JPMorgan, FDIC Clash Over WaMu Liabilities
FDIC spokesman David Barr declined to comment on the litigation. But in the Deutsche Bank lawsuit, the regulator made it clear that it views its obligations under the purchase agreement much differently.
The FDIC "transferred all of [Washington Mutual's] liabilities and obligations under the Governing Agreements" to JPMorgan, argued FDIC counsel William Stein, a partner at Hughes Hubbard & Reed, in court papers. "The assets were purchased subject to ‘all liabilities' affecting those assets."
As for JPMorgan's insistence that it's only on the hook for liabilities specifically listed in Washington Mutual's ledgers, Stein wrote that "there is no reasonable basis to interpret the word 'liabilities' narrowly to mean only those liabilities that have become sufficiently concrete to warrant recording as specific line item amounts."
Further, JPMorgan got a great deal, the FDIC argues, paying $1.9 billion for a bank with assets of nearly $12 billion. "Despite its extraordinary gain and continuing profits, [JPMorgan] now seeks to walk away from the associated obligations and liabilities by denying the plain meaning" of the purchase and assumption agreement.
Figuring out who has to pay for what is not an easy call. U.S. District Judge Rosemary Collyer in 2011 ruled it was premature to dismiss either JPMorgan or the FDIC from the Deutsche Bank suit.
The case is now in discovery, with experts focused specifically on the meaning of the purchase agreement. "One of the basic questions," Collyer wrote, is whether the bank's purchase and assumption agreement "left these alleged liabilities with the FDIC or transferred them" to JPMorgan.
Jenna Greene writes for American Lawyer affiliates The National Law Journal and Legal Times.