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Adam Corporation/Group v. Federal Deposit Insurance Corp.

November 10, 2008

THE ADAM CORPORATION/GROUP ET AL., PLAINTIFFS,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, SOLELY IN ITS CAPACITY ASMANAGER OF THE FSLIC RESOLUTION FUND, DEFENDANT.
FEDERAL DEPOSIT INSURANCE CORPORATION, PLAINTIFF,
v.
THE ADAM CORPORATION/GROUP, DEFENDANT.



The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge

Document Nos.: 7, 15

Document No.: 12

MEMORANDUM OPINION

GRANTING THE FEDERAL DEPOSIT INSURANCE CORPORATION'SUNOPPOSEDMOTION TO CONSOLIDATE CASES;GRANTING THE ADAM CORPORATION/GROUP'SMOTION TO COMPEL ARBITRATION;DENYING AS MOOT THE FEDERAL DEPOSIT INSURANCE CORPORATION'S MOTION TO STAY ARBITRATION

I. INTRODUCTION

This matter is before the court on the Federal Deposit Insurance Corporation's ("FDIC") motion to consolidate cases, the Adam Corporation/Group's ("TACG") motion to compel arbitration and the FDIC's motion to stay arbitration. Each party has asserted monetary demands against the other stemming from TACG's promise to share a portion of its tax revenue with the FDIC. TACG claims the dispute falls under an arbitration clause agreed to by both parties, while the FDIC argues the arbitration clause does not encompass disputes over TACG's tax-sharing obligation. Because the FDIC's motion to consolidate the two cases is unopposed and the court determines that consolidation is proper, it grants that motion. And because the court concludes that the parties' dispute is arbitrable, it grants TACG's motion to compel arbitration and denies as moot the FDIC's motion to stay arbitration.

II. BACKGROUND

A. Factual History

The seeds of this dispute were planted in the wake of the savings and loan crisis of the 1980s, in a 1988 transaction between TACG and the predecessor of the FDIC, the Federal Savings and Loan Insurance Corporation ("FSLIC"). FDIC's Opp'n to Mot. to Compel Arbitration at 2. In this transaction, eleven insolvent Texas savings and loan institutions were consolidated into one new savings and loan association now known as First American Bank ("FAB").*fn1 Id. FAB was an indirect subsidiary of TACG, and TACG owned the stock of FAB. Id. The terms of the transaction were memorialized in an "Assistance Agreement" between FSLIC, FAB and TACG. Id. In the Assistance Agreement, FSLIC promised to provide financial assistance to FAB and TACG, in turn, promised to share with FSLIC a portion of the value of certain tax benefits to which TACG was entitled as a result of the acquisition of the eleven failed institutions. Id. at 2-3. The tax-sharing provision was set forth in Section 9 of the Assistance Agreement. Id. at 2.

In 1996, TACG and the FSLIC's successor, the FDIC, terminated the Assistance Agreement by entering into the "Termination Agreement." Id. at 3. The Termination Agreement extinguished the FDIC's promise to provide financial assistance to TACG, but preserved TACG's obligation to share its tax benefits with the FDIC, stating, "Section 9 of the Assistance Agreement is not terminated by this Agreement and . . . [the parties'] respective obligations thereunder survive without change or alteration as set forth in the Assistance Agreement." FDIC's Mot. to Stay Arbitration, Ex. 5 ("Termination Agreement") at 22-23. The Termination Agreement went on, however, to establish several "clarifications of Section 9 issues," which modified the methodology of computing TACG's tax-sharing obligation. Id. at 23-29. Significantly, the Termination Agreement also contained an arbitration clause in which the parties agreed to arbitrate "any dispute . . . relating to . . . [any of four specific 'dispute items'] or any disputes regarding a party's obligations under this Agreement," id. at 18-19, and a forum selection clause establishing that "[a]ny legal action or proceedings with respect to this Agreement shall be brought in the Federal courts . . . located either in the District of Columbia or the State of Texas," id. at 56.

TACG sold the stock of FAB in 2003, at which time, it asserts, it realized it had miscalculated its tax-sharing obligation and overpaid the FDIC by approximately $40 million. TACG's Mot. to Compel Arbitration at 4. When TACG sought reimbursement for its overpayment, the FDIC responded by agreeing that the calculation method had been erroneous: in its view, TACG had in fact underpaid its tax-sharing obligation because the sale of the FAB stock had yielded tax savings, $150 million of which the FDIC contended it was entitled to under the tax-sharing agreement. FDIC's Opp'n to Mot. to Compel Arbitration at 4-5.

B. Procedural History

The parties attempted to negotiate a resolution of their competing demands and entered into "standstill agreements" to ensure that neither party would initiate litigation while their settlement discussions were pending. Id. at 5. The last standstill agreement expired on November 30, 2007. Id. At 12:01 Eastern Standard Time on that day, the FDIC filed a complaint in this court that was docketed as Civil Action No. 07-2163. Id. Approximately one hour later -- about midnight Central Time -- TACG filed a complaint in the United States District Court for the Northern District of Texas. Id. at 5-6. TACG also filed a claim with the American Arbitration Association ("AAA") in Dallas, Texas, and a motion in the Northern District of Texas to compel arbitration of its claim. Id. at 6. The FDIC filed a motion in the Northern District of Texas to transfer venue to this court, which the Texas court granted after applying the Fifth Circuit's "first-to-file" rule.*fn2 Id. After the Texas suit was transferred to this court as Civil Action No. 08-0753, the FDIC moved to consolidate the two actions. See FDIC's Mot. to Consolidate. TACG then filed a "renewed" motion to compel arbitration, and the FDIC requested that the AAA panel in Texas stay its arbitration proceedings until after this court ruled on the motion to compel arbitration. FDIC's Mot. to Stay Arbitration at 1. When the ...


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