The American Bankers Association and Washington Federal yesterday filed a motion for summary judgment in their class action lawsuit seeking over $1.1 billion in damages resulting from the United States’ improper reduction in dividends paid to Federal Reserve member banks. The cut to the long-established dividend contract was part of the 2015 highway spending bill, which reduced the annual dividend for Fed member banks with more than $10 billion in assets by two-thirds.
In yesterday’s motion, ABA and Washington Federal asked the U.S. Court of Federal Claims to enter judgment for Washington Federal on its contract claims. Specifically, the Seattle-based bank asked the court to find that it had entered into a contract with the United States when it subscribed to Federal Reserve Bank stock and that the United States breached this contract by paying a dividend of approximately 2 percent in 2016.
Washington Federal alternatively asked the court to find that the government breached its implied covenant of good faith and fair dealing by depriving Washington Federal of its expected 6 percent dividend under the contract. Finally, ABA and Washington Federal asked the court to deny the previously filed U.S. motion to dismiss and for partial summary judgment.
In February, ABA and Washington Federal sued in the Court of Federal Claims, seeking to reimburse banks for improper reductions of the dividend payment. The complaint asserted breach of contract and taking of private property without just compensation in violation of the Fifth Amendment to the Constitution. In 2016, banks lost $1.1 billion to the taking, an amount estimated to balloon to $17 billion over 10 years. For more information, contact ABA’s Tom Pinder.