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

Heading: Payments-in-kind costs

Text: 41 The government contends that the $71.3 million made for payments-in-kind is not recoverable because it constitute[s] potential future obligations, not current, out-of-pocket costs. Westfed responds by arguing that the losses incurred in foreseeable reliance on a breached promise are not limited to only cash losses. Further, Westfed frames its actions as mitigation, to comply with the regulators' demands that Westfed raise additional capital for Western. 42 As the trial court recognized, payments-in-kind (PIKs) represent the issuance of additional paper securities to existing debt or equity holders. Westfed II, 55 Fed.Cl. at 552. Over a series of years, Westfed provided PIKs, instead of cash, as interest payments came due on existing debentures. Thus, although Westfed assumed additional obligations on paper, it never actually made any payments from its account, from which it could be said that Westfed sustained an actual loss as a result of the government's breach. Glendale, 239 F.3d at 1382. Westfed merely agreed through the PIKs to prospectively to take on future payment obligations, which may or may not come due in the future. Because PIKs are only potential future obligations, they do not count yet as an actually sustained loss, and therefore the trial court was in error to award Westfed $71.3 million for these alleged expenditures. 43