Commonwealth of Mass v. FDIC ( 1995 )

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
No. 94-1649
COMMONWEALTH OF MASSACHUSETTS,
Petitioner,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
Respondent.
ON PETITION FOR REVIEW OF AN ORDER OF
THE FEDERAL DEPOSIT INSURANCE CORPORATION
Before
Cyr and Boudin, Circuit Judges,
and Keeton,* District Judge.
Thomas O. Bean, Assistant Attorney General, with whom Scott
Harshbarger, Attorney General, was on brief for petitioner.
Edward J. O'Meara, Counsel, with whom Ann S. Duross, Assistant
General Counsel, and Richard J. Osterman, Jr., Senior Counsel, were on
brief for respondent.
February 8, 1995
*Of the District of Massachusetts, sitting by designation.
BOUDIN, Circuit Judge. In the years 1990 through 1992,
the Federal Deposit Insurance Corporation was appointed
receiver for over 30 banks principally located or doing
business in Massachusetts. Massachusetts has an abandoned
property statute, Mass. Gen. L. ch. 200A, that arguably gave
Massachusetts title under state law to certain of the insured
deposits in these banks, based on the failure of the named
depositors to communicate with their banks over an extended
period. Some of these potential claims had matured prior to
the banks' failure; others occurred during the receivership.
In March 1994, Massachusetts wrote to the FDIC naming
the banks and asserting that the Commonwealth owned the
abandoned deposits and that the FDIC was obligated to pay
deposit insurance benefits on those accounts to
Massachusetts. An FDIC attorney responded in April 1994 with
a two-paragraph letter to the Commonwealth's lawyer
reiterating the FDIC's position that the "Massachusetts
abandoned property law is preempted by federal law provisions
which dictate the disposition of unclaimed deposits."
Treating this letter as a dispositive determination,
Massachusetts in June 1994 filed a petition in this court
seeking review of the FDIC's action.
The underlying dispute raises important questions
including interpretation of a federal statute--the Unclaimed
Deposits Amendments Act of 1993--which became law in June
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1993. 107 Stat. 220. The FDIC position on the merits is
that federal law preempts the Massachusetts abandoned
property statute as to abandoned deposits held by the FDIC as
receiver. But the FDIC urges us not to reach the merits and
instead to dismiss for lack of subject matter jurisdiction.
We do not reach the merits because we agree with the
FDIC's threshold defense that direct review of the FDIC's
action in this court is not authorized by statute and that
the matter must be resolved in the first instance in the
district court. The jurisdictional issue turns, by general
agreement, on 12 U.S.C. 1821(f), whose third and fourth
paragraphs read as follows:
(3) Resolution of disputes
(A) Resolution in accordance to corporation regulations
In the case of any disputed claim relating to
any insured deposit or any determination of
insurance coverage with respect to any deposit, the
Corporation [the FDIC] may resolve such disputed
claim in accordance with regulations prescribed by
the Corporation establishing procedures for
resolving such claims.
(B) Adjudication of claims
If the Corporation has not prescribed
regulations establishing procedures for resolving
disputed claims, the Corporation may require the
final determination of a court of competent
jurisdiction before paying any such claim.
(4) Review of Corporation's determination
Final determination made by the Corporation
shall be reviewable in accordance with chapter 7 of
Title 5 by the United States Court of Appeals for
the District of Columbia or the court of appeals
for the Federal judicial circuit where the
principal place of business of the depository
institution is located.
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It is common ground that the FDIC has chosen not to
adopt "regulations . . . establishing procedures for
resolving such claims" to insured deposits or insurance
coverage. In these circumstances, the D.C. Circuit held that
direct court of appeals review under section 1821(f)(4) is
not available and that such a dispute must first be resolved
in a court of general jurisdiction, normally the federal
district court. See Callejo v. RTC, 17 F.3d 1497 (D.C. Cir.
1994). Massachusetts, in response, relies upon decisions of
the Second and Fifth Circuits that read section 1821(f)(4) to
permit immediate court of appeals review.1
Our issue is thus one on which very able judges in
different circuits have reached opposite results in
construing a rather brief set of statutory provisions. There
is certainly some looseness in the language of section
1821(f); but in the end we agree with the D.C. Circuit that
language and policy alike favor the FDIC's position. Since
two other circuits disagree, we think it fitting to explain
our reasoning briefly instead of relying solely on a
reference to the excellent discussion in Callejo.
1Kershaw v. RTC, 987 F.2d 1206 (5th Cir. 1993); Nimon v.
RTC, 975 F.2d 240 (5th Cir. 1992); Abrams v. FDIC, 938 F.2d
22 (2d Cir. 1991). The FDIC cites us to unpublished orders
of the Third and Fourth Circuits that appear to coincide with
Callejo's approach so Callejo may represent the "majority"
view.
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In enacting section 1821(f), Congress explicitly gave
the FDIC two ways to resolve disputes about insured deposits
and insurance coverage of deposits. First, the FDIC can
resolve the disputes itself by adopting regulations for
resolving such claims. Section 1821(f)(3)(A). If it does
so, then under section 1821(f)(4) the dissatisfied claimant
can obtain direct court of appeals review of the FDIC's
"final determination" pursuant to the Administrative
Procedure Act, 5 U.S.C. 701-06. Second, if "the
Corporation has not prescribed regulations" for resolving
such claims, the FDIC "may require the final determination of
a court of competent jurisdiction before resolving such
claims." Section 1821(f)(3)(B).
The phrase "court of competent jurisdiction" assuredly
refers to a federal district court or, absent exclusivity or
removal, a state trial court. The phrase is often used in
this manner, e.g., Watkins v. Green, 548 F.2d 1142, 1143 (4th
Cir. 1977) (construing 5 U.S.C. 703), and this usage is
plainly what is intended here. The reference occurs in a
section juxtaposed with one calling for direct review in the
court of appeals; and in context the provision assumes that
the court of competent jurisdiction will adjudicate factual
disputes when the FDIC has not established procedures for
doing so.
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Against this background, we think that in section
1821(f) Congress deliberately set forth two alternative
methods of resolving deposit and insurance claims, and made
the course to be followed depend on whether the FDIC has
established regulations for the adjudication of such claims.
If it has, the agency decides the factual disputes and there
is direct court of appeals review; if it has not, then the
agency's less formal resolution is subject to scrutiny in an
action brought in a trial court of competent jurisdiction,
which will normally be the federal district court.2
True, the statute's language is not airtight. The
direct route to the court of appeals is available, as the
statute phrases the matter, when there is a "[f]inal
determination" by the FDIC. In the abstract, the quoted
phrase could refer either to a determination made under FDIC
regulations as provided in section 1821(f)(3)(A) or could
include far less formal resolutions, such as the letter at
issue in this case. But, in context, the latter is surely a
less plausible reading of the words; and it becomes even less
plausible when history and function are considered.
2The district courts have original jurisdiction of such
actions without reference to amount in controversy, 12 U.S.C.
1819(b)(2)(A), and the FDIC would almost certainly remove
any such action brought in a state court. Id.
1819(b)(2)(B). Strictly speaking, section 1819(b)(2)(A) does
not confer jurisdiction; it simply recognizes that there are
courts of general jurisdiction able to entertain such claims.
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The tradition of judicial review of official action is
complex enough that few statements about it can be made
without qualification. Still, broadly speaking, two
different avenues for judicial review have existed in the
federal courts: one involves an original action in the
district court to enjoin unlawful official action, especially
where no other means is provided; the other, used with
increasing frequency where an agency has authority to resolve
factual disputes in the first instance, is to empower the
court of appeals to review the agency directly. See
generally Note, Jurisdiction to Review Federal Administrative
Action: District Court or Court of Appeals, 88 Harv. L. Rev.
980 (1975).
Because of the crisis out of which its present powers
have emerged, the FDIC and its companion, the Resolution
Trust Corporation, have enjoyed a succession of statutory
favors relating to their powers, procedures and limitations
on judicial intervention. As a part of this mosaic, it is
not at all surprising that Congress would empower the FDIC to
make the initial choice whether to adjudicate claims itself
or insist that this task be performed by the courts. In the
former case the FDIC would have to expend additional
resources but in return it would be more likely to enjoy a
greater degree of deference in its resolution of issues. 5
U.S.C. 706(2)(A), (E).
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Thus, in constructing section 1821(f) Congress has
simply borrowed from two different traditions of judicial
review, indeed, the two dominant traditions. It has
authorized one to be used if the agency configures its own
procedures to conform to the model of formal agency
adjudication; it has provided for the other to be used if the
agency chooses not to do so but, by some less formal means,
makes clear its unwillingness to pay. The puzzle fits
together quite neatly. Nor is it unprecedented for Congress
to deploy both methods for a single agency. See Note, supra,
88 Harv. L. Rev. at 981 & n.11.
The final reason for resolving any doubts in favor of
the D.C. Circuit's approach is functional. Under Callejo,
the court of appeals is the court of first instance where the
agency has in place a procedure to resolve any disputed
facts. Alternatively, the district court--which has the
capacity for making fact findings as a matter of course--is
the court of first instance where the agency has declined to
establish an adjudicatory procedure. This is not only a
rational plan, but one that corresponds exactly to the
bifurcation in the statutory language.
Of course, one could make the choice of judicial forum
turn on whether in a particular case there were factual
disputes still to be resolved. But this is a call that can
often be made only during the process of judicial review.
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Rules to determine which court has jurisdiction ought to be
clear and easily applied at the outset. In any event,
everything in the statutory language leans against ad hoc
choices: what matters under the statute is whether the FDIC
has adopted (and presumablyused) regulations foradjudication.
In our own case it would probably be more efficient to
resolve the merits in this court at once, because the merits
issues appear to be entirely legal. But we are dealing with
a jurisdictional statute adopted by Congress and intended to
be observed uniformly. On a more practical level, experience
teaches that in the end, a clear and simple schema for
judicial review saves time for everyone. If this case had
begun in the district court, we might now be deciding an
appeal by one side or the other from summary judgment on the
merits.
In sum, the statutory language of section 1821(f)--read
in context--amply supports the D.C. Circuit's interpretation.
If reading the statute in this fashion produced an odd or
impractical outcome, one might search for other
interpretations; but the bifurcation squares with the history
of judicial review proceedings in federal courts, and the
framework is eminently workable. The only quirk is the
initial choice provided to the agency; but it is easily
explained, by the banking crisis, and in any case was
explicitly conferred by Congress.
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The FDIC has tendered an alternative jurisdictional
defense, namely, that section 1821(f) is entirely irrelevant-
-and therefore cannot confer jurisdiction on the courts of
appeals--because Massachusetts' claims raise a broad legal
issue and are thus not claims for insurance benefits. The
Commonwealth's claims, however, were explicitly for deposit
insurance benefits. A claim for such insurance benefits does
not cease to be so because of the substantive issue raised by
the specific claim or the number of claims made.
Given that two circuits have read section 1821(f) to
favor direct court of appeals review, no criticism can attach
to the Commonwealth's choice in this case to begin
proceedings in this court. To avoid any risk that the
Commonwealth might be prejudiced by having to start a new law
suit, we exercise our authority "in the interest of justice"
to transfer this case to the district court instead of
dismissing. See 28 U.S.C. 1631; Callejo, 17 F.3d at 1501.
The district court, of course, may require that the petition
be reframed as a complaint and follow whatever procedural
course it deems appropriate.
Similarly, all issues are open to the district court
except the two specifically decided in this opinion. We have
decided here only that the Commonwealth's claims are claims
for insurance benefits and that federal-court jurisdiction
over the FDIC's disposition of such claims lies in the
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district court rather than in the court of appeals. We have
not considered whether the FDIC's determinations here are
"final" to the extent required for judicial intervention or
any other such question. Our purpose in saying this is not
to inject new issues, but simply to make plain that we have
decided only the two matters actually briefed and argued.
This case is transferred to the United States District
Court for the District of Massachusetts.
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