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American National Insurance Co. v. JPMorgan Chase & Co.

United States District Court, District of Columbia

March 4, 2016

AMERICAN NATIONAL INSURANCE COMPANY, AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, FARM FAMILY LIFE INSURANCE COMPANY, FARM FAMILY CASUALTY INSURANCE COMPANY, and NATIONAL WESTERN LIFE INSURANCE COMPANY, Plaintiffs,
v.
JPMORGAN CHASE & CO. and JP MORGAN CHASE BANK NATIONAL ASSOCIATION, Defendants.

MEMORANDUM OPINION

ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE

We return to a long-running dispute between Plaintiffs, former bondholders of Washington Mutual Bank, and Defendant JPMorgan Chase, the company that acquired Washington Mutual’s assets from a federal receivership. Defendants move to dismiss the operative complaint for failure to state a claim upon which relief can be granted. They are correct: despite years spent in discovery, Plaintiffs can allege no conduct that is actionable under New York law as tortious interference with an existing contract. Defendants’ motion will be granted and the case dismissed.

I. FACTS

The Court presumes general familiarity with the background of this case.[1] The well-pleaded facts alleged in Plaintiffs’ operative complaint must be taken as true in this procedural posture. Baird v. Gotbaum, 792 F.3d 166, 169 n.2 (D.C. Cir. 2015).

The 2008 financial crisis has yielded a host of lawsuits, of which this case is one. Plaintiffs were bondholders of Washington Mutual Bank (WaMu) who saw their bond values deteriorate after the federal government seized WaMu through the Office of Thrift Supervision (OTS), put WaMu into receivership with the Federal Deposit Insurance Corporation (FDIC), and promptly sold all of WaMu’s assets-but not all of its liabilities-to Defendant JPMorgan Chase Bank National Association and its parent company, Defendant JPMorgan Chase & Co. (collectively JPMC).[2] Plaintiffs’ bonds were among the liabilities not sold to JPMC, and thus became essentially worthless.[3]

Plaintiffs first sued in Texas state court, naming only the JPMC defendants. See generally Am. Nat. Ins. Co. v. JPMorgan Chase & Co., 705 F.Supp.2d 17, 18 (D.D.C. 2010) (ANICO I). Plaintiffs posited a conspiracy among JPMC, federal regulators, and some WaMu employees to drive down WaMu’s value and expose it to federal takeover. Id. at 18-19. The alleged conspiracy arose after JPMC’s efforts to acquire WaMu were rebuffed. Id. The goal of the alleged conspiracy was to engineer WaMu’s downfall, drive it into FDIC receivership, and thereby allow the sale of its valuable assets to JPMC at a “fire sale price” without liabilities. Id. at 20. The conspirators allegedly leaked confidential information about WaMu, defamed it in the media and before ratings agencies, encouraged federal regulators to seize WaMu, and discouraged others from bidding for WaMu out of receivership. Id. at 18-19.

FDIC intervened as a defendant in the Texas court, removed the case to federal court, and obtained a transfer to this Court, which dismissed Plaintiffs’ case on April 13, 2010. See generally Id. Reasoning that Plaintiffs’ claims were not fairly traceable to JPMC but rather to FDIC, this Court held that Plaintiffs’ sole recourse was the administrative claim process prescribed by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, 12 U.S.C. § 1821(d) (FIRREA). Id. at 21 (“Having failed to invoke and exhaust this administrative process, Plaintiffs’ claims are barred by the Act.”) (citing Freeman v. FDIC, 56 F.3d 1394, 1400 (D.C. Cir. 1995); Village of Oakwood v. State Bank & Tr. Co., 539 F.3d 373, 386 (6th Cir. 2008)).

The D.C. Circuit reversed. See Am. Nat. Ins. Co. v. F.D.I.C., 642 F.3d 1137 (D.C. Cir. 2011) (ANICO II). Holding that Plaintiffs’ suit vis-à-vis JPMC was not a “claim” under FIRREA, 12 U.S.C. § 1821(d)(13)(D)(ii), the Circuit found that the suit was not barred by that provision. Id. at 1142. Nor was it barred by § 1821(d)(13)(D)(i), which “reaches more broadly than (ii)” but does not reach claims that are purely against the assuming entity such as JPMC. Id.

The case was remanded to this Court for further proceedings. Plaintiffs soon amended their complaint, Dkt. 131 (1st Am. Compl.), to focus singularly on JPMC. The gist of the tortious interference alleged in the First Amended Complaint was that JPMC caused “the value of Plaintiffs’ [WaMu] bonds [to be] reduced during the summer of 2008 up to September 25, 2008, ” the day before WaMu’s seizure by OTS. Id. ¶ 124. Plaintiffs also alleged that JPMC caused OTS to seize WaMu and sell its assets “under circumstances in which the Plaintiffs’ bond contracts would not be honored.” Id.

This Court dismissed two of Plaintiffs’ three counts. See generally Am. Nat. Ins. Co. v. JPMorgan Chase & Co., 893 F.Supp.2d 218, 233 (D.D.C. 2012) (ANICO III). Count II (alleging breach of a confidentiality agreement between WaMu and JPMC) and Count III (alleging unjust enrichment on JPMC’s part) were both deemed “derivative” under the law of Washington State, where WaMu was headquartered. Id. at 230-32. As such, they needed to be brought by WaMu itself or, after it was put into receivership, by FDIC. Id. at 232 (citing 12 U.S.C. § 1821(d)(2)(A); Fed.R.Civ.P. 17(a)).

Discovery ensued for almost two and a half years, until Plaintiffs amended their complaint once again. See 2d Am. Compl. [Dkt. 197]. One count remains: tortious interference with an existing contract. Id. ¶¶ 108-16. The gravamen of this sole count is that JPMC knew about Plaintiffs’ WaMu bonds and nevertheless interfered with them. Plaintiffs allege that JPMC “procured [WaMu’s] breach of the[se] contract[s] without justification.” Id. ¶ 112. JPMC allegedly took various steps to make WaMu’s performance on Plaintiffs’ bonds “more burdensome, more difficult[, ] more expensive, ” and thus “impossible.” Id. ¶ 113. JPMC is alleged to have accomplished this by “gaining access to [WaMu]’s confidential financial information under false pretenses, breaching an agreement to maintain the confidentiality of such information, breaching a stand-still agreement, driving down the credit ratings of [WaMu], and misusing the information” in the months before the seizure by OTS. Id. JPMC is also alleged to have “obstructed efforts to sell [WaMu]’s assets under circumstances in which the Plaintiffs’ bond contracts would be honored” and “used [JPMC’s] insider status and financial strength to work to bring about a regulatory seizure of [WaMu] and obtain the sale of [WaMu’s] assets from federal regulators.” Id.

Plaintiffs claim damages “consisting of loss of their rights and benefits inherent in their [WaMu] bond contracts.” Id. ¶ 115. Critically, their claim is “based on JPMC’s pre-receivership misconduct which caused diminution of their WMB bond values pre-receivership.” Id. ¶ 116 (emphasis added).[4]

II. LEGAL STANDARD

A motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the adequacy of a complaint on its face. Fed.R.Civ.P. 12(b)(6). A complaint must be sufficient “to give a defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). Although a complaint does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is “plausible on its face.” Id. at 570. A court must treat the complaint's factual allegations as true, “even if doubtful in fact.” Id. at 555. A court need not accept as true legal conclusions set forth in a complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In deciding a motion under Rule 12(b)(6), a court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits or incorporated by reference, and matters about which the court may take judicial notice. Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007).

JPMC moves in the alternative for summary judgment. Discovery is complete and a fully developed record is available to the Court, cited by both sides. That evidence need not be considered, however, as Plaintiffs’ complaint fails for purely legal ...


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