Michael Grady v. Jonathan Levin ( 2016 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FILED
FOR THE NINTH CIRCUIT
JUL 25 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
MICHAEL GRADY and JENNIFER No. 14-16457
GRADY,
D.C. No. 2:11-cv-02060-JAT
Plaintiffs-Appellants,
v. MEMORANDUM*
JONATHAN LEVIN; et al.,
Defendants-Appellees,
TRI CITY NATIONAL BANK, a national
bank,
Defendant-counter-claimant-
Appellee,
and
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for Bank of
Elmwood, a Wisconsin corporation,
Intervenor-Defendant.
Appeal from the United States District Court
for the District of Arizona
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
James A. Teilborg, District Judge, Presiding
Submitted July 21, 2016**
San Francisco, California
Before: GRABER and TALLMAN, Circuit Judges, and RAKOFF,*** District
Judge.
This case centers on whether Michael and Jennifer Grady (the Gradys) can
assert violations of the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq.,
against Tri City National Bank (TCNB) for conduct preceding its acquisition of the
assets of a failed bank. In 2008, the Gradys entered into a loan with the Bank of
Elmwood. The bank was subsequently placed into receivership, and its assets were
purchased by TCNB. The district court denied the Gradys’ motion for leave to
amend their complaint to add TILA claims against TCNB, finding that amendment
would be futile. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
We hold that the Gradys’ proposed TILA claims against TCNB “relat[e] to
any act or omission” of the original bank—the Bank of Elmwood—and are subject
to dismissal under the Financial Institutions, Reform, Recovery, and Enforcement
Act (FIRREA) of 1989, 12 U.S.C. § 1821(d)(13)(D)(ii). The Gradys’ proposed
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Jed S. Rakoff, United States District Judge for the
Southern District of New York, sitting by designation.
2
TILA claim that stems from alleged disclosure defects in the original loan
documents, see 15 U.S.C. § 1641(e), is “based on the conduct of the failed
institution” because the operative loan documents were drafted and executed by the
Bank of Elmwood, not TCNB. Rundgren v. Wash. Mut. Bank, FA, 760 F.3d 1056,
1064 (9th Cir. 2014), cert denied, 135 S. Ct. 1560 (2015). And TCNB never
assumed liability for the Bank of Elmwood’s potential malfeasance prior to the
acquisition from the Federal Deposit Insurance Corporation.
Similarly, we find that the Gradys’ proposed TILA rescission claim against
TCNB, see 15 U.S.C. § 1635, plainly qualifies as “functionally, albeit not formally
against [the] failed bank.” Benson v. JPMorgan Chase Bank, N.A., 673 F.3d 1207,
1215 (9th Cir. 2012) (internal quotation marks omitted). Because the Gradys did
not exercise their right to rescind within the unconditional three-day period, the
timeliness of their notice of rescission is entirely contingent on the Bank of
Elmwood’s alleged “fail[ure] to satisfy [TILA’s] disclosure requirements.”
Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015).
In sum, we hold that the Gradys’ proposed TILA claims must first be
exhausted under FIRREA.
AFFIRMED.
3