In the Court of Federal Claims

No. 92-652C

(Filed: September 30, 1999)

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LASALLE TALMAN , F.S.B.,

Plaintiff, United States v. Winstar Corp.; Damages for breach of contract; Lost v. profits; Restitution; Cost of replacement capital.

THE UNITED STATES,

Defendant.

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Wilber H. Boies, Chicago, Illinois, with whom were Marie A. Halpin, Chicago, Illinois, and Thomas P. Steindler, Washington, D.C., for plaintiff. John H. McDermott and Suzanne Wallman, Chicago, Illinois, and Karla L. Palmer, Washington, D.C., also appeared on the briefs.

John A. Davidovich, Special Attorney, U.S. Department of Justice, Washington, D.C., with whom were Shalom Brilliant, Senior Trial Counsel, Rodger D. Citron, Alfonso G. Madrid, Patrick T. Murphy, William F. Ryan, and Tonya J. Williams, U.S. Department of Justice, Washington, D.C., for defendant. Assistant Attorney General Frank W. Hunger, Director David M. Cohen, and Deputy Director Jeanne E. Davidson, U.S. Department of Justice, Washington, D.C., also appeared on the briefs.

OPINION BRUGGINK, Judge.

This case is similar to more than 120 other cases filed as a result of the impact of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183, on the savings and loan industry. It is one of a handful of lead cases picked for early trial on the issue of damages flowing from what the Supreme Court has characterized in United States v. Winstar Corp., 518 U.S. 839, 870 (1996), as the breach of contract implicit in FIRREA. Following that decision, this court granted summary judgment for plaintiff on the issue of liability. See Federal v. United States, 39 Fed. Cl. 753, 765-66, 779 (1997) (California Federal I). The case was then transferred to this judge for resolution of plaintiff's damages. Trial was held over a four week period in February and March of this year; closing arguments were heard on May 27, 1999.(1) This is the third reported damages decision to date, following Glendale Federal Bank v. United States, 43 Fed. Cl. 390 (1999) and California Federal Bank v. United States, 43 Fed. Cl. 445 (1999) (California Federal II). It is hoped that the decisions in these early cases will facilitate either settlement or early resolution on appeal of common damage questions.

It is essential, however, to note characteristics of this case which may distinguish it from others yet to be decided. First, we deal here with a plaintiff that has undergone several evolutionary changes since it entered a contract with the government in 1982. Talman Home Federal Savings and Loan Association of Illinois ("Talman") entered into that contract as a mutual savings and loan association. In 1986, with the assistance of government payments, it converted to a stock association. Later, following the enactment of FIRREA, Talman was required to raise capital to replace supervisory goodwill. Consequently, it agreed in 1991 to be acquired by ABN AMRO North America, Inc. ("ABN AMRO"), subject to a capital infusion of $300 million by the acquirer. Following the merger, plaintiff operated as LaSalle Talman Bank ("LaSalle Talman"), a wholly-owned subsidiary of ABN AMRO, until it merged with LaSalle Cragin Bank ("LaSalle Cragin") in November 1995. Since that time, the bank has operated as LaSalle Bank ("LaSalle").

Second, Talman was a "Phoenix institution;" that is, it was taken under the wing, as it were, of FSLIC's Phoenix program. Under this program, Talman received a series of cash payments or promissory notes from FSLIC to keep it afloat and to enable it to convert to a stock association in 1986. In return, FSLIC replaced the majority of Talman's directors with independent directors it appointed, subjected Talman to various operating restrictio