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Wmi Liquidating Trust v. Federal Deposit Insurance Corporation

United States District Court, District of Columbia

June 16, 2015

WMI LIQUIDATING TRUST, Plaintiff,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.

MEMORANDUM OPINION

REGGIE B. WALTON, District Judge.

The plaintiff, WMI Liquidating Trust, the successor-in-interest to Washington Mutual, Inc., a now-defunct multiple savings and loan holding company that owned Washington Mutual Bank ("WMB") and WMI Investment Corporation ("WMI"), [1] filed this civil suit against the defendant, the Federal Deposit Insurance Corporation ("FDIC"), seeking judicial review under the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2) (2012), and relief from the FDIC's refusal to approve "golden parachute payments" that the plaintiff proposed to pay former employees and officers of the debtors. Complaint ("Compl.") ¶¶ 1-14, 50-67. Currently pending before the Court are the parties' cross-motions for summary judgment. Plaintiff WMI Liquidating Trust's Motion for Summary Judgment ("Pl.'s Mot."); Defendant's Motion for Summary Judgment ("Def.'s Mot."). After careful consideration of the parties' submissions, [2] the Court concludes that it must grant in part and deny in part the plaintiff's motion, grant in part and deny in part the defendant's motion, and remand the case to the FDIC for further consideration consistent with this opinion.

I. BACKGROUND

A. Statutory And Regulatory Background

The Federal Deposit Insurance Act ("FDIA") gives the FDIC the power to "prohibit or limit, by regulation or order, any golden parachute payment." 12 U.S.C. § 1828(k)(1) (2012). A "golden parachute payment" is defined as

any payment (or any agreement to make any payment) in the nature of compensation by any insured depository institution or covered company for the benefit of any institution-affiliated party[3] pursuant to an obligation of such institution or covered company that-
(i) is contingent on the termination of such party's affiliation with the institution or covered company; and-
(ii) is received on or after the date on which-
(I) the insured depository institution or covered company, or any insured depository institution subsidiary of such covered company, is insolvent;
(II) any conservator or receiver is appointed for such institution;
(III) the institution's appropriate Federal banking agency determines that the insured depository institution is in a troubled condition (as defined in the regulations prescribed pursuant to section 1831i(f) of this title);
(IV) the insured depository institution has been assigned a composite rating by the appropriate Federal banking agency or the Corporation of 4 or 5 under the Uniform Financial Institutions Rating System; or
(V) the insured depository institution is subject to a proceeding initiated by the Corporation to terminate or suspend deposit insurance for such institution.

12 U.S.C. § 1828(k)(4)(A); see also 12 C.F.R. § 359.0(b) (2012) ("A golden parachute payment' is generally considered to be any payment to an IAP which is contingent on the termination of that person's employment and is received when the insured depository institution making the payment is troubled or, if the payment is being made by an affiliated holding company, either the holding company itself or the insured depository institution employing the IAP, is troubled."); 12 C.F.R. § 359.1(f). The FDIA includes a list of factors that the FDIC "may" consider in prescribing any regulation concerning the approval of golden parachute payments:

(A) [w]hether there is a reasonable basis to believe that the institution-affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the depository institution or covered company that has had a material [e]ffect on the financial condition of the institution[;]
(B) [w]hether there is a reasonable basis to believe that the institution-affiliated party is substantially responsible for-
(i) the insolvency of the depository institution or covered company;
(ii) the appointment of a conservator or receiver for the depository institution; or
(iii) the troubled condition of the depository institution (as defined in the regulations prescribed pursuant to section 1831i(f) of this title)[;]
(C) [w]hether there is a reasonable basis to believe that the institution-affiliated party has materially violated any applicable [f]ederal or [s]tate banking law or regulation that has had a material ...

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