Order Issued in California Federal Bank 'Goodwill' Lawsuit.
In an order filed today, the judge stated that "plaintiff cannot prove clearly and with certainty that it would have made profitable loans and other profitable investments with the 'lost' capital ... Therefore the issues upon which we will proceed to trial in December are restitution and reliance."
Also in the order, Judge Hodges defined restitution as "return of consideration that plaintiff delivered to the Government, or of amounts by which the United States benefited from its breach." Reliance damages were defined by the judge as, generally, "the out-of-pocket expenses incurred by plaintiff after the contract was signed."
Cal Fed will seek all appropriate avenues of relief concerning this order, including further proceedings before the Court of Federal Claims, and, if necessary, reversal in the Federal Circuit.
In September, Cal Fed filed with the U.S. Court of Federal Claims its expert witnesses damages reports in the goodwill litigation. In the reports, Cal Fed claimed three alternative damages amounts: $1.642 billion in expectation (including lost profits) damages; $1.595 billion in restitution damages; and $725 million in reliance damages. The trial in Cal Fed's damages case is currently scheduled to begin in Washington D.C. on December 7, 1998.
Prior to the now-concluded Glendale Federal Bank goodwill trial, the presiding judge in that case, Chief Judge Loren Smith, rejected the government's effort to exclude evidence of expectation damages from consideration at the trial. A final decision in the Glendale case, which could include expectation damages, is expected before the end of the year.
In July 1995, Cal Fed distributed to its shareholders the Contingent Litigation Recovery Participation Interests (Nasdaq: CALGZ) representing the right to receive a portion of the net after-tax recovery, if any, received by Cal Fed in this litigation. In connection with the merger of First Nationwide Bank and Cal Fed in January 1997, Cal Fed issued the Secondary Contingent Litigation Recovery Participation Interests (Nasdaq: CALGL) representing the right to receive a portion of the net after-tax recovery, if any, received in this litigation following payment of amounts due to the holders of the CALGZs and the retention of certain amounts by Cal Fed.
In May 1998, Golden State Bancorp Inc. issued litigation tracking warrants to its shareholders (Nasdaq: GSBNZ) representing in the aggregate the right to acquire common stock of Golden State with an aggregate value of 85 percent of Glendale Federal's net after-tax recovery in its goodwill litigation.
Based in San Francisco, California Federal Bank is an indirect subsidiary of Golden State Bancorp Inc. (NYSE: GSB).
Information in this press release includes forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, statements regarding Cal Fed's damage claims in its pending goodwill litigation against the U.S. government as set forth in the referenced expert witness reports. Such statements reflect the current views of Cal Fed and the reports of the expert witnesses with respect to future events and are subject to certain risks, uncertainties and assumptions. It is important to note that the actual events and results could differ materially from those described herein as claimed, scheduled, anticipated, believed, estimated or expected because the ultimate disposition of the goodwill litigation, like any litigation, is unpredictable. Cal Fed assumes no obligation to update any such forward looking statement.