James C. Morris v. Branch Banking and Trust Company

The federal-common-law D’Oench doctrine, created and expanded by D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447 (1942), and its progeny, generally provides the Federal Deposit Insurance Corporation (the “FDIC”), as the receiver of a failed bank, as well as the FDIC’s successors-in-interest, added protections against unrecorded agreements that might form the basis of a claim or defense relating to banks that have been declared insolvent. Similarly, another product of federal common law related to the D’Oench doctrine, the so-called federalholder-in-due-course doctrine, purports to insulate the FDIC and its assignees from defenses asserted by borrowers in actions to collect on the failed bank’s negotiable instruments and similar documents evidencing indebtedness. There is a broad and well-recognized circuit split over whether these federal-common-law doctrines are viable in light of this Court’s decisions in O’Melveny & Myers v. FDIC, 512 U.S. 79 (1994), and Atherton v. FDIC, 519 U.S. 213 (1997). Indeed, this Court previously granted certiorari on the same question, but the matter was settled before it came on for hearing. Murphy v. Beck, 530 U.S. 1306 (2000), cert. dismissed, 531 U.S. 1107 (2001). The question presented in this case is: Whether the federal common-law D’Oench and federal-holder-in-due-course doctrines continue to protect the FDIC and its assignees from claims or defenses of customers of the failed financial institution?