RALPH J. MARRA, JR. Acting United States Attorney NICOLE … · 2009-04-30 · CHARLES M. FLESCH (CMF 0150) NICOLE ELLIOTT (NME 5768) JOSEPH. E. HUNSADER (JEH 1726) JOHN J. LoCURTO

RALPH J. MARRA, JR.Acting United States Attorney

CHARLES M. FLESCH (CMF 0150)NICOLE ELLIOTT (NME 5768)JOSEPH. E. HUNSADER (JEH 1726)JOHN J. LoCURTO (JJL 9225)Trial Attorneys, Tax DivisionU.S. Department of JusticeP.O. Box 227, Ben Franklin StationWashington, D.C. 20044Tele: (202) 307-6635/514-0472Fax: (202) 514-6866Email: [email protected]

Counsel for the United States

IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF NEW JERSEY

_______________________________________) Civil No. 2:02cv03082 (SC);

In re: ) Chap. 11 Nos. 01-30135 (RG) and) 01-38790 (RG) (Jointly Administered)

G-I HOLDINGS INC., et al., )) Hon. Stanley Chesler

Debtors. )_______________________________________ ) Return Date: May 18, 2009

UNITED STATES’ BRIEF IN OPPOSITION TO DEBTORS’ APRIL 17, 2009 MOTION FORRECONSIDERATION OF COURT’S JUNE 8, 2007 SUMMARY JUDGMENT DECISION

ON THE § 731 TRANSITION RULE (“THE BINDING CONTRACT EXCEPTION”)

Respectfully submitted,

CHARLES M. FLESCH (CMF 0150)NICOLE ELLIOTT (NME 5768)JOSEPH. E. HUNSADER (JEH 1726)JOHN J. LoCURTO (JJL 9225)Trial Attorneys, Tax DivisionU.S. Department of Justice

Case 2:02-cv-03082-SRC-MAS Document 322 Filed 04/29/2009 Page 1 of 21

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TABLE OF CONTENTSPAGE

PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT & ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. The June 8, 2007 summary judgment decision . . . . . . . . . . . . . . . . . . . . . 1

B. GAF’s prior briefs contained binding judicial admissions . . . . . . . . . . . . 2

C. The United States’ motion in limine to exclude evidence concerning the lobbying efforts and GAF’s motion forreconsideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

II. The Court should deny the motion for reconsideration . . . . . . . . . . . . . . . . . . . . 5

A. The motion for reconsideration is time-barred . . . . . . . . . . . . . . . . . . . . . 6

B. The motion for reconsideration seeks to present additional arguments that could have been but were not presented 3.5 years ago. As a result,GAF may not expand the record and GAF waived its additional arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1. Standards of reconsideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

2. GAF’s waived its additional arguments by failing to make them 3.5 years ago in connection with the original motions and is barred by the FPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

C. Because of its judicial admissions in the earlier briefing, GAF cannot now assert new factual and legal arguments . . . . . . . . . . . . . . . . . 9

D. Even if the Court considers GAF’s “new”arguments, GAF is wrong as a matter of law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

E. GAF's claim that it was the intended beneficiary of the Transition Rule is rendered irrelevant by the Third Circuit's Bizcap decision. . . . . . . . . 12

F. U.S. briefs from other cases are unrevealing . . . . . . . . . . . . . . . . . . . . . 14


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CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

TABLE OF AUTHORITIES

FEDERAL CASES PAGE

Aetna Insurance Co. v. Newton, 274 F. Supp. 566 (D. Del. 1967) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Airborne Freight Corp. v. United States, 153 F.3d 967 (9th Cir. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15

Arab African International Bank v. Epstein, 10 F.3d 168 (3d Cir. 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Berckeley Investment Group, Ltd. v. Colkitt, 455 F.3d 195 (3d Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 9

Bizcap, Inc. v. Olive, 892 F.2d 1163 (3d Cir. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 12

CBS v. PrimeTime 24 J.V.,245 F.3d 1217 (11th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Conn. General Life Insurance Co. v. Commissioner, 177 F.3d 136 (3d Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Forest Producing Corp. v. Commissioner, 132 F.2d 118 (3d Cir. 1942) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

In re G-1 Holdings, Inc., 369 B.R. 832 (D.N.J. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 13, 14, 15

Garcia v. United States, 469 U.S. 70 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Heckler v. Committee Health Services of Crawford County, Inc., 467 U.S.51 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Helvering v. Ohio Leather Co., 317 U.S. 102 (1942) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


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Morris v. Siemens Components Inc., 938 F. Supp. 277 (D. N.J. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

OPM v. Richmond, 496 U.S. 414 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Olegario v. United States, 629 F.2d 204 (2d Cir. 1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Phoenix Canada Oil Co. Ltd. v. Texaco, Inc., 842 F.2d 1466 (3d Cir. 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Planned Parenthood of Central New Jersey v. Attorney General of State ofNew Jersey,

297 F.3d 253 (3d Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

United States v. Pelullo, 399 F.3d 197 (3d Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

United States v. Kjellstrom, 100 F.3d 482 (7th Cir. 1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Western Air Lines, Inc. v. Board of Equalization, 480 U.S. 123 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ELECTRONICALLY REPORTED CASES

Abdullah v. Department of Corrections, 2007 WL 275719 (D.N.J. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Almahdi v. C. Bourque, 2008 WL 2447142 (D.N.J. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8

Bosco v. C.F.G. Health Systems, LLC, 2007 WL 1791254 (D.N.J. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Demetree v. Commonwealth Trust Co., 1996 WL 494910 (Del. Ch. 1996 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

In re G-I Holdings, Inc., 2006 WL 3511150 (D.N.J. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8


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Gentle Laser Solutions, Inc. v. Sona International Corp., 2008 WL 4307478 (D.N.J. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Ingersoll-Rand Co. v. Barnett, 2007 WL 81889 (D.N.J. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Marracco v. Kuder, 2009 WL 235459 (D.N.J. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8

Phil. Reins. Corp. v. Employers Ins. of Wausau, 61 Fed. Appx. 816 (3d Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

U.S. ex rel. Malloy v. Telephonics Corp.,68 Fed. Appx. 270 (3d Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

FEDERAL STATUTES

26 U.S.C. § 6662 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 4

26 U.S.C. § 731(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

MISCELLANEOUS

NJ Local Civil Rule 7.1(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6


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The United States filed a motion in limine to preclude GAF from offering at trial any

evidence concerning its lobbying efforts and any advice received in connection thereto as a

defense to the 26 U.S.C. § 6662 penalty for tax year 1999, citing this Court’s decision on partial

summary judgment and the Third Circuit’s decision in Bizcap, Inc. v. Olive, 892 F.2d 1163,

1167-1168 (3d Cir. 1989). In response to that motion, GAF has now filed a motion to reconsider

the partial summary judgment motion some twenty two months after it was entered based on a

record of previously undisclosed evidence (and some “not really” evidence in the form of draft

affidavits) combined with new arguments it admits that it could have made before. These tactics

are routinely rejected by the courts, and properly so. GAF’s motion should be denied.

STATEMENT & ARGUMENT

I. Introduction.

A. The June 8, 2007 summary judgment decision.

On June 8, 2007, the Court held that, as a matter of law, GAF was not entitled to relief

from 26 U.S.C. § 731(c), under the uncodified Transition Rule in connection with GAF’s receipt

of $47,033,539.89 in cash and Treasury Bonds in the amount of $403,557,000 on February 9,

1999. (See Docket Nos. 230 (order) and 231 (opinion) (published as In re G-1 Holdings, Inc.,

369 B.R. 832 (D.N.J. 2007)). The Binding Contract Exception provides that a pre-enactment

partnership agreement calling for a distribution of “a fixed value of marketable securities” to a

partner is exempt from § 731(c). GAF’s 1994 amended partnership agreement (referred to as the

“1994 Amendment”) did not provide that “a fixed value of marketable securities” would be

distributed to GAF in 1999; rather, the agreement allowed the amount of the Treasury Bond


1Section 3.3(b) of the 1994 Amendment did not fix the value of the Treasury Bonds thatGAF was to receive in 1999. To the contrary, it (i) set the total amount of the 1999 payment at$463,826,718.75, (ii) defined the cash component as “an amount not to exceed $48,000,000,”and (iii) defined the Treasury Bond component as the difference between the cash payment and$463,826,718.75. Therefore, the 1994 Amendment allows the cash component of the 1999payment to GAF to range anywhere from zero to $48,000,000, with the Treasury Bondcomponent varying accordingly. (Docket No. 140-6, Ex. D, at GAF 02001526; same documentappears at Docket No.313-4, Ex. 2002-013 at GAF02-001066- GAF 02-001067.)

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distribution to GAF to vary by up to $48 million.1 Relying on the plain language of the

Transition Rule and the 1994 Amendment, and refusing to rewrite either to achieve the result

advocated by GAF, the Court held that GAF failed to meet the Binding Contract Exception to §

731(c). 369 B.R. at 839-840, 841-842.

The Court also refused to consider an affidavit from GAF’s lobbyist, Jenner, for two

reasons. First, the Court found that the Binding Contract Exception to § 731(c) is unambiguous,

and, therefore, there was no need to consult extrinsic aids to statutory construction, such as

legislative history. 369 B.R. at 840 n.15, 841. Second, even assuming it were necessary to

consult the legislative history, the Court concluded that Jenner’s affidavit (i.e., his testimony)

“d[id] not constitute legitimate legislative history,” because the “affidavit of a lobbyist,

especially when written during the course of litigation, provides no evidence of

contemporaneous Congressional intent.” 369 B.R. at 840, 841 (also citing CBS v. PrimeTime 24

J.V., 245 F.3d 1217, 1224 (11th Cir. 2001) (declining argument that statute was enacted for

party’s benefit and should be interpreted their way because statute was clear and unambiguous)).

B. GAF’s prior briefs contained binding judicial admissions.

In the briefing in 2005 leading up to the Court’s decision, GAF conceded that the

Treasury bond component of the Deferred Property Distribution could vary in amount by $48


2See Berckeley Inv. Group, Ltd. v. Colkitt, 455 F.3d 195, 211 n.20 (3d Cir. 2006)(“Judicial admissions are concessions in pleadings or briefs that bind the party who makesthem.”).

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million. Indeed, given this admission, GAF argued that a contractually fixed minimum value of

Treasuries -- that is, the $415.8 million that GAF would get if RPSSLP chose to distribute $48

million of cash -- satisfied the "fixed value of marketable securities" requirement of the section

731(c) transitional statute. GAF made these binding judicial admissions:2

(1) Section 3.3(b) of the 1994 Amended Partnership Agreement (“the 1994 Amendment”) “provided that the Deferred Property Distribution would consist of (i) cash in anamount not to exceed $48 million and (ii) debt securities issued by the [U.S.] Governmenthaving a maturity date of not less than 29 years after the date of the Deferred PropertyDistribution (‘Treasury Bonds’) .... Thus, the 1994 Amendment fixed the Deferred PropertyDistribution Amount at $463,826,718.75, and it obligated the Partnership to distribute, and GAFand ESSL to accept, Treasury Bonds with a minimum fixed value of $415,826,718.75.” (Docket No. 164 at ¶ 5, pp. 2-3, emphasis added.)

(2) Due to a legislative proposal that was issued on July 15, 1994, GAF retained outside lobbyists to seek relief in the form a transition rule. (See Docket No. 164 at ¶ 7 at p. 4-5.) (citing Jenner Affidavit.) “Congress [allegedly] responded positively ... by enacting astatutory exception (the ‘Transition Rule’) intended to prevent the Partnership’s distribution ofTreasury Bonds to GAF pursuant to the 1994 Amendment from being made taxable to GAF.” (Id. at p. 5; see also id. at p. 7.) GAF lobbied Congress for the enactment of the transitional rule. (Id. at p. 10.)

(3) “Section 3.3(b) of the 1994 Amendment required the Partnership to distribute (1) specified Treasury Bonds with a fixed value of $415,826,718.75, plus (2) an additional$48,000,000, which could be paid, at the election of the Partnership, in cash, Treasury Bonds,or some combination of the two.” (Docket No. 164 at p. 9, emph. added)

(4) “Pursuant to Section 3.3(b) of the 1994 Amendment, the Partnership could have forced GAF and ESSL to accept a distribution of up to $463.8 million in TreasuryBonds.” (Id. at 11 n.10; see also Docket No. 184 at 4 (“The 1994 Amendment required thePartnership to distribute specified marketable securities (Treasury Bonds with a remainingmaturity of more than 29 years) having a fair market value of $415,826,718.75 to GAF andCitibank in liquidation of their respective interests in the Partnership. . . . In this case, the 1994


3In accordance with prior pretrial scheduling orders issued by the Court, all dispositivemotions were required to have been made in the fall of 2005. (See Docket Nos. 125, 137, 167.)

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Amendment also gave the Partnership the right to decide whether to distribute theremaining $48,000,000 consideration in Treasury Bonds, cash, or a combination of thetwo.”) (emph. added.))

(5) “While the partnership could have distributed more than the fixed minimumdistribution of Treasury Bonds, it is clear that, at the least, the minimum distributionamount specified in Section 3.3(b) satisfies both the letter and spirit of the Transition Ruleand the fixed-value requirement.” (Docket No. 164 at p. 14, emph. added.)

Although the Court properly rejected GAF’s notion that the statutory text, "fixed value,"

should be read to mean "fixed minimum value," GAF’s judicial admissions quoted above (i.e.,

that the partnership could distribute $463 million in some combination of a minimum amount of

bonds ($415.8 million) and cash not exceeding $48 million, or through a distribution of more

than the minimum amount of bonds), have consequences.

C. The United States’ motion in limine to exclude evidence concerning the lobbyingefforts and GAF’s motion for reconsideration.

On December 3, 2008, the final pretrial order (“FPO”) was entered. The FPO

recognized GAF’s claims on the Transition Rule had been resolved by the Court’s June 8, 2007,

summary judgment decision (see Docket No. 250, FPO at pp. 13, 20-21, 82-83.) , and listed the

final four major issues to be tried, including whether Debtors are liable for an accuracy related

penalty under 26 U.S.C. § 6662 for tax year 1999. (FPO at pp. 12-13.) Only the contemplated

motions listed in the FPO were to be filed. (FPO at pp. 2-5.) A motion for reconsideration was

not one of the listed motions, (see id.),3 and GAF did not seek leave to file one. At the outset,

therefore, the motion is barred by the FPO. (See FPO at p. 1; see also Phoenix Canada Oil Co.

Ltd. v. Texaco, Inc., 842 F.2d 1466, 1474, 1476 (3d Cir. 1988) (“the district court's preclusion of


4By letter dated April 23, 2009 (Exhibit 1 to Flesch 4/29/09 Declaration), Patricia Ryan, Deputy Counsel in the Office of Senate Legal Counsel, wrote to GAF’s counsel objecting totheir filing unsigned affidavits of Senate staffers, on the grounds that they were not approved orauthorized by the Senate, their accuracy was not verified, and the content privileged under theDebate and Speech Clause of the U.S. Constitution. The Office of Senate Legal Counseldemanded that GAF seek to withdraw the draft affidavits. At this time the draft affidavits remainunsigned.

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an issue raised at the “twenty-third hour,” it seems to us, was within the court's proper

discretion” and pretrial order is binding on the parties).)

In the FPO, the United States disclosed a motion in limine to bar GAF from

presenting evidence at trial of its reliance on the lobbyists as a defense to the Section 6662

penalty for tax year 1999. (FPO at p.4.) We filed that motion on February 17, 2009. (Docket No.

263.) On April 17, 2009, GAF not only opposed the motion but also moved for reconsideration

of the Court’s June 8, 2007, partial summary judgment decision, and seeks summary judgment.

Without any prior disclosures of what it claims to be new evidence, GAF filed an entire “new

record” with its motion, including two unsigned affidavits from a current member of the U.S.

Senate Finance Committee Staff and a former member of that staff.4

II. The Court should deny the motion for reconsideration.

The motion to reconsider ignores prior Court orders, the federal rules, the local rules—as

well as GAF’s prior judicial admissions—to present additional arguments and expand the record

for reconsideration and for summary judgment. And it should be denied. Specifically, the

motion to reconsider is out of time; GAF effectively waived or abandoned its new arguments

when it failed to raise them in response to the summary judgment arguments in 2005; GAF’s

attempt to abandon prior judicial admissions at this stage of the case and launch new arguments


5Local Rules of this Court are the equivalent of standing orders and are required to beobeyed. See Planned Parenthood of Cent. New Jersey v. Attorney General of State of NewJersey, 297 F.3d 253, 260, 261 (3d Cir. 2002).

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should be rejected; the new arguments are wrong as a matter of law; and, at the end of the day

testimony by lobbyists and congressional staffers is still irrelevant, particularly when the statute

they are testifying about is plain on its face. Finally, we briefly address the assertion that the

government is somehow treating GAF differently in a unique and remarkable way.

A. The motion for reconsideration is time-barred.

Under Local Civil Rule 7.1(i),5 motions for reconsideration “shall be served and filed

within 10 business days after the entry of the order or judgment on the original motion by the

Judge ....” Debtors’ motion for reconsideration is 22 months late, and, as a result, is time-barred.

See Abdullah v. Dep’t of Corrections, 2007 WL 275719 at * 3 (D.N.J. 2007) (motion for

reconsideration filed three weeks after decision was time-barred); Gentle Laser Solutions, Inc. v.

Sona Int’l Corp., 2008 WL 4307478 at * 2 (D.N.J. 2008) (motion filed three days late was

untimely) (collecting cases, including U.S. ex rel. Malloy v. Telephonics Corp., 68 Fed. Appx.

270, 274 n.6 (3d Cir. 2003) (affirming New Jersey district court, which had denied motion for

reconsideration on the basis that plaintiff waited seven months to file it and finding that the

motion was “extremely untimely”)); Morris v. Siemens Components Inc., 938 F. Supp. 277, 278

(D. N.J. 1996) (motion for reconsideration filed three months afer decision was untimely)).


6In its brief, GAF has a litany of excuses for its failure to present this evidence and thesearguments before. Among them, at p. 26, is a plea to recognize its limited resources. That claim,unsupported beyond the word “debtor,” is belied by the fact that GAF has paid its attorneys over$23 million (as of February 28 2009) to litigate this case. (See Flesch 4/29/09 Decl., Exs. 2, 3,attaching fee applications from bankruptcy filings of Skadden Arps and McKee Nelson.) GAF’smotion itself has seven attorneys from four law firms and a law professor on the front cover.

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B. The motion for reconsideration seeks to present additional arguments that couldhave been but were not presented 3.5 years ago. As a result, GAF may not expandthe record and GAF waived its additional arguments.

1. Standards of reconsideration.

In denying one of GAF’s several earlier motions for reconsideration, this Court stated

that a motion for reconsideration might be granted if evidence is newly discovered or if a court

overlooked dispositive factual matters or a controlling decision. (See Docket No. 225, also at In

re G-I Holdings, Inc., 2006 WL 3511150 at * 1 (D.N.J. 2006).) But where a party seeks

reconsideration of an order based on newly discovered evidence, that party must show that

“through the exercise of due diligence, the evidence was not and could not have been discovered

in time” prior to the motion for summary judgment. Bosco v. C.F.G. Health Systems, LLC, 2007

WL 1791254 at * 2 (D.N.J. 2007) (citation omitted) (rejecting bald assertion of newly

discovered evidence); see also Almahdi v. C. Bourque, 2008 WL 2447142 at * 2 (D.N.J. 2008)

(Chesler, J.) (“party seeking to introduce new evidence on reconsideration bears burden of first

demonstrating that evidence was unavailable or unknown at the time of the original hearing”);

Marracco v. Kuder, 2009 WL 235459 at * 5 (D.N.J. 2009). Here, GAF makes no showing.

GAF also has failed to explain why it did not present its evidence and make its “additional

arguments” three and one-half years ago.6 Under the foregoing authorities, the Court should not

permit GAF to expand the record.


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This Court has also stated that “[b]ecause reconsideration is an extraordinary remedy, it

is to be granted very sparingly.” In re G-I Holdings, 2006 WL 3511150 at * 1 (citations

omitted); accord Ingersoll-Rand Co. v. Barnett, 2007 WL 81889 at * 2 (D.N.J. 2007).

Accordingly, attempts at a second bite at the proverbial apple are not permitted. Almahdi, 2008

WL 2447142 at *3. “[R]econsideration is not to be used as a means of expanding the record to

include matters not originally before the Court.” Almahdi, 2008 WL 2447142 at * 2; accord

Marracco, 2009 WL 2345469 at ** 1, 5 (rejecting plaintiff’s attempt at raising new facts that

were known to her at the time of the original motion when she filed a declaration with her

motion for reconsideration); Ingersoll-Rand Co., 2007 WL 81889 at * 5 (rejecting submission of

seven new exhibits because information was unavailable at the time motion for partial summary

judgment was filed, and finding it inappropriate to attempt to submit it as part of a motion for

reconsideration in an attempt to expand the record.) Given the foregoing, GAF may not properly

expand the record with materials that it could have presented in 2005 or before.

2. GAF’s waived its additional arguments by failing to make them 3.5 years ago inconnection with the original motions and is barred by the FPO.

Although GAF again seeks to argue that it was the beneficiary of the Transition Rule, it

now argues, for the first time, that: (1) a fixed value of marketable securities is impossible

(Docket No. 313-2 at 12-13); and (2) that another provision in the 1994 Amendment, the true-up

provision, needs to be taken into account to show that the United States’ position, and the

Court’s holding, that the contract allowed a variation of $48 million, was erroneous. (Id. at 16-

17.) GAF could have but did not make these arguments three and one-half years ago and present

the evidence it now seeks to rely upon. As a result, GAF waived all of its additional arguments,


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even if touted as new arguments, by not making them when the Transition Rule’s meaning was

first before the court in a substantial way. Arab African Int’l Bank v. Epstein, 10 F.3d 168, 171

n.2 (3d Cir. 1993) (an argument raised for the first time on reconsideration under NJ Local Civil

Rule, after summary judgment had already been granted, was waived and will not be

considered).

C. Because of its judicial admissions in the earlier briefing, GAF cannot now assertnew factual and legal arguments.

As stated, GAF conceded in its prior briefs that the Treasury bond component of the

Deferred Property Distribution could vary in amount by $48 million as quoted above. GAF is

therefore bound by its prior judicial admissions. Berckeley Inv. Group, 455 F.3d at 211 n.20;

Phil. Reins. Corp. v. Employers Ins. of Wausau, 61 Fed. Appx. 816, 819 (3d Cir. 2003) (judicial

admission in footnote in brief was binding on party who made it).

In its current motion, GAF plainly ignores its prior binding judicial admissions. And

GAF now argues that the cash component of the contract could not vary by $48 million but could

only go up to $48 million. (See Docket No. 313-2 at pp. 3, 16-17.) Yet GAF also claims that

RPSSLP was required to distribute a fixed amount of $48 million in cash and a fixed amount of

Treasuries. (Id. at 6.) Regardless of its shifting arguments and claims, GAF cannot escape from

its prior judicial admissions. Berckeley, 455 F.3d at 211 n.20; Phil. Reins. Corp., 61 Fed.Appx.

at 819.

D. Even if the Court considers GAF’s “new”arguments, GAF is wrong as a matter oflaw.

GAF first asserts that a "fixed value of marketable securities" is impossible,


10

because 30-year Treasuries were available in only $100 denominations and the market value of

Treasuries fluctuates daily. (Docket No. 313-2 at 12-13.) In other words, the possibility of

immaterial rounding, in an amount less than $100, means that fluctuations in value of up to $48

million are permissible. This is a makeweight argument. GAF easily could have drafted the

Deferred Property Distribution language of the 1994 Amendment to provide for a "fixed value of

marketable securities," i.e., 30-year Treasuries with a market value equal to $415.8 million,

subject to rounding adjustments. But having failed to do so, GAF is bound by the exact

language of the 1994 Amendment.

GAF then presents its principal new argument with regard to the so-called "true-up"

provision in the 1994 amendment. The "true-up" provision accounts for changes in the market

value of the Treasuries between (i) the Securities Acquisition Date, defined as a date not less

than 70 days prior to the Deferred Property Distribution Date, meaning the date on which

RPSSLP had to acquire the Treasuries (Docket No. 313-4, Ex. 2002-013 at GAF02-001068), and

(ii) the Deferred Property Distribution Date, the date on which RPSSLP would actually distribute

the Treasuries and cash, having a total value equal to $463.8 million, to GAF. Under the true-up

provision (Id. at GAF02-001069.01), if the Treasuries decreased in value during this 70-day

window, RPSSLP (the partnership) was required to distribute additional cash in order to

maintain the total $463.8 million value of the Deferred Property Distribution. If, conversely, the

Treasuries increased in value during the 70-day window, RPSSLP was required to limit the

amount of Treasuries in the Deferred Property Distribution so that the $463.8 million total value

was not exceeded.


11

But the true-up provision did not fix the value of the Treasuries. Rather, it

maintained the value of the Treasuries as determined by RPSSLP on the Securities Acquisition

Date for the succeeding 70 days, until the Deferred Property Distribution Date. Accordingly,

one must look to the provision respecting RPSSLP's purchase of the Treasuries on the Securities

Acquisition Date to determine whether the value of the Treasuries is fixed. It is not. The

relevant provision states: "Not less than 70 days prior to the Deferred Property Distribution Date

(the "Securities Acquisition Date"), the Partnership shall acquire, if it does not then own,

Securities with a fair market value of not less than the remaining distribution as described in

clause (ii) of the third preceding sentence." (Id. at GAF02-001068; emphasis added.) The

"third preceding sentence" is the very long sentence that begins on the second line of page

GAF02-001067. In that sentence, clause (ii) is found in the last eight lines, providing as follows:

"the type of assets to be distributed to the Class A Limited Partner shall consist of(i) cash in an amount not to exceed $48,000,000 (except as provided in the nextparagraph) and (ii) the remaining distribution shall consist of a direct interest indebt instruments (the 'Securities') issued by the United States Government thathave a maturity date that is not less than twenty-nine (29) years after the date ofthe Deferred Property Distribution (the 'Deferred Property Distribution Date')."

(GAF02-001067; emphasis added.)

The term "remaining distribution" appears in the Securities Distribution Date language

on page GAF02-001068, which references the same "remaining distribution" term in clause (ii)

on page GAF02-001067. None of this contract language defines what the term "remaining

distribution" means, and with good reason. RPSSLP was entitled to choose the amount of the

"remaining distribution" of Treasuries, at a value ranging anywhere from $415.8 million to

$463.8 million. That was the very point that GAF conceded in its 2005 briefing as quoted above.


7The parol evidence rule bars consideration of GAF’s post-hac 2009 affidavits (and anattorney’s June 15, 1994 memorandum to file ( which is also inadmissible hearsay) regarding themeaning or understandings of the 1994 Amendment (dated April 26, 1994)). See, e.g., Demetreev. Commonwealth Trust Co., 1996 WL 494910 at * 4 (Del. Ch. 1996 ) (rejecting post-hactestimony in interpreting a contract); see generally Aetna Ins. Co. v. Newton, 274 F. Supp. 566,571 (D. Del. 1967).

12

Despite GAF's erroneous and misleading emphasis, the "except as provided in the next

paragraph" language in clause (ii) on page GAF02-001067 refers to the paragraph defining the

Securities Acquisition Date on page GAF02-001068, which in turn refers back to clause (ii) on

page GAF02-001067. No matter how many times the reader goes back and forth between these

two references to the "remaining distribution," this circular contract language simply does not

establish "a fixed value of marketable securities," as the § 731 Transition Rule requires.

In the United States’ briefs regarding the summary judgment motion on the Transition

Rule, we argued that transitional relief from an act of Congress must be strictly construed and

cited Supreme Court precedent to that effect. (See, e.g., Docket No. 181, U.S. Reply Brief at 8,

17-18 citing and collecting cases.) Strict construction means that the text of the "binding

contract" must literally comply with every term of the Transition Rule. Here, it clearly does not.

And GAF cannot overcome that conclusion with parol evidence offered to alter the express terms

of the contract. The Transition Rule premises relief on a "binding contract," not a "binding

roadmap memo" or any other evidence (such as the Leo and Heyman affidavits attached to

GAF’s offer of proof) extrinsic to the 1994 Amendment itself.7

E. GAF's claim that it was the intended beneficiary of the Transition Ruleis rendered irrelevant by the Third Circuit's Bizcap decision.

The Third Circuit’s Bizcap decision holds that regardless of whether a statute was


13

enacted for a specific taxpayer as a result of its lobbying efforts, the statute’s plain words

control. 892 F.2d at 1167, 1168. Accordingly, GAF’s attempt to create a new record with more

affidavits of its lobbyists, a former Treasury official (Michael Thomson), current and former

Senate staffers, and others is all irrelevant. See also In re G-I Holdings, 369 B.R. at 341.

Affidavits from lobbyists, former Treasury officials, and even current or former staff

members, are not valid legislative history. See In re G-I Holdings, 369 B.R. at 840, 841;

Western Air Lines, Inc. v. Bd. of Equalization, 480 U.S. 123, 130 n.* (1987) (“Appellants'

attempt at the creation of legislative history through the post hoc statements of interested

onlookers [a lobbyist] is entitled to no weight, however.”); accord Conn. Gen. Life Ins. Co. v.

Commissioner, 177 F.3d 136, 145 (3d Cir. 1999). See also Flesch 4/29/09 Decl., Ex. 1 (4/23/09

letter). The Senate Legal Counsel’s Office recognized as much when it admonished GAF’s

counsel that testimony of this sort had not been authorized in anyone’s recollection, in part,

because doing so “could open the flood gates to requests from a large variety of taxpayers trying

to prove the meaning of particular provisions through means other than the customary

interpretive canons of statutory construction.” Id., 4/23/09 letter at p. 3. Of course, in this case

the customary methods have already defined the statute’s meaning.

GAF’s attempt at distinguishing Bizcap (Docket No. 313-2 at 22) achieves nothing,

because Bizcap is directly on point. It does not matter if GAF was the intended beneficiary of

the Transition Rule. The 1994 Amendment, at section 3.3(b), “does not meet the requirements of

the Statute and thus the 1999 distribution by the Partnership to GAF does not qualify for the


8GAF had not met its burden of showing strict compliance with the § 731 TransitionRule. Relief under the Transition Rule is limited to taxpayers that “sustain the burden of showingcompliance with its exact terms.” Helvering v. Ohio Leather Co., 317 U.S. 102, 106 (1942)(strictly construing “binding contract” statute to deny relief where contract at issue omittedlanguage satisfying statute’s requirements); see also Forest Producing Corp. v. Commissioner,132 F.2d 118, 121 (3d Cir. 1942) (“[A] special tax exemption must be strictly construed andexact compliance with its terms shown by the taxpayer.”) (denying binding contract transitionalrelief).

14

Binding Contract Exception.” In re G-I Holdings, 369 B.R. at 839, 841.8

F. U.S. briefs from other cases are unrevealing.

GAF submitted two briefs (Exs. C and D to GAF’s Offer of proof) by the United States

from cases in the 1990s regarding application of another transition rule. In what became known

as the “world headquarters exception” certain corporations were granted transitional relief to

changes in the investment tax credit in major 1986 tax legislation. And, as both of the briefs

explain, the Senate Finance Committee chairman put into the legislative record a list of the

corporations who were the known beneficiaries of various transition rules to provide some

transparency to the process. The United States described that history in cases against

corporations who were not on the list, but also argued that the terms of the statute did not cover

the taxpayers claiming the benefits in litigation. Therefore, the briefs (and GAF’s arguments

about them) prove nothing. And in any event, the circuit courts found the taxpayers were

entitled to the relief.

In Airborne Freight Corp. v. United States, 153 F.3d 967 (9th Cir. 1998), the Ninth

Circuit rejected the government’s argument that Airborne was not entitled to relief under the

transition rule, § 204(a)(7) of the Tax Reform Act of 1986, and held that statute’s plain words


9The Supreme Court had rejected the use of legislative statements placed in theCongressional Record as part of legitimate legislative history. See Garcia v. United States, 469U.S. 70, 76-78 (1984) and Garcia was cited by this Court. In re G-I Holdings, 369 B.R. at 841.

10On page 1 of its memorandum, GAF seems to propose that the government is taking aremarkable position in this case to deny relief to a statute’s “undisputed intended beneficiary.” But statutes are applied as they are written, as this Court has done. GAF would appear to arguethat it should receive an outright concession based on language that does not cover itscircumstances because it has evidence from a lobbyist it paid. There is no support for that claim.

15

controlled. The Court was not going to read into the statute words that did not appear in the text.

See 153 F.3d at 970.9 In United States v. Kjellstrom, 100 F.3d 482 (7th Cir. 1996), the Seventh

Circuit held that the a subchapter S corporation, Wisco, did not qualify for relief under the same

transition rule because it did not meet the plain words of the statute. 100 F.3d at 484-485. But

the Seventh Circuit did not affirm or agree that the transition rule there was limited to a specific

beneficiary. Id. at 485.

If GAF is making some kind of estoppel or an inconsistent position argument by

submitting those briefs, that effort fails.10 The United States cannot be estopped by its prior

statements in unrelated litigation or made in unrelated contexts. See generally OPM v.

Richmond, 496 U.S. 414 (1990); Heckler v. Comm. Health Services of Crawford County, Inc.,

467 U.S. 51 (1984); see also United States v. Pelullo, 399 F.3d 197, 222-223 (3d Cir. 2005);

Olegario v. United States, 629 F.2d 204, 215 (2d Cir. 1980).

CONCLUSION

For the foregoing reasons, the Court ought to deny GAF’s motion for reconsideration.


16

Dated: April 29, 2009 Respectfully submitted,

RALPH J. MARRA , JR.Acting United States Attorney

/s/ Charles M. Flesch CHARLES M. FLESCH (CMF 0150)NICOLE ELLIOTT (NME 5768)JOSEPH. E. HUNSADER (JEH 1726)JOHN J. LoCURTO (JJL 9225)Trial Attorneys, Tax DivisionU.S. Department of JusticeP.O. Box 227, Ben Franklin StationWashington, D.C. 20044Tele: (202) 307-6635/514-0472Fax: (202) 514-6866Email: [email protected]






__________________________________________) Civil No. 2:02cv03082 (SC);



Debtors. )_________________________________________ )

DECLARATION OF CHARLES M. FLESCH IN SUPPORT OF UNITED STATES’ OPPOSITION TO DEBTORS’ APRIL 17, 2009 MOTION FOR

RECONSIDERATION OF COURT’S JUNE 8, 2007 SUMMARY JUDGMENT DECISION ON THE § 731 TRANSITION RULE (“THE BINDING CONTRACT EXCEPTION”)

I, CHARLES M. FLESCH, declare:

1. I am employed as a Trial Attorney by the Tax Division of the U.S. Department of

Justice, and work in Washington, D.C. I am one of several attorneys co-assigned to the above

captioned case for the United States.

2. I make this declaration in support of the United States’ opposition to debtors’

Case 2:02-cv-03082-SRC-MAS Document 322-2 Filed 04/29/2009 Page 1 of 2

-2-

(“GAF”) April 17, 2009 motion for reconsideration of Court’s June 8, 2007 summary judgment

decision on the § 731 Transition Rule.

3. Attached to this declaration are true copies of the following documents:

a. April 23, 2009 letter from Patricia Ryan, Deputy Counsel from the Office of U.S.

Senate Legal Counsel to GAF’s Counsel (Ex. 1);

b. Portion of fee application by Skadden Arps et al. filed in the case

entitled In re G-1 Holdings, Inc., Case No. 01-30135, Docket No. 9037-1 (USBC D.N.J.) (Ex.

2);

c. Portion of fee application by McKee Nelson LLP filed in the case

entitled In re G-1 Holdings, Inc., Case No. 01-30135, Docket No. 8996-1 (USBC D.N.J.) (Ex.

3);

I declare the foregoing to be true and correct subject to the penalty of perjury. 28 U.S.C.

§ 1746(2). Executed this 29th day of April 2009, in Washington, D.C.

/s/ Charles M. Flesch CHARLES M. FLESCH











__________________________________________) Civil No. 2:02cv03082 (SC);



Debtors. )_________________________________________ )

CERTIFICATE OF SERVICE

IT IS HEREBY CERTIFIED that true copies of the:

1. UNITED STATES’ BRIEF UNITED STATES’ OPPOSITION TO DEBTORS’ APRIL17, 2009 MOTION FOR RECONSIDERATION OF COURT’S JUNE 8, 2007 SUMMARYJUDGMENT DECISION ON THE § 731 TRANSITION RULE (“THE BINDING CONTRACTEXCEPTION”);

2. DECLARATION OF CHARLES M. FLESCH IN SUPPORT OF UNITED STATES’OPPOSITION (WITH EXHIBITS ATTACHED THERETO); and

3. this CERTIFICATE OF SERVICE,

were served this 29 day of April 2009, by filing them with the Clerk of the Court under the


-2-

Court’s CM/ECF system, which will electronically transmit it to counsel for debtors listed

below:

DENNIS JOSEPH O'GRADYJ. ALEX KRESSRIKER, DANZIG, SCHERER, HYLAND & PERRETTI, LLPHEADQUARTERS PLAZAONE SPEEDWELL AVENUEMORRISTOWN , NJ 07962-1981

AND IT IS FURTHER CERTIFIED THAT true copies of the documents listed above

were caused to be served on debtors’ additional counsel, this 29 day of APRIL 2009, by

placing them in an envelope, postage prepaid, and deposited in the U.S. Mail, addressed to:

Albert H. Turkus, Esq.Julia M. Kazaks, Esq.Skadden, Arps, Slate, Meagher & Flom LLP1440 New York Avenue, N.W.Washington, D.C. 20005(and by e-mail)

John Magee, Esq.Sanford W. Stark, Esq.McKee Nelson LLP1919 M Street, N.W., Suite 800Washington, D.C. 20036(and by e-mail)

/s/ Charles M. FleschCHARLES M. FLESCHTRIAL ATTORNEY, TAX DIVISIONU.S. DEPARTMENT OF JUSTICEP.O. BOX 227WASHINGTON, DC. [email protected]


Documents

RALPH J. MARRA, JR. Acting United States Attorney NICOLE … · 2009-04-30 · CHARLES M. FLESCH (CMF 0150) NICOLE ELLIOTT (NME 5768) JOSEPH. E. HUNSADER (JEH 1726) JOHN J. LoCURTO