Another twist in PSFS lawsuit
An appeals court overturned its own ruling. Now, feds and shareholders in the thrift, long defunct, must refile.
Shareholders of the Philadelphia Saving Fund Society, whose PSFS logo still looms over Center City, though the bank died 17 years ago, yesterday lost a round in a long and contentious lawsuit against the federal government.
The U.S. Court of Appeals for the Federal Circuit in Washington threw out its own September opinion that awarded the shareholders millions of dollars in damages after broken promises by federal regulators led to the 1992 seizure of PSFS's parent company, Meritor Savings Bank.
Last year's ruling said shareholders should get $268 million, a reduction from the $371 million first awarded by a lower court.
That court said in 2006 that the government had reneged on a 1982 promise of special accounting treatment to induce Meritor to acquire a struggling rival, Western Savings Fund Society. Western was Philadelphia's second-largest savings and loan, after PSFS.
The appeals court said yesterday that the government's appeal of the 2006 ruling was reinstated and that the two sides must file new arguments, with a hearing on them to be scheduled.
PSFS was founded in 1816. The first savings-and-loan in America, it thrived and grew, becoming familiar as the bank where children started their first savings accounts, where newlyweds went for their first mortgages.
But the Western takeover April 3, 1982, and accounting-rule changes led to Meritor's seizure 10 years later.
In its September ruling, the appeals court had upheld the award of lost value while overturning restitution and "wounded-bank" damages.
An attorney for the shareholders didn't immediately return a call yesterday seeking comment on the latest twist.
The case is one of dozens of lawsuits that center on promises regulators made to encourage takeovers during the savings-and-loan crisis of the 1980s and early 1990s. Plaintiffs in the suits say healthy banks were forced by the Federal Deposit Insurance Corp. to acquire troubled institutions to spare regulators from having to pay off federally insured depositors.
The Supreme Court ruled in 1996 that the U.S. government was liable in at least some cases that focused on a 1989 law that forced accounting changes at thrifts.
Meritor's seizure was the largest ever of a U.S. savings bank.
Meritor shares, which are traded over-the-counter, fell 43 cents, or 15 percent, to close at $2.46 in trading yesterday.