ANICO v. JPMC
An OPINION was filed by Judge Collyer on September 28, 2012. The Judge had first denied
the ANICO Claim against JPMC but ANICO won on Appeal. I don't have a link to the Opinion but
following is a copy and paste of the Opinion up to Page 7:
OPINION
Bondholders of Washington Mutual Bank (“WaMu” or the “Bank”) sue JP
Morgan Chase Bank and JP Morgan Chase Co. (together “JPMC”) for allegedly spreading
misinformation about WaMu that caused credit raters and federal regulators to doubt the Bank’s
ability to weather the financial storm of 2008. As a result of these alleged nefarious activities,
JPMC was able to acquire WaMu at a fire-sale price and the bonds were rendered worthless.
Plaintiffs sue JPMC for tortious interference with their bond contracts, unjust enrichment, and
breach of a confidentiality agreement between JPMC and WaMu’s parent company, Washington
Mutual, Inc. Before the Court is a motion to dismiss the First Amended Complaint. The motion
will be granted in part and denied in part.
I. FACTS
The First Amended Complaint (“Complaint”) makes the following allegations.
The Court assumes the truth of the Complaint’s allegations of fact in ruling on a motion to
dismiss. Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007). Plaintiff Bondholders were investors
in WaMu, a subsidiary of Washington Mutual, Inc., who received bonds in return for their
investments in WaMu. The bonds “evidence the contractual obligation of [WaMu] to pay to
each Plaintiff a stream of future cash payments consisting of coupon payments and a payment of
the principal value of the bond.” Am. Compl. [Dkt. 131] ¶ 105. However, the Office of Thrift
Supervision (“OTS”) put the Bank into receivership with the Federal Deposit Insurance
Corporation on September 25, 2008, and the FDIC-Receiver sold the Bank’s assets and limited
liabilities to JPMC on the very same day. As a result, the bonds were rendered worthless and the
Bondholders are unable to collect. The Amended Complaint makes the following allegations
regarding the events leading up to the sale of WaMu’s assets and certain WaMu liabilities to
JPMC.
On March 11, 2008, JP Morgan Chase Co. (“JPMC Co.”) executed a
confidentiality agreement with Washington Mutual, Inc. (“WMI”) regarding a possible
acquisition of either WMI or WaMu. Id. ¶ 23. Pursuant to the agreement, JPMC Co. received
internal financial information about the Bank but was restricted to using the information solely
for the purpose of evaluating the transaction. JPMC expressly agreed to keep such information
“strictly confidential.”
Id. ¶ 25. The confidentiality agreement specified that it was for the
benefit of WMI and its subsidiaries, their representatives, and their respective successors and
assignees. Id. ¶ 31. JPMC Co. violated the confidentiality agreement by disclosing confidential
WaMu information to third parties and regulators and did not destroy all confidential documents
after its bid to purchase WaMu was rejected on April 8, 2008. Id. ¶ 37.
The Amended Complaint alleges that JPMC Co. then embarked on a scheme to
“to acquire the assets of [WaMu], stripped of the liability to bondholders and other
stakeholders,” id., through regulatory intervention by using financial misrepresentations to create
a bid scenario for WaMu that would be profitable for JPMC. JPMC Co.’s conduct in this regard
is described by the D.C. Circuit in American National Insurance Co. v. Federal Deposit
Insurance Company, 642 F.3d 1137 (D.C. Cir. 2011), and need not be fully repeated here. In
short, the Bondholders allege that JPMC Co. used WaMu’s confidential financial information in
presentations to credit rating agencies, in which JPMC Co. overestimated WaMu’s loan losses
and underestimated its liquidity and financial health, which led to a reduction in WaMu’s credit
ratings and a “loss of 25 percent or more of the value of Plaintiffs’ [WaMu] bonds” in the
months before September 2008. Am. Compl. ¶¶ 47- 48. In its quest for “government
intervention in its plan to acquire [WaMu],” id. ¶
34, JPMC “knowingly overestimated [WaMu] loan losses and otherwise disparaged [WaMu’s] financial health,”
id. ¶ 55, and disclosed to various third parties that JPMC Co. was discussing a potential acquisition of WaMu with the
FDIC in order to incite a “bank run” and “drive down [WaMu]’s credit ratings.” Id. ¶ 56.
Meanwhile, JPMC Co. resumed its own acquisition negotiations with WaMu on
false pretenses, as it merely sought access to more confidential information for use in JPMC’s
bid to FDIC. JPMC Co. acted on the knowledge that the FDIC-Receiver would be more likely
to sell WaMu to JPMC Co. if the FDIC-Receiver perceived that JPMC Co. were better
positioned than other bidders to operate WaMu because of its advanced due diligence. Id. ¶¶ 68-
70. Throughout September 2008, JPMC Co. continued to meet with credit agencies, disclosing
confidential information regarding the Bank and insinuating that JPMC was considering an
acquisition of WaMu from an FDIC receivership, which again caused credit rating agencies to
downgrade WaMu’s rating. These actions also caused the intended run on WaMu, and
depositors withdrew $16.7 billion from the Bank between September 15 and September 25, 2008
causing an alleged “liquidity crisis” for WaMu. Id. ¶ 76.
As a consequence, the FDIC began seeking bids for the sale of WaMu on
September 23, 2008, before the OTS seized the Bank. The Director of OTS is authorized to
issue charters for federal savings associations. See 12 U.S.C. § 1464. The Director is also
authorized to appoint a conservator or receiver for any insured savings association, if the
Director determines that any ground under 12 U.S.C. § 1821(c)(5) exists, i.e., the institution has
insufficient assets to fulfill its obligations or has suffered a substantial dissipation of its assets.
Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No.
101-73, 103 Stat. 83 (1989) (“FIRREA”), the FDIC may accept an appointment for to act as a
receiver. See 12 U.S.C. § 1821(c)(1). Congress enacted FIRREA to enable the FDIC and the
Resolution Trust Corporation to expeditiously wind-up the affairs of failed financial institutions
throughout the country. Freeman v. FDIC, 56 F.3d 1394, 1398 (D.C. Cir. 1995). Under the
FIRREA, the FDIC-Receiver may merge or transfer any asset or liability of the institution under
receivership. 12 U.S.C. § 1821(d)(G). In addition, under this statutory scheme, the FDIC-
Receiver succeeds “to all rights, titles, powers, and privileges of the insured depository
institution, and of any stockholder, member, accountholder, depositor, officer, or director of such
institution with respect to the institution and the assets of the institution.” 12 U.S.C.
§ 1821(d)(2)(A)(i).
The Amended Complaint alleges that JPMC Co. “manipulated the FDIC bidding
process by exerting pressure upon potential competitors to not submit conforming bids, by
constraining the time frame available to competitors to conduct due diligence, by constraining
information available to potential bidders regarding [WaMu], and by encouraging and causing
the FDIC to set bid parameters that would favor JPMC [] Co. and lead other bids to be rejected
as ‘non-conforming.’” Am. Compl. ¶ 92. For example, the FDIC received a bid from Wells
Fargo & Company, which stated that it could not conform to the FDIC’s bid structure because of
“limited due diligence” and “severe time constraints.” Id. ¶ 88. On September 24, 2008, FDIC’s
board of directors approved JPMC Co.’s bid for WaMu and on September 25, 2008 OTS seized
WaMu and placed it into receivership with the FDIC. That very same day JP Morgan Chase
Bank (“JPMC Bank”) and FDIC-Receiver signed a Purchase and Assumption Agreement
“whereby the FDIC, as receiver, sold [WaMu] assets, including [WaMu]’s branches, deposit
liabilities, loan portfolio, and covered bonds and secured debts, to JPMC Bank for $1.9 billion.”
Id. ¶ 94.
Consequently, the bonds in question in this suit became worthless; FDIC-
Receiver circulated a contemporaneous information sheet warning that it did not anticipate that
subordinated debt holders of WaMu would receive any recovery of the debt. The Bondholders
allege that JPMC Co. “caused the Plaintiffs injury by preventing other purchasers, such as Wells
Fargo, from having adequate time or information to negotiate with the FDIC-Receiver in order to
submit a bid under which Plaintiff’s . . . bond contracts would be honored.” Id. ¶ 136.
The Amended Complaint alleges the same three causes of action as its original:
Count I, tortious interference with existing contract against JPMC collectively; Count II, breach
of confidentiality agreement against JPMC Co.; and Count III, unjust enrichment against JPMC
collectively. It alleges that JPMC “willfully and intentionally interfered” with the bond contracts
and procured WaMu’s breach of the contracts “without justification, and in order to benefit
themselves.” Id. ¶ 122. The Bondholders further allege they suffered injury through JPMC
Co.’s breach of the confidentiality agreement because the release of confidential financial
information caused the seizure and sale of WaMu, which led to a breach of the bond contracts.
The Bondholders specifically allege that JPMC Co.’s breach caused the seizure and sale of
WaMu assets under terms by which WaMu’s bond contracts would not be honored. Id. ¶ 133-
34. Finally, the Bondholders advance a claim for unjust enrichment, asserting that JPMC was
unjustly enriched because it failed to pay Bondholders for the benefits it received from stripping
Bondholders of “their rights and benefits under their bond contracts and substantially impairing
[their] bond values.” Id. ¶ 140.
The Bondholders’ original complaint was brought in Texas State Court, removed
to the U.S. District Court for the Southern District of Texas, and then transferred to the U.S.
District Court for the District of Columbia. Their first complaint was dismissed because this
Court determined that the Bondholders’ injuries depended on FDIC-Receiver’s sale of WaMu’s
assets to JPMC, such that the Bondholders were required to pursue their claims administratively.
Am. Nat’l Ins. Co. v. JPMorgan Chase & Co., 705 F. Supp. 2d 17, 21 (D.D.C. 2010) (citing
FIRREA, 12 U.S.C § 1821(d)(13)(D)(ii), which provides for court review of disallowed claims
after exhaustion of administrative remedies). This holding was reversed on appeal when the
D.C. Circuit found that the Bondholders’ suit is against JPMC, a third party, for its own
wrongdoing, and not against the depository institution for which the FDIC is receiver and
thereby the suit is not covered by FIRREA’s administrative claims process. Am. Nat’l Ins. Co.,
642 F.3d at 1142. The D.C. Circuit remanded the case to this Court, at which time the
Bondholders amended their complaint.
JPMC and the FDIC-Receiver (the “Defendants”) again move to dismiss, alleging
that FIRREA still blocks the Bondholders’ claims because their claims are derivative of harm to
WaMu and now belong to the FDIC-Receiver. The Court agrees that the claims alleged in
Counts II and III of the Amended Complaint, breach of the confidentiality agreement and unjust
enrichment, belong to the FDIC-Receiver and that the Bondholders have failed to state a claim in
either count. These two counts will be dismissed. However, Count I, alleging tortious
interference with the existing contract by JPMC, is a cause of action that belongs to the
Bondholders for which they have sufficiently stated a claim. Defendants’ motions will be denied
with respect to Count I.
II. LEGAL STANDARD
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)
challenges the adequacy of a complaint on its face, testing whether a plaintiff has properly stated
a claim. Fed. R. Civ. P. 12(b)(6). Federal Rule of Civil Procedure 8(a) requires that a complaint
contain “a short and plain statement of the claim showing that the pleader is entitled to relief.”
Fed. R. Civ. P. 8(a)(1). 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
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