Commercial Law Corp. PC v. FDIC
- No. 14-1399 (6th Cir. Jan. 27, 2015).
- An unwritten agreement for the payment of legal fees incurred by the counsel for a bank receiver is not an “agreement which tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it…as security for a loan or by purchase or as a receiver” and is therefore not per se invalid under the D’Oench doctrine codified at 12 U.S.C. § 1823.
- Procedural context:
- District court granted FDIC’s motion for summary judgment, concluding that 12 U.S.C. §§ 1821 and 1823 precluded enforcement of plaintiff’s unrecorded fee agreement. The plaintiff appealed the decision, and the Circuit Court reversed.
- Commercial Law Corporation sued the FDIC, in its capacity as bank receiver, for unpaid legal fees for services rendered to the bank prior to the receivership. The district court granted summary judgment in favor of the FDIC and the plaintiff’s argument that the requirement in § 1823 of a written agreement applied only to secret agreements affecting traditional banking transactions, concluding instead that it applied equally to liabilities on service contracts. Rejecting the district court’s analysis, the Circuit Court observed that the overarching purpose of the statute was to enable bank examiners to rely on a bank’s records in valuing the bank’s assets without concern for “secret” agreements, and to encourage “mature consideration” of unusual loan transactions by senior bank officials. The Circuit Court observed that the district court’s analysis, taken to its logical conclusion, would render all manner of vender obligations unenforceable unless reduced to writing and specifically authorized by a bank’s board of directors. The D’Oench doctrine was intended only to protect a failed bank’s loan portfolio from secret agreements, not to allow it to avoid debts incurred in the ordinary course of its business. Accordingly, the Circuit Court reversed.
- Daughtrey, Clay, and Cook.
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