Opinion ID: 210369
Heading Depth: 2
Heading Rank: 1

Heading: The Parties and the Contract

Text: In April 1982, the Federal Savings and Loan Insurance Corporation (FSLIC) created Suffolk County Federal Savings and Loan Association (Suffolk County) by merging two thrifts on Long Island that were incurring significant operating losses. LISB Trial, 67 Fed.Cl. at 619. In October 1982, FSLIC undertook a national solicitation for potential acquirers of Suffolk County because its financial condition continued to decline. Id. at 620. FSLIC determined that of the six bids received, the bid from LISB, a conservatively run and healthy thrift bank with branches in New York state, was the most favorable. Id. at 621. Specifically, FSLIC had determined that LISB's bid was the most attractive of all bids, both because it proposed the least amount of financial assistance from FSLIC and because FSLIC was attracted by LISB's proven record of sound financial management.  Compl. ¶ 24 (emphasis added). Negotiations began, and the parties executed a final Assistance Agreement on August 17, 1983. LISB Trial, 67 Fed.Cl. at 619. Pursuant to the Assistance Agreement, Suffolk County converted from a federal mutual savings and loan association into a federal stock savings bank and changed its name to Centereach, and LISB acquired Centereach as a wholly owned subsidiary by purchasing 100% of Centereach's authorized common stock for $100,000. Assistance Agreement at 1. The agreement required the government to make a direct cash contribution of $75 million to Centereach's net worth account within three business days of the conversion and acquisition. Id. § 3. In total, the government infused $122 million into Centereach under the Assistance Agreement and related agreements. LISB Summ. J., 54 Fed.Cl. at 610. In addition, the government agreed that LISB and Centereach could use the accounting principles in effect for mergers and acquisitions prior to the issuance of FASB # 72 to account for the acquisition. Assistance Agreement § 10. Those accounting principles enabled Centereach to account for approximately $625.4 million of goodwill to be amortized over forty years by the straight-line method. LISB Trial, 67 Fed.Cl. at 622. See generally Winstar, 518 U.S. at 853-56, 116 S.Ct. 2432 (describing goodwill accounting allowed by FSLIC and advantages to acquiring institutions). The Assistance Agreement explicitly conditioned the government's obligations on, inter alia, the receipt of a certificate, dated as of the Purchase Date, signed by the Chairman of the Board of LISB, who as discussed infra Part I.B was James J. Conway, Jr., stating that: (A) The representations and warranties of LISB set forth in § 11(b) are true and substantially correct as of the Purchase Date; and (B) No event has occurred and is continuing on the Purchase Date which would constitute, or which with notice or lapse of time or both would constitute, a Breach. Assistance Agreement § 2(c)(7). Of pertinence here, LISB represented and warranted in section 11(b)(5) the following: Compliance With Law. Except as disclosed in Exhibit G, LISB is not in violation of any applicable statutes, regulations or orders of, or any restrictions imposed by, the United States of America or any state, municipality or other political subdivision or any agency of the foregoing public units, regarding the conduct of its business and the ownership of its properties, including, without limitation, all applicable statutes, regulations, orders and restrictions relating to savings and loan associations, equal employment opportunities, employment retirement income security, and environmental standards and controls where such violation would materially and adversely affect LISB's business, operations or condition, financial or otherwise. (Emphasis added). LISB also represented and warranted in section 11(b)(9): Material Facts. This Agreement and all information furnished by LISB in connection with this Agreement or the Master Agreement do not contain any untrue statement of a material fact or omit to state a material fact necessary to be stated in order to make the statements contained therein not misleading; and there is no fact which materially adversely affects or in the affect the business operation, affairs or condition, financial or otherwise, of LISB or any of its properties or assets which has not been set forth in this Agreement, the Master Agreement or the other documents furnished under either Agreement. (Emphasis added). It is undisputed that LISB's Chairman certified to the government that the representations and warranties of LISB set forth in § 11(b) are true and substantially correct as required by section 2(c)(7) of the Assistance Agreement. Section 16 specified that [t]his Agreement and the rights and obligations under it shall be governed by the law of the State of New York to the extent that Federal law does not control.