United States Court of Appeals

for the Federal Circuit

______________________

JOSEPH R. BIAFORA
AND STEFI BIAFORA,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5130
______________________
Appeals from the United States Court of Federal
Claims in No. 93-CV-6552, Judge Edward J. Damich.
______________________
-------------------------DOLLY ANN LIMITED PARTNERSHIP, MID-CITY
FINANCIAL CORPORATION, EUGENE F. FORD,
JOHN WALSH, IRENE WALSH, HILDA ZELDON,
JOHN J. MCAVOY, SAUL RITZENBERG, JOSEPH
MARILLEY, JULIUS SANKIN, CLARK
ENTERPRISES, INC., JANE DEBLOIS HANNAN,
ESTATE OF, ISADORE RODIS CREDIT SHELTER
TRUST, JANE PARISH REVOCABLE TRUST,
AND DELIA LANG,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.

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v. US

______________________
2013-5134
______________________
Appeal from the United States Court of Federal
Claims in No. 97-CV-5828, Judge Edward J. Damich.
______________________
-------------------------THETFORD PROPERTIES IV, L.P.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5136
______________________
Appeal from the United States Court of Federal
Claims in No. 93-CV-6559, Judge Edward J. Damich.
______________________
-------------------------CARRIAGE HOUSE OF MUSKEGON ASSOCIATES,
LP,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5139
______________________

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Appeal from the United States Court of Federal

Claims in No. 97-CV-5822, Judge Edward J. Damich.
______________________
-------------------------CARRIAGE HOUSE SOUTH ASSOCIATES, LP,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5142
______________________
Appeal from the United States Court of Federal
Claims in No. 97-CV-5823, Judge Edward J. Damich.
-------------------------THETFORD PROPERTIES III, L.P.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5144
______________________
Appeal from the United States Court of Federal
Claims in No. 93-CV-6558, Judge Edward J. Damich.
______________________
Decided: December 10, 2014
______________________

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v. US

HARRY J. KELLY, Nixon Peabody, LLP, of Washington,

DC, argued for plaintiffs-appellants.
DAVID A. HARRINGTON, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States
Department of Justice, of Washington, DC, argued for
defendant-appellee. With him on the brief were STUART
F. DELERY, Assistant Attorney General, ROBERT E.
KIRSCHMAN, JR., Director, FRANKLIN E. WHITE, JR., Assistant Director, ELIZABETH A. SPECK and KENNETH D.
WOODROW, Trial Attorney.
______________________
Before NEWMAN, MOORE, and OMALLEY, Circuit Judges.
MOORE, Circuit Judge.
Appellants, owners of properties with mortgages insured by the United States Department of Housing and
Urban Development (HUD), appeal from judgments of the
United States Court of Federal Claims dismissing their
various takings claims. For the reasons below, we affirmin-part, reverse-in-part, and remand to the Court of Federal Claims for further proceedings consistent with this
opinion.
BACKGROUND
In the 1950s and 60s, the federal government enacted
legislation to encourage private developers to construct,
own, and manage housing projects for low- and moderateincome families. The government did so by insuring
mortgages on the housing projects in exchange for certain
provisions, such as a 40-year mortgage term, an agreement to maintain affordability restrictions on the housing
for the duration of the mortgage, and prepayment limitations or prohibitions on the mortgage. Changing this
regime, Congress passed the Emergency Low Income
Housing Preservation Act of 1987 (ELIHPA), which was
superseded by the Low-Income Housing Preservation and

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Resident Homeownership Act of 1990 (LIHPRHA) (collectively, Preservation Statutes). The Preservation Statutes,
among other things, instituted a pre-approval process to
request the right to prepay mortgages. There were substantive restrictions on HUDs ability to grant prepayment requests, which limited its discretion. Cienega
Gardens v. United States, 503 F.3d 1266, 1272 n.2 (Fed.
Cir. 2007) (HUD was only permitted to approve immediate prepayment upon finding that the effect of prepayment would not materially increase economic hardship
for current tenants, including a finding that alternative
housing was available for current tenants and that the
supply of vacant, comparable housing would not be affected.) (citing 12 U.S.C. 4108(a)). Prepaying the mortgage
was one step in removing affordability restrictions on
properties so that they could be rented at market prices.
The Preservation Statutes permitted HUD to grant
property owners incentives, such as cash distributions or
changes to the regulatory agreement, rather than permission to prepay. Appellants, who each owned one or more
properties with mortgages insured by the government,
filed suits in the Court of Federal Claims claiming that
the Preservation Statutes effected an as-applied taking of
their right to prepay mortgages.
Several of the Court of Federal Claims rulings are being appealed. First, it granted the governments motions
for summary judgment that the takings claims for a
subset of the properties at issue were unripe because the
appellants that owned the subset of properties did not
exhaust their administrative remedies. Anaheim Gardens
v. United States, 107 Fed. Cl. 404, 422 (Fed. Cl. 2012).
Second, it granted the governments motions for summary
judgment that no taking occurred for a subset of properties because the mortgages of those properties did not
include a right to prepay. Anaheim Gardens v. United
States, 107 Fed. Cl. 9, 16 (Fed. Cl. 2012). Third, it granted the governments motion for summary judgment of

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collateral estoppel as to all of the claims of one appellant,

Thetford IV. Anaheim Gardens v. United States, 107 Fed.
Cl. 404, 422 (Fed. Cl. 2012). This appeal followed. We
have jurisdiction under 28 U.S.C. 1295(a)(3).
DISCUSSION
We review a determination of ripeness by the Court of
Federal Claims de novo. Maguire v. United States, 707
F.3d 1351, 1357 (Fed. Cir. 2013). We review the Court of
Federal Claims grant of summary judgment regarding
the existence of a taking de novo. Casitas Mun. Water
Dist. v. United States, 708 F.3d 1340, 1351 (Fed. Cir.
2013). We review a trial courts application of collateral
estoppel de novo. Shell Petroleum, Inc. v. United States,
319 F.3d 1334, 1338 (Fed. Cir. 2003).
I. Ripeness
An as-applied regulatory takings claim does not ripen
until the government entity charged with implementing
the regulations has reached a final decision regarding the
application of the regulations to the property at issue.
Williamson Cnty. Regl Planning Commn v. Hamilton
Bank of Johnson City, 473 U.S. 172, 186 (1985). A plaintiff, however, can be excused from exhausting administrative remedies when it would be futile to do so, such as
when the administrative agency has no discretion to grant
the requested relief or the parties agree on how the challenged regulation would apply. Suitum v. Tahoe Regl
Planning Agency, 520 U.S. 725, 73839 (1997). We have
held that the futility exception applies where no uncertainty remains regarding the impact of the regulation,
certainty being the basis for the ripeness requirement.
Greenbrier v. United States, 193 F.3d 1348, 1359 (Fed.
Cir. 1999) (internal citations omitted).
In Cienega Gardens v. United States, we held that
HUD lacks discretion to grant a prepayment request
under the Preservation Statutes unless (1) implementa-

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tion of the plan will not materially increase economic

hardship for current tenants; and (2) the supply of vacant,
comparable housing is sufficient to ensure that prepayment will not materially affect the availability of decent,
safe, and sanitary housing affordable to low-income
persons in the area. 265 F.3d 1237, 1246 (Fed. Cir.
2001). Certain property owners in Cienega Gardens
presented data showing that charging market rate rents
for the properties at issue would constitute a material
increase in economic hardship for existing tenants and
submitted uncontroverted affidavits attesting that allowing [the owners] to terminate their affordability restrictions would materially affect the supply of lowincome housing in those communities. Id. at 124647.
We held their claims ripe because they set forth uncontested facts demonstrating that it would be futile for them
to file prepayment requests with HUD. Id. at 1248. A
similar ripeness/futility issue is present in this case.
The Court of Federal Claims granted the governments motions for summary judgment that the takings
claims regarding Carriage House of Muskegon, Carriage
House South, Dolly Ann Apartments, Long Drive Apartments #1, Franklin Court Apartments, Holiday Town
Apartments, Washington Street Apartments, Hardee
Street Apartments, and Person Court Apartments (Ripeness Properties) were not ripe. 1 The court found that the
claims were not ripe because the owners of these properties, Carriage House of Muskegon, Carriage House South,
Dolly Ann, Thetford III, and Thetford IV (Ripeness Appellants), failed to exhaust the administrative remedies
under the Preservation Statutes. It also found that the

Appellant Thetford IV does not appeal the Court

of Federal Claims decision as to Calico Court Apartments.
1

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futility exception, which can excuse administrative exhaustion, was not applicable.
The Ripeness Appellants admit that they did not receive a final decision from HUD regarding permission to
prepay the mortgages of the Ripeness Properties. They
argue, however, they should be excused from their failure
to exhaust administrative remedies because they proved
that HUD would not have permitted prepayment under
the Preservation Statutes. First, a representative of each
Ripeness Appellant testified that, based on his or her
experience in the industry and discussions with industry
advisors, he or she believed HUD would not have approved a request to prepay the mortgages of the Ripeness
Properties. Second, an expert, David A. Smith, opined
that HUD could not have approved a request to prepay
the mortgages of the Ripeness Properties. Specifically, he
opined that HUD would not have evaluated alternative
relief available under the Preservation Statutes, such as
cash distributions or changes to the regulatory agreement, until after it concluded that a property could not
meet the requirements to prepay under the Preservation
Statutes because processing such requests was expensive.
He also opined that the existence of certain HUD documentation indicated that HUD had proceeded to processing the properties and that this processing was
indicative of a HUD decision that the properties were not
eligible to prepay. On that basis, he opined that the
Ripeness Properties would be ineligible for prepayment
and that such requests were futile.
These two pieces of evidence do not create a genuine
dispute of material fact sufficient to deny the governments motions for summary judgment. We agree with
the Court of Federal Claims that the Ripeness Appellants
provided an insufficient basis for their opinions that HUD
would not have permitted prepayment for the specific
properties at issue. The testimony of the company representatives amounted to little more than an assertion that

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their advisors told them it would be pointless to request

prepayment. There was insufficient foundation to support
their opinions. Such testimony does not create a dispute
of material fact. Mr. Smiths opinion regarding the Ripeness Properties is similarly unfounded. Mr. Smith provided insufficient foundation for his opinion that because
HUD started the process, it had decided that the Ripeness
Properties were prepayment ineligible. Mr. Smith never
worked for HUD and was not involved in processing
applications for prepayment or other relief under the
Preservation Statutes such that he would be able to
testify as to normal internal HUD processes. There is no
evidence that establishes, for instance, that HUD begins
processing only after it determines ineligibility for prepayment. Mr. Smiths claim that HUD would not have
begun to process the properties unless it determined that
they were not eligible for prepayment is too speculative to
create a dispute of fact over futility. The Ripeness Appellants failed to exhaust their administrative remedies
before bringing suit and did not present evidence which
raised a genuine dispute of material fact regarding futility. Thus, we affirm the Court of Federal Claims determination that the claims for these properties were not
ripe.
II. Right to Prepay
In evaluating a takings claim, the court must first determine whether the claimant has identified a cognizable
Fifth Amendment property interest that is asserted to be
the subject of the taking. Hearts Bluff Game Ranch, Inc.
v. United States, 669 F.3d 1326, 1329 (Fed. Cir. 2012).
The Court of Federal Claims granted the governments
motions for summary judgment that no right was taken
regarding Millwood Apartments, Parthenia Manor
Apartments, Dolly Ann Apartments, Stewarts Creek
Apartments #1, Holiday Town Apartments, and Market
North II Apartments (Prepayment Properties). It concluded that enactment of the Preservation Statutes could not

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have taken a right to prepay from appellants Biafora,

Dolly Ann, Thetford III, and Thetford IV (Prepayment
Appellants) because the mortgage notes for the Prepayment Properties do not include a right to prepay.
The Prepayment Appellants admit that the mortgage
notes stated that the note[s] could not be prepaid for the
40 year term of the mortgage. Br. of Appellant in No.
2013-5136 at 37; Br. of Appellant in No. 2013-5134 at 23;
Br. of Appellant in 2013-5130 at 13; Br. of Appellant in
No. 2013-5144 at 25. Nonetheless, the Prepayment
Appellants argue that before the Preservation Statutes,
HUD would have, by practice, allowed the Prepayment
Appellants to prepay the mortgages of, and remove the
affordability restrictions on, the Prepayment Properties.
In support, they provide legal opinions and letters from
HUD stating that HUDs regulations would supersede
any contrary language in a mortgage note.
We hold that no contractual right to prepay existed
for the Prepayment Properties. The Prepayment Appellants admit that the contracts expressly stated that they
could not be prepaid. Even if HUD had a regulation that
nonetheless allowed prepayment, such regulation would
not create a contractual right. The Prepayment Appellants admit that no takings claim would exist where a
right bestowed by regulation is subsequently withdrawn.
Oral
Argument
at
29:5931:03,
available
at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2
013-5130.mp3. No person has a vested interest in any
rule of law entitling him to insist that it shall remain
unchanged for his benefit. New York Cent. R. Co. v.
White, 243 U.S. 188, 198 (1917); see also Branch v. United
States, 69 F.3d 1571, 157778 (Fed. Cir. 1998). Even if we
construed HUDs practice or regulations favorably to the
Prepayment Appellants, it would not convert a regulatory
benefit into a contractual right. Thus, because we hold
that no contractual right existed where the mortgages
clearly prohibited prepayment, we affirm the Court of

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11

Federal Claims determination that with regard to the

Prepayment Properties, enactment or implementation of
the Preservation Statutes did not take a contract-based
property right to prepay the mortgages without HUD
approval.
III. Collateral Estoppel
Collateral estoppel is generally appropriate if (1) an
issue is identical to one decided in the first action; (2) the
issue was actually litigated in the first action; (3) the
resolution of the issue was essential to a final judgment in
the first action; and (4) the party defending against issue
preclusion had a full and fair opportunity to litigate the
issue in the first action. Shell Petroleum, 319 F.3d at
1338. The Court of Federal Claims dismissed all of Thetford IVs takings claims after granting the governments
motion for summary judgment that Thetford IV was
barred from bringing suit based on collateral estoppel
because it filed and lost an earlier suit regarding ELIHPA
in the United States District Court for the Eastern District of North Carolina (North Carolina action). On the
basis of collateral estoppel alone, the court dismissed
Southgate Apartments, Jefferson Court Apartments,
Glendale Court Apartments, Market North Apartments
#1, Chowan Court Apartments, Columbus Court Apartments, and Peachtree Court Apartments.
We hold that the Court of Federal Claims erred in
dismissing Thetford IVs suit under collateral estoppel.
Collateral estoppel is only appropriate if the issue in the
current litigation is identical to the issue decided in the
North Carolina action. We conclude that they are not.
The North Carolina action involved a facial due process
challenge to ELIHPA. Thetford IVs argument in the
North Carolina action was that Congress had no right to
condition prepayment. Thetford Props. IV Ltd. Pship v.
U.S. Dept. of Hous. & Urban Dev., 907 F.2d 445, 449 (4th
Cir. 1990). Thetford IVs futility argument in that case

12

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was that it should be excused from failing to exhaust

administrative remedies with regard to its due process
challenge because HUD is not able to review the constitutionality of the relevant statute (ELIHPA). Id. at 44749.
The court did not decide, nor did Thetford IV argue, that
it was futile for Thetford IV to request prepayment for
specific properties based on the limitations on HUDs
discretion to allow prepayment. Cf. id. at 449450.
In the present action, Thetford IV asserts that the
Preservation Statutes, as applied, constitute a taking, a
distinct and separate cause of action from the due process
challenge in the North Carolina action. Thetford IV now
claims that it owns a group of properties for which it had
a right to prepay (these mortgages expressly allowed
prepayment after 20 years). The Preservation Statutes
purportedly took that contractual property right. In
response to the governments defense that Thetford IVs
case should be dismissed because it failed to exhaust its
administrative remedies through HUD, Thetford IV
argues that the record establishes that HUD did not have
discretion to permit prepayment of these properties. It
would thus have been futile to receive a final decision
from HUD prior to filing suit. Thetford IV introduced
evidence that for these properties, HUD would not have
been permitted to allow prepayment. These are not
identical issues. Thus, we reverse the Court of Federal
Claims determination that Thetford IV was collaterally
estopped from bringing its claims in this case and reverse
the dismissal of Southgate Apartments, Jefferson Court
Apartments, Glendale Court Apartments, Market North
Apartments #1, Chowan Court Apartments, Columbus
Court Apartments, and Peachtree Court Apartments.
IV. Alternative Bases to Uphold Dismissal
On appeal, the government presents two alternative
bases to affirm dismissal of the remaining properties
(Southgate Apartments, Jefferson Court Apartments,

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13

Glendale Court Apartments, Market North Apartments

#1, Chowan Court Apartments, Columbus Court Apartments, and Peachtree Court Apartments). Thetford IV
argues that these alternative arguments by the government are not properly before the court because they were
not raised in a cross-appeal. We do not agree. [A]n
appellee can present in this court all arguments supported by the record and advanced in the trial court in support of the judgment as an appellee, even if those
particular arguments were rejected or ignored by the trial
court. Bailey v. Dart Container Corp., 292 F.3d 1360,
1362 (Fed. Cir. 2002). In contrast, a cross-appeal is only
necessary and appropriate when a party seeks to enlarge
its own rights under the judgment or to lessen the rights
of its adversary under the judgment. Id. A cross-appeal
was not only unnecessary under the facts of this case, but
would have been improper. Because the government does
not seek to enlarge its rights or lessen Thetford IVs
rights, the appropriate treatment of these arguments was
to consider them as alternative bases for affirmance, as
the government did here.
Because we reverse the Court of Federal Claims determination that Thetford IV was collaterally estopped
from bringing this claim, we must address these alternative bases. The government argues that the Court of
Federal Claims erred in determining that the claims
related to Chowan Court Apartments, Columbus Court
Apartments, and Peachtree Court Apartments (Limitation Properties) were timely. The government argues that
the Court of Federal Claims erred in finding that the
claims related to Southgate Apartments, Jefferson Court
Apartments, Glendale Court Apartments, Market North
Apartments #1, Chowan Court Apartments, Columbus
Court Apartments, and Peachtree Court Apartments
(Algorithmic Properties) were ripe.
A determination of the Court of Federal Claims jurisdiction presents a question of law that we review de

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novo. Cyprus Amax Coal Co. v. United States, 205 F.3d

1369, 1373 (Fed. Cir. 2000). We review the Court of
Federal Claims findings of fact relating to jurisdictional
issues for clear error. John R. Sand & Gravel Co. v.
United States, 457 F.3d 1345, 1353 (Fed. Cir. 2006).
A. Limitations Properties
Claims over which the Court of Federal Claims has
jurisdiction must be filed within six years after such
claim first accrues. 28 U.S.C. 2501. An amendment to
a pleading relates back when the amendment asserts a
claim or defense that arose out of the conduct, transaction, or occurrence set outor attempted to be set outin
the original pleading . . . . R. CT. FED. CL. 15(c)(1)(B).
The Court of Federal Claims allowed Thetford IV to
amend its complaint to add the Limitation Properties to
the case during discovery, but more than 6 years after
repeal of the Preservation Statutes. The court found that
the injury arising from properties listed in the original
complaint and the amended complaint were the same
enactment of LIHPRHA with its prohibition on prepayment. Thus, it found that the claims for the properties
listed in the original complaint and the Limitation Properties arose out of the same conduct, transaction, or
occurrence.
The government contends that the takings claims regarding the Limitation Properties are time-barred because each Limitation Property is distinct from those in
the original complaint. Specifically, it argues that because the Limitation Properties were developed at different times, built in different areas, and funded by different
mortgages, they are not part of the same conduct, transaction, or occurrence as the properties listed in the original complaint.
We hold that the Court of Federal Claims did not err
in allowing Thetford IV to amend its complaint. The
alleged injury, taking of the contractual right to prepay,

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15

arose from enactment of LIHPRHA, which prohibited

prepayment and limited HUDs discretion to permit
prepayment. As such, the claim, taking of the contractual
right to prepay the mortgages of the Limitation Properties, arose out of the same conduct, transaction or occurrence as the properties listed in the original complaint.
Additionally, the government was on notice that Thetford
IV was raising takings claims for their properties based
on enactment of LIHPRHA. Thetford IV simply added
specificity to its complaint by adding the Limitations
Properties, not wholly new claims. We thus affirm the
Court of Federal Claims decision to permit Thetford IV to
amend its complaint to add claims related to the Limitation Properties.
B. Algorithmic Properties
In Cienega Gardens, this court held that HUD lacks
discretion to grant a prepayment request unless (1) implementation of the plan will not materially increase
economic hardship for current tenants; and (2) the supply
of vacant, comparable housing is sufficient to ensure that
prepayment will not materially affect the availability of
decent, safe, and sanitary housing affordable to lowincome persons in the area. Cienega Gardens v. United
States, 265 F.3d 1237, 1246 (Fed. Cir. 2001). These
limitations on HUDs discretion spring directly from 12
U.S.C. 4108. Further, in Cienega Gardens we held that
the model plaintiffs established futility by presenting
property-specific evidence related to the economic hardship and effect of supply of low-income housing in the
relevant communities. 265 F.3d at 124647. They presented property-specific evidence that HUD would not
have been able to approve prepayment of these mortgages
pursuant to its limited discretion under 4108. Id. This
included determining the affordable and market rate
rents for each of the properties. Id. at 1242. Allowing the
model plaintiffs to terminate affordability restrictions and
charge market rents would have caused the monthly rent

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of those tenants to increase by more than 10%. Id. at

1243. We remanded, instructing the trial court to determine under the applicable facts whether each of the other
plaintiffs could similarly establish futility. Id. at 1249.
In this case, the parties filed cross-motions for summary judgment of ripeness. It is undisputed that Thetford IV did not exhaust its administrative remedies,
namely it did not obtain a final refusal from HUD through
the administrative process before proceeding to bring this
action. Thetford IV argued that it would have been futile
for it to await a decision from HUD because HUD did not
have the discretion to grant pre-payment under 4108.
The Court of Federal Claims granted Thetford IVs motion
holding that there was no genuine issue of material fact
that it would have been futile for Thetford IV to pursue
pre-payment through HUD; therefore, the claims were
ripe for the Algorithmic Properties. Correspondingly, it
denied the governments summary judgment motion on
the same ground.
On appeal, the government argues that the Court of
Federal Claims incorrectly decided that the takings
claims related to the Algorithmic Properties were ripe. It
argues that prepayment could have been approved by
HUD if a plan was presented which did not terminate the
affordability restrictions. The government, quoting its
declarations from Messrs. East and Barry, explains that
approval could have been given to a plan to prepay from a
property owner like Thetford IV:
If an owners plan of action proposed to prepay the
mortgage pursuant to the Preservation Statutes,
but did not seek to terminate low-income affordability restrictions in the original regulatory
agreement, the plan of action would have been
approved by HUD. This is because the plan of action would have no effect upon current tenants or
the supply of low-income housing and would

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17

therefore have satisfied the statutory criteria for

prepayment.
Br. of Appellee in No. 2013-5136 at 54.
This, however, is not what Thetford IV was seeking.
Thetford IV sought to prepay its mortgages and terminate
the affordability restrictions.
Thetford IV J.A. 973.
Terminating these restrictions would allow it to realize
the appreciation of its property values. Id. Thus, the
question is whether HUD could have allowed Thetford IV
to prepay and terminate restrictions, in light of the limitations presented in 4108. The governments arguments
and evidence about potential approval under factual
scenarios that differ from Thetford IV do not create a
genuine issue of fact. We likewise reject the governments
argument that a plan must be submitted or that an
application for prepayment would have to be filed with
HUD before a futility analysis can be undertaken. In
circumstances, like here, where the property owner
demonstrates, and the government fails to refute, that
HUD could not have approved prepayment consistent
with the limitation of 4108, futility is established.
The government challenges on appeal the Court of
Federal Claims reliance on Mr. Smiths expert opinion,
data, and calculations as establishing futility. As before
the trial court, here, the governments arguments miss
the mark. Mr. Smiths opinion contained property-specific
data and analysis of the impact on current tenants as well
as supply of low income housing in the relevant communities. Mr. Smiths first algorithmic test evaluated whether
a property was located in an affordable area. If the fair
market rent exceeded 15% of the median income for an
area, Mr. Smith determined that the property was not
located in an affordable area. He opined that if a property
was not located in an affordable area, it could not satisfy
the Preservation Statutes requirements for prepayment.
His second algorithmic test evaluated whether a property

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was located in a market in which there was an excess of

supply over demand. For this, he compared market rents
in a given area with regulated affordable rents. Mr.
Smith opined that the divergence between market and
affordable rents demonstrated that that market lacked
sufficient supply of affordable properties. Thus, he determined that demand exceeded supply in a market if the
difference between market and affordable rents was
greater than 10%. He opined that if a property were
located in an area in which demand exceeded supply, an
owner would be unable to obtain HUDs approval to
prepay the mortgage and terminate the affordability
restrictions of that property. Mr. Smiths report analyzed
each of the Algorithmic Properties, performed calculations
for each, and opined that they were payment ineligible
pursuant to the criteria of 4108.
As the Court of Federal Claims found, Mr. Smiths data was strikingly akin to the data found sufficient in
Cienega Gardens. Anaheim Gardens v. United States, 109
Fed. Cl. 33, 35 (Fed. Cl. 2013). The government argues
that Mr. Smiths first test is invalid because HUD did not
use the affordable areas test to evaluate plans. The
government witnesses testified only that an affordable
areas list was not used and that projects located in metropolitan areas that were not on the affordable areas list
remained potential candidates for prepayment. Thetford IV J.A. 1073, 1078. The relevant question is not
whether HUD used this test, but whether utilizing this
data demonstrated that the properties did not meet the
conditions for prepayment eligibility. The government
provided no evidence that established that this data and
analysis was flawed. The governments claim that a
property not in an affordable area might nonetheless be a
candidate for prepayment does not raise a genuine dispute of material fact. Again the government provides no
specific evidence, data, or explanation of the criteria
under which such a property might still be approved.

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19

Messrs. Barry and East explained that plans could be

approved if an owners plan did not seek to terminate
low-income affordability restrictions in the original regulatory agreement. Thetford IV J.A. 1018, 1023. Again
this is not what Thetford IV sought. It is undisputed that
Thetford IV sought to remove the affordability restrictions. Thus general statements about approval in
circumstances unlike the ones at issue in this case do not
create a genuine issue of fact regarding the propriety of
Mr. Smiths data, methodology or opinion.
The government challenges to Mr. Smiths second test
are likewise flawed. We agree with the Court of Federal
Claims that [i]t is less important whether the [Windfall
Profits Test] was intended as a test for financial incentives rather than for prepayment approval, than whether
the calculations themselves that Mr. Smith employed in
the course of utilizing the WPT demonstrated that the
properties did not meet the conditions for prepayment
under the criteria of the Preservation Statutes. Anaheim
Gardens v. United States, 109 Fed. Cl. 33, 37 (Fed. Cl.
2013). The government complains that Mr. Smith disregarded nine of the ten factors in HUD guidance regarding
a soft market. The government does not refute the
reliability of Mr. Smiths test, which determined supply
did not exceed demand if market rents are greater than
affordable rents by ten percent.
Finally, we made clear in Cienega Gardens that
whether it would be futile for a property owner to seek
prepayment approval must be determined on the basis of
facts and calculations specific to each property. 265 F.3d
at 1248. Yet in this case, the government failed to provide any specific data or calculations related to the Algorithmic Properties and the requirements of 4108. The
government made only generalized assertions that prepayment was possible for properties in general, but its
argument was not tied to any of the Algorithmic Properties or the factual circumstances of those properties. The

20

BIAFORA

v. US

governments argument and declarations fail to address

whether Thetford IV could prepay in the circumstances
presented. We agree with the Court of Federal Claims
that, in these circumstances, summary judgment of
ripeness was properly granted.
CONCLUSION
We affirm the Court of Federal Claims grants of
summary judgment as to the Ripeness Properties and
Prepayment Properties. We reverse the Court of Federal
Claims decision to dismiss the Thetford IV claims regarding the Limitations and Algorithmic Properties. We
remand for further proceedings consistent with this
opinion.
AFFIRMED-IN-PART, REVERSED-IN-PART, AND
REMANDED
COSTS
Each party shall bear their own costs.