## United States Court of Appeals for the Federal Circuit

03-5128 FIRST NATIONWIDE BANK, FIRS T GIBRALTER HOLDINGS, INC., and MACANDREWS & FORBES HOLDINGS, INC., Plaintiffs-Appellees,

v. UNITED STATES, Defendant-Appellant,

Harry M. Reasoner , Vinson & Elkins L.L.P., of Houston, Texas, argued for plaintiffs-appellees. Wi th him on the brief was Thomas P. Marinis, Jr . Of counsel on the brief were John D. Taurman and John M. Faust , of Washington DC. Of counsel was Gary L. Leshko , Cozen O’Connor, of New York, New York. David M. Cohen , Director, Commercial Litigati on Branch, Civil Division, United States Department of Justic e, of Washington, DC, argued for defendant-appellant. With him on the brief were Stuart E. Schiffer , Deputy Assistant Attorney General, Jeanne E. Davidson , Deputy Director, and Scott D. Austin , Trial Attorney. Appealed from: United States Court of Federal Claims Senior Judge Eric G. Bruggink

## United States Court of Appeals for the Federal Circuit

03-5128

FIRST NATIONWIDE BANK, FIRS T GIBRALTER HOLDINGS, INC., and MACANDREWS & FORBES HOLDINGS, INC., Plaintiffs-Appellees,

v. UNITED STATES, Defendant-Appellant,

__________________________ DECIDED: December 13, 2005

__________________________

Before MICHEL, Chief Judge , NEWMAN and LOURIE, Circuit Judges

. NEWMAN, Circuit Judge

.

This case arose from the savings and loan crisis of the 1980s and the ensuing regulatory regime, as summarized in United States v. Winstar Corp. , 518 U.S. 839 (1996). The United States Court of Federal Claims ruled that the government, in enacting and implementing the 1993 Guarini Amendment to the Internal Revenue Code, breached its contractual obligations to the First Na tionwide Bank, and awarded damages. First Nationwide Bank v. United States , 48 Fed. Cl. 248 (2000) (Nationwide I ); 49 Fed. Cl. 75003-5128 2 (2001) (Nationwide II ); 51 Fed. Cl. 763 (2002) (Nationwide III ); 56 Fed. Cl. 438 (2003) (Nationwide IV ). The judgment is affirmed. BACKGROUND In response to the large number of faili ng savings and loan institutions in the economic conditions of the 1980s, the United St ates, acting through the Federal Savings and Loan Insurance Corporation (FSLIC) and related regulatory bodies, encouraged solvent banks to infuse capital and management re sources into failing thrift institutions. The government offered various incentives fo r that purpose, including tax and accounting benefits, regulatory relief and forbearances, and cash payments, as discussed in Winstar , 518 U.S. at 847-56. In accordance with a plan call ed the "Southwest Plan," the FSLIC sought a buyer for five failing savings and loan institutions: First Texas Savings Association, Gibraltar Savings Association, Killeen Savings and Loan Associati on, Montfort Savings Association, and Home Savings Association. Thes e five institutions had total liabilities of over twelve billion dollars. On December 28, 1988 First Na tionwide Bank and associated investors (collectively "Nationwide") agreed to acquire the assets and liabilitie s of the five failing institutions, and also to pr ovide $315 million in cash; the terms and conditions were set forth in an Assistance Agreement between Nationwide and the FSLIC. The Assistance Agreement provided, inter alia , that in addition to the tax deductions available for losses, FSLIC would provide tax-exempt reimbursem ent of 90% of each covered asset that was liquidat ed at a loss. The Court of Federal Claims explained that Nationwide and the government "negotiated to convert one-third of the anticipated tax savings into a reduction in reimbursements," Nationwide III , 51 Fed. Cl. at 768, in that the03-5128 3 10% reduction in loss reimbursement was one- third of the 30% tax rate set in the Assistance Agreement. Id. at 764. The transfer to Nationwide of the five Southwest Plan thrift institutions was completed in December 1988. In August 1989 enactment of the Fi nancial Institutions Reform, Recovery, and Enforcement Act (FIRREA) eliminated many of the incentives that had been employed by the FSLIC to salvage fa iling thrifts, and required the newly formed Resolution Trust Corporation (RTC) to evaluat e all existing agreements with respect to loss reimbursement, tax consequences, and other conc essions and considerations. 12 U.S.C. §1441a(b)(10)(B) (1989). Upon such evaluati on the RTC and other cognizant agencies proposed no change in the arrangement with Na tionwide, and the A ssistance Agreement continued in effect in accordance with its terms. In 1993, in response to concerns that t he various assistance agreements granting tax benefits for covered asset losses had cr eated an incentive to maximize losses, Congress enacted a remedial provision as part of the Omnibus Budget Reconciliation Act of 1993 (OBRA). Section 13224 of the OBRA, know n as the "Guarini Legi slation," disallowed tax deductions for savings and loan losses that were reimbursed wit h tax-exempt FSLIC assistance; this disallowance was made retroac tive to years ending on or after March 4, 1991. Pub. L. No. 103-66, 107 Stat. 485 (1993), 26 U.S.C. §165 note. The effect was to eliminate a substantial benefit provided by the Assistance Agreement. Nationwide (and others) filed suit against the FDIC, as successor to the FSLIC. In August 1996 Nationwide and t he FDIC entered into a Settlement and Termination Agreement (the "Termination Agreement"), te rminating both the Assistance Agreement and03-5128 4 the suit against FDIC. FDIC made certain payments to Nationwide, and the Termination Agreement released the FDIC from further liability: 12.2. Release by First Nationwide and the Acquirers. First Nationwide and the Acquirers each hereby release, hold harmless, acquit, and forever discharge the FDIC Manager [a term used for the FDIC in its capacity as Manager of the FRF (the FS LIC Resolution Fund)] and the FDIC in all its capacities other than as Manager of t he FRF, and their respective present and former parents, subsidiaries and aff iliates, and the respective present and former officers, directors, successo rs, assigns, employees, agents, and representatives of all the foregoing (collectively, the "FDIC Released Persons") from and against any and all acti ons and causes of actions, suits, disputes, debts, accounts, promis es, warranties, damages, claims, proceedings, demands and liabilities, of ev ery kind and character, direct and indirect, known and unknown, at law or in equity, that First Nationwide and the Acquirers now have, have had at any time heretofore, or hereafter may have against the FDIC Released Persons by reason of any act or omission whatsoever by any FDIC Released Pe rsons in connection with the Lawsuit, the Assistance Agreement, the supervi sion of the FDIC Released Persons with respect to the Covered Assets, Related Claims or any other matters governed by the Assistance Agreement, GLOS, the Acquisition Agreements, the ACSI Settlement, the Excess Pr oceeds Agreement, or any other agreements related t hereto; provided , however , that the release provided in this Section 12.1 [sic] s hall not limit the rights of First Nationwide and the Acquirers to bring any claim based on fraud, willful misrepr esentation of a material fact, willful failure to disclos e a material fact, or willful misconduct. Section 4.2 of the Termination Agreement excepted all claims against the United States by reason of the Guarini Legislati on, while preserving the releas e of the FDIC and the RTC: 4.2. Excepted Claims. Excepted entirely from this Agreement (and hereinafter referred to as the "Except ed Claims") are any and all actions and causes of action, suits, disputes, debts, accounts, promises, warranties, damages, claims, proceedings, demands, and liabilities, of every kind and character, direct and indirect, known and unknown, at law or in equity, that First Nationwide or the acquirers now have, have had at any time heretofore, or hereafter may have against the United States of America for breach of contract or constitutional taking by r eason of the enactment of Section 13224 of the Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66 (the "Guarini Legislation"). It is the intenti on of the parties heret o that all claims and counterclaims asserted in the Law suit be dismissed with prejudice, except that such dismissal shall expressl y preserve the rights, if any, of First Nationwide and the Acquirers to assert the Excepted Claims solely03-5128 5 against the United States of Ameri ca in the United States Court of Federal Claims . The Excepted Claims shall not be based on any acts or omissions of the FDIC in any capacit y or the Resolution Trust Corporation ("RTC"), and shall not be asserted agains t the FDIC in any capacity or the RTC as a named defendant in any forum at any time in the future. Nothing contained in this Agreement shall, or shall be deemed to, constitute an admission of any allegation in the Law suit, or waive or relinquish any defenses that the United States of Am erica may have to the Excepted Claims preserved by this Section 4.2. [Emphasis added.] Nationwide, invoking Section 4.2, filed suit in the Court of Federal Claims in September 1996, seeking damages for breach of contract or unconstitutional taking arising from the Guarini Legislation. Responding to the government's motion for partial summary judgment, the court held in Nationwide I that Section 4.2 preserved this claim against the United States. 48 Fed. Cl. at 258. In further proceedings the court held that the government, as contracting party to the Assistance Agreemen t, breached the implied covenant of good faith and fair dealing with enactment of the abrogat ing Guarini Legislation, Nationwide II , 49 Fed. Cl. at 755, and that Nationwide is entitled to recover damages for that breach. Nationwide
III , 51 Fed. Cl. at 769. U pon further hearing, the cour t awarded $70,018,647 in damages.
Nationwide IV , 56 Fed. Cl. at 449. The United States challenges all of these rulings. The United States also asks this court to review and decline to follow our precedential decision, on similar facts, in Centex Corp. v. United States , 395 F.3d 1283 (Fed. Cir. 2005).03-5128 6 DISCUSSION
A In Nationwide I the Court of Federal Claims held t hat the release provision in the Termination Agreement does not bar Nationwide from pressing this claim against the United States. The government argues that Section 12.2 of the Termination Agreement released the FDIC from all liability under t he Assistance Agreement, and that since the FDIC was the government's party to the Termination Agreement in its capacity as successor to FSLIC, the release of the FDIC also released the United States from all liability for breach. Thus the government argues that the Except ed Claim provision, Section 4.2, did not preserve a br each claim against the United States. The government also argues that any judgment agains t the United States would be satisfied from the FSLIC Resolution Fund (FRF) which is managed by FDIC and, because of the re lease of FDIC in Section 12.2, the FRF cannot be called upon to satisfy any judgment against the United States under Section 4.2. Thus the government argues that since Nationwide agreed not to sue the FDIC, it cannot sue the United States despite the express reservation of this right. This question arose in Centex and was decided by the Cour t of Federal Claims in the same way as in Nationwide I , and affirmed by the Feder al Circuit. In Centex the plaintiff bank had entered into a terminati on agreement with the FDIC as successor to the FSLIC, terminating an assistance agreement that cont ained tax benefits expunge d by the Guarini Legislation. The Centex termi nation agreement released the FDIC from claims related to the assistance agreement, but reserved to the bank the right to bring a claim against the United States "based on legislat ion that resulted in the r eduction or elimination of03-5128 7 contractual benefits" of the FSLI C-assisted acquisition of failing thrifts. The bank then sued the United States, alleging that the Guarini Legislation constitu ted a breach of contract and incurred liability for damages. On the government 's argument that the reservation of the right to sue the United States was i neffective, this court on appeal held: The agreement barred an action directly against the FDIC, but to the extent that an action against the Un ited States is considered to implicate the FDIC, such as by requiring that any judgment be paid from the FRF, the reservation of the right to sue the United States in the Termination Agreement must be interpreted to permit such an action. Centex , 395 F.3d at 1313. The government now asks this court to decline to follow Centex and to disregard or hold ineffective Section 4.2 in the Termination Agreement. In Nationwide I , which was decided before the Federal Circuit reached Centex on appeal, the Court of Federal Claims held that this contract claim against the United States was preserved by Section 4.2. The court also held that it is not controlling whether the FDIC manages the fund from which damages ma y be paid, for the claim for breach by reason of the Guarini Legislati on was expressly excepted by Se ction 4.2. We agree that the Court of Federal Claims correctly constr ued the Termination Agreem ent. The principle that a contract is construed to give effect to all of its provisions does not exempt contracts with the United States. See Tecon Corp. v. United States , 411 F.2d 1262, 1264 (Ct. Cl. 1969) ("A construction of a contract provision which gives meaning to all its language is to be favored."); Hol-Gar Mfg. Corp. v. United States , 351 F.2d 972, 979 (Ct. Cl. 1965) ("Also, an interpretation which gives a reasonable meaning to all parts of an instrument will be preferred to one which leaves a portion of it useless, inexplicabl e, inoperative, void, insignificant, meaningless or superfluous"). The government's proposed interpretation would materially change the bargain by elim inating a remedy that had been expressly03-5128 8 reserved. The Court of Federal Claims co rrectly held that the Termination Agreement cannot be interpreted as eliminating Section 4. 2 while preserving Sectio n 12.2, for such an interpretation would deprive a material contract provision of effect. The Centex court also heard the argument that since damages for breach of contract would be paid from a fund of wh ich FDIC is the manager, the release of the FDIC means that the United States coul d not pay any damages if such were awarded, and thus the United States cannot be liable for damages. In Centex the court explained that the asserted source of funds neither insulated the United States fr om liability, nor freed it from the obligation to pay damages if such were incurred. We agree that the Termination Agreement, which preserved Nationwide's clai ms against the United States, did not in Section 12.2 place the FDIC in the position of preventing payment of a judgment against the United States. The holdings of Nationwide I are affirmed.
B The government also argues that the Guarini Legislation could not incur governmental liability for br each of contract with respect to e limination of tax incentives that were included in the Assistance Agreement wit h Nationwide, because the Tax Code did not authorize these tax incentives. The government argues that Nationwide was never entitled to the tax benefits that it re ceived in the Assistance Agreement, and thus suffered no deprivation by the Guarini Legisl ation. The argument appears to be that this aspect of the Assistance Agreement was contrary to law and that the Guarini Legislation simply eliminated the illegality. This argument had been made in Centex , and the Federal Circuit affirmed the comparable holding of the Cour t of Federal Claims. 395 F.3d at 1304.03-5128 9 Various statutes were enacted to facilitat e government intervention when the savings and loan institutions began to fail in large num bers. The Economic Re covery Tax Act of 1981, Pub. L. No. 97-34, 95 Stat. 172, codifi ed at 26 U.S.C. §597, wa s the foundation of several tax incentives, including authorizati on to the FSLIC to grant tax benefits in consideration for investment in and acquisition of weak or insolvent thrift institutions. See Centex , 395 F.3d at 1292. For example, the In ternal Revenue Code at 26 U.S.C. §597(a) provided that assistance payments to acquiring in stitutions in FSLIC- assisted transactions would not be taxed as income to the acquiring institutions, and 26 U.S. C. §597(b) provided that such assistance payments would not reduc e the basis of the acquired assets for tax purposes. Although the government argues that these provisions did not override other provisions of the tax c ode, specifically 26 U.S.C. §§165, 166, and 1001, which the government states are in conflict wit h §597, that is not a tenable argument. The favorable tax treatment was enacted as an incentive to facilit ate the acquisition of failing thrifts, by providing benefits to t he acquiring and merged financial institutions. Indeed, §597 of the Internal Rev enue Code was directed explicitly to the tax treatment of such acquisitions. As a principl e of statutory interpretation, a specific provision prevails against broader or more general provisions , absent clear contrary intent. See Radznower v. Touche Ross & Co. , 426 U.S. 148, 153 (1976) (specific statute not vitiated by general statute absent manifest in tent); Morton v. Mancari , 417 U.S. 535, 550-51 (1974) ("Where there is no clear intention otherwise, a specific statute will not be controlled or nullified by a general one, regardless of the priority of enactment.") This court ruled in Centex , 395 F.3d at 1295, that §597 was enacted as a tax incentive to attract solvent financial institutions to03-5128 10 invest in and manage failing thrifts, and in this application superseded the general provisions of §§165 and 166. Similarly, the general prin ciple of 26 U.S.C. §1001(a) was overtaken by §597. Section 1001(a) concerns deduction of losses from disposition of property, measuring such loss as "the excess of the adjus ted basis provided in such section [1011] for determining loss over the amount realized." The governm ent argues that FSLI C reimbursement of losses on thrift property should always have been included in the "amount realized," and should not have been treated in t he way that was authorized in the Assistance Agreement. However, Code §597 explicitly authorized these tax incentives to FSLIC-assisted thrift acquisitions, until abrogated by the Guarini Legisl ation. This court explained in Centex : After a close examination of the series of statutory provisions enacted in the 1980s and early 1990s that specific ally addressed FSLIC-assisted acquisitions, we agree with the trial cour t that, prior to the enactment of the Guarini amendment in 1993, Congress a llowed built-in losses to be deducted even though they were offset by FSLIC assistance payments. 395 F.3d at 1295. Nationwide entered into the Assistance Ag reement on the prem ise and promise of the tax benefits that were included in the Agr eement. Section 597 of the Internal Revenue Code permitted the tax incentives that we re implemented by t he FSLIC, and were recognized until abrogated by the Guarini Legisl ation. The government cannot reasonably take a contrary position years after entry in to the performance it solicited and authorized. The Court of Federal Claims co rrectly held in Nationwide II that the tax provisions of the Assistance Agreement were in accordance with law, and that the provisions were abrogated by the Guarini Legislation. C03-5128 11 It is undisputed that the G uarini Legislation deprived Nationwide of a significant aspect of the consideration se t forth in the Assistance Agreement. The Court of Federal Claims held that this st atutory deprivation constituted a br each of the implied covenant of good faith and fair dealing. This covenant refl ects the duty that eac h party owes to its contracting partners. As Professor Willist on explained, such a covenant underlies every
contract: The underlying principle is t hat there is an implied cove nant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.... 5 Williston on Contracts §670 (3d ed. 1961). This court elaborated in Centex that: The covenant imposes obligations on both contracting parties that include the duty not to interfere with the other party 's performance and not to act so as to destroy the reasonable expectations of the other party regarding the fruits of the contract. 395 F.3d at 1304. The United Stat es, when it enters into contra cts, is subject to this covenant. See Rumsfeld v. Freedom NY, Inc. , 329 F.3d 1320, 1330 (Fed. Cir. 2003) (the United States is bound by the covenant of good faith and fair dealing); Mobil Oil Exploration & Producing Southeast, In c. v. United States , 530 U.S. 604, 607-08 (2000) (the United States is bound by the same principles of c ontract law as in contracts between private persons).03-5128 12 The Court of Federal Claims recogni zed that the added tax benefits were a significant part of the consider ation to Nationwide in entering this arrangement to salvage the five failing thrift institutions of the Sout hwest Plan. The Resolution Trust Corporation had reported, at the incepti on of the FIRREA: "Assistance payments by FSLIC are not considered taxable to the acquirer. This indirect assistance is significant to acquirers with other profitable lines of business." See Report to the Oversight Board of the Resolution Trust Corporation and the Congress on the 1988/89 Federal Savings and Loan Insurance Corporation Assistance Agreements at 6 (Sept. 18, 1990) (reprinted in Hearing before the Committee on Banking, Housing, and Urban Affairs United States Senate , S. Hrg. 101-113 (Sept. 20, 1990)). It is not di sputed that the Guarini Legisl ation deprived acquiring banks such as Nationwide of a substantial benefit, upon imposing the tax liab ility that had been eliminated by the Assistance Agreement. The government presents three principal ar guments as to why the Court of Federal Claims erred in finding the gov ernment liable for breach: first, that the Assistance Agreement contained no express or implied co venant to preserve t he tax benefits, and therefore no covenant was breached; second, that even if there were an implied covenant, Congress was not bound by that covenant; and third, that the Court of Federal Claims erred in declining to apply the doctrine of unmistakability.
1. The government argues that it s only contractual obligati on concerning covered asset losses was its promise to pay 90% reimbur sement of such losses and that it had no obligation to preserve the tax treatment of such reimbursemen t, despite the tax terms of the Assistance Agreement. The government states t hat since it had no obligation as to future03-5128 13 tax treatment, it cannot be charged with viol ation of a covenant when the Guarini Legislation eliminated the favor able tax treatment. If the government's position is that the promised tax benefits in the Assi stance Agreement were not part of the contra ctual bargain, that position is contrary to the Agreement itself. The Assi stance Agreement by its terms would have expired in 1998 and contained no s uggestion that the tax benefits could end while the other contract ob ligations would continue. The covenant of good faith and fair dealing requires a party to respect and implement the contract in a ccordance with its terms; removal of this material tax benefit was reasonably held by the Court of Federal Claim s to violate this covenant. The Guarini Legislation changed the balance of contract cons ideration, whereby the unilateral removal of this tax benefit was reasonably found to have violated the covenant. Cf. Freedom NY , 329 F.3d at 1330 (government breached express terms of the contract or implied covenant of good faith and fair dealing by withholding payments).
2. The government argues that no governmental entity coul d promise that the tax benefits or any other aspect of the Assist ance Agreement would never be changed. Indeed, we do not hold that Congress cannot act in a way that affects existing government contracts, and we do not assess the merits of the Guarini Legislation. In Winstar , 518 U.S. at 881, the Court responded to a similar ar gument and explained: "The Government's position is mistaken, however, for the complem entary reasons that the contracts have not been construed as binding the Government's ex ercise of authority to modify banking regulation or of any other sovereign pow er, and there has been no demonstration that awarding damages for breach would be t antamount to any such limitation."03-5128 14 The issue is not whether Congress can enact legislation that abrogates or modifies existing government contracts; the issue is whether the government is liable for the consequences of such action. While a cont ract does not prevent Congress from enacting legislation, the government may incur liability for damages when the legislation materially affects performance of the contract. Winstar , 518 U.S. at 870; see Mobil Oil Exploration , 530 U.S. at 619-20 ("the fact t hat Interior's repudiation rest ed upon the enactment of a new statute makes no significant difference"). When the government as contracting party makes a promise in exchange for a benefit, it is bound by mutual obligations, as any party to a contract is bound. The Guarini Legislation was described at the ti me of enactment as a remedial action implementing a change in policy. It was dire cted at existing contracts to which the government was a party, and retroactively abrogat ed contract provisions entered into under the prior policy. As observed in Centex , 395 F.3d at 1306, "the Guarini amendment was the paradigm of targeted tax legi slation." The Court of Feder al Claims correctly held that the United States is liable for the financial consequences of this action as it affected existing contracts.
3. The "doctrine of unmistakab ility" is explained in Winstar , where the Court makes clear that when the government enters into a contra ct with a private person, the government is not precluded from acting in its sovereign capacity notwithstanding the contract unless there is an unm istakable promise not to act; but neither is the government immune from damages incurred as a result of the legislation. The Court explained that the application of the unmistakability doctrine vari es "according to the different kinds of03-5128 15 obligations the Government may assume and the consequences of enf orcing them." 518 U.S. at 880. The government argues that this means that Nationwide must accept the consequences of the Guarini Legislation, because there is no unmistakable promise in the contract to exempt Nationwide from future congressional action. The Court of Federal Claims did not agree, and expl ained that the question of unmistakability "cannot be resolved in isolation from the question of whether the alleged br eaching statute is a sovereign act," quoting Coast-to-Coas t Financial Corp. v. United States , 45 Fed. Cl. 796, 803 (2000). The government proposes that the unmistakability doctrine and the sovereign acts doctrine are separate, and that the Centex court, like the Court of Federal Claims, erred in stating that "[a] pr erequisite for invoking the unmis takability doctrine is that a sovereign act must be implicated." Centex , 395 F.3d at 1307 (citing Winstar , 518 U.S. at 879). The court in Centex explained that "[t]he enactmen t of the Guarini amendment cannot be regarded as a sovereign act because it was not generally applicable legislation in form or substance, but was specifically targeted at appropriating the benefits of a government contract." 395 F.3d at 1308. We have reviewed the matter, and agree that the doctrine of unmis takability is not here applicable. Congress was not bound to refr ain from enacting a regu latory measure to remedy perceived abuses in the FDIC-initiated savings and loan administ ration. The issue is not whether Nationwide must comply with the Guarini Legislati on, for it has so complied; the issue is whether the gover nment can be held liable in damages for the economic effect of the abrogated contra ct provisions. The Court in Winstar explained that "a requirement to pay money supposes no surrender of sovereign power by a soverei gn with the power to03-5128 16 contract." 518 U.S. at 881. Analogy to Winstar makes clear that the obligation of the government to pay damages caused by the Guarini Legislation is not inimical to the nature of the contract. The Court of Federal Claims correctly held in Nationwide III that the government is liable in damages for this breach.
D As damages, the Court of Federal Claims required the government to pay Nationwide the 10% of the covered a sset losses that had been withheld from reimbursement in accordance with the Assistance Agreement. The court called this remedy a form of "partial restit ution," explaining that "there ar e situations in which a fair solution requires partial rescission or equivalent relief, and a failure to recognize this can result in manifest injustice." Nationwide III , 51 Fed. Cl. at 769 (quot ing George E. Palmer, The Law of Restitution §12.6(d)) (1978). The government argues that re stitution is not an available remedy unless there was a "total breach" or repudiation of the entire contract, requiri ng termination of all performance by both parties. The government argues that because Nationwide continued to perform its contractual obligations after enactment of t he Guarini Legislation, and continued to accept payment of only 90% of cover ed asset losses for the five thrift institutions, Nationwide waived recovery of the lost ta x benefits. However, a non-breac hing party is not required to create an even worse situation by abandoning all performance in order to preserve access to remedy. As explained in the Re statement (First) of Restitution §68, comment b, a nonbreaching party does not waive the right to re stitution "where he cont inues to perform only for the purpose of preserving what he has alr eady invested in the performance." Also, Nationwide promptly protested t he Guarini Legislation, filing su it first against the FDIC and03-5128 17 then against the United States. The Court of Federal Claims correctly held that Nationwide's continuing performance was not a wa iver of the right of recovery for the government's breach. The government also argues that the proper remedy (if remedy is held to be warranted) should be measured as expectati on damages. The Court of Federal Claims deemed expectation damages unreliable and imprecis e in this case, for it would require projection into the uncertain future as well as requiring hypothetical reconstruction of the past. Thus the court held that expec tation damages could not be determined with reasonable certainty. See Restatement (Second) of Contracts §352 ("Damages are not recoverable for loss beyond an amount that t he evidence permits to be established with reasonable certainty.") This court has held that when expectation damages in the savings and loan context would be too spec ulative or indeterminate due to the complexities of the transactions, "the law provides a fall-back posit ion for the injured party -- he can sue for restitution." Glendale Fed. Bank v. United States , 239 F.3d 1374, 1380 (Fed. Cir. 2001). We agree with the Court of Feder al Claims that it is prefer able to apply a measure of damages that can be reasonably determined, as against a measure that cannot be established with reasonable cert ainty. The court recogni zed that the parties had "negotiated to convert one-thir d of the anticipated tax sa vings into a reduction in reimbursements," Nationwide III , 51 Fed. Cl. at 768, and aw arded this reduction as a reasonable and fair measure of damages in that it balanced t hose parts of the contract consideration and benefits that are most readily related. Id. at 767-68. We discern no error in the court's analysis and resolution. The decision as to the m easure of damages is affirmed.03-5128 18 E The government argues that the damages, even if meas ured by the 10% withheld reimbursement, are nonetheless subject to reduc tion. The government states that the award should be reduced by the pay ments by the FDIC to Nationwide in settlement of the litigation with the FDIC. The government al so argues that the settlement payment for differences in the book and tax basis of cove red asset losses should be deducted, and that the damages now assessed should be reduced by any covered asset gains. The Court of Federal Claims held that the sections of the Assistance Agreement dealing with covered asset gains and covered asset losses were distin ct and that the Guarin i Legislation affected only covered asset losses. Nationwide points out that the Terminati on Agreement with the FDIC exempted any future action against the United States arising from breach of the Assistance Agreement caused by the Guarini Legislation, and that the settlement with the FDIC related to other matters. We discern no error in the ruling of the Court of Federal Claims that the settlement pay ment by FDIC did not include damages flowing from the Guarini Legislation and ensuing breach of the contractual tax benefits. The government also argues t hat the trial court erred in including in the damage base the covered asset losses of a Nationwide s ubsidiary, specifically, the tax treatment of the Centennial Mortgage Corporat ion for the period before the FDIC purchased Centennial from Nationwide. Nationwide contends, and t he Court of Federal Claims held, that the Guarini Legislation applied to these losses, and that "there was no 'wash' to the consolidated entity." Nationwide IV , 56 Fed. Cl. 447. Contra ry to the government's position, Nationwide by consolidated return could include the covered asset losses of subsidiaries.03-5128 19 We have considered all of the government's arguments, and discern no reversible error in the rulings of the Court of Federal Claims. SUMMARY Section 4.2 of the Terminati on Agreement preserved the right of suit against the United States flowing from the Guarini Legislation. The Assistance Agreement including its tax provisions was a valid contract, and the obligation of good faith and fair dealing was breached by the Guarini Legislati on. The remedy in this case was reasonable, and the withheld 10% reimbursement of covered asset losses is an appropriate and fair measure of damages.

AFFIRMED