Bank of America has urged a federal judge in Washington, D.C., to apply a recent U.S. Supreme Court ruling to limit the Federal Deposit Insurance Corp’s claims in a case alleging the bank underpaid its deposit insurance by $1.1 billion.
In a brief filed on Tuesday, the bank, represented by Helgi Walker of Gibson, Dunn & Crutcher, told U.S. Magistrate Judge Zia Faruqui that the high court’s April decision in AMG Capital Management LLC v. FTC, finding that the U.S. Federal Trade Commission did not have the authority to seek disgorgement from companies that have defrauded consumers should also prohibit the FDIC from pursuing disgorgement from the bank. In both cases, the laws that grant the agencies power do not expressly permit them to seek that remedy, the bank said.
Eric Lyttle of Quinn Emanuel Urquhart & Sullivan, who represents the FDIC, referred an inquiry for comment to the agency. A representative for the FDIC declined to comment on Wednesday. A spokeswoman for Bank of America declined to comment.
In AMG Capital Management, the justices found that the FTC overstepped its authority by seeking court orders to make fraudsters return money improperly obtained from consumers in the form of restitution or disgorgement. Business groups have complained that the FTC aggressively extracted billions of dollars in monetary awards from companies in recent years.
On Tuesday, Bank of America said the decision should apply to the lawsuit the FDIC filed in 2017 accusing the bank of understating its “counterparty risk,” or the danger that trading partners could fail, thus rendering them unable to repay obligations and threatening the bank’s own financial health.
The FDIC charges banks a fee to protect customer deposits. The largest financial companies must pay more than small banks for that protection. The agency seeks payment of $1.1 billion in insurance premiums, plus disgorgement of ill-gotten gains it alleges the bank received by withholding the funds and continuing to do business.
Both Bank of America and the FDIC had moved for summary judgment before AMG Capital was decided. The briefs have been filed under seal.
The bank argued on Tuesday that the Federal Deposit Insurance Act, like the Federal Trade Commission Act, which the Supreme Court interpreted in AMG Capital, only allows the FDIC to recover unpaid assessments and cannot be read to allow the regulator to seek disgorgement.
The case is Federal Deposit Insurance Corp v. Bank Of America NA, U.S. District Court, District of Columbia, No. 17-CV-00036
For Bank of America: Helgi Walker of Gibson, Dunn & Crutcher and others
For the FDIC: Eric Lyttle of Quinn Emanuel Urquhart & Sullivan; Barbara Katron of the FDIC
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