United States Court of Appeals for the Federal Circuit 

04-5065 

GRANITE MANAGEMENT CORPORATION, 

 Plaintiff-Appellant, 

v. 

UNITED STATES, 

Defendant-Appellee. 

. 

Charles J. Cooper, Cooper & Kirk, PLLC, of Washington, DC, argued for plaintiffappellant. With him on the brief were Michael W. Kirk, David H. Thompson and 

Elisebeth Collins Cook. Of counsel on the brief were Michael A. Kahn, Richard Keenan

and Michael F. Kelleher, Folger Levin & Kahn, LLP, of San Francisco, California. 

Tarek Sawi, Trial Attorney, Commercial Litigation Branch, Civil Division, United 

States 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, and Jeanne E. Davidson, Deputy Director. Of counsel on the brief 

were Delfa Castillo, David C. Hoffman and Arlene Pianko Groner, Trial Attorneys. 

Appealed from: United States Court of Federal Claims 

Senior Judge Bohdan A. Futey 
United States Court of Appeals for the Federal Circuit 

04-5065 

GRANITE MANAGEMENT CORPORATION, 

Plaintiff-Appellant, 

v. 

UNITED STATES, 

 Defendant-Appellee. 

______________________________ 

 DECIDED: July 27, 2005 

______________________________ 

Before MAYER, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and CLEVENGER, 

Circuit Judge. 

Opinion for the court filed by Senior Circuit Judge FRIEDMAN. Opinion dissenting in 

part filed by Circuit Judge CLEVENGER. 

FRIEDMAN, Senior Circuit Judge. 

 In this Winstar-related appeal, the acquirer of financially-distressed savings and 

loans associations (also known as “thrifts”) seeks damages from the United States for 

the latter’s breach of agreements permitting the acquired thrifts to treat as capital, for 

regulatory purposes, an item known as “supervisory goodwill,” and to amortize that 

“asset” over a substantial period. The Court of Federal Claims found that the parties 

had entered into agreements regarding such treatment of “supervisory goodwill” and 

that the government had breached those agreements. Granite Mgmt. Corp. v. United 
States, 53 Fed. Cl. 228, 241 (2002) (“Liab. Op.”). The court then granted summary 

judgment for the government on damages, rejecting all the theories upon which the 

acquirer based its damage claims. Granite Mgmt. Corp. v. United States, 58 Fed. Cl. 

766 (2003) (“Damages Op.”). 

With one exception, we affirm the trial court’s rejection of those damage claims. 

We hold that the Court of Federal Claims improperly granted summary judgment for the 

government on the claim that the acquirer could have sold the acquired thrifts for a 

higher price if the thrifts had been allowed to continue treating their “supervisory 

goodwill” as regulatory capital. We conclude that further development of the facts on 

that issue is necessary, and therefore we remand to the Court of Federal Claims for that 

purpose. 

 I 

A. The history and circumstances surrounding the savings and loan industry 

crisis during the late 1970s and early 1980s have been extensively discussed in 

opinions of the Supreme Court and this court. See United States v. Winstar Corp., 518 

U.S. 839 (1996); Winstar Corp. v. United States, 64 F.3d 1531 (Fed. Cir. 1995) (en 

banc); see also, e.g., Fifth Third Bank of W. Ohio v. United States, 402 F.3d 1221 (Fed. 

Cir. 2005); Home Sav. of Am., FSB v. United States, 399 F.3d 1341 (Fed. Cir. 2005); 

Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374 (Fed. Cir. 2001). 

During those years, more than 400 thrifts failed and many others reached the 

brink of insolvency. To deal with the crisis, federal regulators encouraged healthy 

financial institutions and outside investors to purchase troubled thrifts. The regulators 

offered various financial incentives to thrift acquirers, including cash contributions from 

04-5065 2
the government and favorable accounting treatment of an intangible asset known as 

“supervisory goodwill,” which reflected the amount by which the assumed liabilities of 

the acquired thrifts exceeded the value of the acquired assets. Typically, the acquirers 

were permitted to include “supervisory goodwill” in the thrift’s reserve capital 

requirements and to amortize that “asset” over many years. 

In response to continued financial problems in the savings and loan industry, 

Congress in 1989 enacted the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989, Pub. L. No. 101-73, 101 Stat. 183 (“FIRREA”). That Act, 

among other things, barred the thrifts’ use of “supervisory goodwill” as regulatory 

capital. As a result, many thrifts no longer complied with federal regulatory capital 

requirements; a number of them became insolvent and were seized by regulatory 

authorities. 

Thrift acquirers filed lawsuits alleging that by enacting and enforcing FIRREA, 

and thus eliminating use of “supervisory goodwill” as a regulatory asset, the government 

had breached its contracts with the acquirers. In United States v. Winstar Corp., 518 

U.S. 839 (1996), the Supreme Court affirmed this court’s en banc determination that 

FIRREA had that effect, and that the government was liable in damages for breach of 

contract. Since Winstar, this court has decided numerous Winstar–related cases. 

B. The following underlying facts in this case are undisputed. In 1986, the 

appellant Granite Management Corporation (“Granite”) (then known as “First Nationwide 

Financial Corporation”) acquired four financially-troubled thrifts in three separate 

transactions, one transaction each in Ohio (State Savings & Loan Company and 

Citizens Home Savings Company), Missouri (St. Louis Federal Savings & Loan 

04-5065 3
Association), and Kentucky (Lincoln Federal Savings & Loan). The institutions were 

combined into a single thrift called “First Nationwide Bank” that was run by Granite and 

its parent company, Ford Motor Company (Ford). As a result of the acquisitions, 

Granite also obtained “branching rights” that permitted that bank to expand from its 

California base into ten new states where the acquired thrifts were operating, some 

years before deregulation allowed competitors to enter interstate banking. 

The government made a direct cash contribution of $168 million to First 

Nationwide’s capital. Under so-called Assistance Agreements by which the government 

authorized the three transactions, Granite was permitted to treat nearly $150 million as 

“supervisory goodwlll” and to amortize that “asset” over 25 years. The parties dispute 

the amount of the unamortized balance remaining in 1989, when FIRREA was enacted. 

According to Granite, the unamortized balance was approximately $275 million. 

Damages Op. at 769. 

By 1990, First Nationwide had become severely undercapitalized. In order to 

bring the bank into compliance with regulatory requirements, its parent, Ford, provided it 

with $250 million in additional capital. In 1994, Ford and Granite sold First Nationwide 

Bank. 

In 1995, Granite filed suit in the Court of Federal Claims seeking damages for the 

government’s alleged breach of contract and related claims. In 2002, the trial court 

granted Granite’s motion for partial summary judgment on liability. The court ruled that 

the government had entered into contracts with Granite covering the three transactions 

by which Granite acquired the failing thrifts; that the contracts authorized Granite to treat 

“supervisory goodwill” as part of its regulatory capital and to amortize it over twenty-five 

04-5065 4
years; and that the government, by enacting FIRREA, breached these contracts. Liab. 

Op. at 234, 241. 

Granite then presented several alternative theories for determining damages, 

under which it would recover between $104.3 million and $421.9 million. Damages Op.

at 770. First, Granite sought its costs of administering and operating the acquired thrifts 

– its “cost of performance” – under both reliance and restitution theories. Second, 

Granite contended that by acquiring the thrifts, it conferred a benefit on the government, 

and claimed the value of that benefit. Third, Granite sought the “lost value” of the 

“supervisory goodwill” it lost under FIRREA. Granite proposed three bases for those 

“lost value” damages: (1) Granite’s estimated cost of replacing the lost regulatory 

capital; (2) the cost of Ford’s $250 million capital infusion, which Granite contends was 

required to replace the lost goodwill; and (3) the difference between the price at which 

First Nationwide Bank was sold and the higher price Granite contends it could have 

obtained if First Nationwide had included the “supervisory goodwill.” Damages Op. at 

769-70, 777. 

The Court of Federal Claims granted the government’s motion for summary 

judgment on damages. It rejected all of Granite’s damages theories, several of which, it 

held, this court had previously denied in other cases. 

II 

In its brief as appellee, the government challenges the Court of Federal Claims’ 

ruling that the government entered into a contract with Granite regarding the Ohio 

transaction under which Granite acquired two thrifts, State Savings and Citizens Home. 

Citing two of our prior decisions, the government argues that “as in” those cases, it 

04-5065 5
“here made no contractual promise concerning a 25-year amortization period in 

connection [with] the State Savings/Citizens transaction and therefore committed no 

breach with respect to that transaction.” Because the government did not cross-appeal 

on that issue, it cannot now raise it. 

An appellee may rely upon any ground supported by the record for affirmance of 

the judgment, whether or not the lower court relied on that ground. If, however, the 

appellee seeks to change or modify the judgment rather than just affirm it, the appellee 

must file a cross-appeal. Radio Steel & Mfg. Co. v. MTD Prods., Inc., 731 F.2d 840, 

844 (Fed. Cir. 1984) (stating that “a party will not be permitted to argue before us an 

issue on which it has lost and on which it has not appealed, where the result of 

acceptance of its argument would be a reversal or modification of the judgment rather 

than an affirmance”); see also El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 

479-82 (1999). 

In the present case, in which the government did not file a cross-appeal, the 

government’s argument is not made as an alternative ground for affirmance of the 

judgment. To the contrary, the government is seeking to modify or change the 

judgment of the trial court. This is shown by the conclusion of the government’s brief, 

which states: 

For the foregoing reasons, the judgment of the trial court 

should be reversed with respect to the Statewide 

Savings/Citizens Home agreement and affirmed upon all 

other grounds concerning damages. 

Ordinarily, a ruling that the appellee cannot seek a change in the judgment is 

made in circumstances where it is clear that the appellee could have cross-appealed. 

The present case presents a more complex situation in that the government effectively 

04-5065 6
lost on the issue of liability for breach of contract, but ultimately prevailed on the issue of 

contract damages, making it less clear that the government could have cross-appealed 

from the final judgment. However, the facts do not warrant a different conclusion on this 

issue. 

The trial court’s earlier liability order, which the government as appellee seeks to 

change, was not a final judgment and the government could not have directly appealed 

it. If the government had attempted to appeal from the final judgment insofar as that 

judgment incorporated the earlier liability order involving the Ohio transaction, the 

government would have been faced with the problem that ordinarily a litigant cannot 

appeal from a judgment in his favor. Under the peculiar circumstances of this case, 

where the government challenges only part of the earlier order granting partial summary 

judgment, it might have been able to appeal. See Glaros v. H.H. Robertson Co., 797 

F.2d 1564, 1573 (Fed. Cir. 1986) (stating that grant of partial summary judgment “from 

which no immediate appeal lies” is “merged” into the final judgment and reviewable on 

appeal from that judgment), cited with approval in Fifth Third Bank, 402 F.3d at 1236. 

The government also could have made its argument as an alternative ground for 

affirmance of the final judgment without seeking a modification of it. 

 In EF Operating Corp. v. Am. Bldgs., 993 F.2d 1046 (3d Cir. 1993), the Third 

Circuit dealt with a similar situation. In that damages suit, the defendant, Flaherty, 

moved for summary judgment, and also moved to dismiss the plaintiff’s complaint for 

lack of personal jurisdiction. The district court granted Flaherty’s summary judgment 

motion, and, without explicitly ruling on Flaherty’s personal jurisdiction motion, it ruled in 

favor of another defendant that had raised the same jurisdictional issue. The “logical 

04-5065 7
conclusion” was that “the district court decided against Flaherty on the jurisdictional 

issue[.]” Id. at 1048. 

The plaintiff appealed from the final order granting summary judgment. The 

defendant, Flaherty, attempted to contest the personal jurisdiction ruling without filing a 

cross-appeal. Id. The Third Circuit held that because the defendant, “[b]y seeking 

dismissal of the complaint for lack of personal jurisdiction,” was “not seeking to support 

the summary judgment on different grounds” but rather was “seek[ing] to vacate the 

summary judgment,” the court would not consider the personal jurisdiction issue in the 

absence of a cross-appeal. Id. at 1049. 

In this case, the government states that although it made the Ohio transaction 

argument to the Court of Federal Claims in its “motion for summary judgment upon 

liability, the trial court never specifically addressed it,” just as the district court in EF 

Operating did not explicitly rule on the defendant’s motion for personal jurisdiction. Like 

the defendant in EF Operating, the first time the government raised this issue during this 

appeal was in its brief responding to Granite’s appeal. The government made no 

attempt to appeal the trial court’s ruling on liability at any time. Because the 

government does not simply seek to support the grant of summary judgment on 

damages, but instead explicitly asks that “the judgment of the trial court . . . be reversed 

with respect to the Statewide Savings/Citizens Home agreement,” we rule, as the Third 

Circuit did in EF Operating, that for lack of a cross-appeal, the government cannot now 

raise this issue. The circumstances here do not warrant an exception to the general 

rule that without itself appealing, an appellee cannot seek a change in the judgment 

under review. 

04-5065 8
III 

In its appeal Granite argues the same theories of damages that it presented to 

the Court of Federal Claims. Except for the claim discussed in Part IV, below, we find 

its arguments no more persuasive than that court did. Indeed, our precedent fully 

supports the trial court’s rejection of these claims. 

A. Granite seeks to recover its “cost of performance” for operating the acquired 

thrifts, under either a reliance or a restitution theory. “Reliance” damages cover the 

amount a non-breaching party expends in performing the contract in reliance on the 

other party’s anticipated performance. “Restitution” damages are designed to restore 

the non-breaching party to the situation that would have existed had there been no 

contract and no breach. These two theories may be analyzed together because, as this 

court stated in a previous Winstar-related case, a restitution claim “based on recovery of 

the expenditures of the non-breaching party in performance of the contract” “can be 

viewed as a form of reliance damages.” LaSalle Talman Bank, F.S.B. v. United States, 

317 F.3d 1363, 1376 (Fed. Cir. 2003). Granite conceded at trial that “there was no 

substantive difference between the two theories” and sought to recover an “identical 

amount” of damages under each. Damages Op. at 773. 

Granite’s claim is that it was damaged by its acquisition and long-term operation 

of thrifts whose liabilities exceeded their assets, and that this deficit constituted its cost 

of performing the contract. In several Winstar-related cases, however, this court has 

rejected damage claims based upon the excess of liabilities assumed over assets 

acquired. Cal. Fed. Bank, FSB v. United States, 245 F.3d 1342, 1351-52 (Fed. Cir. 

2001); Glendale, 239 F.3d at 1381-82. As the Court of Federal Claims here stated, 

04-5065 9
“assumed liabilities . . . are not a usable measure of either cost to the thrift or benefit to 

the government” when calculating damages. Damages Op. at 773-77. 

Furthermore, as the government points out in its brief, Granite’s alleged liability 

stemmed from the poor quality of the thrifts’ loans it acquired, rather than from the 

government’s breach of the contract permitting the use of “supervisory goodwill.” Roger 

Orders, Granite’s damages expert who performed the accounting upon which Granite 

based this theory of damages, stated that Granite’s costs were “incurred as a result of 

the acquisitions, not as a result of the breach.” Since Granite’s “cost of performance” 

thus did not result from the government’s breach, it is not an appropriate measure of 

damages. See, e.g., Glendale, 239 F.3d at 1382 (noting non-breaching party’s 

entitlement to “damages for any losses actually sustained as a result of the breach”). 

B. Granite contends that it may recover the value of the benefit it conferred on 

the government by acquiring the four troubled thrifts. Granite relies on the 

government’s own analyses of the savings it realized by contracting with Granite rather 

than liquidating the four thrifts. 

The Court of Federal Claims correctly rejected this argument, based on our 

previous holdings that similar “benefit conferred” theories in Winstar-related cases 

“measure [damages] in terms of a liability that never came to pass” and thus are too 

“speculative and indeterminate” to succeed. Glendale, 239 F.3d at 1382; Cal. Fed., 245 

F.3d at 1351. See LaSalle Talman, 317 F.3d at 1376-77 (affirming Court of Federal 

Claims’ determination that liquidation costs which the government allegedly avoided by 

acquirer’s assumption of thrift’s obligations were not “a meaningful measure” of 

damages); Admiral Fin. Corp. v. United States, 57 Fed. Cl. 418, 424 (2003) (relying 

04-5065 10
upon Glendale in rejecting “liquidation cost savings” theory), aff’d, 378 F.3d 1336, 1343 

(Fed. Cir. 2004). 

The trial court determined that the government had other ways to deal with the 

problem, such as arranging for the sale of the thrifts to another buyer. It suggested that 

the government might well have pursued these other options had Granite not acquired 

the thrifts, because “neither [the government] nor [Granite] ever liquidated the thrifts, 

and liquidation was an extremely rare and disfavored occurrence.” Damages Op. at 

773; cf. Glendale, 239 F.3d at 1382 (noting the existence of alternatives to liquidating a 

failing thrift). 

Granite contends that summary judgment on this issue was erroneous because 

material issues of fact exist regarding whether these alternatives to liquidation were truly 

viable. Granite’s argument that the thrifts were “dogs, plagued by credit risk problems,” 

which surely would have been liquidated if not acquired by Granite, is unpersuasive. 

The record shows that other possible acquirers beside Granite indicated interest in 

obtaining the thrifts; that the branching rights associated with the thrifts had significant 

value; and that Granite itself sold, rather than liquidated, the thrifts (combined at that 

point into First Nationwide Bank) after their alleged devaluation by FIRREA. Indeed, 

Granite itself recognizes that there were other possible acquirers of at least three of the 

thrifts, when it suggests, as an alternative measure of damages, that it should recover at 

least the difference between what it paid for the thrifts and the next lowest offer from 

alternative prospective acquirers. As the trial court stated, it would be “inherently 

speculative to try to figure out now what the Government might have done, under 

04-5065 11
different circumstances, nearly a decade and a half ago.” Damages Op. at 773 (quoting 

Franklin Fed. Sav. Bank v. United States, 55 Fed. Cl. 108, 120 (2003)). 

C. Granite seeks to recover its cost of replacing the goodwill capital it lost as a 

result of FIRREA. It relies on two alternative cost bases: (1) replacement of the amount 

of the non-amortized “supervisory goodwill” on its books that FIRREA eliminated, or (2) 

the $250 million cash capital infusion that Ford provided. 

In support of both theories, it relies upon hypothetical studies by its financial 

expert, Professor Christopher James, who calculated the amount it would have cost 

Granite to replace the goodwill capital by assuming that Granite issued preferred stock 

to raise the money. Professor James “analyz[ed] [First Nationwide’s] prior capital 

raising activity and other comparable market transactions” and calculated “the cost of 

the equity capital . . . by reference to the rates on issuances of preferred stock,” and 

then deducted “the cost of [First Nationwide’s] costing liabilities during this period in 

order to reflect the benefit of cash capital not provided by intangible regulatory capital.” 

This court recently rejected a similar theory of capital replacement cost based on 

hypothetical preferred stock issuance in Fifth Third Bank of Western Ohio v. United 

States, 402 F.3d 1221 (Fed. Cir. 2005). Indeed, the plaintiff in Fifth Third Bank relied on 

analysis and calculations by the same financial expert, Professor James. See Fifth 

Third Bank of W. Ohio, 55 Fed. Cl. 223, 228-29 (2003). In neither case did the thrift 

actually issue any preferred stock. In Fifth Third Bank, this court ruled that the 

“[p]laintiff’s cover damages theory [was] based entirely on hypothetical costs that were 

never actually incurred” and was therefore properly rejected by the trial court as “highly 

04-5065 12
speculative.” 402 F.3d at 1237. Similarly, Granite did not record any actual costs in 

connection with obtaining the cash infusion from Ford. 

This court also recently held that the Court of Federal Claims had not abused its 

discretion in basing a damage award for lost “supervisory goodwill” upon “hypothetical 

replacement costs” in Home Savings of America, FSB v. United States, 399 F.3d 1341, 

1353-55 (Fed. Cir. 2005). It does not follow, however, that the trial court’s refusal to 

accept Granite’s comparable theory constituted an abuse of discretion or otherwise 

involved a legal error. The two cases differ in two critical respects. First, in Home 

Savings, as in the present case, the source of the additional capital was the acquirer’s 

parent corporation. Unlike the present case, however, in Home Savings the parent 

corporation was also a plaintiff in the litigation, in addition to the acquiring thrift, and the 

parent also sought to recover its damages. 

Second, there is no contention that Granite itself actually raised any additional 

capital in the private market to replace the lost regulatory goodwill. Granite’s 

calculations are based upon purely theoretical models. As set forth in detail in the trial 

court’s opinion in Home Savings, however, both the acquiring thrift in that case and its 

parent (who was also a party to that litigation) raised substantial capital following the 

loss of “regulatory goodwill” under FIRREA. Home Sav. of Am., FSB v. United States, 

57 Fed. Cl. 694, 700-02 (2003). Home Savings “obtained new capital” by issuing $950 

million in subordinated debt. Its parent company also raised $250 million in 

subordinated debt and $357.5 million in preferred stock, and “[a]fter each of these 

capital raisings, [the parent] contributed all the capital raised to Home Savings.” Id. at 

702. Subsequently, the parent raised an additional $280.7 million in convertible 

04-5065 13
preferred stock, half of which it “infused into Home Savings.” The following year, the 

parent also raised an additional $125 million in subordinated debt, $100 million of which 

“went to Home Savings.” Id. 

Based on these facts, Granite’s case is more like Fifth Third Bank than Home 

Savings. The trial court here correctly rejected Granite’s theories of replacement of 

capital costs as too speculative. 

D. Granite makes two related arguments to avoid the foregoing analysis. First, it 

invokes the principle that where “a reasonable probability of damage can be clearly 

established, uncertainty as to the amount will not preclude recovery.” LaSalle, 317 F.3d 

at 1374 (internal citations and quotations omitted). Second, it contends that even if the 

court below correctly rejected its theories, “at a minimum, jury verdict damages would 

be appropriate in this case.” Bluebonnet Sav. Bank v. United States, 339 F.3d 1341, 

1346 (Fed. Cir. 2003). (Granite also states in its opening brief that the Court of Federal 

Claims “[held] as a matter of law that FNB suffered no damage whatever from the loss 

of over a quarter of a billion dollars in contractually guaranteed regulatory capital” 

(emphasis in original). The trial court, however, did not hold that the government’s 

breach of contract caused Granite no damage, but held only the far different point that 

Granite had failed to prove its damages.) 

The essential premise of these two bases for awarding damages is that, if the 

plaintiff proves that it was damaged, difficulties in calculating the exact amount of such 

damage will not preclude an award. Here, however, the Court of Federal Claims 

determined that Granite failed to prove the predicate element that it had suffered any 

damages, and we uphold those rulings (other than the “lost sale value” damages theory 

04-5065 14
whose rejection we vacate and remand for further proceedings in Part IV, below). 

Granite, therefore, cannot rely upon these two grounds as a basis for recovering 

damages. 

IV 

One of Granite’s experts was Joseph Walker, an investment banker who assisted 

in the First Nationwide sale and who formerly headed J.P. Morgan’s Mergers and 

Acquisitions group. Walker testified that he could have structured the sale to preserve 

the value of the “supervisory goodwill” had it been available, and that the bank could 

have been sold for more if such goodwill had been included. Walker relied upon 

another hypothetical preferred stock issuance calculation by Professor James and upon 

his own “leverage model” and “sensitivity analysis” to show how much more the thrift 

would have been sold for if it had included “supervisory capital.” Damages Op. at 780. 

The “value” of the “supervisory capital” under these two analyses was $136.8 million 

under the James model and $137.1 million under the Walker model, respectively. 

Damages Op. at 770. The Court of Federal Claims rejected this theory of damages 

because it was “speculative” and “implausible” that a buyer would have “expended 

actual cash to acquire the supervisory capital.” Damages Op. at 780 (internal quotation 

marks omitted). 

We conclude that Walker’s evidence sufficed to create an issue of material fact 

as to whether First Nationwide could have been sold for more if it had included 

“supervisory goodwill,” and thus precluded summary judgment for the government on 

that issue. Therefore, the case will be remanded to the Court of Federal Claims for 

further development of the record on that question. On the remand, Granite should 

04-5065 15
have the opportunity to offer evidence, if it can produce it, on at least the following 

questions: 

1. What is the factual basis for Walker’s conclusion that First Nationwide could 

have been sold for a higher price if it had included the “supervisory goodwill?” Have 

there been any sales of thrifts that included such goodwill? If so, did they sell for a 

higher price than thrifts without such goodwill? 

2. Does Walker have any actual factual basis for determining the alleged higher 

amount for which First Nationwide could have been sold if it had included “supervisory 

goodwill”? How much additional value could the thrift have brought if the goodwill was 

included in the deal? What is the basis for that calculation? 

The Court of Federal Claims correctly rejected Professor James’s preferred stock 

theory as too speculative and an unreliable measure of the additional amount the thrift 

would have commanded. Because we remand the case for further proceedings on this 

issue, we express no opinion on the validity of Walker’s own “leverage model” and 

“sensitivity analysis,” or the weight, if any, to which it is entitled. That is for the trial court 

to consider in the first instance, in light of whatever additional evidence is presented on 

the remand. 

3. The parties disagree whether “supervisory goodwill” may be transferred at all. 

Walker assumed that “supervisory capital could be sold,” based on advice he had 

received from counsel. Apparently there is no definitive answer to that question at this 

time. Uncertainty over the question would have affected the additional amount a 

purchaser of the thrifts would have paid if such goodwill were included. This factor must 

04-5065 16
be considered in determining whether the thrift could have been sold for a higher 

amount if it had included “supervisory goodwill,” and, if so, for how much more. 

We cannot tell what evidence, if any, may be produced on these factual 

questions (or on any others the trial court or the parties may raise), or how the Court of 

Federal Claims would evaluate it and what conclusions it would draw from it. All we can 

say at this time is that Walker’s evidence raised sufficient factual issues to entitle 

Granite to go forward with its case on lost sale value damages. 

CONCLUSION 

The portion of the Court of Federal Claims’ judgment that granted summary 

judgment for the government on the issue of whether First Nationwide could have been 

sold for more if it had included “supervisory goodwill” is vacated, and the case is 

remanded to that court for further proceedings on that issue in accordance with this 

opinion. In all other respects, the judgment of that court is affirmed. 

AFFIRMED IN PART, VACATED IN PART and REMANDED

04-5065 17
United States Court of Appeals for the Federal Circuit 

 

 

04-5065 

GRANITE MANAGEMENT CORPORATION, 

 Plaintiff-Appellant, 

v. 

UNITED STATES, 

 Defendant-Appellee. 

 

CLEVENGER, Circuit Judge, dissenting in part. 

 

 I write separately to voice my disagreement with the court's determination that 

the government cannot as an appellee challenge the ruling of the United States Court of 

Federal Claims that the government entered into a contract with Granite Management 

Corporation ("Granite") regarding the "Ohio transaction," pursuant to which Granite 

acquired State Savings & Loan Company and Citizens Home Savings Company. 

 The Supreme Court has recognized two settled principles relevant to the issue. 

On the one hand, "the appellee may not attack the [district court's] decree with a view 

either to enlarging his own rights thereunder or of lessening the rights of his adversary, 

whether what he seeks is to correct an error or to supplement the decree with respect to 

a matter not dealt with below." United States v. Am. Ry. Express Co., 265 U.S. 425, 

435 (1924). On the other, "the appellee may, without taking a cross-appeal, urge in 

support of a decree any matter appearing in the record, although his argument may 

involve an attack upon the reasoning of the lower court or an insistence upon matter 
overlooked or ignored by it." Id.; see also Morley Constr. Co. v. Md. Cas. Co., 300 U.S.

185, 191 (1937) (calling the rule "inveterate and certain"); Bailey v. Dart Container

Corp., 292 F.3d 1360, 1362 (Fed. Cir. 2002) ("[A] party must file a cross-appeal when 

acceptance of the argument it wishes to advance would result in a reversal or 

modification of the judgment rather than an affirmance."). 

On December 16, 2003, the Court of Federal Claims issued a one-page final 

Judgment ordering that Granite's complaint be dismissed. (Joint App. at 1.) The Court

of Federal Claims had previously ruled on summary judgment that Granite failed to

prove damages resulting from the government's breach of the contracts at issue and 

thus had nothing to recover. Dismissal is the prize the government wins if correct on its

contract formation challenge on appeal. It won the same prize on the damages issues

before the Court of Federal Claims. I cannot fathom how the government will enlarge its

rights or lessen those of Granite, per American Railway Express, by attacking as an 

appellee rather than in a cross-appeal the Court of Federal Claims's judgment that the 

government breached a contract regarding the Ohio transaction. Neither the court nor 

Granite on appeal has explained how this can be so. 

The court instead relies on EF Operating Corp. v. American Buildings, 993 F.2d 

1046 (3d Cir. 1993), in support of its determination that for lack of a cross-appeal, the 

government cannot challenge the Court of Federal Claims's decision regarding contract 

formation. In EF Operating, the United States Court of Appeals for the Third Circuit held

that where an appellant files an appeal of the district court's summary judgment on the 

merits of the underlying claim, the appellee must cross-appeal to challenge the district 

court's adverse ruling on appellee's motion to dismiss for lack of personal jurisdiction. 

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Importantly, the Third Circuit noted that "[a] grant of summary judgment and a dismissal 

for lack of personal jurisdiction . . . are wholly different forms of relief. The latter is a 

dismissal without prejudice, whereas the former is a ruling on the merits which if

affirmed would have preclusive effect." Id. at 1048-49 (citation omitted). EF Operating

can be read narrowly to require a cross-appeal in the Third Circuit where the prejudicial 

effect of the relief sought is different from that which flows from the relief actually 

awarded. 

To the extent persuasive, EF Operating is distinguishable from the present case 

in that the government here does not seek to change the prejudicial effect of the 

decision being appealed. Rather, the government merely sought to shore up the Court 

of Federal Claims's dismissal of Granite's complaint by offering an alternative ground for

affirming the dismissal. See Resonate Inc. v. Alteon Websystems, Inc., 338 F.3d 1360, 

1368 (Fed. Cir. 2003) ("No cross-appeal is needed in order for a prevailing party to 

present any legitimate argument in support of the judgment below, even if the argument 

was rejected or ignored by the trial court."). In other words, after final adjudication by

the Court of Federal Claims, the government stood to gain nothing more, and Granite 

nothing less, than what each had safely in hand, that being the dismissal by the Court of

Federal Claims of Granite's complaint. I therefore cannot agree with the court that the 

government had a right of appeal in this case. See Lindheimer v. Ill. Bell Tel. Co., 292 

U.S. 151, 176 (1934) (finding that a party has no right of appeal from a decree in its

favor). 

Finding no government right of appeal, and indeed finding support to the contrary 

that such a cross-appeal would be improper, I would reach the merits of the 

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government's argument regarding contract formation and would affirm the Court of 

Federal Claims's decision in that regard. See Elan Corp., PLC v. Andrx Pharm. Inc., 

366 F.3d 1336, 1340 (Fed. Cir. 2004) (stating that a "cross-appeal was improper, and is 

therefore dismissed, because it merely asserted another ground for affirming the same

judgment, a matter that an appellee may assert without a cross-appeal"). 

I join the remainder of the court's opinion. 

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