                                                                                                                           Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-22-1996

First Bank Natl v. FDIC
Precedential or Non-Precedential:

Docket 95-1519




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          UNITED STATES COURT OF APPEALS
              FOR THE THIRD CIRCUIT


                    No. 95-1519


    FIRST BANK NATIONAL ASSOCIATION, as Trustee;
       ALJAF ASSOCIATES LIMITED PARTNERSHIP;


                         v.

      FEDERAL DEPOSIT INSURANCE CORPORATION,
       as Receiver for Meritor Savings Bank;

                         First Bank National Association
                         as Trustee ("First Bank"),

                                           Appellant


  On Appeal from the United States District Court
     for the Eastern District of Pennsylvania
          (D.C. Civil Action No. 94-2197)


              Argued February 1, 1996

BEFORE: GREENBERG, NYGAARD, and LAY,* Circuit Judges

              (Filed: March 22, 1996)


                         Arthur E. Newbold (argued)
                         Joseph Patrick Archie
                         Dechert, Price & Rhoads
                         4000 Bell Atlantic Tower
                         1717 Arch Street
                         Philadelphia, PA 19103-2793

                         James O. Huber
                         David Lucey
                         Foley & Lardner
                         777 East Wisconsin Ave.
                         Milwaukee, WI 53202




                         1
* Honorable Donald P. Lay, Senior Judge of the United States
Court of Appeals for the Eighth Circuit, sitting by
designation.
                                 Attorneys for Appellant

                                  Miles H. Shore
                                  Saul, Ewing, Remick & Saul
                                  3800 Centre Square West
                                  Philadelphia, PA 19102

                                  Ann S. DuRoss
                                  Richard J. Osterman, Jr.
                                  Jerome A. Madden (argued)
                                  Federal Deposit Insurance
                    Corporation
                                  550 17th St., N.W.
                                  Washington, D.C. 20429

                                         Attorneys for Appellee




                      OPINION OF THE COURT



GREENBERG, Circuit Judge.


          This appeal requires us to decide a narrow issue: under

what circumstances, if any, is the FDIC required to pay the cost

of lease-mandated structural repairs and modifications to a

building when it acts as a receiver for a failed lessee-thrift

and disaffirms its lease under FIRREA?   To decide this issue, we

must construe 12 U.S.C. § 1821(e)(4), the provision of FIRREA

that sets forth the FDIC's obligations when it disaffirms leases.

Because we believe that the FDIC's liability for "unpaid rent"

under FIRREA includes the costs of the structural repairs

mandated by the lease, if any, we will reverse the district

court's order rejecting the claim for these repairs.   We also



                                  2
will reverse the district court's order rejecting the lessor's

claim for the costs of making modifications to the building to

comply with the ADA (Americans with Disabilities Act), because

the district court incorrectly applied the "readily achievable"

standard to determine whether the liabilities had accrued.    We

will remand the case to the district court to determine whether

the obligation of repairing the building and complying with the

ADA had matured by the date the thrift went into receivership.



          I.   FACTUAL BACKGROUND AND PROCEDURAL HISTORY

          Plaintiff, First Bank National Association, Trustee,

("First Bank"), brought this action for breach of contract

against the defendant, the Federal Deposit Insurance Corporation

("FDIC") pursuant to the Federal Deposit Insurance Act, 12 U.S.C.

§ 1811 et seq., as amended by the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989 ("FIRREA").   First Bank

alleged that the FDIC, as receiver for Meritor Savings Bank

("Meritor"), formerly known as the Philadelphia Savings Fund

Society, was liable for sums due under a sublease of the historic

PSFS building Meritor occupied at 12 South 12th Street,

Philadelphia, Pennsylvania.0

          Meritor, the owner of the PSFS building, entered into a

complex series of lease and sublease agreements with First Bank

and other entities during the 1980s.   First Bank Nat'l Ass'n v.

0
 The building, designed by George Howe and William Lescaze and
constructed in 1933, is considered one of the first examples in
the United States of the International Style of architecture. See
Vincent Scully, American Architecture and Urbanism 154 (1988).


                                3
FDIC, 885 F. Supp. 117, 118 (E.D. Pa. 1995).    As a result, First

Bank became Meritor's landlord under a sublease for the space

Meritor occupied in the building, with Meritor apparently

retaining only nominal title to the building.    App. 63. Meritor's

sublease ran until December 31, 2006, but included three options

to renew for ten-year terms until December 31, 2036.     First Bank,

885 F. Supp. at 119.

           Paragraph 4(a) of the sublease between First Bank and

Meritor required Meritor initially to "pay to [First Bank] in

lawful money of the United States as fixed rent for the Premises"

$1,806,000 per quarter.    App. 83, 137.   While the sublease

provided for subsequent changes in the rent, the $1,806,000

figure controlled when the FDIC became the receiver.    Paragraph

6(a)(i) committed Meritor to pay "all taxes, assessments,

governmental or quasi-governmental levies, fees, water and sewer

rents and charges, and all other governmental charges general and

special, ordinary and extraordinary, foreseen and unforeseen"

imposed during the term of the sublease.   App. 87.

           Pursuant to paragraph 6(b) of the sublease, Meritor

also was obligated to:
          comply with and cause the Premises to comply
          with (i) all laws, ordinances and
          regulations, and other governmental rules,
          orders and determinations now or hereafter
          enacted, made or issued, whether or not
          presently contemplated . . .

App. 89.


           The sublease expansively required that Meritor:
           maintain all parts of the Premises in good
           repair and condition, except for ordinary


                                4
             wear and tear and except as expressly
             provided in paragraph 11(b),0 and . . . take
             all action and . . . make all structural and
             non-structural, foreseen and unforeseen and
             ordinary and extraordinary changes and
             repairs which may be required to keep all
             parts of the Premises in good repair and
             condition, ordinary wear and tear excepted.
             Lessor shall not be required to maintain,
             repair or rebuild all or any part of the
             premises.


App. 92.     Overall, it is clear that the sublease put the risks

and burdens of maintaining the building on Meritor.

             The Secretary of Banking of the Commonwealth of

Pennsylvania declared Meritor to be in unsafe and unsound

condition on December 11, 1992, and, pursuant to FIRREA, the FDIC

was appointed its receiver on the same day.     The FDIC disaffirmed

the sublease for the PSFS building pursuant to 12 U.S.C.

§1821(e)(1), on March 31, 1993, and the disaffirmance was

effective that day.0

0
    The provisions of paragraph 11(b) are not applicable here.
0
    12 U.S.C. § 1821(e)(1) provides:

             (e) Provisions relating to contracts entered into
             before appointment of conservator or receiver

                  (1) Authority to repudiate contracts

                   In addition to any other rights a conservator or
                  receiver may have, the conservator or receiver for
                  any insured depository institution may disaffirm
                  or repudiate any contract or lease-

                       (A) to which such institution is a party;

                       (B) the performance of which the conservator
                       or receiver, in the conservator's or
                       receiver's discretion, determines to be
                       burdensome; and



                                   5
          Pursuant to 12 U.S.C. § 1821(e)(4)(B), upon the

disaffirmance First Bank, as lessor, was entitled to "any unpaid

rent, subject to all appropriate offsets and defenses, due as of

the date of the appointment. . . ."   In addition, First Bank was

"entitled to contractual rent" from the FDIC "accruing before . .

. the disaffirmance [of the lease] . . . becomes effective."

Following the disaffirmance, First Bank filed an administrative

claim with the FDIC, and, after its rejection, filed this timely

action on April 7, 1994, as permitted by 12 U.S.C. § 1821(d)(6).

          At the trial, First Bank claimed the FDIC was liable

under section 1821(e)(4)(B) for:
          (1) $1,404,666.67 in unpaid 'fixed quarterly rent' for
          the period October 1, 1992 through December 11, 1992;

          (2) $224,119.68 in property taxes for the period
          January 1, 1993 through March 31, 1993;

          (3) $285,000 for modification of the building to comply
          with the Americans with Disabilities Act ('ADA');

          (4) $980,000 for rehabilitation of the north facade of
          the PSFS building;

          (5) $50,000 for repair of the plumbing;

          (6) $12,000 for repair of the electrical systems;

          (7) $355,000 for renovation and repair of the heating,
          ventilating and air conditioning ('HVAC') system; and

          (8) prejudgment interest on all of the above amounts.




                    (C) the disaffirmance or repudiation of which
                    the conservator or receiver determines, in
                    the conservator's or receiver's discretion,
                    will promote the orderly administration of
                    the institution's affairs.

                               6
First Bank, 885 F. Supp. at 119-20.    In its opinion and judgment

of April 20, 1995, the district court found that the above claims

were valid except for the expenses for the modifications of the

building to comply with the ADA, the cost of the structural

repairs of the north facade of the building, and prejudgment

interest other than that due on the rent.    First Bank appeals

from the denial of the costs of structural repairs to the north

facade of the building and the costs of modifying the building to

comply with the ADA.   The district court had jurisdiction under

12 U.S.C. § 1819(b)(2) and 12 U.S.C. § 1821(d)(6), and we have

jurisdiction under 28 U.S.C. § 1291.



                          II.   DISCUSSION

           To decide whether the district court correctly

rejected First Bank's claims for the cost of structural repairs

and modifications required by the lease, we must construe 12

U.S.C. § 1821(e)(4), the provision of FIRREA that specifies the

FDIC's obligations when it disaffirms leases.

          12 U.S.C. § 1821(e)(4) reads in whole:
          (4) Leases under which the institution is the
          lessee

               (A) In general

               If the conservator or receiver
               disaffirms or repudiates a lease under
               which the insured depository institution
               was the lessee, the conservator or
               receiver shall not be liable for any
               damages (other than damages determined
               pursuant to subparagraph (B)) for the
               disaffirmance or repudiation of such
               lease.
               (B) Payments of rent


                                 7
               Notwithstanding subparagraph (A), the
               lessor under a lease to which such
               subparagraph applies shall-

                         (i) be entitled to the
                    contractual rent accruing before
                    the later of the date-
                         (I) the notice of
                         disaffirmance or repudiation
                         is mailed;
                         (II) the disaffirmance or
                         repudiation becomes effective,
                    unless the lessor is in default or
                    breach of the terms of the lease;

                         (ii) have no claim for damages
                    under any acceleration clause or
                    other penalty provision in the
                    lease; and

                         (iii) have a claim for any
                    unpaid rent, subject to all
                    appropriate offsets and defenses,
                    due as of the date of the
                    appointment which shall be paid in
                    accordance with this subsection and
                    subsection (i) of this section.0


0
          This provision, like much of FIRREA, was modeled after
the Bankruptcy Code, in this instance, 11 U.S.C. § 502(b)(6), the
provision dealing with a trustee's obligations if it terminates a
lease.

11 U.S.C. § 502(b) provides in relevant part:

          (b) Except as provided in subsections
          (e)(2), (f), (g), (h) and (i) of this
          section, if such objection to a claim is
          made, the court after notice and a hearing,
          shall determine the amount of such claim in
          lawful currency of the United States as of
          the date of the filing of the petition, and
          shall allow such claim in such amount, except
          to the extent that-
          . . . .
          (6) if such claim is the claim of a lessor
          for damages resulting from the termination of
          a lease of real property, such claim exceeds-



                               8
           First Bank argues that 12 U.S.C. § 1821(e)(4) limits

claims only to the extent of "any damages . . . for the

disaffirmance or repudiation of such lease."       It thus does not

read the words "other than damages determined pursuant to

subparagraph (B)" as relating to any obligation other than those

flowing from the disaffirmance.       Since the damages for the costs

to repair the facade and to comply with the ADA did not result

from the disaffirmance, First Bank argues that subsection (e)(4)

does not limit its claims.    See Pioneer Bank and Trust Co. v.

RTC, 793 F. Supp. 828 (N.D. Ill. 1992).

           While we acknowledge that First Bank's reading of

section 1821(e)(4) is not unreasonable, we nevertheless disagree

with it.   Subsection (4)(B)(iii) states that when the receiver

disaffirms a lease, the lessor shall "have a claim for any unpaid

rent . . . due as of the date of the appointment."       Such unpaid

rent is not a claim that stems from the disaffirmance or

repudiation of the lease.    Consequently, if subsection (4)(A)


                (A) the rent reserved by such lease,
           without acceleration, for the greater of one
           year, or 15 percent, not to exceed three
           years, of the remaining term of such lease,
           following the earlier of-

                (i) the date of the filing of the
                petition; and
                (ii) the date on which such lessor
                repossessed, or the lessee surrendered,
                the leased property; plus

                (B) any unpaid rent due under such
           lease, without acceleration, on the earlier
           of such dates[.]




                                  9
excluded only claims arising from the disaffirmance of the lease,

subsection (4)(B)(iii) would be superfluous, as the lessor would

have a claim for unpaid rent as of the date of the appointment of

the receiver without regard for the disaffirmance.

          It is a black letter rule of statutory interpretation

that, if possible, a court should construe a statute to avoid

rendering any element of it superfluous.    See United Steelworkers

of Am. v. North Star Steel Co., 5 F.3d 39, 42 (3d Cir. 1993),

cert. denied, 114 S.Ct. 1060 (1994).   Consequently, we construe

subsection (4)(B) to govern the receiver's overall liability for

damages when it repudiates a lease.    Cf. RTC v. Ford Motor Credit

Corp., 30 F.3d 1384, 1387 (11th Cir. 1994) (rejecting argument

that section 1821(e)(4) serves only to limit the RTC's liability

for interests that accrue wholly after the receivership and

permits recovery against property in which the lessor has a

perfected security interest); In re McSheridan 184 B.R. 91, 100-

02 (Bankr. 9th Cir. 1995) (analogous portion of bankruptcy code

encompasses all claims for breach of lease; specifically

rejecting argument that appellant's claims for prepetition breach

of covenants not "termination" damages and therefore not governed

by provision).    By rejecting First Bank's narrow reading of 12

U.S.C. § 1821(e)(4), we are consistent with the approach of the

district court.

          The district court, however, construed subsection

(e)(4) to limit claims to "contractual rent," under section

1821(e)(4)(B)(i).    It reasoned that "contractual rent" excluded

claims for capital improvements because "such improvements by


                                 10
their nature generally have a value to the lessor far beyond the

value to the lessee."    885 F. Supp. at 120.   This construction

makes a distinction between obligations that benefit a lessor

over the long term and more conventional contractual obligations.

See Oldden v. Tonto Realty Corp., 143 F.2d 916, 920 (2d Cir.

1944) (observing that "landlord not in the same position as other

general creditors" because "he has been compensated up until the

date of the bankruptcy petition [and] he regains his original

assets upon bankruptcy").

            While as a policy matter the district court's

distinction was reasonable, we reject its conclusion that First

Bank's recovery is limited to "contractual rent" because we

believe that the language of FIRREA simply will not accommodate

the court's reading.    Section 1821(e)(4)(B) states in relevant

part:
            Notwithstanding subparagraph (A), the lessor
            under a lease to which such subparagraph
            applies shall-

                 (i) be entitled to the contractual rent
                 accruing before the later of the date-

                      (I) the notice of disaffirmance or
                 repudiation is mailed; or
                      (II) the disaffirmance or
                 repudiation becomes effective,
                 . . . .
                 (iii) have a claim for any unpaid rent,
                 subject to all appropriate offsets and
                 defenses, due as of the date of the
                 appointment which shall be paid in
                 accordance with this subsection and
                 subsection (i) of this section.


Id.     Thus, section 1821(e)(4)(B) provides that a claimant has the

right to "unpaid rent" due at the date of appointment of the


                                  11
receiver, and "contractual rent" accruing before the latter of

the date that the notice of disaffirmance or repudiation is

mailed or the date it becomes effective.0

          "Rent," paid or unpaid, clearly encompasses contractual

rent.   Yet "contractual rent" must include a different category

of claims than "rent" generally.       If it did not, there would have

been no reason for Congress to distinguish between "unpaid" and

"contractual" rent in section 1821(e)(4)(B) or, at least,

Congress would have required the FDIC to pay "unpaid contractual

rent" rather then "unpaid rent" due as of the date of the

appointment of the receiver.    Furthermore, it was logical for

Congress to limit liability under the lease once a receiver was

appointed.    We therefore construe section 1821(e)(4)(B) to

distinguish between claims that accrue by the date of the

receivership and claims that accrue between the date of

receivership and the disaffirmance of the lease.      See In re

Vause, 886 F.2d 794, 801 (6th Cir. 1989) (construing Bankruptcy

Act to "provide the lessor with his actual damages for past rent,

but placing a limit on his damages for speculative future rent

payments in long-term leases").

             We therefore must decide if "unpaid rent" encompasses

claims for obligations other than the quarterly monetary rent

imposed on Meritor by December 11, 1992, the date that the FDIC

was appointed its receiver.    We then must decide whether any

0
 This shadows the scheme limiting claims in the Bankruptcy Code
in 11 U.S.C. § 502(b)(6). See n.4 supra.




                                  12
claims that accrued between the date of receivership and the date

that the FDIC disaffirmed the lease, March 31, 1993, constitute

"contractual rent."

           Black's Law Dictionary (6th ed. 1990) defines rent as

"consideration paid for use or occupation of property." Meritor's

obligation to maintain the premises in good repair was an element

of the consideration it paid for use of the property. Presumably,

in lieu of a higher quarterly rent payment, the sublease

obligated it to:
          maintain all parts of the Premises in good
          repair and condition except for ordinary wear
          and tear and . . .[to] take all action and .
          . . make all structural and non-structural,
          foreseen and unforeseen and ordinary and
          extraordinary changes and repairs which may
          be required to keep all parts of the Premises
          in good repair and condition . . . .


App. 92.   Furthermore, the sublease required Meritor to cause the

premises to comply with all applicable governmental laws,

ordinances, regulations and rules, even if adopted after the

execution of the sublease.   Consequently, Meritor had an
obligation to keep the premises in good condition and repair, and

an obligation to ensure that the premises were maintained

lawfully, even if satisfaction of these duties required it to

make substantial renovations to the property.   We find that these

obligations constitute "unpaid rent" for the purposes of 12

U.S.C. § 1821(e)(4)(B)'s specification of the receiver's

liability.0
0
 We do not decide whether an obligation under a lease provision
ever could be so extreme as not to constitute "unpaid rent" under
12 U.S.C. § 1821(b)(4)(B)(iii). The obligations involved here


                                13
          We construe "contractual rent" more narrowly than

"unpaid rent," however, to effect the purpose of the statute in

giving the receiver an opportunity to survey the thrift's

situation without being immediately required to decide whether to

assume large obligations.   Here we find support in bankruptcy

jurisprudence.   In 1185 Avenue of the Americas Assocs. v. RTC, 22

F.3d 494, 497 (2d Cir. 1994), the court noted that "chapter 3 of

the Bankruptcy Code provides a helpful analogy" to the authority

to repudiate contracts under FIRREA.   We nevertheless note that

the purposes of the Bankruptcy Code are not identical to those of

FIRREA and that "equitable principles developed in the

reorganization context cannot simply be grafted onto the national

banking statutes."   Corbin v. Federal Reserve Bank, 629 F.2d 233,

236 (2d Cir. 1980), cert. denied, 450 U.S. 970, 101 S.Ct. 1492

(1981).

          In this case, however, the analogy is apt; FIRREA and

the Bankruptcy Code both seek to balance the legitimate claims of

the lessor with those of the debtor and other claimants.    The

interests of the lessor were explained well in Oldden v. Tonto

Realty Corp., 143 F.2d at 920, where the court explained the

history of the bankruptcy provision which limited a landlord's

claims for future rent:
          But allowance in full of such claims did not
          seem the appropriate answer, since other
          general creditors would suffer
          proportionately, and the claims themselves
          would often be disproportionate in amount to
          any actual damage suffered, particularly in

are not so stringent, particularly when compared to the quarterly
rent of $1,806,000.

                                14
          the event of a subsequent rise in rental
          values. In truth, the landlord is not in the
          same position as other general creditors, and
          there is no very compelling reason why he
          should be treated on a par with them. For,
          after all, he has been compensated up until
          the date of the bankruptcy petition, he
          regains his original assets upon bankruptcy,
          and the unexpired term in no way really
          benefits the assets of the bankrupt's estate.


Id. at 919-20 (footnote omitted).   We find reliance on Oldden

particularly appropriate as the legislative history of the

present Bankruptcy Code shows that Congress approved that case.

See H.R. Rep. No. 595, 95th Cong., 1st Sess. 353-54 (1977), Pub.

L. No. 598, 1978 U.S.C.C.A.N. (92 Stat.) 6309-10.

          In construing 11 U.S.C. § 502(b), the section of the

Bankruptcy Code which limits lessor's post-bankruptcy claims, the

bankruptcy courts generally have defined rent to be an obligation

which is at least "fixed, regular, periodic."   In re Conston

Corp., 130 B.R. 449, 455 (Bankr. E.D. Pa. 1991) (holding that

claims constitute "rent" only if "the lease expressly so provides

and the charges in question are properly classifiable as rent

because they are regular, fixed, periodic charges . . ."); In re
Gantos, Inc., 181 B.R. 903, 907 (Bankr. W.D. Mich. 1995)

(rejecting claim of construction allowance as "rent" because

cases hold that payment must be "regular, fixed and periodically

payable in the same manner as pure rent"); In re McSheridan, 184

B.R. at 100 ("[C]harge must be properly classifiable as rent

because it is a fixed, regular, or periodic charge."); In re

Farley, Inc., 146 B.R. 739, 746 (Bankr. N.D. Ill. 1992) ("[Rent]

includes any payments that relate directly to or increase the


                               15
value or worth of the property, and are fixed, regular

payments.").

           We find this formulation a useful and appropriate

requirement to give meaning to Congress's restriction of a

lessor's recovery for post-receivership claims to "contractual

rent."   We conclude, therefore, that "contractual rent" refers

only to those sums that are fixed, regular, periodic charges.0

           In this case, the costs of structural repairs to the

facade were not fixed, regular, and periodic.    Consequently, the

FDIC is not subject to any liability for the cost of repairs that

accrued after the institution of the receivership because those

costs were not contractual rent.     The district court, however,

found that "Meritor was required under its lease with First Bank

0
 We note that the Bankruptcy Appellate Panel of the Ninth Circuit
faced a problem of construing the analogous Bankruptcy Code
provision, "rent reserved by such lease," in a similar fact
situation of a long-term lease that placed the costs of
maintaining the building on the lessee/debtor in In re
McSheridan, 184 B.R. 91. In that situation the court held that
the following three-part test must be met for a claim to
constitute "rent reserved";

           (1) The charge must: (a) be designated as
           'rent' or 'additional rent' in the lease; or
           (b) be provided as the tenant's/lessee's
           obligation in the lease;

           (2) The charge must be related to the value
           of the property or the lease thereon; and

           (3) The charge must be properly classifiable
           as rent because it is a fixed, regular or
           periodic charge.

We reserve the question as to whether for a charge to be
"contractual rent" it must meet requirements other than being
"fixed, regular, periodic" because we have no need to consider
that point in this case.

                                16
to [install flashing under the windows and insert vertical joints

in the facade to allow for brick movement]" at a cost of

$980,000.   885 F. Supp. at 121.    This finding seemingly would

make the FDIC liable for the structural repairs to the north

facade under its obligation for unpaid rent.

            The district court, however, made this finding in

determining the contractual rent due to First Bank rather than

determining the unpaid rent due.        As a result, it made its

calculations as of the date the FDIC disaffirmed the lease, March

31, 1993, rather than the date Meritor went into receivership,

December 11, 1992.   Consequently, we must remand for the district

court to find what amount, if any, of "unpaid rent" obligations

had accrued by the date of the receivership, December 11, 1992.

            In addition, we note that the FDIC argues that

renovations less extensive than the full $980,000 reconstruction

of the facade would have satisfied Meritor's obligations under

the sublease.   Since the district court's finding that the full

reconstruction was required by the sublease was made in the

context of denying the claim altogether, the court should

consider whether lesser expenditures would have fulfilled

Meritor's obligations.   We will require this reconsideration

because the court did not address this possibility in its

opinion.

            First Bank also argues that the district court erred

when it rejected First Bank's claim for compensation to make

modifications of the building's bathrooms and elevators to comply




                                   17
with the Americans with Disabilities Act pursuant to paragraph

6(b) of the sublease, which required Meritor to:
          comply with and cause the Premises to comply
          with (i) all laws, ordinances and
          regulations, and other governmental rules,
          orders and determinations now or hereafter
          enacted, made or issued, whether or not
          presently contemplated.
App. 89.


          This obligation, like the obligation to make structural

repairs to the north facade, is clearly part of the consideration

that First Bank received for the lease and consequently qualifies

as rent for the purposes of 12 U.S.C. § 1821(e)(4)(B)(iii).     But

since this obligation is not "regular, fixed and periodic," it,

too, does not qualify as "contractual rent" under subsection

(e)(4)(B)(i).   Therefore, for First Bank to recover for the costs

of the modifications, Meritor's obligation to make the

modifications must have accrued by December 11, 1992, the date

the receivership was instituted.

          The section of the ADA implicated here provides that:
          No individual shall be discriminated against
          on the basis of disability in the full and
          equal enjoyment of the goods, services,
          facilities, privileges, advantages, or
          accommodations of any place of public
          accommodation by any person who owns, leases
          (or leases to), or operates a place of public
          accommodation.


42 U.S.C. § 12182(a).   Subsection (b)(2)(A) of section 12182

describes actions and inactions that constitute discrimination

under the statute and it states:
          (2) Specific Prohibitions

          (A) Discrimination


                                18
          For purposes of subsection (a) of this
          section, discrimination includes-
               . . .

               (iv) a failure to remove architectural

               barriers, and communication barriers

               that are structural in nature, in

               existing facilities . . . where such

               removal is readily achievable.0

0
 "Readily achievable" is a term of art.   It is defined by 42
U.S.C. § 12181(9) which states:

          The term 'readily achievable' means easily
          accomplishable and able to be carried out
          without much difficulty or expense. In
          determining whether an action is readily
          achievable, factors to be considered include-

               (A) the nature and cost of the action
               needed under this chapter;

               (B) the overall financial resources of
               the facility or facilities involved in
               the action; the number of persons
               employed at such facility; the effect on
               expenses and resources, or the impact
               otherwise of such action upon the
               operation of the facility;

               (C) the overall financial resources of
               the covered entity; the overall size of
               the business of a covered entity with
               respect to the number of its employees;
               the number, type and location of its
               facilities; and

               (D) the type of operation or operations
               of the covered entity, including the
               composition, structure, and functions of
               the workforce of such entity; the
               geographic separateness, administrative
               or fiscal relationship of the facility
               or facilities in question to the covered
               entity.



                               19
The district court found that:
          While the ADA requires removal of
          architectural and communication barriers in
          existing public accommodations such as the
          PSFS building where such removal is 'readily
          achievable,' it does not require this process
          to be completed by any particular date. . . .
          Although one might well be able to argue that
          at some point a delay would constitute non-
          compliance with the ADA and consequently a
          violation of the sublease, that point had not
          been reached by March 31, 1993.


885 F. Supp. at 122.   The district court thus seemed to find that

in order to constitute non-compliance under the ADA, a particular

unmade modification: (1) must be "readily achievable" and (2)

that an unspecified period, essentially a grace period, must have

elapsed after the ADA's effective date even though the

modifications were "readily achievable" earlier.

          To the extent that the court's holding suggests that a

grace period exists, we disagree because we find no provision for

a grace period in the ADA.   We want to make clear, however, that

in rejecting the "grace period" construction, we are not implying

that the passage of time is irrelevant in determining liability

under the ADA.   We are simply rejecting the district court's

suggestion that liability depends on a temporal element that is

independent of the "readily achievable" standard.
          In considering what is "readily achievable" with

respect to removal of architectural barriers, we first observe

that the "readily achievable" standard necessarily includes a

temporal element.   The ADA defines "readily achievable" as

"easily accomplishable and able to be carried out without much



                                20
difficulty or expense."    Yet what is easy to accomplish in one

year may not be easily accomplishable in one day so a

determination of what is "readily achievable" depends upon the

passage of time.   Furthermore, the ADA does not indicate

expressly whether the temporal element in "readily achievable"

should be measured from the date of the ADA's enactment, July 26,

1990, or the general effective date for the public accommodations

title, January 26, 1992.    We observe, however, that cognizant of

the burdens of the ADA's requirements, Congress granted small

businesses more time than larger organizations before they could

be liable for violations of the ADA.0   Thus, it might be


0
 Section 310 of Title III of the Americans with Disabilities Act,
Pub. L. 101-336, 104 Stat. 353, provided that:

          (a) General rule - Except as provided in
          subsections (b) and (c), this title [enacting
          this subchapter] shall become effective 18
          months after the date of the enactment of
          this Act [July 26, 1990].

          (b) Civil actions. - Except for any civil
          action brought for a violation of section 303
          [section 12183 of this title, governing
          requirements for new construction], no civil
          action shall be brought for any act or
          omission described in section 302 [section
          12182 of this title] which occurs-

               (1) during the first 6 months after the
               effective date, against businesses that
               employ 25 or fewer employees and have
               gross receipts of $1,000,000 or less;
               and

               (2) during the first year after the
               effective date, against businesses that
               employ 10 or fewer employees and have
               gross receipts of $500,000.



                                 21
reasonable to conclude that the temporal element in a

determination of whether the removal of a barrier is "readily

achievable" should be measured from the ADA's enactment.

             Indeed, it could be held as a matter of statutory

construction that the ADA required that "readily achievable"

modifications to existing facilities be made by its effective

date so that the period between the enactment and the effective

date fixed the temporal element of the "readily achievable"

provision.    See Pinnock v. International House of Pancakes

Franchisee, 844 F. Supp. 574, 584 (S.D. Cal. 1993) ("ADA provided

an 18 month notice period in which businesses could comply with

the Act's requirements . . . . [and] [s]mall businesses were

given an even lengthier notice period.").       See also Karen E.

Field, Note, The Americans With Disabilities Act "Readily

Achievable" Requirement For Barrier Removal:      A Proposal For The

Allocation of Responsibility Between Landlord And Tenant, 15

Cardozo L. Rev. 569, 570 (1993).       Of course, the district court

in effect rejected this construction of the ADA by holding that,

at least in this case, the ADA did not require "readily

achievable" modifications to be made by March 31, 1993.             Yet,

if the determination of whether a modification is "readily

achievable" includes a temporal element measured from the date of

the ADA's enactment, and concluding on its effective date, then

the public accommodations section of the ADA was in a practical

sense effective upon its enactment, rather than its stated

effective date, because it required entities to comply with its




                                  22
requirements no later than at the expiration of the 18-month

period between its enactment and its effective date.

            At this time we will not decide the point from which

compliance with the "readily achievable" standard should be

measured.   As we have indicated we have concluded that,

regardless of that point, the district court did not apply the

proper criteria to determine whether Meritor was in compliance

with the ADA at the time of the initiation of its receivership.

Thus, we will remand the case to it for further proceedings.

            On the remand, the court first should determine whether

the ADA should be construed to require that modifications, if

"readily achievable," must be made by the effective date of the

public accommodations title of the ADA to the facility involved.0

If it so concludes then First Bank will be able to recover for

the reasonable costs of the modifications to existing facilities

in this case if they were "readily achievable" because the

effective date of the ADA was prior to December 11, 1992.    If the

court concludes as a matter of statutory construction that the

ADA did not require otherwise "readily achievable" modifications

to be made by its effective date, it should determine: (1)

whether the temporal elements of "readily achievable" should be


0
 In its brief, First Bank indicates that even "assuming that the
PSFS Building was a 'commercial facility' and not a place of
public accommodation, the latest effective date for the ADA would
be July 26, 1992, about nine months before the FDIC's
disaffirmance of the Lease." Br. at 22 n.3. The FDIC seems to
argue that if the building is a commercial facility, the ADA may
not apply to it as it is not newly constructed. Br. at 23 n.10.
These points may be raised on remand.



                                 23
measured from the ADA's enactment or its effective date, and; (2)

whether the modifications in this case were "readily achievable"

as a matter of fact by December 11, 1992.   To the extent, if any,

that the modifications should have been made by that date, First

Bank will be able to recover their reasonable cost.



                         III. CONCLUSION

          In view of our conclusions, we will reverse the April

20, 1995 judgment of the district court both as to the denial of

First Bank's claim for the cost of structural repairs to the

north facade of the building and as to the district court's

denial of First Bank's claim for ADA-mandated renovations.    We

will remand the matter to the district court for further

proceedings consistent with this opinion with respect to the

claim for structural repairs to the north facade and the ADA-

mandated renovations.




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