Opinion ID: 3039046
Heading Depth: 3
Heading Rank: 2

Heading: Kimberly and Summary Judgment

Text: A district court’s grant of summary judgment is reviewed de novo. See Soldano v. United States, 453 F.3d 1140, 1143 (9th Cir. 2006). Viewing the evidence in the light most favorable to the non-moving party, we determine whether there are “any genuine issues of material fact and whether the district court correctly applied the controlling substantive law.” Id. In its orders denying the preliminary injunction and granting summary judgment in favor of defendants, the district court ruled that its decision “was mandated” by the Ninth CirGOLDAMMER v. UNITED STATES 17239 cuit’s decision in Kimberly Associates v. United States. We disagree. There is a critical distinction between Kimberly and the present case. Kimberly was a quiet title action in which borrowers claimed to be entitled to pay off their loans in accordance with their contracts. In the present case, the question is entirely different — whether the agency acted contrary to federal law in failing to comply with ELIHPA to the detriment of the residents. Kimberly involved a dispute similar to the DBSI/TRI IV quiet title lawsuit, in which Kimberly Associates (a subsidiary of DBSI) attempted prepayment of a Section 515 loan on a property in Idaho. Kimberly, 261 F.3d at 867. When RHS rejected the prepayment, citing ELIHPA, Kimberly sued to quiet title of the Idaho property. Id. The government moved to dismiss pursuant to Fed. R. Civ. P. 12(b), raising two initial defenses: sovereign immunity and the unmistakability doctrine.6 6 Without doubt, there is substantial inconsistency in courts’ descriptions of “the unmistakability doctrine.” See, e.g., United States v. Winstar Corp., 518 U.S. 839, 871-72 (1996) (defining unmistakability doctrine as the notion that “[s]overeign power . . . governs all contracts subject to the sovereign’s jurisdiction, and will remain intact unless surrendered in unmistakable terms,” but then holding that “application of the doctrine . . . turns on whether enforcement of the contractual obligation alleged would block the exercise of a sovereign power of the Government”); First Nationwide Bank v. United States, 431 F.3d 1342, 1351-52 (Fed. Cir. 2005) (discussion that unmistakability doctrine and sovereign acts doctrine are separate); Kimberly, 261 F.3d at 869 (trying to clarify the analysis that must be undertaken under the “so-called ‘unmistakability doctrine’ ”); Rhode Island Laborers’ Dist. Council v. Rhode Island, 145 F.3d 42, 44 (1st Cir. 1998) (discussing “[w]hat has been called the ‘unmistakability doctrine’ ”); Tamarind Resort Assocs. v. Virgin Islands, 138 F.3d 107, 112 (3d Cir. 1998) (unclear after Winstar what type of contract the unmistakability doctrine applies to). As we read Kimberly, the “unmistakability doctrine” refers to the second step in the two-step “unmistakability analysis”: the first step is to determine if the act in question qualifies as a “sovereign act,” and it is only after the act is deemed “sovereign” that the question of an “unmistakable waiver” of the government’s sovereign power becomes relevant. See Kimberly, 261 F.3d at 869. Therefore, to say that the unmistakability doctrine does not apply (as we do here) is to say that the court need not reach the second step of the unmistakability analysis because the act in question is not a sovereign act. 17240 GOLDAMMER v. UNITED STATES Id. The district court ruled that the United States had waived sovereign immunity under 28 U.S.C. § 2410, but that “the unmistakability doctrine nevertheless barred Kimberly from any remedy under its contract with the government.” Id. The court then granted the government’s motion to dismiss. [10] On appeal from the motion to dismiss, we agreed with the district court that sovereign immunity had been expressly waived, but held that the unmistakability doctrine did not apply. When the doctrine applies, it is a defense available to the government when the complaining party in a contract dispute claims that the original contract terms control, even when they conflict with subsequent legislation. Then, the court determines whether, in the contract language, the government waived its sovereign right to affect the contract through legislation “in unmistakable terms.” See United States v. Winstar Corp., 518 U.S. 839, 872 (1996) (“Sovereign power governs all contracts subject to the sovereign’s jurisdiction, and will remain intact unless surrendered in unmistakable terms.”) (citation and internal punctuation omitted); Kimberly, 261 F.3d at 869 (The doctrine allows “the Government to make agreements that bind future Congresses, but only if those contracts contain an unmistakable promise.”) (internal quotation marks and citation omitted). As we noted in Kimberly, this doctrine “governs the tension between the exercise of sovereign power and private contractual relations with the government.” 261 F.3d at 869. However, the unmistakability doctrine does not apply to every situation in which legislation affects a prior government contract. As we noted, “when the government is acting as a private contracting party, then the doctrine does not apply, and the government’s rights and duties are governed by law applicable to private parties unaltered by the government’s sovereign status.” Id. (citations omitted). [11] We divided the inquiry into two questions: “(1) in what capacity was the United States acting when it breached GOLDAMMER v. UNITED STATES 17241 its contractual obligations? and (2) if the United States acted in its sovereign capacity, did the contract waive sovereign rights in unmistakable terms?” Id. In answering the first question, we held in Kimberly that, because ELIHPA was not an act of sovereign power, the government was not acting in a sovereign capacity when it altered the Section 515 loan contract.7 Id. at 869-70. We thus held in Kimberly that the unmistakability doctrine did not apply, and the government could not use the doctrine as an initial defense warranting dismissal pursuant to Rule 12(b). Id. at 870. [12] Kimberly remains good law as far as it goes, but nowhere does Kimberly hold that ELIHPA is invalid or that the government is free to disobey it. Bearing in mind that Kimberly was a quiet title action, we had no occasion then to opine on whether the government violated the APA by affirmatively allowing borrowers to ignore ELIHPA’s statutory requirements. [13] Thus, the district court erred in relying on Kimberly as the basis for granting summary judgment on the appellants’ APA claim. On remand, the district court should decide whether RHS acted contrary to law as alleged in appellants’ APA complaint. We note that, if appellants’ APA claim proves successful and Seacrest is returned to the Section 515 program, DBSI may still have recourse for RHS’s apparent breach of contract. In Franconia Associates, 536 U.S. 129 (2002), the Supreme Court noted the availability of a damages action under the 7 This decision created a split with the Eighth Circuit, which in similar ELIHPA cases had ruled that the unmistakability doctrine did bar the owners’ attempts to circumvent ELIHPA in prepaying Section 515 loans. See Charleston Hous. Auth. v. U.S. Dept. of Agric., 419 F.3d 729, 738 (8th Cir. 2005); Parkridge Investors Ltd. Partnership v. Farmers Home Admin., 13 F.3d 1192, 1198 (8th Cir. 1994). 17242 GOLDAMMER v. UNITED STATES Tucker Act, 28 U.S.C. § 1491, to compensate owners for contracts breached because of ELIHPA.8 [14] Because the district court erroneously relied on Kimberly in deciding the summary judgment motion, it never reached the merits of appellants’ APA claim. We therefore reverse the grant of summary judgment and remand to the district court for further proceedings consistent with this opinion. REVERSED and REMANDED. 8 We recognize that the Supreme Court did not directly state that damages under the Tucker Act would be available in all circumstances; however, given the Court’s resolution of the statute of limitations issue that was before it in Franconia, the Court seemed to imply the suitability of such a remedy.