March 21 (Bloomberg) -- Meritor Savings Bank current shareholders are the proper recipients of $276 million from the Federal Deposit Insurance Corp. over broken promises that led to the company’s 1992 seizure, a U.S. appeals court ruled today.
Former shareholder Steven Roth and Interstate Properties argued that owners of Meritor shares at the time it failed should be given a share of the money. The U.S. Court of Appeals for the Federal Circuit in Washington posted the opinion on its website.
Meritor, formerly Philadelphia Savings Fund Society, claimed the government reneged on special accounting treatment after the FDIC in 1982 asked the company to take over the failing Western Savings Fund Society. Meritor was seized a decade later after struggling to absorb Western’s bad loans.
Roth sold his shares after the bank’s failure and said were he not given a share of the $276 million, it would “lead to a bizarre outcome in which the shareholders of Meritor who were injured by the government receive no compensation, while post-seizure speculators who were never injured are compensated,” according to the three-judge panel’s opinion.
“Roth easily could have avoided this ‘bizarre outcome’ if he had simply held onto his shares,” the court ruled.
The case is Slattery v. U.S. 12-5041, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Slattery v. USA, 93cv280, U.S. Court of Federal Claims.
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