American National Insurance v. Federal Deposit Insurance , 642 F.3d 1137 ( 2011 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 5, 2011 Decided June 24, 2011
No. 10-5245
AMERICAN NATIONAL INSURANCE COMPANY AND AMERICAN
NATIONAL PROPERTY AND CASUALTY COMPANY,
APPELLANTS
FARM FAMILY LIFE INSURANCE COMPANY AND FARM FAMILY
CASUALTY INSURANCE COMPANY,
APPELLANTS
NATIONAL WESTERN LIFE INSURANCE COMPANY,
APPELLANT
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER
FOR WASHINGTON MUTUAL BANK, HENDERSON, NEVADA, ET
AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cv-01743)
Gregory Stuart Smith argued the cause for appellants. With
him on the briefs were Andrew J. Mytelka and James M.
Roquemore.
2
Joseph Brooks, Counsel, Federal Deposit Insurance
Corporation, argued the cause for appellee Federal Deposit
Insurance Corporation, As Receiver For Washington Mutual
Bank. With him on the brief were Colleen J. Boles, Assistant
General Counsel, Lawrence H. Richmond, Senior Counsel, and
John J. Clarke Jr. R. Craig Lawrence, Assistant U.S. Attorney,
entered an appearance.
Robert A. Sacks argued the cause for appellees JPMorgan
Chase & Co., et al. On the brief were Bruce E. Clark and Stacey
R. Friedman.
Before: SENTELLE, Chief Judge, TATEL, Circuit Judge, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Chief Judge SENTELLE.
SENTELLE, Chief Judge: Bondholders of the failed
Washington Mutual Bank allege that JPMorgan Chase, through
a series of improper acts, pressured the federal government to
seize Washington Mutual Bank and then sell to it the bank’s
most valuable assets, without any accompanying liabilities, for
a drastically undervalued price. The bondholders asserted three
Texas state law claims in Texas state court, but, after the Federal
Deposit Insurance Corporation intervened in the lawsuit, the
case was removed to federal district court. Finding that 12
U.S.C. § 1821(d)(13)(D)(ii) jurisdictionally barred appellants
from obtaining judicial review of their claims because they had
not exhausted their administrative remedies under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the
district court dismissed appellants’ complaint. Because we hold
that appellants’ suit falls outside the scope of the jurisdictional
bar of § 1821(d)(13)(D), we reverse the decision of the district
court and remand for further proceedings.
3
I.
On review of a district court’s dismissal of a complaint for
lack of subject matter jurisdiction, we make legal determinations
de novo. Nat’l Air Traffic Controllers Ass’n, AFL-CIO v. Fed.
Serv. Impasses Panel, 606 F.3d 780, 786 (D.C. Cir. 2010); see
FED. R. CIV. P. 12(b)(1). We assume the truth of all material
factual allegations in the complaint and “construe the complaint
liberally, granting plaintiff the benefit of all inferences that can
be derived from the facts alleged,” Thomas v. Principi, 394 F.3d
970, 972 (D.C. Cir. 2005) (quoting Barr v. Clinton, 370 F.3d
1196, 1199 (D.C. Cir. 2004)); see also Talenti v. Clinton, 102
F.3d 573, 574–75 (D.C. Cir. 1996), and upon such facts
determine jurisdictional questions. Applying that standard to the
complaint before us, we assume the following facts:
Prior to September 2008, Washington Mutual Bank
(“WMB”), a wholly owned subsidiary of Washington Mutual,
Inc. (“WMI”), was the nation’s largest savings and loan
association. Compl. ¶ 33. However, on September 25, 2008,
the Office of Thrift Supervision (“OTS”) seized WMB and
placed it in receivership with the Federal Deposit Insurance
Corporation (“FDIC”). Id. ¶ 64. On the same day, the FDIC
signed a purchase and assumption agreement with JPMorgan
Chase & Co. and its wholly owned subsidiary JPMorgan Chase
Bank (collectively, “JPMC”), in which it agreed to sell to JPMC
for $1.9 billion “the most valuable assets of [WMB] without any
of [its] liabilities,” including its obligations to unsecured debt
holders and litigation risk. Id. ¶ 67. WMB’s bond contracts
remained with the FDIC-as-receiver, which now cannot meet its
obligations under the contracts. Id. ¶ 71. Left without its
“primary income-producing asset,” WMI, which filed for
bankruptcy immediately following the sale of WMB’s assets to
JPMC, became similarly unable to service its bond contracts,
and its common stock was rendered worthless. Id. ¶ 70.
4
Again assuming the truth of the allegations in the
complaint, the dramatic fall of WMB and WMI (collectively,
“Washington Mutual”) was engineered by JPMC. JPMC
engaged in an elaborate scheme designed to “improperly and
illegally take advantage of the financial difficulties of [WMI]”
and “strip away valuable assets of Washington Mutual without
properly compensating the company or its stakeholders.” Id. ¶¶
20, 30. To carry out this scheme, JPMC first “strategically
plac[ed] key personnel [at Washington Mutual] to gather
information regarding Washington Mutual’s strategic business
decisions and financial health,” id. ¶ 25, and “misus[ed] access
to government regulators to gain non-public information” about
Washington Mutual, id. ¶ 32. Further, when Washington
Mutual sought to sell itself, JPMC “misrepresented to
Washington Mutual that it would negotiate in good faith for the
purchase of the company” and engaged in sham negotiations
with Washington Mutual to gain access to Washington Mutual’s
confidential financial information. Id. ¶¶ 53–54. Then, despite
signing a confidentiality agreement with Washington Mutual,
JPMC leaked harmful information to news media, government
regulators, and investors, in an effort to “distort the market and
regulatory perception of Washington Mutual’s financial health,”
id. ¶¶ 46, 54, 58.
JPMC also applied direct pressure on the FDIC to effectuate
its scheme: It “exerted improper influence over government
regulators to prematurely seize Washington Mutual . . . and to
sell assets of Washington Mutual without an adequate or fair
bidding process,” id. ¶ 32. Indeed, prior to the seizure of WMB,
JPMC had already negotiated an agreement with the FDIC that,
anticipating the seizure of WMB, set forth the requirements for
a bid to purchase assets of WMB-in-receivership and provided
for the transfer of WMB’s valuable assets by the FDIC-as-
receiver to JPMC, at a large profit to JPMC. Id. ¶¶ 47, 58, 62.
5
JPMC used its inside knowledge of Washington Mutual to
create a bid for WMB that would be profitable to JPMC. Id.
¶ 58. When, just prior to the seizure of WMB, the FDIC sought
official bids for WMB, JPMC submitted its prearranged bid, id.
¶¶ 58, 62–63, and the FDIC accepted it, id. ¶ 64. In quick
succession, OTS then seized WMB and JPMC signed a purchase
and sale agreement with the FDIC for the below-market sale of
WMB’s “cherry-picked” assets, stripped of liabilities. Id. ¶¶ 43,
64, 67.
On February 16, 2009, several insurance companies that
hold bonds of WMB and bonds and stocks of WMI filed suit
against JPMC in the District Court of Texas, Galveston County,
alleging that JPMC’s execution of its scheme had injured the
value of their stocks and bonds. The insurance companies
asserted three Texas state law claims: tortious interference with
existing contract, id. ¶¶ 88–93, breach of confidentiality
agreement, id. ¶¶ 94–99, and unjust enrichment, id. ¶¶ 100–03.
After JPMC filed its answer, the FDIC intervened in the
lawsuit and thereby became a party to the action. See TEX. R.
CIV. P. 60 (“Any party may intervene by filing a pleading,
subject to being stricken out by the court for sufficient cause on
the motion of any party.”). The FDIC then removed the action
to the U.S. District Court for the Southern District of Texas, see
12 U.S.C. § 1819(b)(2)(A) (“[A]ll suits of a civil nature at
common law or in equity to which the [FDIC], in any capacity,
is a party shall be deemed to arise under the laws of the United
States.”); 28 U.S.C. § 1331 (“The district courts shall have
original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States.”), and
successfully moved for a transfer of venue to the U.S. District
Court for the District of Columbia.
6
Before the District Court for the District of Columbia, the
FDIC and JPMC both filed motions to dismiss, and plaintiffs
filed a motion to remand to Texas state court. Prior to
disposition of these motions, plaintiffs voluntarily dismissed
with prejudice all claims premised upon harm to their WMI
bonds or stock. As a result, four original plaintiffs lost their
stake in the suit, and all remaining claims alleged damage solely
to WMB bonds.
On April 13, 2010, the district court issued a Memorandum
Opinion and Order granting the FDIC and JPMC’s motions to
dismiss and denying plaintiffs’ motion to remand, holding that
it lacked jurisdiction over plaintiffs’ suit. Am. Nat’l. Ins. Co. v.
JPMorgan Chase & Co., 705 F. Supp. 2d 17 (D.D.C. 2010).
Plaintiffs timely moved to alter or amend the judgment and
requested leave to file an amended complaint. The district court
denied their motion on July 19, 2010. Plaintiffs appeal the
district court’s April 13, 2010, and July 19, 2010, orders.
II.
The district court held that the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 (“FIRREA” or
“the Act”) barred it from exercising jurisdiction to hear
appellants’ claims. It held that because appellants’ injuries
depended on the FDIC’s sale of Washington Mutual’s assets to
JPMC, § 1821(d)(13)(D)(ii) of FIRREA required it to dismiss
appellants’ complaint. Id. at 21.
Passed to “enable the FDIC . . . to expeditiously wind up the
affairs of literally hundreds of failed financial institutions
throughout the country,” Freeman v. FDIC, 56 F.3d 1394, 1398
(D.C. Cir. 1995), FIRREA creates an administrative claims
process for banks in receivership with the FDIC. 12 U.S.C.
§ 1821(d)(3)–(13). The Act requires the FDIC to give notice to
7
the failed bank’s creditors to file claims against the bank,
§ 1821(d)(3)(b), and authorizes the FDIC to receive and then
disallow or allow and pay such claims, § 1821(d)(5), (10).
FIRREA allows claimants either to obtain administrative
review, followed by judicial review, of “any [disallowed] claim
against a depository institution for which the [FDIC] is
receiver,” or to file suit for de novo consideration of the
disallowed claim in a district court. § 1821(d)(6)–(7). It also
prevents a court from exercising jurisdiction, “[e]xcept as
otherwise provided” in the Act, over:
(i) any claim or action for payment from, or any action
seeking a determination of rights with respect to, the assets
of any depository institution for which the [FDIC] has been
appointed receiver, including assets which the [FDIC] may
acquire from itself as such receiver; or
(ii) any claim relating to any act or omission of such
institution or the [FDIC] as receiver.
§ 1821(d)(13)(D).
Noting that § 1821(d)(6) is “[t]he only clause of the
subsection that ‘otherwise provide[s]’ jurisdiction,” Auction Co.
of Am. v. FDIC, 141 F.3d 1198, 1200 (D.C. Cir. 1998), we have
described § 1821(d)(6) and § 1821(d)(13)(D) as setting forth a
“standard exhaustion requirement,” id. Section 1821(d)(6)(A)
“routes claims through an administrative review process, and
[§ 1821](d)(13)(D) withholds judicial review unless and until
claims are so routed.” Id.; see also Freeman, 56 F.3d at 1400(“Section 1821(d)(13)(D) thus acts as a jurisdictional bar to
claims or actions by parties who have not exhausted their
§ 1821(d) administrative remedies.”).
8
The question we must answer, the same as that addressed by
the district court, is whether § 1821(d)(13)(D) applies to and
bars the suit brought by appellants. The FDIC and JPMC argue
that subsection (ii) of § 1821(d)(13)(D) bars appellants’ claims,
in the absence of administrative exhaustion under § 1821(d)(6),
because they “relat[e] to” an act of the FDIC-as-receiver: the
FDIC’s sale of Washington Mutual’s assets to JPMC.
Alternatively, they contend that subsection (i) of the same
provision withholds jurisdiction without administrative
exhaustion because appellants’ claims are “for payment from, or
. . . seek[] a determination of rights with respect to, the assets”
of Washington Mutual.
We disagree. First, subsection (ii) of § 1821(d)(13)(D) bars
only claims that relate to an act or omission of the failed bank or
the FDIC-as-receiver, and appellants’ suit is simply not a
“claim” under FIRREA. In FIRREA, the word “claim” is a
term-of-art that refers only to claims that are resolvable through
the FIRREA administrative process, and the only claims that are
resolvable through the administrative process are claims against
a depository institution for which the FDIC is receiver. Because
appellants’ suit is against a third-party bank for its own
wrongdoing, not against the depository institution for which the
FDIC is receiver (i.e., Washington Mutual), their suit is not a
claim within the meaning of the Act and thus is not barred by
subsection (ii).
Second, although subsection (i) of § 1821(d)(13)(D) reaches
more broadly than (ii), encompassing not just “claims” but also
“action[s] for payment from, or . . . seeking a determination of
rights with respect to, the assets of any depository institution for
which the [FDIC] has been appointed receiver,” its plain
language excludes the suit brought by appellants. Appellants’
suit seeks relief from JPMC for its own conduct; the mere fact
that JPMC now owns assets that Washington Mutual once
9
owned does not render this suit one against or seeking a
determination of rights with respect to those assets. See Rosa v.
Resolution Trust Corp., 938 F.2d 383, 394 (3d Cir. 1991)
(holding that claims for damages against assuming bank for its
own acts did not fall within jurisdictional bar of subsection (i)
because “they seek neither payment from nor a determination of
rights with respect to the assets of [the bank-in-receivership]”
but from the assuming bank).
An examination of FIRREA as a whole demonstrates that
“claim” is a term-of-art that encompasses only demands that are
resolvable through the administrative process set out by
FIRREA. The Act creates a comprehensive administrative
mechanism simply for the processing and resolution of “claims.”
Indeed, it builds the components of the administrative
mechanism by defining how “claims” are to be treated at each
stage of the administrative process. For example, after
establishing the “[a]uthority of [the FDIC-as-receiver] to
determine claims,” § 1821(d)(3), and the FDIC’s “[r]ulemaking
authority relating to determination of claims,” § 1821(d)(4),
FIRREA sets forth the “[p]rocedures for determination of
claims,” § 1821(d)(5), the requirements for “agency review or
judicial determination of claims,” § 1821(d)(6), the content of
administrative “[r]eview of claims,” § 1821(d)(7), the
availability of “[e]xpedited determination of claims,”
§ 1821(d)(8), the exclusion of certain “[a]greement[s] as
[forming the] basis of claim[s],” § 1821(d)(9), and the authority
of the FDIC to make “[p]ayment of claims,” § 1821(d)(10). It
borders on tautology, therefore, that “claims” are necessarily
demands that come within the scope of FIRREA’s
administrative process. Stated another way, demands
unresolvable through the process are not “claims,” as the term
is used in the Act. See Homeland Stores, Inc. v. Resolution
Trust Corp., 17 F.3d 1269, 1274 (10th Cir. 1994) (“As a
practical matter of statutory construction, . . . we proceed on the
10
assumption that Congress intended the ‘claims’ barred
by § 1821(d)(13)(D) to parallel those contemplated under
FIRREA’s administrative claims process laid out in the greater
part of § 1821(d).”); Rosa, 938 F.2d at 394 (“Whatever its
breadth, we do not believe that clause (ii) [of § 1821(d)(13)(D)]
encompasses claims that are not susceptible of resolution
through the claims procedure.”).
Several factors convince us that only claims against
depository institutions for which the FDIC has been appointed
receiver can be processed by the administrative system set forth
in FIRREA. First, § 1821(d)(5)(A)(i), entitled “Procedures for
determination of claims: Determination period: In general,”
provides that “[b]efore the end of the 180-day period beginning
on the date any claim against a depository institution is filed
with the [FDIC] as receiver, the [FDIC] shall determine whether
to allow or disallow the claim” (emphasis added). FIRREA does
not contain any other deadline for FDIC action for other types
of claims. No other kinds of claims are ever specified in the
provisions setting forth the administrative claims process.
Rather, § 1821(d)(6), which establishes the availability of
“agency review or judicial determination of claims,” similarly
governs only “claim[s] against a depository institution for which
the [FDIC] is receiver,” and subsequent claims process
provisions refer simply to “claims.” Furthermore, FIRREA
authorizes the FDIC to allow and pay claims, see
§ 1821(d)(3)(A), (5)(B), (10)(A)–(B), and requires the FDIC to
distribute “amounts realized from the liquidation or other
resolution of any insured depository institution” in payment of
claims, see § 1821(d)(11)(A). That such relief would be
categorically inappropriate in cases not against a depository
institution for which the FDIC is receiver strengthens our
conviction that FIRREA’s administrative claims process is
available only to claims against depository institutions.
11
The FDIC and JPMC argue that the jurisdictional bar of
§ 1821(d)(13)(D) demonstrates that claims other than those
against a depository institution can go through the administrative
claims process. They claim that the broad language used in that
subsection demonstrates that the claims process was intended to
be more widely available. To be sure, we have construed
§ 1821(d)(6)’s “claim against a depository institution” language
broadly in light of §§ 1821(d)(13)(D)(i) and (ii). See Freeman
v. FDIC, 56 F.3d 1394, 1400–01 (D.C. Cir. 1995); OPEIU,
Local 2 v. FDIC, 962 F.2d 63, 67 (D.C. Cir. 1992). Indeed, to
have done otherwise would mean either ignoring Congress’s use
of such broad language in § 1821(d)(13)(D) or transforming
FIRREA from an administrative exhaustion scheme into a grant
of immunity, “a result troubling from a constitutional
perspective and certainly not the goal of FIRREA,” Auction Co.
v. FDIC, 141 F.3d 1198, 1200 (D.C. Cir. 1998); see also id.(“Congress did not intend FIRREA’s claims process to
immunize the receiver, but rather wanted to require exhaustion
of the receivership claims before going to court.” (quoting
Hudson United Bank v. Chase Manhattan Bank of Conn., 43
F.3d 843, 848–49 (3d Cir. 1994))). We, however, have only
construed the claims process broadly where either the failed
depository institution or the FDIC-as-receiver might be held
legally responsible to pay or otherwise resolve the asserted
claim. Where, as here, neither the failed depository institution
nor the FDIC-as-receiver bears any legal responsibility for
claimant’s injuries, the claims process offers only a pointless
bureaucratic exercise. See supra 10–11. And we doubt
Congress intended to force claimants into a process incapable of
resolving their claims.
The FDIC and JPMC also assert that the principle
motivating the Sixth Circuit’s decision in Village of Oakwood v.
State Bank & Trust Co., 539 F.3d 373 (6th Cir. 2008), bars this
lawsuit. In Village of Oakwood, depositors of a failed bank sued
12
another bank (the “assuming bank”) that had purchased various
assets and liabilities of the failed bank from the FDIC-as-
receiver. 539 F.3d at 376. Although plaintiffs in that case
named only the assuming bank as a defendant in the action, their
complaint alleged that the FDIC, not the assuming bank, had
breached its fiduciary duty. Id. One of the four claims asserted
against the third-party bank was aiding and abetting the FDIC’s
breach of its fiduciary duty. Id. Holding that plaintiffs’ claims
fell within the jurisdictional bar of FIRREA, the court of appeals
explained that “permit[ting] claimants to avoid [the] provisions
of [§ 1821](d)(6) and [§ 1821](d)(13) by bringing claims against
the assuming bank . . . would encourage the very litigation that
FIRREA aimed to avoid.” Id. at 386 (quoting Brady Dev. Co.
v. Resolution Trust Corp., 14 F.3d 998, 1002–03 (4th Cir. 1994))
(alterations in original). In other words, the court of appeals
rightly noted that plaintiffs cannot circumvent FIRREA’s
jurisdictional bar by drafting their complaint strategically.
Where a claim is functionally, albeit not formally, against a
depository institution for which the FDIC is receiver, it is a
“claim” within the meaning of FIRREA’s administrative claims
process. Thus because the Village of Oakwood plaintiffs’ suit
was functionally a claim against the FDIC-as-receiver, which is
a claim against the depository institution for which the FDIC is
receiver, see O’Melveny & Myers v. FDIC, 512 U.S. 79, 86
(1994) (“[T]he FDIC as receiver steps into the shoes of the
failed [bank]”) (internal quotations marks omitted);
§ 1821(d)(2)(A) (“[T]he [FDIC] shall, . . . by operation of law,
succeed to all rights, titles, powers, and privileges of the insured
depository institution.”), the court of appeals correctly held the
action jurisdictionally barred.
The suit appellants press, however, is clearly
distinguishable from that in Village of Oakwood. As just
described, in Village of Oakwood the wrongdoing alleged was
perpetrated by the FDIC-as-receiver, which the assuming bank
13
allegedly aided and abetted. Here, in contrast, appellants allege
that JPMC, not the FDIC-as-receiver or Washington Mutual,
itself committed the tortious acts for which they claim relief.
Although the complaint alleges that the FDIC engaged in
conduct without which JPMC’s tortious acts would not have
caused injury to appellants, that actions by the FDIC form one
link in the causal chain connecting JPMC’s wrongdoing with
appellants’ injuries is insufficient to transform the complaint
into one against the FDIC.
The FDIC and JPMC maintain that this case resembles
Village of Oakwood because appellants’ complaint is similarly
premised upon wrongdoing by the FDIC: They argue that the
complaint alleges an agreement between JPMC and the FDIC to
commit the torts alleged. However, even if a suit against only
a third party that alleged a conspiracy between the FDIC and the
third party to commit the acts forming the basis of the claim
were properly characterized as a suit against a depository
institution—a question we do not reach—that is not the case
here. Although appellants’ complaint may be susceptible to the
interpretation urged by the FDIC and JPMC, the procedural
posture of this case requires us to construe the complaint
liberally, in the light most favorable to appellants. Thomas v.
Principi, 394 F.3d 970, 972 (D.C. Cir. 2005). Doing so, we read
the complaint to allege that JPMC alone committed the
wrongdoing for which appellants sue and find no agreement
between JPMC and the FDIC.
We therefore hold that § 1821(d)(13)(D) does not withdraw
jurisdiction from the judiciary to entertain appellants’ lawsuit
because their complaint neither asserts a “claim” under FIRREA
nor constitutes an action for payment from, or seeking a
determination with respect to, the assets of a depository
institution for which the FDIC is receiver.
14
III.
The FDIC and JPMC argue that we should uphold the
district court’s dismissal of appellants’ complaint on an
alternative jurisdictional ground. They contend that appellants
lacked standing to bring their claims because the claims are for
generalized harm to Washington Mutual and thus belong to the
FDIC-as-receiver. See 12 U.S.C. § 1821(d)(2)(A) (“The [FDIC]
shall, as conservator or receiver, and by operation of law,
succeed to all rights, titles, powers, and privileges of the insured
depository institution, and of any stockholder, member,
accountholder, depositor, officer, or director of such institution
with respect to the institution and the assets of the institution.”).
Perhaps it is true that if either the exclusive right to bring
appellants’ claims or the right to preclude appellants from
bringing those claims rested with Washington Mutual, that right
was passed to the FDIC-as-receiver by operation of
§ 1821(d)(2)(A) and appellants may not assert those claims here.
However, the question whether Washington Mutual had any
such right was not decided by the district court. This question
is complex and involves several layers of inquiry: Are the
“rights, titles, powers, and privileges” inherited by the FDIC-as-
receiver from Washington Mutual determined exclusively by
reference to state law or does federal law play a role? If we
should look to state law, which state’s law governs the claims
asserted in this case? What is the substance of the applicable
body of law? And, most basically, is the ownership of the
claims presented below a jurisdictional question, as the FDIC
and JPMC suggest, or is it a question of whether appellants have
a cause of action? We need not answer these knotty questions
and instead remand to the district court to consider them in the
first instance.
15
Because we conclude that § 1821(d)(13)(D) did not bar the
district court from hearing appellants’ suit and remand to the
district court for further proceedings, we do not reach
appellants’ alternative arguments regarding the availability of
subject matter jurisdiction or appellants’ contention that the
district court erred in denying its motion to alter or amend the
judgment and for leave to file an amended complaint.
IV.
For the reasons set forth above, we reverse the order of the
district court and remand for proceedings consistent with this
opinion.