The Federal Circuit Court of Appeals in Washington, D.C. on January 28 ruled in favor of the Meritor Savings Bank shareholders and appears to have moved them closer to collecting a $276 million trial court judgment from the FDIC in an epic case that began in 1992. That's when the FDIC asked Pennsylvania's Department of Banking to shut down Meritor, formerly the Philadelphia Savings Fund Society, even though it was the oldest and largest savings association in the country. Frank Slattery, a principal shareholder of Meritor and PSFS, had brought the case as a derivative action on behalf of the seized bank during a financial crisis that may have been the biggest before today's global financial meltdown.
Both the trial court and, then, a panel for the appellate court found that the FDIC's actions, including the events that triggered the seizure of this storied franchise, constituted a breach of contract for which the U.S. government must now pay at least $276 million. However, after losing before a three-judge panel, the government petitioned for a rehearing en banc last summer to consider whether the trial court had the appropriate jurisdiction to hear the breach of contract dispute.
It is not clear whether the U.S. will appeal this latest ruling to the U.S. Supreme Court. If not, says Thomas Buchanan, the head of Winston's litigation group in Washington, D.C. and first chair in the Meritor case, the bank shareholders would likely collect on the outstanding $276 million judgment later this year.