Admiral Financial Corp. v. U.S., 02-5079.

• Decision Date: 02 June 2003
• Docket Number: No. 02-5079.,02-5079.
• Citation: 329 F.3d 1372
• Parties: ADMIRAL FINANCIAL CORPORATION, Plaintiff, and Federal Deposit Insurance Corporation, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

329 F.3d 1372

ADMIRAL FINANCIAL CORPORATION, Plaintiff, and Federal Deposit Insurance Corporation, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 02-5079.

United States Court of Appeals, Federal Circuit.

June 2, 2003.

John V. Thomas, Associate General Counsel, Federal Deposit Insurance Corporation, Legal Division, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Dorothy Ashley Doherty, John M. Dorsey, III; and John F. Elmore, FCIC, of Dallas Texas. Of counsel were Thomas D. Luck, FDIC, Washington, DC; and Ellis Merritt, Jr., FDIC, Dallas, TX.

William F. Ryan, Trial Attorney, Commercial Litigation Branch, Civil Division Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Stuart E. Schiffer, Deputy Assistant Attorney General; David M. Cohen, Director; Jeanne E. Davidson, Deputy Director; and Arlene Pianko Groner, F. Jefferson Hughes, and Daniel D. McClain, Trial Attorneys. Of counsel was Michael M. Duclos, Trial Attorney.

Before MAYER, Chief Judge, SCHALL, and DYK, Circuit Judges.

SCHALL, Circuit Judge.

The Federal Deposit Insurance Corporation ("FDIC") appeals the decision of the United States Court of Federal Claims that dismissed it from this Winstar-related action for lack of standing based on our decision in Landmark Land Co., Inc. v. United States, 256 F.3d 1365 (Fed.Cir. 2001) ("Landmark"). Admiral Fin. Corp. v. United States, 51 Fed. Cl. 366, 367 (2002). We affirm.

BACKGROUND

I.

This and other Winstar-related cases involve claims against the government stemming from the "thrift" crisis of the early 1980s. The background and history of that crisis and the government's subsequent enactment of the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183 (1989), have been thoroughly discussed in the decision of the Supreme Court in United States v. Winstar Corp., 518 U.S. 839, 843-58, 116 S.Ct. 2432, 135 L.Ed.2d 964 (1996), and in a number of decisions of this court, including, Landmark, Glass v. United States, 258 F.3d 1349 (Fed.Cir.2001), California Federal Bank, FSB v. United States, 245 F.3d 1342 (Fed.Cir.2001), and Glendale Federal Bank, FSB v. United States, 239 F.3d 1374 (Fed.Cir.2001). It is not necessary for us to expand upon these very thorough decisions; accordingly, we limit our discussion in this opinion to the specific circumstances relevant to this appeal.

In the 1980s, the Federal Savings and Loan Insurance Corporation ("FSLIC")¹ provided certain economic incentives to encourage private investors to purchase struggling savings and loans institutions, or "thrifts." This policy represented an attempt to avoid having the government liquidate struggling thrifts and being forced to use FSLIC funds to reimburse depositors. FSLIC's primary inducement to potential thrift purchasers was a partial forbearance from regulatory capital requirements. FSLIC accomplished this by allowing the thrift purchaser to treat the thrift's asset shortfall as a fictional asset. In other words, the difference between the thrift's assets and liabilities was "transformed," under FSLIC regulations, into an asset in an amount equal to the difference between the assets and liabilities. For example, if a thrift had $80 in assets and $100 in liabilities, FSLIC would allow the thrift's purchaser to allocate the $20 shortfall in real assets to a fictional asset called "supervisory goodwill." FSLIC then permitted this "supervisory goodwill" to be included among the assets that the purchaser could use to meet regulatory capital maintenance requirements under FSLIC regulations. "Supervisory goodwill" was to be amortized over a long period, thereby allowing the thrift's purchaser to contribute far less in actual capital to the thrift. These forbearance policies typically were memorialized in a forbearance letter pursuant to an agreement between FSLIC, on behalf of the government, and the thrift institution. See generally California Federal Bank, 245 F.3d at 1345. Because of these policies, failing thrifts became far more attractive as investments to potential purchasers, without any additional cost to FSLIC.

The regulatory policies undertaken by FSLIC were not successful in resolving the thrift crisis, however. See Winstar, 518 U.S. at 856, 116 S.Ct. 2432. As a result, on August 9, 1989, Congress enacted FIRREA. FIRREA made dramatic changes in the thrift industry. See id. at 856, 116 S.Ct. 2432. Among other things, these changes phased out the inclusion of "supervisory goodwill" in the calculation of regulatory capital and imposed upon thrifts additional capital requirements. This change in the method of calculating regulatory capital was especially problematic for purchasers of thrifts who had used the fictional asset of "supervisory goodwill" to meet their regulatory capital requirements under regulatory capital maintenance agreements signed with the government.

FIRREA also changed the structure of the government's regulation of the thrift industry. Under FIRREA, FSLIC was abolished and its functions transferred to other agencies, while a new thrift deposit insurance fund under the management of the FDIC was created. At the same time, FIRREA replaced the Bank Board with the Office of Thrift Supervision ("OTS"), an office within the Treasury Department responsible for the regulation of all federally insured savings associations. Finally, the Resolution Trust Corporation ("RTC") was created to manage and liquidate or otherwise dispose of failed thrifts. See Winstar, 518 U.S. at 856, 116 S.Ct. 2432. Until it went out of existence on December 31, 1995, see 12 U.S.C. § 1441a(m)(1), the RTC operated in two capacities: (1) RTC-Receiver and (2) RTC-Corporate. The task of the RTC in its receiver capacity was to wind up the business affairs of failed thrifts. Winstar, 518 U.S. at 856, 116 S.Ct. 2432. One of the things that RTC-Receiver did after a thrift failed was to convey to RTC-Corporate, by contract of sale, certain assets of the thrift. Landmark, 256 F.3d at 1371 n. 1. In that way, RTC Corporate assumed all of the failed thrift's legal claims, formerly held by RTC-Receiver. Id.

The thrift deposit insurance fund managed by the FDIC was given the name "FSLIC Resolution Fund" ("FRF"). Upon passage of FIRREA, the assets of FSLIC were placed in FRF. Landmark, 256 F.3d at 1381. In 1995, FRF received the assets and liabilities of the RTC. Id. at 1371 n. 1, 1381. The liabilities of the RTC, as successor to FSLIC, included the obligation to pay breach of contract claims against FSLIC. Id. at 1381. The assets of the RTC included the right to repayment of payments made to insured depositors when the RTC paid insured depositors of a failed thrift. By making such payments, the RTC became "subrogated to all rights of the depositor against [the failed thrift] to the extent of such payment or assumption." 12 U.S.C. § 1821(g). The assets of FSLIC were placed in an account maintained as FRF-FSLIC. Id. § 1821a. The assets of the RTC were placed in an account maintained as FRF-RTC. Id. § 1441a(m).² Therefore, a claim asserted by a thrift that had failed as a result of FIRREA's capital requirements resulted in the FDIC, as manager of FRF, asserting the claim as an asset of FRF-RTC against FSLIC, the governmental party to the original contract between the United States and the failed thrift. Landmark, 256 F.3d at 1371 n. 1. Any award constituted an FSLIC liability and would be paid out of FRF-FSLIC. Consequently, the net effect of any damage award to the FDIC on behalf of the failed thrift would result in a transfer of funds from FRF-FSLIC to FRF-RTC.

In due course, OTS issued regulations implementing FIRREA's capital requirements, along with a bulletin that stated that "FIRREA `eliminates [capital and accounting] forbearances' previously granted to certain thrifts." Winstar, 518 U.S. at 857, 116 S.Ct. 2432 (quoting Office of Thrift Supervision, Capital Adequacy: Guidance on the Status of Capital Accounting Forbearances and Capital Instruments Held by a Deposit Insurance Fund, Thrift Bulletin No. 38-2, Jan. 9, 1990). As a result of the new capital compliance standards, many thrifts immediately fell out of capital compliance, making them subject to immediate seizure by the thrift regulators. Id. at 857-88, 116 S.Ct. 2432. Ultimately, the Supreme Court held that the government breached its contracts with several financial institutions, and their investors, by enacting FIRREA. Id. at 843, 116 S.Ct. 2432.

After the enactment of FIRREA, the RTC commonly advanced failing thrifts sufficient money to pay off their depositors upon liquidation. This resulted in the RTC, and, after termination of the RTC in 1995, FRF-RTC becoming a "priority" creditor of failed thrifts. That is because under the statutory scheme of priority for thrift creditors, the FDIC is obligated to completely satisfy the claim of the government, specifically that of FRF-RTC, against the failed thrift for reimbursement of deposit liability before distributing any proceeds to the failed thrift's other creditors. 12 U.S.C. § 1821(d)(11) (1988).³

II.

The facts of this case are as follows. In 1987, Admiral Financial Corporation ("Admiral") approached Haven Federal Savings and Loan Association ("Old Haven") with a proposal to form a new thrift institution. Under the proposal, Admiral would acquire Old Haven through a transaction in which all of Old Haven's issued and outstanding stock would be exchanged for stock of Admiral. On August 6, 1987, Admiral and Old Haven executed an Agreement and Plan of Reorganization. On April 26, 1988, the Bank Board conditionally approved Admiral's application to acquire Old Haven. In that connection, the Bank Board sent a letter to Admiral's counsel authorizing the new thrift ("Haven") to amortize any intangible asset (such as goodwill) "over a period not to exceed 25 years by the straight-line [accounting] ...