In the 1987 case Langley et ux. v. Federal Deposit Insurance Corporation, the Supreme Court ruled that a federal statute allowing banking regulators to repudiate fraudulent contracts applied even if the fraud was not initially apparent to regulators. The Langleys had purchased property with a loan from a bank later taken over by FDIC due to insolvency. When they defaulted on their loan, FDIC sought foreclosure but the Langleys argued that misrepresentations about the property constituted fraud and thus voided their obligation under federal law which allows banking authorities to disavow or repudiate any contract made in connection with fraudulent activity affecting an insolvent institution's assets. However, this argument hinged on whether "fraud" included only deceptions known at time of regulatory takeover or also those discovered later. The court held for FDIC, ruling that such statutory power extended beyond just known instances of fraud at time of receivership; it could include subsequently discovered cases too as long as they affected asset value when authority took over management duties from failed banks' officers and directors.

In the dissenting opinion for Langley v. Federal Deposit Insurance Corporation, Justice O'Connor argued that the majority's decision expanded the scope of federal common law in a way that was not warranted by precedent or policy considerations. She contended that there was no need to create a broad rule of federal common law when state contract laws were already capable of addressing issues related to misrepresentation and fraud. Furthermore, she disagreed with the majority's interpretation of Section 1823(e) of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), arguing it should be read more narrowly so as not to preempt state contract laws unless explicitly stated otherwise by Congress. In her view, this would better respect principles of federalism and avoid unnecessary interference with established areas of state regulation.