Murphy v. FDIC ( 2000 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
APR 07 2000
THOMAS K. KAHN
No. 98-5292 CLERK
________________________
D. C. Docket No. 96-02614-CV-KMM
BRUCE G. MURPHY,
Plaintiff-Appellant,
versus
FEDERAL DEPOSIT INSURANCE
CORPORATION, as receiver for Southeast Bank, N.A.;
JEFFREY H. BECK,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(April 7, 2000)
Before BIRCH and MARCUS, Circuit Judges, and ALAIMO*, Senior District Judge.
MARCUS, Circuit Judge:
*
Honorable Anthony A. Alaimo, Senior U.S. District Judge for the Southern District of
Georgia, sitting by designation.
Plaintiff-Appellant Bruce G. Murphy (“Murphy”) appeals the district court’s
order dismissing his amended complaint against Defendant Jeffrey Beck, as
Successor Agent for the Federal Deposit Insurance Company, (“FDIC”). Among
other things, the district court held that Murphy’s claims against the FDIC were
barred by the federal common law D’Oench, Duhme doctrine first expounded by
the Supreme Court in D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447, 62
S.Ct. 676, 86 L.Ed. 956 (1942). Because acceptance of the D’Oench, Duhme
doctrine is well-settled in this Circuit, and because we can discern no sound reason
for not applying the doctrine in this case, we affirm the district court’s order
dismissing Murphy’s complaint.
I.
The facts underlying this case are straightforward, but the procedural history
of the case is both unusual and important. In June 1989, Murphy received a letter
from Robert H. Haines, III, a general partner in Orchid Island Associates Limited
Partnership (“Orchid”), soliciting Murphy’s investment in Orchid’s development
of the Orchid Island Golf and Beach Club Project (the “Project”) located in Indian
County, Florida. The letter projected a 6.1 multiple return on investments. Soon
thereafter, on August 18, 1989, Murphy invested $515,672.37 in a limited
partnership interest in Orchid.
2
Southeast Bank provided several loans for the Project from the fall of 1988
until the beginning of 1991. These loans totaled approximately $50 million.
Orchid eventually defaulted on its loans and Southeast foreclosed on the property.
Southeast itself was declared insolvent on September 19, 1991 and placed in FDIC
receivership.
On August 20, 1992, Murphy filed suit in the United States District Court
for the District of Columbia against the FDIC, as receiver for Southeast, alleging
that Southeast asserted extensive control over the Project and that Southeast knew
about and participated in the fraudulent activities of Orchid’s principals.
According to the complaint, Murphy was induced to invest by a solicitation letter
from Orchid which falsely represented that projections by Arthur Anderson & Co.
reflected a “6.1 multiple return on [] [his] investment.” Murphy claimed that
Southeast acted in concert with Orchid in making decisions pertaining to the
Orchid development, and that these decisions were separate and apart from
Southeast’s role as a mere lender to Orchid. Murphy added that Southeast’s actions
as a joint venturer with Orchid in the Project caused the loss of his financial
investment. Accordingly, Murphy sued for breach of fiduciary duty, breach of
contract, accounting deficiencies, fraud, negligent misrepresentation and securities
violations.
3
The FDIC moved to dismiss the complaint on the grounds that Murphy’s
claims were barred by the federal common law doctrine of D’Oench, Duhme. On
August 10, 1993, the district court, treating the FDIC’s motion as a motion for
summary judgment, granted summary judgment on all counts. The district court
ruled that under the D’Oench, Duhme doctrine, Murphy could not assert a claim
against the FDIC based on the theory that Southeast was a joint venturer with
Orchid in the Project because there was no written joint venture agreement
between the two. Murphy v. FDIC, 829 F. Supp. 3, 5-6 (D.D.C. 1993). In fact, the
written agreements between the bank and Orchid denied such a relationship. Id.On appeal, the Court of Appeals for the D.C. Circuit reversed the district court’s
decision on all but two counts,1 holding that the D’Oench, Duhme doctrine had
been preempted by the Financial Institutions Reform, Recovery, and Enhancement
Act of 1989 (FIRREA) and did not, therefore, bar Murphy’s claims. See Murphy
v. FDIC, 61 F.3d 34, 39 (D.C. Cir. 1995) (concluding that “the inclusion of §
1
The Circuit Court affirmed the district court’s grant of summary judgment in favor of
the FDIC on Murphy’s two procedural claims seeking 1) a declaratory judgment that the FDIC is
required by statute to establish an ADR procedure, and 2) a writ of mandamus compelling that
result. As for the first claim, the court held that although the Financial Institutions Reform,
Recovery, and Enhancement Act of 1989 (FIRREA) did not seem to require the FDIC to
establish an ADR process, the FDIC appeared to have initiated such a program and therefore
Murphy’s request for the court to order the FDIC to do so was moot. As for the second claim,
the court held that the FIRREA gave the FDIC discretion to decide whether to refer any
particular case to ADR and therefore Murphy was not entitled to an order compelling the FDIC
to direct his case to ADR. Murphy, 61 F.3d at 40-41.
4
1821(d)(9) in the FIRREA implies the exclusion of overlapping federal common
law defenses not specifically mentioned in the statute--of which the D’Oench
doctrine is one”).
After remand to the district court, the FDIC again moved to dismiss the
complaint for failure to state a claim. Without ruling on the motion, the district
court transferred the case to the Southern District of Florida, concluding that the
Southern District of Florida was a more convenient location for the case because
the Plaintiff and the majority of witnesses resided in the district and both the
Project and Southeast Bank had been located there. The district court for the
Southern District of Florida substituted Jeffrey H. Beck as successor agent for the
FDIC and, thereafter, granted the FDIC’s Motion to Dismiss. The district court
offered three alternative grounds for its decision: first, loan agreements between
Orchid and Southeast disclaiming the existence of a joint venture barred Murphy,
as a limited partner in Orchid and therefore a party to the agreements, from
asserting such a joint venture; second, even if Murphy were not a party to the
agreements, he failed to prove the existence of a joint venture relationship between
Orchid and Southeast; and finally, the federal common law D’Oench, Duhme
doctrine barred Murphy’s claim.
II.
5
We review a district court’s order granting a motion to dismiss for failure to
state a claim de novo. Beck v. Deloitte & Touche, 144 F.3d 732, 736 (11th Cir.
1998); McKusick v. City of Melbourne, 96 F.3d 478, 482 (11th Cir. 1996). When
considering a motion to dismiss for failure to state a claim, a court must accept the
allegations in the complaint as true, construing them in the light most favorable to
the plaintiff. Kirby v. Siegelman, 195 F.3d 1285, 1289 (11th Cir. 1999).
On appeal, we need only consider the district court’s third reason for
dismissal. Plainly, the D’Oench, Duhme doctrine was intended “to protect [the
FDIC] and the public funds which it administers against misrepresentations as to
the securities or other assets [and liabilities] in the portfolios of the banks which
[the FDIC] insures.” D’Oench, Duhme, 315 U.S. at 457, 62 S.Ct. at 679, 86 L.Ed.
956. The doctrine originated more than half-a-century ago in the case of D’Oench,
Duhme & Co., Inc. v. FDIC where a securities dealer who executed a demand note
with a bank tried to prevent the FDIC, which had acquired the note, from
enforcing it because of the dealer’s separate agreement with the bank that the note
would not be called for payment. The Supreme Court rejected the defense and
6
squarely held that a secret agreement not on the bank’s records could not operate as
a defense against the FDIC’s suit. Id. at 459, 62 S.Ct. at 680.2
The Eleventh Circuit has described the scope of the D’Oench, Duhme
doctrine in these terms:
In a suit over the enforcement of an agreement originally executed
between an insured depository institution and a private party, a private
party may not enforce against a federal deposit insurer any obligation
not specifically memorialized in a written document such that the
agency would be aware of the obligation when conducting an
examination of the institution’s records.
Baumann v. Savers Federal Sav. and Loan Ass’n, 934 F2d 1506, 1515 (11th Cir.
1991). See also Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A.,
2
Eight years later, Congress partially codified the holding of D’Oench, Duhme, as
section 2(13)(e) of the Federal Deposit Insurance Act of 1950, 12 U.S.C. § 1823(e)(1). This
provision, as modified by the Financial Institutions Reform, Recovery, and Enforcement Act,
Pub. L. No. 101-73, currently provides:
No agreement which tends to diminish or defeat the interest of the Corporation
[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 Corporation 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.
7
(“Motorcity I”), 83 F.3d 1317, 1326 (11th Cir. 1996) (en banc), vacated and
remanded by Hess v. FDIC, 519 U.S. 1087, 117 S.Ct. 760, 136 L.Ed.2d 708(1997), reinstated by Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A.,
(“Motorcity II”) (en banc), 120 F.3d 1140 (11th Cir. 1997), cert. denied, Hess v.
FDIC, 523 U.S. 1093, 118 S.Ct. 1559, 140 L.Ed.2d 791 (1998).3 We have held
that the doctrine “‘applies in virtually all cases where a federal depository
institution regulatory agency is confronted with an agreement not documented in
the institution’s records.’” OPS Shopping Ctr., Inc. v. FDIC, 992 F.2d 306, 308
(11th Cir. 1993) (quoting Baumann, 934 F.2d at 1510). We have also made clear
that the doctrine applies when the FDIC is acting as a receiver. See FSLIC v. Two
Rivers Assocs., Inc., 880 F.2d 1267, 1274, 1276-77 (11th Cir. 1989) (holding that
the federal common law D’Oench, Duhme doctrine protects the FSLIC and the
FDIC in both receiver and corporate capacities); Timberland Design, Inc. v. First
Serv. Bank for Sav., 932 F.2d 46, 49 (1st Cir. 1991) (per curiam) (citing cases for
the proposition that “courts have consistently applied the [D’Oench, Duhme]
doctrine to those situations where the FDIC was acting in its capacity as receiver”).
3
The Supreme Court granted certiorari on Motorcity I, vacated our judgment, and
remanded the case for further consideration in light of its decision in Atherton v. FDIC, 519 U.S.
213, 117 S.Ct. 666 (1997). In Motorcity II, after considering the Supreme Court’s decision in
Atherton, we reaffirmed our previous holding in Motorcity I and reinstated that opinion.
8
Because no written agreement exists between Southeast and Orchid, if the
D’Oench, Duhme doctrine applies in this case, it bars Murphy’s claims against the
FDIC which are based on his allegations that Orchid and Southeast were acting as
joint venturers. Murphy argues, however, that there are four independent reasons
why the D’Oench, Duhme doctrine should not be applied in this case: first, the
choice of law doctrine requires application of D.C. Circuit law rather than Eleventh
Circuit law; second, the D.C. Circuit’s decision that the D’Oench, Duhme doctrine
has been preempted by the FIRREA should be accepted as law of the case; third,
the doctrine should not be applied to cases in which the receivership has generated
a surplus; and finally, the doctrine is no longer valid in light of recent Supreme
Court rulings. We are not persuaded by any of these arguments and address each
in turn.
A.
We have had occasion recently to disagree with the D.C. Circuit as to the
continued viability of the D’Oench, Duhme doctrine. In its consideration of this
case before transfer, the D.C. Circuit held that the doctrine had been preempted by
the FIRREA, and therefore could not bar Murphy’s claims. Murphy v. FDIC, 61
F.3d at 38. According to the D.C. Circuit, “the Supreme Court . . . necessarily
decided the D’Oench question. . . . [T]he inclusion of § 1821(d)(9) in the FIRREA
9
implies the exclusion of overlapping federal common law defenses not specifically
mentioned in the statute--of which the D’Oench doctrine is one.” Id. at 39. In both
Motorcity I and Motorcity II, we expressly disagreed with the D.C. Circuit’s
rejection of the doctrine. See Motorcity I, 83 F.3d at 1327 (noting that “[i]n
Murphy v. FDIC, 61 F.3d 34 (D.C.Cir. 1995), the D.C. Circuit recently held that
the Supreme Court’s reasoning in O’Melveny & Myers v. FDIC, 512 U.S. 79, 114
S.Ct. 2048, 129 L.Ed.2d 67 (1994), leads ‘ineluctably’ to the conclusion that the
common law D’Oench doctrine has been preempted. Id. at 38. . . . We disagree . .
. and hold that the federal common law D’Oench doctrine has not been preempted
by statute” (internal citations omitted)); Motorcity II, 120 F.3d at 1141-44 (noting
the circuit split between the D.C. and Eighth Circuits, which have held that the
FIRREA displaced the D’Oench, Duhme doctrine, and the Fourth Circuit, which
has held that it did not, and holding that the federal common law doctrine was not
preempted by the FIRREA and remained good law in this Circuit). In Motorcity II
we concluded that “the analysis set forth in our prior en banc opinion [Motorcity I]
reflects the most reasonable reading of Congress’s intent--i.e., that Congress did
not intend FIRREA to displace the D’Oench doctrine, but rather intended to
continue the harmonious, forty-year coexistence of the statute and the D’Oench
doctrine.” Id. at 1144.
10
Murphy argues nevertheless that we should apply the law of the D.C. Circuit
rather than our own law to his claims because the law of the transferor court should
govern in the context of transfers pursuant to 28 U.S.C. § 1404(a). Although this
circuit has not addressed the question of whether a transferee court should follow
its own interpretation of federal law or that of the transferor court, several other
circuits have addressed the question, and all have concluded that the transferee
court should apply its own interpretation of federal law. We find the reasoning of
these circuits persuasive.
In In re Korean Air Lines Disaster of September 1, 1983, 829 F.2d 1171(D.C. Cir. 1987), the D.C. Circuit addressed the question of what law to apply to a
number of wrongful death actions that were transferred to the District of Columbia
pursuant to 28 U.S.C. § 1407 for consolidated pretrial proceedings. The
substantive issue before the court was whether the per-passenger damage limits set
by the Warsaw Convention should be applied to limit Korean Air Lines’ liability
when the type size of the liability limit printed on the tickets was smaller than the
size required by the Montreal Agreement. The district court, interpreting District
of Columbia law, held that the damage limits were applicable. See In re Korean
Air Lines Disaster of September 1, 1983, 664 F. Supp. 1463 (D.D.C. 1985). This
ruling was, however, contrary to precedent in the Second Circuit where several of
11
the cases had originally been filed. See In re Korean Air Lines Disaster, 829 F.2d
at 1172. The D.C. Circuit affirmed the district court’s order squarely holding “that
the district court properly adhered to its own interpretation of the Warsaw
Convention/Montreal Agreement in all actions, including those transferred from
district courts within the Second Circuit.” Id. at 1173.
The court also distinguished In re Korean Air Lines from Van Dusen v.
Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964), in which the Supreme
Court held that when a defendant in a diversity action moves for a transfer of
venue under 28 U.S.C. 1404(a), the state law that would have applied in the
transferor court adheres to the case. See Van Dusen, 376 U.S. at 637-39, 84 S.Ct.
at 820. The D.C. Circuit explained that the logic behind Van Dusen--reflecting the
need to ensure that federal and state courts uniformly apply the same state law to
diversity cases regardless of where the cases are tried--does not apply to a case
brought under federal law because federal law is supposed to be unitary. In re
Korean Air Lines, 829 F.2d at 1175-76. As the Circuit Court explained:
Our system contemplates differences between different states’ laws;
thus a multidistrict judge asked to apply divergent state positions on a
point of law would face a coherent, if sometimes difficult, task. But it
is logically inconsistent to require one judge to apply simultaneously
different and conflicting interpretations of what is supposed to be a
unitary federal law.
12
Id. at 1175-76. The court concluded that “[t]he federal courts . . . owe respect to
each other’s efforts and should strive to avoid conflicts, but each has an obligation
to engage independently in reasoned analysis. Binding precedent for all is set only
by the Supreme Court, and for the district courts within a circuit, only by the court
of appeals for that circuit.” Id. at 1176.
The Second, Eighth, and Ninth Circuits uniformly have agreed with the D.C.
Circuit that in cases where federal law is at issue, transferee courts are obligated to
follow their own interpretation of the relevant law. See Campos v. Ticketmaster
Corp., 140 F.3d 1166, 1171 n. 4 (8th Cir. 1998) (holding that the consolidated
issues the court was hearing were controlled by the law of its circuit and not the
law of the various circuits from which the cases were transferred);
Temporomandibular Joint (TMJ) Implant Recipients v. E.I. DuPont De Nemours &
Co., 97 F.3d 1050, 1055 (8th Cir. 1996) (holding that “[w]hen analyzing questions
of federal law, the transferee court should apply the law of the circuit in which it is
located”); Newton v. Thomason, 22 F.3d 1455, 1460 (9th Cir. 1994) (same);
Menowitz v. Brown, 991 F.2d 36, 40-41 (2d Cir. 1993) (same).4
4
The Seventh Circuit has also agreed, in dicta, in the factually dissimilar case of
Eckstein v. Balcor Film Investors, 8 F.3d 1121 (7th Cir. 1993), with the reasoning of the D.C.
Circuit. Eckstein involved a question of the appropriate statute of limitations for a claim of fraud
arising under § 10(b) of the Securities Exchange Act of 1934. The case involved two sets of
plaintiffs, both of whom filed their action before 1990. When the litigation began, federal courts
throughout the country derived the periods of limitations in § 10(b) cases from state law. See
13
We find the reasoning of the D.C., Second, Eighth, and Ninth Circuits
persuasive. Since the federal courts are all interpreting the same federal law,
uniformity does not require that transferee courts defer to the law of the transferor
circuit. Therefore, we conclude that the law of the Eleventh Circuit, rather than the
Eckstein, 8 F.3d at 1124. However, in July 1990, the Seventh Circuit overruled its opinions that
had looked to state law and held that § 13 of the Securities Act of 1933 supplied the proper
statute of limitations for § 10(b) fraud claims. See Short v. Belleville Shoe Manufacturing Co.,
908 F.2d 1385 (7th Cir. 1990). In June 1991, the Supreme Court agreed with the Seventh
Circuit that the federal securities laws are the proper source of the period of limitations but
selected § 9(e) of the Securities Exchange Act of 1934 as the most appropriate rule. See
Lampf,Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 364 n. 9, 111 S.Ct. 2773,
2782 n.9, 115 L.Ed.2d 321 (1991). Congress responded to Lampf by enacting stopgap
legislation which provided that the proper period of limitations for cases filed on or before June
19, 1991, was the limitation period provided by the laws in the applicable jurisdiction as those
law existed on June 19, 1991. See Eckstein, 8 F.3d at 1124 (quoting § 27A of the ‘34 Act, 15
U.S.C. § 78aa-1(a)). The district court in Eckstein held that under the stopgap legislation
provided by § 27A, the law of the Seventh Circuit as stated in Short should control the statute of
limitations imposed on both the plaintiffs who filed originally in the Seventh Circuit and those
who filed originally in the Ninth Circuit. See Majeski v. Balcor Entertainment Co. Ltd., 786 F.
Supp. 1458, 1461 (E.D. Wis. 1992).
On appeal, the Seventh Circuit faced the question of the proper application of § 27A to
transferred cases. The Seventh Circuit agreed with the D.C. Circuit’s reasoning in In re Korean
Air Lines that a transferee court should normally use its own best judgment about the meaning of
federal law when evaluating a federal question. According to the court, “A single federal law
implies a national interpretation. Although courts of appeals cannot achieve this on their own,
the norm is that each court of appeals considers the questions independently and reaches its own
decision, without regard to the geographic location of the events giving rise to the litigation.”
Eckstein, 8 F.3d at 1126. The court concluded, however, that Congress’ stopgap legislation
required a different result in this case. The Seventh Circuit held that § 27A required them to
apply the statute of limitations of the Seventh Circuit to the plaintiffs who filed originally in
Wisconsin and the statute of limitations of the Ninth Circuit to the plaintiffs who filed originally
in California as those laws existed on June 19, 1991. Id. at 1127-28. Unlike in Eckstein, there is
no Congressional mandate in the present case instructing us to depart from the usual rule that a
court of appeals must apply its own interpretation of federal law.
14
law of the D.C. Circuit, regarding the continued viability of the D’Oench, Duhme
doctrine, was properly applied in this case.
B.
Second, Murphy argues that even if the law of the Eleventh Circuit should,
in general, be applied to cases transferred here, the previous holding of the D.C.
Circuit in this case--that the D’Oench, Duhme doctrine has been preempted by the
FIRREA-- binds this Court as “law of the case.” “[L]aw of the case is an
amorphous concept.” Arizona v. California, 460 U.S. 605, 518, 103 S.Ct. 1383,
1391, 75 L.Ed.2d 318 (1983). The doctrine provides that “when a court decides
upon a rule of law, that decision should continue to govern the same issues in
subsequent stages in the same case.” Id; see also Robinson v. Parrish, 720 F.2d
1548, 1549-50 (11th Cir. 1983). The purpose of the doctrine is to bring an end to
litigation by foreclosing the possibility of repeatedly litigating an issue already
decided. See Wheeler v. City of Pleasant Grove, 746 F.2d 1437, 1440 (11th Cir.
1984); United States v. Williams, 728 F.2d 1402, 1406 (11th Cir. 1984) Robinson,
720 F.2d at 1550. The law of the case doctrine does not, however, require rigid
adherence to rulings made at an earlier stage of a case in all circumstances. See
Robinson, 720 F.2d at 1550. The doctrine “directs a court’s discretion, it does not
limit the tribunal’s power.” Arizona, 460 U.S. at 618; see also DeLong Equip. Co.
15
v. Washington Mills Electro Minerals Corp., 990 F.2d 1186, 1196 (11th Cir. 1993)
(noting that the doctrine “‘is not an inexorable command that rigidly binds the
court to its former decisions, but rather is an expression of good sense and wise
judicial practice’”) (quoting Terrell v. Household Goods Carriers’ Bureau, 494
F.2d 16, 19 (5th Cir. 1974)). Both the Supreme Court and this Circuit have made
clear that reconsideration of a prior holding is not improper if the court is
convinced that the prior decision is clearly erroneous and would work manifest
injustice. See Arizona, 460 U.S. at 619 n.8, 103 S.Ct. at 1391 n.8; Wheeler, 746
F.2d at 1440 (citing United States v. Robinson, 690 F.2d 869, 872 (11th Cir.
1982)). Such is the case here. We have explicitly rejected, in both Motorcity I and
Motorcity II, the D.C. Circuit’s prior ruling regarding the preemption of the
D’Oench, Duhme doctrine. We are not, therefore, bound by the “law of the case”
doctrine to adhere to a ruling with which we have emphatically and repeatedly
disagreed.
C.
Third, Murphy argues that even under current Eleventh Circuit law the
D’Oench, Duhme doctrine should not be applied in this particular case because,
Southeast, unlike the vast majority of FDIC receiverships, generated a $150
million surplus. Murphy suggests that because, under 12 U.S.C. § 1821(d)(11)(B),
16
the bank’s shareholders are allowed to divide funds remaining in a receivership
pool after the creditors have been paid in full, applying the D’Oench, Dhume
doctrine in this case would unfairly allow Southeast’s shareholders to benefit from
Murphy’s loss. Murphy contends that allowing the bank’s shareholders to divide
what remains of his lost investment is contrary to notions of equity.
Murphy can point us to no case law, however, saying or even suggesting that
the D’Oench, Duhme doctrine does not apply in cases where the receivership has
generated a surplus. Rather, Murphy cites cases favoring the use of corporate
assets to discharge debts before corporate stockholders are paid. See Bankers
Trust Co. v. Florida East Coast Ry. Co., 31 F. Supp. 961, 964 (S.D. Fla. 1940)
(ordering preferential payment by receivers of defendant railroad of previously
entered judgment awarding plaintiff damages for the wrongful death of her
husband); Hoyt v. Hampe, 214 N.W. 718, 719 (Iowa 1927) (explaining that “[t]he
stockholders of a corporation are not entitled to a distribution of the assets among
themselves while corporate debts remain unpaid”). Neither of these cases involve
the FDIC as a party, and they do not implicate or shed light on the applicability of
the D’Oench, Duhme doctrine in cases of surplus.5
5
The third case Murphy cites in support of his surplus argument, First Interstate Bank
of Texas, N.A. v. First National Bank of Jefferson, 928 F.2d 153 (5th Cir. 1991), also does not
involve the D’Oench, Duhme doctrine and merely underscores the inapplicability of these cases
to the question at hand. In First Interstate Bank the court expressly states that “[t]he D’Oench,
17
As we explained in Motorcity I, the purpose of the D’Oench, Duhme
doctrine is to ensure that the FDIC can rely on the records of a failed bank to
determine quickly whether to engage in a purchase and assumption transaction, or
whether to liquidate the failed bank and pay off insured deposits. Motorcity I, 83
F.3d at 1324. “Neither the FDIC nor state banking authorities would be able to
make reliable evaluations if bank records contained seemingly unqualified notes
that are in fact subject to undisclosed conditions.” Motorcity I, 83 F.3d at 1325.
Permitting the doctrine to be overidden if a receivership generates a surplus in the
future undermines the doctrine’s purpose of enabling the FDIC to make informed
and accurate evaluations of a failed bank’s assets and liabilities at the outset of the
receivership in order to determine the best way to manage the bank’s losses.
Indeed the rationale of D’Oench, Duhme--to protect the FDIC from enforcement of
oral agreements against failed financial institutions--is no less compelling if the
failed institution eventually generates a surplus. The exception Murphy favors
would eviscerate the doctrine. We conclude, therefore, that neither precedent nor
the doctrine’s purpose counsel in favor of creating an exception to the application
Duhme doctrine protects the FDIC, not a solvent bank. The district court correctly declined to
extend the doctrine to this case in which the FDIC is not a party.” Id., 928 F.2d at 156.
18
of the D’Oench, Duhme doctrine for cases in which a receivership generates a
surplus.
D.
Finally, Murphy argues that the D’Oench, Dhume doctrine is no longer good
law because it has been supplanted by the FIRREA. Murphy argues that the
Supreme Court’s decisions in O’Melveny & Myers v. FDIC, 512 U.S. 79, 114
S.Ct. 2048, 129 L.Ed.2d 67 (1994), and Atherton v. FDIC, 519 U.S. 213, 117 S.Ct.
666, 136 L.Ed.2d 656 (1997), require such preemption. Our Circuit has already
spoken clearly on this issue rejecting precisely this claim.
In O’Melveny & Myers, the FDIC, as receiver of a failed California savings
and loan (S & L), brought a malpractice lawsuit against the savings and loan’s
former law firm, pleading causes of action under California law for professional
negligence and breach of fiduciary duty. Id., 512 U.S. at 82, 114 S.Ct. at 2052.
The FDIC alleged that the law firm failed to inform the S & L of the illegal acts of
the S & L’s controlling officers. Id. The law firm defended by arguing that, under
California law, knowledge of the conduct of the S & L’s controlling officers must
be imputed to the S&L, and hence to the FDIC, which, as receiver, stood in the S &
L’s shoes. Id. The FDIC urged the Court to create a new federal common law rule
to govern the imputation of knowledge to the FDIC. Id. at 83, 114 S.Ct. at 2052.
19
The Court declined to do so. First, the Court explained that, by statute, California,
rather than federal common law, governed imputation of corporate officers’
knowledge to the FDIC. The Supreme Court noted that 12 U.S.C. §
1821(d)(2)(A)(i), as amended by the FIRREA, “places the FDIC in the shoes of the
insolvent S & L, to work out its claims under state law, except where some
provision in the extensive framework of FIRREA provides otherwise.” Id., at 87,
114 S.Ct. at 2054. Moreover, the Court explained that even if the FIRREA was not
applicable in the present case this was not a case “in which judicial creation of a
special federal rule would be justified.” Id. at 87, 114 S.Ct. at 2055.6
In Atherton, the Resolution Trust Corporation (later replaced by the FDIC)
sued several officers and directors of the failed City Federal Savings Bank
claiming that they had violated the legal standard of care they owed that federally
insured institution. Id., 519 U.S. at 215, 117 S.Ct. at 668. The Supreme Court
addressed the question of where courts should look to find the standard of care
against which to measure the legal propriety of the defendants’ conduct--to state
law, to federal common law, or to a provision of the FIRREA, 12 U.S.C. §
6The Court explained that the creation of federal common law was justified only in
those limited situations where “there is a ‘significant conflict between some federal policy or
interest and the use of state law.’” O’Melveny, 512 U.S. at 87, 114 S.Ct. at 2054 (quoting Wallis
v. Pan American Petroleum Corp., 384 U.S. 63, 68, 86 S.Ct. 1301, 1304, 16 L.Ed.2d 369(1966)).
20
1821(k). Id. at 215-216, 117 S.Ct. at 669. The district court had held that the
federal statute, § 1821, provided the appropriate standard of care. Id. at 216, 117
S.Ct. at 669. The Court of Appeals for the Third Circuit reversed holding that the
federal statute provided only a baseline level of care but did not prohibit actions
resting upon stricter rules originating in either state law or in federal common law.
Id. at 217, 117 S.Ct. at 669. The Supreme Court vacated the Third Circuit opinion.
As an initial matter the Court held that the federal common law corporate
governance standards articulated by the Court in Briggs v. Spaulding, 141 U.S.
132, 11 S.Ct. 924, 35 L.Ed. 662 (1891), did not survive the Court’s later decision
in Erie R. Co. v. Tompkins. Id., at 226, 117 S.Ct. at 674. As a result, the Court
made clear: “There is no federal common law that would create a general standard
of care applicable to this case.” Id. The Court then went on to consider whether
federal statute, 12 U.S.C. § 1821, or state law provided the appropriate standard of
care in the case. The Supreme Court held that the federal statute’s “gross
negligence” standard provided a floor, but did not stand in the way of a stricter
state-law standard making directors and officers liable for less egregious conduct.
Id. at 227, 117 S.Ct. at 674.
In Motorcity I and Motorcity II we ruled decisively and en banc that the
Supreme Court’s decisions in O’Melveny and Atherton did not abrogate our prior
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holdings regarding the continued viability of the D’Oench, Duhme doctrine. We
explained that both O’Melveny and Atherton dealt with the question of whether to
create new federal common law in particular areas rather than with the question of
whether Congress intended the FIRREA to supplant “the previously established
and long-standing federal common law D’Oench doctrine.” Motorcity II, 120 F.3d
at 1143; see also Motorcity I, 83 F.3d at 1330. In Motorcity II, our affirmation of
the D’Oench, Duhme doctrine in light of the FIRREA and the Supreme Court’s
decisions in O’Melveny and Atherton was explicit:
[W]e decline to accept Motorcity’s invitation to overrule D’Oench.
With the D’Oench doctrine safely in place as a long-standing federal
common law rule, we conclude that the appropriate analysis for the
statutory abrogation issue presented in this case is that articulated in
United States v. Texas,7 and not that articulated in Atherton and
O’Melveny. We continue to believe that the analysis set forth in our
prior en banc opinion reflects the most reasonable reading of
Congress’s intent--i.e., that Congress did not intend FIRREA to
displace the D’Oench doctrine, but rather intended to continue the
harmonious, forty-year coexistence of the statute and the D’Oench
doctrine.
7
In United States v. Texas, 507 U.S. 529, 113 S.Ct. 1631, 123 L.Ed.2d 245 (1993), the
Supreme Court noted the “longstanding . . . principle that ‘[s]tatutes which invade the common
law . . . are to be read with a presumption favoring the retention of long-established and familiar
principles, except when a statutory purpose to the contrary is evident.’” Id. 507 U.S. at 524(quoting Isbrandtsen Co. v. Johnson, 343 U.S. 779, 783, 72 S.Ct. 1011, 1014, 96 L.Ed. 1294(1952)). The Court held that “[i]n order to abrogate a common-law principle, the statue must
‘speak directly’ to the question addressed by the common law.” Id. (citing Mobil Oil Corp. v.
Higginbotham, 436 U.S. 618, 625, 98 S.Ct. 2010, 2015, 56 L.Ed.2d 581 (1978); Milwaukee v.
Illinois, 451 U.S. 304, 315, 101 S.Ct. 1784, 1791, 68 L.Ed.2d 114 (1981)).
22
Id., 120 F.3d 1140, 1144. This panel is bound by the Circuit’s prior en banc
decision. See Chambers v. Thompson, 150 F.3d 1324, 1326 (11th Cir. 1998)
(noting that “[w]e are bound to follow a prior panel or en banc holding, except
where that holding has been overruled or undermined to the point of abrogation by
a subsequent en banc or Supreme Court decision”).
Therefore, under the D’Oench, Duhme doctrine, Murphy has failed to state a
claim against the FDIC because he has not alleged a written agreement between
Southeast and Orchid establishing their joint venture relationship, the D’Oench,
Duhme doctrine remains good law in this Circuit, and there is no sound reason not
to apply the doctrine in this case. Accordingly, we affirm the district court’s order
dismissing Murphy’s complaint.8
AFFIRMED.
8
In view of this ruling, we need not address the district court’s alternative grounds
for dismissal.
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