Federal Deposit Ins. Corp. v. Arciero , 741 F.3d 1111 ( 2013 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS December 20, 2013
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver of First
State Bank of Altus, Altus, Oklahoma,
Plaintiff-Counter-Defendant-Appellee,
v.
No. 12-6287
MARK ARCIERO; WILLIAM
NEWLAND; THOMPSON-DODSON
FARMS, LLC; KEITH DODSON;
GERALD RAY SMITH,*
Defendants-Counter-Claimants-
Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. No. 5:11-CV-00686-M)
Todd Taylor, Taylor & Strubhar, P.C., (Larry D. Derryberry and Rachel R. Shephard,
Derryberry & Naifeh, LLP, with him on the briefs), Oklahoma City, Oklahoma, for
Defendants – Counter-Claimants – Appellants.
*
The appeal is abated as to Mark Arciero and Gerald Ray Smith because they are in
bankruptcy proceedings.
David L. Bryant, GableGotwals, Tulsa, Oklahoma, (John Henry Rule and Barabara M.
Moschovidis, GableGotwals, Tulsa, Oklahoma, and Leslie L. Lynch, GableGotwals,
Oklahoma City, Oklahoma, with him on the brief), for Plaintiff - Counter-Defendant –
Appellee.
Before HARTZ, O’BRIEN, and TYMKOVICH, Circuit Judges.
HARTZ, Circuit Judge.
In an effort to save Quartz Mountain Aerospace, some of its investors and
directors took out large loans from First State Bank of Altus (the Bank) for the benefit of
the company. When the Bank failed in 2009, the Federal Deposit Insurance Corporation
(FDIC) took over as receiver and filed suit to collect on the loans. This appeal concerns
the challenge to those collection efforts by four of those liable on the notes (Borrowers).
Borrowers raised affirmative defenses to the FDIC’s claims and brought counterclaims,
alleging that the Bank’s CEO had assured them that they would not be personally liable
on any of the loans. The United States District Court for the Western District of
Oklahoma granted summary judgment for the FDIC because the CEO’s alleged promises
were not properly memorialized in the Bank’s records as required by 12 U.S.C.
§ 1823(e), a provision of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989, Pub. L. No. 101-73, 103 Stat. 183 (codified in scattered sections of 12, 18 &
31 U.S.C.).
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Borrowers appeal on two grounds: (1) that the district court should not have
granted summary judgment before allowing them to conduct discovery, and (2) that the
district court should have set aside the summary judgment because they presented newly
discovered evidence of securities fraud by the Bank. We affirm the judgment below.
Borrowers did not support their request for discovery with any showing that discovery
could lead to evidence that would satisfy the requirements of § 1823(e); and their new
“evidence” was not admissible evidence and related to a legal theory that Borrowers
could have raised—but did not raise—before.
I. BACKGROUND
In 2008 the Bank’s CEO, Paul Doughty, asked Borrowers and others to take out
and guarantee large loans whose principal purpose was to invest money in Quartz
Mountain Aerospace so it could make payments on its loans from the Bank and stay in
business. Three of the Borrowers—Mark Arciero, William Newland, and Thompson-
Dodson Farms, LLC—signed separate $2.5 million notes; the fourth, Keith Dodson, did
not take out his own loan but guaranteed the Thompson-Dodson Farms note.
Doughty prepared a credit memorandum that accompanied each promissory note.
It described where the loan proceeds would go, including that some of the funds would be
used to purchase life-settlement contracts that would serve as collateral for the loans.1
1
Life-settlement contracts allow an investor to purchase a third party’s life-insurance
policy. The investor becomes responsible for premium payments and collects benefits
Continued . . .
3
The memorandum stated that because of those contracts the “proposed loan can be repaid
in full without the sale of outside assets,” Aplt. App., Vol. II at 268, and that “the credit
risk of advances under this line is fully assured by the atomized life insurance policies
used as collateral,” id. at 270. Borrowers claim that the credit memorandum and
Doughty’s assurances caused them to believe that the loans would not expose them to any
personal liability or financial risk.
On July 31, 2009, the Bank was closed by the Oklahoma State Banking
Department, and the FDIC was appointed as receiver. The FDIC filed suit on June 16,
2011, to collect on the promissory notes. Borrowers did not dispute that they had not
repaid the loans, but asserted that they had no obligation to do so because Doughty’s
representations to them constituted fraudulent inducement. They also brought
counterclaims alleging that the Bank committed fraud; that Doughty breached his
fiduciary duties; that Doughty failed to exercise reasonable care; that the Bank breached
the implied covenant of good faith and fair dealing; that the FDIC had impaired
Borrowers’ collateral; and that the Bank, Doughty, and the FDIC violated the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961‒1968.
The FDIC moved for summary judgment, arguing that what Doughty told
Borrowers was irrelevant because § 1823(e) precludes the use of oral commitments as
defenses to FDIC claims. Borrowers nevertheless submitted affidavits saying that they
when the insured dies. Policies are generally purchased from individuals who are 65
years or older, with life expectancies of 3 to 12 years.
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had been told by Doughty that they would have no personal liability and that the loans
would be fully collateralized. They also requested a deferral of the ruling or denial of
summary judgment to allow for discovery. The district court rejected the request for
delay, saying that further discovery would not be helpful because the FDIC had already
provided Borrowers and the court with the only documents necessary to rule on the
FDIC’s motion, such as the Bank’s loan files and the minutes of the board of directors.
The district court then granted summary judgment. It held that Borrowers had
“breached their obligations under the promissory notes” and that all their affirmative
defenses were barred by § 1823(e). Aplt. App., Vol. II at 342. It also dismissed
Borrowers’ counterclaims because (1) the claims based on prereceivership conduct had
not been administratively exhausted, (2) Borrowers had conceded their impairment-of-
collateral claim by not challenging the FDIC’s argument that Oklahoma does not
recognize such a claim, and (3) federal agencies are not subject to civil RICO liability.
A little over a month later, the Oklahoma Department of Securities opened an
investigation into whether the Bank, Doughty, or Altus Ventures, LLC (an affiliate of the
Bank) had sold unregistered securities, including the life-settlement contracts associated
with the loans in this case. Borrowers moved for reconsideration of the order granting
summary judgment on the theory that the Department’s investigation was newly
discovered evidence that could support an affirmative defense not barred by § 1823(e).
The district court denied the motion because the newly discovered evidence was “merely
cumulative of other evidence that [Borrowers] had at the time of the briefing on [the
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summary-judgment] motion.” Aplt. App., Vol. II at 481. It noted that Borrowers had
previously known of (1) the credit memorandum prepared by Doughty and (2) an FDIC
publication that warned of investor risks inherent in life-settlement contracts, discussed
the applicability of federal securities laws to such contracts, and included a case study
describing how the use of life-settlement contracts as loan collateral contributed to a
community bank’s failure. See id. The court also said that because Borrowers already
“could have, and perhaps should have, raised the issue of whether the loans were
unregistered securities and, thus, were not agreements and were not subject to § 1823[,]
[Borrowers] may not raise this issue for the first time in a motion for reconsideration.”
Id. at 482.
II. DISCUSSION
A. Section 1823(e)
When the FDIC tries to collect on promissory notes acquired from a failed bank, it
regularly confronts defenses that “involve claims of misrepresentation or ‘secret
agreements’ between the bank and the obligor that are not present on the face of the asset
itself.” FDIC v. Oldenburg, 34 F.3d 1529, 1550 (10th Cir. 1994). The FDIC could be
handicapped in litigating such claims because its personnel lack first-hand knowledge of
the relevant events, and those who would have such knowledge—the failed bank’s
directors, officers, and employees—often have nothing personally at stake while their
loyalties may be to the bank customers rather than to the FDIC. “[T]o protect the FDIC
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and the funds it administers,” id., strict statutory requirements must be satisfied before
any agreement can limit the liability of a borrower or guarantor to the FDIC:
No agreement which tends to diminish or defeat the interest of the
[FDIC] in any asset acquired by it under this section or section 1821 of this
title, either as security for a loan or by purchase or as receiver of any
insured depository institution, shall be valid against the [FDIC] unless such
agreement—
(A) is in writing,
(B) was executed by the depository institution and any person
claiming an adverse interest thereunder, including the obligor,
contemporaneously with the acquisition of the asset by the depository
institution,
(C) was approved by the board of directors of the depository
institution or its loan committee, which approval shall be reflected in the
minutes of said board or committee, and
(D) has been, continuously, from the time of its execution, an
official record of the depository institution.
12 U.S.C. § 1823(e)(1). The Supreme Court has read the word agreement broadly in
interpreting this provision. See Langley v. FDIC, 484 U.S. 86, 92–93 (1987). When a
party raises an affirmative defense based on an agreement with the bank, it has the burden
of showing that the agreement meets the requirements of § 1823(e)(1). See Oldenburg,
34 F.3d at 1551.
With this statutory context in mind, we turn to Borrowers’ two issues on appeal.
B. Additional Discovery
Borrowers argue that the district court erred when it denied their motion under
Fed. R. Civ. P. 56(d) to delay ruling on the FDIC’s motion for summary judgment until
discovery could be conducted. Rule 56(d) provides that “[i]f a nonmovant shows by
affidavit or declaration that, for specified reasons, it cannot present facts essential to
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justify its opposition [to a motion for summary judgment], the court may: (1) defer
considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to
take discovery; or (3) issue any other appropriate order.” Fed. R. Civ. P. 56(d) (until
December 2010, Rule 56(f)). The party requesting additional discovery must present an
affidavit that identifies “the probable facts not available and what steps have been taken
to obtain these facts. The nonmovant must also explain how additional time will enable
him to rebut the movant’s allegations of no genuine issue of material fact.” Trask v.
Franco, 446 F.3d 1036, 1042 (10th Cir. 2006) (brackets, citation, and internal quotation
marks omitted). We review a district court’s denial of a Rule 56(d) motion for abuse of
discretion. See id. We will not reverse unless the district court’s decision to deny
discovery “exceed[ed] the bounds of the rationally available choices given the facts and
the applicable law in the case at hand.” Valley Forge Ins. Co. v. Health Care Mgmt.
Partners, Ltd., 616 F.3d 1086, 1096 (10th Cir. 2010) (internal quotation marks omitted).
Borrowers have not identified any documents that discovery could uncover that
would establish a defense satisfying § 1823(e). To prove an agreement limiting their
liability, Borrowers would have to produce (1) a written agreement executed by the Bank
and one of the Borrowers and (2) Bank minutes approving the agreement. See 18 U.S.C.
§ 1823(e)(1). But no Borrower attested to signing such an agreement or gave any reason
to believe that such an agreement existed. And Borrowers do not claim that they are
missing any Bank minutes. Speculation cannot support a Rule 56(d) motion.
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Borrowers state in their opening brief that they have identified people who “could
and likely would provide evidence which would ultimately bring this case outside of
12 U.S.C. § 1823(e).” Aplt. Br. at 18. But the brief does not go on to explain what that
evidence might be or how the evidence would create a defense not governed by
§ 1823(e). Indeed, the quoted sentence is the only reference to § 1823(e) in the opening
brief’s argument on the Rule 56(d) issue. Such an undeveloped assertion does not suffice
to preserve an issue for review. See Bronson v. Swensen, 500 F.3d 1099, 1104 (10th Cir.
2007) (“[W]e routinely have declined to consider arguments that are not raised, or are
inadequately presented, in an appellant’s opening brief.”). And the slightly more
developed argument in Borrowers’ reply brief comes too late. See Cahill v. Am. Family
Mut. Ins. Co., 610 F.3d 1235, 1239 (10th Cir. 2010) (“We do not address arguments first
raised in [a] reply brief.”) We also note that Borrowers apparently did not support their
Rule 56(d) request in district court with a claim that they may have a defense not
controlled by § 1823(e); they do not point to any pleading where they raised such a claim,
nor have we found any discussion of such a claim in the Rule 56(d) pleadings. See Tele-
Communications, Inc. v. Comm’r, 104 F.3d 1229, 1232 (10th Cir. 1997) (“Generally, an
appellate court will not consider an issue raised for the first time on appeal.”) We hold
that the district court did not abuse its discretion in denying the request for Rule 56(d)
relief.
Borrowers devote a section of their brief to the proposition that summary
judgment on their affirmative defenses was improper. But their only argument against
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the summary judgment is that their Rule 56(d) motion was denied. We understand the
argument as merely stating that if we agree with them on the Rule 56(d) motion, the
summary judgment must be set aside. Because we reject their Rule 56(d) argument, we
need say no more on this issue.
C. Newly Discovered Evidence
Borrowers argue that the district court erred in denying their motion for
reconsideration based on newly discovered evidence. A party can seek relief based on
newly discovered evidence under either Fed. R. Civ. P. 59(e) or 60(b)(2). We have held
that relief from judgment under Rule 60(b)(2) is available if:
(1) the evidence was newly discovered since the trial; (2) the moving party
was diligent in discovering the new evidence; (3) the newly discovered
evidence was not merely cumulative or impeaching; (4) the newly
discovered evidence is material; and (5) . . . a new trial with the newly
discovered evidence would probably produce a different result.
Dronsejko v. Thornton, 632 F.3d 658, 670 (10th Cir. 2011) (brackets and internal
quotation marks omitted). The required showing is the same whether judgment was
entered after a trial or on a motion for summary judgment. See id. (“Of course, in this
case the Plaintiffs sought relief from an order dismissing the case, not from the result of a
trial—but the required showing under Rule 60(b)(2) remains the same.”). We have often
expressed the requirements for relief under Rule 59(e) as including only the first two of
the above requirements. See Somerlott v. Cherokee Nation Distribs., Inc., 686 F.3d 1144,
1153 (10th Cir. 2012) (“Where a party seeks Rule 59(e) relief to submit additional
evidence, the movant must show either that the evidence is newly discovered or if the
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evidence was available at the time of the decision being challenged, that counsel made a
diligent yet unsuccessful effort to discover the evidence.” (brackets and internal quotation
marks omitted)). But we have also recognized in the Rule 59(e) context that the newly
discovered evidence “must be of such a nature as would probably produce a different
result,” Devon Energy Prod. Co., L.P. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195,
1213 (10th Cir. 2012) (internal quotation marks omitted), and it is well-settled that the
requirements for newly discovered evidence are essentially the same under Rule 59(e)
and 60(b)(2). See 11 Charles A. Wright, et al., Federal Practice and Procedure § 2859, at
387 (2012) (“The same standard applies to motions on the ground of newly discovered
evidence whether they are made under Rule 59 or Rule 60(b)(2).” (footnote omitted)).
We review the district court’s decision under either rule for abuse of discretion. See
Computerized Thermal Imaging, Inc. v. Bloomberg, L.P., 312 F.3d 1292, 1296 n.3 (10th
Cir. 2002). Accordingly, we need not address the parties’ dispute about which rule
Borrowers made their motion under.
Borrowers’ alleged newly discovered evidence is that the Oklahoma Department
of Securities opened an investigation into the Bank, its affiliate Altus, and Doughty for
selling unregistered securities, including the life-settlement contracts used to secure the
loan to Borrowers. According to Borrowers, this evidence supports claims and defenses
against the FDIC that would not be barred by § 1823(e) because they are based on
securities violations rather than agreements with the Bank.
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Several of our fellow circuits have rejected such attempts to get around § 1823(e).
See FDIC v. Giammettei, 34 F.3d 51, 58 (2d Cir. 1994) (defenses based on the violation
of federal securities laws are subject to the requirements of § 1823(e)); Dendinger v. First
Nat’l Corp., 16 F.3d 99, 102 (5th Cir. 1994) (“[A]n oral misrepresentation by a lender to
a borrower, whether in violation of federal securities law or not, constitutes an unwritten
‘agreement’ that does not bind the FDIC under [§ 1823(e)].”); FDIC v. Investors Assocs.
X, Ltd., 775 F.2d 152, 156 (6th Cir. 1985). But see Adams v. Zimmerman, 73 F.3d 1164,
1168–69 (1st Cir. 1996) (claim based on violation of state securities-law registration
requirement does not rest on agreements subject to § 1823(e)). We need not reach that
issue, however, because evidence of the investigation does not satisfy the requirements
for newly discovered evidence.
Newly discovered evidence must be admissible evidence to support relief under
Rule 59 or 60(b)(2). See Goldstein v. MCI WorldCom, 340 F.3d 238, 257 (5th Cir. 2003)
(it is “self evident” that newly discovered evidence must “be both admissible and
credible” (internal quotation marks omitted)); 11 Charles A. Wright, et al., supra, § 2808,
at 117 (“Newly discovered evidence must be admissible and probably effective to change
the result of the former trial.” (footnote omitted)). The existence of an investigation,
however, is not admissible evidence of alleged misconduct. The purpose of an
investigation is to determine whether misconduct has occurred. Evidence uncovered by
the investigation might be admissible, but Borrowers point to no such evidence. At most,
the opening of an investigation alerted Borrowers to the possibility that securities laws
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governed their transactions with the Bank and that they could bring claims under those
laws. But learning of a new legal theory is not the discovery of new evidence. Moreover,
as noted by the district court, Borrowers had previously been alerted to the possible
availability of the theory. Before the FDIC moved for summary judgment, Borrowers
had a credit memorandum describing the life-settlement contracts associated with their
loans and an FDIC publication that included an article listing the dangers of life-
settlement contracts, which mentioned the applicability of federal securities laws.
We conclude that the district court did not abuse its discretion in denying
Borrowers’ motion to set aside the summary judgment because of alleged newly
discovered evidence.
III. CONCLUSION
We AFFIRM the judgment below.
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