United States Court of Appeals for the Federal Circuit 

 

 

2007-5044, -5048 

FIRST FEDERAL LINCOLN BANK, 

 Plaintiff-Cross Appellant, 

v. 

UNITED STATES, 

Defendant-Appellant. 

Paul M. Honigberg, Blank Rome LLP, of Washington, DC, argued for plaintiffcross appellant. With him on the brief were Edward L. Lublin and Katia I. Fano. 

William G. Kanellis, Trial Attorney, Commercial Litigation Branch, Civil Division, 

United States Department of Justice, of Washington, DC, argued for defendantappellant. With him on the brief was Michael F. Hertz, Deputy Assistant Attorney 

General, Jeanne E. Davidson, Director, Kenneth M. Dintzer, Assistant Director, and 

Scott D. Austin, Elizabeth A. Holt and John J. Todor, Trial Attorneys. 

Appealed from: United States Court of Federal Claims 

Senior Judge Lawrence S. Margolis 

 
 

United States Court of Appeals for the Federal Circuit 

2007-5044, -5048 

FIRST FEDERAL LINCOLN BANK, 

 Plaintiff-Cross Appellant, 

v. 

UNITED STATES, 

 Defendant-Appellant. 

Appeals from the United States Court of Federal Claims in 95-CV-518, Senior Judge 

Lawrence S. Margolis. 

 ___________________________ 

 DECIDED: March 5, 2008 

 ___________________________ 

Before MAYER, DYK, and PROST, Circuit Judges. 

Opinion for the court filed by Circuit Judge DYK. Opinion filed by Circuit Judge MAYER 

dissenting-in-part. 

DYK, Circuit Judge. 

 This case involves allegations that the government entered into contracts with 

First Federal Lincoln Bank (“First Federal”) regarding regulatory treatment of goodwill. 

Recovery was sought under the theory recognized by the Supreme Court in United 

States v. Winstar Corp., 518 U.S. 839 (1996). In 1982 First Federal engaged in 

separate mergers with three other thrifts, Great Plains Federal Savings and Loan 

Association of Falls City, Nebraska (“Great Plains”), Tri-Federal Savings and Loan 
Association of Wahoo, Nebraska (“Tri-Federal”), and First Federal Savings and Loan 

Association of Norfolk, Nebraska (“Norfolk”). 

The Court of Federal Claims found that the government had breached a contract 

regarding regulatory treatment of goodwill with respect to the Great Plains merger and 

assessed damages of $4,501,818. First Federal Lincoln Bank v. United States, 73 Fed. 

Cl. 633, 634, 650 (2006) (“First Federal II”). The Court of Federal Claims found that no 

goodwill contracts existed with respect to the other two mergers. The government’s 

appeal challenges the Court of Federal Claims’ damages determination with respect to 

the Great Plains merger. First Federal’s cross-appeal challenges the determination that 

no goodwill contract existed with respect to the Tri-Federal and Norfolk mergers. We 

reverse the Court of Federal Claims’ damages award, and affirm its liability 

determination with respect to the Tri-Federal and Norfolk mergers. 

BACKGROUND 

I 

 First Federal was organized as a savings and loan association in Lincoln, 

Nebraska in 1907. In 1981, when many other thrifts were experiencing difficult financial 

conditions, the government considered First Federal to be financially healthier than its 

peers. On November 16, 1981, the Federal Home Loan Bank Board (“FHLBB”) 

included First Federal on a list of potential merger partners distributed to financially 

troubled thrifts. 

In October 1981, Great Plains’ accountants informed its management that it had 

fallen below federally mandated minimum net worth requirements, and advised 

management to seek a merger partner. First Federal and Great Plains entered into a 

2007-5044, -5048 2 
preliminary merger agreement on December 8, 1981, which was conditioned, among 

other things, on government approval for First Federal’s use of the purchase method of 

accounting so as to allow goodwill to be claimed as an asset and amortized over a 

period of thirty years. First Federal and Great Plains executed a final merger 

agreement on December 16, 1981, and First Federal filed an application for regulatory 

approval of the merger with the FHLBB dated December 31, 1981. 

On March 24, 1982, the government notified First Federal that its merger 

application with respect to Great Plains would only be approved if the amortization 

period for goodwill were reduced to twenty-five years, the loan discount were accreted 

over the contractual life of the loans, and First Federal accounted for loan prepayments 

based on actual prepayment experience.1 These conditions were standard treatment 

by FHLBB and Generally Accepted Accounting Principles (“GAAP”) at the time. First 

Federal indicated that it would not complete the merger under the conditions proposed 

by the government. Negotiations ensued, and two forbearances were ultimately 

granted with respect to the accretion period on Great Plain’s mortgage portfolio and the 

regulatory treatment of certain problematic loans that had been made by Great Plains. 

However, the government prevailed in restricting the goodwill amortization period to 

twenty-five years. FHLBB conditionally approved First Federal’s merger with Great 

Plains in a resolution dated May 5, 1982. After completing the merger, First Federal 

 1

 As the Supreme Court has explained, Winstar, 518 U.S. at 852-53, 

accretion of loan discount refers to the period over which First Federal would be allowed 

to account for the reduced market value of acquired loans, which at the time of the 

merger would have had a market value less than their face value. 

2007-5044, -5048 3 
submitted the required documentation for final approval, and final approval for the 

merger was granted by FHLBB by letter dated June 23, 1982. 

First Federal initiated a second merger, with Tri-Federal, while its merger with 

Great Plains was pending. In February 1982, FHLBB noted that Tri-Federal was 

running out of cash and suggested that Tri-Federal seek a merger partner. FHLBB did 

not suggest that First Federal be a merger partner, but First Federal approached TriFederal, and the two thrifts executed an agreement in principle on March 23, 1982, 

followed by a final agreement executed on April 15, 1982. First Federal filed an 

application for regulatory approval of the merger with FHLBB on April 30, 1982, seeking, 

among other things, use of the purchase method of accounting consistent with GAAP to 

allow it to claim goodwill as an asset. 

An internal FHLBB staff memorandum dated June 21, 1982, recommended 

approval of the Tri-Federal merger. Although this document noted that First Federal 

sought to use the purchase method of accounting, it did not include any discussion of 

regulatory treatment of goodwill or mention any extended amortization period. FHLBB 

gave preliminary approval for the merger through a letter dated June 24, 1982. This 

conditional approval letter contained standard language noting the use of the purchase 

method of accounting, but did not contain any discussion of the regulatory treatment of 

goodwill, other than a standard requirement for an accountant’s statement certifying 

compliance with GAAP. 

The Tri-Federal merger was consummated on July 1, 1982, and First Federal 

submitted the documents required for final regulatory approval to FHLBB on August 10, 

1982. FHLBB gave final approval to the merger by a letter dated August 16, 1982, 

2007-5044, -5048 4 
which did not mention regulatory or accounting treatment of goodwill. The merger was 

not deemed supervisory, and no explicit regulatory forbearances were granted in any of 

the documents pertaining to the merger. In contrast to the Great Plains merger, there 

was no negotiation between First Federal and the government with respect to regulatory 

treatment of goodwill in the Tri-Federal merger. 

The third merger at issue involved Norfolk. A March 12, 1982, government 

examination report indicated that Norfolk was in danger of being unable to meet 

regulatory net worth requirements. FHLBB did not suggest First Federal as a merger 

partner, but First Federal approached Norfolk, and the two thrifts executed an 

agreement in principle, dated May 7, 1982, which was conditioned upon government 

approval of use of the purchase method of accounting. Norfolk and First Federal 

executed a final merger agreement dated May 18, 1982, which was also conditioned 

upon government approval of the purchase method of accounting. 

First Federal submitted its application for regulatory approval of the Norfolk 

merger dated June 21, 1982, which included both of the merger agreements. An 

internal FHLBB staff memorandum dated August 18, 1982, recommended approval of 

this merger, and noted the request to use the purchase method of accounting. FHLBB 

gave preliminary approval to the Norfolk merger by a letter dated August 23, 1982, 

which included standard language including a request for an accountant’s certification 

that the use of the purchase method of accounting complied with GAAP. The merger 

of Norfolk into First Federal was consummated on September 1, 1982, and, following 

the submission of required documents, final approval was granted by FHLBB in a letter 

dated October 13, 1982. The merger was not deemed supervisory, and no explicit 

2007-5044, -5048 5 
regulatory forbearances were granted in any of the documents pertaining to the merger. 

No negotiation took place between First Federal and the government with respect to 

regulatory treatment of goodwill. 

II 

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 

(“FIRREA”), Pub. L. No. 101-73, 103 Stat. 183, was enacted on August 9, 1989, and 

became applicable after implementing regulations became effective on December 7, 

1989. See Regulatory Capital, 54 Fed. Reg. 46,845 (Nov. 8, 1989). FIRREA phased 

out the use of goodwill to satisfy capital requirements. As of the passage of FIRREA, 

First Federal claimed $13.9 million of remaining goodwill from the Great Plains merger, 

and a total of $29,977,465 of remaining goodwill from the three mergers combined. 

Although in February 1989, prior to the passage of FIRREA, government 

regulators had deemed First Federal a “fundamentally sound” institution and given it the 

second best available rating on a five-point rating scale, government regulators issued 

stark criticism of First Federal and its capital position in 1990 and 1991. First Federal II, 

73 Fed. Cl. at 640-41. In June 1990, the Federal Deposit Insurance Corporation 

(“FDIC”) conducted an examination of First Federal, and, in March 1991, it advised First 

Federal that it would be designated a “problem institution,” the second lowest possible 

rating for a thrift, and informed First Federal that unless its tangible capital level 

improved by the third quarter of 1991, FDIC would recommend the initiation of 

regulatory action against First Federal. The Office of Thrift Supervision (“OTS”) 

(successor to the regulatory jurisdiction of FHLBB) conducted a separate examination of 

First Federal in July 1990, and also criticized First Federal, assigning it a rating of 

2007-5044, -5048 6 
“marginally resistant to the onset of adverse business conditions.” Id. at 640. This rating 

carried a presumption of formal OTS enforcement action, although no enforcement 

action was actually taken. 

The 1990 government regulatory examinations were critical of First Federal’s 

core earnings performance, level of classified assets, and overall level of assets, 

although First Federal remained in compliance with minimum capital requirements. The 

Court of Federal Claims found that this regulatory criticism “flowed from and w[as] 

intertwined with” the enactment of FIRREA, and that as a result of the regulatory stance 

taken by the government, First Federal had no choice but to achieve tangible capital 

ratios in line with the regulators’ demands. Id. at 639. 

First Federal responded to this regulatory criticism by shrinking its size to 

improve its capital position. Beginning in October 1990, First Federal closed some 

branches and priced interest rates on deposits at a low level to run off its least profitable 

deposits. It appears that a strategy of deposit shrinkage and branch closures improved 

First Federal’s capital position both by reducing operating expenses and because using 

assets to pay off deposits meant that First Federal’s remaining capital represented a 

larger percentage of its remaining deposits.2

 In total, First Federal closed twenty-eight 

branches between the enactment of FIRREA and 1992, including twenty-four branches 

in Nebraska. Between June 30, 1990, (the latest figures available prior to First 

 2

 The same strategy of shrinking the deposit base to achieve capital 

compliance seems to have been used successfully by other thrifts as well. See Globe 

Sav. Bank, F.S.B. v. United States, 65 Fed. Cl. 330, 345 (2005) (“The FDIC applauded 

Globe's efforts to shrink drastically in size and achieve capital compliance. In an 

examination of Globe in 1991, the FDIC opined that Globe had ‘sold off assets and 

deposit liabilities in impressive fashion to meet regulatory capital requirements.’”), aff’d 

in part and vacated in part on other grounds, 189 F. App’x 964 (Fed. Cir. 2006). 

2007-5044, -5048 7 
Federal’s initiation of the shrink) and June 30, 1993, (the date the Court of Federal 

Claims imposed to cut off deposit losses caused by the shrink), First Federal lost 

deposits totaling $223,437,499. 

FDIC examined First Federal again in July 1991, and in this examination, noted a 

higher tangible capital level than First Federal had reported at the previous examination, 

while continuing to criticize First Federal’s capital position and earnings performance. It 

upgraded First Federal’s overall rating by one level on the five-point ratings scale. In a 

March 1992 examination, conducted after much of First Federal’s shrink had been 

effectuated, FDIC noted a further increase in First Federal’s tangible capital level, which 

had at all times remained above regulatory minimums, and restored First Federal to the 

“fundamentally sound” rating it had been given prior to the passage of FIRREA. First 

Federal never fell below FIRREA’s minimum capital requirements, and it was not seized 

by government regulators. 

III 

 First Federal filed a complaint seeking breach of contract damages in the Court 

of Federal Claims on August 7, 1985. A bench trial on liability was held in 2003. The 

Court of Federal Claims issued an opinion concluding that First Federal had established 

government liability for breach of contract with respect to the Great Plains merger, but 

had not proven the existence of any contract relating to the treatment of goodwill in 

conjunction with the Tri-Federal or Norfolk mergers. First Federal Lincoln Bank v. 

United States, 58 Fed. Cl. 363, 369-70 (2003) (“First Federal I”). 

The Court of Federal Claims reasoned that the terms of the Great Plains merger 

had been extensively negotiated between First Federal and the government, including 

2007-5044, -5048 8 
negotiations concerning the treatment of goodwill. The court found that this showed the 

government’s intent to contract for use of the purchase method and amortization of 

goodwill over a twenty-five year period. Id. at 369. The Court of Federal Claims found 

that, with respect to this merger, “the terms of the merger approval were extensively 

negotiated between Lincoln and the FHLBB,” id. at 368, and that “all the issues raised 

by [First Federal’s] proposed modifications, including the goodwill amortization period, 

were part of the negotiations.” Id. at 369. 

With respect to the Norfolk and Tri-Federal mergers, however, the court 

reasoned that there was no indication of the government’s intent to contract, because 

there was no evidence of negotiation with respect to goodwill, and the negotiations with 

respect to the Great Plains merger had not been used as a template for the other two 

mergers. Id. at 370. 

Plaintiff argues . . . that the negotiations that took place with regard 

to the Great Plains merger should also be viewed as negotiations for the 

other two mergers. . . . Plaintiff provides no evidence, however, that 

indicates that it communicated that sentiment to the FHLBB. Nor does 

that theory seem to match up with reality, as [First Federal] did not provide 

the same documentation for each of the three mergers. 

 

Id. The Court of Federal Claims concluded that “[i]n this case, the plaintiff has failed to 

provide evidence that such a contractual undertaking was intended between the FHLBB 

and [First Federal] with regard to either the Tri-Federal or the Norfolk mergers.” Id. 

A second trial on the issue of damages was held between May 22, 2006, and 

June 2, 2006. First Federal sought damages, relating only to the Great Plains merger, 

in the amount of $30,688,000, for lost franchise value and lost profits associated both 

with deposits it actually lost and lost opportunities for growth. The Court of Federal 

Claims concluded that the breach of the Great Plains Winstar contract caused First 

2007-5044, -5048 9 
Federal to begin to shrink its deposit base, and that this strategy was a response to 

regulatory criticism. That criticism was either directly caused by the breach or was so 

closely related to the breach that it could not be separated for purposes of the causation 

analysis. The court also concluded, however, that First Federal had not adequately 

proven either that it would have realized a profit on its lost assets or that its deposits 

would have grown absent the breach. It thus rejected First Federal’s claims for lost 

profits and lost deposit growth as speculative. The court valued the deposits lost in First 

Federal’s shrink between 1990 and 1993 based on data relating to the premiums paid 

for financial institution deposits in 2001, and ultimately assessed damages for lost 

franchise value in the amount of $4,501,818. 

The government appeals the Court of Federal Claims’ ruling on damages, and 

First Federal cross-appeals the earlier ruling as to liability for the Norfolk and Tri-Federal 

mergers. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3). We review the 

Court of Federal Claims’ conclusions of law without deference and review its factual 

findings under the clearly erroneous standard. Bank of Am., FSB v. Doumani, 495 F.3d 

1366, 1371 (Fed. Cir. 2007). 

DISCUSSION 

I 

 We first address the damage award with respect to the Great Plains merger. All 

of the damages awarded to First Federal were allegedly incurred as a result of shrinking 

its deposit base between June 30, 1990, and June 30, 1993, in order to comply with 

capital requirements under FIRREA. Assuming that the Court of Federal Claims 

correctly held that the implementation of FIRREA caused First Federal’s shrink, the 

2007-5044, -5048 10 
government argues that the Court of Federal Claims erred in concluding that First 

Federal had adequately proven its lost franchise value damages. The government 

urges that the Court of Federal Claims erred by calculating the lost value as of the date 

of trial, based on 2001 data, rather than as of the 1990 to 1993 period when the 

deposits were lost.3

 First Federal argues that the use of 2001 data was proper and was 

designed to approximate the value of the lost deposits on the date of trial. The Court of 

Federal Claims agreed. We agree with the government. 

A 

In general, in an action for breach of contract, “the appropriate date for 

calculation of damages is the date of breach.” Energy Capital Corp. v. United States, 

302 F.3d 1314, 1330 (Fed. Cir. 2002); see also Estate of Berg v. United States, 687 

F.2d 377, 380 (Ct. Cl. 1982) (“As a general rule, our law has adopted the standard of 

market value at the time and place of the failure to perform as the basis for measuring 

the compensation to which the injured promisee is entitled.”). In this case, the 

government breached its agreement with First Federal when it required First Federal to 

shrink its deposit base during the 1990-1993 period to remain in capital compliance. 

Our decision in Energy Capital recognized an exception to the general rule that contract 

damages are measured as of the date of the breach for 

anticipated profits or . . . other expectancy damages that, absent the 

breach, would have accrued on an ongoing basis over the course of the 

 3

 First Federal maintains that the government failed to object at trial to the 

use of the 2001 valuation date for the lost deposits claim. There was, however, no 

reason for the government to do so because at trial First Federal did not separately 

claim the value of the lost deposits; rather, the lost deposits calculation was simply an 

ingredient of the overall lost profits claim. The lost deposits were treated as a separate 

claim only in the decision of the Court of Federal Claims when the overall lost profits 

claim was rejected as speculative. 

2007-5044, -5048 11 
contract. In those circumstances, damages are measured throughout the 

course of the contract. To prevent unjust enrichment of the plaintiff, the 

damages that would have arisen after the date of judgment . . . must be 

discounted to the date of judgment. 

302 F.3d at 1330. As we have previously explained, expectancy damages are “the 

benefits the nonbreaching party expected to receive in the absence of a breach.” Cal.

Fed. Bank v. United States, 395 F.3d 1263, 1267 (Fed. Cir. 2005). First Federal asserts 

that valuation as of the time of trial was appropriate, under Energy Capital, because its 

lost franchise value claim represents expectancy damages. 

 Contrary to the dissent, the claim allowed by the Court of Federal Claims is not a 

claim for lost profits or expectancy damages. First Federal’s claim for lost profits was 

disallowed by the Court of Federal Claims, and that ruling has not been appealed. 

While First Federal at times has characterized the lost deposits aspect of its claim as 

seeking “lost profits,” First Federal has recognized that “The Trial Court Awarded 

Damages Based on the Value of the Foregone Deposits, Not the Earnings that the 

Foregone Deposits Would have Generated.” Br. of Plaintiff-Cross Appellant at 51.4

 In 

other words, the Court of Federal Claims actually allowed recovery of lost value on the 

theory that First Federal was damaged by the forced elimination of deposits in the 1990-

 4

 First Federal further asserted in its brief that the government’s arguments 

ignore[] that the trial court declined to award any damages resulting 

from lost earnings on foregone deposits. Instead, the court awarded 

damages for the value of the deposits [First Federal] actually lost as a 

result of the government’s breach. Thus, the government’s arguments 

concerning the difficulty of proving profits flowing from lost leverage 

capacity . . . are a non sequiter. 

Brief of Plaintiff-Cross Appellant at 51 (citation omitted, emphases in original). 

2007-5044, -5048 12 
1992 period. Paradoxically, the Court of Federal Claims did not value this loss at the 

date the loss occurred, but rather valued the loss, years later, at the date of the trial. 

 Thus, the claim for lost franchise value associated with lost deposits allowed by 

the Court of Federal claims was in fact a claim for loss of income-generating property.5 

The market value of income-generating property reflects the market’s estimate of the 

present value of the chance to earn future income, discounted by the market’s view of 

the lower future value of the income and the uncertainty of the occurrence and amount 

of any future property. See Schonfeld v. Hilliard, 218 F.3d 164, 176 (2d Cir. 2000) 

(citing Dan B. Dobbs, Law of Remedies § 3.3(7) (2d ed. 1993)). It has been established 

that the damages for lost income-producing property is properly determined as of the 

time the property is lost (usually the time of the breach) because the market value of the 

lost property reflects the then-prevailing market expectation as to the future income 

potential of the property, and it is precisely this opportunity that the nonbreaching party 

has lost. 

When the defendant's conduct results in the loss of an income-producing 

asset with an ascertainable market value, the most accurate and 

immediate measure of damages is the market value of the asset at the 

time of breach--not the lost profits that the asset could have produced in 

the future. 

Id. (emphasis added). The Second Circuit explained that a prominent treatise supports 

this reasoning because “[m]arket value damages are ‘based on future profits as 

estimated by potential buyers who form the ‘market’’ and ‘reflect the buyer's discount for 

the fact that the profits would be postponed and . . . uncertain.’” Id. (quoting Dobbs, 

 5

 Although deposits are liabilities, they are in many ways similar to incomegenerating property. The bank pays interest on the deposits, but loans the money at a 

2007-5044, -5048 13 
Law of Remedies § 3.3(7), at 313 & n.2). Valuation as of the date of the breach is also 

consistent with the general principle that lost property is valued as of the date of the 

breach. See Energy Capital, 302 F.3d at 1330; 11 Joseph M. Perillo, Corbin on 

Contracts § 55.13, at 50 (rev. ed. 2005) (explaining that value of lost asset is 

determined as “the amount of money that the plaintiff could have obtained [for it] from 

other people at the time and place.”); see also 24 Richard A. Lord, Williston on 

Contracts § 64:4, at 51 (4th ed. 2002) (quoting Schonfeld’s statement that lost assets 

are properly valued as of the date of the breach). 

It is of no consequence here that First Federal was unable to obtain replacement 

deposits at the time of the shrink. Even when income-producing property cannot be 

replaced by the nonbreaching party, damages for the loss of such property are based 

on its market value as of the date of the breach. For example, in Schonfeld, two 

investors had breached a contract to provide capital to a closely-held cable television 

corporation. 218 F.3d at 177-180. As a result, the corporation lost an exclusive license 

to distribute certain BBC television programming in the United States for a 20-year 

period. Id. at 179. Although the exclusive license could not have been replaced, 

because of the lack of capital resulting from the breach, the Second Circuit held the 

damages were properly based on the prevailing market value of the lost exclusive 

license at the time of the breach. Id. 

For the same reasons, the loss suffered by First Federal as a result of the lost 

deposits is properly measured by the prevailing market value of those deposits at the 

 

higher rate, thus generating a profit. The deposits here have a value reflected in the 

premium that other banks are willing to pay to acquire such deposits. 

2007-5044, -5048 14 
time they were lost. We conclude that the Court of Federal Claims erred in awarding 

value of the lost deposits as of the date of the trial, based on 2001 data. 

B 

We next turn to the question of whether First Federal is entitled to recover lost 

franchise value at the date of the breach, i.e. 1990-1993. Two things are fatal to any 

such claim here. First, First Federal has never made such a claim either before the 

Court of Federal Claims or on appeal. It chose to proceed entirely on a future lost 

profits theory, which was rejected by the Court of Federal Claims, and on a lost future 

value theory, which we have rejected in the preceding section of this opinion. First 

Federal never asserted a claim for the value of the deposits at the time of the loss.6 

The mere fact that the government, on appeal, presented its own estimate of the market 

value of First Federal’s lost deposits as of the time they were lost based on trial exhibit 

DX-1321 (discussed below) does not preserve a claim for damages that First Federal 

did not itself assert either at the damages trial or on appeal. 

Second, there was no finding by the Court of Federal Claims as to deposit values 

in the 1990-1993 period, and First Federal has agreed that there is no record evidence 

that would support such a finding.7

 The only specific indication of the deposit premium 

 6

 See First Federal II, 73 Fed. Cl. at 646. Dr. Kaplan’s testimony at trial 

makes clear that his calculation was based on the market value of deposits in 

approximately 2001, and was intended to approximate the market value of the forgone 

deposits as of the date of trial. Dr. Kaplan’s model also included a separate 

approximation of the net profit that these deposits would have generated between the 

time they were lost and the date of the trial, as the dissent describes, but the Court of 

Federal Claims rejected that claim. 

7

 At oral argument, when asked whether there was any evidence introduced 

at trial as to the value of the deposit at the date of the breach, First Federal responded 

that “[t]here was no evidence because the trial court correctly . . . valued the deposits as 

of the presumed date of the trial.” Oral Arg., at 12:50-13:04. 

2007-5044, -5048 15 
applicable between 1990 and 1993 was a demonstrative exhibit, DX-1321, used by a 

government expert witness, Dr. Rochester. First Federal objected to the admission of 

this exhibit. Although Dr. Rochester was allowed to use DX-1321 while testifying, the 

demonstrative exhibit itself was “not . . . admitted for the truth of the matters stated 

therein.” Damages Trial Tr. at 2174 (June 1, 2006). Dr. Rochester did not testify with 

respect to the deposit values for 1990-1993 reported on DX-1321. 

The only other mention of deposit premiums applicable between 1990 and 1993 

was by First Federal’s expert Dr. Kaplan. Dr. Kaplan’s vague testimony, however, only 

indicates that ”[a]s sort of a general approximation, the branch premiums hovered for 

many of those years . . . from 1990 when the Resolution Trust Corporation started its 

business, the first year or two you are looking at premiums of about 1 percent. And it 

crept up to 2 percent, 2 and a half percent in the later years, so you have an incredible 

distortion.” Id. at 1574-76 (May 30, 2006). This testimony appears to relate generally to 

the period between 1990 and 1996 when the Resolution Trust Corporation was 

liquidating failed thrifts. However, Dr. Kaplan did not refer to DX-1321 or provide any 

basis for these estimates. Indeed, he indicated that these estimates are not a fair 

reflection of “private transactions in the marketplace.” Id. at 1576. 

Moreover, Dr. Kaplan agreed that the premium or value attributable to deposits, 

unlike standardized commodities with little variation, is dependent on the particular 

characteristics of the deposits and branches being transferred and the particular market 

for deposits prevailing at that time and place. Important determinants of deposit value 

identified by Dr. Kaplan include the branches’ size, their location, the demographics of 

their customers, the degree of competition to which they are subject, their costs and 

2007-5044, -5048 16 
profitability, the market’s view of their future profitability, and the composition of their 

deposits including the mix of account types or products represented. There is almost no 

evidence in the record in this case of the characteristics of First Federal’s deposits with 

respect to these market criteria in 1990-1993. 

A claim for an attenuated loss resulting from a breach, like a lost profits claim, 

must not be speculative and must be supported by evidence providing a reasonable 

basis for the amount of damages. See Old Stone Corp. v. United States, 450 F.3d 

1360, 1377 (Fed. Cir. 2006) (citing Cal. Fed. Bank v. United States, 395 F.3d 1263, 

1272-73 (Fed. Cir. 2005); Glendale Fed. Bank, FSB v. United States, 378 F.3d 1308, 

1313 (Fed. Cir. 2004); Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374, 1380 

(Fed. Cir. 2001)); see also 3 Dobbs, Law of Remedies § 12.4(3), at 69-70 (“[S]pecial or 

consequential damages . . . must be proven with reasonable certainty and must not be 

‘speculative.’”). It is well established that “[a]n expert’s testimony will not support a 

verdict if it lacks an adequate foundation in the facts of the case.” Genmoora Corp. v. 

Moore Bus. Forms, Inc., 939 F.2d 1149, 1157 (5th Cir. 1991) (rejecting expert valuation 

estimate based on assumptions about financial status and financial report errors which 

lacked supporting record evidence) (citing cases). Thus, even if Dr. Kaplan’s somewhat 

vague testimony were viewed as supplying average premium data for 1990-1993, that 

evidence would not be sufficient to show the amount of damages without testimony 

connecting the data to the actual loss suffered. There is no evidence here that the 

average premium data for the 1990-1993 period discussed in passing by Dr. Kaplan 

were representative of the deposits that First Federal lost. Indeed, the only testimony 

2007-5044, -5048 17 
was Dr. Kaplan’s assertion that the estimates he reported did not fairly reflect private 

market transactions.8 

Because First Federal is not entitled to damages based on the value of its lost 

deposits as of the date of the trial, and has neither made nor supported any claim to the 

value of the lost deposits at the time they were lost, we reverse the Court of Federal 

Claims’ award of damages in favor of First Federal. 

II 

In its cross-appeal, First Federal argues that the Court of Federal Claims erred in 

its conclusion that there was no goodwill contract with respect to the Norfolk and TriFederal mergers. 

“In order to prevail in a Winstar case a plaintiff . . . must establish that a contract 

existed with the government whereby the government was ‘contractually bound to 

recognize the supervisory goodwill and [particular] amortization periods.’” Franklin Fed.

Sav. Bank v. United States, 431 F.3d 1360, 1365 (Fed. Cir. 2005) (quoting Winstar 

Corp. v. United States, 64 F.3d 1531, 1541-42 (Fed. Cir. 1995), aff'd, 518 U.S. 839 

(1996)). To prove the existence of a Winstar contract, like any other contract with the 

government, “four basic requirements must be met: (1) mutuality of intent to contract; 

(2) lack of ambiguity in offer and acceptance; (3) consideration; and (4) a government 

representative having actual authority to bind the United States in contract.” Anderson 

v. United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003). 

This court has previously explained the type of evidence needed to prove the 

government’s intent to enter into a Winstar contract. We have emphasized that 

 8

 There is a similar lack of testimony with respect to the figures appearing in 

2007-5044, -5048 18 
“regulatory proclamations are insufficient to create contractual obligations because . . . 

‘[m]ere approval of the merger does not amount to [an] intent to contract.’” Id. at 1357 

(quoting D & N Bank v. United States, 331 F.3d 1374, 1378 (Fed. Cir. 2003)). “An 

agency’s performance of its regulatory or sovereign functions does not create 

contractual obligations.” D & N Bank, 331 F.3d at 1378-79. Rather, “there must . . . be 

a clear indication of intent to contract and the other requirements for concluding that a 

contract was formed.” Id. at 1378. A plaintiff must provide “something more than a 

cloud of evidence that could be consistent with a contract to prove a contract and 

enforceable contract rights.” Id. at 1377. In other words, “something more” than mere 

regulatory approval of the merger must be shown. Id. at 1379-80; see also Mola Dev. 

Corp. v. United States, Nos. 2007-5058, 2007-5080, slip op. at 11-12 (Fed. Cir. Feb. 25, 

2008). At the same time, we have recognized that a formal written agreement is not 

necessary to prove the existence of a Winstar contract when there is other adequate 

evidence of the government’s intent to form a contract. See Fifth Third Bank of W. Ohio 

v. United States, 402 F.3d 1221, 1231-32 (Fed. Cir. 2005). 

No such evidence exists here. There is no evidence that the government took 

any action to encourage First Federal to merge with either Norfolk or Tri-Federal. There 

is also nothing in the merger agreements between First Federal and Norfolk and TriFederal, or the government’s approval letters that could evince the government’s intent 

to enter into a goodwill contract. In both mergers First Federal communicated to the 

government a request only for, and in both mergers received, standard treatment of 

goodwill, including use of the purchase method of accounting and amortization of 

 

DX-1321, even if we were to assume that DX-1321 constituted record evidence. 

2007-5044, -5048 19 
goodwill over a twenty-five year period in compliance with GAAP. Neither merger was 

designated as instituted for supervisory purposes, no government assistance was 

provided, there were no forbearances with respect to goodwill, and there was no 

negotiation with respect to the treatment of goodwill. 

First Federal does not argue that there is any document that purports to be an 

agreement between it and the government with respect to the Norfolk or Tri-Federal 

mergers, or that there were any negotiations at all between First Federal and the 

government regarding the regulatory treatment of goodwill in these mergers. Instead, 

stressing the proximity in time of the three mergers, First Federal urges that it and the 

government used the contractual agreement that was reached with respect to the Great 

Plains merger as a template for the subsequent mergers. The Court of Federal Claims 

rejected this argument. It found that (1) First Federal had never communicated to the 

government that it considered the latter mergers to include the same terms as the Great 

Plains merger and (2) there were substantial differences between the documents used 

in the Great Plains transaction and those used in the Norfolk and Tri-Federal 

transactions, precluding any inference that the government understood the latter 

transactions as involving the same contractual elements as the former. 

Contrary to First Federal’s position, we see no inconsistency between the Court 

of Federal Claims’ holding and our decision in Fifth Third. In Fifth Third, we held that a 

Winstar contract formed with respect to one transaction, could be used as a template for 

subsequent transactions. 402 F.3d at 1231-32. At the same time, we made clear that 

each transaction must be considered separately to determine whether a Winstar

contract was formed. See id. at 1231-33 (analyzing contract formation as to each of a 

2007-5044, -5048 20 
series of mergers); see also Hughes v. United States, 498 F.3d 1334, 1339-40 (Fed. 

Cir. 2007) (recognizing that separate contractual documents with respect to the same 

transaction must be analyzed separately if they could constitute separate agreements). 

In Fifth Third, a Winstar contract embodied in the documents exchanged 

between the parties, was formed in a first merger, as confirmed by express negotiation 

about the use of goodwill, and in three subsequent mergers both the government and 

the thrift “understood that the parties were agreeing to the same terms as those in the 

[first] acquisition.” 402 F.3d at 1232. Although the subsequent mergers used less 

detailed documents, we emphasized that the evidence of negotiation was particularly 

strong as to each of the mergers, and that the negotiations for each “followed a similar 

pattern.” Id. at 1227. The government first contacted the acquiring institution to 

propose each merger; the acquiring institution “requested FSLIC cash assistance,” and 

the government “responded each time that no cash assistance was available, but that 

instead [it] could offer the same regulatory and accounting treatment of supervisory 

goodwill that had been used in the [first] transaction.” Id. 

Unlike the factual situation presented in Fifth Third, there is no evidence of an 

agreement to use the Great Plains merger as a template, and the Court of Federal 

Claims did not err in finding that each merger was separate and that there was no 

negotiation with respect to goodwill as to the two later mergers.9 Nor did the Court of 

 9

 As the Court of Federal Claims further noted in denying reconsideration: 

Unlike the mergers in Fifth Third and the Great Plains transaction, 

the pattern and circumstances of the Tri-Federal and Norfolk transactions 

evidence that the special treatment of goodwill was not a central part of 

the agreements. The Tri-Federal and Norfolk mergers involved no premerger negotiations regarding the treatment of goodwill and Lincoln 

2007-5044, -5048 21 
2007-5044, -5048 22 

Federal claims err in deciding that the necessity of counting goodwill for regulatory 

compliance purposes did not establish the existence of contracts with respect to Norfolk 

and Tri-Federal. See Fifth Third, 402 F.3d at 1233 (“economic irrationality cannot 

create contracts”). The Court of Federal Claims’ conclusion that there were no goodwill 

contracts with respect to the Norfolk and Tri-Federal mergers is not clearly erroneous. 

CONCLUSION 

The judgment of the Court of Federal Claims awarding damages is reversed 

because First Federal was not entitled to recover damages based on the market value 

of its lost deposits as of the date of trial, and neither claimed nor introduced evidence to 

support damages based on the value of the lost deposits at the time they were lost. 

With respect to First Federal’s cross-appeal, the challenged liability judgment of the 

Court of Federal Claims, concluding that no Winstar contract was formed with respect to 

the Norfolk or Tri-Federal mergers, is not clearly erroneous and is affirmed. 

REVERSED in part and AFFIRMED in part 

COSTS 

No costs. 

 

submits no evidence that it ever communicated a request for special 

treatment of goodwill with respect to the Tri-Federal and Norfolk mergers. 

First Federal Lincoln Bank v. United States, 68 Fed. Cl. 200, 203 (2005). 
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT 

 

2007-5044,-5048 

 

FIRST FEDERAL LINCOLN BANK, 

Plaintiff-Cross Appellant, 

v. 

UNITED STATES, 

Defendant-Appellant. 

Appeals from the United States Court of Federal Claims in 95-CV-518, Senior Judge 

Lawrence S. Margolis. 

 

MAYER, Circuit Judge, dissenting-in-part. 

I dissent from the majority’s reversal of the Court of Federal Claims’ damages 

award. The trial court made a reasonable and well-supported determination of the 

damages sustained by First Federal Lincoln Bank (“First Federal”), and the majority 

offers no persuasive justification for setting it aside. Furthermore, after deciding to 

jettison the expectancy damages theory upon which this case was tried, the majority 

precludes First Federal from presenting evidence as to the damages it suffered under 

the majority’s newly-adopted damages paradigm. This is fundamentally unjust. 

I. Standard of Review 

The Court of Federal Claims conducted a two-week trial on damages, at which it 

heard expert witnesses from both sides, weighed the evidence and made a 

determination as to the quantum of damages sufficient to remedy the government’s 

breach. As the majority acknowledges, the trial court properly determined that First 

Federal was entitled to damages for the value of deposits it was forced to run off to 
comply with elevated capital requirements. Ante at 11. The majority does not dispute 

that the trial court’s award of approximately $4.5 million in damages was a reasonable 

approximation of the value that First Federal’s deposits would have had, at the date of 

trial, if the breach had not forced it to “shrink” by running off deposits. The majority 

concludes, however, that the trial court’s damages award must be set aside because 

damages were calculated as of the date of trial rather than as of the date of breach. Id.

at 12-14. 

This court has long acknowledged that the “ascertainment of damages is not an 

exact science,” Bluebonnet Sav. Bank, F.S.B. v. United States, 266 F.3d 1348, 1355 

(Fed. Cir. 2001), and that “the trial court [is] in the best position to make the factual 

determinations necessary to establish an appropriate damages award.” Bluebonnet 

Sav. Bank, F.S.B. v. United States, 339 F.3d 1341, 1346 (Fed. Cir. 2003). During a trial 

on damages, the trial court gains an “intimate familiarity” with the facts in a complex 

case, see id., and is in a superior position to make intricate judgments as to the 

quantum of monetary damages sufficient to make an injured claimant whole. 

Accordingly, this court should set aside a trial court’s damages calculation only under 

exceptional circumstances, such as where the decision is “‘clearly unreasonable, 

arbitrary or fanciful’” or where “‘the record contains no evidence upon which the [trial] 

court could have rationally based its decision.’” Hi-Shear Tech. Corp. v. United States, 

356 F.3d 1372, 1377-78 (Fed. Cir. 2004) (quoting Air Land Forwarders, Inc. v. United 

States, 172 F.3d 1338, 1341 (Fed. Cir. 1999)). In making damages determinations, the 

Court of Federal Claims “‘occupies the position of a jury under like circumstances; and 

all that litigants have any right to expect is the exercise of the court’s best judgment 

2007-5044,-5048 2
upon the basis of the evidence provided by the parties.’” Bluebonnet, 266 F.3d at 1357 

(quoting Specialty Assembling & Packing Co. v. United States, 355 F.2d 554, 573 (Ct. 

Cl. 1969)). 

The majority fails to establish clear error in the trial court’s decision to calculate 

damages as of the date of trial rather than as of the date of breach. To the contrary, the 

trial court’s damages methodology is fully supported—even compelled—by this court’s 

precedent. 

II. Discounting Damages to the Date of Judgment 

The majority’s conclusion that damages must be calculated as of the date of 

breach was considered and expressly rejected in Energy Capital Corp. v. United States, 

302 F.3d 1314, 1330 (Fed. Cir. 2002). There, a financing corporation sued for damages 

after the government breached a contract allowing it to provide financing for energy 

improvements in subsidized housing. Id. at 1317-20. The Court of Federal Claims 

awarded the corporation the profits it lost as a result of the government’s breach, 

discounted to the date of judgment. On appeal, the government argued that the 

damage award should have been discounted to the date of breach instead of the date of 

judgment. Id. at 1330. This court rejected that contention, concluding that since lost 

profits were to accrue over the course of the contract, damages were correctly 

discounted to the date of judgment. Id.

“‘The time when performance should have taken place is the time as of which 

damages are measured.’” Id. (quoting Reynolds v. United States, 158 F. Supp. 719, 

725 (Ct. Cl. 1958)). Lost profits typically have not accrued on the date of breach; they 

accrue on an ongoing basis throughout the contract term. Id. Because lost profits and 

2007-5044,-5048 3
other expectancy damages “would have accrued on an on-going basis over the course 

of the contract,” damages should properly be awarded as of the date of judgment rather 

than the date of breach. Future profits are discounted to the date of judgment to reflect 

the present value of money. Id. at 1330 (“Discounting future lost profits to the date of 

judgment merely converts future dollars to an equivalent amount in present dollars at 

the date of judgment . . . .”); see also N. Helex Co. v. United States, 634 F.2d 557, 562-

64 (Ct. Cl. 1980) (awarding damages for breach of contract discounted to the date of 

judgment). 

The majority is simply wrong when it states that “First Federal’s claim for lost 

profits was disallowed by the Court of Federal Claims . . . .” Ante at 12. The Court of 

Federal Claims stated—repeatedly and unambiguously—that its damages award was 

based on a “lost profits” model.1 First Fed. Lincoln Bank v. United States, 73 Fed. Cl. 

 1

 The Court of Federal Claims explained its damages award as follows: 

Dr. Kaplan’s lost profits model calculates [First Federal’s] 

damages based on $550 million in foregone deposits the thrift 

allegedly lost as a result of the Government’s breach. Dr. 

Kaplan’s foregone deposit amount is derived from [First 

Federal’s] post-breach (1) shrink and (2) missed growth 

opportunities. The court concluded supra that Dr. Kaplan’s 

projection of [First Federal’s] post-breach deposit growth rate is 

speculative and therefore rejects the alleged $250 million in 

foregone deposits from [First Federal’s] missed growth 

opportunities that Dr. Kaplan factors into his lost profits model. 

Remaining is the alleged $300 million in foregone deposits from 

[First Federal’s] post-breach shrink, which is comprised of $225 

million from deposit runoff and $75 million from branch office 

closings. The court concluded supra that the breach caused 

[First Federal] to shrink its institution and, therefore, [First 

Federal] may recover damages from the foregone deposits due 

to that shrink. 

As explained supra, Dr. Kaplan’s lost profits model

calculates damages by adding [First Federal’s] lost earnings 

2007-5044,-5048 4
633, 643 (2006). The damages award was premised entirely on the “lost profits” model 

prepared by First Federal’s expert witness, Dr. Donald Kaplan. Id. This model had two 

components: (1) “$250 million in deposits lost from missed growth opportunities,” and 

(2) “$300 million in deposits lost due to the shrink.” Although the trial court rejected the 

first component of Dr. Kaplan’s model as unduly speculative, it awarded damages 

based on “what remain[ed] of Dr. Kaplan’s lost profits model” which was “his calculation 

of [First Federal’s] lost franchise value due to the foregone deposits caused by the 

thrift’s post-breach shrink.” Id. (emphasis added). 

The trial court’s damage award was designed to approximate “the discounted 

present value of the net interest income, operating expenses, and fee income generated 

by the foregone deposits in perpetuity.” Id. Given that the damage award was 

essentially an award for projected revenues—less projected expenses—on foregone 

deposits, it is hard to fathom how it can be perceived as anything other than a lost 

 

from foregone deposits with [First Federal’s] lost franchise 

value due to foregone deposits and is then reduced pro rata by 

multiplying it by 46%. The court concluded supra that Dr. 

Kaplan’s calculation of [First Federal’s] lost earnings from 

foregone deposits is speculative because it relies on a proxy to 

determine the thrift's yield on foregone assets. What remains 

of Dr. Kaplan’s lost profits model is his calculation of [First 

Federal’s] lost franchise value due to the foregone deposits 

caused by the thrift’s post-breach shrink. According to Dr. 

Kaplan, a lost franchise value calculation determines the value 

the thrift’s deposit franchise would have had on the date of trial 

had the Government not breached its contract. Dr. Kaplan 

calculates [First Federal’s] lost franchise value by multiplying 

the thrift’s foregone deposits by a branch sale premium. Dr. 

Kaplan asserts that this methodology approximates the 

discounted present value of the net interest income, operating 

expenses, and fee income generated by the foregone deposits 

in perpetuity. 

First Fed., 73 Fed. Cl. at 646 (emphases added). 

2007-5044,-5048 5
profits award. Although the damage award is sometimes referred to as a “lost franchise 

value” award rather than a “lost profits” award, the difference between the two types of 

awards is one of semantics, not substance. The award was specifically designed to 

compensate First Federal for projected income, less projected expenses, on foregone 

deposits, and the trial court therefore properly treated it as a lost profits award. See

Katz v. Cisneros, 16 F.3d 1204, 1207 (Fed. Cir. 1994) (“Regardless of the 

characterization of the case ascribed by [the plaintiff] in its complaint,” the court must 

“look to the true nature of the action.”); see also LaSalle Talman Bank, F.S.B. v. United 

States, 462 F.3d 1331, 1337 (Fed. Cir. 2006) (affirming an award of special dividends in 

a damages award “regardless [of] whether the dividends were called special or 

mandatory”); Balboa Ins. Co. v. United States, 775 F.2d 1158, 1163 (Fed. Cir. 1985) 

(surety had right to “total fund” remaining in government’s possession regardless of 

“what [the fund] is called”). 

The majority’s assertion that the trial court’s damage award cannot be deemed a 

lost profits award, ante at 12-14, is also curious because even the government 

acknowledges that the award was for lost profits. The government explains: “Since a 

valuation of [First Federal’s] franchise (including any premia paid for [First Federal’s] 

deposits) would incorporate the future expected profits of the franchise, it is the 

equivalent of a ‘lost profits’ award.” Since the damage award was an award of lost 

profits, under the reasoning of Energy Capital, the trial court was justified in calculating 

damages as of the date of trial rather than the date of breach. 

The majority’s assertion that “First Federal’s claim for lost profits was disallowed 

by the Court of Federal Claims, and that ruling has not been appealed,” ante at 12, is 

2007-5044,-5048 6
not correct. First Federal states expressly that the Court of Federal Claims made an 

award of lost profits, and argues that that award should be affirmed on appeal: 

The government has failed to meet its burden of showing that the 

trial court’s award of expectancy damages measured by the value 

of [First Federal’s] foregone deposits caused by the government's 

breach of the Great Plains contract was clearly erroneous, or that 

the quantum of damages awarded constituted an abuse of 

discretion. “Lost profits may be recovered where the plaintiff 

establishes by a preponderance of the evidence that: (1) the loss 

was the proximate result of the breach; (2) the lost profits were 

foreseeable; and (3) a sufficient basis exists for estimating the lost 

profits with reasonable certainty.” The Court of Federal Claims 

found that [First Federal] had satisfied this burden and awarded 

$4.5 million in expectancy damages based on the diminished value 

of [First Federal’s] franchise resulting from the deposits that the 

Great Plains breach caused [First Federal] to run off. 

 First Federal Brief at 44-45 (footnotes and citations omitted) (emphases added); see

also id. at 70 (“Lost franchise value models provide a well-settled measure of lost profits 

in Winstar cases.”); id. at 80 (“The trial court correctly awarded expectancy damages 

based on lost deposit franchise value . . . .”). 

 The Court of Federal Claims did reject one portion of First Federal’s claim for lost 

profits. First Federal initially sought to recover lost earnings on foregone deposits 

based on an adjustable mortgage backed security (“MBS”) rate. The court, however, 

found that this calculation was unduly speculative because First Federal “did not 

maintain the adjustable rate MBS in its investment portfolio following the breach . . . .” 

First Fed., 73 Fed. Cl. at 644. This is the portion of the lost profits award that has not 

been appealed. 

Clearly, lost profits from an asset and that asset’s fair market value are related 

concepts. See, e.g., Protectors Ins. Serv., Inc. v. United States, 132 F.3d 612, 616 

(10th Cir. 1998) (the “prospect of future earnings is considered in arriving at the fair 

2007-5044,-5048 7
market value of a given business”); Eateries, Inc. v. J.R. Simplot Co., 346 F.3d 1225, 

1236 (10th Cir. 2003) (“fair market value ‘necessarily incorporate[s] expected future 

profits’”) (emphasis in original, citations omitted)). The trial court elected to proceed on 

a lost profits rather than a fair market value model, and the majority has shown no clear 

error in its decision to do so. See Bank of Am., F.S.B. v. Doumani, 495 F.3d 1366, 

1372 (Fed. Cir. 2007) (the clear error standard governs a trial court's “findings about the 

general type of damages to be awarded (e.g., lost profits)”).

The trial court’s damages methodology is also fully consistent with Globe, a 

Winstar case with facts similar, in many respects, to those of the present case. In 

Globe, the government’s breach caused Globe Savings Bank to downsize by disposing 

of its branch networks. Globe Sav. Bank, F.S.B. v. United States, 65 Fed. Cl. 330, 345-

46 (2005), aff’d in relevant part and vacated in part, 189 F. App’x 964 (Fed. Cir. 2006). 

Globe was forced to run off $160 million in deposits to meet elevated capital 

requirements. Id. The value of Globe’s foregone deposits was calculated using a 

deposit premium based on branch sales occurring close to the time of trial, not at the 

time of breach. Id. at 358. The Globe approach to damages was properly used by the 

Court of Federal Claims as a template for awarding damages in the present case. The 

court explicitly stated that it was relying on the methodology “affirmed by the Federal 

Circuit” in Globe. 73 Fed. Cl. at 646. 

2007-5044,-5048 8
III. Expectancy Damages 

Although the majority acknowledges that expectancy damages, which typically 

take the form of an award of lost profits,2

 can be awarded as of the date of trial rather 

than the date of breach, it concludes that the damages for the lost franchise value 

associated with First Federal’s foregone deposits cannot properly be deemed 

expectancy damages. Ante at 12-14. It cites no authority to support this conclusion. 

Nor does it cite any authority for the proposition that the franchise value associated with 

First Federal’s lost deposits must be calculated as of the date of breach. Instead, it 

simply offers the bald assertion that First Federal’s “claim for lost franchise value 

associated with lost deposits . . . was in fact a claim for loss of income-generating 

property.” Id. at 13. It then cites to a case from the Second Circuit, Schonfeld v. 

Hilliard, 218 F.3d 164, 176 (2d Cir. 2000), for the proposition that income-producing 

property should be valued at the time of breach rather than the time of judgment. 

Schonfeld, however, offers no support for the majority’s decision to reject the trial 

court’s damages award. There, the defendants’ breach caused the plaintiff to lose an 

exclusive license to distribute television programming. 218 F.3d at 179. The plaintiff 

originally claimed damages for lost profits, but the court rejected the claim because the 

contract related to a new entertainment venture and the plaintiff “could establish neither 

the existence nor the amount of lost profits with reasonable certainty.” Id. at 173. 

 2

 Expectancy damages are the ordinary measure of damages in breach of 

contracts cases. LaSalle Talman Bank, F.S.B. v. United States, 317 F.3d 1363, 1371 

(Fed. Cir. 2003); Glendale Fed. Bank, F.S.B. v. United States, 239 F.3d 1374, 1380 

(Fed. Cir. 2001). Such damages make the injured party whole by giving him the 

benefits he “expected” to receive had the breach not occurred. Glendale, 239 F.3d at 

1380. Expectancy damages normally take the form of lost profits, but can also include 

other incidental damages. LaSalle, 317 F.3d at 1371; Glendale, 239 F.3d at 1380. 

2007-5044,-5048 9
However, the court awarded the plaintiff damages for the fair market value of the 

exclusive license, concluding that the license had a readily ascertainable market value 

and therefore provided an accurate measure of the loss sustained. Id. at 176-79. 

Nothing in Schonfeld conflicts with the Court of Federal Claims’ damages 

determination in the present case. At most, Schonfeld stands for the proposition that, 

under certain circumstances, an award for the fair market value of an asset provides a 

more reliable measure of damages than lost profits. 

Here, valuing the lost deposits as of the date of breach would have provided 

neither an accurate nor a reliable measure of the damages First Federal sustained. In 

the early 1990s, following the government’s breach, the savings and loan industry was 

in a state of tumult. The premia paid for deposits at the time of breach were significantly 

lower than the premia paid near the time of trial. Because First Federal had little choice 

about when to divest itself of deposits—it was compelled to run off deposits soon after 

the government increased minimum capital requirements—its recovery should not be 

predicated on the relatively low deposit premia prevailing in the period immediately 

following the government’s breach. 

 “The general type of damages to be awarded, their appropriateness, and rates 

used to calculate damages are reviewed for clear error.” Hunt Trust Estate v. United 

States, 470 F.3d 1044, 1049 (Fed. Cir. 2006); see Bank of Am., 495 F.3d at 1372. 

Because there has been no showing of clear error in the trial court’s damages award, I 

would affirm it. 

2007-5044,-5048 10
IV. Waiver 

Having concluded that damages must be calculated as of the date of breach, the 

majority then denies First Federal the opportunity to present evidence regarding the 

damages it suffered as of that date. Given that the government’s liability for breach of 

contract is undisputed,3 this decision is both puzzling and disturbing. 

At trial, First Federal presented extensive evidence about the profits it lost as a 

result of the government’s breach. See First Federal, 73 Fed. Cl. at 643-49. Given that 

lost profits had been awarded as of the date of trial in both Energy Capital and Globe, 

First Federal quite reasonably directed its evidence to the value its deposit franchise 

would have had at the date of trial, if the government had not breached its contract. Id. 

Although the government raised a wide array of objections to First Federal’s damages 

calculations at trial, it never argued that First Federal’s deposits should be valued at the 

time of breach rather than the time of trial. First Federal therefore had no reasonable 

way of anticipating that it would need to present damages evidence as of the date of 

breach. 

Even where questions exist as to the exact measure of damages, it is “a 

perversion of fundamental principles of justice to deny all relief to the injured person, 

and thereby relieve the wrongdoer from making any amend for his acts.” Story 

Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563 (1931). The 

government’s liability is clear, and the majority has advanced no persuasive justification 

for denying First Federal the damages it is due. See Franconia Assocs., Inc. v. United 

States, 61 Fed. Cl. 718, 746 (2004) (“[C]are must be taken lest the calculation of 

 3

 The government does not appeal the determination that it is liable to First 

Federal for breach of contract. 

2007-5044,-5048 11
2007-5044,-5048 12

damages become a quixotic quest for delusive precision or worse, an insurmountable 

barrier to any recovery.”).