Banking Law

A few weeks ago, when United Western Bancorp., on behalf of itself and its former subsidiary bank, sued the OTS for putting the bank into receivership, we said that the deck was stacked against the plaintiffs. We also said that the plaintiffs' first hurdle would be to survive a motion to dismiss and that we thought that the plaintiffs' counsel had done a decent job of crafting a complaint to achieve that purpose. The OTS thinks that the facts say otherwise.

On March 4, 2011, the OTS filed a Motion to Dismiss and alleged in an accompanying memorandum that the plaintiffs have failed to satisfy the basic jurisdictional hurdle that requires the failed bank, through its board of directors, to file a lawsuit seeking to challenge the receivership within thirty days of the appointment of the FDIC as receiver. The OTS alleges "on information and belief" that the bank's board of directors did not take necessary formal action to authorize the filing of the lawsuit by the bank, that such failure means that the court lacks subject matter jurisdiction to hear the claims contained in the complaint and, therefore, the complaint should be dismissed. This is the kind of technical defect that busy judges sometimes are inclined to use to kick the litigation to the curb before they have to worry about the merits.

We'll be waiting the counter arguments of the plaintiffs. The "information and belief" is based upon one of the attorneys for the OTS asking for the bank's board resolution and the plaintiff's counsel responding that since the OTS has been playing "hide the salami" with respect to documents the plaintiffs want to review, "we'll show you ours when you show us yours." From an educational standpoint, I hope this survives the motion to dismiss so we get a chance to look inside the mind of the OTS as to why it really took this bank down while a recapitalization effort was in the works.