A federal judge in Missouri yesterday dismissed a lawsuit brought by two mutual bank depositors seeking a windfall payout of their bank’s accumulated capital when it merged into another institution. In a friend-of-the-court brief, the American Bankers Association and the Missouri Bankers Association urged the court to reject the plaintiffs’ claims, arguing that they had no enforceable ownership interest in the bank.
The court concluded that mutual savings association depositors have “no specific individual equity interest in the association” and thus have no ownership right to its accumulated capital or retained earnings — nor any right to vote on a merger — that can give rise to a claim of breach of fiduciary duty. The court also found that the plaintiffs suffered no damages. It also rejected the plaintiffs’ claim that the surviving bank unjustly enriched itself.
In their brief, ABA and MBA had argued that if plaintiffs are allowed to raid a mutual bank’s capital, then the bank will be placed in an untenable position with the financial regulators who determine whether the bank is safe and sound and bank depositors sweeping capital out of the bank. In other words, had the plaintiffs prevailed, the precedent would have threatened mutual banks’ economic viability. For more information, contact ABA’s Dawn Causey or Andrew Doersam.