Opinion ID: 210145
Heading Depth: 2
Heading Rank: 1

Heading: The Assistance Agreements involved in this case each provided:

Text: All the terms and provisions of this agreement shall be binding upon and inure to the benefit of the parties and their respective transferees, successors, and assigns, but this Agreement may not be assigned by any party nor may any rights or obligations under it be transferred or delegated to or vested in any other party through merger, consolidation, or otherwise, without the prior written consent of the CORPORATION. Id. at 160. Granite contends that because the consent provision was executory, it did not survive the termination of the Assistance Agreements that FIRREA caused, and that when it sold First Nationwide, it therefore was not required to obtained the regulators' `written consent for the transfer of supervisory goodwill.' We do not so read the provision. The first clause is a typical transferees, successors, and assignees provision. It, however, is limited by the immediately following language that any rights or obligations under the agreement may not be transferred without the prior written consent of the regulators. The two clauses are part of an integrated whole. The assurance that Granite's rights under the agreements would inure to the benefit of its transferees, successors, and assigns also is subject to the condition that Granite could not transfer those rights without the consent of the regulators. These two integral parts of the provision cannot be split, as Granite seeks to do, between the availability of the contractual provisions to Granite's transferees and the requirement of prior regulatory approval of the transfers. As the trial court stated, [t]he assignment clause is thus an all-or-nothing proposition, either the entire assignment provision remained in effect after the expiration of the Assistance Agreement or it did not. Id. at 161. It therefore follows that if the regulators would not have consented to Granite's transfer of the supervisory goodwill when it sold First Nationwide, Granite could not have obtained a higher price for First Nationwide if the sale had included supervisory goodwill. Stated differently, if Granite were unable to transfer the supervisory goodwill, no one would be willing to pay anything additional for it. Because we uphold the trial court's finding that the regulators would not have allowed the transfer of supervisory goodwill on the sale of First Nationwide, that results in affirmance of the trial court, and we need not consider the other grounds on which that court also based its decision. B. The supervisory goodwill involved here was a fictitious asset created to encourage and facilitate financially-sound thrifts to acquire financially-distressed ones. It was not true goodwill, which represents the excess of a business' going-concern value over the value of its assets. See Winstar, 518 U.S. at 848-49, 116 S.Ct. 2432 (Opinion of Justice Souter). Here, as noted, it represented the converse, i.e., the excess of the amount paid for a business' assets over the value of those assets. It was designed not to reflect the true worth of the business but to encourage sound thrifts to acquire financially-distressed ones by creating fictitious assets they could use to satisfy regulatory capital requirements and permit substantial depreciation. As the trial court stated: Supervisory goodwill is not a tangible asset, but an accounting fiction. It is a means of substituting an agreement with regulators for real assets in the calculation of regulatory capital. Granite, 74 Fed.Cl. at 160 (internal citations and quotation marks omitted). None of the considerations that led to and informed the regulators' adoption of the supervisory goodwill concept were applicable to Granite's sale of First Nationwide. By the time of that transaction, First Nationwide was a well capitalized and financially-sound institution. There was no need to provide financial incentives to induce successful thrifts to acquire it, or any compelling federal interest in favor of such acquisition. Accordingly, as the Court of Federal Claims stated, the transfer of Granite's supervisory goodwill would have been completely counter to the purpose of regulatory forbearances (a shorthand description of the treatment of supervisory goodwill). Id. at 162. The record supports that court's finding that the regulators would have had no reason to approve, and would not have approved, the transfer of supervisory goodwill as part of Granite's sale of First Nationwide to First Madison. Granite argues that the trial court's conclusion that the regulators would not have approved the transfer of supervisory goodwill here was refuted by evidence that, in fact, they had approved other such transfers. We conclude that the record does not show any significant regulatory approval of pre-FIRREA supervisory goodwill transfers. Before the trial court, Granite presented studies by its expert, Professor James, of pre-FIRREA thrift transfers in which the regulators allegedly approved the transfer of supervisory goodwill. Professor James relied on four instances of such transfers, the applicability of which to the present case the trial court described as questionable. Id. at 162. The court noted that three of the transactions involved a different method of accounting than the present case. Id. The court further pointed out that the amount of supervisory goodwill allegedly transferred was uncertain because pre-FIRREA, supervisory goodwill was not identified separately from goodwill. Id. at 163. The court concluded that Professor James' attempt at presenting actual factual evidence of pre-FIRREA transfers of goodwill simply is not reliable. Id. The trial court noted other examples in the record that contradicted Professor James' claim. It stated that pre-FIRREA, First Nationwide twice sold thrift entities and in each sale eliminated from its books a significant amount of goodwill. Id. Finally, two government regulators, who functioned pre-FIRREA, testified that they had never heard of a request to transfer supervisory goodwill or Assistance Agreements during their tenures. Granite, 74 Fed.Cl. at 163 (footnote omitted). The trial court concluded that [i]t seems highly unlikely, therefore, that two high ranking regulators would have no knowledge of an Assistance Agreement being included in a sale if it had ever happened. Id. Finally, Granite repeats the argument it made in the prior appeal that it is not plausible that the value of its supervisory goodwill was zero. As we stated in our opinion there, [t]he trial court, however, did not hold that the government's breach of contract caused Granite no damage, but held only the far different point that Granite had failed to prove its damages. Granite, 416 F.3d at 1383. The same conclusion applies here. As Mr. Justice Jackson, speaking for the Court in United States v. Yellow Cab Co., 338 U.S. 338, 340-341, 70 S.Ct. 177, 94 L.Ed. 150 (1949), stated, in words equally applicable to the present case: The judgment below is supported by an opinion, prepared with obvious care, which analyzes the evidence and shows reasons for the findings. To us it appears to represent the considered judgment of an able trial judge, after patient hearing, that . . . [Granite's] evidence fell short of its allegations  a not uncommon form of litigation casualty, from which [Granite] is no more immune than others.