On June 17, 2015, Judge Rosemary Collyer of the U.S. District Court for the District of Columbia issued a decision in Deutsche Bank National Trust Company v. Federal Deposit Insurance Corporation, et al., which extensively cites Restatement Second of Contracts as a source for the federal common law of contracts.
The decision is a victory for J.P. Morgan Chase & Co., holding that J.P. Morgan is responsible for some, but not all, of the billions of dollars in liabilities previously held by Washington Mutual Bank, which J.P. Morgan acquired during the financial crisis.
The opinion states that “courts should look to the Restatement (Second) of Contracts when analyzing questions of federal common law,” and refers to precedent acknowledging that the principles found in that Restatement are those “from which we would be inclined to fashion a federal common-law rule since those principles represent the ‘prevailing view’ among the states.”
The court relied upon the standard found in Restatement Second of Contracts § 202 in concluding that the contract governing the WaMu acquisition is unambiguous, and only transfers certain of the disputed liabilities to J.P. Morgan. The opinion also cites § 206 of that Restatement, noting that, even if ambiguity had existed in the contract, it would have been construed against the drafter (the FDIC) rather than J.P. Morgan.