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Media Alerts - MBIA Insurance Corp. v. FDIC
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March 8, 2013
  MBIA Insurance Corp. v. FDIC
Headline: D.C. Circuit affirms dismissal of IndyMac case

Alert Type: New

Area of Law: Banking

Issue(s) Presented: Whether funds paid by an insurance company for losses on mortgage-backed securities are recoverable as administrative expenses under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), 12 U.S.C. ยง1821(d).

Brief Summary: In 2006 and 2007, Appellant MBIA Insurance insured mortgage-backed securities issued by IndyMac Bank, FSB. IndyMac was placed in receivership by the Office of Thrift Supervision in 2008, and the FDIC was appointed to act as the bank's receiver, to wind up IndyMac's business and transfer its assets and liabilities to an appropriate successor. MBIA sued the FDIC to recover the money it paid out in claims made against its policies, arguing that FDIC had tacitly approved agreements between IndyMac and MBIA because it had not explicitly repudiated them when it assumed the role of receiver. The U.S. District Court for the District of Columbia dismissed the suit, finding MBIA's claim inconsistent with the language and purpose of FIRREA. MBIA appealed, and the U.S. Court of Appeals for the District of Columbia Circuit affirmed.

The D.C. Circuit considered the question of when an agreement is approved within the meaning of FIRREA de novo. Under the statute, the FDIC, acting as a receiver, has discretion regarding which agreements of the failed bank to honor and which to repudiate. Expenses associated with "approved" agreements are deemed administrative expenses and given the highest repayment priority. MBIA argued that "approved" referred broadly to any contract that the FDIC had not expressly repudiated, while the FDIC argued that "approved" applied narrowly to only those contracts that it affirmatively approved. Concluding that the broad reading urged by MBIA would "undermine Congress's stated purpose to prefer depositors over other creditors" of failing banks, the D.C. Circuit held that the FDIC's reading was more consistent with both the language of FIRREA and Congress's goals in adopting it.

For the full text of this opinion, visit:

Panel (if known): Henderson, Rogers, Sentelle

Argument Date: 11/14/2012

Date of Issued Opinion: 3/8/2013

Docket Number: No. 11-5317

Decided: Affirmed

Case Alert Author: Ripple Weistling

Counsel, if known: Howard R. Hawkins, Jr., Jason Jurgens, David F. Williams, and Geoffrey Gettinger for appellant.

J. Scott Watson, Colleen J. Boles, Lawrence H. Richmond,
William R. Stein, and Scott H. Christensen for appellee.

Author of Opinion: Rogers

Author of Dissent: N/A

Circuit: D.C. Circuit

Case Alert Circuit Supervisors: Elizabeth Beske; Ripple Weislting

    Posted By: Ripple Weistling @ 03/08/2013 01:56 PM     DC Circuit  

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