245 F.3d 1342 (Fed. Cir. 2001), 99-5108, California Federal Bank FSB v. United States

• Citation: 245 F.3d 1342
• Party Name: CALIFORNIA FEDERAL BANK, FSB, PLAINTIFF-CROSS APPELLANT, v. UNITED STATES, DEFENDANT-APPELLANT.
• Case Date: April 03, 2001
• Court: United States Courts of Appeals, U.S. Court of Appeals — Federal Circuit

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245 F.3d 1342 (Fed. Cir. 2001)

CALIFORNIA FEDERAL BANK, FSB, PLAINTIFF-CROSS APPELLANT,

v.

UNITED STATES, DEFENDANT-APPELLANT.

99-5108, -5119

United States Court of Appeals, Federal Circuit

April 3, 2001

Appealed from: United States Court of Federal Claims Senior Judge Loren A. Smith

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Theodore B. Olson, Gibson, Dunn & Crutcher, Llp, of Washington, Dc, argued for plaintiff-cross appellant. With him on the brief were Theodore J. Boutrous, Jr., Mark A. Perry, and David B. Salmons. Of counsel were John C. Millian, and Paul Blankenstein.

Jeanne E. Davidson, Deputy Director, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, Dc,

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argued for defendant-appellant. With her on the brief was David M. Cohen, Director, Commercial Litigation Branch. Of counsel on the brief were Lee M. Straus, Elizabeth W. Newsom, Kenneth M. Kulak, Tarek Sawi, and Teresa A. Kolb, Attorneys, Commercial Litigation Branch. Also of counsel on the brief were Scott R. McIntosh, Special Counsel; Thomas M. Bondy, and Susan Pacholski, Trial Attorneys, Appellate Staff. Of counsel was Jonathan Lawlor, Trial Attorney, Commercial Litigation Branch.

Jerry Stouck, Spriggs & Hollingsworth, of Washington, Dc, for amicus curiae Plaintiffs' Coordinating Committee. Of counsel on the brief were Charles J. Cooper, and Steven S. Rosenthal, Cooper, Carvin & Rosenthal, Pllc, of Washington, Dc; and Melvin A. Garbow, Arnold & Porter, of Washington, Dc.

John v. Thomas, Assistant General Counsel, Federal Deposit Insurance Corporation, of Washington, Dc, amicus curiae for Federal Deposit Insurance Corporation. With him on the brief were Dorothy A. Doherty, Counsel; John M. Dorsey III, Senior Counsel; and Richard Gill, Counsel.

Before Mayer, Chief Judge, Plager, Senior Circuit Judge,^[*] and Linn, Circuit Judge.

Mayer, Chief Judge.

The United States appeals the summary judgment of the United States Court of Federal Claims holding the government liable for breach of its contract with California Federal Bank (Cal Fed) pertaining to the regulatory treatment of a series of mergers of Cal Fed with other thrifts. See Cal. Fed. Bank v. United States, 39 Fed. Cl. 753 (1997) (Cal Fed I). Cal Fed cross-appeals the Court of Federal Claims' denial of lost profits and restitutionary relief and its calculation of Cal Fed's costs due to the breach. See Cal. Fed. Bank v. United States, 43 Fed. Cl. 445 (1999) (Cal Fed II). We affirm-in-part, vacate-in-part, and remand.

Background

The history and circumstances surrounding the thrift crisis of the early 1980s and the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub. L. 101-73, 103 Stat. 183, in 1989 have been extensively discussed in the original Winstar cases and will not be revisited here. See Winstar Corp. v. United States, 518 U.S. 839, 843-858 (1996) (Winstar III).

This action is one of more than 120 pending Winstar-related cases. To improve efficiency and preserve judicial resources, the Court of Federal Claims selected four exemplary cases, including this one, that it considered via hearings and summary judgment motions to decide the common issues pertaining to the liability of the government and to resolve dispositively any common issues for the remaining Winstar- related cases. The numerous plaintiffs were organized into a Plaintiffs Coordinating Committee (PCC) which identified 13 common issues it believed were raised in the government's summary judgment briefing. The court found 11 of these to be present in the four exemplary cases.

The transactions at issue here are threefold: 1) Cal Fed's 1982 acquisition of three Georgia thrifts and one Florida thrift (the Southeastern transaction); 2) Cal Fed's 1982 acquisition of Brentwood Savings and Loan Association (Brentwood), a California thrift; and 3) Cal Fed's 1983 acquisition of Family Savings and Loan Association (Family), a Nevada thrift.

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In the Southeastern transaction, Cal Fed assumed $305.67 million in net liabilities through four supervisory mergers in February 1982. It entered into an assistance agreement with the government under which it received a forbearance letter permitting the excess liabilities to be recorded as supervisory goodwill and amortized over 35 to 40 years, and a $9 million capital credit from the Federal Savings and Loan Insurance Corporation (FSLIC) as an additional inducement. Cal Fed later sold these southeastern thrifts. The government does not dispute the presence of a contract with Cal Fed regarding the Southeastern transaction because the assistance agreement contained a provision that explicitly incorporated the contemporaneous forbearance letters.

However, the government does contest the presence of a contract in the remaining two transactions, in which there was no capital credit inducement provided by the FSLIC and, accordingly, no assistance agreement explicitly incorporating the forbearance letters into a single document. By a September 2, 1982 letter, in its acquisition of Brentwood, Cal Fed specifically requested approval from the Federal Home Loan Bank Board (FHLBB) to amortize goodwill created by the acquisition over the estimated useful life of 35 years. The FHLBB approved the acquisition on September 30, 1982, and on October 1, 1982, issued a forbearance letter stipulating that the resulting association may amortize any goodwill created over 35 years. The FHLBB agreed not to enforce its net worth requirements for a period of five years to the extent that Cal Fed's failure to meet the requirements was attributable to the assets or liabilities acquired from Brentwood. Cal Fed assumed $314.63 million in net liabilities from Brentwood in October 1982.

The Family acquisition proceeded similarly, though the commitment regarding amortization of goodwill was contained in the Acquisition Agreement, Article 6.1(a), which stated that the resulting association of Cal Fed and Family may amortize any goodwill created under the purchase method of accounting using the straight line method over the useful life of 40 years. This amortization was structured in the agreement as a condition precedent to Cal Fed's obligations. The merger application sent to the FHLBB included the acquisition agreement and an additional request to approve the 40-year amortization. In two subsequent forbearance letters dated November 26, 1982, and January 5, 1983, the FHLBB confirmed Cal Fed's entitlement to record the merger under the purchase method of accounting and amortize resulting goodwill over 40 years. Cal Fed assumed $17.74 million in net liabilities in its acquisition of Family in 1983. As in the Brentwood transaction, the FHLBB agreed not to enforce its net worth requirements for a period of five years to the extent that Cal Fed's failure to meet the requirements was attributable to the assets or liabilities acquired from Family. In all three transactions, Cal Fed was permitted to count goodwill as an asset for regulatory capital purposes for as long as it remained on their accounting records.

Cal Fed brought suit against the government in the Court of Federal Claims for breaching its merger agreements by enacting FIRREA, which forced the accelerated phase-out of goodwill over a five-year period beginning in 1989. The court held on summary judgment that the government was liable for breach of its contract with Cal Fed and referred the case to trial on the issue of damages. Before trial, the court denied the claim for lost profits on summary judgment because of their highly speculative nature. After trial, the court awarded Cal Fed the sum of $22.967 million in damages as the cost of replacing the regulatory capital lost due to the accelerated

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phase out of goodwill under FIRREA. The court denied Cal Fed's request for restitution because it had not proven that its agreement to assume the net liabilities of the acquired thrifts was a cost in the circumstances of this case, and rejected wounded bank damages based on insufficient proof of causation. The United States appeals and Cal Fed cross-appeals.

Discussion

The Tucker Act grants the Court of Federal Claims jurisdiction over actions "founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort." 28 U.S.C. §§ 1491(a)(1) (1994). We have jurisdiction under 28 U.S.C. §§ 1295(a)(3) (1994).

Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. We review a grant of summary judgment by the Court of Federal Claims de novo to determine whether the summary judgment standard has been correctly applied. Winstar Corp. v. United States, 64 F.3d 1531, 1539 (Fed. Cir. 1995) (en banc) (Winstar II) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)); Southfork Sys., Inc. v. United States, 141 F.3d 1124, 1131 (Fed. Cir. 1998).

Whether a contract exists is a mixed question of law and fact. Cienega Gardens v. United States, 194 F.3d 1231, 1239 (Fed. Cir. 1998) (citation omitted). We review the trial court's legal conclusions independently and its findings of fact for clear error. Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374, 1379 (Fed. Cir. 2001). "[A]ny agreement can be a contract within the meaning of the Tucker Act, provided that it meets the requirements for a contract with the Government, specifically: mutual intent to contract including an offer and acceptance, consideration, and a Government representative who had actual authority to bind the Government." Massie v. United States, 166 F.3d 1184, 1188 (Fed. Cir. 1999) (quoting Trauma Serv. Group v. United States, 104 F.3d 1321, 1326 (Fed. Cir. 1997)). Contract interpretation is a...