## Facts

- During the savings-and-loan crisis, federal regulators sought private investors to acquire failing thrifts.
- William Popham formed Admiral Financial Corporation to acquire Haven Federal Savings and Loan Association, a failing thrift with substantial negative net worth.
- The transaction was approved by federal thrift regulators and treated the negative net worth as “supervisory goodwill,” allowable as regulatory capital and amortizable over 25 years.
- Admiral also executed a Regulatory Capital Maintenance/Dividend Agreement requiring it to keep Haven’s capital at or above regulatory minimums and to cure any shortfall within specified cure periods after notice.
- The agreement included a “successor regulations/amendments” clause providing that references to existing regulations included successor regulations and that amendments to those regulations could increase or decrease Admiral’s obligations.
- Haven fell out of capital compliance even under pre-1989 rules; Admiral did not cure within the initial cure period, and regulators issued a default notice with an additional cure period.
- During the extended cure period, Congress enacted FIRREA, which restricted the use of supervisory goodwill for regulatory capital, worsening Haven’s measured capital deficit.
- Haven was later placed into receivership while significantly undercapitalized under both pre-FIRREA and FIRREA standards.

## Issues

1. Whether the capital maintenance agreement’s successor-regulations/amendments clause allocated to Admiral the risk of future regulatory changes, including FIRREA’s restrictions on supervisory goodwill.
2. Whether Admiral could prove a compensable injury caused by FIRREA (as opposed to Haven’s preexisting capital deficiency and Admiral’s failure to cure).

## Decision

- The Federal Circuit affirmed judgment for the United States.
- The court held the successor-regulations/amendments clause unambiguously shifted to Admiral the risk that future regulatory changes could increase its capital obligations.
- Because Admiral assumed that risk by contract, applying FIRREA’s stricter capital rules did not breach any contractual promise regarding supervisory goodwill.
- The court’s disposition made Admiral ineligible for Winstar-type contract damages based on FIRREA’s change to goodwill treatment.

## Legal Principles

- Contract interpretation governs whether a thrift acquirer assumed the risk of post-closing regulatory change; explicit risk-shifting language is enforced according to its terms.
- A clause incorporating successor regulations and stating that regulatory amendments may increase or decrease obligations can constitute a clear assumption by the private party of the risk of adverse regulatory change.
- An asserted promise concerning supervisory goodwill must be read together with the full set of transaction documents; an express successor-regulations clause can qualify or defeat a claimed “goodwill guarantee.”
- Where the private party assumed the risk of regulatory change, the government’s enforcement of later-enacted capital standards does not constitute a breach supporting Winstar-type recovery.

## Conclusion

The Federal Circuit held that Admiral’s capital maintenance agreement expressly incorporated successor regulations and permitted amendments to increase Admiral’s obligations, thereby allocating to Admiral the risk of FIRREA’s stricter capital rules; enforcing FIRREA therefore was not a breach, and Admiral could not recover contract damages.


Admiral Fin. Corp. v. United States, 378 F.3d 1336 (Fed. Cir. 2004)