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Admiral Financial Corp. v. United States

378 F.3d 1336 (2004)

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Admiral Financial Corp. v. United States

United States Court of Appeals for the Federal Circuit

378 F.3d 1336 (2004)

Facts

William Popham sought to acquire a failing savings-and-loan institution. Popham contacted the Federal Home Loan Bank Board (the board) to discuss options. The board suggested that Popham acquire Haven Federal Savings and Loan (Haven). Popham formed Admiral Financial Corporation (Admiral) (plaintiff) to acquire Haven. Soon after, Admiral and Haven agreed to terms of an acquisition. Admiral agreed to contribute millions in assets to Haven to ensure that Admiral complied with the bank board’s minimum capital requirements. A condition of the agreement was that the board would give Admiral some forbearances with respect to the regulatory oversight of Haven. Eventually, the board passed a resolution approving the merger between Admiral and Haven. Pursuant to the resolution, the board was to treat Haven’s negative net worth as goodwill, which constituted an asset. The board also agreed to permit Admiral to amortize the goodwill over a 25-year period. Subsequently, the board and Admiral entered a capital-maintenance agreement. Admiral agreed to maintain a certain level of capital in Haven and make up any deficit within 90 days. The capital-maintenance agreement included clause VI(D), which expressly provided that any references to regulations included any successor regulations and that any amendments to regulations may increase or decrease Admiral’s obligations. Within a year, Haven was out of compliance with capital requirements. Admiral failed to make up the capital shortfall within 90 days, so the board gave Admiral a notice of default. Admiral had 90 days to cure the default. About a month into the 90-day cure period, Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act (the financial-reform act), which restricted the classification of goodwill as an asset. About six months later, Haven went into receivership. At that time, Haven was over $22 million out of capital compliance under the financial-reform act, and it was about $12 million out of compliance under the accounting methods in place prior to the financial-reform act. Admiral sued the United States (defendant), alleging that the enactment of the financial-reform act breached the board’s promise that goodwill counted toward capital requirements. The district court entered judgment for the government, finding that Admiral had anticipatorily breached the contract, and that, even if Admiral had not breached the contract, Admiral had not been harmed by the government’s breach. Admiral appealed.

Rule of Law

Issue

Holding and Reasoning (Bryson, J.)

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