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YORK ASSOCS. v. SECRETARY

February 24, 1994

YORK ASSOCIATES, INC., Plaintiff,
v.
SECRETARY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants.



The opinion of the court was delivered by: CHARLES R. RICHEY

 UNITED STATES DISTRICT COURT JUDGE

 Before the Court is Defendants' Motion For Amendment of Judgment. Pursuant to Fed.R.Civ.P. 59(e), the Defendants seek to amend this Court's Order, which this Court issued with an accompanying Opinion on April 27, 1993, declaring that the Plaintiff was entitled to interest on insurance benefits paid in cash at the same rate as if the payments were made in debentures. See York Associates, Inc. v. Secretary Dep't of Hous. and Urban Dev., 820 F. Supp. 14 (D.D.C. 1993). More specifically, the Defendants move to amend this declaratory judgment to provide that it is nonretroactive in operation, and move the Court to clarify that its consolidation of the Defendants' counterclaim with Civil Action No. 93-0839 preserves the filing date of the counterclaim.

 The issues before the Court are (1) whether its decision of April 27, 1993, should have retroactive effect, and (2) whether the Court should clarify the status of the filing date of the counterclaim. In light of the papers filed by the parties, the oral arguments given by counsel, the applicable law, and the entire record herein, the Court shall deny in part and grant in part the Defendants' Motion For Amendment of Judgment, by denying the Defendants' request for nonretroactivity, but affirming that the filing date of its counterclaim has been preserved.

 I. BACKGROUND

 When the borrowers in this case defaulted on their payments to York, York filed for reimbursement benefits with HUD as to those loans. York subsequently defaulted in its payments due to GNMA and GNMA took over York's loan portfolio. As required, HUD reimbursed York and GNMA pursuant to the coinsurance agreements, but these reimbursement payments were made in cash, not debentures, and did not include post-default interest. pursuant to § 520 of the National Housing Act, 12 U.S.C. § 1735d, the Plaintiff brought this action to force HUD to include the same amount of interest that York would be entitled to if the payments had been made in debentures.

 On April 27, 1993, the Court found that § 520 applies to mortgage loans made pursuant to the coinsurance program established by § 244 of the National Housing Act, 12 U.S.C. § 1715z-9, and the Court granted summary judgment for the Plaintiff on Counts I, X, XI, and XII of its Complaint. In addition, because the Defendants had raised an Unclean Hands defense and a permissive counterclaim in their answer, the Court ordered that these claims be consolidated with a new action filed by the Government in Civil Action No. 93-839. Furthermore, the Court refrained from granting injunctive relief at that time in order not to prejudice any of the Defendants' rights for any claims the Government may have in Civil Action No. 93-839, and framed the summary judgment as a declaratory judgment.

 II. ACCORDING TO RECENT SUPREME COURT DECISIONS ADVOCATING RETROACTIVITY OF JUDGMENTS, THIS COURT MUST NOT AMEND ITS JUDGMENT TO DECLARE ITS ORDER OF APRIL 27, 1993, TO BE NONRETROACTIVE.

 Until recently, Chevron Oil v. Huson, 404 U.S. 97, 30 L. Ed. 2d 296, 92 S. Ct. 349 (1971), has controlled the issue of retroactivity, using a three-prong test to determine if a "new principle of law" should have a prospective effect. *fn1" However, the Supreme Court has recently attacked the Chevron Oil approach, and its precedental value is doubtful. *fn2" Two recent cases in particular, James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 115 L. Ed. 2d 481, 111 S. Ct. 2439 (1991) and Harper v. Virginia Dep't of Taxation, 125 L. Ed. 2d 74, 113 S. Ct. 2510 (1993), indicate that the traditional application of the Chevron Oil test has been cut back, and that this Court's prior Opinion in York should have retroactive effect.

 In Beam, the Court held that, in dealing with choice of law, "when the Court has applied a rule of law to the litigants in one case it must do so with respect to all others not barred by procedural requirements or res judicata." Beam emphasized that in resolving a question of choice-of-law, full retroactivity "is overwhelmingly the norm, and is in keeping with the traditional function of the courts to decide cases before them based upon their best current understanding of the law." Id. at 2443 (citations omitted). Writing for the plurality in Beam, Justice Souter went on to criticize selective prospectivity, in which a court applies a new rule in the case before it, and reverts to the old one with respect to all other cases arising on facts predating the court's pronouncement of the new rule. Id. at 2444-47. Citing its abandonment of the possibility of selective prospectivity in criminal cases in Griffith v. Kentucky, 479 U.S. 314, 328, 93 L. Ed. 2d 649, 107 S. Ct. 708 (1987), in favor of completely retroactive application of all decisions to cases pending on direct review, the Beam Court extended the Griffith concept of retroactivity to the civil context. Beam, 111 S. Ct. at 2444-2448. More specifically, the Court found Griffith's equality principle, under which similarly situated litigants should be treated the same, and stare decisis considerations to be even more persuasive in the civil arena than the criminal.

 Strengthening the plurality opinion in Beam, Harper v. Virginia Dept. of Taxation, 125 L. Ed. 2d 74, 113 S. Ct. 2510 (1993), furthered the rejection of the Chevron Oil balancing approach and called for a presumption in favor of full retroactivity in the civil context. As Justice Thomas, writing for the Court, stated:

 
When this Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule.

 Harper, 113 S. Ct. at 2517. The two bases for this rejection were (1) that selective prospectivity by the judiciary intrudes into the functioning of legislatures, and (2) the equality principle ...


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