Opinion ID: 211884
Heading Depth: 3
Heading Rank: 1

Heading: Pre-contract costs

Text: 36 The government contends, at the very least, that the trial court erred in determining the compensable damages. First, the government asserts that the trial court erroneously awarded $10 million in pre-contract costs to acquire Old Western. We agree in part with the government. While acknowledging that pre-contract damages have often been denied, the trial court noted that courts have in special circumstances permitted recovery of foreseeable damages arising from preparation to perform under the to-be-formed contract. Westfed I, 52 Fed.Cl. at 161-62. In this case, about $3.1 million was paid to acquire Old Western stock on the open market in October 1987, a month after it had submitted its application to acquire Old Western on a stand-alone basis and a year before Westfed submitted its application for the acquisition and merger of Bell with Old Western. Another $6.9 million was incurred to purchase Old Western before formation of the breached contract. The trial court does not identify any persuasive reasons based on the record evidence to demonstrate that the expenditures in 1987 were in fact made pursuant to a binding agreement with the government in preparation for the performance under the breached contract, rather than pursuant to an attempt to acquire Old Western on a stand-alone basis. The evidence does not demonstrate that the October 1987 pre-contract expenditures were in fact made in reliance on the contract to be formed in connection with the acquisition and merger. Given the dearth of evidence proffered, we must conclude that the trial court's finding in regard to the alleged preparatory pre-contract costs is clearly erroneous. Accordingly, we reverse the trial court's award of $3.1 million in pre-contract damages. 37 However, there is evidence, such as a Letter of Intent dated June 22, 1988, suggesting that the FSLIC knew by that point in time that Westfed was incurring expenses in preparation for and reliance upon the contract. The appellate record does not indicate the timing of the $6.9 million in pre-contractual expenditures. Without evidence that these expenses were incurred before the FSLIC issued its Letter of Intent, we cannot find clear error in the trial court's decision that these damages were foreseeable and were suffered in reliance on the contract. We therefore affirm the remainder of the award of pre-contract damages, which amounts to $6.9 million. 38