Glendale Federal Bank, Fsb v. United States,

378 F.3d 1308 (9th Cir. 2004)

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Nature of the Case

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Facts

This is the second appeal on the damages question. The first resulted in an award to P of $909 million in restitution and 'non-overlapping reliance damages.' D appealed. The appeals court concluded that the award of $909 million was not supportable, and vacated the judgment. In the first damages trial, P sought 'expectancy damages,' the kind of damages often associated with lost profits. The trial court rejected that theory. The trial court fashioned a restitution remedy based on the assumed risk. The issue was the market value of the liabilities assumed by P. The court awarded $510 million. In yet another review, the appeals court concluded that the restitution theory was flawed because it was based on an assumption that the non-breaching party was entitled to the supposed gains received by the breaching party when those gains in the context of these cases were both speculative and indeterminate. The $510 million was vacated. A viable theory on which damages could be based was a reliance theory. The trial court had considered reliance theory as a basis for an award, and had added specific reliance damages of $381 million to the total award granted P; these were denominated non-overlapping reliance damages and identified as damages for post-breach events. Such damages had to be real, and reasonably ascertainable. Following the first appeal on damages and our remand to the trial court for further consideration of the issues, P moved in the trial court for entry of judgment, asking the court to reinstate the post-breach 'wounded bank' portion of its earlier judgment. This was the $381 million with an additional $527 million in out-of-pocket losses. D came up with zero. D contends that the P-invented notion of 'wounded bank' damages was invalid. These losses were said to have occurred because three years after, and as a result of, the breach, P fell out of capital compliance; depositors and others became nervous about placing funds with it; the bank was required to pay more interest to attract depositors; and it was required to pay higher fees for deposit insurance. P relied upon the same model it presented in support of its earlier claim for lost profits under the now-discredited expectancy damages theory. P got the $381 million but not $527 million because its reliance model failed to measure the actual losses sustained by it as a result of D's breach. D appealed. P cross-appealed the denial of its claim for the additional $527 million.