Magazine article American Banker

FDIC Plans to Appeal Judgment Stemming from Bailout of Bank

Magazine article American Banker

FDIC Plans to Appeal Judgment Stemming from Bailout of Bank

Article excerpt

WASHINGTON -- To reverse a multimillion dollar judgment, the Federal Deposit Insurance Corp. plans to appeal a lawsuit stemming from its resolution of the failed First Republic Bank Corp.

Accusing the FDIC of "highhanded and cavalier conduct," U.S. District Judge Joe Kendall concluded that the FDIC, in conjunction with NationsBank, unlawfully breached a long-term lease signed by First Republic Bank.

NationsBank bought the failed First Republic from the FDIC in 1988. NationsBank was then named NCNB Texas.

Judge Awards Damages

In a stinging 55-page opinion, Judge Kendall awarded the real estate company direct and consequential damages of $43.6 million, punitive damages of another $43.6 million, and interest expenses of about $27 million as well as legal costs.

Of that $114 million total, FDIC and NationsBank are jointly on the hook for $43.6 million while NationsBank alone is responsible for the punitive damages.

NationsBank, with help from the FDIC, first bullied the building's landlord, Burnett Plaza Associates, and eventually illegally broke the lease, according to the May 12 court ruling.

Case Tried in Texas

The case, Burnett Plaza Associates v. NCNB Texas National Bank and the FDIC, was tried in the U.S. District Court for the Northern District of Texas, Dallas division.

"There is a strong likelihood that we'll appeal," FDIC spokesman Alan J. Whitney said Thursday. Mr. Whitney refused to discuss the case any further. NationsBank spokeswoman Martha Larsh would not comment.

In March 1988, the FDIC bolstered First Republic with a $1 billion cash infusion. …

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