several mortgage loans between 1983 and 1989 coinsured by the Defendant Department of Housing and Urban Development ("HUD") pursuant to § 244 of the National Housing Act ("NHA"). 12 U.S.C. § 1701 et seq. The loans at issue are part of a mortgage-backed securities program operated by Defendant Government National Mortgage Association ("GNMA"). Following borrower default, HUD must reimburse the lender for up to 90% of the loss caused by the default. Based on the preference of the lender, reimbursement payments by HUD may be made in the form of debentures or cash. 24 C.F.R. § 255.819 (1988). As our Circuit has held, when such a reimbursement payment takes the form of debentures, it must include interest from the date of default. DRG Funding Corp. v. Secretary of Housing and Urban Development, 283 U.S. App. D.C. 191, 898 F.2d 205 (D.C. Cir. 1990).
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.
However, the Supreme Court has recently attacked the Chevron Oil approach, and its precedental value is doubtful.
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 enunciated by Griffith and Beam. Harper, 113 S. Ct. at 2516.
This Circuit has adopted the pro-retroactivity approach of Beam and Harper. In a case involving the retroactive application of agency adjudication, our Court of Appeals stated that "Harper abolished exceptions to the retroactive application of judicial rulings in civil cases and rejected the three factor retroactivity test" of Chevron Oil. UFCW, Local No. 150-A v. NLRB, 303 U.S. App. D.C. 65, 1 F.3d 24, 35 (D.C. Cir. 1993), petition for cert. filed, 62 U.S.L.W. 3493 (U.S. Jan. 6, 1994).
The Defendants move the Court to deny retroactive application of the Court's Opinion in York. In the alternative to a holding of complete nonretroactivity, the Defendants request that this Court hold its April 27, 1993, Opinion in York is nonretroactive prior to the date that DRG Funding was decided. However, both parties note that the Court of Appeals applied DRG Funding to the parties before it in that case. Therefore, the Court rejects the Defendant's proposed alternative of a modified retroactive ruling.
The Court concludes that the policies underlying Harper compel the Court to deny the Defendants' request to amend the judgment's retroactive effect. In York, the Court found and applied § 520 of the NHA and 24 C.F.R. Part 255 as they existed when York and HUD insured the loans in this case. Tinkering with the retroactivity or prospectivity of this Court's decision would go beyond the judicial role, as indicated by another post-Harper decision:
Courts apply their interpretations to pending cases because the rule they are interpreting predates the parties' acts. Judicial interpretations "change the law" from (losing) litigants' perspective, but from the judicial perspective the process of interpretation aims at getting as close as one can to a meaning that predates the litigation.