Maher, Jerome A. v. FDIC ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-1701
JEROME A. MAHER and JOHN R. GRAVEE,
Plaintiffs-Appellants,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 6828—Rebecca R. Pallmeyer, Judge.
____________
ARGUED FEBRUARY 8, 2006—DECIDED MARCH 21, 2006
____________
Before MANION, KANNE, and EVANS, Circuit Judges.
MANION, Circuit Judge. Jerome Maher and John Gravee
sued the Federal Deposit Insurance Corporation (“FDIC”)
seeking pension trust funds from their employment with
a failed bank. The district court determined that res judicata
barred the suit. Maher and Gravee appeal. Because the case
is moot, we dismiss. Additionally, to encourage finality in
this litigation, we alternatively affirm the district court’s
judgment that Maher’s and Gravee’s claims are barred by
res judicata, or claim preclusion.
2 No. 05-1701
I.
Jerome Maher served as the vice-president and John
Gravee as the president of First Federal Savings and Loan of
Wilmette, Illinois (“First Federal”). First Federal merged
with three failing financial institutions in 1982, forming
Horizon Federal Savings Bank (“Horizon”). Maher and
Gravee became the top two officers of the new institution.
The merger required Maher and Gravee to relinquish their
pension plans established at First Federal, with the under-
standing that a new plan could be established at Horizon
once the new institution gained financial stability. In
1985, Horizon did create a new plan for them: a “rabbi
trust,” in which the principal remained a general asset of
Horizon, allowing Horizon’s creditors to reach the trust
assets in the event of bankruptcy or some other event of
default. Two years later, the trust was amended to create
a “secular trust,” which placed the trust assets with an
independent trustee, beyond the reach of Horizon’s credi-
tors. Subsequently, on January 11, 1990, the federal Office of
Thrift Supervision (“OTS”) declared Horizon insolvent. The
OTS appointed the Resolution Trust Corporation (“RTC”) as
Horizon’s receiver. The RTC terminated Maher and Gravee
on June 28, 1990.
Maher and Gravee then requested payment of the pension
trust funds from its independent trustee. After the RTC
ordered the trustee not to disburse the funds, Maher and
Gravee filed suit against the trustee, the RTC, and Horizon
seeking the assets held in the trust funds. A district court
held that the secular trust violated 12 C.F.R. § 563.39 (1987)
and was therefore invalid. Maher v. Harris Trust & Sav. Bank,
No. 90-C-5118, 1994 WL 682625 (N.D. Ill. Dec. 5, 1994). This
court affirmed that decision. Maher v. Harris Trust & Sav.
Bank, 75 F.3d 1182, 1191 (7th Cir. 1996) (“[T]he property
No. 05-1701 3
interest plaintiffs acquired as a result of the trusts are void
and [ ] the trust assets will be shared by all persons with
proper claims against Horizon.”).
The RTC, which was succeeded by the FDIC, commenced
separate litigation, suing Maher, Gravee, and the directors
of Horizon for gross negligence. F.D.I.C. v. Maher, 966
F. Supp. 622 (N.D. Ill. 1997). Maher and Gravee filed
counterclaims against the RTC, OTS, and FDIC seeking the
trust funds and other compensation. After a settlement with
the other directors, Maher’s and Gravee’s counterclaims
were transferred to the Court of Federal Claims, where they
were dismissed for failure to state a claim. Maher v. United
States, 48 Fed. Cl. 585, 587 (Ct. Cl. 2001) (“[T]he facts [Maher
and Gravee] have pled, even when taken at face value, are
insufficient, as a matter of law, to make out a contract claim
against the United States.”). The Federal Circuit affirmed.
Maher v. United States, 314 F.3d 600 (Fed. Cir. 2002).
In this phase of the dispute, Maher and Gravee sued the
FDIC “as Successor Receiver of Horizon Federal Savings
Bank” seeking “enforcement of their remaining employment
and pension benefits.” They claim that the invalidation of
the secular trust resurrected the rabbi trust, and they seek
payment of those funds. The FDIC filed a motion to inter-
vene in its corporate capacity, as opposed to its capacity as
a receiver, to defend the lawsuit; this distinction is impor-
tant because the FDIC’s liability varies with its capacity. In
its corporate capacity, the FDIC’s liability for claims against
a receiver is limited to the assets of the receivership. 12
U.S.C. § 1821(i)(2). The district court permitted the interven-
tion and determined that the claims against the FDIC were
barred by res judicata. Maher and Gravee appeal. The FDIC
argues on appeal that this court lacks subject matter juris-
4 No. 05-1701
diction, that the claims are moot, and that they are barred by
res judicata.
II.
We first address this court’s subject matter jurisdiction.
The complaint states generally that “Defendants [sic] failure
to honor [Maher’s and Gravee’s] pension rights is
a violation of federal law.” The complaint then cites to
the “Employe[e] Retirement Income Security Act, 29
U.S.C. § 1140 et seq. (ERISA).” Earlier in the complaint,
Maher and Gravee also refer to the Financial Institutions
Reform Recovery and Enforcement Act (FIRREA). On
appeal, they claim that both acts provide a basis for sub-
ject matter jurisdiction.
Under FIRREA, a claimant can file an administrative
claim with the receiver, which then has 180 days to allow or
deny the claim. If the receiver denies or does not render a
decision within 180 days, the claimant has 60 days to file
suit. Federal courts lack jurisdiction to address claims that
fail to comply with FIRREA’s administrative claims process.
12 U.S.C. § 1821(d)(6)(A); Maher, 75 F.3d at 1190-91; Capitol
Leasing Co. v. F.D.I.C., 999 F.2d 188, 193 (7th Cir. 1993).
Maher and Gravee filed this lawsuit more than a year after
the termination of the receivership and more than a decade
after they claimed to have filed administrative claims on
April 12, 1990. Thus, since they failed to comply with the
administrative procedures, FIRREA does not provide
subject matter jurisdiction over these claims.
Nonetheless, Maher and Gravee also claim jurisdiction
based on ERISA. Although they only describe a claim under
ERISA in cursory fashion, they do invoke federal jurisdic-
tion on this basis. Even if the complaint may fail to state a
No. 05-1701 5
claim upon which relief may be granted, the court has
subject matter jurisdiction over the disposition of the ERISA
claim. Health Cost Controls v. Skinner, 44 F.3d 535, 537 (7th
Cir. 1995) (“[I]f a plaintiff fails to properly allege a claim for
relief brought under a federal statute, the case should be
dismissed under Federal Rule of Civil Procedure 12(b)(6),
rather than Rule 12(b)(1) [for lack of subject matter jurisdic-
tion].” (citation omitted)); Kolupa v. Roselle Park Dist., 438
F.3d 713, No. 05-2925, 2006 WL 306955, (7th Cir. Feb. 10,
2006) (“[C]omplaints need not plead facts and need not
narrate events that correspond to each aspect of the applica-
ble legal rule.”); see also Primax Recoveries, Inc. v. Gunther,
433 F.3d 515, 517 (6th Cir. 2006) (“[A] federal court has
subject-matter jurisdiction, even if the plaintiff is unable to
state a claim upon which relief can be granted.”). Therefore,
we have subject matter jurisdiction over the ERISA claims.
Maher and Gravee, however, cannot overcome the
next hurdles of mootness and res judicata. “Under Article
III of the Constitution, the exercise of federal judicial pow-
er depends on the existence of a justiciable case or con-
troversy; federal courts do not have jurisdiction to re-
view moot cases.” Buckley v. Archer-Daniels-Midland Co.,
111 F.3d 524, 526 (7th Cir. 1997) (citation and internal
quotation omitted). This court has stated that “[a] case is
moot if there is no possible relief which the court could
order that would benefit the party seeking it.” In re
Envirodyne Indus., 29 F.3d 301, 303 (7th Cir. 1994) (citation
omitted).
Maher and Gravee brought this suit against the FDIC,
which appears only in its corporate capacity. In that capac-
ity, the FDIC is not liable for any other actions taken by the
FDIC in its capacity as a receiver. See F.D.I.C. v. Roldan
Fonesca, 795 F.2d 1102, 1109 (1st Cir. 1986). The Horizon
6 No. 05-1701
receivership was terminated on January 1, 2002, prior to the
filing of this case. Advanced notice of the termination was
published in the Federal Register. Notice, 64 Fed. Reg. 41121(July 29, 1999). With the termination, the receivership ceased
to exist as a legal entity and the FDIC in its corporate
capacity assumed only limited liabilities from the receiver,
which cannot exceed the liquidated assets of Horizon. 12
U.S.C. § 1821(i)(2). Presently, as the FDIC succinctly states
in its brief, “[n]o assets remain to satisfy a judgment in [ ]
favor [of Maher or Gravee].” Without any receivership
assets, there can be no recovery from the FDIC in its corpo-
rate capacity. See First Ind. Fed. Sav. Bank v. F.D.I.C., 964 F.2d
503, 507 (5th Cir. 1992) (“Congressional policy requires that
creditors of failed institutions look only to the assets of the
institution for recovery of their losses, and not to the
taxpayers.”). Since the FDIC’s corporate liability is limited
to the assets of the receivership, and since the receivership
is now terminated and without assets, there is no possible
relief for this court to order for Maher or Gravee against
the FDIC in its corporate capacity. We therefore dismiss
for lack of a justiciable case or controversy.
Alternatively, even if the court were able to order relief,
the claims are clearly barred by the doctrine of res judicata,
or claim preclusion. In fact, this case presents a paradigm of
the doctrine. As this court has instructed, “[r]es judicata bars
suits where there is [1] a final judgment on the merits; [2] an
identity of the issues of the lawsuit; and [3] an identity of
the parties or their privies.” Hamdan v. Gonzales, 425 F.3d
1051, 1059 (7th Cir. 2005) (internal quotation and citation
omitted). Res judicata also bars litigation of claims that
“could have been raised” in the previous litigation, but were
not. Golden v. Barenborg, 53 F.3d 866, 869-70 (7th Cir. 1995).
No. 05-1701 7
The FDIC, Maher, and Gravee were parties in previous
litigation that rendered a final judgment on the merits.
Maher and Gravee had the opportunity to raise these claims
in not one, but two previous lawsuits. First, Maher and
Gravee sued the trustee of the secular trust and Horizon’s
receiver (whose liability was ultimately assumed by the
FDIC), seeking the pension funds. Notably, that litigation
concluded that the secular trust was invalid and even
addressed claims about the rabbi trust, stating that:
Plaintiffs seek as alternative relief, a declaration that the
provisions of the rabbi trust be revived under the
doctrine of substitution of contracts. However, the
authorities plaintiffs cite do not support this novel
contention and I decline to adopt it. Furthermore,
revival of the rabbi trust would not change plaintiffs’
rights with respect to the assets of the trust. Beneficia-
ries of a rabbi trust established by a thrift are unsecured
creditors of the thrift; the [ ] receiver is entitled to the
trust assets.
Maher, 1994 WL 682625, at *2, aff’d Maher, 75 F.3d at 1191.
Next, in the Court of Claims, Maher and Gravee brought
a claim against the United States for its actions “through the
RTC, OTS, and FDIC.” Maher, 314 F.3d at 602. The Federal
Circuit, in affirming the Court of Claims’s deci-
sion dismissing the claim, stated that:
To the extent Maher and Gravee have a claim for breach
of their employment contracts, including a claim for
payment of the proceeds of the deferred compensation
trust, established for them by Horizon, such a claim
would be directly against Horizon through its receiver,
not indirectly through the government. Maher and
Gravee made a failed attempt at such a claim more than
8 No. 05-1701
ten years ago when they sued Harris Bank, Horizon,
and the RTC. See Maher, 75 F.3d at 1187, 1190-91.
Moreover, under FIRREA, persons having claims
against the assets of a thrift are subject to the adminis-
trative claims review process prescribed by 12 U.S.C. §
1821(d). The government argues that Maher and Gravee
have failed to timely follow these procedures; Maher
and Gravee argue otherwise. This issue is not framed by
the Amended Complaint and is not properly before us
on appeal.
Id. at 607 n.2. The Federal Circuit then concluded that “[t]he
Amended Complaint in this case does not establish a cause
of action against the government for . . . payment of the
proceeds of the deferred compensation trusts.” Id. at 607.
Maher and Gravee pursued or could have pursued claims
on the secular and rabbi trusts in these previous cases. Their
appellate brief even admits this continuing endeavor,
stating that “[f]or 15 years of litigation, [Maher and Gravee]
have sought to enforce these contractual rights.” Under the
doctrine of res judicata, Maher and Gravee are not entitled
to seek repeatedly the pension funds on marginally different
theories. Therefore, even if this case presented a justiciable
case or controversy, their claims would be barred by the
doctrine of res judicata.
III.
Because Maher and Gravee fail to present a justiciable
controversy, we DISMISS. Alternatively, we AFFIRM the
district court’s conclusion that the claims are barred by
the doctrine of res judicata.
No. 05-1701 9
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-21-06