The United States Government has asked the U.S. Court of Federal Claims to dismiss the class-action lawsuit brought against it by the American Bankers Association and Washington Federal, N.A. Among other things, the bank’s and ABA’s complaint alleges that the Government breached contracts with Federal Reserve member banks by reducing dividends paid to those financial institutions. In response, the Government’s "Motion to Dismiss and Motion for Partial Summary Judgment," maintains that: the ABA and Washington Federal have not established the court’s jurisdiction over the case; there is no express or implied contract between Washington Federal and the Government, nor an entitlement, for payment of 6-percent dividends on Reserve Bank stock; and the complaint fails to state a claim for a "compensable taking" of any cognizable property right in a specified dividend rate.
As previously reported, the lawsuit by Washington Federal and the ABA stems from a 2015 law, Fixing America’s Surface Transportation (FAST) Act, which was intended to provide a longer-term solution to highway funding. To raise revenues for the highway funding, the FAST Act encroached upon decades-old practices at the Federal Reserve Board. One source of revenue reduces the dividend paid on Federal Reserve Bank stock to member banks, and the FAST Act and its implementing rule covering the dividend amount take into account the size of the bank (see Banking and Finance Law Daily, Feb. 9, 2017).
Complaint. In their complaint, the ABA and Washington Federal have contended that the fixed annual dividend of 6 percent on stock purchased in one of 12 regional Federal Reserve Banks "had been guaranteed to member bank stockholders since the Federal Reserve Act was enacted in 1913, and it is memorialized in contracts between the Federal Reserve Banks and their member bank stockholders." Moreover, they claim that the reduction in the dividend by the FAST Act and its implementing rule constitutes a "classic bait-and-switch" maneuver.
Government’s motion. The Government’s 72-page "Motion to Dismiss and Motion for Partial Summary Judgment," filed on April 7, 2017, contends that:
- the ABA lacks standing to assert any claims;
- the ABA and Washington Federal have not established the court’s subject matter jurisdiction;
- the Government has no contractual or statutory obligation to pay 6-percent dividends on Reserve Bank stock;
- there is no express or implied contract between Washington Federal and the Government;
- even assuming the existence of an express or implied contract, Washington Federal and the ABA have not established any breach because "the Government’s statements and conduct evidence only an intention to pay dividends at the statutory rate;"
- the Government has not breached any "implied duty of good faith and fair dealing" because the Government has no contractual obligation to pay 6-percent dividends; and
- the ABA and Washington Federal have failed to state a claim for a compensable taking of any cognizable property right in a specified dividend rate.
Companies: American Bankers Association; Washington Federal, N.A.
MainStory: TopStory BankingOperations FedCirNews FederalReserveSystem PrudentialRegulation SecuritiesDerivatives WashingtonNews
Interested in submitting an article?
Submit your information to us today!Learn More