Essentially, the firm, and its Sullivan and Cromwell lawyers, are arguing that the FDIC has breached its contract in inducing the firm to buy up Washington Mutual. That contract, it is argued, provided an indemnity for the thrift's legal liabilities. The key issue is whether JPMorgan "expressly assumed" those liaiblities when it bought WaMu. If it didn't, the FDIC might have. I am no contract expert, but I do not find this argument to be uncompelling.
Here's the relevant language from the complaint:
the FDIC-Receiver agreed to indemnify JPMC for, among other things, "any and all costs, losses, liabilities, expenses (including attorneys' fees) ... , judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with claims against [JPMC]" insofar as they are:
• "based on liabilities of [WMB] that are not assumed by [JPMC] pursuant to this Agreement." (P&A § 12.1.)
• "based on any action or inaction prior to Bank Closing of the Failed Bank, its directors, officers, employees or agents as such, or any Subsidiary or Affiliate of the Failed Bank, or the directors, officers, employees or agents as such of such Subsidiary or Affiliate."
• "based on the rights of any creditor as such of the Failed Bank, or any creditor as such of any director, officer, employee or agent of the Failed Bank or any Affiliate of the Failed Bank, with respect to any indebtedness or other obligation of the Failed Bank or any Affiliate of the Failed Bank arising prior to Bank Closing." (/d. § 12.1(a)(2).)
HT: Jennifer Taub. And happy holidays!
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