II

104TH CONGRESS

1ST SESSION S. 648

To clarify treatment of certain claims and defenses against an insured depository institution under receivership by the Federal Deposit Insurance

Corporation, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 30 (legislative day, MARCH 27), 1995

Mr. COHEN (for himself, Mr. D’AMATO, Mr. BENNETT, and Mr. FAIRCLOTH)

introduced the following bill; which was read twice and referred to the

Committee on Banking, Housing, and Urban Affairs

A BILL

To clarify treatment of certain claims and defenses against

an insured depository institution under receivership by

the Federal Deposit Insurance Corporation, and for other

purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘D’Oench Duhme Re5 form Act’’.

6 SEC. 2. FINDINGS AND PURPOSES.

7 (a) FINDINGS.—The Congress finds that—
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1 (1) in D’Oench Duhme & Co. v. Federal De2 posit Insurance Corporation, 315 U.S. 447 (1942),

3 the Supreme Court determined that secret side

4 agreements that were not recorded in the records of

5 an insured depository institution should not be en6 forceable against Federal banking agencies when

7 those agencies acquired assets following the failure

8 of the institution;

9 (2) the Supreme Court based its holding (here10 after in this section referred to as the ‘‘D’Oench

11 doctrine’’) on its power to develop Federal common

12 law;

13 (3) in 1950, the Congress supplemented the

14 D’Oench doctrine by amending section 13(e) of the

15 Federal Deposit Insurance Act to invalidate agree16 ments relating to assets acquired by Federal bank17 ing agencies that were not recorded in official depos18 itory institution records;

19 (4) Federal and State courts have expanded the

20 scope of the D’Oench doctrine and section 13(e) of

21 the Federal Deposit Insurance Act by interpreting

22 them to bar tort claims based on oral representa23 tions, claims that do not relate to assets acquired by

24 Federal banking agencies, and numerous other
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1 claims and defenses beyond the original scope and

2 intent of those two lines of authority;

3 (5) the Federal banking agencies’ aggressive

4 use of the D’Oench doctrine and section 13(e) of the

5 Federal Deposit Insurance Act in the administrative

6 claims process and litigation, combined with the ex7 pansive interpretation of those authorities by the Su8 preme Court, have led to fundamentally unfair re9 sults; and

10 (6) many individuals have been barred from as11 serting potentially valid claims and defenses once an

12 insured depository institution has been declared in13 solvent and taken over by a Federal banking agency.

14 (b) PURPOSES.—The purposes of this Act are—

15 (1) to unify the lines of authority developed

16 under the Federal common law and referred to in

17 subsection (a) and section 13(e) of the Federal De18 posit Insurance Act, so that all cases relating to

19 agreements against the interest of the Federal De20 posit Insurance Corporation are decided pursuant to

21 Federal statutory law; and

22 (2) to return the D’Oench doctrine to its origi23 nal purpose by continuing to bar the enforcement of

24 unrecorded agreements, but allowing certain poten-
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1 tially valid intentional tort and other claims and de2 fenses to be adjudicated on their merits.

3 SEC. 3. CLARIFICATION.

4 Section 13(e) of the Federal Deposit Insurance Act

5 (12 U.S.C. 1823(e)) is amended to read as follows:

6 ‘‘(e) AGREEMENTS AGAINST INTERESTS OF THE

7 CORPORATION.—

8 ‘‘(1) IN GENERAL.—No agreement which tends

9 to diminish or defeat the interest of the Corporation

10 in any asset acquired by the Corporation under this

11 section or under section 11, by purchase or assump12 tion, or in its capacity as receiver of any insured de13 pository institution, shall be enforceable against the

14 Corporation unless that agreement is in writing and

15 was executed in the ordinary course of business by

16 an insured depository institution through an officer

17 or other employee or representative of the institution

18 having the authority to execute such an agreement

19 on behalf of the institution.

20 ‘‘(2) CLAIMS AGAINST THE CORPORATION.—

21 Notwithstanding paragraph (1), no court may bar,

22 estop, or otherwise prohibit the adjudication against

23 the Corporation, in its corporate capacity and as re24 ceiver of an insured depository institution, of—
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1 ‘‘(A) a claim or defense that does not re2 late to specific assets acquired by the Corpora3 tion;

4 ‘‘(B) a claim or defense that does relate to

5 transactions that would not, in the normal

6 course of business, be reflected in the trans7 action records of the institution;

8 ‘‘(C) a claim or defense in litigation com9 menced before the date of the appointment of

10 the Corporation as receiver or conservator for

11 the insured depository institution;

12 ‘‘(D) a claim or defense, filed at any time,

13 based on alleged intentional torts or alleged vio14 lation of State or Federal law, if—

15 ‘‘(i) the party asserting the claim or

16 defense demonstrates that the party did

17 not—

18 ‘‘(I) participate in a scheme to

19 defraud the subject insured depository

20 institution; or

21 ‘‘(II) knowingly lend itself to a

22 scheme to mislead bank examiners by

23 misrepresenting the value of the as24 sets of the institution; and
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1 ‘‘(ii) any oral representations relied

2 upon are not in conflict with a written

3 agreement contained in the records of the

4 institution.

5 ‘‘(3) STATUS AS HOLDER IN DUE COURSE.—Ex6 cept as otherwise provided in paragraph (1), any

7 other provision of Federal statutory law, or applica8 ble State law, the Corporation may not defeat a

9 claim related to an asset by demonstrating that the

10 asset was acquired in good faith, for value, and

11 without actual knowledge of the claim, unless the

12 Corporation also demonstrates that the asset was

13 not acquired by the Corporation upon its appoint14 ment as conservator or receiver or as part of a pur15 chase and assumption transaction.

16 ‘‘(4) EXCEPTION FOR VENDOR AGREEMENTS.—

17 Subsection (e)(1) does not apply to an agreement for

18 the sale or purchase of goods or services actually re19 ceived by or delivered to an insured depository insti20 tution before the date of appointment of a receiver

21 for that institution.’’.

22 SEC. 4. REPEAL.

23 Section 11(d) of the Federal Deposit Insurance Act

24 (12 U.S.C. 1821(d)) is amended—

25 (1) by striking paragraph (9); and
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1 (2) by redesignating paragraphs (10) through

2 (19) as paragraphs (9) through (18), respectively.

3 SEC. 5. CONFORMING AMENDMENTS.

4 Section 11 of the Federal Deposit Insurance Act (12

5 U.S.C. 1821) is amended—

6 (1) in subsection (e)—

7 (A) in paragraph (8)(A), by striking ‘‘sub8 section (d)(9) of this section and’’;

9 (B) in paragraph (8)(B), by striking

10 ‘‘(12)’’ and inserting ‘‘(11)’’; and

11 (C) in paragraph (8)(E), by striking ‘‘sub12 section (d)(9) of this section,’’; and

13 (2) in subsection (g)(4), by striking ‘‘(d)(11)’’

14 and inserting ‘‘(d)(10)’’.

15 SEC. 6. APPLICABILITY.

16 Section 13(e) of the Federal Deposit Insurance Act,

17 as amended by this Act, shall apply to administrative

18 claims brought or pending, and any litigation filed, in

19 progress, or on appeal, on or after October 19, 1993.

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