WASHINGTON - The Solicitor General's office asked the Supreme Court Friday to review a federal appeals court decision finding the government liable for breaking its promise to let thrifts count goodwill toward their capital requirements.
The government said the U.S. Court of Appeals for the Federal Circuit in an Aug. 30 decision misinterpreted a legal doctrine, ignored conflicting decisions by other judges, and improperly restricted the executive branch's regulatory power.
"These cases warrant review by this court because they involve important legal principles ... which will govern the result in approximately 100 other pending cases," Solicitor General Drew Days wrote.
Legal observers expect the high court to accept the case because as much as $10 billion in damages is at stake. Oral argument could occur as early as April.
This case involves Glendale Federal Bank of Glendale, Calif., and two failed institutions, which sued the government shortly after Congress abolished regulatory goodwill in 1989. It is the first to reach the Supreme Court. Combined, the 100 plaintiffs are seeking $10 billion in claims.
The plaintiffs agreed in the 1980s to take over weak institutions after the government promised that regulatory goodwill - an intangible asset - could be counted as regulatory capital for as long as 40 years.
Congress changed the rules, however, in 1989 when it forced thrifts to write off all their goodwill by 1994. The losses caused scores of thrifts to fail.
The thrifts sued, charging the government breached written contracts. The government responded that it had the right to change a contract without the other party's consent. It also said these institutions knew the rules might be changed.
That the government would push the case to the Supreme Court "doesn't come as a surprise," said Glendale chairman Stephen J. Trafton. "But it comes as a disappointment and yet another frustration in pursuit of this case."
Glendale proposed a novel settlement in October, pledging to commit the proceeds to economic development projects in California, including low- income home mortgages, small-business loans, and health care programs.
On Monday Mr. Trafton said Glendale will withdraw its offer in 30 days unless the government begins to negotiate. Time is important, Mr. Trafton said in an interview, because the thrift has a fiduciary responsibility to stockholders to extract the best deal possible. This duty will require the thrift to demand a cash payment for its stockholders if it wins the Supreme Court case, he said.
Justice Department officials previously have ignored Glendale's settlement offer.
