Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Given the Federal Depositors Insurance Corporation’s run of bank closings in the last two years, there are probably a lot of folks who will be interested in an en banc ruling Friday by the U.S. Court of Appeals for the Federal Circuit, in a case that dates all the way back to the FDIC’s 1982 attempt to save a failing Pennsylvania bank by brokering a merger with a solvent bank. In a 6-to-4 ruling, the Federal Circuit majority found that the U.S. Court of Federal Claims has jurisdiction over suits against the FDIC when the litigation involves the alleged breach of a contract. In reaching that conclusion, the majority rejected a standard that has created confusion about the purview of the Court of Federal Claims, ruling that its jurisdiction under the Tucker Act “is not limited by the appropriation status of the agency’s funds or the source of funds by which any judgment may be paid.” The decision restores a $276 million Court of Federal Claims judgment for Meritor Savings Bank, which had a 1982 contract with the FDIC setting forth the terms under which its predecessor, the Philadelphia Savings Fund Society, agreed to merge with the failing Western Savings Fund Society. Represented by Winston & Strawn, Meritor claimed in a successful 1993 derivative action in the Court of Federal Claims that the FDIC breached the contract, leading to the seizure and sale of the bank in 1992. (Meritor’s claims against the FDIC paralleled dozens of so-called Winstar cases against the Federal Savings & Loan Insurance Corporation.) Sullivan & Cromwell represents other significant Meritor shareholders who sued the FDIC; S&C’s Bradley Smith argued along with Thomas Buchanan of Winston & Strawn at the Federal Circuit. Almost 10 years into the litigation, according to Meritor counsel Buchanan, the government asserted that the Court of Federal Claims did not have jurisdiction to hear Meritor’s case because, among other reasons, the FDIC is funded by member banks, not by the U.S. via an appropriation bill. The government’s argument rested on a line of cases that followed the Court of Federal Claims’s 1966 ruling in Kyer v. U.S., in which the court found that an industrial alcohol broker could not sue the U.S. Department of Agriculture’s Grape Crush Committee for breach of contract because the committee was a “non-appropriated funds instrumentality.” “Our judgments are paid only from appropriated funds,” the Kyer court concluded. “Thus, to remain within the framework of our jurisdiction, it is essential that the contract sued on be one which could have been satisfied out of appropriated funds.” Over the years, according to the Federal Circuit’s Meritor majority ruling, the Kyer decision has been inconsistently applied, with courts offering varying interpretations of whether government entities relied on federally appropriated funds or whether any judgment against them would be paid by appropriated funds. “The cases were all over the map,” Buchanan told us. “That’s why the majority opinion is so good. It clears up a collection of cases that has no rhyme or reason.” The Federal Circuit majority concluded that nothing in the legislative record supports the idea that the source of an agency’s funds is the key issue in determining the jurisdiction of the Court of Federal Claims under the Tucker Act. “Over the long history of the Tucker Act, the courts have respected the nation’s intention to provide a broad waiver of immunity for claims against the government,” the majority found, in an opinion written by Judge Pauline Newman. “Apart from the Court of Claims’ explanation of its ruling in Kyer with respect to the Grape Crush Administrative Committee and the extension of this ruling to cases falling directly within the rule articulated in Kyer, the government’s argument that Tucker Act jurisdiction is limited by access to the Judgment Fund, or varies with the self-sufficiency of the activity, is devoid of support. We…hold that the source of funding of an agency’s activi- ties or for payment of its judgments is not a limitation on Tucker Act jurisdiction.” The four judges who dissented from the majority view, in an opinion written by Arthur Gajarsa, argued against upending “settled law” that excludes contracts involving non-appropriated fund instrumentalities from the jurisdiction of the Court of Federal Claims. If the majority’s opinion stands, Buchanan told us, people will have rights of action against the FDIC in both federal district court, if their claims involve allegations of unlawful regulatory actions, or the Court of Federal Claims for contract suits. “People can sue in either place,” Buchanan said. “At a minimum, there will be a lot of claims that involve concurrent jurisdictions.” The government has not said whether it plans to appeal the en banc Federal Circuit ruling to the U.S. Supreme Court. Buchanan told us the Meritor plaintiffs intend to ask for a meeting with the U.S. Solicitor General to argue against a Justice Department petition for certiorari. Among the arguments, Buchanan said, is the government’s own predent: In at least three different federal court cases in three different circuits, Buchanan said, the FDIC itself argued that suits against it belong in the Court of Federal Claims.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.