California Court Does not allow Creditor of a Failed Bank to reach Collateral transferred by FDIC

Landlord (L) required Alliance Bank (T) to put up a standby letter of credit (SLC) as security for the lease. T obtained SLC from Union Bank by putting up $500K cash deposit. T failed and was turned over to FDIC for receivership. FDIC disaffirmed lease. L attempted to go after $500K held as pledge for SLC. Held: L may not seize collateral behind SLC, because that would interfere with FDIC's attempts to wind up a failed bank.
Contributor
Robin Mashal
Los Angeles, California
Commercial Litigation
(310) 286-2000

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I am a litigation lawyer, licensed to practice law in the State of California. You can reach me by phone at (310) 286-2000.