somehow change. And our view is it doesn't. The reason it doesn't is because we have accounted separately already for the repayment obligation. We have done that by figuring out the present value of that future repayment obligation and deducting that from our claim from the get go. And so to use so that the $500,000 loan required us to put aside $50,000 because 50 years later when you were $500,000. Then we put aside that $50,000 and our claim that was only for $450,000 and that's our damages claim. At that point we view the $450,000 as being the same as any other sum of money that should have been paid at their account drive. But it would have been tax-worthy for the reason we described. And therefore it's entitled to a tax gross of just like this court rule in the Solomon Homes savings. With respect to South Republic, that is its own set of issues. They are a care that I had a commitment that it had entered to respect to that property. But it also had negotiated the right to withdraw from that commitment unless HUD could provide a justification not to allow to do so. In other words consent had to be granted which consent would not be unreasonable without the phraseology that agreement. The case law provided under the circumstances HUD had an obligation to articulate legitimate reasons not to allow care about it to exercise. We have to sacrifice exercise that right overall. They propered two reasons. The first of which was they said even if you exercise that right in fact you don't get to withdraw from the obligations you took upon yourself. We have tracked the language and are briefing that is simply not a logical or appropriate requirement interpretation of that language because the right to withdraw was the right to withdraw from the program. And so for HUD to say even if you exercise that right you wouldn't have been able to throw from the program would render that agreement annulative. The court below didn't disagree with us on that issue. I didn't make direct finding by saying we had a very reasonable position. But the court said was they weren't sure whether even if we didn't have the right to withdraw from that that meant we were entitled under the repayment agreement to incentives. And so that's the second question. Our view is that it's perfectly obvious that we were the repayment agreement on its face says that South Park is engaged in discussion and appeal with HUD as to whether it had the right to withdraw from the program. Dr. Rosenbaum and the interest of equity and less my colleagues have questions which will dominate of course. I think we will ask you if you have any final closing statement. We think of those circumstances now for a part did qualify. Thank you very much
. In case we take an underwise