March 12, 1993    UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 92-1542

                   BRUCE A. HOWELL, ET AL.,

                   Plaintiffs, Appellants,

                              v.

FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR ELIOT      
                        SAVINGS BANK,

                     Defendant, Appellee

                                         

                         ERRATA SHEET

   The opinion of  this court  issued on February  17, 1993  is
amended as follows:

   On  page 4, third line of footnote 1, replace "charges" with
"changes".

February 17, 1993
                UNITED STATES COURT OF APPEALS
                    For The First Circuit
                                         

No. 92-1542

                   BRUCE A. HOWELL, ET AL.,

                   Plaintiffs, Appellants,

                              v.

            FEDERAL DEPOSIT INSURANCE CORPORATION
             AS RECEIVER FOR ELIOT SAVINGS BANK,

                     Defendant, Appellee.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. William G. Young, U.S. District Judge]
                                                    

                                         

                            Before

                     Breyer, Chief Judge,
                                        
             Higginbotham, Senior Circuit Judge,*
                                               
                  and Boudin, Circuit Judge.
                                           

                                         

Edwin A.  McCabe with  whom Karen  Chinn Lyons,  Joseph P.  Davis,
                                                                  
III, The McCabe Group, and Lawrence Sager were on brief for appellant.
                                     
Lawrence   H.  Richmond,   Counsel,  Federal   Deposit   Insurance
                       
Corporation,  with  whom Ann  S.  DuRoss,  Assistant General  Counsel,
                                    
Federal Deposit  Insurance Corporation, Colleen B.  Bombardier, Senior
                                                          
Counsel,  Federal  Deposit  Insurance  Corporation,  John  C. Foskett,
                                                                 
Michael P.  Ridulfo  and Deutsch  Williams Brooks  DeRensis Holland  &amp;
                                                                  
Drachman, P.C.  were on brief for appellee.
         

                                         

                      February 17, 1993
                                         

                 
*of the Third Circuit, sitting by designation.

     BOUDIN,  Circuit Judge.    Appellants in  this case  are
                           

former officers  of a failed bank.  They sued the FDIC as the

bank's  receiver when  the FDIC  disallowed their  claims for

severance  pay  under their  contracts  with the  bank.   The

district court  sustained the  FDIC, reasoning that  Congress

had restricted such claims.  Although the statute in question

is not easily construed  and the result  is a severe one,  we

believe  that the officers'  claims fail, and  we sustain the

district court.

     The facts, shorn of flourishes added by the parties, are

simple.  In  1988 and 1989, the four appellants  in this case

were   officers  of   Eliot   Savings   Bank   ("Eliot")   in

Massachusetts.   In November 1988, when  Eliot was undergoing

financial strain, Eliot made an agreement with Charles Noble,

its  executive vice  president, committing  the bank  to make

severance  payments (computed under  a formula but apparently

equivalent  to three  years' salary)  if his  employment were

terminated.   In  August 1989,  the bank entered  into letter

agreements  with  three   other  officers--appellants   Bruce

Howell, Patricia McSweeney,  and Laurence  Richard--promising

them  each a  year's  salary as  severance  in the  event  of

termination.   Finally,  in  December 1989  a further  letter

agreement  was  made  with  Noble,  reaffirming  the  earlier

agreement with him while modifying it in certain respects.

                             -2-

     The agreements make clear that they were not intended to

alter the "at will" employment relationship between Eliot and

the  officers.   The  bank  remained  free to  terminate  the

officers,  subject  to severance  payments,  and  (so far  as

appears)  the officers were not bound to remain for any fixed

term.   The letter agreements  with the three  officers other

than Noble state that the severance payments were promised in

consideration of the officers' "willingness to remain" in the

bank's  employ; and the same  intent can be  gleaned from the

two agreements with Noble.   The weakened financial condition

of  the  bank  is  adverted  to in  each  of  the  four  1989

agreements.

     At  some  point in  1989  the FDIC  began  to scrutinize

closely Eliot's affairs.  The officers allege, on information

and  belief, that  the FDIC  and the  bank agreed  that Eliot

would take steps  to retain its qualified management; and the

complaint  states that the  FDIC "knew  and approved"  of the

four  letter agreements  made  in 1989.    The officers  also

contend that they  were advised by  experienced counsel at  a

respected law  firm that the severance  agreements were valid

and would withstand an  FDIC receivership if one ensued.   It

is further alleged that,  in December 1989, the FDIC  and the

bank entered into a consent order that provided that the bank

would continue to retain qualified management.

                             -3-

     Eliot failed and was closed on June 29, 1990.   The FDIC

was  appointed its receiver.  Within two months, the officers

were  terminated.    The  officers  then  made administrative

claims  for their  severance benefits pursuant  to applicable

provisions  of  FIRREA, 12  U.S.C.      1821(d)(3), (5),  the

statute  enacted in  1989 to  cope with  the torrent  of bank

failures.1  In  October 1990, the FDIC disallowed the claims,

stating  that the claims  violated public policy.    Although

the FDIC letter is not before us, it apparently is based upon

the FDIC's  general opposition  to what are  sometimes called

"golden  parachute  payments," a  subject  to  which we  will

return.   Following  the disallowance,  the  officers pursued

their  option,  expressly provided  by  FIRREA,  to bring  an

original  action in  federal  district court.    12 U.S.C.   

1821(d)(6).  

     In their district court complaint, the officers asserted

claims against the FDIC for breach of contract, for breach of

the  contracts' implied  covenant  of fair  dealing, and  for

detrimental  reliance.   The  FDIC  moved to  dismiss  or for

summary judgment.  Thereafter, the  officers sought  to amend

their complaint by adding a  promissory estoppel claim and by

                    

     1FIRREA is the  Financial Institutions Reform, Recovery,
and  Enforcement Act  of  1989, 103  Stat.  183, codified  in
various sections of 12 and  18 U.S.C.   Among other  changes,
FIRREA amended pre-existing  provisions specifying the FDIC's
powers as receiver and the claims provisions governing claims
against failed banks.  

                             -4-

explicitly  naming the  FDIC in  its "corporate  capacity" as

well as  in its capacity as  receiver.  In  a bench decision,

the  district   judge  ruled  that  the   FDIC  had  lawfully

repudiated the  contracts between Eliot and  the officers and

that under FIRREA  there were no compensable  damages for the

resulting breach.  As for the promissory estoppel  claim, the

court deemed it  "futile" and refused to allow the amendment;

the  court referred  to the  general principle  that estoppel

does  not operate  against the  government and to  the FDIC's

broad grant of  authority under  FIRREA.   The officers  then

sought review in this court.

     The first claim made on appeal, taken in order of logic,

is that  the FDIC's  repudiation of the  severance agreements

was itself invalid.  At this point we need to explain briefly

the structure  of the statute.   Section 1821  governs, among

other  matters, the powers of the FDIC as receiver, 12 U.S.C.

  1821(d),  the procedure  for processing claims  against the

failed bank,  12 U.S.C.     1821(d)(3), (5),  and substantive

rules for  contracts entered into prior  to the receivership.

12 U.S.C.    1821(e).  Section 1821(e)(1) gives  the receiver

the right  to disaffirm  or repudiate  any contract  that the

bank may have  made before receivership  if the FDIC  decides

"in its discretion" that performance will be "burdensome" and

that disavowal  will "promote the  orderly administration" of

the failed bank's affairs.  12 U.S.C.   821(e)(1).  

                             -5-

     The  power of  a receiver  to repudiate  prior executory

contracts  made  by  the   debtor,  a  familiar  incident  of

bankruptcy law, see 11 U.S.C.    365 (executory contracts and

unexpired  leases), means  something less than  might appear.

By repudiating the contract the receiver is freed from having

to comply  with the contract, e.g.,  American Medical Supply,
                                                             

Inc.  v. FTC,  1990  U.S. Dist.  LEXIS  5355 (D.  Kan.  1990)
            

(specific enforcement),  but the repudiation is  treated as a

breach of  contract that gives  rise to an  ordinary contract

claim  for damages,  if  any.   Whether  that claim  is  then

"allowed"  by the receiver and if so whether there are assets

to satisfy it, are  distinct questions; at this point  we are

concerned  only with  the receiver's  authority to  affirm or

disaffirm.  In this case the officers do not dispute that the

FDIC  did repudiate  the  severance agreements.   Rather  the

officers argue  that the repudiation is  ineffective, and the

agreements remain enforceable, because  the FDIC did not make

the statutory findings, or abused its discretion, or both.

     Interesting questions are posed by such a challenge, but

the questions need not be  resolved in this case.  The  claim

was  not made in the  district court and,  accordingly, it is

waived.  Clauson v. Smith, 823 F.2d 660, 666 (1st Cir. 1987).
                         

The complaint  makes only  the barest  reference to  abuse of

discretion by the FDIC, mentioning it not as a separate claim

but  in the prefatory description  of facts; and  there is no

                             -6-

reference  whatever to this line  of argument, or  to lack of

required  FDIC  findings,  in  the opposition  filed  by  the

officers to the FDIC's  motion to dismiss.  A  litigant would

normally have an uphill battle in overturning an FDIC finding

of  "burden," if  the FDIC  made one,  but in all  events the

issue has not been preserved in this case.

     The second ground of  appeal raises the central question

before  us,  namely,  whether  a  damage  claim  based  on  a

repudiated  severance contract  is allowed  under FIRREA.   A

stranger to FIRREA might  think it apparent that breach  of a

contract  to make  severance payments  inflicts damages  on a

discharged employee  in the amount of  the promised payments.

The  hitch is  that  in FIRREA  Congress adopted  restrictive

rules  that  limit  the   damages  permitted  for  repudiated

contracts.   12  U.S.C.    1821(e).   In a  general provision

subject  to certain exceptions,  12 U.S.C.   1821(e)(3)(A)(i)

provides  that  the  receiver's  liability  for  a repudiated

contract is "limited to  actual direct compensatory damages .

. . ."  Additionally,  section 1821(e)(3)(B) provides:

     For  purposes  of  subparagraph (A),  the  term  `actual
     direct compensatory damages' does not include--
          (i) punitive or exemplary damages;
          (ii) damages for lost profits or opportunities; or
          (iii) damages for pain and suffering.

     The question thus framed is  whether, or to what extent,

the  statute's  limitation  to  "actual  direct  compensatory

damages" bars  the contractual severance claims  made in this

                             -7-

case.2   The  question  is easy  to  state but  less easy  to

answer.   Although  FIRREA's concept  of  limiting  allowable

claims  for  contract  damages  echoes the  approach  of  the

Bankruptcy Code, 11 U.S.C. 502, that statute is more specific

and  informative.   In particular,  section  502(b)(7) limits

claims by  a terminated  employee for future  compensation to

one year's pay.  So far as appears from the parties'  briefs,

FIRREA's   broad   exclusionary   language  ("actual   direct

compensatory  damages") has  been plucked  out of the  air by

Congress, although  the general  purpose is obvious  enough. 

If   there  is   any  illuminating  legislative   history  or

precedent, it has  not been  called to our  attention by  the

parties  and  we have  been  unable to  locate  anything very

helpful.

     It  is   fair  to   guess  that  Congress,   faced  with

mountainous bank  failures,  determined to  pare back  damage

claims founded  on repudiated contracts.   In all likelihood,

the legislators knew that many uninsured depositors and other

unsecured creditors would recover  little from failed  banks;

and the  government's own  liability (to  insured depositors)

would be  effectively increased to the  extent that remaining

assets went  to contract-claim  creditors of the  bank rather

than  to the  government  (as the  subrogee  for the  insured

                    

     2We do  not reach  the FDIC's alternative  argument that
the  severance  pay would  be  barred  as representing  "lost
profits or opportunity."

                             -8-

depositors whom the FDIC  compensated directly).  It  is thus

not surprising  that Congress might wish  to disallow certain

damage claims  deemed less  worthy than  other claims.   This

assessment   casts  some  light  on  Congress'  approach  and

provides a predicate for  considering the severance  contract

claims posed in this case.

     We  conclude,  not  without some  misgivings,  that  the

officers'  claims  do  not  comprise allowable  claims  under

FIRREA.   The amounts stipulated  by the Eliot  contracts are

easily determined--a  formula payment for Noble  and a year's

pay for the others.  But the statute calls upon the courts to

determine  the  nature  of  the  damages  stipulated  by  the
                      

contract or sought by the  claimant in order to rule  out any

but  those permitted  by Congress.   In  this case,  analysis

persuades us that the  damages provided by Eliot's repudiated

severance  contracts with  its  officers, and  sought by  the

appellants  for their breach  in this  case, are  not "actual

direct    compensatory   damages"    under   12    U.S.C.    

1821(e)(1)(A)(i).

     Severance payments,  stipulated in advance, are  at best

an  estimate  of  likely  harm  made  at  a  time  when  only

prediction is possible.   When discharge actually occurs, the

employee may have no  way to prove the loss  from alternative

employments foregone, not to mention possible disputes  about

the  discharged  employee's ability  to  mitigate damages  by

                             -9-

finding  new  employment.    A severance  agreement  properly

protects  against  these  uncertainties  by  liquidating  the

liability.    Such  payments  comprise or  are  analogous  to

"liquidated damages,"  at least  when  the amount  is not  so

large  as  to  constitute  an  unenforceable  penalty.    See
                                                             

generally  E. Allan  Farnsworth,  Contracts    12.18 (2d  ed.
                                           

1990); Charles McCormick, Damages   146 (1935).3
                                 

     Unfortunately   for   the   appellants,  the   statutory

language--"actual  direct   compensatory  damages"--does  not

quite  embrace  the  payments  promised  by  the    officers'

severance agreements.  Eliot's officers may, or may not, have

suffered injury  by remaining at the bank,  depending on what

options  they had  in the  past that  are not  available now.

Conceivably,  they  suffered no  damage at  all; conceivably,

their actual damages from staying at Eliot exceed the amounts

stipulated  in the agreements.   The point  is that severance

payments of this class do not comprise actual damages.  Thus,

based  on statutory  language alone,  the starting  point for

                    

     3Of course,  the other  office of a  severance agreement
may  be to provide a cause of  action for an at will employee
who otherwise has no contractual claim at all.  E.g., Pearson
                                                             
v. John Hancock Mutual Life Ins.  Co., 979 F.2d 254, 258 (1st
                                     
Cir.  1992).    In  this case,  the  at  will  status  of the
appellants  is not decisive; they did  have contracts and our
task is  to  see  whether  the  promised  payments  fit  into
FIRREA's compensable-damage pigeonhole.

                             -10-

statutory construction,  the FDIC appears to  have the better

case.

     One might  argue that, although  the severance  payments

are not actual damages, they are often a good-faith effort to

estimate such damages  and should in such  cases be permitted

as  consistent with  the spirit  of the  statute, if  not its

language.   But the spirit of the statute is quite otherwise.

The statute actually excludes (see 12 U.S.C.   1821(e)(3)(B))

two  less-favored categories of  what are indisputably actual

damages (lost  profits, pain and  suffering), reinforcing the

impression that Congress intended strictly to limit allowable

claims for repudiated contracts.   The treatment of leases in

the  next subsection  is  yet further  evidence of  Congress'

temper.    12  U.S.C.    1821(e)(4)  provides  that,  if  the

receiver disaffirms a lease to which the bank was lessee, the

lessor's  damages are limited to past rent and loss of future

rent is not compensable.  Yet the  lessor may have accepted a

lower monthly  rent in  exchange for  a  long-term lease  and

protection  against the risk of  an empty building.   As with

severance   pay,  the   lessor   may   have  foregone   other

opportunities but the loss is not to be recompensed.

     Each side has offered in its favor still broader  policy

arguments.    The officers  claim  that  the disallowance  of

promised severance pay will mean that a troubled  bank cannot

effectively contract  to retain able officers  who may rescue

                             -11-

it.    The  FDIC,  by  contrast,  implies  that  the  present

arrangements may  be  "golden parachutes"  by which  insiders

take  advantage  of the  crisis  to  assure themselves  of  a

handsome  farewell gift from a  failing bank.   The FDIC also

points to regulations  it has proposed, but  not yet adopted,

to curtail  severely such  arrangements; its new  rules would

disallow  severance contracts  for bank  officials except  in

narrowly  defined conditions,  such  as where  an officer  is

induced  to leave  another post  to help a  troubled thrift.4
                 

The FDIC  claims that  the regulations and  their authorizing

statute reflect public policy.

     The policy  arguments of the  officers and the  FDIC may

each  have some force, to some extent they offset each other,

and neither set is decisive  in this case.  In answer  to the

officers,  it may be said that their argument presents a fact

and  policy question best left to Congress and to expert bank

regulators;  those bodies  in turn  have ample  incentives to

make the right adjustment in delimiting severance agreements.

As  to  the  FDIC's   argument,  Congress  has  not  declared

severance payments unlawful but merely authorized the FDIC to

do so, and the  latter's proposed regulations are not  yet in

                    

     4The regulations  were proposed  on October 7,  1991, 56
Fed.  Reg. 50529,  pursuant to  the Comprehensive  Thrift and
Bank Fraud Prosection and Taxpayer Recovery  Act of 1990, 104
Stat. 4859, adding 12 U.S.C.   1828(k) (FDIC "may prohibit or
limit, by regulation or order, any golden parachute payment .
. . .").

                             -12-

force.  Further, this case arises on a motion  to dismiss, so

there  is no basis whatever for considering any imputation of

bad motive or misconduct on the part of Eliot's officers.

     The officers' last argument in support of their contract

claims is  that the "actual  damage" restriction, if  read as

the    FDIC   urges,    is   an    unconstitutional   taking.

Alternatively, they say that  the statute is so close  to the

line that  it should  be read  favorably to  them to avoid  a

constitutional question.   These  arguments were not  made in

the  district   court  and  we  decline   to  consider  them.

Litigation  is a  winnowing process  and, except  in criminal

cases where  the stakes are different,  only in extraordinary

circumstances  will we take up a contention that has not been

made in the district court.   We note that arguments that the

FDIC might itself have made, but did not, have been similarly

ignored,  including   a   possible  claim   that  its   order
                                                             

disallowing  the severance  claims  is a  currently effective

"order"  under  the golden  parachute  statute,  12 U.S.C.   

1828(k).

     What  remains  to  be  considered  are  the  detrimental

reliance  claim in  the  original complaint  and the  related

promissory   estoppel   claim  advanced   by   the  attempted

amendment.  In  substance, the officers argue  that the FDIC,

acting in  its supervisory  or "corporate" capacity  prior to

Eliot's failure,  was so  closely associated with  the bank's

                             -13-

severance  promises that  their  repudiation by  the FDIC  as

receiver  violates estoppel doctrine  or gives rise  to a new

claim  against the  FDIC.   That the  FDIC was  implicated in

forming the  severance contracts  is  a factual  proposition,

apparently  denied  by  the  FDIC, but  we  must  accept  the

proposition  as true for purposes of  reviewing the motion to

dismiss.

     The  FDIC seeks  to  answer the  officers' estoppel  and

reliance argument by citing  to cases that say that  the FDIC

is  treated  as  two  separate  persons when  acting  in  its

"corporate"  capacity as a  regulator and when  acting in its

capacity as receiver.  E.g., FDIC v. Roldon Fonseca, 795 F.2d
                                                   

1102, 1109 (1st Cir. 1986).  On this theory, the  FDIC is not

liable  in this  case  as regulator,  even  if it  affiliated

itself with  the promise of  severance pay,  since "it"  (the

FDIC  as  regulator)  did  not  break  the  promise;  and  as

receiver, the FDIC was free to disavow  the contracts because

"it" (the FDIC as receiver) made no promises.  

     The  officers  argue  that  this  "separate  capacities"

doctrine  was designed for a different purpose and should not

be  applied  in the  present  context  to produce  an  unjust

result.  But the Eighth Circuit applied this doctrine without

much  hesitation  to a  case in  which  the FDIC  as receiver

sought to repudiate a lease it had previously accepted in its

capacity as  "conservator,"   conservator  being yet  another

                             -14-

incarnation  in  which the  FDIC sometimes  appears.   RTC v.
                                                          

CedarMinn  Building Limited Partnership,  956 F.2d  1446 (8th
                                       

Cir.),  cert. denied,  113  S. Ct.  94 (1992).    As for  the
                    

claimed injustice, it is not clear that any apparent inequity

worked in this  case is greater than occurs in the usual case

in which  the separate-capacities doctrine is  invoked.  FDIC
                                                             

v. Roldon Fonseca, 795 F.2d at 1109.
                 

     There  is another  answer  to the  officers' claim  that

rests more solidly on visible  policy.   Putting to one  side

the  separate  capacities  defense,  courts  are  for obvious

reasons  reluctant  to permit  estoppels  against the  United

States,  e.g., Heckler  v. Services  of Crawford  County, 467
                                                        

U.S. 51, 60 (1984), although exceptions may be found.  United
                                                             

States v.  Pennsylvania Industrial  Chemical Corp.,  411 U.S.
                                                 

655,  670-675  (1973).    There  are  many  reasons  for  the

reluctance, including a  concern for the  public purse and  a

recognition that the government--unlike the  normal actor--is

an enterprise  so vast  and complex  as  to preclude  perfect

consistency.  See generally  Hansen v. Harris, 619  F.2d 942,
                                             

649-58 (2d  Cir. 1980) (Friendly, J.,  dissenting), rev'd sub
                                                             

nom. Schweiker v. Hansen, 450 U.S. 785 (1981).  While leaving
                        

many questions  unanswered, the Supreme Court  has made clear

that an estoppel against the United States is not measured by

the  rules used for ordinary litigants.  Heckler, 467 U.S. at
                                                

62.

                             -15-

     In the present  case, even the  most liberal reading  of

the reliance  and  estoppel counts  leaves  the FDIC  in  the

position of one who encouraged  or invited the bank's promise

of severance pay.   Yet  (as we construe  the actual  damages

clause), Congress  has decided that, in  parceling out fairly

the  limited  assets  of  a  failed  bank,  contract  damages

reflecting  severance pay  are not  permitted.   "[T]o permit

[the claim]  . . . would  be judicially to admit  at the back

door  that which  has been  legislatively turned away  at the

front  door."   FDIC  v. Cobblestone  Corp., 1992  U.S. Dist.
                                          

LEXIS 17024  (D. Mass. 1992).   It is hard to  imagine a less

attractive case for creating a  new judicial exception to the

general rule against estoppel of the government.

     The judgment of the district court is affirmed.
                                                   

                             -16-
