Here are two "squibs" on the same case - delivering the welcome message (if you ain't heard the news) that the dreaded "D'Oench Doctrine" at least as applied to suits against banks in federal receivership, is dead - fully replaced by a more restrictive statutory version in FIRREA. This ruling by the D.C. Circuit overrules scores, and possibly hundreds, of cases nationwide.

BANKING; FEDERAL RECEIVERS; D'OENCH DOCTRINE; TORT CLAIMS: Investor's tort claims against FDIC, as receiver are not barred by the statutory version of D'Oench doctrine. Murphy v. Federal Deposit Ins. Corp., 61 F.3d 34 (D.C. Cir. 1995) (remanded for further proceedings).

A limited partner in a real estate partnership sued the FDIC, as receiver for a failed bank, in tort, claiming that the bank was a controlling joint venturer or partner of the borrower partnership, despite express language in the loan documents to the contrary. The investor claimed that the bank effectively controlled the borrower by being involved in a plan for the borrower to conduct a public bond offering, with a bridge loan and other existing loans from the bank to be paid from the proceeds of the bond offering. For purposes of summary judgment, the court assumed that these allegations made out a claim that the FDIC as receiver would be liable for the alleged misdeeds of the borrower partnership and for the bank's alleged fraud and negligent misrepresentation as the promoter of the proposed bond offering.

The FDIC invoked the statutory equivalent of the D'Oench doctrine, 12 U.S.C. 1823(e), which gives it immunity from claims not shown on the records of the lender that would tend to diminish its assets.

Held: To invoke the statutory protection, the FDIC must show that if the investor prevails, the FDIC's interest in a specific asset would be diminished. Because the investor is essentially a tort claimant, rather than a borrower seeking to avoid a payment due, his success would diminish the overall value of the bank rather than any particular asset of the bank.

In an important additional ruling, discussed separately under this heading, the court also held that the broader "common law" version of D'Oench also does not apply.

BANKING; FEDERAL RECEIVERSHIPS; D'OENCH DOCTRINE: D'Oench is dead. FIRREA preempts and replaces common law version of D'Oench doctrine, and doctrine is limited to statute version set forth in FIRREA - applicable only to specific claims limiting value pf particular assets. Murphy v. Federal Deposit Ins. Corp., 61 F.3d 34 (D.C. Cir. 1995) (remanded for further proceedings). The facts of this case are set forth in a companion entry discussing the statutory rulings in this case.

On the common law Doench point, this far reaching opinion stands to overrule scores (if not hundreds) of cases fashioning a broad "common law" defense for federal receivers based upon D'Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447 (1942). These cases have held that the common law D'Oench doctrine bars claims and affirmative defenses against the FDIC in its capacity as receiver if the claim might work a "fraud" on the FDIC because it was not set forth as a documented part of the failed lender's files. Originally, the doctrine was used as a response to claims of unwritten "understandings" raised defensively by parties who had notes or other written financial obligations payable to the bank.

The cases have viewed D'Oench as being broadly protective of the federal receivership assets, and consequently have used it to strike down various tort claims and other affirmative claims that might result in judgments diminishing those assets. Basing its decision on O'Melveny & Myers v. FDIC, ____ U.S. ____, 114 S.Ct. 2048 (1994) (FIRREA preempted federal common law with respect to issue of imputed knowledge), the court held that FIRREA likewise preempts the federal common law doctrine set forth in Doench.

The court acknowledges that it, like most other federal courts, had not viewed FIRREA as replacing the common law aspects of D'Oench, but concludes that the U.S. Supreme Court's opinion in O'Melveny & Myers changes everything.

Comment: Watch for the appeal, but in the meantime, start reviewing those claims that you thought had been D'Oench barred.

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