DPJ Co. Ltd. Partnership v. F.D.I.C., 93-2145

Decision Date09 March 1994
Docket NumberNo. 93-2145,93-2145
PartiesDPJ COMPANY LIMITED PARTNERSHIP, Plaintiff, Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Bank of New England, N.A., Defendant, Appellee. . Heard
CourtU.S. Court of Appeals — First Circuit

Page 247

30 F.3d 247
of New England, N.A., Defendant, Appellee.
No. 93-2145.
United States Court of Appeals,
First Circuit.
Heard March 9, 1994.
Decided July 27, 1994.

Page 248

Robert D. Loventhal with whom Robert D. Loventhal Law Office, Sharon, MA, was on brief, for appellant.

Gregory E. Gore, Counsel, F.D.I.C., with whom Ann S. DuRoss, Asst. Gen. Counsel, and Robert D. McGillicuddy, Sr. Counsel, Washington, DC, were on brief, for appellee.

Before TORRUELLA, Circuit Judge, COFFIN, Senior Circuit Judge, and BOUDIN, Circuit Judge.

BOUDIN, Circuit Judge.

DPJ Company Limited Partnership ("DPJ") is a Massachusetts real estate developer. On February 12, 1988, it entered into a commitment letter agreement with the Bank of New England. Subject to various conditions being satisfied, the agreement contemplated the creation of a three-year $2.5 million line of credit on which DPJ could draw to finance primary steps in land development ventures (e.g., deposits, option payments, and architectural and engineering services).

The commitment letter provided that the creation of the line of credit--an event called the "closing" (as in "closing" a deal)--would occur after DPJ met various requirements, such as the delivery to the bank of certain documents, appraisals, and the like. DPJ also had to pay a non-refundable loan commitment fee of $31,250 immediately. In satisfying the conditions, DPJ spent a total of $180,072.37 in commitment fees, closing costs, legal fees, survey costs, points, environmental reports and other such items.

The line of credit was "closed" on July 23, 1988. Between that time and January 6, 1991, DPJ borrowed approximately $500,000 from the bank pursuant to the line of credit. The bank failed on January 6, 1991. On February 1, 1991, the bank's receiver, the Federal Deposit Insurance Corporation, disaffirmed the line of credit agreement pursuant to its statutory authority to repudiate contracts of failed banks. 12 U.S.C. Sec. 1821(e)(1). Although the FDIC may repudiate such contracts, the injured party may under the statute sue the FDIC as receiver for damages for breach of contract; but, with certain exceptions, the injured party may recover only "actual direct compensatory damages," 12 U.S.C. Sec. 1821(e)(3)(A)(i), and may not recover inter alia "damages for lost profits or opportunities." Id. Sec. 1821(e)(3)(B)(ii).

On May 22, 1991, DPJ filed an administrative claim with the FDIC to recover the costs and expenses it incurred pursuant to the commitment letter mentioned to obtain the line of credit. 12 U.S.C. Sec. 1821(d)(5). The FDIC disallowed the claim. DPJ then brought suit in the district court to recover its claimed damages. Id. Sec. 1821(d)(6)(A). Both sides moved for summary judgment.

The district court entered a decision on September 10, 1993, denying recovery to DPJ. The court concluded that DPJ was "really seek[ing] to recoup its closing costs as compensation for its lost borrowing opportunity resulting from the FDIC's disaffirmance." In substance, the court held that the "loss of borrowing capability" does not constitute "actual direct compensatory damages." In support of its decision it cited and relied upon Judge Zobel's decision in FDIC v. Cobblestone Corp., 1992 WL 333961 (D.Mass. Oct. 28, 1992). DPJ then appealed to this court.

The critical statutory phrases--"actual direct compensatory damages" and "lost profits and opportunities"--have been the recurrent subject of litigation. See, e.g., Howell v. FDIC, 986 F.2d 569 (1st Cir.1993); Lawson v. FDIC, 3 F.3d 11 (1st Cir.1993). We have read the limitation of recovery to compensatory damages, and the exclusion barring lost profits or opportunities, against the background of Congress' evident purpose: "to spread the pain," in a situation where the assets are unlikely to cover all claims, by placing policy-based limits on what can be recouped as damages for repudiated contracts. Howell, 986 F.2d at 572; Lawson, 3 F.3d at 16.

Contract damages are often calculated to place the injured party in the position that

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that party would have enjoyed if the other side had fulfilled its part of the bargain. Subject to various limitations, lost profits and opportunities are sometimes recovered under such a "benefit of the bargain" calculation. A. Farnsworth, Contracts Sec. 12.14 (2d ed. 1990); C. McCormick, Damages, Sec. 25 (1935). Yet where an injured claimant cannot recover the full benefit of the bargain--for example, because profits cannot be proved with sufficient certainty--there is an alternative, well-established contract damage theory:

"[O]ne who fails to meet the burden of proving prospective profits is not necessarily relegated to nominal damages. If one has relied on the contract, one can usually meet the burden of proving with sufficient certainty the extent of that reliance.... One can then recover damages based on reliance, with deductions for any benefit received through salvage or otherwise."

Farnsworth, supra, Sec. 12.16, at 928 (emphasis added).

As McCormick has explained,...

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