Legal Case Summary

. That's no different from what the Supreme Court said in the concrete pipe case. Thank you. Exactly the same principle. A similar principle is enunciated in Penn Central itself and it is that line of cases that the court took and said in CNN at 10 that you apply that and you have to look at the value of the property as a whole. The 81% figure you alluded to is one that uses a return based approach. Exactly the approach that was considered in CNN at 10 and rejected as inappropriate in CNN at 10. We're talking about the same approach here and I add that it's important not to use that return based approach because the standard method of evaluating economic impact is a diminution and value sort of approach that considers the property as a whole. In order to have consistency across taking sure as prudence you can't be using different methods. And the court talked about that a little bit in CNN at 10. Also talked about that in the second rose acre decision about the danger of having multiple different tests and the misleading impression that you can get from that 81% sort of figure. So then do you think it's erroneous because CNN at 10 allowed for two different tests. One that was based on market value at the time of the regulation and then a separate one which seems to be based on return based approach and your comment just a minute ago might have suggested that you thought it was inappropriate for the court to have these two alternative tests available to establish taking. Not I'm not suggesting that. The two tests that are talked about in CNN at 10 are the diminution and value approach. 81% wasn't a property as the whole approach. It wasn't under under CNN as I understand the issue here today with respect to economic impact. The two choices are the 18% which is what a CCA is arguing for and the 5% which the government is arguing for. Right? That's exactly right. The 81% figure is neither of the approaches that the court mentioned in CNN at 10. Both of those approaches look at the value of the property as the whole. The 81% approach does exactly what the court said you cannot do in CNN at 10, which is break things into temporal parts and then look at a returns at a particular period of time against what was in this case a benchmark 15% mortgage back security

. I understand CCA to argue the number of things which probably an in bank panel of this court would have to decide. They're challenging the contract decisions under CNICA 4. I think it is the privity issue I think. I understand them also to be challenging whether or not the 81% diminution, whether CNICA 10 was correct. CNICA 8 certainly suggested something like what they had concluded with the 81% number was the correct measure or approach to the measure of damages. And CNN came along and said no it's not. It wasn't argued by the government and that's why it wasn't addressed and so we can now do it. Do you understand them to be challenging that as well? Maybe we can't reach it at a panel level. It has to go to in bank or do you think they are not at all challenging that on the other side? I did not see their argument as seeking an on-bong review of that aspect of CNN at 10. Obviously the court doesn't title to do what it chooses to do in terms of on-bong review but I did not read their brief as requesting that. The only request that I saw for an on-bong consideration was on the breach of contract decision from CNICA 4 which is a very distinct issue. Now with respect to the difference between the 18% and 5%, the 18% is computed without regard to the offsetting benefits. That's exactly right. And 5% is the government's view as to what the figure would be with the offsetting benefits that we said should be included in CNICA 10. Was there any evidence put in by CCA as to what the figure would be if you took into account offsetting benefits? No. They did not introduce evidence on or man or in the initial trial about the value of offsetting benefits. They have relied simply on the argument that offsetting benefits are too speculative to consider. Is that a finding effect by the lower court that we have to give difference to that their speculative? No, it is not. And the reason that I say that is because if you look at the history of this case and you look at what the court said in CNICA 10, the court found in CNICA 10 that the statutory benefits were specifically included as a direct benefit to project owners as part of the same statutes that we're talking about. But the court in CNICA 10 didn't put a value on those. They didn't say that the value was anything other than speculative

. It just said you have to consider these. Well, the court said, and I can quote, they said that the statutory scheme afforded offsetting benefits quote, which were specifically designed to ameliorate the impact of the prepay restrictions. Unquote. And it also said that these benefits, and here's another quote, quote, must be considered as part of the takings analysis. I think those benefits rejected as relevant by the court of federal claims decision that we were reviewing in CNICA 10 on the same ground. That is that they were speculative and uncertain. That's exactly right. So CNICA 10 presumably we were projecting that determination by the court of federal claims that they shouldn't be taken into account because they were speculative and uncertain. That's exactly right. The court in the CNICA 9 decision, which was on appeal, had rejected those statutory benefits, had refused to consider them on the very grounds that they were uncertain that they were speculative. But this was different. They just refused to consider them outright. They didn't do any factual analysis of them. I mean, you're not suggesting that this court did fact-finding with respect to the value of those benefits in CNICA 10, are you? No, I'm suggesting that the court found based on the record in that case that there was a benefit. They didn't quantify it. The fact that there was a benefit that in fact was provided. And in this case, the law court analyzed the benefit, her testimony, and said that the government's proofs still left the conclusion that they were speculative. Well, I got two things to say about that. One, the court didn't find that the court rejected considering them because they were speculative. But the court didn't find, well, let's go back to what we're talking about here and talk a little bit about the trial record. Even under a clearly erroneous standard, you lose on this because the property's owner, Mr

. Norman himself, said we could sell under the preservation statutes. The director of HUD's preservation division testified that buyers were prevalent and that he was unaware of any instance, anywhere in the United States, where an owner was unable to find a willing offerer. So you believe that the property owners were required to sell even if that's not what they purchased the property for? No, the reason that you don't look, this is not like mitigation of damages. Here, economic impact is one of the prongs to establish that a taking has occurred is part of the liability determination. This court enforced products and in Sianic 10 said that with respect to each pen central factor, the burden rests on the plaintiff. The court specifically said that with respect to with respect to economic impact in Sianic 10. What the burden relies on the plaintiff and they established 18 percent if the government wants to suggest that the number should be offset by other benefits. Why isn't the government's burden? Why isn't we're not talking about the burden of persuasion, but just the burden of proof? Why hasn't it switched to the government to establish that the 18 percent number is not the accurate number? It should reflect a reduction for these other benefits. Well, what the court found in Sianic 10 was that you look at the statutes as a whole and they're not merely restrictions and deference, but benefits. Well, I have to take it into account. Certainly, when the evidence is presented, there are many examples of this in the law. We have patent law obviousness. There are four prongs of the test, all of which may be considered, but the person who's moving for obviousness doesn't have to bring forth all of the contrary evidence that falls on the opposer to do. It has to be considered when presented. It can't be rejected when presented. But why does that mean that it's always their burden to produce the evidence that would help your case? Where it's part of the fundamental liability determining? I guess your answer that would mean we did produce evidence. We did meet a burden of production if there is one, but once we've met the burden of production, the burden of proof on this issue, as the case has said, remains with the plaintiff. We absolutely did because it was the government's evidence that established that 5% not CCA's evidence. They didn't produce any evidence whatsoever. I'd add that even if we're looking at an 18% economic impact, which disregards the preservation statutes' benefits and therefore necessarily has got to overstate the total impact. An 18% economic impact is not close to what this court has found is necessary or any court has found it is necessary to establish a regulatory taking

. What about the trial court's specific findings of fact as it related to the timing of a potential sale? Didn't the trial court make findings of fact that said that the potential sale couldn't occur until 1996 and that therefore that would reduce any benefit or economic benefit to CCA? What the trial court found was that the trial court completely discounted the sale option under a lipa and that is where the mistake lies. The trial court then went and looked at lipera, the second statute. Now CCA was eligible to proceed under both or actually they had to elect, but they could proceed under either. But a lipa was available. The trial court's finding about timing related to lipera. So the timing findings related to the separate statute. Under a lipa, the timing testimony of Kevin East is in the record. That's the only evidence about timing under a lipa and he said he was the director of HUD's preservation division nationally, well-versed in this and he said that sales under a lipa generally took 12 to 18 months. But you're saying that we should adopt your contrary evidence even though there was specific fact running by the lower court? Yes, that was part of their burden and frankly based on the evidence in the record that we cite to and the absence of contrary evidence, the court's decision would be clearly erroneous. But frankly, the court doesn't have to decide on us finding a 5% economic impact, in truly in our favor in this case, 80 to 90% economic impact is what is typically required and no court since the decision in Pencentral 35 years ago has found a regulatory taking where economic impact did not exceed 50%. CCA has stipulated that the economic impact in this case is no more than 18%. So is it your view that CNG-10 overruled the specific findings in CNG-8 that said that you don't need something approaching 100% in order to be a regulatory taking that even a far lesser amount could be sufficient? The trial court found that in this case in assessing the taking of claim, neither CNG-8 nor CNG-10 found such a thing. To the contrary, both cases said that you have to show a, I think the language's decase law has required there being a showing of a significant economic loss or serious economic loss, some phraseology along those, as a threshold matter to recover interregnary taking. Is the co-constitutional principle turns on percentages? Well, if you look at what the Supreme Court said in Lingo, it said that the purpose of the regulatory actions that are functionally equivalent to the classic taking where the government has directly appropriated private property or asked the owner from his domain. And the court goes on to say that the pen central analysis turns in large measure on economic impact. We think that's right because without an economic impact exceeding 50%, probably only in the order of 80% to 90%, you're not talking about a regulatory action that is akin to a direct condemnation. And that's what, that's the whole point of pen central is to find serious cases where the regulatory regulations affect the value of property so severely that it's akin to a condemnation or an ouster of the opponent. And CNG-8's statement that this is akin to a physical taking, you think that's been overruled by specifically in the CNG-10 decision. If you look at what the court explains in CNG-10, it says that there were three elements of the CNG-8 decision that applied across the board, that other aspect and none of those three elements are what we're talking about here in terms of character, for instance. What it said was that the other aspects of CNG-8 were based on specific arguments made about specific plaintiffs. And so they do not apply broadly

. And if you look at CNG-8 itself, what it did was it ruled in favor of four model plaintiffs. But with respect to the other, I believe it was 38 projects in that case, it did not rule in favor of the plaintiffs. It made with respect to the fact that by preventing property owners from using the property in the manner in which they chose to use it even for a limited period of time, the court specifically said that that was akin to a physical taking. Did it not? It uses that language. And that's not different from plaintiff to plaintiff. That is something that was based on the arguments that were made, actually the lack of arguments that were made by the government in CNG-8. And the court made that clear when it only applied certain factual findings in, well, when it only ruled regarding four model plaintiffs in CNG-8, allowed the other claims to go for it. And when it's expelled out exactly what its view of CNG-8 was in CNG-10. I'd note just in passing that the three judge panel in CNG-8 was, in fact, part of the seven judge panel in CNG-10. I don't think that that is necessarily decisive, but the same judges that were involved in CNG-8 were also writing and on the panel that rendered the CNG-10 decision. Is that in CNG-8, if I recall correctly, the government didn't argue that this was comparable to rent control? That's correct. It was now part of your argument. Exactly. That here what we're talking about is the fundamental character of this, the fundamental effect of this, putting aside benefits, is that the owner was unable to raise rents from their current rents unilaterally to a market rent rental for a period of few years. And that in and of itself is very similar to what you're talking about when you're talking about rent control. There's some limit on the ability to raise rents for projects up to a market level. And it's that difference in the rents, the resulted in the stipulated 18% economic impact, again, economic impact at a level that does not support. Let me ask you a couple more questions that goes back to CNG-8. If we were to take the plaintiffs there and use the methodology, the calculation methodology that CNG-10 dictates, it would come out to be closer to 18% would it not? You're talking about the the form model plaintiffs? You know, I cannot say, Droner, I am confident it would be lower than the 96, 97, 98%. 18% is not. You know, I really can't say

. It would be substantially lower than the 90% level. So your view would be that the government simply didn't make the right arguments since CNG-8 and all of those plaintiffs shouldn't have gotten a windfall. I hate to say that we didn't make all the right arguments since CNG-8, but given how things turned out in CNG-10, I think that that's clearly a case. But clearly under your current analysis, do you believe that those more plaintiffs would lose for the same reason that you think this plaintiffs should be? I think that's likely. Okay. Any other questions? Thank you, Mr. Henry. What will restore your rebuttal time? Thank you. Mr. Palbon? May I please the Court? Every Supreme Court case and every just federal circuit decision on regular property tests. Let me ask you first about this rent control issue, which is raised here. Why isn't this similar to rent control? Some of the treatises at the time describing this program describe it as a form of rent control. I mean, isn't that the essence of what the government was doing by saying that you can't pre-pay the mortgage that you're going to continue to be subject to rent control for the traditional period that turned out to be five years? Why isn't that similar to rent control? It's not similar to rent control at all, Your Honor. As the Supreme Court's decision in Yee versus Escondito made clear in the rent control context, the property owner made decide not to rent the property at all. It may put the property to a different use. It doesn't have to continue to participate in the program. In this case, CCA was partied to a regulatory agreement, and it had to operate the property in the fashion that was dictated by HUD. So it's a completely different circumstance. But there are rent control cases like that where the rent control system has required that you continue to operate the program, continue to lease the units to people, and those rent control programs have been upheld, right? In Yee, Your Honor. I'm probably my Court of Appeals cases, right? There are Court of Appeals cases in which rent control programs have been upheld that required people to continue to operate the apartment building or whatever it is as a rent control building, right? Well, I'm not familiar with those cases that you're referring to. I do know that in Yee, the Supreme Court made clear that the rent control presents a different circumstance from the situation that we have here where the property owner is required to continue to participate in the program

. The Supreme Court in Yee stated quite explicitly that it would be a different case from the one that was before it if the property owner did not have the opportunity to withdraw from the rent control program. Which raises the question, in fact, there were opportunities to withdraw from the program here, which allowed a sale or if a sale couldn't occur, you could prepay the mortgage and exit the program. So why isn't that similar? Since those opportunities did exist. There was no obligation on the part of CCA to take advantage of the options that were presented. It's not a question of whether there's an obligation to take advantage of the options. Those options existed to exit the program. So while you say that Yee requires an opportunity to exit, I'm not sure that's true. Well, but if it does, there was an opportunity to exit here, right? Well, exiting the program here would have required CCA to sell the property. That's not the circumstance that the Supreme Court was positing in Yee at all. It was simply positing the circumstance that the property owner in Yee could cease participating in the program. You didn't have to sell the program. You had to offer it for sale. And if a sale wasn't accomplished, then you could exit the program. You could get out of the program without actually selling the property, right? If one went through that process and a purchaser materialized over the course of three-year schedule that was implicated as a result of this option, if the seller materialized, then the sale had to be made. That was the purported objective of the Libra procedure. Yes. And then if you couldn't get a sale at full market price, then you could withdraw from the program. If there was no purchaser or if there was no funding from the Congress, and we know that that occurred in a number of instances, then at a certain point the property owner had the right to prepay the mortgage and exit the program, but nonetheless had to continue to charge the HUD-controlled rents for an additional three-year period. So in the situation that your honor is positing, we're talking about a five to six-year period during which the HUD level rents would be required to be charged to the tenants. Now, what kind of findings did the trial court make with respect to the likelihood of a sale or to the with respect to whether or not the sale option was meaningful? The court did exactly what it was told to do in Siena Gatenin. It looked at these options very carefully, and it found specifically that the opportunity to prepay and sell the property was speculative in this case

. There was no assurance as the court observed that a buyer would materialize. All that was present in this case was an indirect expression of interest from one unidentified potential buyer that came to Mr. Norman through the party that was servicing the mortgage, but it didn't go anywhere. So the court specifically found- What about the fact that the government says that there's been no instance identified in which someone wanted to sell in which a buyer wasn't found? Well, that's the government's argument, but the court will know- You see, it's evidence, right? The court will know specifically- That's evidence, right? That was the government's evidence. There was testimony to that effect from Mr. East, but- And there was no contrary testimony, right? Did you present any contrary testimony on that point? On that specific point, no, you're on it, but the court analyzed the evidence very carefully and found that in this case all that happened was, as I said, a single indirect expression of interest from a possible purchaser. The court then went on to find specifically with respect to the New Orleans market that there were three property owners who had plans of action approved by HUD, and then there was no funding for those plans. So at the end of the day, they were not implemented. But if there was no funding, then you could withdraw from the program, right? Well, at that point, after having been through a three-year process, one can then prepay and then have the privilege of charging HUD-regulated brands for an additional three years. But the court of federal claims did not take into account the fact that if funding were unavailable, you could withdraw from the program. No, I'm quite certain that the court below was well aware of and noted that- Where did the court recognize that you could withdraw from the program if the funding wasn't available? I believe that when the trial court is exploiting the procedures that were available underlipper that that was noted. No, but I don't think it was. I mean, if you can show me where it was, I didn't seem to take account of the fact that if the funding was unavailable, you could get out. Well, I'm not recalling specifically now. I thought that the court and exploiting the statute noted that point. We can go back and check and either did or he didn't. But the judge did consider all the evidence and he made specific findings that in this case- The process that doesn't depend on the individual facts. If there's no buyer, if there's no funding, an either event, even if the court were right about it, there's no buyer, there's no funding, you can still get out. But that's the ground for being able to get out is that you can't sell it or there's no funding to promote a sale. You're on a that process would result in a even longer period- Well, for the first time- The first time- Which has been a longer period, but you could get out. I mean, there's no question

. There's no point in taking the list of the list out. If the criminal can't get out, that's what the statute and the regulation say. If you can't find a buyer or you can't get funding, you can get out. The property owner could get out eventually under hope when that legislation was passed. It cut short the permanent taking that Lifer and had to establish- No, no, no. But in terms of the Lifer and Lifer, there is nothing speculative. Is there about the ability to get out? If you can't find a buyer or you can't get funding, you can get out. You may have to to keep their rents in place for three years, but there's nothing speculative about the ability to get out, right? For first of all, with respect to Alipa, Your Honor, there is nothing in the statute and there is nothing in the regulations that says forth any type of process or procedure for selling the property and getting out of the program. And the court looked at that issue very closely and made specific findings as to that as well. All of the findings are to what the statute says. Well, the court observed what the statute said. But is it true that under Alipa, you had an absolute right to get out? Not under Alipa, absolutely not. Under Alipa, if one went through the process of getting appraisals and so on and so forth, which the court knows well, and at the end of that, two and a half to three-year process, if there was no buyer, at that point there was a right to prepay, but you then nonetheless had to pay, had to charge HUD-regulated rents for the next three years. But there's nothing speculative about the right to get out. It may be that you have to continue to fix the rents to the HUD level for three years, but there's nothing speculative about the right to get out of the program. What the court found was speculative, Your Honor, was attaching any type of value to what this option might produce. And I haven't seen that the court considered the right to get out of the program. And Professor Dickey, the government's own expert, himself said that where these options have not been exercised, where somebody has not filed a plan of action, gone through the process and actually received the benefits that simply looking at it in the way that we're discussing it right now, Professor Dickey, their expert said that the value was speculative. And that's the full-of-ish. All of this really goes to whether the number should be 18% or something less than 18%. Or 5% yes. But I guess from my question to you is, what cases exist that would suggest something at the level of 18% diminution and value is enough under the patent central framework? Well, let me answer that in two ways. Your Honor, first of all, the pen central test is an ad hoc, highly fact-based test in which there were three elements, all of which have to be balanced. And in Kaiser Etner and in Lingle, the court put preeminent emphasis on the fact that the right to exclude a fundamental property right is what was at issue. And so the balance has to alter depending on the character of the taping or the investment back expectations. But turning specifically to the numbers, the 81% impact that was previously discussed in the earlier history of this case is an economic impact that is concentrated in the five-year period of the taping. That's what that represents. Please reject that approach in Ciennigotan. Your Honor, did we reject that approach in Ciennigotan? Specific. The court in Ciennigotan said that the lifetime value of the property needed to be considered. In my opinion, we specifically rejected the approach that leads to the 81% calculation, right? Yes. Well, I wouldn't say that it was specifically rejected as such. I would say that the court below was directed to take into account. We specifically considered that approach that led to an 81% calculation and said that's not a correct approach, right? In the sense that the court directed that the lifetime impact to be considered, that's correct. That's what led to the 18% figure not considering the offset. Right. And my point, Your Honor, is that if the 81% impact concentrated in the five-year period is mathematically equivalent to this 18% or so impact for the simulation of the entire value of the property. Don't talk about me. Suppose we say that the approach that leads to the 81% calculation was rejected. Then you end up, you contend that the right figure is 18% correct? 18% is the impact when you look at the lifetime value of the property. But when you're talking about real estate and you're talking about the infinite life of real estate and the infinite income potential that a real estate property can produce, you will never have a regulatory taking where the duration of the taking is five or six years and produce an economic impact over the lifetime of the property on the order of 60, 70 or 80% that the government is suggesting. So this argument, though, doesn't this argument really, isn't what you're arguing now and an argument that would be appropriate before the in-bank court, but not before the panel

. But I guess from my question to you is, what cases exist that would suggest something at the level of 18% diminution and value is enough under the patent central framework? Well, let me answer that in two ways. Your Honor, first of all, the pen central test is an ad hoc, highly fact-based test in which there were three elements, all of which have to be balanced. And in Kaiser Etner and in Lingle, the court put preeminent emphasis on the fact that the right to exclude a fundamental property right is what was at issue. And so the balance has to alter depending on the character of the taping or the investment back expectations. But turning specifically to the numbers, the 81% impact that was previously discussed in the earlier history of this case is an economic impact that is concentrated in the five-year period of the taping. That's what that represents. Please reject that approach in Ciennigotan. Your Honor, did we reject that approach in Ciennigotan? Specific. The court in Ciennigotan said that the lifetime value of the property needed to be considered. In my opinion, we specifically rejected the approach that leads to the 81% calculation, right? Yes. Well, I wouldn't say that it was specifically rejected as such. I would say that the court below was directed to take into account. We specifically considered that approach that led to an 81% calculation and said that's not a correct approach, right? In the sense that the court directed that the lifetime impact to be considered, that's correct. That's what led to the 18% figure not considering the offset. Right. And my point, Your Honor, is that if the 81% impact concentrated in the five-year period is mathematically equivalent to this 18% or so impact for the simulation of the entire value of the property. Don't talk about me. Suppose we say that the approach that leads to the 81% calculation was rejected. Then you end up, you contend that the right figure is 18% correct? 18% is the impact when you look at the lifetime value of the property. But when you're talking about real estate and you're talking about the infinite life of real estate and the infinite income potential that a real estate property can produce, you will never have a regulatory taking where the duration of the taking is five or six years and produce an economic impact over the lifetime of the property on the order of 60, 70 or 80% that the government is suggesting. So this argument, though, doesn't this argument really, isn't what you're arguing now and an argument that would be appropriate before the in-bank court, but not before the panel. Because, I mean, the case, Siena Gatenis, exactly on point, it's exactly these sorts of facts and it rejected that approach. You're saying that was wrong and maybe I'm sympathetic, but the problem is it's binding precedent. And so the 18% impact is the only impact that we can really consider. Yes, but I want my question to you was what cases would substantiate a finding of a taking with an 18% impact? I think the 18% impact has to be viewed as the level of impact that results when the lifetime value of the property is considered. And you can't take cases that look to a 70, 80 or 90% impact when we're talking about either a permanent taking or where the impact is evaluated during the temporary period of the taking and simply transpose that 70 or 80% rule to the circumstance where the lifetime value of the property is being considered. You will necessarily produce a lower percentage. If, for example, if Congress passed legislation, confiscating the net, the net would agree that if the 18% is the right figure that you lose? No, absolutely not. No. Well, then why would you win if it's 18%? Well, because there are cases which with a particular deprivation and question has a character that is very severe or with a primary investment back expectations are of a particular sort. When you balance out the different factors, then the economic impact doesn't need to attain a 70 or 80% level. Look at the Kaiser Hettner case is a good example. There, the court recognized that what was being taken was the fundamental right to exclude. It was a physical taking case. It was an easement. It was a physical taking case, right? It created a right on the part of physical taking. Well, there was a physical taking dimension to it, but I don't think you can look at it solely as a physical taking case. It gave a right to certain to the public to traverse a particular waterway. It was described as an easement. It certainly wasn't taking the entire property value anywhere near. Let's see, that's the problem. The Supreme Court has said when you have a physical taking case, I mean, look at the cable box in Laredo

. Because, I mean, the case, Siena Gatenis, exactly on point, it's exactly these sorts of facts and it rejected that approach. You're saying that was wrong and maybe I'm sympathetic, but the problem is it's binding precedent. And so the 18% impact is the only impact that we can really consider. Yes, but I want my question to you was what cases would substantiate a finding of a taking with an 18% impact? I think the 18% impact has to be viewed as the level of impact that results when the lifetime value of the property is considered. And you can't take cases that look to a 70, 80 or 90% impact when we're talking about either a permanent taking or where the impact is evaluated during the temporary period of the taking and simply transpose that 70 or 80% rule to the circumstance where the lifetime value of the property is being considered. You will necessarily produce a lower percentage. If, for example, if Congress passed legislation, confiscating the net, the net would agree that if the 18% is the right figure that you lose? No, absolutely not. No. Well, then why would you win if it's 18%? Well, because there are cases which with a particular deprivation and question has a character that is very severe or with a primary investment back expectations are of a particular sort. When you balance out the different factors, then the economic impact doesn't need to attain a 70 or 80% level. Look at the Kaiser Hettner case is a good example. There, the court recognized that what was being taken was the fundamental right to exclude. It was a physical taking case. It was an easement. It was a physical taking case, right? It created a right on the part of physical taking. Well, there was a physical taking dimension to it, but I don't think you can look at it solely as a physical taking case. It gave a right to certain to the public to traverse a particular waterway. It was described as an easement. It certainly wasn't taking the entire property value anywhere near. Let's see, that's the problem. The Supreme Court has said when you have a physical taking case, I mean, look at the cable box in Laredo. Even a tiny little tiny little part of the property of physical taking case entitles you to damages, but in the regulatory context, you've got to have more. And while no court has ever defined exactly where the threshold diminution number should fall, so I'm sympathetic to hearing your arguments about why something as low as 18% ought to be enough, at the same time, I don't see cases below 50% and most of them hover in the 80s and 90s. So it's very difficult for me to think that 18% is going to meet whatever that threshold is. I appreciate you pointing around about all of those cases when we talk about 70 or 80 or 90%. Those are measuring the impact that results either from a permanent taking or they're measuring the impact which results during the concentrated period of the temporary taking. There's no case which says you can take that 70% impact that has felt over a five-year period of temporary taking and transpose it to a consideration of the lifetime value of the property and say you have to have the same 70% impact. I'm not understanding how you're trying to distinguish the permanent takings ones because I actually see those as hurting you not helping you in the following way. 18% permanently seems worse to me than 18% over five years. So the idea that all of those cases required 70 to 80% when it was permanent also actually seems to suggest to me maybe you should have to show more than 70 or 80% if it's temporary. So I'm not sure why your distinction actually helps you. Well what I'm trying to show is that on one side of the equation we have cases in which high levels of impact are being discussed and they fall into two categories. The permanent case at the permanent takings but also temporary regulatory takings where 70 or 80% was required but when they're measuring the impact they're focusing on what was taken during that five-year period or six-year period whatever the duration is and not with respect to any comparison to the lifetime value of the property and what the government is advocating for here is an effect or rule that would do away with temporary regulatory takings because when you have real property you will never, it's mathematically impossible. You will never have a taking on the order of 70, 80 or 90% if the duration of the taping is five or six years. It's just not possible. All right thank you Mr. Palma. I'm pleased to court. I noted the outset that council for CCA could not identify any regulatory taking case where less than a 50% economic impact has been sufficient to establish a taking. Has the issue ever really been analyzed in this context? Has anybody looked at using the formula that we put forth but then analyzing what that means in the context of a temporary taking? Absolutely. I mean the cases that we are talking about that analyze economic impact have the standard measure for analyzing economic impact has been the one that the court enunciated in the Senate content. It's not a new standard

. Even a tiny little tiny little part of the property of physical taking case entitles you to damages, but in the regulatory context, you've got to have more. And while no court has ever defined exactly where the threshold diminution number should fall, so I'm sympathetic to hearing your arguments about why something as low as 18% ought to be enough, at the same time, I don't see cases below 50% and most of them hover in the 80s and 90s. So it's very difficult for me to think that 18% is going to meet whatever that threshold is. I appreciate you pointing around about all of those cases when we talk about 70 or 80 or 90%. Those are measuring the impact that results either from a permanent taking or they're measuring the impact which results during the concentrated period of the temporary taking. There's no case which says you can take that 70% impact that has felt over a five-year period of temporary taking and transpose it to a consideration of the lifetime value of the property and say you have to have the same 70% impact. I'm not understanding how you're trying to distinguish the permanent takings ones because I actually see those as hurting you not helping you in the following way. 18% permanently seems worse to me than 18% over five years. So the idea that all of those cases required 70 to 80% when it was permanent also actually seems to suggest to me maybe you should have to show more than 70 or 80% if it's temporary. So I'm not sure why your distinction actually helps you. Well what I'm trying to show is that on one side of the equation we have cases in which high levels of impact are being discussed and they fall into two categories. The permanent case at the permanent takings but also temporary regulatory takings where 70 or 80% was required but when they're measuring the impact they're focusing on what was taken during that five-year period or six-year period whatever the duration is and not with respect to any comparison to the lifetime value of the property and what the government is advocating for here is an effect or rule that would do away with temporary regulatory takings because when you have real property you will never, it's mathematically impossible. You will never have a taking on the order of 70, 80 or 90% if the duration of the taping is five or six years. It's just not possible. All right thank you Mr. Palma. I'm pleased to court. I noted the outset that council for CCA could not identify any regulatory taking case where less than a 50% economic impact has been sufficient to establish a taking. Has the issue ever really been analyzed in this context? Has anybody looked at using the formula that we put forth but then analyzing what that means in the context of a temporary taking? Absolutely. I mean the cases that we are talking about that analyze economic impact have the standard measure for analyzing economic impact has been the one that the court enunciated in the Senate content. It's not a new standard. It's the one that is done when we cite many cases in our brief with higher economic impacts where there's no taking. All of those cases use the same sort of approach to economic impact that we're talking about here that results in an 18% economic impact. Can temporary taking context? Some yes some no. I can't identify which cases are temporary which cases are permanent. Well what this court has said in CNN at 10 and what the Supreme Court said in first English is there is no difference in analyzing economic impact between well it's spec set specifically in CNN at 10 that there's no difference in analyzing economic impact between a temporary and a permanent taking except that you take the duration of the regulatory restriction into account when you're analyzing the economic impact. So once that's taken... Just as Scalia said that in this context then the government can always cut off any regulatory taking argument by stopping the taking at some point. What I would say to that is that if in the character of the government action it was shown that there was some attempt to gain the system that might be something that the court could properly evaluate in looking at character under the Penn Central rubric. We don't have that here. The legislative history is clear that the HOPEC was enacted because the benefits being provided under the preservation statutes were costing too much. Congress spent millions of dollars actually hundreds of millions of dollars in providing benefits directly to project owners affected by the preservation statutes. And it was that reason that the preservation statutes were dropped or were repealed not because there was a fear that there was going to be a taking and that goes right back to why there is a problem with the trial court's analysis. You don't consider those benefits in assessing economic impact when you're looking at the 18% figure. But moreover the the trial court refused to even consider those benefits in looking at the character of the government action. At the same time the court is saying that the government is placing the cost of housing the poor on project owners. You can't ignore the fact that Congress was appropriating millions of dollars, many millions of dollars as a direct benefit to owners when you're looking at whether or not the cost has been shifted onto those owners. But that's what the trial court did. So that's an error in an analyzing character and it too is concrete. Those benefits that you're talking about, those predated the original agreements

. It's the one that is done when we cite many cases in our brief with higher economic impacts where there's no taking. All of those cases use the same sort of approach to economic impact that we're talking about here that results in an 18% economic impact. Can temporary taking context? Some yes some no. I can't identify which cases are temporary which cases are permanent. Well what this court has said in CNN at 10 and what the Supreme Court said in first English is there is no difference in analyzing economic impact between well it's spec set specifically in CNN at 10 that there's no difference in analyzing economic impact between a temporary and a permanent taking except that you take the duration of the regulatory restriction into account when you're analyzing the economic impact. So once that's taken... Just as Scalia said that in this context then the government can always cut off any regulatory taking argument by stopping the taking at some point. What I would say to that is that if in the character of the government action it was shown that there was some attempt to gain the system that might be something that the court could properly evaluate in looking at character under the Penn Central rubric. We don't have that here. The legislative history is clear that the HOPEC was enacted because the benefits being provided under the preservation statutes were costing too much. Congress spent millions of dollars actually hundreds of millions of dollars in providing benefits directly to project owners affected by the preservation statutes. And it was that reason that the preservation statutes were dropped or were repealed not because there was a fear that there was going to be a taking and that goes right back to why there is a problem with the trial court's analysis. You don't consider those benefits in assessing economic impact when you're looking at the 18% figure. But moreover the the trial court refused to even consider those benefits in looking at the character of the government action. At the same time the court is saying that the government is placing the cost of housing the poor on project owners. You can't ignore the fact that Congress was appropriating millions of dollars, many millions of dollars as a direct benefit to owners when you're looking at whether or not the cost has been shifted onto those owners. But that's what the trial court did. So that's an error in an analyzing character and it too is concrete. Those benefits that you're talking about, those predated the original agreements. Those benefits were part of the original agreements and part of the inducements to enter into these contracts in the first place. Let me be clear, Your Honor. I'm not talking about the tax benefits here which were the principal reason that people got into this. That these projects were tax-owned. You think every plaintiff is the same in that regard because I mean the trial judge here made specific findings that that was not the principal reason for these claims. Your Honor, when you are looking at interference with investment backed expectations. You are looking at reasonable investment backed expectations. And what the court said you look at, let me go back to what this court said in consolidated Edison in an on-bought decision. It said that subjective intent is irrelevant. It said that again in chance for a manner. But what the trial court did in terms of factual findings is he made factual findings about the subjective intent of the project owners. He didn't base it on the objective evidence that we put it in the record such as the six private placement memoranda such as our expert testimony such as the learned treatise that was admitted into evidence that was written back in 1972 and speaks specifically about these kinds of investments. All of which uniformly says that these are tax shelters and that is the expectation for investors. You look at the the perspectives in particular. They say the main benefit is from income tax savings and they place a one dollar value on the ability to prepaid 20 years in the future. One dollar. But it's not that this judge didn't consider those. He just found those not to be the driving force, right? You found that those not to be representative of these particular plaintiffs. What the court fairness? You say he didn't consider them. He considered them. He rejected them

. Those benefits were part of the original agreements and part of the inducements to enter into these contracts in the first place. Let me be clear, Your Honor. I'm not talking about the tax benefits here which were the principal reason that people got into this. That these projects were tax-owned. You think every plaintiff is the same in that regard because I mean the trial judge here made specific findings that that was not the principal reason for these claims. Your Honor, when you are looking at interference with investment backed expectations. You are looking at reasonable investment backed expectations. And what the court said you look at, let me go back to what this court said in consolidated Edison in an on-bought decision. It said that subjective intent is irrelevant. It said that again in chance for a manner. But what the trial court did in terms of factual findings is he made factual findings about the subjective intent of the project owners. He didn't base it on the objective evidence that we put it in the record such as the six private placement memoranda such as our expert testimony such as the learned treatise that was admitted into evidence that was written back in 1972 and speaks specifically about these kinds of investments. All of which uniformly says that these are tax shelters and that is the expectation for investors. You look at the the perspectives in particular. They say the main benefit is from income tax savings and they place a one dollar value on the ability to prepaid 20 years in the future. One dollar. But it's not that this judge didn't consider those. He just found those not to be the driving force, right? You found that those not to be representative of these particular plaintiffs. What the court fairness? You say he didn't consider them. He considered them. He rejected them. No, because he considered them in making this subjective determination, but he made no determination at all about the objective factor, right? That's exactly right. It's a question whether you're looking at the subjective intent of Mr. Norman's uncle and father, which he made that factual finding about, and whether you're looking at the expectations of the industry as a whole, the objective expectation of the industry as a whole. And that is an important key element of looking at interference with investment-backed expectations. And the court didn't find. In fact, the court specifically found that there were owners that had these tax shelter expectations in the industry. And then he created a second class of owners that he said was interested in long-term benefits. But there's not a single example, putting aside CCA itself. There's not a single example in the record of any project anywhere in the United States that had that kind of expectation. And that's not surprising because owners did not have to forego short-term tax benefits in order to obtain whatever benefit they might get in terms of a long-term benefit. Let me just ask you one more question on this issue, though. The objective inquiry, which is important. But the objective inquiry is still supposed to be based on what an objective investor in the shoes of the particular plaintiff would do, correct? It's not objective in the sense that you remove it from the actual circumstances, correct? No, you don't remove it from the actual circumstances. What we're talking about here is the objective expectations of an investor in the narrowed, if you like, to even the New Orleans area. But there's no difference. There's no record basis for suggesting the expectations in New Orleans are any different than the expectations in Seattle or Minneapolis where we have a perspective in a growing suburban area that says tax benefits are the reason to invest in this. So that's a distinction without a difference. But if you're supposed to be in the shoes of the particular investor, why is evidence of syndicators in totally different circumstances and totally different areas? Why is that relevant? If there had been evidence introduced that people who are selling interest in section 221, the three or 236 projects in San Francisco had a different expectation than people in Minneapolis or in Los Angeles. I think what Judge O'Malley is asking you is whether in considering the individual circumstances, you should consider somebody who doesn't syndicate separately from the run of the mill people who do syndicate. In other words, whether the reasonable investor is a broad spectrum that includes both syndicators and non syndicators or whether you should limit it to non syndicate. Thank you, Your Honor

. No, because he considered them in making this subjective determination, but he made no determination at all about the objective factor, right? That's exactly right. It's a question whether you're looking at the subjective intent of Mr. Norman's uncle and father, which he made that factual finding about, and whether you're looking at the expectations of the industry as a whole, the objective expectation of the industry as a whole. And that is an important key element of looking at interference with investment-backed expectations. And the court didn't find. In fact, the court specifically found that there were owners that had these tax shelter expectations in the industry. And then he created a second class of owners that he said was interested in long-term benefits. But there's not a single example, putting aside CCA itself. There's not a single example in the record of any project anywhere in the United States that had that kind of expectation. And that's not surprising because owners did not have to forego short-term tax benefits in order to obtain whatever benefit they might get in terms of a long-term benefit. Let me just ask you one more question on this issue, though. The objective inquiry, which is important. But the objective inquiry is still supposed to be based on what an objective investor in the shoes of the particular plaintiff would do, correct? It's not objective in the sense that you remove it from the actual circumstances, correct? No, you don't remove it from the actual circumstances. What we're talking about here is the objective expectations of an investor in the narrowed, if you like, to even the New Orleans area. But there's no difference. There's no record basis for suggesting the expectations in New Orleans are any different than the expectations in Seattle or Minneapolis where we have a perspective in a growing suburban area that says tax benefits are the reason to invest in this. So that's a distinction without a difference. But if you're supposed to be in the shoes of the particular investor, why is evidence of syndicators in totally different circumstances and totally different areas? Why is that relevant? If there had been evidence introduced that people who are selling interest in section 221, the three or 236 projects in San Francisco had a different expectation than people in Minneapolis or in Los Angeles. I think what Judge O'Malley is asking you is whether in considering the individual circumstances, you should consider somebody who doesn't syndicate separately from the run of the mill people who do syndicate. In other words, whether the reasonable investor is a broad spectrum that includes both syndicators and non syndicators or whether you should limit it to non syndicate. Thank you, Your Honor. I had misunderstood. There's no reason that the benefits that are provided by the project, whether you hold the project yourself or you syndicate it, are going to be any different. The tax benefits, for instance, are going to be the same whether you hold it or you syndicate it. The syndications typically occurred when the developer didn't have the need for the tax shelter and so when they do cash in on that by selling the tax shelter aspect of the investment to somebody else. But there's absolutely no distinction between someone who purchases property to hold it and someone who purchases property to syndicate it. I'm saying there's no difference in the returns that this kind of property would generate, that the fact that you syndicate, that you sell shares up to others doesn't affect where the money is coming from for the particular project. When you're talking about a reasonable investor in this sort of project, the money comes from where the money comes from. Well, here we're going to consider individual investors in this project. This investor only put $32,000 into this program, right? That's right. It was a very low, I believe it was 1.6% of the replacement value of the project as a whole. Far far lower than what you would be putting into a project if you were developing as a conventional project. That's one of the benefits that was expected and gained through participating in this project and one that was not interfered with by the preservation statutes. What about the contract issue? Well, the contract issue frankly is not properly before the court. What we had in the contract issue was a case that went to trial where the contract issue was not raised on appeal to this court where the contract issue was not raised. But let's assume it was properly before the court. Why shouldn't we visit that issue? Well, the issue is, there's binding precedent on that issue, first of all. So unless the issue were reviewed on bomb, a standard for controls. And there's no reason to review that issue on bomb because I read the decision yesterday. It's a well-reasoned, coaching decision. It's consistent with federal common law

. I had misunderstood. There's no reason that the benefits that are provided by the project, whether you hold the project yourself or you syndicate it, are going to be any different. The tax benefits, for instance, are going to be the same whether you hold it or you syndicate it. The syndications typically occurred when the developer didn't have the need for the tax shelter and so when they do cash in on that by selling the tax shelter aspect of the investment to somebody else. But there's absolutely no distinction between someone who purchases property to hold it and someone who purchases property to syndicate it. I'm saying there's no difference in the returns that this kind of property would generate, that the fact that you syndicate, that you sell shares up to others doesn't affect where the money is coming from for the particular project. When you're talking about a reasonable investor in this sort of project, the money comes from where the money comes from. Well, here we're going to consider individual investors in this project. This investor only put $32,000 into this program, right? That's right. It was a very low, I believe it was 1.6% of the replacement value of the project as a whole. Far far lower than what you would be putting into a project if you were developing as a conventional project. That's one of the benefits that was expected and gained through participating in this project and one that was not interfered with by the preservation statutes. What about the contract issue? Well, the contract issue frankly is not properly before the court. What we had in the contract issue was a case that went to trial where the contract issue was not raised on appeal to this court where the contract issue was not raised. But let's assume it was properly before the court. Why shouldn't we visit that issue? Well, the issue is, there's binding precedent on that issue, first of all. So unless the issue were reviewed on bomb, a standard for controls. And there's no reason to review that issue on bomb because I read the decision yesterday. It's a well-reasoned, coaching decision. It's consistent with federal common law. The plaintiffs offer the proposition that interpreting, in interpreting an agreement, and here the agreement between the United States and CCA was the regulatory agreement. That's the only agreement between CCA and the United States. The other agreements were with other people. That's right. There was one between CCA, actually, there were two. There was a mortgage and a mortgage note between CCA and its lender. Those are the other agreements. It was only in the note between CCA and its lender that there is a right to prepare. So CCA points to cases that say you interpret those agreements together. And we don't disagree with that proposition. If there's a question about what the meaning of the regulatory agreement is, certainly you look at the whole context of the transaction. It's a fundamentally different proposition to say that in interpreting how the regulatory agreement is to be construed, you actually merge that with the mortgage note and the mortgage. Those documents were not incorporated by reference. And the regulatory agreement was as the square held in CNK4, a freestanding, complete agreement. Absolutely no reason that it doesn't get enforced according to its terms. And when you enforce it according to its terms, there's simply no pre-payment right and therefore no privity between CCA and the United States. Do you agree that that conclusion is inconsistent with a number of decisions from our sister circuits who find that you don't have to have every single one of the documents signed by everybody to a tri-partite agreement? No, I don't disagree that's in conflict with sister circuits. If you're talking about let me see if I can spell out what my understanding of the law is. And that's that if you have an agreement between two parties or more than two parties where it is memorialized in separate writings, for instance, there are situations where you've got a letter making an offer and a letter coming back making changes and then a confirmation of that. You look at all those together and maybe all those different agreements between the three parties actually comprise the agreement. That's not the case we're talking about

. The plaintiffs offer the proposition that interpreting, in interpreting an agreement, and here the agreement between the United States and CCA was the regulatory agreement. That's the only agreement between CCA and the United States. The other agreements were with other people. That's right. There was one between CCA, actually, there were two. There was a mortgage and a mortgage note between CCA and its lender. Those are the other agreements. It was only in the note between CCA and its lender that there is a right to prepare. So CCA points to cases that say you interpret those agreements together. And we don't disagree with that proposition. If there's a question about what the meaning of the regulatory agreement is, certainly you look at the whole context of the transaction. It's a fundamentally different proposition to say that in interpreting how the regulatory agreement is to be construed, you actually merge that with the mortgage note and the mortgage. Those documents were not incorporated by reference. And the regulatory agreement was as the square held in CNK4, a freestanding, complete agreement. Absolutely no reason that it doesn't get enforced according to its terms. And when you enforce it according to its terms, there's simply no pre-payment right and therefore no privity between CCA and the United States. Do you agree that that conclusion is inconsistent with a number of decisions from our sister circuits who find that you don't have to have every single one of the documents signed by everybody to a tri-partite agreement? No, I don't disagree that's in conflict with sister circuits. If you're talking about let me see if I can spell out what my understanding of the law is. And that's that if you have an agreement between two parties or more than two parties where it is memorialized in separate writings, for instance, there are situations where you've got a letter making an offer and a letter coming back making changes and then a confirmation of that. You look at all those together and maybe all those different agreements between the three parties actually comprise the agreement. That's not the case we're talking about. That's not the sort of case we're talking about here. Here we have a freestanding, whole agreement that is the regulatory agreement that has no right to pre-pay. We have a mortgage note that does not involve the United States that does talk about pre-paying the mortgage. Well, the mortgage is then guaranteed by the United States and the guaranteed specifically addresses the 20-year-right to repeal the contract. The guarantee does not. All the guarantee says is that it's pursuant to the regulations that then set forth the right pre-pay without how to prove it. It says pursuant to the regulations authorizing the United States to enter into these sorts of deeds to make the, to actually make the loan guarantees. Okay. Thank you, Mr. Chairman. Thank you.

We argued cases today. The first one is number 10, 2010, 5100, CCA, associates of the United States and Mr. Harrington. May please the court. The judgment in this regulatory taking action should be reversed. The trial court aired each part of its analysis under Penn Central. It failed in considering offsetting statutory benefits, both in assessing the character of the government action and in assessing economic impact. It mistakenly fashioned a new fourth Penn Central factor and it incorrectly treated the preservation statutes as a permanent restriction on prepayment in assessing interference with investment-backed expectations. The court should bear in mind two things in assessing CCA's claim. First, this action concerns a regulatory taking under Penn Central. It does not allege a per se taking under loretto. This is important because CCA frequently invokes per se taking cases in its briefs and uses the language from physical occupation cases and discussing its claim here. Second, in CNN, a 7-judge panel of this court. Well, don't you hang a lot of your case on Tahoe Sviara and isn't that a per se case? I don't believe we do hang a lot of our case on that, Your Honor. It is a per se case and in fact, it is a particular case that says that you distinguish between per se taking cases and regulatory taking cases, that you have to be careful in applying holdings from per se cases in regulatory actions. But to the extent we're going to talk about an 81% diminution and value as opposed to an 18% diminution and value, didn't the genesis of that notion stem from Tahoe Sviara and carry through to CNN at 10 and now you'd like us to apply it in this case as well. Well, not simply Tahoe Sviara, Your Honor. And Tahoe Sviara does when talking about the property interest that is to be considered as the denominator, if you will, in the economic impact figure. It says that you look at the property as a whole and it said that it's improper to, in Tahoe Sviara, they were splitting up in temporal segments. And the court said you don't do that. You look at the value of the property as a whole when you're considering economic impact. But that is a very different one. That's no different from what the Supreme Court said in the concrete pipe case. Thank you. Exactly the same principle. A similar principle is enunciated in Penn Central itself and it is that line of cases that the court took and said in CNN at 10 that you apply that and you have to look at the value of the property as a whole. The 81% figure you alluded to is one that uses a return based approach. Exactly the approach that was considered in CNN at 10 and rejected as inappropriate in CNN at 10. We're talking about the same approach here and I add that it's important not to use that return based approach because the standard method of evaluating economic impact is a diminution and value sort of approach that considers the property as a whole. In order to have consistency across taking sure as prudence you can't be using different methods. And the court talked about that a little bit in CNN at 10. Also talked about that in the second rose acre decision about the danger of having multiple different tests and the misleading impression that you can get from that 81% sort of figure. So then do you think it's erroneous because CNN at 10 allowed for two different tests. One that was based on market value at the time of the regulation and then a separate one which seems to be based on return based approach and your comment just a minute ago might have suggested that you thought it was inappropriate for the court to have these two alternative tests available to establish taking. Not I'm not suggesting that. The two tests that are talked about in CNN at 10 are the diminution and value approach. 81% wasn't a property as the whole approach. It wasn't under under CNN as I understand the issue here today with respect to economic impact. The two choices are the 18% which is what a CCA is arguing for and the 5% which the government is arguing for. Right? That's exactly right. The 81% figure is neither of the approaches that the court mentioned in CNN at 10. Both of those approaches look at the value of the property as the whole. The 81% approach does exactly what the court said you cannot do in CNN at 10, which is break things into temporal parts and then look at a returns at a particular period of time against what was in this case a benchmark 15% mortgage back security. I understand CCA to argue the number of things which probably an in bank panel of this court would have to decide. They're challenging the contract decisions under CNICA 4. I think it is the privity issue I think. I understand them also to be challenging whether or not the 81% diminution, whether CNICA 10 was correct. CNICA 8 certainly suggested something like what they had concluded with the 81% number was the correct measure or approach to the measure of damages. And CNN came along and said no it's not. It wasn't argued by the government and that's why it wasn't addressed and so we can now do it. Do you understand them to be challenging that as well? Maybe we can't reach it at a panel level. It has to go to in bank or do you think they are not at all challenging that on the other side? I did not see their argument as seeking an on-bong review of that aspect of CNN at 10. Obviously the court doesn't title to do what it chooses to do in terms of on-bong review but I did not read their brief as requesting that. The only request that I saw for an on-bong consideration was on the breach of contract decision from CNICA 4 which is a very distinct issue. Now with respect to the difference between the 18% and 5%, the 18% is computed without regard to the offsetting benefits. That's exactly right. And 5% is the government's view as to what the figure would be with the offsetting benefits that we said should be included in CNICA 10. Was there any evidence put in by CCA as to what the figure would be if you took into account offsetting benefits? No. They did not introduce evidence on or man or in the initial trial about the value of offsetting benefits. They have relied simply on the argument that offsetting benefits are too speculative to consider. Is that a finding effect by the lower court that we have to give difference to that their speculative? No, it is not. And the reason that I say that is because if you look at the history of this case and you look at what the court said in CNICA 10, the court found in CNICA 10 that the statutory benefits were specifically included as a direct benefit to project owners as part of the same statutes that we're talking about. But the court in CNICA 10 didn't put a value on those. They didn't say that the value was anything other than speculative. It just said you have to consider these. Well, the court said, and I can quote, they said that the statutory scheme afforded offsetting benefits quote, which were specifically designed to ameliorate the impact of the prepay restrictions. Unquote. And it also said that these benefits, and here's another quote, quote, must be considered as part of the takings analysis. I think those benefits rejected as relevant by the court of federal claims decision that we were reviewing in CNICA 10 on the same ground. That is that they were speculative and uncertain. That's exactly right. So CNICA 10 presumably we were projecting that determination by the court of federal claims that they shouldn't be taken into account because they were speculative and uncertain. That's exactly right. The court in the CNICA 9 decision, which was on appeal, had rejected those statutory benefits, had refused to consider them on the very grounds that they were uncertain that they were speculative. But this was different. They just refused to consider them outright. They didn't do any factual analysis of them. I mean, you're not suggesting that this court did fact-finding with respect to the value of those benefits in CNICA 10, are you? No, I'm suggesting that the court found based on the record in that case that there was a benefit. They didn't quantify it. The fact that there was a benefit that in fact was provided. And in this case, the law court analyzed the benefit, her testimony, and said that the government's proofs still left the conclusion that they were speculative. Well, I got two things to say about that. One, the court didn't find that the court rejected considering them because they were speculative. But the court didn't find, well, let's go back to what we're talking about here and talk a little bit about the trial record. Even under a clearly erroneous standard, you lose on this because the property's owner, Mr. Norman himself, said we could sell under the preservation statutes. The director of HUD's preservation division testified that buyers were prevalent and that he was unaware of any instance, anywhere in the United States, where an owner was unable to find a willing offerer. So you believe that the property owners were required to sell even if that's not what they purchased the property for? No, the reason that you don't look, this is not like mitigation of damages. Here, economic impact is one of the prongs to establish that a taking has occurred is part of the liability determination. This court enforced products and in Sianic 10 said that with respect to each pen central factor, the burden rests on the plaintiff. The court specifically said that with respect to with respect to economic impact in Sianic 10. What the burden relies on the plaintiff and they established 18 percent if the government wants to suggest that the number should be offset by other benefits. Why isn't the government's burden? Why isn't we're not talking about the burden of persuasion, but just the burden of proof? Why hasn't it switched to the government to establish that the 18 percent number is not the accurate number? It should reflect a reduction for these other benefits. Well, what the court found in Sianic 10 was that you look at the statutes as a whole and they're not merely restrictions and deference, but benefits. Well, I have to take it into account. Certainly, when the evidence is presented, there are many examples of this in the law. We have patent law obviousness. There are four prongs of the test, all of which may be considered, but the person who's moving for obviousness doesn't have to bring forth all of the contrary evidence that falls on the opposer to do. It has to be considered when presented. It can't be rejected when presented. But why does that mean that it's always their burden to produce the evidence that would help your case? Where it's part of the fundamental liability determining? I guess your answer that would mean we did produce evidence. We did meet a burden of production if there is one, but once we've met the burden of production, the burden of proof on this issue, as the case has said, remains with the plaintiff. We absolutely did because it was the government's evidence that established that 5% not CCA's evidence. They didn't produce any evidence whatsoever. I'd add that even if we're looking at an 18% economic impact, which disregards the preservation statutes' benefits and therefore necessarily has got to overstate the total impact. An 18% economic impact is not close to what this court has found is necessary or any court has found it is necessary to establish a regulatory taking. What about the trial court's specific findings of fact as it related to the timing of a potential sale? Didn't the trial court make findings of fact that said that the potential sale couldn't occur until 1996 and that therefore that would reduce any benefit or economic benefit to CCA? What the trial court found was that the trial court completely discounted the sale option under a lipa and that is where the mistake lies. The trial court then went and looked at lipera, the second statute. Now CCA was eligible to proceed under both or actually they had to elect, but they could proceed under either. But a lipa was available. The trial court's finding about timing related to lipera. So the timing findings related to the separate statute. Under a lipa, the timing testimony of Kevin East is in the record. That's the only evidence about timing under a lipa and he said he was the director of HUD's preservation division nationally, well-versed in this and he said that sales under a lipa generally took 12 to 18 months. But you're saying that we should adopt your contrary evidence even though there was specific fact running by the lower court? Yes, that was part of their burden and frankly based on the evidence in the record that we cite to and the absence of contrary evidence, the court's decision would be clearly erroneous. But frankly, the court doesn't have to decide on us finding a 5% economic impact, in truly in our favor in this case, 80 to 90% economic impact is what is typically required and no court since the decision in Pencentral 35 years ago has found a regulatory taking where economic impact did not exceed 50%. CCA has stipulated that the economic impact in this case is no more than 18%. So is it your view that CNG-10 overruled the specific findings in CNG-8 that said that you don't need something approaching 100% in order to be a regulatory taking that even a far lesser amount could be sufficient? The trial court found that in this case in assessing the taking of claim, neither CNG-8 nor CNG-10 found such a thing. To the contrary, both cases said that you have to show a, I think the language's decase law has required there being a showing of a significant economic loss or serious economic loss, some phraseology along those, as a threshold matter to recover interregnary taking. Is the co-constitutional principle turns on percentages? Well, if you look at what the Supreme Court said in Lingo, it said that the purpose of the regulatory actions that are functionally equivalent to the classic taking where the government has directly appropriated private property or asked the owner from his domain. And the court goes on to say that the pen central analysis turns in large measure on economic impact. We think that's right because without an economic impact exceeding 50%, probably only in the order of 80% to 90%, you're not talking about a regulatory action that is akin to a direct condemnation. And that's what, that's the whole point of pen central is to find serious cases where the regulatory regulations affect the value of property so severely that it's akin to a condemnation or an ouster of the opponent. And CNG-8's statement that this is akin to a physical taking, you think that's been overruled by specifically in the CNG-10 decision. If you look at what the court explains in CNG-10, it says that there were three elements of the CNG-8 decision that applied across the board, that other aspect and none of those three elements are what we're talking about here in terms of character, for instance. What it said was that the other aspects of CNG-8 were based on specific arguments made about specific plaintiffs. And so they do not apply broadly. And if you look at CNG-8 itself, what it did was it ruled in favor of four model plaintiffs. But with respect to the other, I believe it was 38 projects in that case, it did not rule in favor of the plaintiffs. It made with respect to the fact that by preventing property owners from using the property in the manner in which they chose to use it even for a limited period of time, the court specifically said that that was akin to a physical taking. Did it not? It uses that language. And that's not different from plaintiff to plaintiff. That is something that was based on the arguments that were made, actually the lack of arguments that were made by the government in CNG-8. And the court made that clear when it only applied certain factual findings in, well, when it only ruled regarding four model plaintiffs in CNG-8, allowed the other claims to go for it. And when it's expelled out exactly what its view of CNG-8 was in CNG-10. I'd note just in passing that the three judge panel in CNG-8 was, in fact, part of the seven judge panel in CNG-10. I don't think that that is necessarily decisive, but the same judges that were involved in CNG-8 were also writing and on the panel that rendered the CNG-10 decision. Is that in CNG-8, if I recall correctly, the government didn't argue that this was comparable to rent control? That's correct. It was now part of your argument. Exactly. That here what we're talking about is the fundamental character of this, the fundamental effect of this, putting aside benefits, is that the owner was unable to raise rents from their current rents unilaterally to a market rent rental for a period of few years. And that in and of itself is very similar to what you're talking about when you're talking about rent control. There's some limit on the ability to raise rents for projects up to a market level. And it's that difference in the rents, the resulted in the stipulated 18% economic impact, again, economic impact at a level that does not support. Let me ask you a couple more questions that goes back to CNG-8. If we were to take the plaintiffs there and use the methodology, the calculation methodology that CNG-10 dictates, it would come out to be closer to 18% would it not? You're talking about the the form model plaintiffs? You know, I cannot say, Droner, I am confident it would be lower than the 96, 97, 98%. 18% is not. You know, I really can't say. It would be substantially lower than the 90% level. So your view would be that the government simply didn't make the right arguments since CNG-8 and all of those plaintiffs shouldn't have gotten a windfall. I hate to say that we didn't make all the right arguments since CNG-8, but given how things turned out in CNG-10, I think that that's clearly a case. But clearly under your current analysis, do you believe that those more plaintiffs would lose for the same reason that you think this plaintiffs should be? I think that's likely. Okay. Any other questions? Thank you, Mr. Henry. What will restore your rebuttal time? Thank you. Mr. Palbon? May I please the Court? Every Supreme Court case and every just federal circuit decision on regular property tests. Let me ask you first about this rent control issue, which is raised here. Why isn't this similar to rent control? Some of the treatises at the time describing this program describe it as a form of rent control. I mean, isn't that the essence of what the government was doing by saying that you can't pre-pay the mortgage that you're going to continue to be subject to rent control for the traditional period that turned out to be five years? Why isn't that similar to rent control? It's not similar to rent control at all, Your Honor. As the Supreme Court's decision in Yee versus Escondito made clear in the rent control context, the property owner made decide not to rent the property at all. It may put the property to a different use. It doesn't have to continue to participate in the program. In this case, CCA was partied to a regulatory agreement, and it had to operate the property in the fashion that was dictated by HUD. So it's a completely different circumstance. But there are rent control cases like that where the rent control system has required that you continue to operate the program, continue to lease the units to people, and those rent control programs have been upheld, right? In Yee, Your Honor. I'm probably my Court of Appeals cases, right? There are Court of Appeals cases in which rent control programs have been upheld that required people to continue to operate the apartment building or whatever it is as a rent control building, right? Well, I'm not familiar with those cases that you're referring to. I do know that in Yee, the Supreme Court made clear that the rent control presents a different circumstance from the situation that we have here where the property owner is required to continue to participate in the program. The Supreme Court in Yee stated quite explicitly that it would be a different case from the one that was before it if the property owner did not have the opportunity to withdraw from the rent control program. Which raises the question, in fact, there were opportunities to withdraw from the program here, which allowed a sale or if a sale couldn't occur, you could prepay the mortgage and exit the program. So why isn't that similar? Since those opportunities did exist. There was no obligation on the part of CCA to take advantage of the options that were presented. It's not a question of whether there's an obligation to take advantage of the options. Those options existed to exit the program. So while you say that Yee requires an opportunity to exit, I'm not sure that's true. Well, but if it does, there was an opportunity to exit here, right? Well, exiting the program here would have required CCA to sell the property. That's not the circumstance that the Supreme Court was positing in Yee at all. It was simply positing the circumstance that the property owner in Yee could cease participating in the program. You didn't have to sell the program. You had to offer it for sale. And if a sale wasn't accomplished, then you could exit the program. You could get out of the program without actually selling the property, right? If one went through that process and a purchaser materialized over the course of three-year schedule that was implicated as a result of this option, if the seller materialized, then the sale had to be made. That was the purported objective of the Libra procedure. Yes. And then if you couldn't get a sale at full market price, then you could withdraw from the program. If there was no purchaser or if there was no funding from the Congress, and we know that that occurred in a number of instances, then at a certain point the property owner had the right to prepay the mortgage and exit the program, but nonetheless had to continue to charge the HUD-controlled rents for an additional three-year period. So in the situation that your honor is positing, we're talking about a five to six-year period during which the HUD level rents would be required to be charged to the tenants. Now, what kind of findings did the trial court make with respect to the likelihood of a sale or to the with respect to whether or not the sale option was meaningful? The court did exactly what it was told to do in Siena Gatenin. It looked at these options very carefully, and it found specifically that the opportunity to prepay and sell the property was speculative in this case. There was no assurance as the court observed that a buyer would materialize. All that was present in this case was an indirect expression of interest from one unidentified potential buyer that came to Mr. Norman through the party that was servicing the mortgage, but it didn't go anywhere. So the court specifically found- What about the fact that the government says that there's been no instance identified in which someone wanted to sell in which a buyer wasn't found? Well, that's the government's argument, but the court will know- You see, it's evidence, right? The court will know specifically- That's evidence, right? That was the government's evidence. There was testimony to that effect from Mr. East, but- And there was no contrary testimony, right? Did you present any contrary testimony on that point? On that specific point, no, you're on it, but the court analyzed the evidence very carefully and found that in this case all that happened was, as I said, a single indirect expression of interest from a possible purchaser. The court then went on to find specifically with respect to the New Orleans market that there were three property owners who had plans of action approved by HUD, and then there was no funding for those plans. So at the end of the day, they were not implemented. But if there was no funding, then you could withdraw from the program, right? Well, at that point, after having been through a three-year process, one can then prepay and then have the privilege of charging HUD-regulated brands for an additional three years. But the court of federal claims did not take into account the fact that if funding were unavailable, you could withdraw from the program. No, I'm quite certain that the court below was well aware of and noted that- Where did the court recognize that you could withdraw from the program if the funding wasn't available? I believe that when the trial court is exploiting the procedures that were available underlipper that that was noted. No, but I don't think it was. I mean, if you can show me where it was, I didn't seem to take account of the fact that if the funding was unavailable, you could get out. Well, I'm not recalling specifically now. I thought that the court and exploiting the statute noted that point. We can go back and check and either did or he didn't. But the judge did consider all the evidence and he made specific findings that in this case- The process that doesn't depend on the individual facts. If there's no buyer, if there's no funding, an either event, even if the court were right about it, there's no buyer, there's no funding, you can still get out. But that's the ground for being able to get out is that you can't sell it or there's no funding to promote a sale. You're on a that process would result in a even longer period- Well, for the first time- The first time- Which has been a longer period, but you could get out. I mean, there's no question. There's no point in taking the list of the list out. If the criminal can't get out, that's what the statute and the regulation say. If you can't find a buyer or you can't get funding, you can get out. The property owner could get out eventually under hope when that legislation was passed. It cut short the permanent taking that Lifer and had to establish- No, no, no. But in terms of the Lifer and Lifer, there is nothing speculative. Is there about the ability to get out? If you can't find a buyer or you can't get funding, you can get out. You may have to to keep their rents in place for three years, but there's nothing speculative about the ability to get out, right? For first of all, with respect to Alipa, Your Honor, there is nothing in the statute and there is nothing in the regulations that says forth any type of process or procedure for selling the property and getting out of the program. And the court looked at that issue very closely and made specific findings as to that as well. All of the findings are to what the statute says. Well, the court observed what the statute said. But is it true that under Alipa, you had an absolute right to get out? Not under Alipa, absolutely not. Under Alipa, if one went through the process of getting appraisals and so on and so forth, which the court knows well, and at the end of that, two and a half to three-year process, if there was no buyer, at that point there was a right to prepay, but you then nonetheless had to pay, had to charge HUD-regulated rents for the next three years. But there's nothing speculative about the right to get out. It may be that you have to continue to fix the rents to the HUD level for three years, but there's nothing speculative about the right to get out of the program. What the court found was speculative, Your Honor, was attaching any type of value to what this option might produce. And I haven't seen that the court considered the right to get out of the program. And Professor Dickey, the government's own expert, himself said that where these options have not been exercised, where somebody has not filed a plan of action, gone through the process and actually received the benefits that simply looking at it in the way that we're discussing it right now, Professor Dickey, their expert said that the value was speculative. And that's the full-of-ish. All of this really goes to whether the number should be 18% or something less than 18%. Or 5% yes. But I guess from my question to you is, what cases exist that would suggest something at the level of 18% diminution and value is enough under the patent central framework? Well, let me answer that in two ways. Your Honor, first of all, the pen central test is an ad hoc, highly fact-based test in which there were three elements, all of which have to be balanced. And in Kaiser Etner and in Lingle, the court put preeminent emphasis on the fact that the right to exclude a fundamental property right is what was at issue. And so the balance has to alter depending on the character of the taping or the investment back expectations. But turning specifically to the numbers, the 81% impact that was previously discussed in the earlier history of this case is an economic impact that is concentrated in the five-year period of the taping. That's what that represents. Please reject that approach in Ciennigotan. Your Honor, did we reject that approach in Ciennigotan? Specific. The court in Ciennigotan said that the lifetime value of the property needed to be considered. In my opinion, we specifically rejected the approach that leads to the 81% calculation, right? Yes. Well, I wouldn't say that it was specifically rejected as such. I would say that the court below was directed to take into account. We specifically considered that approach that led to an 81% calculation and said that's not a correct approach, right? In the sense that the court directed that the lifetime impact to be considered, that's correct. That's what led to the 18% figure not considering the offset. Right. And my point, Your Honor, is that if the 81% impact concentrated in the five-year period is mathematically equivalent to this 18% or so impact for the simulation of the entire value of the property. Don't talk about me. Suppose we say that the approach that leads to the 81% calculation was rejected. Then you end up, you contend that the right figure is 18% correct? 18% is the impact when you look at the lifetime value of the property. But when you're talking about real estate and you're talking about the infinite life of real estate and the infinite income potential that a real estate property can produce, you will never have a regulatory taking where the duration of the taking is five or six years and produce an economic impact over the lifetime of the property on the order of 60, 70 or 80% that the government is suggesting. So this argument, though, doesn't this argument really, isn't what you're arguing now and an argument that would be appropriate before the in-bank court, but not before the panel. Because, I mean, the case, Siena Gatenis, exactly on point, it's exactly these sorts of facts and it rejected that approach. You're saying that was wrong and maybe I'm sympathetic, but the problem is it's binding precedent. And so the 18% impact is the only impact that we can really consider. Yes, but I want my question to you was what cases would substantiate a finding of a taking with an 18% impact? I think the 18% impact has to be viewed as the level of impact that results when the lifetime value of the property is considered. And you can't take cases that look to a 70, 80 or 90% impact when we're talking about either a permanent taking or where the impact is evaluated during the temporary period of the taking and simply transpose that 70 or 80% rule to the circumstance where the lifetime value of the property is being considered. You will necessarily produce a lower percentage. If, for example, if Congress passed legislation, confiscating the net, the net would agree that if the 18% is the right figure that you lose? No, absolutely not. No. Well, then why would you win if it's 18%? Well, because there are cases which with a particular deprivation and question has a character that is very severe or with a primary investment back expectations are of a particular sort. When you balance out the different factors, then the economic impact doesn't need to attain a 70 or 80% level. Look at the Kaiser Hettner case is a good example. There, the court recognized that what was being taken was the fundamental right to exclude. It was a physical taking case. It was an easement. It was a physical taking case, right? It created a right on the part of physical taking. Well, there was a physical taking dimension to it, but I don't think you can look at it solely as a physical taking case. It gave a right to certain to the public to traverse a particular waterway. It was described as an easement. It certainly wasn't taking the entire property value anywhere near. Let's see, that's the problem. The Supreme Court has said when you have a physical taking case, I mean, look at the cable box in Laredo. Even a tiny little tiny little part of the property of physical taking case entitles you to damages, but in the regulatory context, you've got to have more. And while no court has ever defined exactly where the threshold diminution number should fall, so I'm sympathetic to hearing your arguments about why something as low as 18% ought to be enough, at the same time, I don't see cases below 50% and most of them hover in the 80s and 90s. So it's very difficult for me to think that 18% is going to meet whatever that threshold is. I appreciate you pointing around about all of those cases when we talk about 70 or 80 or 90%. Those are measuring the impact that results either from a permanent taking or they're measuring the impact which results during the concentrated period of the temporary taking. There's no case which says you can take that 70% impact that has felt over a five-year period of temporary taking and transpose it to a consideration of the lifetime value of the property and say you have to have the same 70% impact. I'm not understanding how you're trying to distinguish the permanent takings ones because I actually see those as hurting you not helping you in the following way. 18% permanently seems worse to me than 18% over five years. So the idea that all of those cases required 70 to 80% when it was permanent also actually seems to suggest to me maybe you should have to show more than 70 or 80% if it's temporary. So I'm not sure why your distinction actually helps you. Well what I'm trying to show is that on one side of the equation we have cases in which high levels of impact are being discussed and they fall into two categories. The permanent case at the permanent takings but also temporary regulatory takings where 70 or 80% was required but when they're measuring the impact they're focusing on what was taken during that five-year period or six-year period whatever the duration is and not with respect to any comparison to the lifetime value of the property and what the government is advocating for here is an effect or rule that would do away with temporary regulatory takings because when you have real property you will never, it's mathematically impossible. You will never have a taking on the order of 70, 80 or 90% if the duration of the taping is five or six years. It's just not possible. All right thank you Mr. Palma. I'm pleased to court. I noted the outset that council for CCA could not identify any regulatory taking case where less than a 50% economic impact has been sufficient to establish a taking. Has the issue ever really been analyzed in this context? Has anybody looked at using the formula that we put forth but then analyzing what that means in the context of a temporary taking? Absolutely. I mean the cases that we are talking about that analyze economic impact have the standard measure for analyzing economic impact has been the one that the court enunciated in the Senate content. It's not a new standard. It's the one that is done when we cite many cases in our brief with higher economic impacts where there's no taking. All of those cases use the same sort of approach to economic impact that we're talking about here that results in an 18% economic impact. Can temporary taking context? Some yes some no. I can't identify which cases are temporary which cases are permanent. Well what this court has said in CNN at 10 and what the Supreme Court said in first English is there is no difference in analyzing economic impact between well it's spec set specifically in CNN at 10 that there's no difference in analyzing economic impact between a temporary and a permanent taking except that you take the duration of the regulatory restriction into account when you're analyzing the economic impact. So once that's taken... Just as Scalia said that in this context then the government can always cut off any regulatory taking argument by stopping the taking at some point. What I would say to that is that if in the character of the government action it was shown that there was some attempt to gain the system that might be something that the court could properly evaluate in looking at character under the Penn Central rubric. We don't have that here. The legislative history is clear that the HOPEC was enacted because the benefits being provided under the preservation statutes were costing too much. Congress spent millions of dollars actually hundreds of millions of dollars in providing benefits directly to project owners affected by the preservation statutes. And it was that reason that the preservation statutes were dropped or were repealed not because there was a fear that there was going to be a taking and that goes right back to why there is a problem with the trial court's analysis. You don't consider those benefits in assessing economic impact when you're looking at the 18% figure. But moreover the the trial court refused to even consider those benefits in looking at the character of the government action. At the same time the court is saying that the government is placing the cost of housing the poor on project owners. You can't ignore the fact that Congress was appropriating millions of dollars, many millions of dollars as a direct benefit to owners when you're looking at whether or not the cost has been shifted onto those owners. But that's what the trial court did. So that's an error in an analyzing character and it too is concrete. Those benefits that you're talking about, those predated the original agreements. Those benefits were part of the original agreements and part of the inducements to enter into these contracts in the first place. Let me be clear, Your Honor. I'm not talking about the tax benefits here which were the principal reason that people got into this. That these projects were tax-owned. You think every plaintiff is the same in that regard because I mean the trial judge here made specific findings that that was not the principal reason for these claims. Your Honor, when you are looking at interference with investment backed expectations. You are looking at reasonable investment backed expectations. And what the court said you look at, let me go back to what this court said in consolidated Edison in an on-bought decision. It said that subjective intent is irrelevant. It said that again in chance for a manner. But what the trial court did in terms of factual findings is he made factual findings about the subjective intent of the project owners. He didn't base it on the objective evidence that we put it in the record such as the six private placement memoranda such as our expert testimony such as the learned treatise that was admitted into evidence that was written back in 1972 and speaks specifically about these kinds of investments. All of which uniformly says that these are tax shelters and that is the expectation for investors. You look at the the perspectives in particular. They say the main benefit is from income tax savings and they place a one dollar value on the ability to prepaid 20 years in the future. One dollar. But it's not that this judge didn't consider those. He just found those not to be the driving force, right? You found that those not to be representative of these particular plaintiffs. What the court fairness? You say he didn't consider them. He considered them. He rejected them. No, because he considered them in making this subjective determination, but he made no determination at all about the objective factor, right? That's exactly right. It's a question whether you're looking at the subjective intent of Mr. Norman's uncle and father, which he made that factual finding about, and whether you're looking at the expectations of the industry as a whole, the objective expectation of the industry as a whole. And that is an important key element of looking at interference with investment-backed expectations. And the court didn't find. In fact, the court specifically found that there were owners that had these tax shelter expectations in the industry. And then he created a second class of owners that he said was interested in long-term benefits. But there's not a single example, putting aside CCA itself. There's not a single example in the record of any project anywhere in the United States that had that kind of expectation. And that's not surprising because owners did not have to forego short-term tax benefits in order to obtain whatever benefit they might get in terms of a long-term benefit. Let me just ask you one more question on this issue, though. The objective inquiry, which is important. But the objective inquiry is still supposed to be based on what an objective investor in the shoes of the particular plaintiff would do, correct? It's not objective in the sense that you remove it from the actual circumstances, correct? No, you don't remove it from the actual circumstances. What we're talking about here is the objective expectations of an investor in the narrowed, if you like, to even the New Orleans area. But there's no difference. There's no record basis for suggesting the expectations in New Orleans are any different than the expectations in Seattle or Minneapolis where we have a perspective in a growing suburban area that says tax benefits are the reason to invest in this. So that's a distinction without a difference. But if you're supposed to be in the shoes of the particular investor, why is evidence of syndicators in totally different circumstances and totally different areas? Why is that relevant? If there had been evidence introduced that people who are selling interest in section 221, the three or 236 projects in San Francisco had a different expectation than people in Minneapolis or in Los Angeles. I think what Judge O'Malley is asking you is whether in considering the individual circumstances, you should consider somebody who doesn't syndicate separately from the run of the mill people who do syndicate. In other words, whether the reasonable investor is a broad spectrum that includes both syndicators and non syndicators or whether you should limit it to non syndicate. Thank you, Your Honor. I had misunderstood. There's no reason that the benefits that are provided by the project, whether you hold the project yourself or you syndicate it, are going to be any different. The tax benefits, for instance, are going to be the same whether you hold it or you syndicate it. The syndications typically occurred when the developer didn't have the need for the tax shelter and so when they do cash in on that by selling the tax shelter aspect of the investment to somebody else. But there's absolutely no distinction between someone who purchases property to hold it and someone who purchases property to syndicate it. I'm saying there's no difference in the returns that this kind of property would generate, that the fact that you syndicate, that you sell shares up to others doesn't affect where the money is coming from for the particular project. When you're talking about a reasonable investor in this sort of project, the money comes from where the money comes from. Well, here we're going to consider individual investors in this project. This investor only put $32,000 into this program, right? That's right. It was a very low, I believe it was 1.6% of the replacement value of the project as a whole. Far far lower than what you would be putting into a project if you were developing as a conventional project. That's one of the benefits that was expected and gained through participating in this project and one that was not interfered with by the preservation statutes. What about the contract issue? Well, the contract issue frankly is not properly before the court. What we had in the contract issue was a case that went to trial where the contract issue was not raised on appeal to this court where the contract issue was not raised. But let's assume it was properly before the court. Why shouldn't we visit that issue? Well, the issue is, there's binding precedent on that issue, first of all. So unless the issue were reviewed on bomb, a standard for controls. And there's no reason to review that issue on bomb because I read the decision yesterday. It's a well-reasoned, coaching decision. It's consistent with federal common law. The plaintiffs offer the proposition that interpreting, in interpreting an agreement, and here the agreement between the United States and CCA was the regulatory agreement. That's the only agreement between CCA and the United States. The other agreements were with other people. That's right. There was one between CCA, actually, there were two. There was a mortgage and a mortgage note between CCA and its lender. Those are the other agreements. It was only in the note between CCA and its lender that there is a right to prepare. So CCA points to cases that say you interpret those agreements together. And we don't disagree with that proposition. If there's a question about what the meaning of the regulatory agreement is, certainly you look at the whole context of the transaction. It's a fundamentally different proposition to say that in interpreting how the regulatory agreement is to be construed, you actually merge that with the mortgage note and the mortgage. Those documents were not incorporated by reference. And the regulatory agreement was as the square held in CNK4, a freestanding, complete agreement. Absolutely no reason that it doesn't get enforced according to its terms. And when you enforce it according to its terms, there's simply no pre-payment right and therefore no privity between CCA and the United States. Do you agree that that conclusion is inconsistent with a number of decisions from our sister circuits who find that you don't have to have every single one of the documents signed by everybody to a tri-partite agreement? No, I don't disagree that's in conflict with sister circuits. If you're talking about let me see if I can spell out what my understanding of the law is. And that's that if you have an agreement between two parties or more than two parties where it is memorialized in separate writings, for instance, there are situations where you've got a letter making an offer and a letter coming back making changes and then a confirmation of that. You look at all those together and maybe all those different agreements between the three parties actually comprise the agreement. That's not the case we're talking about. That's not the sort of case we're talking about here. Here we have a freestanding, whole agreement that is the regulatory agreement that has no right to pre-pay. We have a mortgage note that does not involve the United States that does talk about pre-paying the mortgage. Well, the mortgage is then guaranteed by the United States and the guaranteed specifically addresses the 20-year-right to repeal the contract. The guarantee does not. All the guarantee says is that it's pursuant to the regulations that then set forth the right pre-pay without how to prove it. It says pursuant to the regulations authorizing the United States to enter into these sorts of deeds to make the, to actually make the loan guarantees. Okay. Thank you, Mr. Chairman. Thank you