Fifth Third Bank v. United States

The savings-and-loan crisis of the 1980s resulted in many savings-and-loan associations, or thrifts, becoming financially distressed. During the crisis, the United States government (defendant) sought help from successful banks in salvaging distressed savings-and-loan associations. As part of the plan to encourage banks to rescue failing thrifts, the government made promises to banks that acquired failing thrifts. The government promised that the acquirors could use the supervisory-goodwill accounting method to keep the acquired thrifts in compliance with capital requirements. Citizens Federal Bank FSB (Citizens) was a bank interested in acquiring failing thrifts. Citizens acquired four failing thrifts in reliance on the government’s promise that Citizens could use the supervisory-goodwill accounting method to remain in regulatory compliance. In 1989, Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act (the financial-reform act) in response to the savings-and-loan crisis. The financial-reform act changed the way goodwill counted toward capital requirements, so Citizens no longer received special accounting treatment for its supervisory goodwill. Consequently, Citizens was no longer in compliance with capital requirements. Soon after, Citizens sold its branches in Cincinnati and converted the ownership of Citizens from mutual form to stock form in order to raise capital to meet capital requirements. In 1998, Citizens sold its remaining assets to Fifth Third Bank (Fifth Third) (plaintiff). Later, Fifth Third sued the United States government for breach of contract, alleging that the financial-reform act caused Fifth Third’s predecessor, Citizens, to suffer financial losses. The federal claims court entered judgment for the government, finding that the government and Citizens had not formed a contractual relationship. The court of appeals reversed the lower court’s ruling, finding the government liable for breach of contract. The case was remanded for a trial to determine damages. After trial, the federal claims court awarded Fifth Third expectancy damages. The government appealed.