## Facts

- During the savings-and-loan crisis, federal regulators encouraged healthy institutions to acquire failing thrifts by permitting favorable regulatory capital treatment for “supervisory goodwill.”
- Citizens Federal Bank FSB acquired four failing thrifts in reliance on agreements allowing supervisory goodwill to count toward regulatory capital.
- In 1989, FIRREA changed capital rules and eliminated the promised goodwill treatment, pushing Citizens out of capital compliance.
- To restore compliance, Citizens sold Cincinnati branches and converted from mutual to stock form to raise capital.
- Fifth Third later became Citizens’ successor and pursued a breach-of-contract claim against the United States based on the FIRREA-driven change in promised capital treatment.
- Liability for breach had already been established in earlier proceedings; the remand proceedings addressed damages, and the Court of Federal Claims awarded Fifth Third expectancy (lost-profit) damages based on a “but-for” world without FIRREA.

## Issues

1. Whether Fifth Third proved expectancy damages with reasonable certainty and adequate causation in light of assumptions used to construct the “but-for” world.
2. Whether claimed lost profits tied to branch sales and recapitalization actions were too speculative, remote, or insufficiently connected to the breach to be recoverable.
3. Whether Fifth Third was entitled to additional damages beyond the trial court’s award under alternative measures (e.g., reliance or restitution).

## Decision

- The Federal Circuit reversed/vacated the Court of Federal Claims’ expectancy-damages award.
- The court held that Fifth Third’s damages proof did not satisfy the requirements of causation and reasonable certainty for contract expectancy recovery.
- The court rejected, as presented, claimed components of lost profits and related losses that depended on conjectural business and regulatory assumptions, including consequences attributed to branch-sale and capital-raising decisions.
- The case was remanded for recalculation of damages consistent with the court’s standards and for consideration of permissible alternative damage measures within those constraints.

## Legal Principles

- Expectancy damages in government contract cases require proof that the breach caused the loss and that the amount can be determined with reasonable certainty.
- Lost profits may be denied when the damages model depends on speculative “but-for” assumptions about future business strategy, market conditions, or regulatory outcomes.
- Claimed damages may be unrecoverable when they are too remote from the breach or insufficiently supported by evidence linking the claimed consequences to the contractual promise.
- In Winstar-related supervisory-goodwill cases, government breach liability does not relax traditional damages requirements; plaintiffs must substantiate their damages with non-speculative proof.

## Conclusion

The Federal Circuit vacated Fifth Third’s expectancy damages because the “but-for” lost-profit model and related categories of loss were not proven with the required causation and reasonable certainty, and it remanded for a damages recalculation under standard contract-damages rules.


Fifth Third Bank v. United States, 518 F.3d 1368 (Fed. Cir. 2008)