## 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 Litigati on Branch, Civil Division, United States Department of Justic e, 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 fi nancially-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 “s upervisory goodwill,” and to amortize that “asset” over a substantial per iod. The Court of Federal Claims found that the parties had entered into agreements r egarding such treatment of “supervisory goodwill” and that the government had br eached those agreements. Granite Mgmt. Corp. v. UnitedStates , 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 grant ed 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 concl ude that further development of the facts on that issue is necessary, and therefore we rem and to the Court of F ederal 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 thri fts failed and many others reached the brink of insolvency. To deal with the cr isis, 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 2the government and favorable accounting treat ment of an intangible asset known as “supervisory goodwill,” which reflected the am ount by which the assumed liabilities of the acquired thrifts exceeded the value of the acquired assets. Typically, the acquirers were permitted to include “supervisory good will” in the thrift’s reserve capital requirements and to amortize that “asset” over many years. In response to continued financial probl ems in the savings and loan industry, Congress in 1989 enacted the Financial In stitutions Reform, Recovery, and Enforcement Act of 1989, P ub. L. No. 101-73, 101 Stat. 183 (“FIRREA”). That Act, among other things, barred the thrifts’ us e of “supervisory goodwill” as regulatory capital. As a result, many thrifts no longer complied with federal regulatory capital requirements; a number of t hem became insolvent and were seized by regulatory authorities. Thrift acquirers filed lawsuits allegi ng that by enacting and enforcing FIRREA, and thus eliminating use of “supervisory good will” 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 governm ent was liable in damages for breach of contract. Since Winstar , this court has decided numerous Winstar –related cases. B. The following underlying facts in th is case are undisputed. In 1986, the appellant Granite Management Co rporation (“Granite”) (then k nown as “First Nationwide Financial Corporation”) acqui red four financially-troubled thrifts in three separate transactions, one transaction each in Ohio (State Savings & Loan Company and Citizens Home Savings Company), Mi ssouri (St. Louis Federal Savings & Loan

04-5065 3Association), and Kentucky (Lincoln Federal Savings & Loan). The institutions were combined into a single thrift called “First Na tionwide Bank” that was run by Granite and its parent company, Ford Motor Company (For d). As a result of the acquisitions, Granite also obtained “branching rights” t hat permitted that bank to expand from its California base into ten new states where t he acquired thrifts were operating, some years before deregulation allo wed competitors to enter interstate banking. The government made a direct cash c ontribution of $168 million to First Nationwide’s capital. Under so-called A ssistance Agreements by which the government authorized the three transactions, Granite wa s permitted to treat nearly $150 million as “supervisory goodwlll” and to amortize that “asse t” over 25 years. The parties dispute the amount of the unamortiz ed balance remaining in 1989, when FIRREA was enacted. According to Granite, the unamortized bal ance was approximately $275 million. Damages Op. at 769. By 1990, First Nationwide had become seve rely 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 re lated claims. In 2002, the trial court granted Granite’s motion for partial summary j udgment on liability. T he court ruled that the government had entered into contracts with Granite coveri ng the three transactions by which Granite acquired the failing thrifts; t hat the contracts authorized Granite to treat “supervisory goodwill” as part of its regulatory capital and to am ortize it over twenty-five

04-5065 4years; and that the government, by enacti ng FIRREA, breached these contracts. Liab. Op. at 234, 241. Granite then presented several alter native theories for determining damages, under which it would recover bet ween $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 re liance and restitution theories. Second, Granite contended that by acquiring the thrifts , it conferred a benef it 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 estimat ed 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 in cluded 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, seve ral 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 ent ered into a contract with Gr anite regarding the Ohio transaction under which Granite acquired two thrifts, State Savings and Citizens Home. Citing two of our prior decisi ons, the government argues that “as in” those cases, it

04-5065 5“here made no contractual promise concer ning 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 support ed by the record for affirmance of the judgment, whether or not the lower c ourt relied on that ground. If, however, the appellee seeks to change or modify the judgment rather than just a ffirm 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 woul d be a reversal or modifica tion 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 gov ernment did not file a cross-appeal, the government’s argument is not made as an alternative gr ound 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 agr eement and affirmed upon all other grounds concerning damages. Ordinarily, a ruling that the appellee c annot 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 si tuation in that the government effectively

04-5065 6lost on the issue of liability fo r breach of contract, but ultimately prevailed on the issue of contract damages, making it less clear that the government coul d have cross-appealed from the final judgment. However, the facts do not warrant a different conclusion on this issue. The trial court’s earlier li ability order, which the governm ent as appellee seeks to change, was not a final judgm ent 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 t he earlier liability order involvi ng the Ohio transaction, the government would have been fac ed with the problem that or dinarily 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 gr ant 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 it s 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 si tuation. 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 distri ct court granted Flaherty ’s summary judgment motion, and, without explicitly ruling on Flaherty’s personal juri sdiction motion, it ruled in favor of another defendant that had raised the same jurisdictional issue. The “logical

04-5065 7conclusion” was that “the di strict 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 per sonal 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 differ ent grounds” but rather was “seek[ing] to vacate the summary judgment,” the court w ould not consider the personal jurisdiction issue in the absence of a cross-appeal. Id. at 1049. In this case, the government states t hat 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 Grani te’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 s upport the grant of summary judgment on damages, but instead explicitly asks that “the j udgment of the trial co urt . . . 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 except ion to the general rule that without itself appealing, an appellee cannot seek a change in the judgment under review.

04-5065 8III In its appeal Granite argues the same t heories 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 restitut ion theory. “Reliance” damages cover the amount a non-breaching party expends in perfo rming the contract in reliance on the other party’s anticipated perfo rmance. “Restitution” damages are designed to restore the non-breaching party to t he situation that would have existed had there been no contract and no breach. These two theorie s 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 th at “there was no substantive difference between the two theor ies” 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, F SB v. United States , 245 F.3d 1342, 1351-52 (Fed. Cir. 2001); Glendale , 239 F.3d at 1381-82. As the Cour t 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 c ontract permitting the use of “supervisory goodwill.” Roger Orders, Granite’s damages expert who performed the accounting upon which Granite based this theory of damages, stat ed that Granite’s costs were “incurred as a result of the acquisitions, not as a result of the breac h.” Since Granite’s “cost of performance” thus did not result from t he 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 acquiri ng the four troubled thrifts. Granite relies on the government’s own analyses of the savings it r ealized 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 conferr ed” theories in Winstar -related cases “measure [damages] in terms of a liability that never came to pass” and thus are too “speculative and indetermi nate” 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 cost s 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, 42 4 (2003) (relying

04-5065 10upon Glendale in rejecting “liquidation cost savings” theory), aff’d , 378 F.3d 1336, 1343 (Fed. Cir. 2004). The trial court determined that the gov ernment had other ways to deal with the problem, such as arranging for t he sale of the thrifts to another buyer. It suggested that the government might well hav e 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 ra re and disfavored occurrence.” Damages Op. at 773; cf. Glendale , 239 F.3d at 1382 (noting t he 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 t hat 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 acquire rs beside Granite indicated interest in obtaining the thrifts; that the branching right s associated with the thrifts had significant value; and that Granite itself sold, rather than liquidated, the thri fts (combined at that point into First Nationwide Bank) after t heir 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 m easure 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 11different 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 it s 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 ca lculated the amount it would have cost Granite to replace the goodwill capital by a ssuming that Granite issued preferred stock to raise the money. Professor James “anal yz[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 t heory 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 wa s therefore properly rejected by the trial court as “highly

04-5065 12speculative.” 402 F.3d at 1237. Similarly, Gr anite did not record any actual costs in connection with obtaining the cash infusion from Ford. This court also recently held that t he 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 Americ a, FSB v. United States , 399 F.3d 1341, 1353-55 (Fed. Cir. 2005). It does not follow, howev er, that the trial court’s refusal to accept Granite’s comparable theory consti tuted an abuse of discretion or otherwise involved a legal error. The two cases diffe r 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 t he present case, however, in Home Savings the parent corporation was also a plainti ff in the litigation, in addition to the acquiring thrift, and the parent also sought to recover its damages. Second, there is no content ion that Granite itself actually raised any additional capital in the private market to replac e the lost regulator y 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 subs tantial capital following the loss of “regulatory good will” 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 preferr ed 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 13preferred stock, half of whic h 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 reject ed 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 quot ations 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 guarant eed regulatory capital” (emphasis in original). The trial court, however, did not hold t hat 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 bas es for awarding damages is that, if the plaintiff proves that it was damaged, difficult ies 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 elem ent that it had suffered any damages, and we uphold those rulings (other t han the “lost sale value” damages theory

04-5065 14whose rejection we vacate and remand for fu rther 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 Walk er, an investment banker who assisted in the First Nationwide sale and who formerly headed J.P. Morgan’s Mergers and Acquisitions group. Walker te stified that he could have stru ctured 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 good will had been included. Walker relied upon another hypothetical preferred stock issuance calculation by Professor James and upon his own “leverage model” and “sens itivity 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 capita l” 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 “implausib le” that a buyer would have “expended actual cash to acquire t he supervisory capital.” Damages Op. at 780 (internal quotation marks omitted). We conclude that Walker’s evidence suffi ced 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 su mmary judgment for the government on that issue. Therefore, the case will be remanded to the Court of Federal Claims for further development of the re cord on that question. On the remand, Granite should

04-5065 15have the opportunity to offer evidence, if it can produce it, on at least the following questions: 1. What is the factual basis for Walk er’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 fact ual 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 re jected 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 t he case for further proceedings on this issue, we express no opinion on the validit y 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 inst ance, in light of whatever addi tional 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. Apparent ly there is no definitive answe r to that question at this time. Uncertainty over the question woul d have affected the additional amount a purchaser of the thrifts woul d have paid if such goodwill were included. This factor must

04-5065 16be considered in determining whether the th rift 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 t he 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 evidenc e 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 “superviso ry 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 disagr eement with the court's determination that the government cannot as an appel lee challenge the ruling of t he United States Court of Federal Claims that the gov ernment entered into a contra ct with Granite Management Corporation ("Granite") regar ding the "Ohio transaction," pursuant to which Granite acquired State Savings & Loan Company an d Citizens Home Savings Company. The Supreme Court has recognized two settl ed 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, "t he appellee may, without taki ng 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 t he lower court or an insistence upon matteroverlooked or ignored by it." Id. ; see als o 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 Decem ber 16, 2003, the Court of Federal Claim s issued a one-page fina l Judgment ordering that Granite's complaint be dismiss ed. (Joi nt App. at 1.) The Cour t of Federal Claims had previously ruled on summary judgment that Grani t e failed to prove dam ages resulting from the governm ent's breac h of t he c o ntracts at issue and thus had nothing to recover. Dis missal is t he prize the government wins if cor r ect on its contract formation challenge on appeal. It won the same prize on the damages issue s before the Court of Federal Claim s . I c annot fathom how the gov e r nment 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 Feder al Claims's decision regarding contract formation. In EF Operating , the United States Court of Appea ls for the Third Circuit held that where an appel lant files an appeal of t he district court's summary judgment on t h e merits of the underly ing claim, the appellee must cross-appeal t o challenge the district court's adverse ruling on appellee's motion to di smiss for lack of personal jurisdiction.

04-5065 2Importantly, the Third Circuit noted that "[a] grant of su mmary judgment and a dismissa l for lack of personal jurisdiction . . . are wholly different forms of relief. The latter is a dismissal without prejudice, w hereas the former is a ruli ng on the merits which if affirmed would hav e preclusive effect." Id. at 1048-49 (citation omitted). EF Operating can be read narrowly to require a cross-appeal in the Third Circuit w here the prejudicial effect of the relief s ought is different from that which fl ows from the relief actually awarded. To the ext ent persuasive, EF O perating is distinguishable fr om the present case in that the government here does not seek to change the prejudicial effect of the decision being appealed. Rather , the gover nment merely sought to shore up the Court of Federal Claims's dism issal of Granite's complaint by offering an alternativ e ground for affirming the dismissal. See Res onate Inc. v. Al teon Websystems, Inc. , 338 F.3d 1360, 1368 (Fed. Cir. 2003) ("No cros s-appeal is need ed in order for a pr evailing party to present any legitimate argument in support of the judgment below, even if the argument was rejected or ignor ed by the trial court."). In other words, after final adjudication by the Court of Federal Claims, the government stood to gai n nothing more, and Granite nothing les s , than what each had safely in hand, that being the dismissa l by the Court of Federal Claims of Granite's com p laint. I th erefore cannot agree wit h the c o urt that the government had a right of appeal in this c a se. See Lindh eimer v. Ill. Bell Tel. Co. , 292 U.S. 151, 176 (1934) (finding that a party has no ri ght 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 wo uld be improper, I would re ach the m e rits of the

04-5065 3government's argument regarding contract formation and would affirm the Court of Federal Claims's dec isi on in that regard. See Elan Corp., PLC v. Andrx Pharm. Inc. , 366 F.3d 1336, 1340 (Fed. Cir. 2004) (stating t hat a "cross-appeal was improper, and is therefore dismissed, becaus e it merely ass e rted another ground for affirming the sam e judgment, a matter that an appellee ma y assert without a cross-appeal"). I join the remainder of the court's opinion.

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