WASHINGTON -- A Supreme Court decision making it harder for the government to prevail in court cases involving failed thrifts increases the likelihood that Congress soon will intervene in the matter, government officials said.
On Monday, the Supreme Court announced two decisions that weakened government claims against officers, directors, accountants, lawyers and others who worked for failed thrifts.
The high court's action, "certainly adds to the weight of our argument," that Congress should act to better define the laws, said Alan J. Whitney, a spokesman for the Federal Deposit Insurance Corp.
Congress is considering such a move. The Senate version of the pending interstate branching bill has a provision establishing a federal statute of limitations for such cases. If Congress passes such a law, it would strengthen the government's case in dozens of similar cases nationwide.
The high court action "keeps the issue alive," a Resolution Trust Corp. official said.
On Monday, the court ruled unanimously in O'Melveny & Myers vs. the Federal Deposit Insurance Corp., that state rules govern the law firm's liability in the case, not a federal common law statute, as the FDIC argued. The court did not rule on the merits of the case.
The nation's highest court also ruled Monday it would not review a Fifth Circuit Court of Appeals decision in FDIC vs. Dawson. The lower court held that state law on the statute of limitations governed the case, not federal common law.
The FDIC's Mr. Whitney said the two rulings put $3 billion in claims at risk. That is likely to kindle Congressional interest in the matter.
The government has been pressing Congress for some time to address the issue. Last week, John E. Ryan, the RTC's acting chief executive officer, and Andrew C. Hove Jr., acting FDIC chairman, each sent letters to members of House conference committee on the interstate banking bill, urging their support for the provision.
Mr. Hove wrote that the provision, "ensures that claims held by the FDIC and RTC, as receivers of failed financial institutions, will not be deemed time-barred before the agencies even are appointed receiver."
But Thomas P. Vartanian, chairman of the financial institutions practice at Fried, Frank, Harris, Shriver & Jacobson, said the court decision would not necessarily induce Congress to enact legislation making it easier for the government to win cases against those affiliated with failed thrifts.
"If you want to come back and change the rules of the game after the fact, then you are going to have to deal with the Supreme Court on the issues of retroactivity," Mr. Vartanian said.
The issue is also key for the RTC. Although taxpayers nationwide have paid for the S&L crisis, Mr. Ryan wrote, in some states, "local laws effectively shield savings and loan operators from federal efforts to pursue viable professional liability claims related to a thrift's failure."
The Savings and Community Bankers of America said the RTC and the FDIC already have wasted taxpayer money by pursuing cases on weak legal grounds.