Motion for approval of qualified settlement trust; trust corpus derived from recoveries in 56 individual but closely related cases alleging breach of contract and uncompensated taking
OPINION AND ORDER
LETTOW, Judge.
In these four consolidated cases, plaintiffs, Henry Housing Limited Partnership, Alber-marle Housing Limited Partnership, Apex Housing Limited Partnership, and Hartsville Housing Associates, for -themselves and on behalf of 52 other similarly situated plaintiffs, seek approval of the Weaver Rural Housing Qualified Settlement Trust (the “Weaver Trust” or “Trust”) to administer any settlement proceeds as a qualified settlement fund under 26 U.S.C. (“I.R.C.”) § 468B. Mot. for Approval of Qualified Settlement Fund Pursuant to 26 U.S.C. § 468B (“Pis.’ Mot.”), EOF No. 60. The government responds that it does not object to the establishment of the Trust but takes no position regarding its particular terms. Def.’s Resp. to Pis.’ Mot.
for Approval of Qualified Settlement Trust Fund (“Def.’s Resp.”), ECF No. 62.
BACKGROUND
Plaintiffs in this case and the related cases are limited partnerships organized under North Carolina law that share the same general partners, Weaver Investment Company and H. Michael Weaver.
See
Pis.’ Mot. at 1, Ex. A (listing plaintiffs and docket numbers).
Plaintiffs are engaged in building and operating rural housing projects associated with the federal- Rural Development Program and have filed actions against the government in this court for breach of contract and contravention of the Fifth Amendment’s prohibition on taking property without just compensation, based upon the government’s alleged repudiation of contract prepayment rights in connection with that Program.
Id.
at 1-2;
see generally Henry Housing Ltd. P’ship v. United States,
95 Fed.Cl. 250 (2010). Although plaintiffs’ individual cases differ in the particular factual circumstances attendant to each property, they involve many common factual and legal issues and are very closely related. Pis.’ Mot. at 1-2. Accordingly, all, 56 cases were assigned to a single judge. The cases initially proceeded separately, but in consort with one another. Then, after consulting with the parties, the court selected four of the cases to serve as bellwether actions that might represent most of .the factual variations within the larger group, and which when resolved might provide a template for disposition of all the cases.
See
Consolidation and Scheduling Order, No. 10-226C (Mar. 27, 2012), ECF No. 33. Following discovery and an alternative dispute resolution proceeding before Judge Horn, those, four cases are nearing settlement.
See
Hr’g Tr. 4:11 to 5:9 (Apr. 23, 2015).
In anticipation of complications arising from variations in the timing and amount of
settlements for each of their individual claims, on March 26, 2015, plaintiffs created the Weaver Trust, drafted to become effective upon the court’s entry of an order approving the Trust and retaining jurisdiction over it. Pis.’ Mot. at 2-3. An agreement (the “Trust Agreement”) was executed on March 26, 2015 to govern the Trust.
See
Notice of Filing under Seal, Weaver Rural Housing Qualified Settlement Trust (“Weaver Trust”), No. 10-226C (Apr. 30, 2015), ECF No.-70. Upon approval of the Weaver Trust, plaintiffs’ rights to recoveries in their individual eases will transfer to the Trust, be accumulated as each of the individual eases is resolved and the recovery proceeds paid, and ultimately be distributed in accord with the Trust Agreement following the resolution of the claims in all of the individual cases. Pis.’ Mot. at 2-3; Weaver Trust at 1 (stating that “all of the [partnerships want the establishment of this trust to receive the proceeds from the [ljitigation and provide a mechanism for allocating the expenses related to the [ljitigation and, accordingly each [pjart-nership has or will assign their rights to the [ljitigation [pjroceeds ... to this [Tjrust”). “Plaintiffs have collectively agreed to share expenses with respect to [their] claims,” specifying that “[tjhe allocation of those expenses will be affected by the amount of recovery made by each ... [pjlaintiff.” Pis.’ Mot. at 2. Plaintiffs have retained an independent trustee to administer the Trust, pay expenses, and approve and administer payment to each individual plaintiff.
Id.
at 2-3;
see also
Weaver Trust at l.
Acknowledging that “properly and completely allocating expenses will be impossible until all [of their] claims are resolved,” Pis.’ Mot. at 2, plaintiffs request that the Weaver Trust be administered as a qualified settlement fund under I.R.C. § 468B,
id.
at 3. Specifically, plaintiffs represent, that “[ojther-wise, recoveries that were paid into the Trust might be treated as received by [an individual] [pjlaintiff'in the year of payment for tax purposes, even though the Trustee will not make a payment to any ... [pjlaintiff until all ... [cjlaims have been resolved and expenses allocated, which will likely be in a subsequent tax year.”
Id.; see also
Hr’g Tr. 8:12 to 9:9.
On April 23, 2015, a hearing was held to address the details of the Trust. Subsequently, pursuant to the court’s request, plaintiffs submitted a copy of the Weaver Trust under seal to the court on April 30, 2015.
STANDARD FOR DECISION
Qualified settlement funds are primarily established to collect assets accumulated from settlements of claims resulting from an event or related events and to make distributions to appropriate parties.
See
Notice of Filing Ex. A (Robert W. Wood,
U.S. Income Portfolios: Other Pass-through Entities Portfolios 738-1st: Qualified Settlement Funds and Section U68B
§ I, at 1 (Bloom-berg BNA 2015), ECF No. 69. Treasury Regulation § 1.468B-1 defines á qualified settlement fund as “a fund, account, or trust” that satisfies the following requirements:
(1) It is established pursuant to an order of, or is approved by, the -United States, any state (including the District of Columbia), territory, possession, or political subdivision thereof, or any agency or instrumentality (including a court of law) of any of the foregoing and is subject to the continuing jurisdiction of that governmental authority;
(2) It is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event
(or related series of
events) that has occurred and that has given rise to at least one claim asserting liability—
(ii) Arising out of a tort,
breach of contract,
or
violation of law ...;
and
(3) The fund, account, or trust is a
trust under applicable state law,
or its assets are otherwise segregated from
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Motion for approval of qualified settlement trust; trust corpus derived from recoveries in 56 individual but closely related cases alleging breach of contract and uncompensated taking
OPINION AND ORDER
LETTOW, Judge.
In these four consolidated cases, plaintiffs, Henry Housing Limited Partnership, Alber-marle Housing Limited Partnership, Apex Housing Limited Partnership, and Hartsville Housing Associates, for -themselves and on behalf of 52 other similarly situated plaintiffs, seek approval of the Weaver Rural Housing Qualified Settlement Trust (the “Weaver Trust” or “Trust”) to administer any settlement proceeds as a qualified settlement fund under 26 U.S.C. (“I.R.C.”) § 468B. Mot. for Approval of Qualified Settlement Fund Pursuant to 26 U.S.C. § 468B (“Pis.’ Mot.”), EOF No. 60. The government responds that it does not object to the establishment of the Trust but takes no position regarding its particular terms. Def.’s Resp. to Pis.’ Mot.
for Approval of Qualified Settlement Trust Fund (“Def.’s Resp.”), ECF No. 62.
BACKGROUND
Plaintiffs in this case and the related cases are limited partnerships organized under North Carolina law that share the same general partners, Weaver Investment Company and H. Michael Weaver.
See
Pis.’ Mot. at 1, Ex. A (listing plaintiffs and docket numbers).
Plaintiffs are engaged in building and operating rural housing projects associated with the federal- Rural Development Program and have filed actions against the government in this court for breach of contract and contravention of the Fifth Amendment’s prohibition on taking property without just compensation, based upon the government’s alleged repudiation of contract prepayment rights in connection with that Program.
Id.
at 1-2;
see generally Henry Housing Ltd. P’ship v. United States,
95 Fed.Cl. 250 (2010). Although plaintiffs’ individual cases differ in the particular factual circumstances attendant to each property, they involve many common factual and legal issues and are very closely related. Pis.’ Mot. at 1-2. Accordingly, all, 56 cases were assigned to a single judge. The cases initially proceeded separately, but in consort with one another. Then, after consulting with the parties, the court selected four of the cases to serve as bellwether actions that might represent most of .the factual variations within the larger group, and which when resolved might provide a template for disposition of all the cases.
See
Consolidation and Scheduling Order, No. 10-226C (Mar. 27, 2012), ECF No. 33. Following discovery and an alternative dispute resolution proceeding before Judge Horn, those, four cases are nearing settlement.
See
Hr’g Tr. 4:11 to 5:9 (Apr. 23, 2015).
In anticipation of complications arising from variations in the timing and amount of
settlements for each of their individual claims, on March 26, 2015, plaintiffs created the Weaver Trust, drafted to become effective upon the court’s entry of an order approving the Trust and retaining jurisdiction over it. Pis.’ Mot. at 2-3. An agreement (the “Trust Agreement”) was executed on March 26, 2015 to govern the Trust.
See
Notice of Filing under Seal, Weaver Rural Housing Qualified Settlement Trust (“Weaver Trust”), No. 10-226C (Apr. 30, 2015), ECF No.-70. Upon approval of the Weaver Trust, plaintiffs’ rights to recoveries in their individual eases will transfer to the Trust, be accumulated as each of the individual eases is resolved and the recovery proceeds paid, and ultimately be distributed in accord with the Trust Agreement following the resolution of the claims in all of the individual cases. Pis.’ Mot. at 2-3; Weaver Trust at 1 (stating that “all of the [partnerships want the establishment of this trust to receive the proceeds from the [ljitigation and provide a mechanism for allocating the expenses related to the [ljitigation and, accordingly each [pjart-nership has or will assign their rights to the [ljitigation [pjroceeds ... to this [Tjrust”). “Plaintiffs have collectively agreed to share expenses with respect to [their] claims,” specifying that “[tjhe allocation of those expenses will be affected by the amount of recovery made by each ... [pjlaintiff.” Pis.’ Mot. at 2. Plaintiffs have retained an independent trustee to administer the Trust, pay expenses, and approve and administer payment to each individual plaintiff.
Id.
at 2-3;
see also
Weaver Trust at l.
Acknowledging that “properly and completely allocating expenses will be impossible until all [of their] claims are resolved,” Pis.’ Mot. at 2, plaintiffs request that the Weaver Trust be administered as a qualified settlement fund under I.R.C. § 468B,
id.
at 3. Specifically, plaintiffs represent, that “[ojther-wise, recoveries that were paid into the Trust might be treated as received by [an individual] [pjlaintiff'in the year of payment for tax purposes, even though the Trustee will not make a payment to any ... [pjlaintiff until all ... [cjlaims have been resolved and expenses allocated, which will likely be in a subsequent tax year.”
Id.; see also
Hr’g Tr. 8:12 to 9:9.
On April 23, 2015, a hearing was held to address the details of the Trust. Subsequently, pursuant to the court’s request, plaintiffs submitted a copy of the Weaver Trust under seal to the court on April 30, 2015.
STANDARD FOR DECISION
Qualified settlement funds are primarily established to collect assets accumulated from settlements of claims resulting from an event or related events and to make distributions to appropriate parties.
See
Notice of Filing Ex. A (Robert W. Wood,
U.S. Income Portfolios: Other Pass-through Entities Portfolios 738-1st: Qualified Settlement Funds and Section U68B
§ I, at 1 (Bloom-berg BNA 2015), ECF No. 69. Treasury Regulation § 1.468B-1 defines á qualified settlement fund as “a fund, account, or trust” that satisfies the following requirements:
(1) It is established pursuant to an order of, or is approved by, the -United States, any state (including the District of Columbia), territory, possession, or political subdivision thereof, or any agency or instrumentality (including a court of law) of any of the foregoing and is subject to the continuing jurisdiction of that governmental authority;
(2) It is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event
(or related series of
events) that has occurred and that has given rise to at least one claim asserting liability—
(ii) Arising out of a tort,
breach of contract,
or
violation of law ...;
and
(3) The fund, account, or trust is a
trust under applicable state law,
or its assets are otherwise segregated from
other assets of the transferor (and related persons).
Treas. Reg. § 1.468B-1 (emphasis added).
ANALYSIS
A.
Qualifications 'of the Weaver Trust
The Trust would receive the settlement proceeds from the “action[s] ... .against the [government seeking compensátion for the [gjovernment’s alleged repudiation of the contract prepayment rights held by the [p]artnerships.” Weaver Trust at 1 (noting that each relevant partnership “has potential claims (for alleged breach of contract, just compensation under the Fifth Amendment for an alleged taking of private property, or both) against the United States of America ... for compensation for damages it has suffered under the Rural Development [P]ro-gram as a result of restrictions on its ability to prepay its loans”). All. 56 cases are currently pending in this court. They involve the same type of contract with the same party,
i.e.,
the United States. The plaintiffs are also limited partnerships controlled by the same general partners. Common factual and legal questions also are apparent. In each of these cases, plaintiffs are represented by the same counsel.
See
Notice of Directly Related Cases, ECF No. 26.
The chief question respecting approval under Treas. Reg. § 1.468B-1 (c)(2) is whether the Weaver Trust has been established to “resolve or satisfy one or more contested or uncontested claims that have resulted or may result from ... a related series of events ... that has occurred” and has given rise to claims for “breach of contract” and for a “violation of law.” Treas. Reg. § 1.468B — 1(c)(2). The contracts at issue are so-called “Post-1979 FmHA Contracts,” and the loans attendant to those contracts are “Post-1979 FmHA Loans,” entered between each of the partnerships and the Farmers Home Administration, now succeeded by Rural Housing and Community Development Services, in the Department of Agriculture. The documentation for the contracts and loans was on standard FmHA forms, adapted for each particular subsidized rural housing project. And, the legislation abrogating the plaintiffs’ right to prepay applied to all like contracts and loans. Despite those close parallels in the claims, each of the plaintiffs had a separate contract and attendant loan. Thus, different transactions were involved for the individual plaintiffs, such that joinder under Rule 20(a) of the Rules of the Court of Federal Claims (“RCFC”) would not have been appropriate.
See, e.g., Franconia Assocs. v. United States,
61 Fed.Cl. 335, 337 (2004) (holding that plaintiffs, each of whom had entered into an agreement for a
low interest loan from FmHA, had claims with many common legal or factual questions, but that was not enough to support permissive joinder under RCFC 20(a)). Do the plaintiffs nonetheless have sufficient commonality that their claims can be said “to result from ... [a] related series of events,” Treas. Reg. § 1.468B-l(c)(2), enabling the proceeds of future settlements to be grouped together in one settlement fund? In a sense, the assembled judges of the court have already answered this question in the affirmative by approving the assignment of the group of eases to a single judge for resolution. This result, guided by practical considerations, is now supported by the parties’ representations that future settlements can be effectively and efficiently managed through a qualified settlement fund. Although Treas. Reg. § 1.468B-1 lists examples illustrating various applications of the regulation, and none of these examples are directly pertinent to the circumstances at hand, the court concludes that the claims are so closely related that the criteria of Treas. Reg. § 1.468B-l(c)(2) have been satisfied.
Insofar as the other requirements of Treas. Reg. 1.468B-l(c) are concerned, the Trust is established under North Carolina law,
see
Hr’g Tr. 15:25 to 16:4, and thus it comports with Treas. Reg. 1.468B-l(c)(3). Moreover, the requirements outlined in § 1.468B-l(c)(l) will be met upon the issuance of this order, approving the Trust as a qualified settlement fund and maintaining continuing jurisdiction over the Trust.
See
Weaver Trust at 1 (noting that “the effectiveness of this declaration of trust is conditioned upon the issuance of an [ojrder by the United States Court of Federal Claims ... approving this Trust and retaining jurisdiction over this Trust”). Accordingly, the Weaver Trust constitutes a qualified settlement fund under Treas. Reg. § 1.468B-1, and it may be approved by the court.
B.
Administration of the Trust
The court approves the Weaver Trust as a qualified settlement fund and agrees to retain jurisdiction over the Trust for the duration of its existence. The designated trustee shall file annual financial reports informing the court of the status of the Trust. In addition, the trustee must provide the court with any request for appointment of a successor trustee, notice of any litigation or other contested proceeding involving the Trust, including those related to taxation, and a petition for termination of the Trust.
CONCLUSION
For the reasons stated, plaintiffs’ Motion for Approval of Qualified Settlement Fund Pursuant to Section 468B of the Internal Revenue Code is GRANTED. The Weaver Rural Housing Qualified Settlement Trust is approved, and the court retains jurisdiction over the Trust for the duration of its existence. The first annual financial reports shall be provided to the court on May 15, 2016, and shall be due on May 15th of every year thereafter until termination of the Trust.
It is so ORDERED.