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SEC, et al v. Stanford International Bank, et a

Summarizing by Paul Stewart

American National Insurance Co. v. FDIC

Citation:
No. 10-5245 (D.C. Cir. June 24, 2011)
Tag(s):
Ruling:
Reversing the U.S. District Court for the District of Columbia (the “D.C. District Court”), the D.C. Circuit held that §1821(d) of the Financial Institutions Reform, Recover and Enforcement Act of 1989 (“FIRREA”) did not bar the D.C. District Court from exercising jurisdiction over several insurance companies’ (collectively, the “Investor Plaintiffs”) state-law claims relating to JPMorgan Chase & Co. and JPMorgan Chase Bank’s (collectively, “JPMorgan”) purchase of certain assets of Washington Mutual Bank (“WaMu Bank”) from an FDIC receivership. Initially, the D.C. Circuit addressed the FDIC and JPMorgan’s two arguments that, without first exhausting the administrative process, the Investors Plaintiffs’ claims were barred because (1) the claims related to the FDIC’s actions as a receiver (i.e., the FDIC’s sale of WaMu’s Bank’s assets to JPMorgan), §1821(d)(13)(D)(ii), or alternatively, (2) the claims were “for payment from, or . . . [sought] a determination with respect to, the assets” of WaMu Bank. §1821(d)(13)(D)(i). The court rejected first argument because the court found that the Investor Plaintiffs suit was not “claim” under §1821(d)(13)(D)(ii). Under FIRREA, the term “claim,” as a term-of-art, only refers to those claims that may be resolved through administrative process; specifically, claims against a depository institution in an FDIC receivership. Because the Investor Plaintiffs’ suit was against JPMorgan, a third-party, and not WaMu Bank, the suit did fall with FIRREA’s definition “claim,” and thus, was not barred. Next, relying on §1821(d)(13)(d)(i)’s plain language, the D.C. Circuit also rejected second argument. Specifically, the court reasoned that subsection (i) did not apply because by suing JPMorgan for its individual actions, the Investor Plaintiffs had neither sued WaMu Bank nor sought a determination of rights with respect to WaMu Bank’s assets. Next, examining other sections of FIRREA in conjunction with §1821(d), the D.C. Circuit opined that FIRREA’s administrative system could process only those claims against a depository institution in an FDIC receivership. Although the court acknowledged that a plaintiff must first seek administrative review if its claims are functionally (albeit not formally) against the FDIC or a depository institution in an FDIC receivership, here that exception did not apply because the Investor Plaintiffs sued to recover damages that alleged resulted from tortious actions committed by JPMorgan, not the FDIC or WaMu. Therefore, the court concluded that §1821(d) did not bar the Investor Plaintiff’s claims. Finally, the FDIC and WaMu also argued that the complaint should be dismissed for a lack standing. However, because the standing issue was being asserted for the first time, the D.C. Circuit remanded that issue to the D.C. District Court.
Procedural context:
On February 16, 2009, the Investor Plaintiffs filed suit against JPMorgan in Texas state court alleging that their investements (both bonds and stocks) in WaMu Bank and Washington Mutual, Inc. (“WaMu Holding Co.” and with WaMu Bank collectively, “WaMu”) had been injured by JPMorgan’s elaborate scheme to purchase WaMu Bank’s assets, free of any accompanying liabilities, through an FDIC receivership. The Investor Plaintiffs asserted three Texas state law claims: (1) tortious interference with an existing contract; (2) breach of a confidentiality agreement, and (3) unjust enrichment. After JPMorgan filed its answer, the FDIC (i) intervened in the lawsuit, (ii) removed the action to the U.S. District Court for the Southern District of Texas, and (iii) successfully moved to transfer venue to the D.C. District Court. Before the D.C. District Court, the FDIC and JPMorgan moved to dismiss, and the Investor Plaintiffs moved to remand the action to the Texas state court. Prior to the D.C. District Court’s decision, the Investor Plaintiffs voluntarily dismissed with prejudice all claims based on harm to their WaMu Holding Co. investments. On April 13, 2010, the D.C. District Court denied the remand motion and granted the motion to dismiss, holding that it lacked jurisdiction over the action under 12 U.S.C. § 1821(d) because the Investor Plaintiffs had not exhausted their administrative remedies under FIRREA. On July 19, 2010, the D.C. District Court also denied the Investor Plaintiffs moved to alter or amend the April 13 order and requested leave to file an amended complaint. The Investor Plaintiffs appealed both orders to the D.C. Circuit.
Facts:
Prior to being placed in an FDIC receivership on September 25, 2008, WaMu Bank was the largest savings and loan association in country. On the same day, JPMorgan purchased “the most valuable assets of [WaMu Bank] without any its liabilities” from the FDIC receivership for $1.9 billion. Following the sale, WaMu Bank’s bond obligations, which could not be met, remained in the FDIC receivership. Immediately after the sale, WaMu Holding Co. filed for bankruptcy, became unable to service its bond obligations, and its shares became worthless. The Investor Plaintiffs alleged JPMorgan engineered WaMu’s downfall through an elaborate scheme. Under the first part of the alleged scheme, JPMorgan improperly obtained confidential non-public information about WaMu through (1) corporate spies placed at WaMu, (2) misused access to government regulators, and (3) sham merger negotiations. Next, despite signing confidentiality agreement, JPMorgan allegedly distorted the market and regulatory perception about WaMu by leaking harmful information to various sources. Under the second part of the alleged scheme, JPMorgan improperly exerted pressure on government regulators to prematurely seize WaMu Bank and sell its assts without an adequate and fair bidding process. According to the Investor Plaintiffs, JPMorgan was able to purchase WaMu Bank’s best assets for a deeply discounted price.
Judge(s):
Sentelle, Tatel, Randolph

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