Free Motion for Extension of Time - District Court of Federal Claims - federal

Case 1:92-cv-00872-LAS

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS AMERICAN SAVINGS BANK, F.A., et al., Plaintiffs, v. UNITED STATES, Defendant. ) ) ) )

No. 92-872C (Senior Judge Smith)

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DEFENDANT'S MOTION FOR ENLARGEMENT OF TIME FOR FILING OF JOINT STATUS REPORT AND POSTPONEMENT OF STATUS CONFERENCE Pursuant to this Court's oral order at the July 31, 2008 status conference, defendant, the United States, respectfully submits this motion for 1) enlargement for the filing of the joint status report with plaintiffs, American Savings Bank, F.A., Keystone Holdings, Inc., Keystone Holdings Partners, L.P., N.A., Capital Holdings, Inc., New American Capital, Inc., and New American Holdings, Inc. (collectively "plaintiffs"); and 2) postponement of the status conference. We respectfully request that the Court grant the motion for enlargement for filing the joint status report from September 5, 2008, until October 31, 2008, to accommodate our need to analyze plaintiffs' computation and analysis of damages. Plaintiffs have informed us they will produce that computation and analysis by October 17, 2008. We simultaneously request a postponement of the status conference, currently scheduled for September 12, 2008, for the purpose of discussing the parties' joint status report, to a date as shortly after October 31, 2008, as is convenient for the Court. We have conferred with counsel for plaintiffs in attempt to reach agreement, but were unable to do so. Counsel for plaintiffs have informed us that they intend to file a response to this motion.

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PROCEDURAL BACKGROUND AND DISCUSSION At the Court's July 31, 2008 status conference, the Court instructed the parties to confer and produce a joint status report concerning the projected case schedule by Septelnber 5, 2008, with a status conference to be held Septelnber 12, 2008. At the July 31 status conference, we requested that plaintiffs furnish a statement setting forth their proposed damages in advance of the status report, in order to enable us to analyze the statement and determine our view of the appropriate schedule for future proceedings in this matter. In turn, plaintiffs stated that they would provide a description of the categories of damages, with a "precise computation" to follow after the status report. Transcript (July 31, 2008) at 40 (attached as Exhibit A). On August 25, 2008, we received a letter from plaintiffs addressing their proposed damages theories and trial schedule. See Letter from Yalowitz to Todor (August 25, 2008) (attached as Exhibit B). The letter states that plaintiffs intend to present evidence at trial concerning "one or more" of three damages theories, as well as a request for a jury verdict. The letter then contains a one-paragraph description of their proposed claims for lost profits and reliance damages, and a one-sentence description of their lnitigation claim. Although we recognize that plaintiffs stated at the July 31 status conference that they would provide a description of damages outlining the basis for the theories, rather than a "precise computation," tbr the joint status report, the description of damage theories and claims plaintiffs provided contains considerably less detail in terms of methodology, or supporting evidence, than we anticipated. None of the descriptions identify the witnesses, evidence, or calculations plaintiffs intend to present at trial. Significantly, as plaintiffs previously sought only restitution,

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rather than damages, for the breach of the Warrant Forbearance, none of plaintiffs' current claims have previously been the subject of discovery or briefing before the Court. Plaintiffs' lost profits and reliance theories also do not appear to have any connection with the evidence and damages theory this Court considered for the Note Forbearance, and the mitigation theory may or may not have a connection with the Note Forbearance evidence and damages theory. As a result, we are not in a position where we can meaningfully determine our view of an appropriate schedule for purposes of a joint status report. Although plaintiffs notified us of their categories of proposed damages, the current level of detail amounts to little more than the information typically contained in a complaint, rather than an analytical model setting forth a methodology for a computation and analysis of damages. Absent further disclosure regarding which theories plaintiffs actually intend to present at trial, as well as the methodology and support for those theories, we are unable to provide the Court with a meaningful proposal setting forth our view of the appropriate schedule for future proceedings in this matter. In the August 25 letter, however, plaintiffs did state that on October 17, 2008, they would be able to produce their calculation and analysis of the damages to be proven at trial. We do believe that, upon receipt of that information, we will be able to engage in a meaningful determination of the necessary extent of preparation for trial that will be required and the appropriate schedule to allow sufficient time for that preparation. We estimate that we could perform this analysis and present a joint status report to the Court within two weeks of receiving plaintiffs' computation and analysis. Thus, we respectfully request that the Court enlarge the time for filing of the joint status report until October 31, 2008, with a status conference to be set shortly thereafter to discuss the parties' respective projected case schedules.

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Lastly, having reviewed plaintiffs' proposed case schedule, we do feel compelled to inform the Court that our initial evaluation of the necessary time for trial preparation and, potentially, length of trial differs considerably from plaintiffs. Plaintiffs have proposed a March 2009 trial date, with two weeks allotted for trial. In our experience, both of these time measures are unrealistic. Based upon our previous experience with Winstar damages trials, and given that plaintiffs' claims are both numerous and new, we find it highly unlikely that the necessary time for preparation of witnesses and case theories, discovery, and pretrial briefing would allow for trial before September 2009. We say this reluctantly because we are anxious to see this case, as well as all the remaining Winstar cases, resolved as quickly as possible. Our current belief that trial could occur in September 2009 also does not account for a period devoted to mediation. If the parties desire mediation, additional time would be needed. Moreover, in our experience, Winstar-related trials involving lost profits claims, which plaintiffs are now asserting, have been highly fact-intensive and have typically required trial lengths of, at minimum, three to six weeks. Plaintiffs are proposing lost profits, reliance, and mitigation damages, representing virtually all of the types of damages sought in Winstar trials, and the trial length would thus necessarily need to accommodate a wide range of evidence. We aclcnowledge that plaintiffs may have a different view regarding these issues, and that receipt of pla~ntlttS' computation and analysis of damages on October 17 may ciaril~ the issues ti~rther. Nevertheless, neither the proposed March 2009 trial date, or two-week trial length, appear realistic.

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CONCLUSION For the foregoing reasons, we respectfully request that the Court enlarge the time for filing of the joint status report until October 31, 2008, with a status conference to be set as soon after October 31, 2008, as is convenient for the Court.

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Respectfully submitted, MICHAEL F. HERTZ Deputy Assistant Attorney General JEANNE E. DAVIDSON Director s/Kemaeth M. Dintzer KENNETH M. DINTZER Assistant Director s/Jolm J. Todor JOHN J. TODOR Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit, 8th Floor 1100 L Street, NW Washington, D.C. 20005 Telephone: (202) 616-2382 Facsimile: (202) 514-8640 Attorneys for Defendant

Of Counsel: SCOTT D. AUSTIN Senior Trial Counsel ELIZABETH A. HOLT VINCENT PHILLIPS Trial Attorneys Civil Division Department of Justice September 4, 2008

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CERTIFICATE OF SERVICE I certify that on this 4th day of September 2008, I caused the foregoing "DEFENDANT'S MOTION FOR ENLARGEMENT OF TIME TO FILE JOINT STATUS REPORT" to be filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. s/Jolm J. Todor

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IN THE UNITED STATES AMERICAN SAVINGS BANK, et al., Plaintiffs,

COURT OF FEDERAL

CLAIMS

UNITED STATES, Defendant.

) ) ) ) ) ) Docket ) ) ) )

No. 92-872C

Thursday, July 31, 2008
Live Tape (The following transcript was transcribed from a digital recording provided by the United States Court of Federal Claims to Heritage Reporting Corporation on August 21, 2008.)

APPEA/tANCES:

On Behalf of Plaintiff:
MELVIN GARBOW, Esquire KENT YALOWITZ, Esquire MICHAEL JOHNSON, Esquire JOSHUA WILSON, Esquire Arnold & Porter, LLP 555 Twelfth Street, N.W. Washington, D.C. 20004-1206 (202) 942-5000

Heritage Reporting Corporation (202) 628-4888

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to the joint status report on September 5, would the Court like to set a date or the Plaintiffs propose to produce to us this statement outlining their damages claim, say a week or I0 days before that? THE COURT: Mr. Yalowitz?

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MR. YALOWITZ: That's fine. I think we can probably do it even before then. It wouldn't be a computation. It would be a description of the categories of damages, the basis for the theories. Then we would have a more precise computation further on, but it would give the Defendant an idea of what the shape of trial would be based on their prior experience with similar cases. THE COURT: MR. TODOR: Okay. Plaintiffs' counsel also I think I mean, it wouldn't be a precise

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used the word 26(a).

analog, but if the Plaintiffs have an idea of what they're looking at in terms of witnesses, in terms of the type of proof, obviously any information number one that would be new and two will be helpful to us in seeing what agreements we can reach with Plaintiffs with respect to the schedule. THE COURT: Okay. I mean, it does seem necessary for the Court to set a date for that, but we'll rely on counsel's cooperation. Heritage Reporting Corporation (202) 628-4888

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ARNOED & PORTER EEP

Kent A. Yalowitz Kent_Yalowitz@apo~e~corn 212.715.1113 212.715.1399 Fax

399 Park Avenue New York, NY 10022-4690

August 25, 2008

John J. Todor Trial Attorney Commercial Litigation Branch Civil Division U.S. Department of Justice Attn: Classification Unit - 8th Floor 1100 L Street, NW Washington, DC 20005
Re: American Savings Bank, N.A. v. United States, No. 92-872 C

Dear John: As you know, Judge Smith has asked that the parties submit a joint status report to the Court by September 5, 2008, outlining the pro'ties' proposals for further proceedings in this case. Attached please find Plaintiffs' proposals, including a schedule for pretrial activities and trial. We have also set forth a description of the types of damages that Plaintiffs intend to seek as compensation for breach of the wan'ant forbearance. Please provide us with your comments or counterproposals, if any, so that we may prepare a joint filing in accordance with the Court's request.

Sincerely,

Kent)~.~itz

Washington, DC

New York

London

Brussels

Los Angeles

Century City

Northern Virginia

Denver

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PLAINTIFFS' DRAFT OF 8/25/08 IN THE UNITED STATES COURT OF FEDERAL CLAIMS AMERICAN SAVINGS BANK, F.A., et al. ) Plaintiffs, v.

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) No. 92-872 C (Senior Judge Loren A. Smith)

) ) THE UNITED STATES OF AMERICA, ) Defendant.

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JOINT CASE MANAGEMENT REPORT Pursuant to the Court's request, and Appendix A of the Rules of the Court of Federal Claims, the parties submit this Joint Case Management Report setting forth the parties' respective proposals for a schedule of pretrial activities and a trial to determine Plaintiffs' damages for breach of the Warrant Forbearance. Plaintiffs also set forth a description of the damages claims they intend to present at trial. I. PLAINTIFFS' DAMAGES CLAIMS

Pursuant to the Federal Circuit's mandate, Plaintiffs are to present to this Court evidence in support of damages for breach of Defendant's warrant forbearance promise, a promise the parties

books the $167 million fair value of the stock purchase warrants issued by New American Capital Holdings, Inc. to Defendant as part of the Transaction (as defined in the parties' contract documents). Defendant breached that promise. Plaintiffs intend to present evidence in support of one or more of the following claims for damages.

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1.

Lost Profits

Defendant's warrant forbearance breach eliminated $167 million in regulatory capital from New American's books. Absent the breach, Plaintiffs would have used that capital to support more than $1 billion in additional income earning assets at New American. Based on the performance of actual assets on New American's books over the contract period, and evidence of the historical performance of other thrifts during that time, Plaintiffs will prove that Defendant's warrant forbearance breach caused New American substantial lost profits that this Court should award as dmnages. 2. Reliance Damages

Alternatively, Plaintiffs are entitled to recover their cost of performing the contractual obligations that Plaintiffs undertook in exchange for the warrant forbearance. As Defendants have acknowledged as an "uncontroverted fact," and as Plaintiffs will prove at trial, Plaintiffs agreed to pay to FSLIC a "second preference" in reliance on the warrant forbearance promise. When Washington Mutual acquired New American, Plaintiffs paid the FDIC an extra $150 million more than they would have paid in the absence of the Warrant Forbearance promise. The extra $150 million more that Plaintiffs paid to the FDIC pursuant to the second preference constitutes an expenditure made in reliance on Defendant's Warrant Forbearance promise. It is properly compensable as damages to Plaintiffs for the breach of that promise. 3. Mitigation Damages

The Court may also award as damages the cost to New American of replacing the $167 million in regulatory capital eliminated by the warrant forbearance breach.

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4.

Jury Verdict Damages The Federal Circuit has held that where a breach of contract is established and injury

to a Plaintiff is certain, any ambiguity as to the amount of damages owed should be construed against the party in breach. Plaintiffs will prove that they were severely injured by the warrant forbearance breach. Should the Court decide that the amount of damages owed to Plaintiffs for Defendant's breach cannot be ascertained with reasonable certainty, the Court should fashion a jury verdict damages award that fairly compensates Plaintiffs for their injuries. II. PROPOSED SCHEDULE OF PRETRIAL PROCEEDINGS EVENT
PLAINTIFFS' PROPOSAL DEFENDANT'S PROPOSAL

Plaintiffs to provide Defendant with a calculation and analysis concerning the Fri., Oct. 17, 2008 damages to be proven at trial. Deadline for deposing the fact witness sponsor(s) of Plaintiffs' Damages Theories. Defendant Discloses Counter-Damages Theories (if any). Fri., Nov. 14, 2008

Fri., Dec. 5, 2008

Deadline for deposing Defendant's expert Thurs., Jan. 8, 2009 if any. Parties confer to make the exchanges Fri., Jan. 9, 2009 including witness and exhibits lists. Plaintiffs file Memorandum of Contentions of Fact and Law, deposition Fri., Jan. 23, 2009 designations, and witness and exhibit lists (except for rebuttal and impeachment).

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Defendant files Memorandum of Contentions of Fact and Law, deposition Fri., Feb. 20, 2009 designations, and witness and exhibit lists (except for impeachment). Parties simultaneously file deposition counter-designations, register any Fri., Feb. 27, 2009 objections to exhibits and witnesses, and file any motions in lirnine. Parties simultaneously file responses to motions in limine, and any additional deposition designations required for purposes of completeness. Parties dispense with replies in support of motions in limine.

Fri., Mar. 6, 2009

Final pretrial conference during which Court will hear oral argument upon and Fri., Mar. 13, 2009 resolve any motions in limine, and rule upon objections to witnesses and exhibits.
....

Trial Commences. Trial Ends.

Mon., Mar. 16, 2009 Fri. Mar. 27, 2009

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Melvin C. Garbow ARNOLD & PORTER, LLP 555 Twelfth Street, NW Washington, DC 20004 202-942-5000 (tel) 202-942-5999 (fax) Kent A. Yalowitz ARNOLD & PORTER, LLP 399 Park Avenue New York, NY 10022 212-715-1000 (tel) 212-715-1399 (fax)
Of Counsel:

Todor Commercial Litigation Branch Civil Division UNITED STATES DEPARTMENT OF JUSTICE 1100 L Street, NW Washington, DC 20530 202 616 2382 (tel) 202 514 8640 (fax)
John J.

Of Counsel

Scott Austin Elizabeth Holt

Howard N. Cayne David B. Bergman Michael A. Johnson Joshua P. Wilson Alexea R. Juliano ARNOLD & PORTER, LLP 555 Twelfth Street, NW Washington, DC 20004 202-942-5000 (tel) 202-942-5999(fax)

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