OPINION
First Federal Lincoln Bank v. United States,
DISCUSSION
A motion for reconsideration, pursuant to R. Ct. Fed. Cl. 59(a)(1) (“RCFC”), must be based on a manifest error of law or mistake of fact and must show either: (1) that an intervening change in the controlling law has occurred; (2) that previously unavailable evidence is now available; or (3) that the motion is nеcessary to prevent manifest injustice. Bannum, Inc. v. United States,
I. The Federal Circuit’s Decisions in D & N Bank v. United States and Anderson v. United States
In D & N Bank v. United States,
In Anderson v. United States,
II. Do D & N Bank and Anderson Represent a Change in Controlling Law?
Defendant first contends that D &N Bank and Anderson established a more stringent standard than the standard this Court applied to the facts and circumstances of the Great Plains transaction. Plaintiff, on the other hand, claims that D & N Bank and Anderson did not enunciate new law, but rather applied the “well-settled principles of contract law” established by prior precedent. Pl.’s Opp. at 7. The Court agrees with plaintiff, and finds neither D & N Bank nor Anderson established an intervening change in the controlling law which renders the Court’s decision a clear error of law.
A. Standard for Determining Government Acceptance Under Prior Winstar Precedent
Defendant essentially claims that for plaintiff to establish the “manifest assent” necessary under prior precedent, it must point to some affirmative statement of the government’s intention to be bound in either the Bank Board’s Resolution or a Forbearance Letter. Thus, according to defendant, regardless of the negotiations that resulted in FHLBB approval, if the documents do not expressly state that goodwill is to be amortized in a certain way, there is no contract. The Court believes that defendant misinterprets prior precedent. It is well settled that a court must apply ordinary principles of contract interpretation to determine whether a contract exists between a private party and the govеrnment. United States v. Winstar Corp.,
Based on controlling Winstar precedent, this Court finds that determining whether the “manifest assent” necessary to form a contract exists involves a two-step inquiry. First, a court should look to documents such as FHLBB resolutions, forbear
Prior precedent establishes that, contrary to defendant’s assertions, the fact that a FHLBB Resolution includes nothing more than regulatory boilerplate does not foreclose a finding that a contract exists if the “realities of the transaction” favor interpreting the approval’s language as a contractual promise rather than a regulatory аction. See Home Federal Bank of Tennessee, F.S.B. v. United States,
B. The Standard Applied in D & N Bank and Anderson
Defendant’s next contention is that, even if the court set forth the correct standard, D & N Bank and Anderson made that standard more stringent. This Court disagrees. In D & N Bank, the court expressly stated that to show manifеst assent by the government a plaintiff must show an “affirmative statement of the government’s intention to be bound either in documents or based upon witness testimony about the words and actions of the relevant government officials.”
In Anderson the court again applied this standard. The court first looked at the Resolution and the forbearance letter relating to the merger at issue and found that neither constituted “the necessary ‘manifest assent,’ ” to form a contract.
Similar to the approach followed in D & N Bank, the court did not end its analysis; but rather, next inquired into the circumstances surrounding the transaction. Id. at 1358. Having determined that the language in the documents was merely regulatory boilerplate, the court still had to determine whether this language was added by the Bank Board acting as a “regulator or as a сontractor.” Id. at 1357. The court found that the “undisputed evidence ... confirm[ed] that the Bank Board did not manifest a contractu
III. Application of Controlling Winstar Precedent in the Great Plains Transaction
The next issue defendant’s motion presents is whether this Court misapplied controlling Winstar precedent. Defendant contends that because the facts of D & N Bank and Anderson are so similar to the facts in the Great Plains transaction, the Court’s decision in First Federal II constitutes a clear error of law. Defendant’s claim is based on two contentions: first, thаt D & N Bank and Anderson cannot be distinguished from the Great Plains transaction and second, that the Court erred in relying on certain evidence presented at trial. In response, plaintiff claims that defendant mischaracterizes the evidence presented during the Lincoln trial in an effort to “force fit the facts of [the Great Plains transaction] into the fact pattern presented in D & N Bank and in Anderson.” Pl.’s Opp. at 14. The Court agrees with plaintiff and finds that the evidence conсerning the Great Plains transaction is clearly distinguishable from the evidence presented in both D & N Bank and Anderson and thus, the fact that this Court reached a different result does not establish a clear error of law or fact.
A. The Great Plains Transaction is Legally Distinguishable from D & N Bank and Anderson
The evidence of negotiations surrounding the Great Plains transaction can be distinguished from those present in. D & N Bank and in Anderson. The court, in D & N Bank, analyzed three different types of circumstantial evidence — testimony by govеrnment officials that D & N contracted with the government, statements and documents by government officials that referred to D & N’s merger as “supervisory,” and market conditions at the time of the merger.
Unlike D & N Bank or Anderson, in the Great Plains transaction there were extensive negotiations that specifically addressed the issues of goodwill amortization and purchase aсcounting. The testimony at trial, along with the documents presented, showed that Lincoln’s offer to merge was initially conditioned on permission to amortize loan discounts by the sum-of-the-year digits method over ten years and to amortize goodwill on a straight-line basis over 30 years. First Fed. II,
In both D & N Bank and Anderson, the negotiations or circumstances leading up to approval of both mergers did not give the regulatory boilerplate language used in the resolutions a contractual meaning, but rather confirmed that the government was aсting solely in its regulatory capacity. In the Great Plains transaction, however, the negotiations and circumstances leading up to approval of the merger gave that same regulatory boilerplate language a contractual meaning. Therefore, defendant’s claim that the evidence of negotiations in this case cannot be differentiated from the negotiations in Anderson or the circumstances in D & N Bank is without merit.
B. Proper Characterization of the Negotiations
Defendant characterizes the evidence relied on by the Court as negotiations consisting of: (1) Lincoln requesting the ability to amortize any goodwill resulting from the acquisition of Great Plains over a period of 30 years; (2) the government’s request that Lincoln conform its goodwill treatment to existing regulatory policy consistent with GAAP; and (3) Lincoln’s acquiescence to the government’s request. In reality, the evidence showed extensive negotiations between Lincoln and FHLBB that led to a modification of Lincoln’s offer, rather than Lincoln’s acquiescence in the government’s rejection of an extended amortization period.
Defendant points to the fact that the three alternatives the government gave Lincoln all conformed with existing regulatory policy and were consistent with GAAP. Specifically, it argues that because the alternatives offered by FHLBB conformed with existing regulatory policy consistent with GAAP, the FHLBB was not acting as a contracting party, but rather as a regulator, simply approving the merger. While it might be true that the FHLBB alternatives presented to Lincoln conformed with existing regulatory policy consistent with GAAP, this Court fails to see how this is relevant to determining whether a contract, under which Lincoln was guaranteed a certain amortization period regardless of a change in regulatory policy, existed. In the Glendale transaction in Winstar II, the Federal Circuit found that a contract existed, under which Glendale could amortize goodwill over a period not to exceed 40 years. Winstar v. U.S.,
In affirming the Federal Circuit’s rulings in Winstar II, the Supreme Court agreed with this standard, noting that the question to be determined is whether an agreement allowing thrifts to use accounting methods consistent with existing regulatory policy was a mere statement of the “background rules,” or was a “part of the ‘agreements and understandings’ between the parties,” to which they were bound. Winstar III,
Defendant argues that the Court incorrectly relied on the FHLBB’s grant of two forbearances, both unrelated to goodwill amortization, to show that a contract existed under which plaintiff could amortize goodwill over a 25-year period. Defendant’s contention both misinterprets the law of contracts and mischaracterizes the evidence relied on by the Court.
As the Supreme Court explained in Winstar III, supervisory goodwill was attractive for two reasons.
The evidence shows that Lincoln bargained with FHLBB for the ability to use certain accounting methods — namely the ability to amortize goodwill over an extended period of time, the ability to accrete loan discounts in a certain manner, and the net worth forbeаrance. The government gave Lincoln alternatives regarding each of these issues. In exchange for better alternatives for the loan discounts and the net worth forbearance, Lincoln was willing to settle for a shorter amortization period. Put another way, in exchange for a 25-year amortization period, the government was willing to give Lincoln better treatment regarding its loan discounts and its net worth forbearance. Given that the principle incentive for utilizing these accounting principles was the timing difference, it makes sense that Lincoln would have negotiated for them together and also that Lincoln would have agreed to a shorter amortization period in exchange for a shorter loan accretion period. Thus, unlike the government’s characterization of the negotiations, this was a bargained-for-exchange that allowed the government to avoid “a possible supervisory problem.” First Federal II,
Contrary to defendant’s argument, the Court finds that it correctly viewed the evidence it relied on in its original opinion and further, based on that evidence, it correctly held that goodwill amortization was an essential term of the contract, which the government accepted when it approved the merger, First Federal II,
CONCLUSION
Defendant fails to point to any manifest error of law or mistake of faсt that renders the First Federal II decision, regarding the Great Plains transaction, clearly erroneous. While defendant disagrees with the findings of fact, the conclusions of law, and the application of the law to the facts in First Federal II, such disagreements are better dealt with through the appeals process than on a motion for reconsideration. Further, because this Court still agrees with its original conclusions, defendant’s motion for reconsideration is DENIED.