Free Motion for Reconsideration - Rule 59(a) - District Court of Federal Claims - federal

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No. 93-280C (Senior Judge Smith)

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

FRANK P. SLATTERY, JR., et al., Plaintiffs, v. THE UNITED STATES, Defendant.

DEFENDANT'S MOTION FOR RECONSIDERATION AND CLARIFICATION

STUART E. SCHIFFER Deputy Assistant Attorney General

DAVID M. COHEN Director

OF COUNSEL: SCOTT D. AUSTIN WILLIAM G. KANELLIS Attorneys Commercial Litigation Branch Civil Division Department of Justice

F. JEFFERSON HUGHES Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: (202) 305-3067 Fax: (202) 514-8640

October 25, 2006

Attorneys for Defendant

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TABLE OF CONTENTS Page TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. II. Standard Of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Count II Should Be Dismissed As Part Of The Court's Final Judgment . . . . . . . . . . . . . . 3 A. Plaintiffs Waived The Allegations Of Count II In The Parties' Summary Judgment Briefing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Plaintiffs Abandoned Count II In Their Post-Trial Briefing And Closing Argument Upon Liability . . . . . . . . . . . . . . . . . . . . . . . . . 5 This Court's Opinion Upon Liability Did Not Address Count II . . . . . . . . . . . . . 7

B.

C. III.

The Final Judgment Needs To Be Clarified With Respect To The "Gross-Up" Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 The Final Judgment Needs To Be Clarified With Respect To Receivership Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

IV.

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

i

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TABLE OF AUTHORITIES CASES Page(s) Brewer v. Purvis, 816 F.Supp. 1560 (M.D. Ga. 1993), aff'd, 44 F.3d 1008 (11th Cir.), cert. denied, 115 S.Ct. 1965 (1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Christian v. United States, 49 Fed. Cl. 720 (2003), rev'd in part on other grounds, 337 F.3d 1338 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Coconut Grove Entertainment, Inc. v. United States, 46 Fed. Cl. 249 (2000) . . . . . . . . . . . . . . . . 2 Finch v. Hughes Aircraft Co., 926 F.2d 1574 (Fed. Cir. 1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Fru-Con Construction Corp. v. United States, 44 Fed. Cl. 298 (1999) . . . . . . . . . . . . . . . . . . . . . 2 Harvey v. District of Columbia, 949 F. Supp. 878 (D.D.C. 1996) . . . . . . . . . . . . . . . . . . . . . . . . 1 Peters v. Welsh Dev. Agency, 920 F.2d 438 (7th Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Principal Mutual Life Ins. Co. v. United States, 29 Fed. Cl. 157 (1993) . . . . . . . . . . . . . . . . . . . . 2 Slattery v. United States, 53 Fed. Cl. 258 (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8 Slattery v. United States, 69 Fed. Cl. 573 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Southern Nevada Shell Dealers Ass'n v. Shell Oil Co., 725 F. Supp. 1104 (D. Nev. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Swedish Am. Hosp. v. Midwest Operating Engineers Fringe Benefit Funds, 842 F. Supp. 1039 (N.D. Ill. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Valluzzi v. United States Postal Service, 775 F. Supp. 1124 (N.D. Ill 1991) . . . . . . . . . . . . . . . . 5 Zucker v. Ernst & Young, 14 F.3d 477 (9th Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 STATUTES & REGULATIONS 12 U.S.C. § 1821(a)(5)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 12 U.S.C. § 1821(d)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12 ii

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GAO Office of Gen. Counsel, Principles of Fed. Appropriations Law, Vol. III, Chapter 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 10 Wright, Miller & Kane, Federal Practice & Procedure § 2651 . . . . . . . . . . . . . . . . . . . . . . . . . 9 11 Wright, Miller & Kane, Federal Practice & Procedure § 2810.1 (2d ed. 1995) . . . . . . . . . . 1, 2 22 U.S. Op. Off. Legal Counsel 141, 1998 WL 1180050 (July 22, 1998) . . . . . . . . . . . . . . . . . . 10 RCFC 52(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RCFC 59(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RCFC 60(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ ) FRANK P. SLATTERY, JR., et al., ) ) Plaintiffs, ) ) v. ) No. 93-280C ) (Senior Judge Smith) THE UNITED STATES, ) ) Defendant. ) ____________________________________ ) DEFENDANT'S MOTION FOR RECONSIDERATION AND CLARIFICATION Pursuant to Rules 52(b), 59(a)(1) and 60(b)(1) of the Rules of the Court of Federal Claims, defendant, the United States, respectfully requests reconsideration and clarification of this Court's final order dated October 11, 2006, and final judgment dated October 12, 2006. Specifically, we request reconsideration of a finding of breach with respect to Count II of Slattery's first amended complaint, and seek clarification of those portions of the final judgment that relate to a potential "gross-up" of the award for taxes and to the receivership claims. The motion for reconsideration is appropriate because, contrary to footnote 2 of the Court's final order, the allegations in Count II of the first amended complaint were not decided by the Court's liability decision, and were also waived and later abandoned by plaintiffs in the proceedings upon liability. Additionally, the Court's final order omits to provide necessary instructions for the Government to pay the final judgment, so clarification is necessary. ARGUMENT I. Standard Of Review Motions for reconsideration or alteration of a Court's decision are not routinely granted. E.g., Harvey v. District of Columbia, 949 F. Supp. 878, 879 (D.D.C. 1996); see also 11 Wright,

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Miller & Kane, Federal Practice & Procedure § 2810.1 (2d ed. 1995). To prevail on such a motion in this Court, a litigant must show "extraordinary circumstances" which justify relief. Fru-Con Construction Corp. v. United States, 44 Fed. Cl. 298, 300-01 (1999). A litigant must make this showing by either: (1) establishing a clearly apparent or obvious error of law or mistake of fact in the Court's ruling that renders the decision manifestly unjust; (2) establishing a change in controlling law that might alter the Court's decision; or (3) proffering new evidence that was not available at the time of trial. Id.; Coconut Grove Entertainment, Inc. v. United States, 46 Fed. Cl. 249, 255 (2000); 11 Wright, Miller & Kane, Federal Practice and Procedure § 2810.1. A party may not rehash old arguments or relitigate issues previously before the Court. See Coconut Grove Entertainment, 46 Fed. Cl. at 255; Principal Mutual Life Ins. Co. v. United States, 29 Fed. Cl. 157, 164 (1993). Nor may a party present new evidence that could have been presented at trial, for "the litigation process rests on the assumption that both parties present their case once, to their best advantage." Fru-Con Construction, 44 Fed. Cl. at 301 (internal quotation marks and citation omitted). "Put simply, the rulings of a court are not mere first drafts, subject to revision and reconsideration at a litigant's pleasure." Id. (internal quotation marks and citation omitted). But if a party can show an error of law or a mistake of fact material to the Court's decision, reconsideration of a Court's judgment is warranted. See Fru-Con Construction, 44 Fed. Cl. at 300-01; Coconut Grove Entertainment, 46 Fed. Cl. at 255.

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II.

Count II Should Be Dismissed As Part Of The Court's Final Judgment We respectfully seeks reconsideration of the Court's final judgment incorporating Count

II of the first amended complaint in its final judgment, the rationale for which incorporation is set forth in footnote 2 of this Court's final order, filed October 11, 2006: Defendant requests that Count II also be dismissed. Defendant's Opposition to Plaintiffs' Proposed Order, footnote 1. However, the Court has held in its opinion that the 1991 contract was an effect of the 1988 breach. Plaintiffs were forced into this contract by the Government under threat of personal liability owing to their status as directors. Therefore, far from being a contract that absolved the Government, it is a further breach. This statement is inconsistent with the Court's previous ruling upon liability. While the Court's August 14, 2002 opinion on liability did hold that the 1991 Written Agreement was a breach of contract, this holding did not relate to Count II's allegations. Instead, Count II alleges that the 1991 Written Agreement "constitutes a binding contract" that "requires the parties to renegotiate the contract should the Congress take away Meritor's contractual right to treat supervisory goodwill as a regulatory capital asset" and which was breached when the "FDIC failed to renegotiate the 1991 Written Agreement, as that agreement expressly requires." Count II concludes that the alleged breach of the 1991 Written Agreement "proximately caused the Pennsylvania Secretary of Banking to seize Meritor, and to appoint a receiver for the institution, thereby causing harm to the institution, to the plaintiff, and to every other shareholder of the institution." 1st Amend. Compl. ¶¶ 78-85. As noted in the Court's final order, in our opposition to Slattery's proposed final order, we had requested that the Court dismiss Count II. We did so because plaintiffs waived this argument during briefing of the motions on summary judgment by not responding to our -3-

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arguments, and later abandoned the allegations of Count II during the trial upon liability to support their assertions that Meritor's pre-existing breach of the 1991 Written Agreement did not excuse the FDIC's breach in 1992. As a result, the Court did not decide Count II after the trial upon liability. Thus, footnote 2 of the Final Order would, if not corrected, add a fourth "breach" to the Court's liability findings, apparently by mistake. A. Plaintiffs Waived The Allegations Of Count II In The Parties' Summary Judgment Briefing

Plaintiffs neglected to pursue the theory in Count II throughout the liability proceedings. In Slattery's January 19, 1999 memorandum in support of plaintiffs' motion for partial summary judgment at p. 72, plaintiffs concluded by asking the Court "to find that FDIC breached the parties' 1982 agreement by failing to treat Meritor's supervisory goodwill as regulatory capital" in 1988, 1991 and 1992. There was no mention of a breach of the 1991 Written Agreement. Furthermore, our motion for summary judgment, filed the same day, asserted at pp. 35-37 that the allegations of Count II should be dismissed because the 1991 Written Agreement was a regulatory agreement outside of the jurisdiction of the Tucker Act and that, in any case, the Written Agreement had not been breached by the Government. Slattery's March 3, 1999 opposition to our motion, while it did take issue with our arguments for dismissing the nonbreach counts of the first amended complaint, failed to counter our assertions that Count II should be dismissed. See pl. opp. to def. mot. for summ. judg. at 33-42. By failing to respond to our argument, Slattery conceded that there was no potential for Government liability under Count II. Failure to respond to a summary judgment argument implicitly concedes the argument. See Finch v. Hughes Aircraft Co., 926 F.2d 1574, 1576-77

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(Fed. Cir. 1991); Brewer v. Purvis, 816 F.Supp. 1560, 1579 (M.D. Ga. 1993) ("Summary judgment is appropriate since Plaintiff failed to respond to [defendant's] argument on this issue."), aff'd, 44 F.3d 1008 (11th Cir.), cert. denied, 115 S. Ct. 1965 (1995); Southern Nevada Shell Dealers Ass'n v. Shell Oil Co., 725 F. Supp. 1104, 1109 (D. Nev. 1989) ("The plaintiffs, by failing to respond to Arco's [the defendant's] argument in their opposition paper, have implicitly conceded that . . . [defendant's argument] . . precludes liability."); Swedish Am. Hosp. v. Midwest Operating Engineers Fringe Benefit Funds, 842 F. Supp. 1039, 1043 (N.D. Ill. 1993); Valluzzi v. United States Postal Service, 775 F. Supp. 1124, 1125 (N.D. Ill. 1991). By their concession, plaintiffs removed the breach theory incorporated in Count II from the issues to be contested at the trial upon liability. B. Plaintiffs Abandoned Count II In Their Post-Trial Briefing And Closing Argument Upon Liability

Despite having already conceded this issue, plaintiffs did attempt to resurrect this theory before the trial upon liability in their pre-trial contentions of law nos. 8-10, 13, and 26, which asserted that the FDIC had breached the 1991 WA. However, plaintiffs then clearly abandoned the theory underlying Count II in their post-trial briefing and closing argument after the trial upon liability. In their post trial reply brief [on liability], May 24, 2000 at 44-45, plaintiffs described the breaches in their first amended complaint as relating only to the 1982 MOU: The government here had a continuing duty under the 1982 MOU to permit the institution to amortize supervisory goodwill for a specific period of time. . . Under the continuing claim doctrine, each breach of that duty by the government created a new cause of action. Plaintiffs allege three breaches in their amended complaint: (1) the decision to impose heightened capital requirements in the -5-

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1988 MOU; (2) the decision to impose heightened capital requirements in the 1991 Written Agreement; and (3) the decision to initiate insurance revocation proceedings against the Bank and cause the Pennsylvania Department of Banking ("PDB") to seize the Bank in December, 1992. No mention was made of a breach theory based upon the 1991 Written Agreement. Id. In the same document at 73, plaintiffs made it clear that the theory expressed in Count II ­ that the 1991 Written Agreement was a valid contract breached by the Government ­ had been abandoned as inconsistent with their other theories: Second, because the 1991 Written Agreement was itself imposed on Meritor in breach of the 1982 goodwill agreement it is of no legal force or effect, and Meritor's alleged noncompliance with the illegal demands imposed in the 1991 Written Agreement can confer upon the government no rights or privileges of any kind. It would be a perverse world in which FDIC can justify its unlawful actions in 1992 by Meritor's noncompliance with unlawful demands made one year earlier. In their closing argument, plaintiffs continued to demonstrate that they were not pursuing Count II, summarizing the essence of the complaint and first amended complaints as follows, at Tr. (L) 6142: First of all, it relates back to the occurrence that is the heart and soul of the complaint, that is the1982 MOU and the breach of that. That's what that original complaint is all about. We've merely alleged that there were two other breaches of that. Plaintiffs also described what the Court had to resolve as to liability, at Tr. (L) 6035:14-18: Specifically, the Court has two issues before it. The first is what did the 1982 MOU provide in terms of the treatment of the goodwill on the books of Meritor that resulted from the merger between Western Savings & Loan and Meritor. Second, did the government breach that agreement.

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Nowhere did the plaintiffs assert that the Court must resolve any issue as to whether the Government had breached the 1991 Written Agreement, which would have been inconsistent with their assertion that it was "of no legal force or effect." Plaintiffs clearly abandoned the allegations and the breach theory set forth in Count II. C. This Court's Opinion Upon Liability Did Not Address Count II

In keeping with this position of the plaintiffs with respect to Count II, this Court's opinion upon liability did not address the breach theory based upon the 1991 Written Agreement. Instead, the Court concluded only that the 1982 agreement was breached in 1988, 1991, and 1992: As detailed in the previous pages, the court finds that the FDIC is liable for violating the terms of its 1982 Memorandum of Understanding (MOU) with Meritor regarding how the Western goodwill would be treated for capital purposes. The FDIC violated the agreement when it forced Meritor to enter the 1988 Memorandum of Understanding . . . The FDIC also breached the 1982 MOU when it forced Meritor to enter a 1991 Written Agreement after satisfying the terms of the 1988 MOU. . . . Finally, the FDIC breached the 1982 MOU when it removed Meritor's FDIC insurance on December 11, 1992, which directly led the Secretary of the PDB to close the bank. Meritor and its shareholders were harmed by all of these actions. Thus, the FDIC is liable to Meritor for its breaches of the 1982 MOU. Slattery v. United States, 53 Fed. Cl. 258, 290 (2002). The Court also summarized its liability holdings in the opinion upon damages without any mention of the theory set forth in Count II: In its previous opinion, this Court found the Federal Deposit Insurance Corporation ("FDIC") liable for breaching its 1982 Memorandum of Understanding ("1982 MOU") with Meritor Savings Bank ("Meritor"). [FN1] Specifically, this Court held: (1) the FDIC liable for violating the terms of its 1982 MOU with -7-

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Meritor regarding how the goodwill arising from Meritor's merger [FN2] of Western Savings Fund ("Western") would be treated for regulatory purposes; (2) that the FDIC violated the agreement when it forced Meritor to enter the 1988 Memorandum of Understanding ("1988 MOU") requiring Meritor to obtain higher capital levels than its peers, and when it failed to do so, to quickly raise $200 million in tangible capital that directly lead to the sale of 54 of Meritor's best branches and other assets; (3) that the FDIC breached the 1982 MOU when it forced Meritor to enter a 1991 Written Agreement after satisfying the terms of the 1988 MOU [FN3]; and (4) that the FDIC breached the 1982 MOU when it removed Meritor's FDIC insurance on December 11, 1992 which directly led the Secretary of the Pennsylvania Department of Banking to close the bank. Slattery v. United States, 53 Fed.Cl. 258 (2002) ("Slattery I"). Slattery v. United States, 69 Fed.Cl. 573, 575 (2006). Clearly, the Court has not previously decided the validity of Count II of plaintiffs' first amended complaint. Moreover, we explained in post-liability trial briefing that "[a]ny `breach' by the FDIC in 1992 was excused by the pre-existing material breach of Meritor with respect to the capitalrelated agreements of the parties, embodied in their final form of the 1991 WA." Govt. PostTrial Br. at 35. As noted above, the plaintiffs asserted in response that the 1991 Written Agreement was "of no legal force or effect," thus that their apparent breach of that agreement could not excuse any breach by the Government in 1992. Should this Court, rather than correcting the apparent error in its final order and final judgment, decide to consider whether the 1991 Written Agreement was breached by the Government, it would likewise need to determine whether the prior material breach of that agreement by Meritor excused any apparent breach of the same agreement by the Government in 1992. The current form of the final judgment is manifestly in error and we request that the Court reconsider its final judgment and amend it to dismiss the allegations of Count II. -8-

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III.

The Final Judgment Needs To Be Clarified With Respect To The "Gross-Up" Issue The final judgment states that the award is to be "grossed up to account for any corporate

income taxes that the IRS [Internal Revenue Service] may claim against these damages." (Emphasis added). This language raises two problems. First, the language renders conditional this Court's judgment. There is simply no provision in the Court's rules that allows this Court to enter a conditional judgment, but this appears to be the result of the judgment, which provides for a tax "gross-up" only if the IRS asserts a claim against the Meritor receivership for Federal corporate income taxes at some indefinite point in the future. Indeed, as noted in 10 Federal Practice and Procedure § 2651: Finally, the difference between a conditional judgment and a judgment as defined in Rule 54(a) should be noted. Some courts have authorized judgments that do not become effective unless certain conditions are complied with, or that may be defeated or amended by the performance of a given act or the occurrence of a certain event. Judgments of this type are considered judgments under Rule 54(a) only when the contingency has been removed; FN26 prior to that time the court's decision is not appealable. Thus, until the IRS acts or fails to act within the time required by statute, the Court's order of a "gross-up" is contingent, and will be nullified in part if the IRS does not claim any such taxes are due. The situation is as stated in Peters v. Welsh Dev. Agency, 920 F.2d 438, 440 (7th Cir. 1990): In [another case], this Court could tell from the face of the judgment and a review of the docket sheet that the case was over. In the present case, by contrast, the District Court's conditions are temporally open-ended, and this Court has no way to be sure whether those conditions have or have not been met. The judgment here simply does not tell this Court that the case in the District Court is over.

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See also Zucker v. Ernst & Young, 14 F.3d 477, 481 (9th Cir. 1994) (unsatisfied requirement in judgment that parties notify the trial court of an event deprived the appellate court of jurisdiction). The Court's final judgment would not appear to produce a final appealable judgment, given the need for action by the IRS. Additionally, the plain language of this judgment appears to require the FDIC's Deposit Insurance Fund ("DIF")1, the presumed source of payment for any judgment for the FDIC's breach of contract, see 22 U.S. Op. Off. Legal Counsel 141, 1998 WL 1180050 (July 22, 1998) (concluding that the FSLIC Resolution Fund ("FRF") was the appropriate source to pay any judgments in cases where the FSLIC was a party to an assistance agreement with a thrift because the FRF had assumed the liabilities of FSLIC), to pay the full amount of any taxes "claimed" by the IRS, regardless of whether the receivership is ultimately found liable for any taxes. However, like any taxpayer, the FDIC receiver will presumably have the option to pay any taxes claimed due, then sue for a refund if it disputes the amount of taxes the IRS claims are owed, including taking an appeal of any adverse trial decision. Thus, the amount of such taxes actually paid by the receivership may not be known for years. As explained in the opinion by the Office of Legal Counsel, the FRF, here by analogy the DIF, takes the place of the Judgment Fund as the source of payment for Winstar-related case damages, here by analogy any damages paid in Slattery. See 22 U.S. Op. Off. Legal Counsel 141, 1998 WL 1180050, at § II (page numbers unavailable). The Judgment Fund will not pay

1

The Permanent Insurance Fund ("PIF") funded the FDIC's assistance to Meritor in 1982. In accordance with 12 U.S.C. § 1821(a)(5)(B), the Bank Insurance Fund ("BIF") assumed all assets and liabilities of the PIF as of August 9, 1989. Under recent legislation, the BIF has been merged into the Deposit Insurance Fund. -10-

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appealable judgments. See Christian v. United States, 49 Fed. Cl. 720, 727-28 (2003), rev'd in part on other grounds, 337 F.3d 1338 (Fed. Cir. 2003) (explaining that "finality for Judgment Fund purposes requires the exhaustion of appeal rights so as to protect the Government from premature payment); see also GAO Office of Gen. Counsel, Principles of Fed. Appropriations Law, Vol. III, Ch. 14 at 58 (purpose of finality requirement to protect Government "against loss by premature payment of a judgment which might later through appeal be amended or reversed") (citation omitted). As a substitute for the Judgment Fund, the DIF also will not pay final judgments that remain appealable. Accordingly, we respectfully request that the Court clarify when it contemplates the DIF being required to make any payments for a tax "gross-up." IV. The Final Judgment Needs To Be Clarified With Respect To Receivership Claims We respectfully request that the Court clarify what it intended to order with respect to its statement that the award "shall be paid net of any receivership claims." The FDIC as receiver is required by 12 U.S.C § 1821(d)(11), "Depositor preference," to pay claims in the following sequence: (A) In general. Subject to section 5(e)(2)(C) [12 U.S.C.S. § 1815(e)(2)(C)], amounts realized from the liquidation or other resolution of any insured depository institution by any receiver appointed for such institution shall be distributed to pay claims (other than secured claims to the extent of any such security) in the following order of priority: (i) Administrative expenses of the receiver. (ii) Any deposit liability of the institution. (iii) Any other general or senior liability of the institution (which is not a liability described in clause (iv) or (v)). (iv) Any obligation subordinated to depositors or general creditors (which is not an obligation described in clause (v)). (v) Any obligation to shareholders or members arising as a result of their status as shareholders or members (including any depository institution holding company or any shareholder or creditor of such company).

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Thus, payments to shareholders are made when all other claims have been satisfied. See id. According to the "Goodwill Financial Reporting Package ­ Meritor Savings Bank," dated March 31, 2006, the Meritor receivership owes unpaid interest of more than $2 million to other creditors, $29 million to the FDIC, and an estimated Federal income tax liability of $11.126 million owing to the IRS. See Report 3 of Goodwill Fin'l Reporting Package. In accordance with 12 U.S.C § 1821(d)(11), the FDIC as receiver would be required to pay those claims out of any funds received by the receivership, in this case any judgment paid, before paying any surplus to the shareholders. The Court is respectfully requested to clarify what mechanism it intends to accomplish its expressed intent that the award shall be paid "net of any receivership claims." Specifically, to satisfy the Court's judgment, the Government needs to know whether the Court intends for the FDIC's DIF to pay the Meritor receivership such additional funds as would be required to satisfy all existing claims, including the estimated claim of the IRS, against Meritor, so that any judgment against the United States/FDIC would not be reduced before payment to shareholders. Alternatively, if the Court intends for the FDIC receiver to follow some distribution scheme other than the statutory one, we need to know what that intended distribution scheme is. These are two very different scenarios, and we need to know which the Court intended. Also, in the event that either party appeals the Court's judgment in this regard, clarification of this issue is necessary so that the appellate court may fully consider the issue without the need for remand. CONCLUSION Based upon the arguments presented above, we respectfully urge the Court to reconsider and amend its final judgment to dismiss Count II of plaintiffs first amended complaint, and -12-

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further request the Court to clarify its final order and final judgment with respect to the directions to "gross-up" the judgment to account for any Federal corporate income taxes that the IRS "may claim against these damages," and to pay the damages "net of any receivership claims." Respectfully submitted, STUART E. SCHIFFER Deputy Assistant Attorney General

s/David M. Cohen by Jeanne E. Davidson by Patricia M. McCarthy DAVID M. COHEN Director

OF COUNSEL: SCOTT D. AUSTIN WILLIAM G. KANELLIS Attorneys Commercial Litigation Branch Civil Division Department of Justice

s/F. Jefferson Hughes F. JEFFERSON HUGHES Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, NW Washington, D.C. 20530 Tele: (202) 305-3067 Fax: (202) 514-8640

October 25, 2006

Attorneys for Defendant

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APPENDIX TO DEFENDANT'S MOTION FOR RECONSIDERATION AND CLARIFICATION

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CERTIFICATE OF SERVICE I hereby certify that on this 25th day of October, 2006, a copy of the foregoing "DEFENDANT'S MOTION FOR RECONSIDERATION AND CLARIFICATION" and "APPENDIX TO DEFENDANT'S MOTION FOR RECONSIDERATION AND CLARIFICATION" were filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system. s/ F. Jefferson Hughes