You could view it as adding injury to insult. Even as the Federal Deposit Insurance Corp.'s influence continues to wane, as a consensus in Washington holds, it has also been rebuffed in the courts.
Case in point: A District Court judge ruled in May that the FDIC and NationsBank are jointly liable for $114 million in damages for conspiring to avoid paying their obligations on a long-term office lease between First Republic Bank-Fort Worth and an affiliate of Texas' Prentiss Properties Ltd. The FDIC was the receiver for the failed bank, and NationsBank later bought it. Another Prentiss affiliate is seeking $170 million from the FDIC.
The judge concluded that the plaintiffs suffered from "the unlawful breach of the lease" in 1989, when the suit was filed. Without a lead tenant in 40-story Burnett Plaza, it lost value and couldn't compete for "several big deals that closed around us," says William A. Brewer III, a partner with Dallas' Bickel & Brewer, which represents Prentiss.
Brewer says his firm also is seeking $22 million in attorneys' fees and has been working to get a final judgment entered. Meanwhile, the court has ordered the two sides to sit with a mediator to try to reach an agreement.
And in mid-June, the Supreme Court ruled against the FDIC's claim that a law firm that represented an insolvent thrift in two real estate syndications in 1985 should be held liable for amounts later paid by the S&L to investors claiming they were deceived by the thrift's condition.
The high court accepted the argument by O'Melveny & Myers, the law firm, that the FDIC had "stepped into the shoes" of the thrift and should be subject to state laws that assume the institution's officers' conduct is known to the thrift itself. The FDIC had argued that as a matter of federal common law, such knowledge cannot be "imputed" to the thrift, or to itself as receiver.
Further, the FDIC argued that protection of the deposit insurance fund required displacing any state rules that would impede collection. "There is no federal policy that the (insurance) fund should always win," the Court declared. Forget about always: The FDIC would settle for just a few wins these days.
