LAWFUEL – The United States Court of Federal Claims recently awarded $382.4 million to the Firm’s client Washington Mutual Bank, with additional damages still to be awarded that could increase the award to as high as $480 million.
The award stands as the largest damages award to any plaintiff in the 120 so-called “Winstar” cases that arose out of the savings and loan crisis of the 1980s. Washington Mutual is the successor by acquisition to Anchor Savings Bank, a New York institution which was one of the first savings and loan institutions in the United States. In the early 1980s, Anchor was one of a number of thrift institutions and other investors that agreed to assist government thrift insurers by acquiring failing thrifts.
Anchor acquired thrifts in New Jersey, Georgia, and Florida with a combined net worth deficit of several hundred million dollars. The government agreed that Anchor could count the resulting goodwill from these acquisitions toward its regulatory minimum capital requirements, a commitment that was essential to making the deals viable. In 1989, however, Congress passed sweeping thrift reform legislation that breached the earlier goodwill promises made by the government and caused Anchor to immediately fail its regulatory capital requirements. As a result of the breach, Anchor was forced to divest its East Coast branch network along with its profitable mortgage banking subsidiary, Residential Funding Corporation, and to “shrink” its assets by $2 billion.
Anchor and other thrifts brought breach of contract suits against the United States, which came to be known as the “Winstar cases” after the Supreme Court’s decision in the test case Winstar Corp. v. United States, 518 U.S. 839 (1996). After winning summary judgment on liability issues in 2002, the case proceeded to a six-week bench trial on damages in 2005 before Judge Lawrence J. Block. On March 14, 2008, in a thorough 183-page decision, Judge Block ruled in favor of Washington Mutual on each of the claims asserted at trial, and awarded damages in the amount of $382.4 million with certain damage components still to be increased by a “tax gross-up” so that Washington Mutual will be made whole after payment of taxes on the award.
The Jones Day trial team was led by George Manning of the Dallas Office, along with Washington Office partners Edwin Fountain, Adrian Wager-Zito, and Geoff Irwin, and Washington Office associate Debra Clayman.