A federal appeals court has affirmed a lower court's ruling awarding SunTrust Banks Inc. $30.6 million of damages from the U.S. government in a case dating to the height of the savings and loan crisis.
More than 100 thrifts filed a lawsuit in 1995 arguing that the government had reneged on a pledge to allow healthy thrifts that bought failing ones during the crisis to count goodwill as regulatory capital. The plaintiffs included American Federal Bank of Greenville, S.C., which, through a series of mergers and acquisitions, eventually became part of SunTrust.
American Federal and the other plaintiffs filed their suit after Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which prohibited acquiring banks and thrifts from applying goodwill toward capital.
In 2004 the U.S. Court of Federal Claims agreed with American Federal that the United States had breached a contract that had allowed the thrift to count as capital goodwill it inherited when it bought four failing thrifts. A second decision in 2006 set monetary damages but was appealed by the federal government.
On Oct. 1 the U.S. Court of Appeals for the Federal Circuit in Washington affirmed the 2006 decision.
Howard N. Cayne, a partner with Arnold & Porter LLP in Washington, who represented SunTrust in the matter, said there are roughly a dozen cases relating to the original suit still pending.
"The courts are still dealing with the thrift bailout legislation of more than 19 years ago," Mr. Cayne said.
