August 16, 1994     UNITED STATES COURT OF APPEALS
                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 93-2145

               DPJ COMPANY LIMITED PARTNERSHIP,

                    Plaintiff, Appellant,

                              v.

            FEDERAL DEPOSIT INSURANCE CORPORATION,
          AS RECEIVER FOR BANK OF NEW ENGLAND, N.A.,

                     Defendant, Appellee.

                                         

                         ERRATA SHEET

The opinion of this  court issued on July 27, 1994, is amended  as
follows:

On  page  7,   footnote  1,  line   3,  change   "Cobblestone"  to
                                                             
"Cobblestone".

On  page 8, paragraph  2, line 1, change  "reliance of damages" to
"reliance damages".

                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 93-2145

               DPJ COMPANY LIMITED PARTNERSHIP,

                    Plaintiff, Appellant,

                              v.

            FEDERAL DEPOSIT INSURANCE CORPORATION,
          AS RECEIVER FOR BANK OF NEW ENGLAND, N.A.,

                     Defendant, Appellee.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

       [Hon. Edward F. Harrington, U.S. District Judge]
                                                      

                                         

                            Before

                   Torruella, Circuit Judge,
                                           

                Coffin, Senior Circuit Judge,
                                            

                  and Boudin, Circuit Judge.
                                           

                                         

Robert D. Loventhal with whom Robert  D. Loventhal Law Office  was
                                                             
on brief for appellant.
Gregory E. Gore,  Counsel, Federal Deposit Insurance  Corporation,
               
with  whom Ann  S. DuRoss,  Assistant General  Counsel, and  Robert D.
                                                                  
McGillicuddy, Senior Counsel, were on brief for appellee.
        

                                         

                        July 27, 1994
                                         

     BOUDIN, Circuit Judge.  DPJ  Company Limited Partnership
                          

("DPJ")  is  a  Massachusetts  real  estate  developer.    On

February  12,  1988,  it  entered into  a  commitment  letter

agreement with the Bank  of New England.  Subject  to various

conditions  being satisfied,  the agreement  contemplated the

creation of a three-year $2.5 million line of credit on which

DPJ  could draw to finance  primary steps in land development

ventures (e.g., deposits, option payments,  and architectural
              

and engineering services).

     The commitment letter provided  that the creation of the

line  of  credit--an  event   called  the  "closing"  (as  in

"closing"  a  deal)--would  occur   after  DPJ  met   various

requirements,  such as  the delivery to  the bank  of certain

documents, appraisals, and  the like.  DPJ also had  to pay a

non-refundable  loan commitment  fee of  $31,250 immediately.

In  satisfying   the  conditions,   DPJ  spent  a   total  of

$180,072.37 in  commitment fees, closing  costs, legal  fees,

survey  costs, points,  environmental reports and  other such

items.

     The  line  of credit  was  "closed"  on  July 23,  1988.

Between  that   time  and  January  6,   1991,  DPJ  borrowed

approximately $500,000 from the bank pursuant to the line  of

credit.   The bank failed on January 6, 1991.  On February 1,

1991,  the bank's  receiver,  the Federal  Deposit  Insurance

Corporation,  disaffirmed  the   line  of  credit   agreement

                             -2-

pursuant to its statutory authority to repudiate contracts of

failed banks.  12 U.S.C.   1821(e)(1).  Although the FDIC may

repudiate  such contracts,  the injured  party may  under the

statute  sue the FDIC as  receiver for damages  for breach of

contract; but, with certain exceptions, the injured party may

recover only "actual direct  compensatory damages," 12 U.S.C.

  1821(e)(3)(A)(i),  and may not recover  inter alia "damages
                                                    

for lost profits or opportunities."  Id.   1821(e)(3)(B)(ii).
                                        

     On May  22, 1991, DPJ filed an administrative claim with

the  FDIC  to  recover the  costs  and  expenses it  incurred

pursuant  to the  commitment letter  mentioned to  obtain the

line of credit.  12 U.S.C.   1821(d)(5).  The FDIC disallowed

the claim.   DPJ then brought  suit in the  district court to

recover  its claimed  damages.   Id.    1821(d)(6)(A).   Both
                                    

sides moved for summary judgment.

     The district  court entered a decision  on September 10,

1993,  denying recovery to DPJ.  The court concluded that DPJ

was  "really  seek[ing]  to   recoup  its  closing  costs  as

compensation  for  its lost  borrowing  opportunity resulting

from the FDIC's disaffirmance."  In substance, the court held

that the  "loss of borrowing capability"  does not constitute

"actual  direct compensatory  damages."   In  support of  its

decision it cited  and relied upon Judge  Zobel's decision in

FDIC  v. Cobblestone Corp., 1992 WL 333961 (D. Mass. Oct. 28,
                          

1992).  DPJ then appealed to this court.

                             -3-

     The    critical   statutory    phrases--"actual   direct

compensatory damages" and "lost profits  and opportunities"--

have been  the recurrent subject  of litigation.   See, e.g.,
                                                            

Howell v. FDIC, 986 F.2d 569 (1st Cir. 1993); Lawson v. FDIC,
                                                            

3 F.3d  11 (1st Cir. 1993).   We have read  the limitation of

recovery to  compensatory damages, and the  exclusion barring

lost  profits or  opportunities,  against  the background  of

Congress'  evident  purpose:    "to spread  the  pain,"  in a

situation where  the assets are unlikely to cover all claims,

by placing policy-based  limits on  what can  be recouped  as

damages for repudiated  contracts.  Howell, 986 F.2d  at 572;
                                          

Lawson, 3 F.3d at 16.
      

     Contract  damages  are  often calculated  to  place  the

injured  party in  the position  that that  party would  have

enjoyed  if  the other  side had  fulfilled  its part  of the

bargain.   Subject to  various limitations, lost  profits and

opportunities are  sometimes recovered under  such a "benefit

of  the bargain"  calculation.   A.  Farnsworth, Contracts   
                                                          

12.14 (2d ed. 1990); C. McCormick, Damages,   25 (1935).  Yet
                                          

where  an injured claimant cannot recover the full benefit of

the bargain--for  example, because  profits cannot  be proved

with  sufficient  certainty--there is  an  alternative, well-

established contract damage theory:

          [O]ne  who fails  to  meet the  burden of
          proving   prospective   profits  is   not
          necessarily relegated to nominal damages.
          If one has  relied on  the contract,  one

                             -4-

          can  usually meet  the burden  of proving
          with sufficient certainty  the extent  of
          that reliance  .  . .  .   One  can  then
          recover damages based  on reliance,  with
                                            
          deductions   for  any   benefit  received
          through salvage or otherwise."

Farnsworth, supra,   12.16, at 928 (emphasis added).
                 

     As McCormick has explained, "[t]his recovery is strictly

upon the contract,"  McCormick,  supra,   142 at 583.   It is
                                      

not a remedy for  unjust enrichment, nor is it  rescission of

the  contract.   It  is  a contract  damage  computation that

"conform[s] to the more  general aim of awarding compensation

in all cases,  and [it] departs from the standard of value of

performance only  because of  the difficulty in  applying the

[latter standard]."  Id. at 583-84.  See generally In re  Las
                                                             

Colinas, Inc.,  453 F.2d  911, 914  (1st  Cir. 1971)  (citing
             

numerous authorities), cert. denied, 405 U.S. 1067 (1972).  
                                   

     Subject  to common-law  limitations, to  which  we shall

return in due  course, expenditures by DPJ  in fulfilling its

part of the bargain can properly be recovered as compensatory

damages under this  alternative reliance  theory.   Certainly

damages  so computed do not  offend the terms  of the federal

statute.  The FDIC  does not dispute that the  $180,072.37 in

costs and expenses were "actual" expenditures.   And, as they

were apparently  made to  fulfill specific stipulations  laid

down  by  the  bank,  the  resulting damages  can  fairly  be

described as  "direct," a  term normally used  to filter  out

damages  that  are causally  remote,  unforeseeable  or both.

                             -5-

Farnsworth, supra, at    12.14-12.15.
                 

     Similarly, DPJ's expenditures are not, by any stretch of

literal language, "lost profits or opportunities."  One might

argue   that  since   lost  profits  and   opportunities  are

unrecoverable, the  recovery of  reliance damages would  also

offend  the policy of the statute.  But the policy underlying

the  statutory  ban  on  lost profits  and  opportunities  is

Congress'  apparent view  that these  benefits have,  in some

measure, an aspect of being windfall gains.  This same policy

is  reflected in  the disallowance  of punitive  or exemplary

damages, 12 U.S.C.   1821(e)(3)(B)(i), and damages for future
                                                             

rent when the FDIC disaffirms a lease and surrenders property

previously leased by the bank.  Id.   1821(e)(4)(B).
                                   

     There is  normally no windfall involved  in the recovery

of  reliance damages.    DPJ is  seeking  to recapture  money

actually  spent  under  the  commitment  letter agreement  to

obtain a line  of credit  that the FDIC  has now  repudiated.

Whether or not one shares Congress' belief that "lost profits

and opportunities"  are a  special category of  damages which

should  be  disfavored,  that  policy is  not  even  remotely

offended  by  returning  DPJ its  out-of-pocket  expenditures

which, because of the FDIC's repudiation, have made DPJ's own

expenditures (at least in part) fruitless.

     The district court called DPJ's claim one to recover for

a "lost  opportunity" since  the breach of  contract deprived

                             -6-

DPJ of the opportunity  to secure further loans.   This could

be so if, as  in Cobblestone, DPJ were claiming  profits that
                            

would have  been realized through  further loans.1   It might

be  arguably  so (we  do  not decide  the  point) if  DPJ was

claiming as damages the cost of securing a substitute line of

credit.   But reliance damages  do not compensate  for a lost

opportunity;  they merely restore to  the claimant what he or

she spent before the opportunity was withdrawn.

     In sum,  DPJ has claimed  reliance damages in  this case

and we hold that reliance damages--or  at least those claimed

by DPJ--are  "actual direct  compensatory  damages," are  not

compensation for  "lost profits  and opportunities," and  are

not  barred  by  Cobblestone.   Construction  of  the  quoted
                            

statutory phrases is, of course, a matter of federal law, and

the concept of reliance damages has long been recognized both

in  federal litigation,  Rumsey Mfg.  Corp. v.  United States
                                                             

Hoffman  Mach. Corp., 187 F.2d 927, 931-32 (2d Cir. 1951) (L.
                    

Hand), and in Massachusetts.  Air Technology Corp. v. General
                                                             

Elec. Co., 199 N.E.2d 538, 549 n.19 (Mass. 1964).
         

     When we  turn  to the  final  issues in  this  case--the

common-law  limitations on  reliance  damages--the choice  of

                    

     1In Cobblestone,  the company took the  position that it
                    
had lost approximately $5 million because the FDIC repudiated
a line  of credit  used by  Cobblestone to  finance equipment
that  it expected to  lease to customers.   We agree with the
denial of  such a  lost-profits recovery in  Cobblestone, but
                                                        
think the decision quite distinguishable.

                             -7-

governing law is more debatable.  The  underlying  obligation

on which DPJ sues is a contract created by Massachusetts law.

Federal law imposes statutory limits  on the damages that may

be awarded against the FDIC when it repudiates the  contract.

Whether the  nuances and  qualifications that shape  reliance

damages should  be decided  under Massachusetts  law, federal

law  or conceivably both is an interesting question.  It need

not be answered here, because Massachusetts' view of reliance

damages  does not appear to depart from general practice.  We

turn,  then,  to  possible  common-law  limitations  on DPJ's

recovery of reliance damages in this case.

     First,  because  reliance  damages seek  to  measure the

injured party's "cost of  reliance" on the breached contract,

"an injured  party cannot  recover for costs  incurred before
                                                             

that  party made the contract."   Farnsworth, supra,   12.16,
                                                   

at  928 n.2.  The FDIC in  this case argues that, at the time

DPJ made its expenditures, the bank had no obligation to make

a loan at all, for that obligation arose only after the  bank

later   made  a   discretionary  judgment   to   "close"  the

transaction and  establish the  line of credit.   Farnsworth,

supra,    12.16, at 928  n.2.  The  FDIC concludes that DPJ's
     

pre-loan expenditures were not made in reliance upon the line

of credit promise but were made in order to secure it.

     This will not wash.  The commitment letter was itself an

agreement that gave rise,  upon the satisfying of conditions,

                             -8-

to the bank's obligation to create and maintain DPJ's line of

credit.   Whether the bank reserved for itself the discretion

to refuse to close (e.g.,  if dissatisfied with the documents
                        

submitted to it), the DPJ expenditures were made pursuant  to
                                                         

the agreement and  so "in  preparing to perform  and in  part

performance" by DPJ.  McCormick, supra,    142, at 583.  As a
                                      

practical  matter, companies  do  not  normally spend  almost

$200,000  in  satisfying loan  conditions  without  very good

reason  to expect  that  the loan  itself  will be  approved.

Thus, we think it is unrealistic to separate the expenditures

by DPJ from the bank's promise  to provide the line of credit

and to make loans pursuant to it.

     Second, where full performance  of a contract would have

given claimant no benefit, or at least less than the reliance

damages   claimed,   this  fact   may  justify   limiting  or

disallowing reliance  damages.   The notion is  that claimant

should on no account get more than  would have accrued if the

contract had  been performed.  Farnsworth, supra,   12.16, at
                                                

930 &amp; nn. 11-14 (citing cases).  Prior to the bank's closing,

DPJ had borrowed only $500,000; DPJ in turn  says that it was

preparing  to borrow further on  its line of  credit when the

FDIC put an end to the opportunity.  If it has not waived the

issue,  on remand the FDIC might conceivably try to show that

DPJ would  in fact not have  borrowed further on  the line of

credit  and,  therefore,  that   DPJ  had  in  fact  received

                             -9-

everything it  would have  received had FDIC  not disaffirmed

the line of credit agreement.  

     Third, a reliance recovery may  be reduced to the extent

that the  breaching party  can  prove that  a "deduction"  is

appropriate "for  any benefit received [by  the claimant] for

salvage or otherwise."  Farnsworth, supra,   12.16, at 928-29
                                         

&amp; nn. 1, 3 &amp; 7 (citing cases).  Compare Restatement (Second),
                                                            

Contracts     349  (benefits  not  mentioned).     It  is  an
         

intriguing question whether, assuming that the issue is open,

there  should  be  any  deduction  for  the  benefit  already

received by DPJ by  virtue of the $500,000 in  loans actually

made and, if so, how that deduction should be measured.

     These  are by  no means  easy issues  to resolve  in the

abstract.   On the one hand  the FDIC could argue,  if it has

not  waived the  issue,  that DPJ  received  some portion  of

benefits  promised by the agreement,  such as 20  per cent of

the potential loan amount ($500,000  out of $2.5 million)  or

the  availability of  credit  for two  and  one half  of  the

promised  three  years.   On the  other  hand DPJ  might have

arguments as to why  no equitable offset is proper.   Neither

side has briefed the  relatively sparse caselaw pertaining to

a  possible  deduction for  benefits received  where reliance
           

damages are claimed.  

     There  is no  indication  that the  FDIC  argued in  the

district  court that  DPJ  would assuredly  have declined  to

                             -10-

borrow further on the line of credit or that a deduction from

the  amount claimed  should be  made  to account  for benefit

received.  Certainly no such arguments have been made in this

court.  If the FDIC does press such arguments on  remand, the

district court can determine  whether the arguments have been

waived by a failure to assert them in a timely manner.  

     The judgment of  the district court  is vacated and  the
                                                    

matter remanded for further proceedings  consistent with this
               

opinion.

                             -11-
