22 



that the Federal Home Loan Bank and the Federal Savings and 

 Loan Insurance Corporation had breached their contract, promising 

 that the thrifts could count this supervisory good will toward the 

 regulatory capital requirements. 



The government raised many defenses, but the one I would like 

 to focus on this afternoon is that the regulatory change was merely 

 a public and general act that was a sovereign act, insulating the 

 government from liability. The court rejected the sovereign act de- 

 fense. Under the sovereign acts doctrine, so long as the govern- 

 ment's legislative or executive acts are public and general, they 

 cannot be deemed to violate contracts between the government and 

 private parties. The government maintained that the imposition of 

 more stringent regulatory requirements under FIRREA was a pub- 

 lic and general act and that the changes couldn't be considered a 

 breach of the government's contract. 



However, the Supreme Court found it significant that the regu- 

 latory legislation was motivated by government self interest and 

 that it was impossible to attribute a public and general character 

 to FIRREA when the legislation had the substantial effect of help- 

 ing the government out of improvident agreements. The court em- 

 phasized that the government may not force some people alone to 

 bear the public burdens which should be born by the public as a 

 whole. 



I believe the sovereign acts defense also does not apply to timber 

 sale regulation. The actions of the Forest Service in screening exist- 

 ing timber sales and imposing these additional wildlife standards 

 cannot occur as public and general acts, specifically the Winstar de- 

 cision — given the Winstar decision, any past statements by Con- 

 gress to assert the sovereign acts doctrine to avoid contract dam- 

 ages in timber sale cases is likely to fail. 



For example, regarding the Alaska Pulp and Ketchikan Pulp con- 

 tracts, the House Committee on Insular Affairs wrote, "the commit- 

 tee considers termination of the long-term contracts to be an appro- 

 priate exercise of the Federal Government's power to protect the 

 public interests and that, pursuant to sovereign act immunity, no 

 damages will be paid to APC or KPC." 



Well, ultimately the contracts were unilaterally modified rather 

 than terminated. The assertion of the sovereign acts doctrine is 

 likewise ineffective. This is particularly true when the statute is di- 

 rected at individual contracts despite self-serving legislative pro- 

 nouncements to the contrary that the legislation is public and gen- 

 eral. 



The Winstar decision holds that unless contracts explicitly pro- 

 vide otherwise, the government bears the risk of statutory and reg- 

 ulatory changes that preclude completion of the contract. This is 

 the case with the majority of timber sale contracts in the West and 

 will strengthen timber purchasers' arguments in their contract 

 claims against the government. 



And I am not alone in my analysis of Winstar and how it relates 

 to Federal contracts. The Forest Service's own analysis of the con- 

 tract, the National Forest Management Act, and some contract 

 cases dealing with timber sales support this conclusion. In an April 

 27, '92, memo to the regional foresters, the Forest Service Chief in- 

 terpreted the agency's timber sale contract to require compensation 



