Washington Mut. Inc. v. United States
636 F.3d 1207
9th Cir.2011Background
- In 1981, Home Savings of America, FSB agreed to acquire Southern Federal, Hamiltonian, and Security thrifts, with FSLIC providing Rights including branching rights and RAP rights as part of an incentives package.
- Bank Board resolutions and FSLIC entered into an Assistance Agreement conditioned on the merger, incorporating the RAP and branching rights into the overall transaction.
- FIRREA (1989) changed capital requirements by excluding unidentifiable intangibles like supervisory goodwill, affecting how such transactions were treated financially.
- In 1992–1993, Home Savings sold Missouri branches; in 1998, Washington Mutual (WaMu) acquired Ahmanson/Home Savings; in 2005, Ahmanson filed amended returns claiming refunds for 1990, 1992, 1993 based on RAP rights amortization and Missouri branching rights abandonment; IRS denied, WaMu sued.
- The district court granted summary judgment for the United States, rejecting WaMu’s cost-basis and fair market value theories; WaMu appeals seeking recovery via amortization and abandonment deductions.
- The Ninth Circuit holds that Home Savings had a cost basis in the RAP and branching rights equal to part of the excess of the thrifts’ liabilities over their asset values, but remands to determine the precise basis; it does not resolve WaMu’s alternative fair market value theory.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Basis in RAP and branching rights | WaMu seeks a cost basis equal to excess liabilities | US says no basis because rights were part of merger and not outside | Yes, cost basis exists; remand to quantify |
| Compatibility with G reorganization | Basis would not undermine G reorg treatment | Basis conflicts with tax-free structure | Compatible; not inconsistent with G reorganization |
| Collateral estoppel applicability | WaMu relies on prior Winstar-type rulings | Estoppel does not apply to current issues | Collateral estoppel does not apply |
| FMV basis under § 597 (alternative theory) | Rights have fair market value as FSLIC inducement | FMV theory not decided at this stage | Not addressed on the merits; remanded (concurred by author in part) |
Key Cases Cited
- United States v. Winstar Corp., 518 U.S. 839 (1996) (contractual promises surrounding supervisory mergers; basis for recognizing government liability)
- Home Savings of Am. v. United States, 50 Fed.Cl. 427 (2001) (Winstar-type damages; supervisory merger context)
- Home Savings of Am. v. United States, 399 F.3d 1341 (Fed. Cir. 2005) (affirmed contract-based liability for supervisory goodwill issues)
- Home Savings of Am. v. United States, 70 Fed.Cl. 303 (2006) (further Federal Claims decisions on related issues)
- Kraft, Inc. v. United States, 30 Fed. Cl. 739 (1994) (economic substance governs tax results; basis concepts applied)