California Federal Bank was awarded just $23 million in damages Friday in the latest court decision in the regulatory goodwill cases.
The thrift, a subsidiary of Golden State Bancorp, San Francisco, was seeking $1.5 billion of damages to compensate for the government's eliminating supervisory goodwill after Cal Fed acquired five failing thrifts in the early 1980s.
In a statement Sunday, Cal Fed vowed to appeal the "flawed" decision.
"Coming nearly 10 years after the government broke its promises to Cal Fed, the $23 million award falls far short of Cal Fed's actual damages," the thrift said. A spokesman for Cal Fed declined to comment further.
The small judgment elated the Justice Department and tempered the enthusiasm of dozens of thrifts that have filed similar lawsuits.
The decision is the second damages award in more than 100 pending regulatory goodwill suits, which stem from the government's 1989 decision to eliminate favorable accounting treatment granted to acquirers of ailing thrifts.
The lawsuits-which basically argue that the government broke its promise to let thrifts subtract from their capital the value of intangible assets- seek a collective $20 billion.
A week earlier, Chief Judge Loren A. Smith of the Federal Claims Court granted Glendale Federal Bank $909 million. Experts predicted that a slew of large awards would follow.
But Judge Robert H. Hodges Jr. rejected similar arguments in Cal Fed's case.
He ruled that Cal Fed did not deserve "restitution" damages equal to the value of services it provided to the government and the earnings lost because of the breach of contract. Such damages represented a substantial portion of Glendale's win, but Judge Hodges said Cal Fed may have actually benefited from the businesses it acquired.
Judge Hodges also dismissed Cal Fed's demand for repayment of higher insurance and examination costs because he said there was no proof that the government's repeal of supervisory goodwill was the cause.
He said the thrift should recoup only the transactional costs of raising new capital to replace supervisory goodwill.