D'Oench, Duhme Doctrine




The D'Oench, Duhme doctrine was first articulated by the Supreme Court in D'Oench,

Duhme & Co. v. FDIC, 315 U.S. 447 (1942), holding that a person who had agreed to execute

unconditional notes to a bank on the basis of a secret side agreement that the bank would not call

the notes for payment could not rely upon the secret agreement as a defense to payment of the

notes to the bank, for which the FDIC had since been appointed receiver. The D'Oench, Duhme

doctrine was expanded beyond this initial paradigm to bar a wide variety of both claims made and

defenses raised against the FDIC as receiver. In addition, in 1989, as part of the Financial

Institutions Reform, Recovery, and Enforcement Act (FIRREA), Congress passed its own

version of the D'Oench, Duhme doctrine, which bars any claim that (1) is based upon an

agreement that is either unwritten or, if written, does not meet the stringent requirements of the

statute, and (2) would diminish or defeat the interest of the FDIC in an asset acquired by it as

receiver of a failed depository institution. 12 U.S.C. 1823(e).

For several years after the passage of FIRREA, courts continued to apply the common-

law D'Oench, Duhme doctrine in a way that was more expansive than what Congress provided

for in 1823(e). However, in Murphy v. FDIC, 61 F.3d 34 (D.C. Cir. 1995), the District of

Columbia Circuit Court of Appeals held, based on the Supreme Court's opinion in O'Melveny &

Myers v. FDIC, 114 S. Ct. 2048 (1994), that the D'Oench, Duhme doctrine was preempted by

the passage of 1823(e) in 1989. Thus, according to the D.C. Circuit, D'Oench, Duhme can no

longer serve as a separate bar to claims that otherwise would not be barred by 1823(e).

Without addressing the preemption issue, the First Circuit recently held that neither the

D'Oench, Duhme doctrine nor 1823(e) bars an action against the FDIC as receiver for a failed

bank for the bank's sale of unregistered securities in violation of state law. Adams v. Zimmerman,

64 U.S.L.W. 2465 (1st Cir. Jan. 19, 1996). The court reasoned that while D'Oench, Duhme and

1823(e) are expansive in scope, they only protect the FDIC from claims or defenses based upon

an agreement or arrangement. Since the claim in Adams was not based upon such an agreement,

neither D'Oench, Duhme nor 1823(e) would bar the plaintiff's claims.

Taken together, the decisions in Murphy and Adams may signal a new willingness on the

part of courts to restrict the previously boundless outer limits of the D'Oench, Duhme doctrine

and 1823.