John S. Decker, P.C.

The Federal Deposit Insurance Corp. has accused Capital One of trying to "turn back time" by retroactively distributing $56 billion and claiming it was erroneously included in the FDIC's fee calculations, in order to dodge roughly $99 million in special assessments tied to the 2023 regional bank crisis. On Monday, the FDIC filed counterclaims and an answer to Capital One's complaint, saying "there are no time machines when it comes to special assessments." Capital One sued the FDIC in September, challenging a $149 million charge in a special assessment levied by the agency as part of an effort to recoup losses from the 2023 regional banking crisis. The industrywide assessment at issue was intended to help the FDIC cover losses from the March 2023 failures of Silicon Valley Bank and Signature Bank, when the government committed to backstopping even their uninsured depositors to avert a deeper panic. The assessment has charged banks individually based on their reported levels of uninsured deposits at the end of 2022, before the crisis hit. Capital One claims that it does not owe nearly a third of the $475 million special assessment the FDIC ordered it to pay, and that the agency improperly included as an uninsured deposit a roughly $56 billion intercompany position between Capital One and one of its wholly owned subsidiaries, Capital One Funding, and another $189 million intercompany position between the bank and another subsidiary, Capital One Auto Receivables. Capital One says the intercompany positions should not have been included in the calculation because they do not meet the statutory definition of "deposit" under the Federal Deposit Insurance Act and were not reflected in the bank's reported levels of uninsured deposits at the end of 2022. The bank claims it has demonstrated to the FDIC "in a series of communications" that the intercompany positions were wrongly included and that the $475 million invoice is incorrect. The FDIC pushed back Monday, alleging that after it published its notice of proposed rulemaking announcing that it would recover the losses sustained by the 2023 banking failure through special assessments in May 2023, Capital One concluded that it would be ordered to pay a hefty amount based on the amount of uninsured deposits it had reported for 2022. The bank then tried to avoid the forthcoming special assessment by declaring, in June 2023, a distribution of "nearly all" of the $56 billion deposit and retroactively dating it, according to the FDIC. "Needless to say, a distribution that occurred in June 2023 would do nothing to reduce the amount of uninsured deposits reported on Capital One's 2022 call report unless Capital One somehow were able to turn back time. And that is precisely what Capital One claims to have done," the filing states. "When it declared the distribution on June 23, 2023, Capital One also claimed that it was retroactive with an 'effective date' of Oct. 1, 2022." According to the FDIC, Capital One removed the $56 billion deposit from its 2022 report and claimed it was no longer a "deposit," even though relevant agreements previously identified the account holding the funds as FDIC-insured. "Capital One claims that its subsidiary went back in time more than half a year and retroactively distributed most of those funds to Capital One so ... they no longer existed in the account on the relevant date for the special assessment," the filing states. "Capital One also now claims that the funds were never 'deposits' as that term is defined in the Federal Deposit Insurance Act. These arguments are simply wrong." Capital One over the summer disclosed the assessment dispute to investors but did not have an exact figure of the alleged overage. According to the complaint, the dispute is currently at an impasse and therefore requires adjudication. Capital One seeks declaratory judgment that the FDIC erroneously included the intercompany positions in its special assessment calculation, while the FDIC seeks a final judgment declaring that Capital One underpaid for its FDIC deposit insurance and violated the obligations of the special assessment rule. The FDIC expects to recoup more than $19 billion through the special assessment, which began last year and is projected to continue into next year. Banks are paying the assessment in installments on top of the regular premiums they pay for deposit insurance. Representatives for the parties did not immediately respond to requests for comment Tuesday. Capital One is represented by John S. Moran, Bryan A. Fratkin and Juliet B. Clark of McGuireWoods LLP and John Gleeson, Helen V. Cantwell and Elliot Greenfield of Debevoise & Plimpton LLP. The FDIC is represented by its own Sarah E. Paulson, Andrew A. Nicely and Jason Benton. The case is Capital One NA v. Federal Deposit Insurance Corp., case number 1:25-cv-01515, in the U.S. District Court for the Eastern District of Virginia.

Nov 18

4 min

A fundraising and political consultant on Wednesday lost an appeal to quash criminal charges related to an alleged "dark money scheme" to obscure the backers of a Michigan ballot campaign. Heather Lombardini had appealed an Ingham County Circuit Court judge's rejection of a motion to quash the charges, arguing there was insufficient evidence for the charges and that they are "inextricably linked" to campaign finance, yet were not brought under Michigan's campaign finance law in spite of that law's exclusivity clause. In a one-paragraph order, a Michigan Court of Appeals panel rejected the appeal. The co-founder of Bright Spark Strategies, a Lansing, Michigan, consulting firm, Lombardini was charged in February 2024 and bound over later that year on two felony charges, one count of uttering and publishing and one count of forgery, while three counts of campaign finance violations were dismissed. The Michigan attorney general's office has accused Lombardini of participating in what the office has labeled a "dark money scheme" to conceal the identities of donors funding a ballot proposal campaign by funneling their contributions through nonprofit organizations. The campaign, dubbed Unlock Michigan, sought to limit the governor's emergency powers to respond to the COVID-19 pandemic. According to state investigators, supporters of the Unlock Michigan campaign were directed to donate to nonprofit organizations Michigan Citizens for Fiscal Responsibility and Michigan! My Michigan!, which each contributed funds to the Unlock Michigan campaign. Lombardini was listed as the president of MCFR and treasurer of MMM in their organizational statements. The nonprofit organizations did not have to disclose the names of their donors, unlike political campaigns, enabling Unlock Michigan supporters to keep their identities hidden. Lombardini's charges relate to a statement attributed to her in an affidavit submitted in response to a campaign finance complaint. In the affidavit, Lombardini denied that MCFR solicited or received contributions for Unlock Michigan. In her appeal, Lombardini argued the attorney general was improperly twisting a campaign finance case into a forgery prosecution to avoid running into expired criminal enforcement deadlines under the Michigan Campaign Finance Act. But that legislation is the exclusive enforcement mechanism for campaign finance activities, Lombardini argued, and any enforcement under the act is "untimely — by a longshot." "The statute imposes strict timelines for both the secretary of state to refer a matter to the AG for criminal enforcement (90 business days), and for the attorney general to then decide whether to proceed with criminal enforcement (60 business days)," Lombardini said. "Here, the secretary of state made her referral months late, and then the attorney general waited another year and a half to file charges — more than 400 business days after the statutory deadline." Lombardini initially faced three misdemeanor campaign finance violation counts as well, but a district court judge dismissed the counts as time-barred in 2024, citing the MCFA deadlines. According to Ingham County Circuit Court records, Lombardini's jury trial is set to begin Jan. 27 in front of Judge Wanda M. Stokes. Another fundraising consultant, Sandra Baxter, was accused of lying to state investigators about the extent of her role fundraising for Unlock Michigan. Baxter was initially charged with perjury, but pled guilty to the lesser charge of making a false statement, a misdemeanor. She was sentenced in August to three months of probation, community service and a $2,500 fine, according to the Michigan attorney general's office. Lawyers for the parties did not immediately respond to requests for comment. Judges Allie Greenleaf Maldonado, Michelle M. Rick and Matthew S. Ackerman sat on the panel for the Court of Appeals. The state is represented by Kahla D. Crino, John S. Pallas and Autumn A. Wilmot of the Department of Attorney General. Lombardini is represented by Paul D. Hudson, Thomas W. Cranmer and Gerald J. Gleeson of Miller Canfield Paddock & Stone PLC. The case is People of Michigan v. Heather Lombardini, case number 376801, in the Michigan Court of Appeals.

Nov 13

3 min

Enhanced US LLC, a sporting event organizer that lets athletes use performance-enhancing drugs, failed to plausibly allege that World Aquatics and others broke antitrust laws by conspiring to thwart its competitions, a New York federal judge said Monday. Enhanced had argued World Aquatics, along with USA Swimming Inc. and the World Anti-Doping Agency, used their powers over elite swimming competitions, swimmers and other professionals to unlawfully stymie its attempts to hold competitions featuring top athletes who don't use performance-enhancing drugs along with athletes who do in an inaugural Enhanced Games next year in Las Vegas. The complaint, filed in August, sought a preliminary injunction and hundreds of millions of dollars in damages, but stumbled and fell out of the gate Monday as U.S. District Judge Jesse M. Furman found all its claims deficient and granted bids to have it dismissed. The judge gave Enhanced, which is backed by private investors and has plans to offer swimmers prize purses of up to $500,000, as well as bonuses of up to $1 million for broken world records, up to 30 days to amend its complaint. Enhanced took particular aim at a bylaw that World Aquatics, an international governing body for aquatic sports, put forward in June. The judge said the bylaw barred people from participating in World Aquatics events and competitions if they support or participate in sporting events embracing certain "scientific enhancements." While Enhanced argued the bylaw was an unlawful bid to block athletes and others from participating in its events, the judge noted that the bylaw clearly left national member federations such as USA Swimming free to apply the policy or not. "Enhanced asks the court to accept its allegation that USA Swimming is automatically bound by By-Law10 despite the plain text of the By-Law stating precisely the opposite and Enhanced's own acknowledgment that USA Swimming has not adopted such a policy. But the court cannot make that inference when Enhanced has not pleaded any factual basis to make that claim facially possible," Judge Furman said. Comments the World Anti-Doping Agency, or WADA, made supporting the bylaw and condemning the Enhanced Games, warning that athletes and support staff who participate in events promoting the use of performance-enhancing drugs could run afoul of anti-doping rule violations, should hardly come as a surprise, according to the judge, and do not signify its participation in a conspiracy to boycott the company. "Indeed, Enhanced does not attempt to explain how WADA's statements would be contrary to its 'economic self-interest' in perpetuating clean sport and alleges no facts indicating any degree of communication between WADA, World Aquatics or USA Swimming," Judge Furman said in the 33-page decision. "The public calls by WADA to other organizations to 'come together' to condemn Enhanced are far more plausibly explained by WADA's relative powerlessness and inability to take concrete action against athletes than evidence of its entry into a conspiracy with either or both of World Aquatics and USA Swimming," the judge added. According to the judge, Enhanced also failed to plausibly allege that World Aquatics holds or has attempted to secure monopsony power — a situation where a single buyer dominates the market — over the labor market for elite swimmers. "Enhanced's assertion that World Aquatics is the 'sole purchaser' of the services of elite swimmers and holds a '100% share' of that market is fatally undermined by its concession that World Aquatics does not host 100% of the competitions within the relevant market," Judge Furman said. "Nor does Enhanced allege any facts that could support an inference that World Aquatics somehow dictates the compensation paid to elite swimmers in the elite international swimming competitions it does not hold," the judge added. Enhanced did not immediately respond to a request for comment on Tuesday. James Fitzgerald, a spokesperson for WADA, said that it welcomed the court's decision. "WADA is pleased that common sense has prevailed and remains focused on its core mission of protecting clean sport for the good of athletes around the world," Fitzgerald said in a statement to Law360 on Tuesday. Representatives for the other parties did not immediately respond to requests for comment. Enhanced is represented by Christopher R. Brennan, Evan T. Barr, Nicole Kaplan, Pamela L. Schoenberg and Edward B. Schwartz of Reed Smith LLP. World Aquatics is represented by Arthur J. Burke, Greg D. Andres, Mari Grace and Ryan W. Cooke of Davis Polk & Wardwell LLP. USA Swimming Inc. is represented by Karen M. Lent, Evan H. Levicoff, Matthew M. Martino and Michael H. Menitove of Skadden Arps Slate Meagher & Flom LLP. World Anti-Doping Agency is represented by Jonathan M. Sperling, John S. Playforth and Derek Ludwin of Covington & Burling LLP. The case is Enhanced US LLC v. World Aquatics et al., case number 1:25-cv-07096, in the U.S. District Court for the Southern District of New York.

Nov 18

4 min

A Teamsters pension fund is urging the Delaware bankruptcy court to reject Yellow Corp.'s liquidation plan, arguing the trucking company is reserving potential arguments against the fund's $17.8 million claim that have already been resolved and discharged. In an objection filed Wednesday, Local 705 International Brotherhood of Teamsters Pension Fund told the court that Yellow had said it was not pursuing an argument that the fund's claim against the company was subordinated, and therefore should not be allowed to reserve the right to pursue that position in its plan. Yellow filed for bankruptcy in 2023 with $1.5 billion in debt, amid a highly contentious dispute with the Teamsters, which represents roughly 22,000 of the company's 30,000 workers. A Delaware bankruptcy judge approved the debtor's latest disclosure statement in September 2025, allowing it to solicit votes on the Chapter 11 liquidation plan. In its filing, the pension challenged the plan's reservation of the right to assert that the $17.8 million the fund alleged it is owed due to Yellow's withdrawal from its pension plan are subordinated to other unsecured claims in the case. The fund contended that the company had "ample" opportunity to raise this argument during its objection to the fund's claims in the bankruptcy. The court has ruled on the objection, and therefore Yellow is barred from raising that argument in the future, the pension said. It also alleged during discovery on the claim dispute in 2024 that Yellow stated it was only disputing whether the fund claim should be discounted to the present value of its pension plan contributions. The fund stopped taking discovery on other potential claim objections as a result, and Yellow should not be allowed to pursue those objections, it said. Counsel for the fund and the debtor did not immediately respond to requests for comment Thursday. The Teamsters fund is represented by William D. Sullivan and William A. Hazeltine of Sullivan Hazeltine Allinson LLC, Stephen J. Rosenblat of Baum Sigman Auerbach & Newman Ltd. and John S. Delnero of Pedersen & Houpt. The debtors are represented by Laura Davis Jones, Timothy P. Cairns, Peter J. Keane and Edward Corma of Pachulski Stang Ziehl & Jones LLP, and Patrick J. Nash Jr., Shirley Chan and Allyson B. Smith of Kirkland & Ellis LLP. The case is In re: Yellow Corp., case number 1:23-bk-11069, in the U.S. Bankruptcy Court for the District of Delaware.

Oct 30

2 min

In an ongoing dispute over a $14 million Securities and Exchange Commission whistleblower award, a federal judge in Pennsylvania has denied attempts to transfer a related defamation suit to New York federal court after concluding that the plaintiff's choice of venue was "paramount." Last week, U.S. District Judge Michael M. Baylson of the Eastern District of Pennsylvania denied defendant Kevin Barnes' motion to transfer well-known activist short seller Carson Block's defamation suit to the U.S. District Court for the Southern District of New York. The suit accuses Barnes, a former business associate of Block's, of making various defamatory comments to media outlets regarding Block's alleged unwillingness to share a $14 million whistleblower award he received after his company, Muddy Waters, investigated a Chinese company. Barnes moved to transfer the case to the Southern District of New York, where his related breach of partnership action against Block and Muddy Waters is pending. Barnes argued the cases were substantially similar and that the action should be transferred to New York. Block countered that traditional "private interest" factors under the change of venue statute weighed against transfer. The court agreed with Block, shooting down Barnes' argument after concluding the cases weren't "truly duplicative" of each other. "On balance, the private interest factors weigh against transfer because plaintiff's choice of forum is paramount, and the remaining factors do not overcome this assumption," Baylson said. The case, Block v. Barnes, comes after Barnes became involved with Block's company, Muddy Waters, which "prepares freely available reports that expose fraud, financial inaccuracies, and other forms of corporate malfeasance, primarily focusing on China-based companies listed on North American stock exchanges." In 2011, Barnes sought to assist Muddy Waters on an investigation into Focus Media, a Chinese digital media and advertising company. The parties entered into an independent-contractor agreement that said that Barnes wasn't an employee, Baylson said. According to Block, Barnes played a minor role in the investigation as one of six onsite investigators. In 2015, Focus Media was fined $55.6 million by the SEC after the agency had investigated the same misconduct that Muddy Waters' reports exposed. Following the fine, Block prepared an SEC whistleblower award. He alleged that Barnes reached out and offered to "quarterback" a submission on behalf of Muddy Waters. Block claimed he declined Barnes's offer, but that Barnes still submitted his own whistleblower application. In 2022, the SEC awarded Block $14 million for his efforts, while denying Barnes' competing application. Following the award, Barnes sued Block and Muddy Waters in the Supreme Court of the State of New York for breach of partnership, unjust enrichment, and constructive trust. Block and Muddy Waters removed the action to the Southern District of New York, where it is still pending. Block alleged that Barnes and his counsel repeatedly contacted him demanding money, and engaged in a campaign to defame him, using various media outlets to accuse him of withholding profits the parties had agreed to share. Block initially filed a defamation suit in the U.S. District Court for the Western District of Texas in August 2022, where he resides. That suit was dismissed in July 2023 for lack of personal jurisdiction, and Block filed the present suit in June 2023. Barnes moved to transfer in September 2023, which Block opposed, claiming that Barnes lives near Philadelphia, that neither of them lives in New York, and that the location of witnesses and documents, as well as the convenience of parties, favors Philadelphia. The court sided with Block, concluding that various private interest factors, including the plaintiff's choice of venue, weighed against the transfer. "Here, Block had a legitimate, rational reason to file outside of his 'home turf' because the Western District of Texas did not have personal jurisdiction over Barnes," Baylson said. "Thus, Barnes's burden is not lessened, and Block's choice of forum remains the paramount consideration." John S. Summers of Hangley Aronchick Segal & Pudlin, in Philadelphia, represented Block. Arlene Fickler of Dilworth Paxson, in Philadelphia, represented Barnes. Neither immediately responded to requests for comment.

Dec 1

3 min