[2001-1 USTC ¶50,109] First Nationwide Bank, et al., Plaintiffs v. The United States , Defendant

U.S. Court of Federal Claims, 96-590C, 12/28/2000

48 FedCl 248

2000 U.S. Claims LEXIS 243.

[Code Sec. 1 ]

Constitutional arguments: Takings: Deductions, availability of.--Banks that acquired failing thrifts pursuant to an acquisition agreement with the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation, but were denied deductions of covered asset losses, failed to establish that the deductions were available prior to passage of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66). Thus, their claim that the government breached the implied covenant of good faith and fair dealing and amounted to a constitutional taking was rejected. The availability of the deduction was not irrelevant; the rights, obligations, and expectations of the taxpayers under the agreement were tied to the covenant.
[Code Secs. 7122 and 7402 ]

Summary judgment: Affirmative defenses: Accord and satisfaction: Release: Amended pleadings: Undue delay or prejudice: Breach of contract.--The government was granted leave to amend its pleadings to assert the affirmative defenses of accord and satisfaction and release against banks that acquired failing thrifts pursuant to an acquisition agreement with the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation (FSLIC), but were denied deductions of covered asset losses. There was no undue delay by the government in raising the affirmative defenses or undue prejudice because the taxpayers failed to sufficiently assert their claims under the agreement. Moreover, the release of the Federal Deposit Insurance Corporation as manager of the FSLIC Resolution Fund, from which any judgment or settlement would be paid did not necessarily preclude the taxpayers' recovery. Thus, the government was awarded only partial summary judgment in connection with the taxpayers' contractual and constitutional claims.

John D. Taurman, Harry M. Reasoner and Thomas P. Marinis, Jr. Washington, D.C., for plaintiffs. David W. Ogden, Assistant Attorney General, Scott Austin, David M. Cohen, Jeanne E. Davidson, Glenn I. Chernigoff, Paul G. Freeborne, Kenneth M. Kulak, Department of Justice, Washington, D.C. 20530, for defendant.

OPINION

BRUGGINK, Judge:

Pending in this Winstar-related ¹ case are defendant's motion for leave to file an amended answer; plaintiffs' motion for partial summary judgment; defendant's cross-motion for partial summary judgment or, in the alternative, request for discovery; plaintiffs' motion to strike certain testimony; and defendant's motion for leave to file reply to plaintiffs' supplemental brief. Oral argument was held on September 28, 2000. At oral argument, the court allowed the parties to file supplemental briefs. For the reasons set forth below, defendant's motion to file an amended answer is granted, plaintiffs' motion for partial summary judgment is denied, defendant's cross-motion for partial summary judgment is granted in part and denied in part, defendant's request for discovery is denied, plaintiffs' motion to strike is denied, and defendant's motion for leave to file reply to plaintiffs' supplemental brief is granted.

BACKGROUND ²

This case is one of a group of five pending "tax benefit" cases that arise out of a series of agreements entered into by the Federal Savings and Loan Insurance Corporation ("FSLIC") with various financial institutions in late 1988. Pursuant to these agreements, the FSLIC promised certain assistance to these financial institutions in regard to their acquisition from the FSLIC of the assets and liabilities of failing thrifts. In the pending tax benefit cases, the plaintiff financial institutions allege that their agreements with the FSLIC contained the promise of tax deductions for losses incurred as the result of the subsequent sale of certain thrift assets purchased by the plaintiffs from the FSLIC ("covered asset losses"), even though the agreements also provided that the FSLIC would reimburse the plaintiffs for the losses. The plaintiffs in these five cases have sued the government for breach of their agreements with the FSLIC, claiming that the government, through Congress's enactment of §13224 of the Omnibus Budget Reconciliation Act of 1993 (popularly referred to as the "Guarini legislation"), has broken its promise of tax deductions for covered asset losses by making those deductions unavailable. ³

As damages for this alleged breach of contract, the plaintiffs in the other four tax benefit cases seek the amount that would have been saved in taxes had the Guarini legislation not been enacted. However, the plaintiffs in this case, First Nationwide Bank, First Gibraltar Holdings, Inc., and MacAndrews & Forbes Holdings, Inc., without abandoning other claims they have in common with the other tax benefit plaintiffs, seek an additional remedy because of the unique assistance agreement they entered into with the FSLIC. The issues associated with that unique assistance agreement have been brought before the court in plaintiffs' motion for partial summary judgment.

The assistance agreement in question ("Assistance Agreement") provided for only ninety percent reimbursement by the FSLIC of the covered asset losses, rather than for full reimbursement as was the case with the assistance agreements at issue in the other tax benefit cases. Plaintiffs allege that the FSLIC's right to reimburse them for only ninety percent of their covered asset losses was contingent upon the continued availability of the tax deductions that were eliminated by the Guarini legislation. This allegation is based on plaintiffs' assertion that the ten percent of the reimbursement retained by the FSLIC represented the FSLIC's share of the benefits derived from those tax deductions. Without the availability of the deductions, plaintiffs aver, the basis for anything less than full reimbursement vanishes. Consequently, the unique remedy sought by plaintiffs in this case is return of the ten percent of the full reimbursement amount ⁴ retained by the Federal Deposit Insurance Corporation ("FDIC") after enactment of the Guarini legislation. ⁵

In their initial brief in support of their motion, plaintiffs set forth several theories they claim entitle them to the additional ten percent. ⁶ In plaintiffs' supplemental brief, a new theory is presented. The theories presented in the initial brief are as follows:

1. "Contemporaneous Government Documents[,] Incorporated by the Assistance Agreement's Integration Clause[,] Confirm that the Parties' Tax Benefit Sharing Arrangement Was Contingent on the Availability of a Tax Benefit to Share." Pls.' Mot. Part. Summ J. at 36. Therefore, under the Assistance Agreement, the FDIC is not entitled to retain ten percent of the full reimbursement amount;

2. "The Most Reasonable Interpretation of the Assistance Agreement is that FSLIC's Right to Reimburse Only the 'After-Tax' Portion of Covered Asset Losses Did not Apply Unless a Tax Deduction Was Available." Id. at 37. Plaintiffs here aver that the Assistance Agreement is ambiguous regarding the level of reimbursement for covered asset losses should the covered asset loss deduction become unavailable. That ambiguity, for a number of reasons presented, should be resolved in plaintiffs' favor. After the ambiguity has been properly resolved, the FDIC is not entitled to retain ten percent of the full reimbursement amount;

3. "To the Extent the Language of the Assistance Agreement Cannot Be Construed to Reflect the Parties' True Agreement Regarding the Scope of Their Tax Benefit Sharing Arrangement, It Should be Reformed to Do So." Id. at 41. Here, plaintiffs argue that the parties to the Assistance Agreement made a material mistake of fact in believing that the written memorial of the Assistance Agreement accurately reflected the parties' agreement. That material mistake provides a basis for reforming the contract in plaintiffs' favor. Therefore, under the reformed Assistance Agreement, the FDIC is not entitled to retain ten percent of the full reimbursement amount;

4. "Should the Court Find Insufficient Evidence that the Parties Actually Reached Agreement With Regard to the Sharing of Unavailable Tax Benefits, the Court Should Imply a Contractual Term In Order to Preserve the Essence of the Parties' Transaction." Id. at 43. That term should require full reimbursement of the plaintiffs in the event the deduction becomes unavailable. "The government therefore breached the Assistance Agreement by continuing to withhold full assistance payments even after the Guarini legislation retroactively repealed the tax benefit that had existed since 1981." Id. at 47; and

5. "The Government's Actions Breached its Obligation of Good Faith and Fair Dealing under the Assistance Agreement." Id. at 47. Plaintiffs' argument here is that the enactment of the Guarini legislation itself constituted a breach of the obligation of good faith and fair dealing under the Assistance Agreement. See id. at 48. Therefore, as a result of that breach, the FDIC is not entitled to retain ten percent of the full reimbursement amount.

Common to all five of these initial theories is the unique provision of the Assistance Agreement permitting the FSLIC to reimburse only ninety percent of covered asset losses. It is noteworthy, moreover, that a common denominator in the first four theories is that the event of breach is the failure of the FDIC to pay one hundred percent reimbursement for the covered asset losses upon failure of the deduction. Only in the fifth theory is the event of breach the passage of the Guarini legislation itself.

In their supplemental brief, plaintiffs present a theory that was not articulated in their prior filings. The first four theories asserted in plaintiffs' original motion rest on the argument that enactment of the Guarini legislation gave rise to a duty on the part of the FDIC to provide full reimbursement for covered asset losses; consequently, non-payment of that full reimbursement was a breach of a contract duty. The new argument is different. Plaintiffs now argue that enactment of the Guarini legislation discharged a duty on the part of plaintiffs to make tax benefit payments to FSLIC. ⁷ Thus, this theory does not depend on an allegation that the FDIC breached the contract. ⁸

Opposing plaintiffs' motion, defendant asserts, among other arguments, that a settlement and termination agreement between plaintiffs and the FDIC in a prior case bars plaintiffs from arguing any of these theories under the doctrines of accord and satisfaction and release. The termination and settlement agreement ("Settlement Agreement") defendant relies on was entered into on August 19, 1996, to terminate the Assistance Agreement and to resolve a lawsuit brought against the FDIC in 1995. That lawsuit was styled First Texas Bank v. FDIC, Civil Action No. 3:95-CV-2584-H (N.D.Tex. filed Nov. 20, 1995 ). The plaintiff in that case, First Texas Bank, is a predecessor in interest to plaintiff First Nationwide Bank. Consequently, the Settlement Agreement's provision (§2.3) regarding the termination of the Assistance Agreement is relevant to the case at hand. Also relevant, because of the government's arguments, are the Settlement Agreement's provision (§12.2) regarding the release of the FDIC as manager of the FSLIC Resolution Fund ("FRF"), the Settlement Agreement's provisions (§§4.1 and 4.2) regarding the continuing viability of claims, and the Settlement Agreement's provision (§2.1) regarding the payment of a settlement sum to plaintiffs.

It is helpful to set out in full the relevant sections of the Settlement Agreement. Section 2.1, Payment of Settlement and Termination Payment, states:

The FDIC Manager shall pay or cause to be paid to First Nationwide, in the manner provided in Section 2.4 of this Article 2, Thirteen Million One Hundred Sixty Two Thousand Nine Hundred Thirty-One and No/100ths Dollars ($13,162,931) (the "Settlement and Termination Payment").

Section 2.3, Termination of Assistance Agreement, states:

The parties hereto agree that, except as otherwise provided for herein, upon the occurrence of the Closing, the Assistance Agreement (including any and all provisions therein which explicitly survive the termination or expiration of the Assistance Agreement) and all rights and obligations of the parties thereto not previously fulfilled shall terminate effective as of the Closing Date, save and except: (a) the FDIC Manager's obligation to indemnify First Nationwide pursuant to Section 7(a)(1)-(3) of the Assistance Agreement after the termination of the Assistance Agreement; and (b) the settlement agreement reached between the FDIC and First Nationwide, dated January 11, 1994 , relating to the GLOS audit of legal fees which resolved disputes arising prior to September 30, 1993 .

Section 4.1, Settlement of Lawsuit, states:

Within one business day after the Closing Date, First Nationwide, the Acquirers and the FDIC Manager will instruct their attorneys to prepare and file a Stipulated Order of Dismissal of the Lawsuit pursuant to which any and all claims asserted by either party to the Lawsuit shall be dismissed with prejudice, except as provided in Section 4.2 below.

Section 4.2, Excepted Claims, states:

Excepted entirely from this Agreement (and hereinafter referred to as the "Excepted Claims") are any and all actions and causes of action, suits, disputes, debts, accounts, promises, warranties, damages, claims, proceedings, demands, and liabilities, of every kind and character, direct and indirect, known and unknown, at law or in equity, that First Nationwide or the acquirers now have, had at any time heretofore, or hereafter may have against the United States of America for breach of contract or constitutional taking by reason of the enactment of Section 13224 of the Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66 (the "Guarini Legislation"). It is the intention of the parties hereto that all claims and counterclaims asserted in the Lawsuit be dismissed with prejudice, except that such dismissal shall expressly preserve the rights, if any, of First Nationwide and the Acquirers to assert the Excepted Claims solely against the United States of America in the United States Court of Federal Claims. The Excepted Claims shall not be based on any acts or omissions of the FDIC in any capacity or the RTC [Resolution Trust Corporation] as named defendant in any forum at any time in the future. Nothing contained in this Agreement shall, or shall be deemed to, constitute an admission of any allegation in the Lawsuit, or waive or relinquish any defenses that the United States of America may have to the Excepted Claims preserved by this Section 4.2.

Section 12.2, Release by First Nationwide and the Acquirers, states:

First Nationwide and the Acquirers each hereby release, hold harmless, acquit, and forever discharge the FDIC Manager [a term used in the Settlement Agreement to refer to the FDIC in its capacity as Manager of the FRF] and the FDIC in all its capacities other than as Manager of the FRF, and their respective present and former parents, subsidiaries and affiliates, and the respective present and former officers, directors, successors, assigns, employees, agents, and representatives of all the foregoing (collectively, the "FDIC Released Persons") from and against any and all actions and causes of actions, suits, disputes, debts, accounts, promises, warranties, damages, claims, proceedings, demands and liabilities, of every kind and character, direct and indirect, known and unknown, at law or in equity, that First Nationwide and the Acquirers now have, had at any time heretofore, or hereafter may have against the FDIC Released Persons by reason of any act or omission whatsoever by any FDIC Released Persons in connection with the Lawsuit, the Assistance Agreement, the supervision of the FDIC Released Persons with respect to the Covered Assets, Related Claims or any other matters governed by the Assistance Agreement, GLOS, the Acquisition Agreements, the ACSI Settlement, the Excess Proceeds Agreement, or any other agreements related thereto; provided, however, that the release provided in this Section 12.1 [sic] shall not limit the rights of First Nationwide and the Acquirers to bring any claim based on fraud, willful misrepresentation of a material fact, willful failure to disclose a material fact, or willful misconduct.

On August 19, 1996, the same day the Settlement Agreement was signed, the parties in First Texas filed a stipulation of dismissal in the United States District Court for the Northern District of Texas. The language of the stipulated order of dismissal is similar to that of the Settlement Agreement. Regarding certain future claims, classified as Excepted Claims, the stipulated order states that these claims "may not be based on any acts or omissions of the FDIC or Resolution Trust Company, and may not be asserted against the FDIC in any forum at any time in the future."

On September 20, 1996, little more than a month after the dismissal, plaintiffs filed the present lawsuit. In its answer, defendant did not assert the affirmative defenses of accord and satisfaction and release. The first filing in which defendant raised these defenses was its cross-motion for partial summary judgment. Defendant has now filed a motion for leave to file an amended answer seeking to assert accord and satisfaction and release. Plaintiffs oppose the motion.

DISCUSSION

I. Defendant's Motion for Leave to Amend

Under Rule of the United States Court of Federal Claims ("RCFC") 15(a), leave to amend a pleading "shall be freely given when justice so requires." RCFC 15(a). However, undue delay by the party seeking leave and undue prejudice to the party opposing leave are alternative bases for denying leave to amend. Foman v. Davis, 371 US 178, 182, 9 L.Ed.2d 222, 83 SCt 227 (1962). Plaintiffs contend that both undue delay on the part of the government and prejudice to them are present here. If the motion to amend is denied, plaintiffs also contend, on the basis of RCFC 8(c), ⁹ that defendant has waived the affirmative defenses of accord and satisfaction and release.

A. Undue Delay

Nothing in plaintiffs' complaint or in any other document filed prior to plaintiffs' motion for partial summary judgment indicated that plaintiffs would attempt to make the precise arguments asserted in their motion for partial summary judgment. ¹⁰ There are two counts in plaintiffs' complaint. Count I begins at paragraph 27 of the complaint and incorporates the first twenty-six paragraphs of that complaint. Paragraph 26 refers to the ten percent reduction in assistance payments, and paragraph 29 asks for "restitution of the benefits received by the Government as a result of its actions." There is thus notice in this count of the general claim to the additional reimbursement. The basis for claiming return of the "benefits received by the Government as a result of its actions" ¹¹ is set forth in paragraph 28: "The Government's denial of the deductibility of reimbursed covered asset losses in connection with plaintiffs' First Texas acquisitions is contrary to the Government's contractual obligations to plaintiffs and frustrates a principal purpose of the transaction."

Count II, beginning at paragraph 30, also incorporates the first twenty-six paragraphs of the complaint, and at paragraph 32 asks for an award of "just compensation for the property the Government has taken." The basis for the claim asserted in Count II is that the denial of the covered asset loss deduction took plaintiffs' contractual rights in violation of the Fifth Amendment to the U.S. Constitution. While this language is perhaps less clear than that of Count I, it may have put the government on notice of the claim to the ten percent additional reimbursement.

A fair reading of the language of these two counts is that plaintiffs are basing their claims solely on Congress's enactment of the Guarini legislation. In addition, unlike the theories advanced in plaintiffs' motion for partial summary judgment, the gravamen of the complaint is their inability to take the deduction, not the retention of ten percent of the covered asset loss reimbursement. However, even if the complaint put the government on notice of plaintiffs' claim to the additional reimbursement, the complaint did not put the government on notice that plaintiffs would assert grounds in support of that claim which were inconsistent with the Settlement Agreement. Indeed, the government concedes that the plaintiffs can seek recovery of the additional ten percent of the full reimbursement. See Def.'s Reply to Pls.' Opp'n to Def.'s Cross-mot. at 8. What is unique is the assertion in the first four initial theories that the breaching party was the FDIC because it chose to retain the ten percent.

Later developments in the case prior to plaintiffs' motion for partial summary judgment also did not serve to provide the government with notice of the prohibited bases of recovery. Plaintiffs' reliance on the May 2, 2000, statement by defendant's counsel regarding his understanding of plaintiffs' claim illustrates plaintiffs' misconception. The statement made by defendant's counsel was, "All I've ever heard since I've been on this case is that it's the 10 percent claim." Transcript of Conference, May 2, 2000 , at 38. This statement only indicates knowledge of the general nature of plaintiffs' claim; it does not demonstrate knowledge of the grounds contained in plaintiffs' motion. Plaintiffs also cite a footnote in the March 24, 1998, Joint Preliminary Status Report ("JPSR") that states that the plaintiffs are not pursuing claims based on the lobbying activities of the FDIC. See JPSR at 7 n.11. Plaintiffs contend that this statement should have put the government on notice of their reliance on other activities of the FDIC as bases for recovery, such as retention of the ten percent amount in violation of the Assistance Agreement. That inference is not warranted.

Section 4.2 of the Settlement Agreement prohibits the Excepted Claims from being based on "any acts or omissions of the FDIC " or RTC . Plaintiffs' acknowledgment that its claims are not based on lobbying activities of the FDIC amounts to no more than an acknowledgment of the settlement. It did not put the government on notice that plaintiffs were claiming that the FDIC breached a promise when, despite enactment of the Guarini legislation, it retained ten percent of the full reimbursement amount for covered asset losses. ¹²

Plaintiffs' citations to Venters v. City of Delphi, 123 F3d 956 (7th Cir. 1997), and Maul v. Constan, 928 F2d 784 (7th Cir. 1991), are inapposite. The defendant did not " 'lie behind a log' and ambush . . . plaintiff[s] with an unexpected defense.' " Venters, 123 F3d at 968-69. Defendant stated its understanding of plaintiffs' claims in its first filing in this case: "Plaintiffs specifically allege that they have been denied certain tax benefits that plaintiffs assert were promised to them in the course of the acquisition of the associations." Def.'s Unoppsd. Mot. for an Enlrgmnt. of Time at 1. This understanding is consistent with defendant's current position. In the absence of clearer notice, there was no undue delay on defendant's part in asserting the affirmative defenses of accord and satisfaction and release in the specific context of the arguments raised by plaintiffs in their motion for partial summary judgment.

The new theory raised in plaintiffs' supplemental brief, like the first four theories presented in their motion for partial summary judgment, also does not rely on an allegation that passage of the Guarini legislation was a breach of contract or a compensable taking. Instead, this theory alleges that passage of the Guarini legislation released plaintiffs from a contractual duty to make tax benefit payments. Consequently, for the reasons just discussed, there is no undue delay by the government in asserting the defenses of accord and satisfaction and release in the context of this new theory.

This same analysis does not hold true for defendant's argument that the general release of the FDIC as manager of the FRF bars plaintiffs' suit because any judgment in this case would be paid out of the FRF. The government did not present this defense until oral argument. If the government is correct that the FRF would be the source for any judgment in this case due to the enactment of FIRREA in 1989, then this defense should have been raised in defendant's answer in 1996 because the only notice necessary to alert defendant to the possibility of this defense is that this case is Winstar-related, something obvious from the start. Defendant waited until now to assert a defense resting on arguments contained in a memo written by the Justice Department's own Office of Legal Counsel in 1998. Such delay does not comport with the requirements of RCFC 8(c). Accordingly, the defense based on the release of the FRF as a source for a money judgment in this case is barred because of undue delay. ¹³ The court must now determine whether allowing defendant to assert its other accord and satisfaction and release arguments would unduly prejudice plaintiffs.

B. Undue Prejudice

In order to show undue prejudice, "the non-movant must demonstrate that one of the following circumstances will result: severe disadvantage or inability to present facts or evidence; necessity of conducting extensive research shortly before trial due to introduction of new evidence or legal theories; or excessive delay that is unduly burdensome." St. Paul 's Fire & Marine Ins. Co. v. United States , 31 FedCl 151, 153 (1994). Plaintiffs' claim that they "cannot help but have been prejudiced by pursuing this case aggressively and at great expense for over three and a half years." Pls.' Opp'n to Def.'s Mot. for Leave at 7. They cite Tenneco Resins, Inc. v. Reeves Brothers, Inc., 752 F2d 630 (Fed. Cir. 1985), for the proposition that "the risk of substantial prejudice increases with the passage of time." Tenneco Resins, 752 F2d at 634 (citation omitted). The delay here, however, is traceable to the fact that the complaint did not clearly articulate the theories on which plaintiffs now rely in their motion for partial summary judgment.

In any event, plaintiffs have had the opportunity to respond to defendant's accord and satisfaction and release defenses. No prejudice is apparent, particularly when, as explained below, the court would reject the substance of plaintiffs' first four theories. See infra at 22-24. The court will therefore consider the merits of the defenses.

II. The Merits of the Parties' Cross-motions for Partial Summary Judgment

Defendant argues that the Settlement Agreement executed by plaintiffs and the FDIC in the First Texas case bars certain claims, or at least theories, presented in plaintiffs' motion for partial summary judgment based on an accord and satisfaction. ¹⁴ We agree with defendant that certain claims are barred, although not with all of defendant's arguments in this respect.

There are several essential elements of an accord and satisfaction: " 'proper subject matter, competent parties, meeting of the minds of the parties, and consideration.' " Brock & Blevins Co. v. United States, 170 CtCl 52, 59, 343 F2d 951 (1965) (quoting Nevada Half Moon Mining Co. v. Combined Metals Reduction Co., 176 F2d 73, 76 (10th Cir. 1949)). Most commonly, an accord and satisfaction is a " 'mutual agreement between the parties in which one pays or performs and the other accepts payment or performance in satisfaction of a claim or demand which is a bona fide dispute.' " Id. Here, defendant argues that the Settlement Agreement in First Texas represents the accord reached by the parties and that, by necessary implication, the payment of the $13,162,931 sum specified in §2.1 of the Settlement Agreement as the "Settlement and Termination Payment" represents the satisfaction of the accord. ¹⁵

The Settlement Agreement terminates the 1988 Assistance Agreement entered into by the plaintiffs and the FSLIC and also settles claims raised in the First Texas lawsuit. The relevant portions of the Settlement Agreement are §§2.3, 12.2, 4.1, and 4.2, quoted fully above.

A. Defendant's Argument Based on Termination of the Assistance Agreement

Section 2.3 provides that, "except as otherwise provided herein," the Assistance Agreement and "all rights and obligations of the parties thereto not previously fulfilled shall terminate" as of the closing date selected in the Settlement Agreement. Defendant contends that because plaintiffs' motion asserts a failure of the FDIC to provide the proper reimbursement for covered asset losses, plaintiffs are improperly seeking to enforce an obligation of the FDIC that arose under the Assistance Agreement and that ceased to exist after the closing date selected in the Settlement Agreement.

The court rejects this argument. Section 2.3 of the Settlement Agreement provides that "the Assistance Agreement . . . and all rights and obligations of the parties thereto not previously fulfilled shall terminate effective as of the Closing Date." As plaintiffs point out, this provision does not mean that all pre-existing rights, including legal claims, were extinguished. This court, in Statesman Savings Holding Corp. v. United States, 41 FedCl 1 (1998), summarized a holding in an earlier Winstar-related case concerning this issue of termination agreements: "The termination of assistance agreements did not affect the Government's obligation to honor its promises respecting the accounting treatment of goodwill." Statesman Sav. Holding Corp., 41 FedCl at 7 (citing California Fed. Bank v. United States , 39 FedCl 753, 764 (1997)). Only executory promises were terminated. See id.

The same is true here. The termination of plaintiffs' Assistance Agreement did not affect any causes of action they may have that accrued prior to execution of the Settlement Agreement. Section 2.3 only terminated the parties' rights and obligations with respect to continued performance. Plaintiffs here are not seeking continued performance of the Assistance Agreement; they are seeking damages for a breach that occurred during past performance. As the court stated at oral argument, "All future obligations are extinguished; there are no more rights and obligations under the contract. However, the parties still have whatever prior exposure that they had to litigation based on past performance." Tr. at 55. Absent a specific release, in other words, the parties are in no different position than if their rights and obligations under the contract had ended due to the expiration of the contract term. Section 2.3 does not bar the plaintiffs' current motion for partial summary judgment. ¹⁶

B. Defendant's Argument Based on Release of the FRF as a Source for a Judgment

The court has already held that this defensive argument is barred because it was not raised in a timely manner. However, it also fails on its merits. At oral argument, defendant referred to the possibility that any judgment or settlement in this case would be paid out of the FRF, rather than the government's Judgment Fund, and suggested that, under the Settlement Agreement, this fact might present an impediment to plaintiffs' claims. In its supplemental brief, defendant argues that a judgment or settlement in this case would indeed be paid out of the FRF and that plaintiffs' claims are therefore barred because §12.2 of the Settlement Agreement releases the FDIC as manager of the FRF and, by necessary implication, the FRF itself, "from and against any and all actions and causes of action, suits, disputes, debt, accounts," etc. Defendant's argument, if accepted, would not simply require denial of plaintiffs' motion for partial summary judgment: it would require dismissal of plaintiffs' entire case.

The government's argument disregards the consequences of §4.2 of the Settlement Agreement. That section excepts "entirely" from the Settlement Agreement certain claims identified as Excepted Claims. As long as a claim is an Excepted Claim, §12.2 is no bar to its being raised here. The only limitation on Excepted Claims is that they cannot be based on any acts or omissions of the FDIC or RTC in any capacity. The court must now determine whether the arguments presented in plaintiffs' motion for partial summary judgment and their supplemental brief are Excepted Claims and, if so, whether they violate the limitation imposed on Excepted Claims.

C. Defendant's Argument Based on Settlement of Claims Against the FDIC

Section 4.1 provides for the preparation and filing of a "Stipulated Order of Dismissal of the [First Texas ] Lawsuit pursuant to which any and all claims asserted by either party to the Lawsuit shall be dismissed with prejudice, except as provided in Section 4.2 below." Section 4.2 excepts "entirely" from the Settlement Agreement, including the release provisions of §12.2, plaintiffs' claims against the "United States of America for breach of contract or constitutional taking by reason of the enactment" of the Guarini legislation. Under §4.2, Excepted Claims may be brought only in this court and only against the United States of America; the FDIC and the RTC cannot be named defendants. In addition, the Excepted Claims may not be based on any acts or omissions of the FDIC or the RTC in any capacity. Thus, a limitation was placed on the theories plaintiffs could use in pursuing the Excepted Claims.

The only recovery plaintiffs are seeking in their current motion is the additional ten percent reimbursement for covered asset losses. ¹⁷ In support, they assert several alternative theories, set forth above. For purposes of analysis, the court shall consider the first four of plaintiffs' initial theories collectively because the court finds that each of these theories points to the FDIC as the breaching party. The fifth initial theory and the new theory presented by plaintiffs' supplemental brief, which do not implicate the FDIC as the breaching party, shall be considered separately.

1. Plaintiffs' First Four Theories

The first four of plaintiffs' theories do not rest on the argument that the Guarini legislation was a breach of contract. As plaintiffs state in their opening brief:

It is the retention of the 10% of covered asset loss reimbursements, as the FDIC's purported "share" of a tax benefit that does not exist, that constitutes the breach of contract for which Plaintiffs seek partial summary judgment on liability in this Motion. . . . Given the terms of the parties' agreement, the decision by the government to withhold full assistance payments violated Plaintiffs' contract rights without regard to the reason why the tax benefits were unavailable to be shared.

Pls.' Mot. Part. Summ J. at 30-31.

Enactment of the Guarini legislation, under these theories, is simply a condition precedent to the FDIC's alleged duty to provide full reimbursement to plaintiffs for covered asset losses; enactment of the legislation gave rise to a duty on the part of the FDIC, pursuant to the Assistance Agreement as written by the parties or reformed by the court, to provide this full reimbursement. Under plaintiffs' analysis, the Assistance Agreement provided that the FSLIC and its successors would fully reimburse the plaintiffs for covered asset losses should the covered asset loss deduction become unavailable. After enactment of the Guarini legislation, plaintiffs allege, the FDIC wrongfully withheld full reimbursement; thus, the FDIC, not Congress, is the breaching party under these first four theories.

When questioned at oral argument regarding the identity of the breaching party under these first four theories, plaintiffs' counsel answered that the breacher was the United States . Tr. at 34, 131. This answer is unsatisfactory as it ignores the distinction drawn by the parties themselves in the Settlement Agreement between the United States and the FDIC; it is also at odds with plaintiffs' own briefing as evinced by the language contained in the above quotation from plaintiffs' motion. Plaintiffs chose to base the first four theories of their motion for partial summary judgment on the allegation that the FDIC breached the contract by retaining the ten percent amount of the full reimbursement. Thus, these claims are not Excepted Claims because Excepted Claims are only those that are brought against the " United States of America for breach of contract or constitutional taking by reason of the enactment" of the Guarini legislation. Their continuing viability, therefore, is not dependent upon whether or not they run afoul of the limitation placed on Excepted Claims by §4.2 regarding "any acts or omissions of the FDIC."