Washington Mutual, Inc. v. United States

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

WASHINGTON MUTUAL, INC., as No. 14-35289
successor in interest to H.F.
Ahmanson & Co. and D.C. No.
Subsidiaries, 2:06-cv-01550-BJR
Plaintiff-Appellant,

v. OPINION

UNITED STATES OF AMERICA,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Washington
Barbara Jacobs Rothstein, District Judge, Presiding

Argued and Submitted December 9, 2016
Seattle, Washington

Filed May 12, 2017

Before: Richard C. Tallman and Morgan Christen, Circuit
Judges, and Morrison C. England, Jr.,* District Judge.

Opinion by Judge England

*
The Honorable Morrison C. England, Jr., United States District
Judge for the Eastern District of California, sitting by designation.
2 WASHINGTON MUTUAL V. UNITED STATES

SUMMARY**

Tax

The panel affirmed the district court’s judgment, in a tax
refund action, finding that taxpayer had failed to establish a
reliable cost basis in certain rights for which it sought tax
deductions and losses, in connection with taxpayer’s
acquisition of certain failed savings and loan associations
during the 1970s and 1980s.

In 1981, Home Savings of America, FSB (Home
Savings), agreed to acquire three failing savings and loan
associations (thrifts) in exchange for a package of incentives
from the Federal Savings and Loan Insurance Corporation.
The incentives included the right to maintain branches in
other states (branching rights) and the right to use the
purchase method of accounting, which focused on Regulatory
Accounting Principles (RAP rights). Washington Mutual Inc.,
as successor in interest to Home Savings, initially appealed
the district court’s judgment that Home Savings had no cost
basis in its RAP right to amortization deductions, and its
abandonment loss deduction for branching rights in Missouri.
In a previously published opinion, this court held that Home
Savings had a cost basis in both sets of rights equal to some
part of the excess of the acquired thrifts’ liabilities over the
value of their assets, and remanded for determination of that
cost basis. On remand, the district court determined that
Washington Mutual had not met its burden of proving Home
Savings’s cost basis in the rights at issue.

**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
 WASHINGTON MUTUAL V. UNITED STATES 3

In this subsequent appeal, the panel held that the district
court permissibly concluded that taxpayer did not meet its
burden of establishing a cost basis for its intangible assets.
The panel first held that the district court applied the proper
legal standards, did not clearly err in determining that the
evidence was insufficient to reliably value the Missouri
branching right, and was not required to sua sponte assign a
value to that right. The panel also held that taxpayer had
failed to establish that Home Savings had permanently
abandoned its right to operate in Missouri for purposes of an
abandonment loss deduction.

COUNSEL

Thomas D. Johnston (argued) and Richard J. Gagnon,
Shearman & Sterling LLP, Washington, D.C.; Maria O’Toole
Jones, Alan I. Horowitz, and Steven R. Dixon, Miller &
Chevalier Chartered, Washington, D.C.; for Plaintiff-
Appellant.

Arthur Thomas Catterall (argued) and Teresa E. McLaughlin,
Attorneys, Tax Division/Appellate Section, United States
Department of Justice, Washington, D.C.; Annette L. Hayes,
United States Attorney; United States Attorney’s Office,
Seattle, Washington; for Defendant-Appellee.
4 WASHINGTON MUTUAL V. UNITED STATES

OPINION

ENGLAND, District Judge:

Plaintiff-Appellant Washington Mutual, Inc.
(“Appellant”), as successor in interest to H.F. Ahmanson &
Co., and Ahmanson’s wholly owned subsidiary Home
Savings of America (“Home”), appeals from a judgment
entered in favor of Defendant-Appellee United States of
America (“Government”) after a bench trial in this tax refund
action. Appellant argued in the district court that it was
entitled to refunds attributable to losses and deductions it
should have been afforded for certain intangible assets
acquired during the savings and loan crisis of the 1970s and
1980s. The district court, however, determined that the
valuation model relied upon by Appellant’s expert was
fundamentally flawed. As such, the district court held that
Appellant failed to meet its burden to establish the value for
the intangible assets, as well as its burden to establish a cost
basis in those assets—a necessary requisite to allowing
amortization deductions for those assets. Further, the district
court determined that Appellant failed to show that it
abandoned the Missouri Branching Right when it closed its
Missouri deposit-taking branches and, therefore, that it was
not entitled to an abandonment loss deduction. As a result,
the district court dismissed the case. We have jurisdiction
under 28 U.S.C. § 1291, and we affirm.

I

A

The parties’ dispute evolved out of transactions
originating from the savings and loan crisis. During the
 WASHINGTON MUTUAL V. UNITED STATES 5

1970s and 1980s, savings and loan associations, or “thrifts,”
saw their profitability dissipate when the Federal Reserve
chose to remedy rising inflation by allowing interest rates to
skyrocket. See United States v. Winstar Corp., 518 U.S. 839,
844–45 (1996). Thrifts were consequently forced to pay
depositors higher interest rates, while the thrifts’ income
streams, which derived from long-term mortgage loans with
low, fixed rates, remained stagnant. Id. at 845. The high
interest rates also decimated the housing market, further
drying up the thrifts’ revenue streams and forcing the entire
industry towards insolvency. See H.R. Rep. No. 101-54(I), at
296 (1989).

In the event that a thrift’s liabilities exceeded its assets,
the Federal Savings and Loan Insurance Corporation
(“FSLIC”), as thrift regulator and insurer of thrift deposits,
was required to initiate a takeover and liquidate the thrift.
See Winstar, 518 U.S. at 844–47. FSLIC lacked the funds
necessary to liquidate all of the thrifts that were failing at the
time, however, and the Federal Home Loan Bank Board
(“Bank Board”) instead chose to encourage healthy thrifts to
agree to such takeovers through what were referred to as
“supervisory mergers.” Id. at 847. In order to make these
supervisory mergers attractive to healthy thrifts, the FSLIC
had to offer non-cash incentives, two of which—both
exempting limitations otherwise imposed on the operations of
savings and loan associations—are especially relevant here.
Id. at 848; see also Wash. Mut. Inc. v. United States, 636 F.3d
1207, 1209 (9th Cir. 2011) (“WAMU I”).

First, thrifts were historically prohibited from opening
branches outside of their home states. WAMU I, 636 F.3d at
1213. Accordingly, the FSLIC offered an incentive to
healthy associations hoping to expand nationally by allowing
6 WASHINGTON MUTUAL V. UNITED STATES

those thrifts an opportunity to operate in a new state if the
first branch in that state was acquired through a supervisory
merger. Id. This incentive is referred to by the parties as the
“Branching Right.” Id. at 1209, 1213.

Second, thrifts were limited by minimum regulatory
capital requirements, which mandated that each thrift
maintain minimum capital of at least three percent of its
liabilities. See Winstar, 518 U.S. at 845–46. This presented
an obstacle to taking over a failing thrift since, by definition,
the failing thrift’s liabilities already exceeded its assets. See
id. at 850. To counter this, regulators permitted healthy
thrifts agreeing to a supervisory merger to apply the
“purchase method” of accounting. Id. at 848. Under this
method, an acquiring thrift was permitted to designate those
excess liabilities as “supervisory goodwill,” which, in turn,
could be counted toward the supervisory thrift’s minimum
regulatory capital requirement. Id. at 848–49. Thrifts were
also permitted to amortize that supervisory goodwill over a
period of 40 years. Id. at 851. These incentives, which
focused on Regulatory Accounting Principles, are referred to
as the “RAP Right.” WAMU I, 636 F.3d at 1209, 1213.

Home was a “healthy” thrift and, in 1981, agreed to a
supervisory merger by which it would take over three failing
thrifts, two in Missouri and one in Florida. Id. at 1211–12.
Through a series of transactions Home assumed the liabilities
of the failing thrifts in exchange for a “generous incentive
package.” Id. at 1219. Under this package, Home received,
among other things, cash and indemnities as to covered
assets, and was allowed to structure the transaction as a tax
free “G” reorganization, giving it significant tax benefits. Id.
Home also received Branching Rights for Missouri and
Florida, permitting it to open branches in those states, as well
 WASHINGTON MUTUAL V. UNITED STATES 7

as the RAP Right and its associated benefits. Id. at 1213,
1219.

B

The current litigation arose after Home sold its Missouri
branch offices in 1992 and 1993 and was later acquired by
Appellant in 1998. Id. at 1209, 1214. Appellant filed
amended tax returns on behalf of Home in 2005, requesting
refunds for tax years 1990, 1992, and 1993. Id. at 1214.
According to Appellant, the Internal Revenue Service (“IRS”)
had not credited Home for its RAP Right amortization
deductions during those years, nor had it allowed an
abandonment loss deduction in 1993 for the Missouri
Branching Right. Id. Based on these denials, Appellant filed
suit on Home’s behalf. Id.

In its first review of this case, the district court ruled in
favor of the Government at summary judgment, deciding that
Home did not have a cost basis in either the RAP Right or the
Branching Rights. Id. at 1216. As such, the district court
held that Appellant was not entitled to amortization and loss
deduction-related refunds. Id.

Appellant appealed, and we reversed, holding that “Home
Savings had a cost basis in the RAP rights and the branching
rights equal to some part of the excess of the three acquired
thrifts’ liabilities over the value of their assets.” Id. at 1209.
The panel remanded with instructions to the district court “to
determine the cost basis and conduct further proceedings in
accordance to [that] opinion.” Id. at 1221.
8 WASHINGTON MUTUAL V. UNITED STATES

C

On remand, the district court heard evidence over the
course of an eight-day bench trial and ultimately held that
Appellant had failed to carry its burden of establishing a
reliable cost basis for the Missouri Branching Right.
Accordingly, the court ruled that Appellant had not
established its right to a tax refund. Appellant similarly failed
to convince the district court that Home had permanently
abandoned its right to operate in Missouri. As a consequence,
the court ruled that it was not entitled to take an abandonment
loss for the 1993 tax year. The court dismissed Appellant’s
tax refund claims with prejudice and entered judgment for the
Government.

In reaching its decision, the district court initially
reasoned that, based on our prior remand, Appellant was
required to do two things to establish the cost basis for each
right. First, it needed to establish the “Purchase Price” for the
failed thrifts, which could be determined by subtracting the
value of the three failed thrifts’ assets from their liabilities.
See WAMU I, 636 F.3d at 1219. Second, Appellant was
required to show what portion of the Purchase Price should be
allocated among the various rights. Importantly, however,
because the Purchase Price was less than the total fair market
value of Home’s incentive package, it was not enough for
Appellant to determine the fair market value of a single asset
and assign to it a proportionate amount of the Purchase Price.
Instead, Appellant had to establish the fair market value of
each individual asset to reach a total fair market value for the
entire incentive package. Appellant could then use this total
fair market value to determine each asset’s proportionate
value, and apply that value pro rata to the Purchase Price to
 WASHINGTON MUTUAL V. UNITED STATES 9

establish the cost basis of each asset. The district court
explained Appellant’s burden with a helpful illustration:

Assume that a thrift paid $300 for an
incentive package it received in a supervisory
merger. Assume, as well, that the incentive
package is comprised of three assets: A, B,
and C. Now assume that the fair market value
of A is $175, the fair market value of B is
$125, and the fair market value of C is $100.
Therefore, the total fair market value of the
combined assets constituting the incentive
package is $400. This information is not
sufficient to allow for the correct allocation of
the purchase price among A, B, and C. For
instance, one cannot simply allot $175 of the
purchase price to A because that would result
in too much of the purchase price being
allotted to A. In other words, A would be
allotted one-hundred percent of its fair market
value, while B and C would be left with some
percentage less than one-hundred percent
because only $125 of the purchase price
would remain to allocate to B and C, whose
fair market value is $125 and $100,
respectively, for a total of $225.

Wash. Mut., Inc. v. United States, 996 F. Supp. 2d 1095, 1105
(W.D. Wash. 2014) (“WAMU II”). Thus, if Appellant failed
to establish the fair market value for any of the individual
assets, it would be impossible to determine the total fair
market value of the incentive package and, thereby, the pro-
rata share of the Purchase Price—and the cost basis—for each
individual asset. Id.
10 WASHINGTON MUTUAL V. UNITED STATES

Considering the evidence adduced at trial, the district
court concluded that Appellant “failed to establish, to a
reasonable certainty, the fair market value for the Missouri
Branching Right” and, therefore, could not establish a cost
basis in that Right or in the RAP Right.1 Id. at 1106. The
district court found that Appellant failed to meet its
evidentiary burden in large part due to shortcomings in the
testimony of Appellant’s valuation expert, Roger Grabowski.
The district court explained the “Grabowski Model” as
follows:

Mr. Grabowski used an income approach to
determine the fair market value of the
Missouri Branching Right to a hypothetical
buyer. More specifically, Mr. Grabowski
used a discounted cash flow model known as
the “excess earnings” approach. Excess
earnings represent the cash flows that the
hypothetical buyer would have expected the
Branching Right to generate beginning in
December 1981, net of charges for the use of
contributory assets, and discounted to present
value. In order to determine the excess
earnings (i.e. the cash flow) attributable to the
Missouri Branching Right under the excess
earnings approach, Mr. Grabowski employed
a five-step analysis. First, he projected the net
operating income generated by the Branching
Right based on: (a) the projected rate of
overall statewide thrift deposit market growth

1
The district court also concluded that, given this failure, it was not
required to reach the parties’ remaining disputed issues (e.g., the extent of
the failing thrifts’ liabilities, assets, and the values for each).
 WASHINGTON MUTUAL V. UNITED STATES 11

in Missouri; (b) the projected market share
that the hypothetical buyer could be expected
to capture in Missouri; (c) the projected
spread on loans funded by the new deposits;
and (d) the projected operating expenses for
the hypothetical buyer. Second, he deducted
income taxes from the net operating income to
arrive at the projected net income. Third, Mr.
Grabowski projected charges for the use of
contributory assets (commonly referred to as
“capital charges”) and deducted those charges
from the net income to arrive at the projected
cash flow attributable to the Missouri
Branching Right. Fourth, Mr. Grabowski
used a 22% discount rate to determine the
present value of the projected cash flow.
Lastly, Mr. Grabowski deducted estimated
transition costs and assemblage value from
the present value of the cash flow. This
resulted in Mr. Grabowski finding a fair
market value of $28.8 million for the Missouri
Branching Right.

Id. at 1107 (citations omitted).

The Government responded to the Grabowski Model, not
by offering its own valuation, but by convincing the trial
judge that the Model was fundamentally flawed and
unreliable as a basis for determining the value of the Missouri
Branching Right. For example, the district court determined
that Mr. Grabowski’s assumptions regarding Missouri deposit
market growth were unreliable because his projections
regarding statewide deposit growth failed to account for the
12 WASHINGTON MUTUAL V. UNITED STATES

effects of disintermediation2 and improperly included
“interest credited” balances as a source of “new” deposit
growth, thereby inflating his calculations. Id. at 1111.

The court also discredited Mr. Grabowski’s assumption
that Home’s ability to capture market share in Missouri could
be adequately predicted by looking to its prior expansion into
Northern California. The court explained that Home’s
intrastate expansion was not a reliable predictor of a
hypothetical interstate expansion into the Missouri deposit
market because: (1) Home’s prior expansion occurred in the
1970s when the economic landscape for thrifts was entirely
different; (2) Home’s Northern California expansion was
facilitated primarily by acquiring existing thrifts, while the
Grabowski Model assumed Missouri growth would be by
way of organic expansion; and (3) the Grabowski Model
contradicted Home’s own internal market-share projections
made at the time of the supervisory merger.

The court further found that evidence presented at trial
did not support the Grabowski Model’s underlying
assumption that a hypothetical buyer could originate a
sufficiently high volume of new loans to offset the costs of all
projected new deposits in the market at that time. According
to the district court, this assumption was flawed because it
failed to account for the fact that interest rates had risen
dramatically and that the thrift industry was loan driven—that
is, if loan demand was high, thrifts would seek to attract
additional deposits; but if loan demand was weak, earnings

2
Disintermediation refers to the withdrawal of deposit accounts from
the thrift industry. During the savings and loan crisis, this outflow
resulted from the desire of depositors to get higher interest rates than
thrifts were allowed to offer on accounts under then-existing regulations.
 WASHINGTON MUTUAL V. UNITED STATES 13

would drop if there were an inordinate amount of new
deposits. The Grabowski Model, on the other hand, was
driven by deposits. Mr. Grabowski assumed that the
hypothetical buyer would want to attract as many new
deposits as possible, and would worry about originating
mortgage income after the fact. But underlying this
assumption was the notion that the buyer would be able to
place all newly generated deposits into income-generating
mortgages. According to the district court, however, the
likelihood of such an outcome was minimal at best, as the
evidence produced at trial indicated that the then-existing
high interest rates were not conducive to increasing loan
volumes.

The district court also rejected as “unrealistic” the
Grabowski Model’s assumption that a hypothetical buyer
could count on a net interest spread of 2.5% between its
income-generating loans and its outgoing deposit payments.
Id. at 1114. According to the court, Mr. Grabowski assumed
that Appellant would not have to pay the going market rate
for new deposits, but would rather be able to attract new, low-
interest rate deposits by marketing its secure reputation, just
as it did during the Northern California expansion. But since
the court had already rejected Appellant’s reliance on
intrastate California market growth as a predictor of success
in its interstate venture, the district court was quick to reject
this assumption.

With respect to Mr. Grabowski’s final assumption, the
court faulted the Grabowski Model for attempting to identify
a license value for the Missouri Branching Right by
comparing a “without” scenario to a “with” scenario. Id. at
1115. Under a “without” or start-up scenario, the
hypothetical buyer would move into the new Missouri market
14 WASHINGTON MUTUAL V. UNITED STATES

without assemblage—i.e., branches, personnel, equipment,
etc. Under the “with” or baseline scenario, however, the
same buyer would enter the same market, but would do so
with existing operational branches. Using this framework,
Mr. Grabowski attempted to value the Missouri license by
comparing how long it would take a hypothetical buyer in the
“without” scenario to reach the same point as a buyer in the
“with” scenario—and projected that a “without” buyer would
be able to catch up to the “with” buyer within four years.

To reach this conclusion, however, the district court noted
that the hypothetical “without” buyer in the Model would
have to achieve new deposit growth of between 90% and
165% over that period. The court observed that such a
conclusion “simply def[ied] explanation” because
“[a]ssuming such extravagant growth during a time when
depositors were fleeing the savings and loan market defie[d]
credibility.” Id.

The court further faulted the Grabowski Model’s license
value projection because it failed to consider that the value of
the Missouri Branching Right license might actually decline.
Since other thrifts were similarly obtaining branching rights,
the district court determined that the Model should have
addressed the possibility that additional thrifts could be
granted the right to enter the Missouri market and, thereby,
dilute the value of Home’s right. But rather than take this
into account, Mr. Grabowski simply projected a perpetually
increasing value.

Ultimately, the court was more persuaded by the
Government’s expert, Dr. Steven Mann. According to Dr.
Mann, the premiums paid for intrastate thrift mergers around
the date of the supervisory merger in this case were similar to
 WASHINGTON MUTUAL V. UNITED STATES 15

those paid by Home for the right to expand into the new
Missouri and Florida markets. Accordingly, the
Government’s theory was that if, as Appellant argued, Home
paid a premium for the failing thrifts in 1981 because it
wanted the Branching Rights, then a similar premium would
not be present for intrastate mergers, which would, by default,
not include Branching Rights. But since the purchase
premiums were similar for both types of mergers, the
Government argued that the Grabowski Model improperly
attributed too large a premium to the Branching Right, and
that the purchase premiums must be driven by some other
intangible asset associated with the mergers.

Appellant argued in response that the Government’s
comparisons were flawed because the interstate acquisitions
involved assisted takeovers of failing thrifts that were
qualitatively different than the intrastate mergers. According
to Appellant, intrastate purchasers benefitted from “marketing
and operational efficiencies,” which Mr. Grabowski referred
to as “synergy,” along with “trade name value and market
positioning,” both of which did not exist in interstate mergers.
Id. at 1116. As a result, Mr. Grabowski argued that, while the
purchase premiums may be similar for both types of mergers,
the premiums in each were a result of different assets—the
intrastate mergers due to “synergies” and the interstate
mergers due to Branching Rights—and that Dr. Mann’s
analysis therefore did not undermine the Grabowski Model’s
projections.

The district court, however, rejected this explanation.
The court found that it did not adequately explain why the
premiums were similar and that it was contradicted by other
parts of Dr. Mann’s testimony, which indicated that acquiring
premiums paid by both large and small thrifts were similar
16 WASHINGTON MUTUAL V. UNITED STATES

despite the fact that the identified “synergies” would not have
been as beneficial to the bigger entities. The district court
found Dr. Mann’s testimony undermined Mr. Grabowski’s
testimony and the trustworthiness of his model. And given
the multiple weaknesses it identified in Appellant’s evidence,
the district court ultimately concluded that Appellant failed to
carry its burden of establishing either a cost basis in the
Missouri Branching Right or its corresponding entitlement to
the tax refunds it sought.

The court then went on to consider Appellant’s
abandonment claim, holding that Home had not abandoned
the Missouri Branching Right in 1993 and was therefore not
entitled to an abandonment loss deduction for that tax year.
The court properly determined that to establish abandonment,
Appellant was required to show both that “Home intended to
abandon the Missouri Branching Right” and that it
“performed an overt act of abandonment.” Id. at 1117.

Appellant offered evidence that, in the early 1990s, Home
entered into three agreements to either sell or exchange the
Missouri branches, and that each agreement contained a
covenant not to compete, prohibiting Home from soliciting
deposits for a limited period (two or three years) in the
designated geographic area.

The district court, however, focused on the fact that the
non-compete clauses contained exceptions. For example, one
of the agreements allowed Home to purchase and operate
branches within Missouri if Home merged with, purchased,
or was purchased by another thrift already operating in the
non-compete area. The other two agreements permitted
Home to continue operating its existing branches, and one of
those agreements also permitted Home to open new loan
 WASHINGTON MUTUAL V. UNITED STATES 17

offices in the area. Home’s Senior Vice President, Verne
Kline, further testified that the non-compete clauses were
intended to provide Home with flexibility “should an
opportunity arise or if there [was] a change of a decision.” In
fact, Mr. Kline indicated that one of his goals in negotiating
the sale of the Missouri branches was to retain “the most
flexibility that [Home] could get.” As Mr. Kline explained,
Home was trying to anticipate and avoid future obstacles in
the event “[Home] were to go out and acquire another
national firm that perhaps had branches in these [non-
compete] areas.”

Despite the above exceptions and Mr. Kline’s testimony,
Appellant argued that the totality of the evidence
demonstrated that Home intended to abandon the Missouri
Branching Right. Appellant pointed out that it had notified
stock analysts, shareholders, and the Office of Thrift
Supervision that Home was closing its Missouri branches,
and that these facts evidenced that it had abandoned the
Missouri Right and the Missouri thrift market.

The district court disagreed. It noted that the express
language of the covenants not to compete undermined
Appellant’s argument, and Mr. Kline’s testimony cast further
doubt on its position as well. The court was not persuaded by
the notices Home provided to interested parties, as that
evidence failed to demonstrate that Home was permanently
abandoning its right to re-enter the Missouri market. In fact,
the court found that the evidence actually supported the
conclusion that “Home recognized the value in leaving the
Missouri Branching Right intact,” id. at 1119, as it would
remain useful to Home’s nationwide thrift business, rather
than just its Missouri operations and, thus, had value to
Home’s potential future growth. The district court concluded
18 WASHINGTON MUTUAL V. UNITED STATES

that Home had taken action to “safeguard,” as opposed to
“permanently disavow,” its Branching Right and that no
deduction was warranted. Id. at 1120. The district court then
dismissed Appellant’s claims.

D

On appeal, Appellant contends that the district court
improperly concluded that no cost basis could be assigned to
the relevant intangible assets because: (1) it committed
reversible legal error when it declined to estimate a cost basis
for the Missouri Branching Right; (2) its error was due, at
least in part, to its misunderstanding of the applicable burden
of proof; (3) Appellant offered sufficient evidence from
which the court could have, under the proper standard,
calculated the value of the Missouri Branching Right, even if
it disagreed with Mr. Grabowski’s ultimate valuation; and
(4) in any event, the district court’s disagreement was itself
based on a clearly erroneous criticism of the inputs Mr.
Grabowski used for his mid-case scenario.3

Appellant also contends that the district court erred by
denying the abandonment loss deduction for the Missouri
Branching Right because: (1) it misapplied the test for
determining whether an abandonment loss was warranted and
improperly required Appellant to show that it “permanently
discarded” the Missouri Branching Right, ignoring the fact
that the abandonment test is disjunctive and permits a loss if
a taxpayer simply discontinues its business; (2) it improperly

3
As part of his scenario analysis, Mr. Grabowski ran his Model using
a variety of assumptions that were probability weighted. He ultimately
picked the “mid-case scenario” for his final analysis and testimony in the
district court.
 WASHINGTON MUTUAL V. UNITED STATES 19

held that the Missouri Branching Right was useful to Home’s
nationwide thrift business as opposed to only its Missouri
operations; and (3) it attached too much significance to the
covenants not to compete.

II

We apply de novo review to questions of law, such as the
question whether the district court applied the correct burden
of proof. See Husain v. Olympic Airways, 316 F.3d 829, 835
(9th Cir. 2002); Taisho Marine & Fire Ins. Co. v. M/V Sea-
Land Endurance, 815 F.2d 1270, 1274 (9th Cir. 1987).
Whether that burden of proof has been met, however, is
reviewed for clear error. See Potts, Davis & Co. v. Comm’r,
431 F.2d 1222, 1227 (9th Cir. 1970). Whether the district
court applied the correct legal standard to evaluate an
abandonment loss claim is subject to de novo review. See
A.J. Indus., Inc. v. United States, 503 F.2d 660, 662 (9th Cir.
1974).

“Where the trial has been by a judge without a jury, the
judge’s findings must stand unless clearly erroneous.”
Comm’r v. Duberstein, 363 U.S. 278, 291 (1960) (internal
quotation marks and citation omitted). “Clear error review is
deferential to the district court, requiring a definite and firm
conviction that a mistake has been made.” Husain, 316 F.3d
at 835 (internal quotation marks and citation omitted).

III

A

The district court permissibly concluded that Appellant
did not meet its burden of establishing a cost basis for its
20 WASHINGTON MUTUAL V. UNITED STATES

intangible assets. More specifically, the district court (1) held
Appellant to the correct burden; (2) did not make any clearly
erroneous factual findings; (3) permissibly determined that
the cumulative fundamental flaws underlying the Grabowski
Model rendered it incapable of producing a reliable value for
the Missouri Branching Right; and (4) was thus not required
to sua sponte assign a value to that Right.

1

Because this is a refund case, Appellant’s burden is “to
prove not only that the Commissioner erred in his
determination of tax liability but also to establish the correct
amount of the refund due.” Fed-Mart Corp. v. United States,
572 F.2d 235, 238 (9th Cir. 1978) (quoting Crosby v. United
States, 496 F.2d 1384, 1390 (5th Cir. 1974)). “Thus, if
insufficient evidence is adduced upon which to determine the
amount of the refund due, the Commissioner’s determination
of the amount of tax liability is regarded as correct.” Id.
(quoting Crosby, 496 F.2d at 1390).4 Appellant contends

4
To be clear, this is precisely what occurred in the district court. The
district court determined that Appellant’s evidence was insufficient to
support a valuation of the Missouri Branching Right and, as such,
Appellant could not meet its burden to establish a cost basis in any of the
rights. And because Appellant had the burden of proof in this action,
Appellant consequently could not prove that it was entitled to a refund.
Despite the fact that the result to Appellant was ultimately a zero recovery,
the district court did not hold that Appellant had a cost basis of zero in the
Rights—it simply found a failure of proof. To the extent this seems
draconian, we note that the United States is not entirely immune from this
type of rule. In a deficiency case, for example, if a taxpayer proves that
the Government’s deficiency notice is not only wrong, but also that it is
arbitrary and lacking in foundation, then the IRS is likewise required to
prove the amount of the deficiency. If the Government fails to meet its
respective burden in such a case, the deficiency noticed is reversed in its
 WASHINGTON MUTUAL V. UNITED STATES 21

that, in concluding it had not met its burden, the district court
improperly held Appellant to an unwarranted standard and
required Appellant to establish the market value of the
Missouri Branching Right under a heightened level of
“certainty” and “precision,” instead of simply requiring only
a reasonable estimation of its value. We disagree.

Contrary to Appellant’s argument, the district court did
not require an unprecedented level of precision. The court
made clear that the burden was on Appellant to prove its
refund entitlement and that the case law at times used the
word “exact.” See, e.g., Compton v. United States, 334 F.2d
212, 216 (4th Cir. 1964) (“To put it another way, the ultimate
question in a suit for refund is not whether the Government
was wrong, but whether the plaintiff can establish that taxes
were in fact overpaid. The plaintiff, to prevail, must establish
the exact amount which she is entitled to recover.”). But the
district court tempered its use of that word by employing the
phrase “reasonable certainty” to make clear that it was not
holding Appellant to a more stringent standard of
“exactness,” “certainty,” or “precision.” See, e.g., Trigon Ins.
Co. v. United States, 234 F. Supp. 2d 581, 586 n.7 (E.D. Va.
2002) (“The ‘exact amount’ text is not to be taken literally,
but instead is subject to the general proviso that claims for
refunds, like those for damages, must be supported by
evidence proving the claim amount with reasonable
specificity.”). In fact, the district court agreed with Appellant
that, assuming the existence of a sufficient evidentiary record,
an estimate would suffice for valuation purposes.
Accordingly, when the isolated phrases on which Appellant

entirety, judgment is entered for the taxpayer, and there is zero recovery
by the IRS. See, e.g., Morrissey v. Comm’r, 243 F.3d 1145 (9th Cir.
2001); Estate of Simplot v. Comm’r, 249 F.3d 1191 (9th Cir. 2001).
22 WASHINGTON MUTUAL V. UNITED STATES

relies are taken in context, they are unremarkable and do not
detract from the conclusion that the court understood the
appropriate standard.

Appellant’s argument based on the district court’s use of
the phrase “heavy burden” similarly misses the mark. The
district court used that phrase only while discussing Capital
Blue Cross v. Commissioner, 431 F.3d 117 (3d Cir. 2005), a
case relied upon by Appellant for the proposition that where
“the Government refuses to submit expert valuation
testimony regarding particular adjustments to a proffered
valuation, a court will essentially be forced to start from the
taxpayer’s valuation.” While the district court did observe
that the taxpayer bears a “heavy burden” to show that an
intangible asset is capable of separate valuation, see Capital
Blue Cross, 431 F.3d at 129–30, the district court also noted
that this “heavy burden” was not a new burden being imposed
on Appellant. Rather, the district court was merely
explaining the difficulties that may confront some taxpayers
who are simply unable to show that their assets are capable of
individual valuation.

Indeed, Capital Blue Cross elaborated that “[o]nce it is
established that the assets have a reasonably ascertainable
value, the court is obligated to seek the correct value of the
contracts not, upon catching the taxpayer in an error, to deny
any deduction automatically.” Id. at 130. Thus, the “heavy
burden” referred to by the district court here only went to the
potential difficulty in proving that intangible assets are
capable of separate valuation. In this context, the district
court’s use of the phrase “heavy burden” did not alter the
burden of proof. It merely explained that in some instances
that burden is difficult to carry.
 WASHINGTON MUTUAL V. UNITED STATES 23

2

Having determined that the district court correctly
understood and applied the appropriate standards, we turn to
Appellant’s contentions that the district court’s criticisms of
the Grabowski Model were clearly erroneous. According to
Appellant, the district court’s findings in this regard were
flawed for two primary reasons: (1) the court’s approach to
the valuation was overly pessimistic; and (2) the court
overlooked the fact that Mr. Grabowski factored risk into his
model by using a 22% discount rate and, therefore,
improperly faulted Mr. Grabowski for failing to adequately
address the risks inherent to the thrift industry in 1981.

Appellant further contends that the district court
misunderstood a number of complex and technical issues that
arose during trial, which resulted in the court’s clearly
erroneous rejection of the Grabowski Model in its entirety.
More specifically, Appellant asks us to find that the district
court: (1) erred by rejecting the Grabowski Model’s reliance
on Home’s intrastate Northern California expansion;
(2) misconstrued the Grabowski Model’s projected growth of
the Missouri deposit market; (3) incorrectly held that “interest
credited” should not be considered a source of “new” funds
for lending; and (4) failed to recognize that its criticism of the
Grabowski Model’s net interest spread was actually an attack
on Home’s business judgment and the basic premise that a
willing buyer would have thought that the projected spread
was feasible. However, because the district court’s findings
were based on a permissible view of the evidence, none of
these arguments are persuasive.

As to the first argument, Appellant takes the position that
the district court’s pessimistic perspective is incompatible
24 WASHINGTON MUTUAL V. UNITED STATES

with the perspective of a “willing buyer.” But Appellant
points to no authority standing for the proposition that a
willing buyer cannot also realistically assess a market in the
manner undertaken by the district court. Moreover, the
district court’s conclusion was amply supported by the
record. It is undisputed that Home engaged in the
supervisory mergers against the backdrop of the savings and
loan crisis. Despite this, Mr. Grabowski projected that Home
would see healthy growth and that it would be able to convert
all of its projected Missouri deposits into new loans. Not
only did Mr. Grabowski’s projections seem to contravene the
economic realities at the time, they were also contrary to
Home’s own 1981 market projections.5

Additionally, the Government offered evidence that
projecting high loan volumes in 1981 was ill advised given
the high interest rates at the time. Not only was it difficult for
buyers to qualify for loans, specifically adjustable rate
mortgages, but Home’s management was not sure whether
such loans would have any widespread appeal. Given the
profuse evidence supporting a more pessimistic market
outlook, the district court was justified in rejecting Mr.
Grabowski’s optimistic assumptions.

Appellant further contends that the district court ignored
the Grabowski Model’s use of a 22% discount rate and,
therefore, incorrectly concluded that Mr. Grabowski failed to

5
In fact, there was evidence in the record to support the conclusion
that, contrary to Appellant’s current arguments, Home had no interest in
the Missouri market and it purchased those branches only to acquire the
Florida Branching Right. To the extent Appellant is addressing the value
of the Missouri Branching Right, this evidence cuts against Appellant’s
argument that the district court took too pessimistic a view of the
evidence.
 WASHINGTON MUTUAL V. UNITED STATES 25

adequately address risk in his Model and improperly required
Appellant to account for the same risks twice. This argument
is flawed, however, because it suggests that the 22% discount
rate was intended to counter-balance the overly optimistic
projections identified by the district court. In fact, Mr.
Grabowski used the same discount rate for each of his
scenarios, regardless of whether he used conservative or
optimistic industry-wide assumptions for those scenarios.
The 22% risk premium was therefore directed at his view of
the thrift industry as a whole and was not adjusted at any
point to address the overly optimistic assumptions identified
by the district court.

The district court’s remaining factual findings were also
not clearly erroneous. Appellant claims that the district court
improperly rejected the Grabowski Model’s reliance on
Home’s previous intrastate expansion because the court
erroneously concluded that disintermediation would have
reduced both the Missouri deposit market as a whole and the
hypothetical buyer’s proportional share of that shrinking
market. But while disintermediation may not directly affect
a hypothetical buyer’s ability to capture deposit market share,
that was not the only reason the district court rejected
Appellant’s attempt to use Home’s Northern California
expansion as a predictor of its anticipated results in Missouri.
To the contrary, the court determined that predicting future
success of an interstate merger at a time when the thrift
industry was insolvent by reference to Home’s prior ability to
capture intrastate market share in a growing market during a
relatively stable period was unreliable. The court also noted
that this comparison was especially problematic because
Home’s growth into Northern California was based on
acquiring existing institutions, which it did not have in
Missouri, and because Home’s own projections with regard
26 WASHINGTON MUTUAL V. UNITED STATES

to Missouri market share were much more conservative.6
These findings were not in error.

The district court’s conclusion that Mr. Grabowski
overstated potential statewide deposit growth was also
permissible. As the district court noted, Mr. Grabowski
included “interest credited” as a source of “new deposit
growth.” And while it is true that interest posted to the
accounts of existing customers can still be used for lending,
the district court did not err when it determined that “interest
credited” did not constitute “new” growth and, therefore,
should not have been included as such in the Model.

Unlike true new deposit dollars that are essentially open
for capture, “interest credited” dollars typically stay within
their existing institution. Thus, these dollars are not a
categorical source of new funds flowing into the thrift
market; rather, a hypothetical buyer would have to convince
a depositor to leave its current establishment in favor of the
newcomer. But to do so, the buyer would have to offer a

6
It appears the district court did err in citing the wrong line of an
exhibit when it was discussing Mr. Grabowski’s projections for Missouri
deposit growth. Rather than citing to the numbers corresponding to
statewide growth, the court mistakenly cited to a line that corresponded to
a hypothetical buyer’s anticipated growth in deposits within the state.
Despite this essentially clerical error, however, the district court made
clear that it properly understood the Grabowski Model to reflect that, “in
real dollar terms, Missouri’s deposit market did not actually grow.”
WAMU II, 996 F. Supp. 2d at 1107. Further, it recognized that
Appellant’s “contention that the Grabowski Model actually shows nominal
deposit growth if it is adjusted for inflation” was “only true for the
Model’s statewide deposit projections” and not for a hypothetical buyer’s
individual deposit projections. Id. at 1111. The court was thus clear that
the higher percentages to which it referred were tied to individual deposit
growth as opposed to statewide growth.
 WASHINGTON MUTUAL V. UNITED STATES 27

higher rate of return to the depositor than the existing
institution—a scenario that was highly unlikely during the
savings and loan crisis. Accordingly, the district court
correctly faulted the Model for including these funds and
artificially skewing Missouri’s deposit market growth.7

Last, the district court did not clearly err when it rejected
Mr. Grabowski’s projected 2.5% net interest spread, which he
claimed a hypothetical buyer could expect to achieve in
Missouri. Appellant takes the position that the district court
should have deferred to that projection because it mirrored
Home’s actual forecasts at the time of the underlying
transactions. Nothing in the record or the case law, however,
supports the conclusion that the court was bound by Home’s
estimates.

In sum, none of the district court’s challenged factual
findings were clearly erroneous, and we decline to reverse on
this ground. See Husain, 316 F.3d at 835.

3

Finally, the district court did not clearly err when it
determined that the cumulative flaws underlying the
Grabowski Model rendered it incapable of producing a
reliable value for the Branching Right. Appellant pleads to
the contrary, arguing first that no such finding was ever made
and, second, that any such finding was unsupported. Again,
we disagree.

7
This conclusion is not undermined by the fact that the district court
cited to the incorrect percentages in one part of its discussion. See supra
note 6. The district court’s qualitative challenges to projected statewide
deposit growth are valid, and this minor error does not warrant reversal.
28 WASHINGTON MUTUAL V. UNITED STATES

When read against the backdrop of the extensive record
in this case, including counsels’ post-trial arguments, the
district court’s decision makes clear that it accepted the
Government’s primary contention that the Grabowski Model
was “too flawed to form a reliable basis for valuing the
Missouri Branching Right.” WAMU II, 996 F. Supp. 2d at
1109. The trier of fact agreed when it ruled that the evidence
was too unreliable to support even an estimation of the value
of the Rights. And although the court did not expressly state
that no reliable evidence would permit an “informed
estimation” of the intangible assets, that conclusion was
implicit in its findings that Mr. Grabowski’s assumptions
were “unreliable” and “unrealistic.” While it may have been
helpful if the trial court had made a more exacting statement
to that effect, it is clear to us that the court did in fact reach
that conclusion.

Even more, the court made clear that it was familiar with
the relevant authorities, including those standing for the
proposition that, assuming sufficient evidence had been
produced, an informed estimate was all that was required.
The district court also went to great lengths to explain that it
“[was] not required to, and indeed [could not], derive the cost
basis from unreliable evidence.” WAMU II, 996 F. Supp. 2d
at 1103 (citing Norgaard v. Comm’r, 939 F.2d 874, 879 (9th
Cir. 1991)); see also id. (“[C]ourts decline to apply Cohan[ v.
Commissioner, 39 F.2d 540 (2d Cir. 1930),] in cases where
there is no doubt that the taxpayer incurred some deductible
expense, but the taxpayer failed to present evidence sufficient
to allow the court to make an accurate finding on the amount
of the deduction.”).

In sum, the court’s extensive discussion of the evidentiary
prerequisites to making an informed estimate undermines the
 WASHINGTON MUTUAL V. UNITED STATES 29

theory that the district court misunderstood the standard or
applied it erroneously. The very fact that the court did not
engage in an estimation exercise—when it knew that an
estimation should be made if sufficient evidence was
presented—further supports the conclusion that the court had
already determined that the evidence before it was
inadequate.8 See Norgaard, 939 F.2d at 879–80. We see no
error in the district court’s understanding of this evidentiary
standard.

We also agree with the district court’s application of that
standard and its ultimate determination that estimation based
on the evidence in the record was effectively impossible.9
Contrary to Appellant’s arguments, the district court’s
criticisms of Appellant’s evidence were not limited to inputs
but were, in fact, much more fundamental. The district court
did not just disagree with Mr. Grabowski’s quantitative

8
The substantial flaws identified in this case also render it
distinguishable from Capital Blue Cross, 431 F.3d 117. The Capital Blue
Cross case depends on the assumptions that (1) the taxpayer has shown
that an asset has a reasonably ascertainable value and (2) the Government
identified only minor flaws in the taxpayer’s analysis. Id. at 130. Here,
however, the Government identified major, systemic flaws, and it did not
concede that the value of the Rights may be determined separately and
with reasonable precision.
9
We need not decide whether the ascertainability of an asset’s value
is a question of law or of fact, thus affecting our standard of review.
Compare Steen v. United States (In re Steen), 509 F.2d 1398, 1404 n.9
(9th Cir. 1975) (“While the amount of the fair market value of property is
a question of fact, whether value is ascertainable is reviewable question
of law.”), with Clodfelter v. Comm’r, 426 F.2d 1391, 1395 (9th Cir. 1970)
(“Whether property has ascertainable market value on a particular date and
the amount of that value is a question of fact.”). Under any standard of
review, we agree with the district court that the evidence was insufficient
to derive a value.
30 WASHINGTON MUTUAL V. UNITED STATES

inputs; it disagreed with the qualitative assumptions
underlying the Model itself. While interest rates or market
share inputs could potentially be modified in isolation, it is
much less clear how the court could have unilaterally
modified the Model to address Mr. Grabowski’s reliance on:
(1) an unrealistically “rosy” view of the future of the thrift
industry in 1981 (e.g., by failing to properly consider
disintermediation and relying on statistics that included
“interest credited” balances); (2) an unrealistic estimate of
Home’s ability to capture market share; (3) a flawed income-
based approach to evaluating whether a hypothetical buyer in
a loan-driven industry would be able to use new deposits to
generate new loans; (4) an unrealistic hypothetical net interest
spread; (5) an improbable growth rate during a time when
associations were struggling to attract and retain depositors;
and (6) a potential decrease in the Missouri Branching
Right’s license value.10

Given the above, Appellant’s argument that the court was
required to sua sponte estimate some value for the Rights is
foreclosed. On these facts, such a proposition would
essentially do away with the taxpayer’s burden. Instead, the
cases make clear that a district court may only be obligated to
value an asset when it determines that the asset “may be
valued separately” or has “a reasonably ascertainable value,”

10
While we do believe it possible that some of the flaws identified by
the district court could potentially have been addressed in reliance on
other evidence in the record (e.g., the district court could perhaps have
substituted a different net interest spread), the record does not reflect any
obvious manner in which the court could have addressed, for example,
Grabowski’s overestimates regarding a hypothetical buyer’s ability to
generate new loans or the value of the license. These flaws go to defects
in the Model itself, and it remains unclear to us how a court could address
all of Model’s flaws simultaneously and reach any principled result.
 WASHINGTON MUTUAL V. UNITED STATES 31

or “sufficient evidence was introduced to allow the [district]
court to reach a reasonable conclusion” as to value. Capital
Blue Cross, 431 F.3d at 129–30; R.M. Smith, Inc. v. Comm’r,
591 F.2d 248, 251 (3d Cir. 1979). Since the district court
permissibly determined that the Missouri Branching Right did
not have a “reasonably ascertainable value,” it was not
required to undertake such an exercise here.11

The district court applied the proper legal standards and
did not clearly err in criticizing the Grabowski Model or in
determining that the evidence was insufficient to reliably
value the Missouri Branching Right. The court properly
determined that Appellant failed to meet its burden and, thus,
appropriately dismissed Appellant’s claims on this basis.

B

Even assuming the Missouri Branching Right could be
valued, Appellant nonetheless failed to show reversible error
as to the denial of its abandonment deduction.

Internal Revenue Code § 165(a) provides for an
abandonment deduction for “any loss sustained during the
taxable year and not compensated for by insurance or
otherwise.” 26 U.S.C. § 165(a). An abandonment loss may
be appropriate if “[the] business or transaction is discontinued

11
Nor was the district court constrained by the mandate from the first
appeal to calculate a cost basis for each of the rights. That appeal did not
address any arguments regarding the actual valuation itself. On remand,
the court simply directed the district court to “proceed to determine the
cost basis and conduct further proceedings in accordance to this opinion.”
WAMU I, 636 F.3d at 1221. The district court remained free to conduct
the proceedings as it deemed necessary to independently calculate the
value of the Rights.
32 WASHINGTON MUTUAL V. UNITED STATES

or where such property is permanently discarded from use
therein.” Treas. Reg. § 1.165-2(a). A deduction is proper if
there is “(1) an intention on the part of the owner to abandon
the asset, and (2) an affirmative act of abandonment.” A.J.
Indus., Inc. v. United States, 503 F.2d 660, 670 (9th Cir.
1974).

Appellant contends that the district court misapplied the
test for determining whether an abandonment loss was
warranted and, thus, committed legal error. First, Appellant
argues that the district court improperly required Appellant to
show that it had “permanently discarded” the Missouri
Branching Right and ignored the disjunctive nature of the
abandonment test, which also permits a loss if the taxpayer
discontinues its business. Second, Appellant contends that
the court improperly defined the business in which the
Missouri Branching Right was used as Home’s nationwide
thrift business, rather than as a more limited Missouri-based
operation. In addition, Appellant argues that the district court
clearly erred in its factual analysis by attaching too much
significance to the covenants not to compete that were
included in the transfer agreements for the sale of the
Missouri branches.

Despite the fact that the district court never explicitly
stated in its written order that the disjunctive test requires
inquiry into whether “such business . . . is discontinued or . . .
such property is permanently discarded from use therein,” it
nonetheless applied the correct legal standard. Treas. Reg.
§ 1.165-2(a) (emphasis added). The district court expressly
acknowledged that, “[a]ccording to [Appellant], Home
abandoned the Missouri Branching Right by closing its
Missouri deposit-taking branches.” WAMU II, 996 F. Supp.
2d at 1118. More specifically, the district court identified
 WASHINGTON MUTUAL V. UNITED STATES 33

Appellant’s argument to be that “Home [] abandon[ed] the
[Missouri Branching] Right by abandoning the economically
inefficient business in which it used the Right (i.e., Missouri
deposit taking), disposing of the assets it used in that business
(i.e., the Missouri branches), and ceasing to use the Right in
that business.” Id.

The district court then explained the Government’s
competing position. According to the district court, the
Government claimed that the closing of the Missouri deposit-
taking branches was insufficient to prove abandonment in
light of (1) the covenants not to compete that reserved for
Home the right to re-enter the market, and (2) the testimony
of Home’s executives indicating that Home had not
foreclosed the option of using the Missouri Branching Right
in the future. Id.12

Based on both parties’ arguments and the evidence before
it, the district court expressly determined that Home had not
shown that it intended to discontinue the business in which
the Branching Right was used. In doing so, the district court
repeatedly addressed Home’s sale of the Missouri branches
and its decision to withdraw from the Missouri market at the
time. Appellant’s problem is not that the district court
misunderstood the legal standard, but that the court disagreed
with Appellant as to the factual importance of the limitations
on the covenants not to compete and the contemporaneous
evidence that Home intended to keep its future options open.

12
Our conclusion is further supported by the fact that, as argued by
Appellant, it was impossible for Home to “permanently discard” the
Missouri Branching Right. Since the Right could not be discarded, the
only relevant prong that the court could have considered was whether the
business in which the Right applied had been discontinued.
34 WASHINGTON MUTUAL V. UNITED STATES

Accordingly, the district court applied the correct standard.
Appellant simply disputes the result.

To that end, Appellant primarily takes issue with the
district court’s conclusion that Home’s relevant “business” be
viewed at the national level. But contrary to Appellant’s
arguments, the district court’s determination on that issue was
permissible. The district court properly determined that the
Missouri Branching Right remained potentially useful to
Home’s ongoing national business to the extent Home could
either decide to re-enter the Missouri market or attempt to
entice a merger with or a sale to another thrift with similar
inclinations to expand outside of its home state. The record
clearly permits this finding and the court’s broad view of
Home’s business was not clearly erroneous.

We further conclude that the district court attached the
proper significance to the covenants not to compete and to the
testimony of Home’s executives that Home had not
permanently given up on the idea of operating deposit
institutions in Missouri.13 The district court permissibly
reasoned that the Missouri Branching Right retained value
upon disposition of the existing branches because the

13
To the extent Appellant’s argument turns on the district court’s use
of the word “permanently,” that argument is not well taken. The district
court may have used the phrases “permanently abandoned” and
“permanently disavowed,” but it appears that use of the word
“permanently” was not necessarily intended to refer to the issue of
whether an asset was discarded. Rather, it seems “permanently” was used
to differentiate between a “permanent” and “temporary” action. The
district court essentially concluded that, because of the limitations on the
covenants not to compete, Home’s withdrawal from Missouri was, by
definition, only “temporary” and, thus, did not support the finding that
Home really intended to discontinue its business there.
 WASHINGTON MUTUAL V. UNITED STATES 35

Right—and the attendant ability to re-enter the Missouri
market—held value beyond just the ability to purchase or
operate branches. Stated another way, Home did not show
that it intended to discontinue its business—or abandon the
Branching Right—when it expressly reserved the right to re-
enter the Missouri market. Rather, it is clear that Home
recognized that the Branching Right itself remained
potentially valuable to its nationwide thrift business as an
asset that might be attractive to a suitor in a merger or
acquisition. The district court’s interpretation of the evidence
before it was appropriate, and Appellant has failed to point to
any error warranting reversal.14

Costs are awarded to the Appellee.

AFFIRMED.

14
Appellant’s argument that the district court incorrectly applied a
heightened burden of proof akin to a criminal standard to this issue is
rejected. Passing use of the word “doubt” is insufficient to justify the
inference that the district court confused the civil preponderance standard
with the tougher criminal standard.