FDIC Receiver Must Arbitrate Audit Negligence Claims Against EY

The Federal Deposit Insurance Corporation, as receiver for First NBC Bank, must arbitrate claims that Ernst & Young LLP negligently audited the bank and failed to discover fraud by its CEO, a federal court said.

Since the FDIC-R isn’t bringing an enforcement claim in its corporate capacity, but rather a claim that belonged to the bank that now belongs to it, the court can compel arbitration based on an agreement between EY and the bank’s holding company, the US District Court for the Eastern District of Louisiana said on Tuesday.

“The Bank would have been bound to the agreement between ...