Federal Deposit Insurance v. AmTrust Financial Corp. (In Re AmTrust Financial Corp.)
694 F.3d 741
| 6th Cir. | 2012Background
- AFC filed for bankruptcy in late 2009; the FDIC was appointed receiver for AmTrust Bank.
- The FDIC sought payment from AFC under 11 U.S.C. § 365(o), arguing AFC committed to capital maintenance via the Bank’s cease-and-desist order.
- The November 19, 2008 cease-and-desist order required the Bank to have and maintain 7% Tier 1 and 12% total capital ratios, with AFC’s Board to ensure the Bank complied.
- The Bank failed to meet the mandated capital ratios by December 31, 2008; OTS downgraded the Bank, and AFC explored capital reduction plans rather than external infusions.
- OTS later issued risk-reduction plans and a PCA framework; AFC entered into a noteholder agreement reducing available capital; AFC ultimately filed for bankruptcy and the Bank was closed by OTS, with FDIC as receiver.
- The district court held the C&D’s paragraph 8 ambiguity, and found no enforceable capital-maintenance commitment by AFC; the advisory jury and the district court ultimately favored AFC; FDIC appealed and the Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is paragraph 8 of the C&D ambiguous about a capital-maintenance commitment? | FDIC argues paragraph 8 imposes a capital-maintenance obligation on AFC. | AFC argues paragraph 8 creates only an oversight obligation and not a capital-maintenance commitment. | Yes, the paragraph is ambiguous. |
| Does the district court have to defer to OTS’s interpretation (Auer) of the C&D? | FDIC seeks deference to OTS’s interpretation that AFC must maintain capital. | AFC argues OTS’s interpretation was vague or inconsistent and not entitled to Auer deference. | Auer deference not required; interpretation not clearly supported. |
| Was extrinsic evidence properly used to interpret the C&D? | FDIC contends extrinsic evidence shows a capital-maintenance intent. | AFC contends extrinsic evidence supports only an oversight reading. | The district court did not clearly err; extrinsic evidence supports oversight reading. |
| Was the appeal procedurally proper given Ortiz and invited-error concerns? | FDIC argues it could appeal the legal issue despite trial posture; Ortiz did not bar review. | AFC argues Ortiz and invited-error prevent review of the ambiguity ruling. | Ortiz Applicable to purely legal questions; here, ambiguity review is appealable. |
Key Cases Cited
- Lincoln Elec. Co. v. St. Paul Fire & Marine Ins. Co., 210 F.3d 672 (6th Cir. 2000) (contract-interpretation framework; ambiguity allows extrinsic evidence)
- West v. Fred Wright Constr. Co., 756 F.2d 31 (6th Cir. 1985) (clear weight of the evidence standard for factual findings)
- United States v. U.S. Gypsum Co., 333 U.S. 364 (1948) (standard for reviewing findings of fact; clearly erroneous)
- Auer v. Robbins, 519 U.S. 452 (1989) (agency deference to agency interpretations of regulations; high bar for deference)
- Chase Bank USA, N.A. v. McCoy, 131 S. Ct. 871 (2011) (limits on when agency interpretations receive deference; not all agency readings prevail)
- Perez v. Aetna Life Ins. Co., 150 F.3d 550 (6th Cir. 1998) (contract interpretation using extrinsic evidence when ambiguity exists)