Court Opinion

ID: 6936067
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:33:36.644521+00
Date Added: 2024-06-11T16:07:28.338945
License: Public Domain

LOURIE, Circuit Judge,
dissenting.
I respectfully dissent.
I have no quarrel with the majority’s conclusion that the government had a contractual obligation to permit the thrifts to count supervisory goodwill as regulatory capital and to accept the particular amortization periods. Moreover, there can be little doubt concerning the essential unfairness in Congress’s denial of those contractual rights in its enactment of FIRREA.
However, I believe that the sovereign acts doctrine is a barrier to the thrifts’ recovery under a breach of contract theory. In Horowitz v. United States, the Supreme Court held that “the United States when sued as a contractor cannot be held liable for an obstruction to the performance of [a] particular contract resulting from its public and general acts as a sovereign.” Horowitz v. United States, 267 U.S. 458, 461, 45 S.Ct. 344, 69 L.Ed. 736 (1925). An embargo placed by the Railroad Administration on shipments of silk by freight did not obligate the government for breach of its contract to ship silk which the Ordnance Department had sold to the petitioner. This case is no different in principle.
The majority holds that the enactment of certain sections of FIRREA was riot a “public and general” act because “legislation whose principal effect is to abrogate specific contractual rights does not immunize the government from contractual liability under the doctrine.” In support of this principle, the majority cites Everett Plywood Corp. v. United States, 651 F.2d 723, 731-32, 227 Ct.Cl. 415 (1981) and Sun Oil Co. v. United States, 572 F.2d 786, 817, 215 Ct.Cl. 716 (1978). The majority also quotes the Court of Federal Claims’ decision in Winstar II stating that the government is not afforded immunity when it “acts not in its capacity as sovereign, but in its capacity as contractor.” Winstar Corp. v. U.S., 25 Cl.Ct. 541, 551 (1992). In addition, the majority refers to Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434 (1934), and Perry v. United States, 294 U.S. 330, 55 S.Ct. 432, 79 L.Ed. 912 (1935).
Neither Everett nor Sun Oil, however, involved an act of general legislation as the asserted ground of contract breach. Everett dealt with an agency’s termination of a single logging contract. The Everett court specifically stated that “[i]t would have been an entirely different case if Congress had passed a law immediately prohibiting all cutting in public forests.” Everett, 651 F.2d at 732. Similarly, in Sun Oil the Secretary of the Interior denied a single drilling permit; there was no question of an alleged breach by legislation. In both Everett and Sun Oil the agency action was directed to a single contract, not all government contracts having a particular provision. Furthermore, unlike the legislation at issue in Lynch and Perry, FIRREA’s change in the regulatory treatment of supervisory goodwill did not repudiate a debt of the United States. No authority of which I am aware suggests that a comprehensive piece of national legislation such as FIRREA is not a “public and general” sovereign act of government.
The majority, like the Court of Federal Claims, states that only certain sections of FIRREA are relevant to the issue at hand. Of course, defining the relevant governmental action narrowly focuses on the impact that FIRREA had on the particular parties before us. However, it also mischaraeterizes the true nature of the governmental action. Congress did not act only against certain thrifts or contracts; it acted to deal with the entire thrift system in order to save it. Doing so required dealing with the problem of underfunded thrifts to which the treatment of goodwill was integrally related.
*1553Furthermore, I cannot see how Congress was acting in its contractual capacity, rather than in its role as sovereign, when it enacted FIRREA. The government was not buying goods or services when it acted. The legislation was intended to eliminate, nationally, practices that Congress thought were inconsistent with sound banking practice or that otherwise threatened the government’s ability to insure the depositors of the thrifts. FIRREA, in fact, reshaped the entire thrift industry on a national level. Thus, one can hardly characterize Congress’s act of passing FIRREA as “contractual” rather than sovereign. Moreover, the enactment of FIRREA was public and general; it was broadly directed to the good of the general public, to the country’s financial system, rather than to a specific contract that it disapproved.
That some members of Congress argued that enactment of certain provisions of FIR-REA would break promises made to the thrifts does not mean that Congress’s passage of FIRREA was not a sovereign act; it only states the problem and indicates the understandable distress felt by those members. Nor do such statements overcome the government’s sovereign right to enact comprehensive national legislation for the common good without liability for breach of particularly affected contracts. Thus, while the thrifts certainly were victimized when they made commitments in reliance on accounting treatment agreed to by the regulatory agencies, I am unable to conclude that the government was powerless to enact appropriate legislation in order to restructure the U.S. thrift industry.