David Williams v. Fdic

MEMORANDUM

The plaintiffs are a group of former employees of Washington Mutual (“WAMU”), a federal thrift institution that failed in 2008 and was seized by the Federal Deposit Insurance Corporation (“FDIC”) pursuant to 12 U.S.C. § 1464 (d)(2)(A). The plaintiffs seek to recover from the FDIC payments allegedly due them under a provision of their employment contracts and triggered by a change of ownership of the company. The controlling federal regulation, however, is 12 C.F.R. § 563.39 (b)(4). Under that regulation, when the FDIC takes over as receiver “all obligations under the [employment] contract shall terminate as of the date of default” except for any “vested rights of the contracting parties[.]” 12 C.F.R. § 563.39 (b)(4). For a right to vest, the employee must have had an enforceable right to a claim of immediate payment before the Office of Thrift Supervision (“OTS”) appointed the FDIC as receiver. Modzelewski v. RTC, 14 F.3d 1374, 1378-79 (9th Cir.1994).

WAMU failed on September 25, 2008 when the OTS declared that WAMU was in an “unsafe and unsound condition” and appointed the FDIC as receiver. The plaintiffs’ contractual rights terminated by operation of law on that…