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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ AMBASE CORPORATION and ) CARTERET BANCORP, INC. ) ) Plaintiffs, ) ) ) Case No. 93-531C FEDERAL DEPOSIT INSURANCE CORP., ) No. 95-531-C Successor to the rights of ) Senior Judge Smith CARTERET SAVINGS BANK, F.A. ) Senior Judge Loren A. Smith ) ) Plaintiff Intervenor ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. ) __________________________________________) FDIC'S STATEMENT WITH REGARD TO SUMMARY JUDGMENT

Of Counsel: John V. Thomas Deputy General Counsel D. Ashley Doherty Counsel November 7, 2007

Federal Deposit Insurance Corporation Legal Division Andrew C. Gilbert Counsel of Record for Plaintiff-Intervenor 550 Seventeenth Street, NW, MB-3060 Washington, DC 20429 (202) 898-3871 [email protected]

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TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................................... ii FDIC'S STATEMENT WITH REGARD TO SUMMARY JUDGMENT.................................... 1 ARGUMENT.................................................................................................................................. 3 I. Issues Relating to The Receivership Deficit Are Premature ....................................................... 3 A. The Receivership Deficit Is Relevant Only to Justiciability.............................................. 3 B. Justiciability Is Not Currently At Issue .............................................................................. 4 II. Future Evidentiary Issues Can Be Decided on Summary Judgment.......................................... 7 A. Which Elements Will Flow to the "Coffers of the Government"? .................................... 7 B. Which Elements of the Receivership Deficit Are Insufficiently Final for Justiciability? . 8 III. Substantive Review of Carteret's Receivership Deficit Is Inappropriate ................................. 9 A. Attacks on Congressional Action Are Damages Claims against the Government .......... 10 B. FDIC-R's Past and Future Conduct Is Not Reviewable Here on the Merits.................... 11 C. FDIC-C Polices Are Not Reviewable Here on The Merits.............................................. 13 IV. The Damages Claim Here Belongs to the FDIC-R ................................................................ 14 V. Unless Justiciability Issues Are Deferred, The Pre-Trial Schedule Should Be Adjusted.... 15 CONCLUSION............................................................................................................................. 16 CERTIFICATE OF FILING......................................................................................................... 18 ATTACHMENT A ....................................................................................................................... 19

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TABLE OF AUTHORITIES Cases AmBase Corp. v. United States, 58 Fed. Cl. 32 (2003)............................................................ 4, 15 AmBase Corp. v. United States, 61 Fed. Cl. 794 (2004)....................................................... passim American Capital Corp. v. FDIC, 472 F.3d 859, 867 (Fed. Cir. 2007) ........................................ 15 Bailey v. United States, 341 F.3d 1342 (2003)....................................................................... 3, 7, 8 Bennett v. Coors Brewing Co., 189 F.3d 1221, 1238 (10th Cir. 1999) ........................................... 5 Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652, 658 (2003) ................................... 5 First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279, 1287 (1999).......... 15 Glidden v. Zdanok, 370 U.S. 530, 557 (1962).............................................................................. 11 Hall v. United States, 69 Fed. Cl. 51, 56 (2005)........................................................................... 13 In re . Milwaukee, St. Paul & Pacific Railroad Co., 701 F.2d. 604 (7th Cir. 1983) ................ 12, 13 In re Bean, 252 F.3d 113, 117-118 (2nd Cir. 2001)......................................................................... 5 Martinez v. United States, 333 F.3d 1295 (Fed. Cir. 2003 ........................................................... 13 McNabb v. United States, 54 Fed. Cl. 759 (2002)........................................................................ 13 MedImmune, Inc. v. Genentech, Inc., -- U.S --, 127 S.Ct.764, 771 (2007) ................................. 12 Ross v. Bernhard, 396 U.S. 531, 538 (1970) ................................................................................ 15 Suess v. United States, 33 Fed. Cl. 89 (1995)................................................................................. 9 Suess v. United States, 74 Fed. Cl. 510, 516 (2006) .................................................................. 6, 9 Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp., 482 F.3d 1330, 1336 (Fed. Cir. 2007) ...................................................................................... 12 Texas v. United States, 523 U.S. 296, 300 (1998).......................................................................... 5 Trek Leasing, Inc. v. United States, 62 Fed. Cl. 673 (2004) ........................................................ 13 United States v. King, 395 U.S. 1, 3 (1969) ................................................................................. 11

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Statutes 12 U.S.C. § 1441a(m)(2)............................................................................................................... 15 12 U.S.C. § 1821(d)(13)(D).......................................................................................................... 11 12 U.S.C. § 1821(j). ...................................................................................................................... 11 12 U.S.C. § 1821a(a)(1-2)............................................................................................................. 15 28 U.S. C. § 2503(b). ...................................................................................................................... 6 5 U.S.C. §§ 701 et seq................................................................................................................... 13 Other Authorities Amended Order, AmBase Corp. v. U.S., No. 93-531C (Apr. 13, 2007) ........................................ 5 Order, AmBase Corp. v. United States, No. 93-531C (Dec. 13, 2006) .......................................... 5 Order, United States v. Federal Deposit Insurance Corporation, No. 02-1427 (D.D.C., May 2, 2006). ........................................................................................................................................ 10 Rules Fed. R. Evid. 402 ........................................................................................................................... 6 Fed. R. Evid. 401 ............................................................................................................................ 6 Fed. R. Evid. 401, cmt. (1972 Prop. Rules) .................................................................................... 6 R. Ct. Fed. Cl. 57, cmt. (2002 Rev.) ............................................................................................. 11 Treatises C. Callen, "Rationality and Relevancy: Conditional Relevancy and Constrained Resources," 2003 Mich. St. L. Rev. 243 (2003) ............................................................................................. 6 C.A. Wright, et al., 13A Fed. Prac. & Proc. Juris. 2d. § 3532 (2007) ...................................... 5, 6 J.W. Moore, et al., 5 Moore's Federal Practice § 23.1.02[1](3d. ed. 2005)................................ 15

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS __________________________________________ AMBASE CORPORATION and ) CARTERET BANCORP, INC. ) ) Plaintiffs, ) ) ) Case No. 93-531C FEDERAL DEPOSIT INSURANCE CORP., ) No. 95-531-C Successor to the rights of ) Senior Judge Smith CARTERET SAVINGS BANK, F.A. ) Senior Judge Loren A. Smith ) ) Plaintiff Intervenor ) ) v. ) ) THE UNITED STATES OF AMERICA, ) ) Defendant. ) __________________________________________) FDIC'S STATEMENT WITH REGARD TO SUMMARY JUDGMENT Plaintiff-Intervenor Federal Deposit Insurance Corporation ("FDIC-R"), successor to the rights of the former Carteret Savings Bank, F.A. ("Carteret" or "the Thrift"), submits this statement pursuant to the Court's Trial Scheduling Order ("TSO") of April 13, 2007. The TSO ordered the parties to submit their positions with regard to "whether the trial schedule [set forth in the TSO] can be avoided by summary judgment." This statement addresses the question of whether and when it would be profitable for the Court to entertain summary judgment motions relating to justiciability, and, in connection therewith, Carteret's projected receivership deficit. After a lengthy discovery and briefing process, this Court recently found that the case is currently justiciable. Therefore, both trial and summary judgment motions on that topic are premature and inappropriate at this time.

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The projected receivership deficit will become relevant to this goodwill contract case if, and only if, a question arises in the future as to whether this case continues to be justiciable. That question will arise if, and only if, this Court awards damages in an amount less than the projected receivership deficit. At that time, the question of justiciability would then be ripe for decision. The issue before the Court at that time will not be what the receivership deficit "should" be. Rather, it will be an evidentiary issue: whether the Government can produce evidence, sufficient in quantity and weight, to show that damages due are less than the amount of money that would ultimately flow back to the United States Treasury via payment of claims against the Carteret receivership. Whether the Government has produced sufficient evidence to show how much money FDIC-R is likely to pay to Treasury is a question that can, when and if necessary, be resolved by summary judgment. Neither trial nor summary judgment will ever be appropriate in this case with respect to conduct of the Resolution Trust Corporation in resolving Carteret, the past conduct of FDIC-R in resolving the Carteret estate, the anticipated conduct of FDIC-R with respect to payment of claims against the Carteret estate, or the conduct of the Federal Deposit Insurance Corporation acting in its corporate capacity ("FDIC-C") in adopting various policies. Those issues are outside the jurisdiction of this Court. 1

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The Shareholder-Plaintiffs have contended that the FDIC "explicitly concedes" that "this Court has jurisdiction to consider Carteret's claims for damages." AmBase Statement of Issues Reply Brief at 1 (Oct. 19, 2006). If this is meant to imply that FDIC-R concedes jurisdiction in this Court to adjudicate the conduct of FDIC in any capacity, it is mistaken. The FDIC's statement that "there is no reason to treat the FDIC's current estimates of the receivership's ultimate tax liability as dispositive" refers, as was clear in context, only to the evidentiary weight and probative value of those "current estimates." FDIC's Response to AmBase's Statement of Issues at 19-20 (Sept. 13, 2006). The statement in no way constitutes a concession that FDIC's ultimate tax liability, or any other element of the projected receivership deficit, is an appropriate issue for decision in this case, which they are not.

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ARGUMENT I. Issues Relating to The Receivership Deficit Are Premature A. The Receivership Deficit Is Relevant Only to Justiciability This Court has determined that it "must carefully review the receivership deficit to permit inclusion of only those costs which are legitimately part of the receivership deficit." AmBase Corp. v. United States, 61 Fed. Cl. 794, 802 (2004). As the Court further noted, "[t]his leaves, of course, the logistical question of how to conduct such a review." Id. At the present time, there is no basis for reviewing the receivership deficit by means of either summary judgment or trial. As this Court has stated, the significance of the receivership deficit in goodwill cases is that it is relevant to whether claims should be dismissed "for lack of Article III standing as an intra-governmental dispute." Id. at 801, discussing Bailey v. United States, 341 F.3d 1342 (2003). Specifically, a goodwill case presents "a nonjusticiable intragovernmental dispute" if the size of the award "recovered from the government by the FDIC" is less than the FDIC's subrogated claim, such that the entire damages award "would flow to the [FSLIC Resolution Fund], from one government coffer to another." Id., quoting Bailey, 341 F.3d at 1346. The Shareholder-Plaintiffs appear to argue that this Court should determine the "proper calculation and size of the receivership deficit" even if it awards damages in an amount greater than the projected receivership deficit. Plaintiffs' Reply in Support of Their Motion for Entry of an Order Setting Pretrial Schedule at 8 (Mar. 26, 2007)("SHP Reply"). 2 They assert that this is

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The Shareholder Plaintiffs emphasize that "the receivership deficit at the time of any award effectively reduces any damages recovery by the shareholders of the thrift." SHP Reply at 8. That stockholders will receive distributions from the receivership estate only after creditors are paid in full does not affect the justiciability of the case. Therefore, it cannot justify inquiry by this Court into "the specifics of the receivership."

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appropriate because "the receivership deficit at the time of any award effectively reduces any damages recovery by the shareholders of the thrift." Id. (emphasis added). Given that any damages awarded in this case must be paid to FDIC-R, and that other claims with statutory priorities higher than those of the Shareholder-Plaintiffs are pending against the Carteret receivership, Shareholder-Plaintiffs can indeed expect ultimately to receive less than 100% of damages awarded here. That is, of course, merely a function of the fact that this is, as this Court has previously held, a shareholder-derivative case. AmBase Corp. v. United States, 58 Fed. Cl. 32, 52, 54 (2003)(shareholder plaintiffs pursue Carteret's breach of contract claim derivatively). It does not change the fact that the only relevance of the size of the projected receivership deficit here is to the issue of justiciability. B. Justiciability Is Not Currently At Issue Since the receivership deficit is relevant here only for purposes of comparison to a damages award, this Court originally saw "no reason" for it to "pursue any inquiry" in this case "into the specifics of the receivership until at least such time as there is a decision that some damages must be awarded." AmBase Corp. v. U.S., 61 Fed. Cl. at 802. Two years later, the Government challenged the continued justiciability of the case, arguing that "any recovery on Carteret's contract claim will flow to the United States and the case is moot" and should therefore be dismissed. Government Response to AmBase's Statement of Issues at 6 (August 30, 2006). This Court rejected that argument, however, and found that "the case is justiciable at this time." Amended Order, AmBase Corp. v. U.S., No. 93-531C (Apr. 13, 2007); see also Order, AmBase Corp. v. United States, No. 93-531C (Dec. 13, 2006). No challenge to the justiciability of the case is currently pending. Nor has the most recent round of discovery produced evidence indicating that the case has become non-justiciable. To the

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contrary, the Shareholder-Plaintiffs' experts now calculate damages ranging from $785 million to over $8 billion dollars. An award of an amount anywhere on this continuum would greatly exceed Carteret's total net receivership deficit, which was last projected at $299.7 million (including taxes), as of year-end 2006. 3 Moreover, as discussed below, discovery has clarified the fact that currently projected estimate of income taxes that will ultimately be paid by the receivership is so highly contingent that it should be disregarded for purposes of determining justiciability. Therefore, the question of justiciability is not currently at issue. Whether the case continues to be justiciable depends upon "the outcome of another as-yet undecided issue", viz., damages; for now, therefore, the issue of justiciability continues to be premature. C.A. Wright, et al., 13A Fed. Prac. & Proc. Juris. 2d. § 3532 at 114 (2007), citing In re Bean, 252 F.3d 113, 117-118 (2nd Cir. 2001)(issue of whether bankruptcy trustee's compensation should be offset did not present "real controversy" until after bankruptcy court had passed on trustee's fee application); Bennett v. Coors Brewing Co., 189 F.3d 1221, 1238 (10th Cir. 1999)(prior to determination of whether plaintiffs' releases were valid, attorneys' fees provision therein was not ripe for review). In fact, the issue of justiciability is not merely premature: it is "not ripe for judicial review" since "it is premised upon `contingent future events that may not occur as anticipated, or indeed may not occur at all.' " Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652, 658 (2003), quoting Texas v. United States, 523 U.S. 296, 300 (1998). Moreover, it may never be mature or ripe for decision: as this Court has recognized, "[i]f, after trial, it is determined that no damages are to be awarded, it will render the present question moot." AmBase Corp. v. United States, 61 Fed. Cl. at 802.

Goodwill Financial Reporting Package-Carteret Federal Savings Bank (Mar. 23 2007), a copy of which is attached hereto as Exhibit A.

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"Evidence which is not relevant is not admissible" at trial. Fed. R. Evid. 402. 4 Relevant evidence is evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. Fed. R. Evid. 401 (emphasis added). There is no provision for admission of evidence with respect to facts that may be "of consequence to the determination of the action." As the drafters of the Federal Rules of Evidence note, relevance exists "only as a relation between an item of evidence and a matter properly provable in the case." Fed. R. Evid. 401, cmt. (1972 Prop. Rules). Matter that may be "properly provable," depending on the outcome of the case, is not relevant. 5 Consideration now of the future justiciability of this case, including inquiry into the "specifics of the receivership deficit," would not result in judicial or other economies. Rather, it would "dissipate judicial energies better conserved for litigants who have a real need for official assistance," as well as forcing parties "to bear the burdens of litigation without substantial justification" and to "grapple with hypothetical possibilities rather than immediate facts." 13A Fed. Prac. & Proc. § 3532.1 at 114. In another goodwill case, this Court was led to believe, at the time of its decision on damages, that "the receivership deficit would be a negative number and thus valueless." Suess v. United States, 74 Fed. Cl. 510, 516 (2006)(emphasis added). However, as this Court noted, this "did not [a]ffect the government's liability for the breach." Id. Therefore, the case went forward, through the damages trial and damages decision, despite uncertainty with respect to future justiciability. Here, where there is currently no pending
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"The proceedings of the Court of Federal Claims shall be . . . in accordance with the Federal Rules of Evidence." 28 U.S.C. § 2503(b). 5 Such evidence does not fall within the definition of evidence the relevancy of which is "conditioned on fact." Fed. R. Evid. 104(b). Such evidence is evidence whose relevance is dependent on the introduction of other evidence, not on the outcome of the trial. Id. "Trial judges generally limit their application of conditional relevancy to a few sorts of problems, such as authentication, proof of notice or knowledge, admissibility of prior wrongs or acts under Federal Rule 404(b), and personal knowledge of witnesses." C. Callen, "Rationality and Relevancy: Conditional Relevancy and Constrained Resources," 2003 Mich. St. L. Rev. 1243, 1253 (2003); see also id. at 1297.

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challenge to justiciability of this case, nor evidence currently indicating that justiciability is questionable, the same procedure should be followed. II. Future Evidentiary Issues Can Be Decided on Summary Judgment If damages eventually awarded are less than the projected receivership deficit, the Government can be expected to argue that the case has become non-justiciable. It can also be expected to proffer the then-current Carteret goodwill financial reporting package as evidence in support of that proposition. A. Which Elements Will Flow to the "Coffers of the Government"? At that time, the first question before the Court will be which elements of the total projected receivership deficit should be considered for the purposes of determining justiciability. In the Bailey case, the Court did not hold that the damages award should be compared to the entire "receivership deficit" of $68.2 million. Rather, it held that the "subrogated claim owned by the [FSLIC Resolution Fund]" of $66 million was the relevant comparison. Bailey v. United States, 341 F.3d at 1346. The subrogated claim was a claim "for funds provided to cover deposit liabilities" that the receivership had been unable to repay out of recoveries on assets. Id. The rationale for the Court's decision was that "the FRF's subrogated claim of $66 million" would exceed the "maximum potential damages award of $64 million" and thus "any damage award . . . would flow to the FRF." Id. In reaching the decision that Bailey was non-justiciable, the court in that case did not take into account either "expenses, including FDIC operating expenses, and taxes," or interest, which brought the receivership deficit to "$71.1 million as of December of 200." Bailey, 341 F.3d at 1344-45. The logical inference is that, for the purposes of determining justiciability, it is appropriate to consider the various elements of a receivership deficit, rather than considering it in

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toto. If justiciability becomes an issue after the damages trial, the question of which elements of the total receivership deficit are relevant to the issue of justiciability can be decided by summary judgment. At that time, the first question before the Court will be which elements of the total projected receivership deficit will never be relevant to justiciability: that is, which elements will, if paid, not result in the flow "from one government coffer [i.e., the FSLIC Resolution Fund] to another." Bailey, 341 F.3d at 1346. An obvious category is amounts owed to third-party creditors of the receivership, together with the interest owed thereon. Payment of those amounts would flow to those creditors, not to the U.S. Treasury. If and when justiciability becomes an issue again, this should be demonstrable on summary judgment. B. Which Elements of the Receivership Deficit Are Insufficiently Final for Justiciability? When and if it becomes necessary for this Court to re-examine justiciability, the second question will be what weight should be given to evidence proffered by the Government. For example, income taxes, a primary component of the total projected net receivership results, will, if ever paid, flow to the U.S. Treasury. However, it is almost certain that the Government will be unable to submit evidence of the amount of a future tax payment that will be sufficiently probative for the purposes of determining justiciability. The estimates of Carteret's future tax liability contained in the goodwill financial reporting package are contingent in the extreme. As the FDIC has consistently stated, "[t]he amount of taxes, penalties, and interest, if any, due to the IRS has not been finally determined." Response of Plaintiff Federal Deposit Insurance Corporation to AmBase's Motion to Dismiss the FDIC (Fed. Cl. Sept. 30, 2003); see also FDIC's Response to AmBase's Statement of Issues at 19 (Sept. 13, 2006).

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As in other goodwill cases, the ultimate tax liability of the Carteret receivership is dependent both upon a substantial award of damages and upon the results of negotiations with the Internal Revenue Service. See, e.g., Suess v. United States, 33 Fed. Cl. 89 (1995); Suess v. United States, 52 Fed. Cl. 221 (2002); Order, United States v. Federal Deposit Insurance Corporation, No. 02-1427 (D.D.C., May 2, 2006)(approving tax settlement). The estimate of the Carteret receivership's potential future tax liability that is set forth in the Carteret goodwill reporting package should thus be disregarded for the purposes of determining justiciability. If the Government contends otherwise, this evidentiary issue will be suitable for summary judgment. 6 In sum, only amounts that are both reasonably certain and reasonably certain to flow back to the "coffers of the Government," such as the outstanding principal on the subrogated deposit resolution loan, should be considered for the purpose of determining continued justiciability. Elements of the receivership deficit that will go elsewhere (e.g., to third-party creditors) or that are not final should not be included in the justiciability calculation. Which elements fall into that category should be determinable by summary judgment, if and when justiciability becomes an issue. II. Substantive Review of Carteret's Receivership Deficit Is Inappropriate Anticipating a future Government challenge to justiciability, the Shareholder-Plaintiffs have already challenged estimates of other elements of the receivership deficit. Those challenges fall into three broad categories:

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The issue of whether the Carteret receivership's ultimate tax liability can be projected with sufficient certainty to be relevant for justiciability purposes is different from the issue of whether any damages award in this case should be "grossed up" to reflect tax consequences. See Suess v. United States, 74 Fed. Cl. 510, 515 (2006)(denying, as premature, a gross-up for taxes expected to be paid on damages award).

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(a) attacks on Congressional action, such as the alleged failure adequately to fund the RTC, which allegedly reduced the value of the Carteret receivership and created a need to borrow, and the enactment of the Minority Preference Program; (b) attacks on the conduct of FDIC as receiver, such as the sale of Carteret Mortgage Company, which was allegedly a bad business decision; and (c) attacks on policies established by the FDIC acting in its corporate capacity ("FDIC-C"), including policies relating to tax accounting, post-insolvency interest, allocation of administrative and litigation expenses, and establishing and carrying out a Minority Preference Program, allegedly in violation of the Constitution and economic rationality. A. Attacks on Congressional Action Are Damages Claims against the Government The Shareholder-Plaintiffs' attacks on Congressional action, particularly its alleged failure adequately to fund the RTC, are misstated as challenges to elements of the receivership deficit. In reality, these attacks are contentions that, in a "but for" world, events would have transpired otherwise: the value of the Carteret receivership would have been higher, and consequently there would have been no need for the receivership to borrow. As such, these contentions are claims that the Government, by its actions or inactions, inflated the damages caused by its breach of Carteret's goodwill contract. These claims can be pursued by the Shareholder-Plaintiffs only against the United States directly. The projected receivership deficit should not be reduced to reflect any diminution in the value of the Carteret receivership caused by Government action or inaction.

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B. FDIC-R's Past and Future Conduct Is Not Reviewable Here on the Merits. FDIC-R believes that it has handled Carteret, and the hundreds of other receiverships it dealt with during the crisis of the late 1980's and early 1990's, effectively, legally, and well. Whether it is right is not a question properly before this Court. Attacks on the past and future conduct of the FDIC itself, as receiver, are outside the jurisdiction of this Court. The FDIC does not repeat here its argument that the FDI Act precludes any court from having jurisdiction over "any claim relating to any act or omission" of a depository institution for which the FDIC, or RTC, was appointed receiver, or any action of the FDIC, or RTC, as receiver. 12 U.S.C. § 1821(d)(13)(D). Nor does the FDIC repeat its argument that the FDI Act also precludes this court from "restrain[ing] or affect[ing] the exercise of powers or functions of the Corporation as . . . receiver," 12 U.S.C. § 1821(j), which, as this Court has noted, "is intended to prevent injunctive relief against the FDIC's actions as receiver." AmBase Corp v. United States, 61 Fed. Cl. at 799. FDIC-R does, however, still stand on these arguments. The FDI Act is not the only curb on the power to review and grant relief with respect to the FDIC's actions as receiver. In this case, the FDIC-R is a plaintiff-intervenor, not a defendant. The Shareholder-Plaintiffs have not, and cannot, assert a claim against FDIC-R: the Government is the only permissible defendant before this Court, and the FDIC-R is not, as this Court has recognized, "the Government." AmBase Corp. v. United States, 61 Fed. Cl. at 796-07. Moreover, the Court of Federal Claims grants only money judgments; it does not grant either injunctions or declaratory relief. United States v. King, 395 U.S. 1, 3 (1969)(relief the Claims Court can give is

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"limited to actual, presently due money damages from the United States"); Glidden Co. v. Zdanok, 370 U.S. 530, 557 (1962). 7 As a result, any finding by this Court that the FDIC-R erred, or may be going to err, in its conduct of the Carteret receivership would be non-binding on FDIC-R. To put it more bluntly, if damages are awarded in this case, a finding critical of FDIC-R's management of the Carteret receivership would not preclude FDIC-R from paying claims against that receivership according to the projections set forth in the then-current goodwill financial package or, for that matter, in some other fashion. Such a finding by this Court would constitute, at most, " `an opinion advising what the law would be upon a hypothetical state of facts,' " in a dispute that did not " `admi[t] of specific relief through a decree of a conclusive character.' " Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp., 482 F.3d 1330, 1336 (Fed. Cir. 2007), quoting MedImmune, Inc. v. Genentech, Inc., -- U.S. ­ , 127 S.Ct.764, 771 (2007); see also Teva Pharmaceuticals. at 1337 (plaintiffs seeking declaratory judgment must show "injury-in-fact" that is "likely to be redressed by the requested relief."). In a strikingly similar case, shareholders of a railroad in the midst of reorganization sought a declaratory judgment that certificates of indebtedness held by the railroad were worthless. In re Chicago, Milwaukee, St. Paul & Pacific Railroad Co., 701 F.2d 604 (7th Cir. 1983). The shareholders sought to have the certificates declared worthless because they had been issued pursuant to a federal statute, known as the "MRRA," that allegedly violated the Constitution. Holding that the shareholders' claims were not ripe for review, the court stated: [T]he shareholders' claims are speculative and hypothetical. The shareholders are not currently suffering any concrete harm because neither the principal nor interest is being paid. There is a possibility that there will be insufficient assets remaining in the estate to satisfy the [railroad's] creditors with priority senior to
The authority of Court of Federal Claims to render declaratory judgments is limited to "the context of procurement protests." R. Ct. Fed. Cl. 57, cmt. (2002 Rev.)
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MRRA claims. There is, moreover, an excellent possibility that the entire MRRArelated debt will be forgiven as a result of [another statute]. If either of these events occurs, there will be no injury to the shareholders, and they will have no case or controversy to press. .... . . . Future events may well render the shareholders' claims moot. Id. at 609, 610 (dismissing appeal). The Shareholder-Plaintiffs here are in exactly the same position. Therefore, their allegations with respect to FDIC-R's conduct of the receivership should not be adjudicated on the merits. C. FDIC-C Policies Are Not Reviewable Here on the Merits In addition to attacking FDIC-R's conduct of the Carteret receivership, the ShareholderPlaintiffs attack the policies that FDIC-R followed, such as the post-insolvency interest rate and the establishment of a Minority Preference Program. See, e.g., AmBase Statement of Issues Reply Brief at 5 (Oct. 19, 2006)(alleging "improper inflation of the receivership deficit" is attributable to "FDIC in its corporate capacity"). The only statutory basis for attacking those polices is the Administrative Procedure Act, 5 U.S.C. §§ 701 et seq. ("APA"), which provides the remedy for administrative action that is "arbitrary, capricious, or irrational." Claims under the APA are not adjudicable in the Court of Federal Claims. Hall v. United States, 69 Fed. Cl. 51, 56 (2005)(CFC lacks jurisdiction to review an agency decision under the APA), citing Martinez v. United States, 333 F.3d 1295 (Fed. Cir. 2003)(CFC lacks APA jurisdiction) and McNabb v. United States, 54 Fed. Cl. 759 (2002)("APA reviews are conducted in federal district court rather than the Court of Federal Claims, since the APA addresses `relief other than money damages.'). 8 In the absence of the ability to invalidate an FDIC-C policy, and require a "do-over," an opinion finding that FDIC-C acted arbitrarily would, like a finding that FDIC-R erred, constitute an advisory opinion. Consequently,
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28 U.S.C.§ 1367, which provides for "supplemental jurisdiction," is not applicable to the Court of Federal Claims. Hall v. United States, 69 Fed. Cl. at 57, citing Trek Leasing, Inc. v. United States, 62 Fed. Cl. 673 (2004).

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Shareholder-Plaintiffs may not here attack, on the merits, the policies adopted by FDIC-C, and currently being applied by FDIC-R, with respect to the calculation of post-insolvency interest. FDIC-R thus disputes the Shareholder-Plaintiffs' ability to obtain an "equitable review," AmBase v. United States, 61 Fed. Cl. at 797, 800, or any other merits determination concerning the projected receivership deficit. However, FDIC-R does not dispute Shareholder-Plaintiffs' ability to obtain an evidentiary review of the Government's evidence if, at some point in the future, the Government makes a new motion challenging justiciability. If that should happen, the Shareholder-Plaintiffs would free to attack, as this Court would be to review, the sufficiency (including the relevance, weight, and probative value) of any evidence submitted by the Government with respect to the issue of what funds will ultimately flow to its "coffers." That review must, however, be limited to traditional evidentiary grounds: it cannot serve as a subterfuge for deciding non-justiciable and unenforceable claims against the FDIC-R, as receiver or in any capacity. If such an evidentiary review is called for, summary judgment is likely to be appropriate. III. The Damages Claim Here Belongs to the FDIC-R Without going into specifics, the Shareholder-Plaintiffs have characterized as "flawed" the "analysis" that "any damages award must `flow through' the receivership, and that the receivership deficit at the time of any award effectively reduces any damages recovery by the shareholders of the thrift." Plaintiffs' Reply in Support of Their Motion for Entry of an Order Setting Pretrial Schedule at 8 (Mar. 26, 2007). Apparently, in Shareholder-Plaintiffs'' view, either the damages award in this case does not "flow through" the receivership, or their recovery should not be reduced by payment of higher-priority claims, or both. Shareholder-Plaintiffs seem to be implying that they are entitled to a direct award of damages.

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In view of this insinuation, FDIC-R repeats what should not, in light of this Court's prior statements, 9 need repeating: Carteret, not its shareholders, owned its contract claims. FDIC-R is the successor to the rights of Carteret and also the manager of the FSLIC Resolution Fund that succeeded, by operation of law, to the assets and liabilities of the Resolution Trust Corporation ("RTC"). 12 U.S.C. §§ 1441a(m)(1), 1441a(m)(2), 1821a(a)(1-2). As a result, it owns Carteret's breach of contract claim. Moreover, any damages awarded on that claim are payable only to the FDIC, which will distribute them to claimants of the Carteret receivership according to the established system of priorities. Ross v. Bernhard, 396 U.S. 531, 538 (1970); First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279, 1287-88 (1999); Suess v. United States, 52 Fed. Cl. 221, 232 (2002); J.W. Moore, et al., 5 Moore's Federal Practice § 23.1.02[1] (3d. ed. 2005). Shareholder-Plaintiffs "cannot randomly disregard the corporate form to [their] own benefit. [A thrift's] injuries that resulted in its losses and ultimate downfall are properly its own." American Capital Corp. v. FDIC, 472 F.3d 859, 867 (Fed. Cir. 2007). V. Unless Justiciability Issues Are Deferred, The Pre-Trial Schedule Should Be Adjusted Should the Court decide to entertain evidence relating to the projected receivership deficit prior to rendering a decision on damages, summary judgment motions are likely to reduce the necessity for trial as to some or all elements of that projection. At this time, both Shareholder-Plaintiffs' and intervenor-plaintiffs' Appendix A submissions are due on Dec. 21, 2007, with the Government's Appendix A submission due one

This Court previously made it clear that the Government's breach of contract "create[d] in . . . Carteret, a cause of action against the government," AmBase v. United States, 58 Fed. Cl. at 51, and that "FDIC is an indispensable party as the successor to the rights of Carteret, which include the breach of contract claims that the shareholder Plaintiffs seeks to pursue derivatively." AmBase Corp. v. United States, 61 Fed. Cl. at 795 (emphasis added).

9

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month later, on January 21 or 22, 2008. 10 If the Court decides to hear evidence relating to justiciability, including evidence with respect to the projected receivership deficit, prior to deciding damages, this schedule should be adjusted. In that event, FDIC proposes that the existing schedule be amended to provide for filing of its motions on January 22, 2007, one month after Shareholder-Plaintiffs file their Appendix A submission. FDIC-R further proposes to file its own Appendix A submission on February 5, 2008, two weeks after the Government files its Appendix A submission. Because of the likelihood that summary judgment motions would reduce the necessity for trial as to some or all elements of the projected receivership deficit, summary judgment motions on that subject should be decided prior to trial, and the trial should be postponed until after they are decided. CONCLUSION The issue of justiciability, and the related issue of what weight should be given to projections of Carteret's receivership deficit, is premature at this time. In fact, depending on the damages award ultimately made, those issues may never need to be decided. Therefore, the Court should neither entertain summary judgment motions on, nor try, these issues until after a damages award has been made. If, after damages have been awarded, the continued justiciability of this case becomes doubtful, the Court will need to evaluate the Government's evidence as to the amount of money that would ultimately flow back to the United States Treasury via payment of claims against the Carteret receivership. That limited issue should be resolvable at that time by summary judgment. Should the Court decide to entertain evidence relating to justiciability before deciding damages, summary judgment motions should be useful in obviating the need for trial. In that
10

January 21, the date specified in the TSO, is a federal holiday.

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event, the existing trial schedule should be modified to allow FDIC-R to file its motions on January 22, 2007, and its Appendix A submission on February 5, 2008. Trial should be postponed until those motions are decided. Respectfully submitted, Federal Deposit Insurance Corporation Legal Division s/ Andrew C. Gilbert Andrew C. Gilbert Counsel of Record for Plaintiff-Intervenor 550 Seventeenth Street, NW, MB-3060 Washington, DC 20429 (202) 898-3871

Of Counsel: John V. Thomas Deputy General Counsel D. Ashley Doherty Counsel November 7, 2007

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CERTIFICATE OF FILING I hereby certify this 7th day of November 2007, that I caused a copy of the foregoing FDIC'S STATEMENT WITH REGARD TO SUMMARY JUDGMENT 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, and that parties may access this filing through the Court's electronic filing system. s/ Andrew C. Gilbert

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ATTACHMENT A Goodwill Financial Reporting Package-Carteret Federal Savings Bank (Mar. 23 2007).

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