MCI Communications Services, Inc. v. Federal Deposit Insurance
2011 U.S. Dist. LEXIS 93290
| D.D.C. | 2011Background
- WaMu, a federal savings bank, repudiated WaMu’s contract with Verizon under FIRREA after FDIC became receiver.
- SARA contract governed Verizon’s performance for WaMu; JPMorgan Chase initially continued performance for nine months post-receivership.
- JPMC did not assume the SARA and later transferred the contract back to the FDIC, which repudiated it effective July 1, 2009.
- Verizon claimed various direct compensatory damages for the repudiation, including credits, labor costs, and other out-of-pocket expenditures; severance and benefits costs were also alleged.
- FDIC moved for judgment on the pleadings under Rule 12(c); Count III (vendor costs) was conceded as non-recoverable, leaving Counts I and II for dispute.
- Court grants in part and denies in part the FDIC’s motion, allowing some Counts I elements to proceed while dismissing Count II and parts of Count I regarding certain deductions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loyalty credits are recoverable under FIRREA | Verizon seeks reliance-like recovery for pre-SARA credits | Credits tied to prior contract should not be recoverable | Partially recoverable potential; cannot dismiss entirely on pleadings |
| Whether service and other credits are recoverable | Credits were inducements for WaMu’s performance | Likely pre-existing obligations; may not be recoverable | Not dismissible on pleadings; factual development needed to determine recoverability |
| Whether labor costs and out-of-pocket expenses are recoverable | Costs incurred in reliance on SARA should be recoverable | Indirect damages; not recoverable under FIRREA | Recoverable only to restore pre-repudiation position; final two-and-a-half years barred |
| Whether financial concessions differ from credits and are recoverable | Concessions are akin to credits | Ambiguity; not stated distinctly | Dismiss Count I as to financial concessions that differ from credits |
| Whether the rates and charges provisions bar recovery of costs | WaMu paid for services; costs not barred | Offsets pre-repudiation payments; should bar recovery | Rates/charges do not bar recovery of all out-of-pocket costs; pre-repayment offsets may limit recovery |
Key Cases Cited
- Office & Prof'l Employees Int'l Union, Local 2 v. FDIC, 962 F.2d 63 (D.C. Cir. 1992) (de novo review; FIRREA damages framework)
- Nashville Lodging Co. v. Resolution Trust Corp., 59 F.3d 236 (D.C. Cir. 1995) (reliance damages recoverable under FIRREA; restitution warranted)
- ALLTEL Info. Svcs. v. FDIC, 194 F.3d 1036 (9th Cir. 1999) (limits on damages; no lost profits or liquidated damages under FIRREA)
- OPEIU II, 27 F.3d 598 (D.C. Cir. 1994) (severance and certain benefits may be recoverable as direct compensatory damages)
- DPJ Co. Ltd. Partnership v. FDIC, 30 F.3d 247 (1st Cir. 1994) (recovery of costs incurred to meet conditions for a line of credit under a repudiated commitment letter)