In another case stemming from the Wall Street meltdown, a
federal judge in July found that the government's emergency economic legislation voided Citigroup's federally assisted $2.16 billion agreement to take over failing Wachovia Corp. Wells Fargo & Co. ultimately acquired the bank for $12.7 billion without FDIC assistance.
Citigroup sought damages of as much as $60 billion in the failed takeover, but Judge Shira A. Scheindlin found in Wachovia Corp. v. Citigroup Inc. that the Emergency Economic Stabilization Act, signed into law Oct. 3, 2008, rendered the initial exclusivity agreement unenforceable. That was the same day the Wells Fargo transaction was announced.
Scheindlin found that the bailout's provisions to mitigate "systemic risk" at the least possible cost meant that while the FDIC could support the Citigroup deal, it also could participate in a "broad range of actions necessary to rescuing Wachovia, including conducting a competitive sale of Wachovia."
Citigroup initially sued in state court to block the sale on claims of breach of contract and tortious interference. Although Citigroup dropped its attempt to stop the sale, it has continued to seek damages. The issues moved the case to federal court, but the matter of damages still is pending before the New York Supreme Court.