[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 648 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 648

To clarify treatment of certain claims and defenses against an insured 
   depository institution under receivership by the Federal Deposit 
             Insurance Corporation, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

               March 30 (legislative day, March 27), 1995

 Mr. Cohen (for himself, Mr. D'Amato, Mr. Bennett, and Mr. Faircloth) 
introduced the following bill; which was read twice and referred to the 
            Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To clarify treatment of certain claims and defenses against an insured 
   depository institution under receivership by the Federal Deposit 
             Insurance Corporation, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``D'Oench Duhme Reform Act''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) in D'Oench Duhme & Co. v. Federal Deposit Insurance 
        Corporation, 315 U.S. 447 (1942), the Supreme Court determined 
        that secret side agreements that were not recorded in the 
        records of an insured depository institution should not be 
        enforceable against Federal banking agencies when those 
        agencies acquired assets following the failure of the 
        institution;
            (2) the Supreme Court based its holding (hereafter in this 
        section referred to as the ``D'Oench doctrine'') on its power 
        to develop Federal common law;
            (3) in 1950, the Congress supplemented the D'Oench doctrine 
        by amending section 13(e) of the Federal Deposit Insurance Act 
        to invalidate agreements relating to assets acquired by Federal 
        banking agencies that were not recorded in official depository 
        institution records;
            (4) Federal and State courts have expanded the scope of the 
        D'Oench doctrine and section 13(e) of the Federal Deposit 
        Insurance Act by interpreting them to bar tort claims based on 
        oral representations, claims that do not relate to assets 
        acquired by Federal banking agencies, and numerous other claims 
        and defenses beyond the original scope and intent of those two 
        lines of authority;
            (5) the Federal banking agencies' aggressive use of the 
        D'Oench doctrine and section 13(e) of the Federal Deposit 
        Insurance Act in the administrative claims process and 
        litigation, combined with the expansive interpretation of those 
        authorities by the Supreme Court, have led to fundamentally 
        unfair results; and
            (6) many individuals have been barred from asserting 
        potentially valid claims and defenses once an insured 
        depository institution has been declared insolvent and taken 
        over by a Federal banking agency.
    (b) Purposes.--The purposes of this Act are--
            (1) to unify the lines of authority developed under the 
        Federal common law and referred to in subsection (a) and 
        section 13(e) of the Federal Deposit Insurance Act, so that all 
        cases relating to agreements against the interest of the 
        Federal Deposit Insurance Corporation are decided pursuant to 
        Federal statutory law; and
            (2) to return the D'Oench doctrine to its original purpose 
        by continuing to bar the enforcement of unrecorded agreements, 
        but allowing certain potentially valid intentional tort and 
        other claims and defenses to be adjudicated on their merits.

SEC. 3. CLARIFICATION.

    Section 13(e) of the Federal Deposit Insurance Act (12 U.S.C. 
1823(e)) is amended to read as follows:
    ``(e) Agreements Against Interests of the Corporation.--
            ``(1) In general.--No agreement which tends to diminish or 
        defeat the interest of the Corporation in any asset acquired by 
        the Corporation under this section or under section 11, by 
        purchase or assumption, or in its capacity as receiver of any 
        insured depository institution, shall be enforceable against 
        the Corporation unless that agreement is in writing and was 
        executed in the ordinary course of business by an insured 
        depository institution through an officer or other employee or 
        representative of the institution having the authority to 
        execute such an agreement on behalf of the institution.
            ``(2) Claims against the corporation.--Notwithstanding 
        paragraph (1), no court may bar, estop, or otherwise prohibit 
        the adjudication against the Corporation, in its corporate 
        capacity and as receiver of an insured depository institution, 
        of--
                    ``(A) a claim or defense that does not relate to 
                specific assets acquired by the Corporation;
                    ``(B) a claim or defense that does relate to 
                transactions that would not, in the normal course of 
                business, be reflected in the transaction records of 
                the institution;
                    ``(C) a claim or defense in litigation commenced 
                before the date of the appointment of the Corporation 
                as receiver or conservator for the insured depository 
                institution;
                    ``(D) a claim or defense, filed at any time, based 
                on alleged intentional torts or alleged violation of 
                State or Federal law, if--
                            ``(i) the party asserting the claim or 
                        defense demonstrates that the party did not--
                                    ``(I) participate in a scheme to 
                                defraud the subject insured depository 
                                institution; or
                                    ``(II) knowingly lend itself to a 
                                scheme to mislead bank examiners by 
                                misrepresenting the value of the assets 
                                of the institution; and
                            ``(ii) any oral representations relied upon 
                        are not in conflict with a written agreement 
                        contained in the records of the institution.
            ``(3) Status as holder in due course.--Except as otherwise 
        provided in paragraph (1), any other provision of Federal 
        statutory law, or applicable State law, the Corporation may not 
        defeat a claim related to an asset by demonstrating that the 
        asset was acquired in good faith, for value, and without actual 
        knowledge of the claim, unless the Corporation also 
        demonstrates that the asset was not acquired by the Corporation 
        upon its appointment as conservator or receiver or as part of a 
        purchase and assumption transaction.
            ``(4) Exception for vendor agreements.--Subsection (e)(1) 
        does not apply to an agreement for the sale or purchase of 
        goods or services actually received by or delivered to an 
        insured depository institution before the date of appointment 
        of a receiver for that institution.''.

SEC. 4. REPEAL.

    Section 11(d) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(d)) is amended--
            (1) by striking paragraph (9); and
            (2) by redesignating paragraphs (10) through (19) as 
        paragraphs (9) through (18), respectively.

SEC. 5. CONFORMING AMENDMENTS.

    Section 11 of the Federal Deposit Insurance Act (12 U.S.C. 1821) is 
amended--
            (1) in subsection (e)--
                    (A) in paragraph (8)(A), by striking ``subsection 
                (d)(9) of this section and'';
                    (B) in paragraph (8)(B), by striking ``(12)'' and 
                inserting ``(11)''; and
                    (C) in paragraph (8)(E), by striking ``subsection 
                (d)(9) of this section,''; and
            (2) in subsection (g)(4), by striking ``(d)(11)'' and 
        inserting ``(d)(10)''.

SEC. 6. APPLICABILITY.

    Section 13(e) of the Federal Deposit Insurance Act, as amended by 
this Act, shall apply to administrative claims brought or pending, and 
any litigation filed, in progress, or on appeal, on or after October 
19, 1993.
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