Appeal from the United States Court of Federal Claims in case no. 94-CV-522, Judge Mary Ellen Coster Williams.
The opinion of the court was delivered by: Gajarsa, Circuit Judge.
Before GAJARSA, DYK, and PROST, Circuit Judges.
This is a Winstar-related case. The issue before this court is whether or not a holding company has standing to pursue damages for breach of contract against the United States ("Government"). The Government appeals the final judgment of the United States Court of Federal Claims ("Claims Court"), which held that First Annapolis Bancorp, Inc. ("Bancorp") had standing to sue the Government for breach of contract after the enactment of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). First Annapolis Bancorp, Inc. v. United States, 75 Fed. Cl. 263, 273--74 (2007) ("First Annapolis I"). Because the Claims Court erred in finding that Bancorp had standing, we reverse.
This case is one of the many Winstar-related cases, which are now reaching the final stage of litigation. See United States v. Winstar Corp., 518 U.S. 839 (1996) (plurality opinon) ("Winstar"). Winstar-related cases involve claims against the Government following Congress's enactment of FIRREA, which was passed as part of the Government's response to the savings and loan crisis of the 1980s. Castle v. United States, 301 F.3d 1328, 1332 (Fed. Cir. 2002). The background of the crisis has been well explained in other cases, see, e.g., Winstar, 518 U.S. at 843--58, so we describe it only briefly here to provide context for the present case.
In the 1980s, many thrifts (savings and loan associations) began to fail. Winstar, 518 U.S. at 845. The Federal Savings and Loan Insurance Corporation ("FSLIC") lacked the funds to liquidate all of the failing thrifts. Id. at 847. Thus, the Federal Home Loan Bank Board ("FHLBB"), which supervised the FSLIC, encouraged healthy thrifts to merge with ailing thrifts. Id. at 844, 847. The FHLBB had to provide specific financial incentives to encourage these "supervisory mergers" because the ailing thrifts' purchase prices would be greater than their fair value. Id. at 848--49. The primary incentive provided to the parties was a promise that these acquisitions would be subject to a particular type of accounting treatment, "purchase method accounting," that would assist the acquiring thrifts in meeting the reserve capital requirements imposed by federal regulations. Id. at 848. In an FSLIC-sponsored supervisory merger, an acquiring thrift could designate the excess of the purchase price over the fair value of all of the ailing thrift's identifiable assets acquired as an intangible asset, called "supervisory goodwill." Id. at 848--49. The healthy thrift could count the supervisory goodwill as regulatory capital in meeting its federal reserve capital requirements and could amortize the goodwill asset over a long period of time. Id. at 851.
When Congress enacted FIRREA, it completely restructured regulation of the federal thrift industry. Id. at 856. The FSLIC was abolished, and the FHLBB was replaced with the Office of Thrift Supervision ("OTS"). Id. Pursuant to FIRREA, thrifts were required to maintain a set amount of minimum capital, and after a transition period, supervisory goodwill could no longer be included as part of the capital account. Id. at 857. As a result, many of the merged thrifts that had relied on the supervisory goodwill to meet their regulatory capital requirements were no longer able to meet those requirements, and some, such as Winstar, were seized by the Government and liquidated. Id. at 858. Winstar and others sued the Government for breach of contract. Id. This court found that the Government's passage of FIRREA breached the contract with the thrifts. Winstar Corp. v. United States, 64 F.3d 1531, 1551 (Fed. Cir. 1995) (en banc). In a plurality opinion, the Supreme Court held that the Government was liable for breach of contract. Winstar, 518 U.S. at 860.
To understand the standing issue in this appeal, we must provide an historical scenario of the inter-relatedness of the various institutions. First Federal Savings & Loan Association of Annapolis ("First Federal"), a federal mutual savings and loan association, voluntarily converted into a stock savings bank on July 21, 1988 when the FLHBB approved the conversion. First Annapolis I, 75 Fed. Cl. at 266, 269. After converting to a stock savings bank, First Federal merged with First Annapolis Savings Bank, F.S.B. ("First Annapolis"), a newly formed federal stock savings bank. Id. at 266.Bancorp is a savings and loan holding company that was incorporated on November 20, 1987 under the laws of the State of Delaware. Id. at 267, 267 n.6. Bancorp was formed "for the purpose of acquiring the stock of the merged institutions, thereby infusing capital into the converted and merged thrift." Id. at 266. The circumstances surrounding Bancorp's creation are central to this appeal.
First Federal posted "net losses for each fiscal year beginning with the fiscal year [that] ended on September 30, 1981" until March 31, 1988, which impacted First Federal's attempt to meet its regulatory capital requirements. J.A. 400790. On March 18, 1987, First Federal's board of directors ("Board") decided to obtain outside capital through a supervisory conversion to increase First Federal's net worth by over $5 million. First Annapolis I, 75 Fed. Cl. at 266. To effectuate the conversion, First Federal submitted an Application for Voluntary Supervisory Stock Conversion*fn1 ("Conversion Application") to the FHLBB on November 5, 1987. Id. In the Conversion Application, the Board represented that it complied with the applicable rules and regulations for converting First Federal into a stock association.
First Federal also submitted a Holding Company Application ("HCA") and a Regulatory Business Plan ("Business Plan") with its Conversion Application. Bancorp, which did not exist yet, was the applicant listed on the HCA, which stated that Bancorp would "be incorporated under the laws of the State of Delaware for the purpose of acquiring [First Federal] pursuant to its voluntary supervisory conversion into a stock saving bank." J.A. 400202; see First Annapolis I, 75 Fed. Cl. at 267 n.6. Bancorp was incorporated on November 20, 1987 to acquire First Annapolis's stock and infuse capital into First Annapolis. First Annapolis I, 75 Fed. Cl. at 266, 267 n.6. On May 13, 1988, Bancorp amended the HCA and First Federal amended the Conversion Application to account for Bancorp's incorporation and to describe how Bancorp would acquire First Annapolis. Id. at 267 n.6.The amendment to the HCA explained that Bancorp would sell 12 million to 15 million shares of its common stock, of which the proceeds would be used to infuse at least $11 million of capital into First Annapolis. Id. at 267.Additionally, First Federal submitted a Plan of Conversion (attached as Exhibit A to the HCA) that contained a Miscellaneous clause stating that First Federal would "not loan funds or otherwise extend credit to any person to purchase shares of [Bancorp] Stock offered in the Conversion." J.A. 400231.
On July 8, 1987, First Federal entered into a Supervisory Agreement with the FHLBB. Under the Supervisory Agreement, First Federal was required "to submit a business plan detailing how [it] w[ould] increase its level of capital . . . to meet and maintain minimum regulatory capital levels." J.A. 400791. The Business Plan "proposed that First Federal be converted from a federal mutual savings and loan association to a stock savings bank" and, once converted, would "merge with a newly formed federal stock savings bank, First Annapolis." First Annapolis I, 75 Fed. Cl. at 266. It also set forth capital benchmarks that "effectively functioned as a five-year forbearance with regard to the regulatory capital requirements, whereby First Annapolis would be in compliance with the regulatory capital requirements as long as it maintained capital sufficient to meet the relaxed capital benchmarks." Id. at 268.
On July 21, 1988, the FHLBB "approved the voluntary conversion of First Federal from a mutual to a federal stock savings bank, the formation of First Annapolis . . . (the interim entity) and its merger with First Federal, and the acquisition of First Annapolis stock by Bancorp" by issuing two resolutions ("Resolutions"), Resolution Nos. 88-602 and 88-603. Id. at 269. In Resolution No. 88-603, the FHLBB conditioned the conversion's approval on: (1) First Annapolis's "achieving a ratio of net worth to total liabilities equal to at least one percent of liability computed on the basis of [generally accepted accounting principles]," (2) Bancorp's infusion of "capital in the amount of $11 million through the purchase of First Annapolis'[s] common stock," (3) Bancorp's stipulation that "First Annapolis would operate in accordance with the Business Plan for a period of five years," (4) Bancorp and First Annapolis's execution of "a Regulatory Capital [Maintenance] and Dividend Agreement [("RCMDA")] with the FSLIC," (5) First Annapolis's submission of "an opinion from an independent certified public accountant (CPA) describing any intangible assets, including goodwill, arising from the transaction and the method of amortization of the intangible assets," and (6) the Board's issuance of "a ...