Suess v. Federal Deposit Insurance Corporation ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
C. ROBERT SUESS, )
)
Plaintiff, )
)
v. ) Civil Action No. 09-2126 (JMF)
)
FEDERAL DEPOSIT INSURANCE )
CORPORATION, AS RECEIVER FOR )
THE BENJ. FRANKLIN FEDERAL )
SAVINGS AND LOAN ASSOCIATION )
)
Defendant. )
____________________________________)
MEMORANDUM OPINION
This case was referred to me for all purposes including trial. Currently pending and
ready for resolution are 1) Plaintiff C. Robert Suess’ Motion for Summary Judgment and
Supporting Memorandum of Points and Authorities [#10] (“Plains. MSJ”) and 2) FDIC’s Cross
Motion for Summary Judgment and Memorandum of Points and Authorities [#11]. For the
reasons stated below, plaintiff’s motion will be denied and defendant’s motion will be granted.
STATEMENT OF MATERIAL FACTS NOT IN DISPUTE
The following statement is premised on the summary of the pertinent facts contained in
the Federal Circuit’s decision in Suess v. United States, 535 F.3d 1348 (Fed. Cir. 2009) and in
the Complaint for Relief (“Compl.”) [#1].
1. Plaintiff, C. Robert Suess (“plaintiff” or “Suess”), is a resident of Eugene, Oregon, and a
major shareholder of Benj. Franklin Federal Savings & Loan Association (“Benj.
Franklin”), a bank based in Portland, Oregon.
2. Defendant is the Federal Deposit Insurance Corporation (“FDIC” or “the Receiver”).
3. The FDIC was established under the Federal Deposit Insurance Act and is the primary
federal regulator of state-chartered savings banks. 12 U.S.C. § 1821.14. In September 1982, Benj. Franklin merged with Equitable Savings and Loan and in July
1985, purchased Western Heritage Savings and Loan Association.
5. In return for acquiring the assets and liabilities of Equitable Savings and Loan, the FDIC
and the Federal Savings and Loan Corporation (“FSLC”) let Benj. Franklin carry $342
million dollars of “supervisory goodwill” as a capital asset to be amortized over a period
of thirty-two years. Benj. Franklin received $6.8 million dollars in supervisory goodwill,
to be amortized over a period of up to twenty-five years, as a result of acquiring the
assets and liabilities of Western Heritage.
6. In late 1989, the Office of Thrift Supervision (“OTS”) “promulgated final regulations
implementing the requirement set forth in the Financial Institutions Reform, Recovery,
and Enforcement Act (“FIRREA”) that most of a thrift’s contracted-for supervisory
goodwill be excluded from its regulatory capital calculations.” Compl. ¶ 1.
7. In February 1990, federal regulators seized Benj. Franklin due to its failure to satisfy the
minimum regulatory capital requirements.
8. At that time, the Resolution Trust Corporation (“RTC”) was appointed to serve as Benj.
Franklin’s Receiver during wind down and liquidation.
1
All references to the United States Code or the Code of Federal Regulations are to the
electronic versions that appear in Westlaw or Lexis.
2
9. In September 1990, plaintiff and several other shareholders filed a lawsuit against the
United States for breach of contract. See Suess v. United States, 33 Fed. Cl. 89, 92
(1995).
10. On December 31, 1995, the FDIC became the Receiver for Benj. Franklin when, by
operation of statute, it succeeded to the rights and obligations of the RTC.
11. In the course of three separate decisions, the United States Court of Federal Claims held
that the United States was liable for the breach of two contracts, one in reference to Benj.
Franklin’s merger with Equitable and the other in reference to its purchase of Western
Heritage. See Suess, 535 F.3d at 1350.
12. On July 17, 2002, the Internal Revenue Service (“IRS”) filed a complaint in the United
States District Court for the District of Columbia against the FDIC, in its capacity as
Receiver, seeking resolution of its Amended Proof of Claim for $1,077,768,461. Compl.
¶ 27; United States’ Complaint for Judicial Determination of Tax Claims in FDIC
Receivership Proceeding and to Reduce Income Tax Assessments to Judgment [#1],
United States v. FDIC, No. 02-CIV-1429 (D.D.C. 2002). The matter was assigned to the
Honorable Emmet G. Sullivan, Associate Judge of this Court.
13. On December 13, 2006, the shareholders were awarded a final judgment of $52,008,750
by the Court of Federal Claims, payable to the FDIC in its capacity as Receiver. Suess,
535 F.3d at 1348.
14. In United States v. FDIC, Judge Sullivan approved a settlement under which, inter alia,
the FDIC, as Receiver, would pay $50 million in taxes due for the calendar years 1990-
2002 and plaintiff and the other shareholders would be reimbursed in full for the
3
attorney’s fees and costs expended in both the Court of Federal Claims and in the matter
before Judge Sullivan. See United States v. FDIC at [#33] (agreement attached to Order
approving settlement). That reimbursement was paid in full.
15. The United States then appealed the judgment, arguing that the trial court erred in finding
that Benj. Franklin entered into any valid contract with the United States regarding the
bank’s acquisition of Equitable in 1982.
16. On August 7, 2008, the United States Court of Appeals for the Federal Circuit reversed
the lower court’s ruling as to Equitable. Suess, 535 F.3d at 1367. The court also
remanded the case to the Court of Federal Claims “so that it may determine what
damages, if any, are necessary to compensate [Benj] Franklin for its losses associated
solely with the government’s breach of contract associated with the Franklin-Western
transaction.” Id.
17. On December 31, 2008, plaintiff submitted a proof of claim to the Receiver seeking
reimbursement for the attorney’s fees and costs expended on the appeal. Plains. MSJ at
Ex. 6.
18. On April 22, 2009, plaintiff, through his attorney, Thomas M. Buchanan, sent a letter to
Richard Gill of the FDIC. Plains. MSJ at Ex. 9. In the letter, plaintiff argues that he
should be reimbursed for the attorney’s fees and costs he incurred defending against the
government’s appeal because the FDIC would otherwise have had to do it and pay for it
from Benj. Franklin surplus funds. Id.
19. On September 15, 2009, the Receiver denied the $470,754.33 petition in its entirety.
Plains. MSJ at Ex. 7. According to the Receiver, plaintiff did not provide “a valid basis
4
for the reimbursement of attorney’s fees and costs in connection with an unsuccessful
appeal that reversed a judgment.” Plains. MSJ at Ex. 7.
CONCLUSIONS OF LAW
I. Standard of Review
Under FIRREA, a claimant may file suit in the United States District Court for the
District of Columbia. 12 U.S.C. § 1821(d)(6)(A)(ii). “FIRREA divests Article III courts of
subject matter jurisdiction over claims presented to the [FDIC] until the claimant has exhausted
administrative remedies” and “[s]ection 1821(d)(13)(D) limits the jurisdiction of district courts
to de novo review . . .” Orchard Hills Coop. Apartments, Inc. v. RTC, 779 F. Supp. 104, 106-07
(C.D. Ill. 1991). Accord Winston & Strawn LLP v. FDIC, No. 06-CIV-1120, 2007 WL
2059769, at *3 (D.D.C. July 13, 2007) (“[T]his Court reviews de novo claims filed with, and
processed by, the FDIC under its administrative claims process.”) (emphasis in original); Nants
v. FDIC, 864 F. Supp. 1211, 1217 (S.D. Fl. 1994) (“The judicial proceeding contemplated by
FIRREA consists of a de novo determination of [plaintiff’s] claim for unpaid fees and costs,
arising from his contract . . . not a review of the FDIC’s disallowance of the claim.”) (emphasis
in original).2
II. Standard for Summary Judgment
Both parties’ motions for summary judgment are made pursuant to Rule 56 of the Federal
Rules of Civil Procedure, which provides that “[t]he judgment sought should be rendered if the
pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no
2
At one point I questioned this Court’s jurisdiction over the subject matter, but based on the
parties’ submissions, I am convinced that this Court has jurisdiction over an action against the
FDIC in its capacity as receiver. See 12 U.S.C. § 1819(a).
5
genuine issue of material fact and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(c). See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Friendship
Edison Pub. Charter Sch. Collegiate Campus v. Nesbitt, 532 F. Supp. 2d 121, 122 (D.D.C.
2008).
III. Analysis
As noted above, in February 1990, after the OTS implemented the FIRREA regulations
that excluded a thrift’s contracted-for supervisory goodwill from the calculation of its regulatory
capitol, federal regulators seized Benj. Franklin due to its failure to satisfy the minimum
regulatory capital requirements. Shortly thereafter, in September 1990, plaintiff and several
other shareholders filed a lawsuit, in the Court of Federal Claims, against the United States for
breach of contract. Ultimately, in November 1998, that court held that the United States was
liable for the breach of two contracts.
In the meantime, the IRS filed a complaint against the Receiver seeking action on a Proof
of Claim for over one billion dollars. The IRS and the Receiver ultimately settled that claim. As
part of that settlement, the Receiver agreed to reimburse plaintiff and the other shareholders for
the attorney’s fees and costs expended both at trial in the Court of Federal Claims and in defense
of the tax claim in District Court.
A. The Receiver Did Not Breach Any Duty it had to Plaintiff and the Other
Shareholders
1. The Receiver Did Not Agree to Reimburse Plaintiff for His
Representation of the Shareholders Before the United States Court of
Appeals for the Federal Circuit
With respect to the proceedings before the Federal Circuit, it is conceded that there was
no express agreement between the parties relating to the reimbursement of plaintiff’s attorney’s
6
fees and costs. In the absence of an express agreement pertaining to attorney’s fees in the
Federal Circuit, that plaintiff and the other shareholders were reimbursed for their previous
efforts as part of a settlement agreement does not mean that plaintiff has an automatic right to
claim reimbursement in this case.
2. The Receiver Did Not Breach Either a Fiduciary or Statutory Obligation
to the Shareholders
Under FIRREA, the role of the FDIC, as Receiver, is defined as follows:
The Corporation shall, as conservator or receiver, and by operation
of law; succeed to - -
(i) all rights, titles, powers, and privileges of the insured depository
regulatory institution, and of any stockholder, member, account
holder, depositor, officer, or director of such institution with
respect to the institution and the assets of the institution ...
12 U.S.C. § 1821(d)(2)(A).
In addition, the FDIC may perform the following tasks:
(i) take over the assets of and operate the insured depository
institution with all the powers of the members or shareholders, the
directors, and the officers of the institution and conduct all
business of the institution;
(ii) collect all obligations and money due the institution;
(iii) perform all functions of the institution in the name of the
institution which are consistent with the appointment as
conservator or receiver; and
(iv) preserve and conserve the assets and property of such
institution.
12 U.S.C. § 1821(d)(6)(B). As Receiver, therefore, the FDIC has a statutory responsibility to
Benj. Franklin’s shareholders.
In addition, as Receiver, the FDIC also has a fiduciary responsibility to its shareholders.
See Golden Pacific Bancorp. v. FDIC, 375 F.3d 196, 201 (2d Cir. 2004) (“It is undisputed that,
7
as receiver, the FDIC owes a fiduciary duty to the [corporation’s] creditors and to [the
corporation].”).
Plaintiff’s first argument is that the FDIC, as Receiver of Benj. Franklin, breached both
its statutory and fiduciary obligations to plaintiff and the other shareholders by failing to defend
their interests in the proceedings before the court of appeals. Plains. Mot. at 7. Plaintiff
contends, therefore, that he is entitled to reasonable attorney’s fees because he did what the
Receiver should have done. Id.“[A]s a general proposition, the FDIC’s statutory receivership authority includes the right
to control the prosecution of legal claims on behalf of the insured depository institution now in
its receivership.” First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279,
1295 (Fed. Cir. 1999). Accord Hickey v. NCNB Texas Nat. Bank, 763 F. Supp. 896, 899 (N.D.
Tex. 1991) (as receiver, the FDIC has the affirmative duty to defend the failed bank); Peoples’
Sav. and Loan Ass’n v. First Federal Sav. and Loan Ass’n, 677 F. Supp. 1104, 1108 (D. Kan.
1988) (“[T]he FDIC . . . in its capacity as receiver, willingly defends or asserts claims against
receivership assets in court.”) (internal citations omitted).
Plaintiff’s argument, however, is without merit. The Receiver did represent the
shareholders’ interests in the court of appeals. Although plaintiff contends that he took the lead
on appeal, and the Receiver concedes the point,3 the fact remains that the Receiver entered its
appearance before the court of appeals and, in conjunction with plaintiff, ensured that the
3
See Plains. Mot., Exhibit 12 at 1, n.1 (“The other issues in this appeal are appropriately stated
and addressed by Plaintiffs-Cross Appellants Suess, et al. The FDIC is satisfied with their
statement of those issues as well as their statements of jurisdiction, the case, the facts, and the
standard of review; therefore, the FDIC does not include such statements here. Fed. R. App. P.
28.1(c)(2).”).
8
shareholders’ interests were represented. It is inaccurate for Suess to portray himself as
fulfilling a responsibility that the FDIC abdicated by virtue of not filing a brief on appeal. While
the RTC may not have initially responded to Suess’ demand that it sue the United States,4 the
FDIC participated in the appeal as a party. As the FDIC indicated to the Federal Circuit, it was
content with the arguments Suess made except for one, which it addressed in its own brief.5 The
FDIC was under no obligation to bore the Federal Circuit by repeating verbatim the arguments
Suess made, nor was it under any obligation to risk owing Suess over $400,000 in legal fees
because the FDIC did not run Suess’ brief on appeal though a xerox machine and sign its name
to it.
In any event, the real issue is not whether the Receiver breached any duty it had to
plaintiff and the other shareholders, but whether plaintiff is entitled to be reimbursed for his
contribution to the Receiver’s fulfillment of those duties. To secure such reimbursement,
plaintiff must establish that there is a legal theory, supported by precedent, that requires such
reimbursement.
Here, we have to begin with the premise that the American Rule prevails in this and all
other jurisdictions, meaning that a party pays its own attorney’s fees unless some recognized
exception applies. See Swedish Hosp. Corp. v. Shalala, 1 F.3d 1261, 1265 (D.C. Cir. 1993).
The only ones available are the common fund theory and its legal child, the award of fees to a
stockholder for the corporation’s behalf in a derivative action. Of course, Suess is also entitled
to fees despite any such theory if he and his fellow shareholders had a contract with FDIC or if,
4
See Suess 33 Fed. Cl. at 97.
5
See Plains. Mot., Exhibit 12.
9
despite the absence of a contract, a court imputes one in order to prevent the FDIC from being
unjustly enriched.6 I now turn to each of these legal theories.
B. Plaintiff is Not Otherwise Entitled to Reimbursement
1. Common Fund Analysis
This Circuit permits “a party who creates, preserves, or increases the value of a fund in
which others have an ownership interest to be reimbursed from that fund for litigation expenses
incurred, including counsel fees.” Swedish Hosp. Corp., 1 F.3d at 1265. This policy is animated
by two concerns. The first “is that unless the costs of litigation are spread to the beneficiaries of
the fund they will be unjustly enriched by the attorney’s efforts.” Id. The second is to motivate
lawyers to undertake representation of worthy causes that would not otherwise attract competent
counsel. Consol. Edison Co. v. Bodman, 445 F.3d 438, 443 (D.C. Cir. 2006).
As to the latter, the court of appeals, in language that is prescient in its application to this
case, noted that if lawyers already have sufficient motivation from their expected compensation
from the clients they represent, there is no need to provide the additional motivation of recovery
from any common fund their actions may create:
We note by way of background that the common fund theory
conventionally rests on a theory that beneficiaries of the lawsuit
would be unjustly enriched if not compelled to pay a share of the
fees that made success possible. See, e.g., Swedish Hospital v.
Shalala, 1 F.3d 1261, 1265 (D.C. Cir.1993). It may well be that
courts have found it sensible to apply the unjust enrichment
principle here (after all, human life abounds in windfalls) because
doing so answers a potential free-rider problem. See Wal-Mart
Stores Health & Welfare Plan v. Wells, 213 F.3d 398, 402 (7th
Cir.2000) (noting that free riding on attorney's efforts would be
6
Note that the latter two cannot coexist. One cannot prevail on the same facts upon a claim of
an implied in fact contract and a claim that a contract must be imputed in order to prevent unjust
enrichment. Plesha v. Ferguson, 725 F. Supp. 2d 106, 111 (D.D.C. 2010).
10
“contrary to the equitable concept of ‘common fund’ ”); cf. United
States v. Tobias, 935 F.2d 666, 668 (4th Cir. 1991) (“Generally, a
fund claimant who is represented by counsel . . . is deemed not to
have taken a ‘free ride’ on the efforts of another's counsel.”); John
P. Dawson, Lawyers and Involuntary Clients: Attorney Fees from
Funds, 87 Harv. L. Rev... 1597, 1647-51 (1974) (discussing
incentives to free ride on attorneys' efforts). If lawyers considering
representation of some but not all of a cluster of beneficiaries can
recover compensation only from beneficiaries who actively retain
them, claims will not be brought-even though meritorious-where
the expected value of the gains for beneficiaries willing to
participate can't generate adequate compensation for counsel (and
thus enable the bringing of suit). Under a rule awarding fees out of
litigation proceeds received by passive beneficiaries, lawyers’
anticipation of fee recoveries will provide the requisite incentive.
In some cases, of course, a subset of potential beneficiaries will
have stakes large enough to call forth ample litigation effort; if so,
the free-rider concern declines, possibly to nil. This last point
would be pertinent, if at all, in calculation of fees.
Id. at 442-43.
In this case, there was surely a “subset of potential beneficiaries” with “stakes large
enough to call forth ample litigation effort.” Suess was the largest shareholder and the greatest
potential beneficiary of a $52,008,750 judgment. It is absurd to suggest that he would have
lacked sufficient motivation to defend that judgment if he could not have reasonably expected
that the FDIC would pay the fees he incurred to defend against the government’s appeal. Nor
can one possibly find any concern about free riders who would benefit from his work when he
stood to get the lion’s share of the judgment he was defending. With any concern about
motivation or unfairness of a free ride obviated, Suess’s claim for compensation for his work on
the losing appeal never breaks from the gate.
Second, sine qua non to recovery from a common fund is the creation of that fund from
the lawyer’s efforts. Abbott, Puller & Myers v. Peyser, 124 F.2d 524, 525 (D.C. Cir. 1941);
11
Geiger v. Peyser, 123 F.2d 167, 168 (D.C. Cir. 1941); Kalodner v. Bodman, 241 F.R.D. 6, 10
(D.D.C. 2006); Wienberg v. Goldenberg’s Inc., 81 F. Supp. 353, 353 (D.D.C. 1948); Lett v. City
of St. Louis, 24 S.W.3d 157, 162 (Mo. Ct. App. 2000). As these cases teach, if the battle is
instead one between adversaries over a fund that was already in existence, the common fund
theory does not apply, and the case defaults to the ordinary rule that each party pays its own fees
and costs.
In other words, the lawyer’s efforts must either cause the fund to come into creation or,
once in creation and in control of the court, her efforts must keep it from being diminished.
Hence the emphasis by the court in Consolidated Edison on the claiming party’s showing that it
played “a causal role in achieving the benefits for which they seek reimbursement,”7 meaning
that it must show that its work was the cause in fact of the creation or preservation of the fund or
that, but for its action, the fund would not have been created or preserved.
Likewise, in Thomas v. Peyser, 118 F.2d 369 (D.C. Cir. 1941), the court held that the
appellants, attorneys who sought reimbursement of fees under a common fund theory, were not
so entitled because their efforts to protect a piece of real property held in receivership were
ultimately unsuccessful. Describing the common fund theory, the court stated that “[i]t is well
settled that if one who has an interest in a common fund brings a successful suit to preserve,
protect, or increase that fund, or if he creates or brings to court a fund in which others may share
with him, he is entitled to an allowance of counsel fees to be paid out of the fund.” Id. at 370(internal citations omitted) (emphasis added).
7
Consol. Edison, 445 F.3d at 372-73.
12
Here, while Suess’s efforts in the Court of Federal Claims resulted in a $55 million
judgment, his efforts in the appellate court neither created a new fund nor preserved the one that
was in existence. Simply put, his efforts in the Federal Circuit added neither a jot nor a tittle to
the money available to the Benj. Franklin stockholders, including himself. Since there is no
legal authority whatsoever for a deviation from the ordinary rule, he and his fellow plaintiffs
must pay their own fees.
2. Derivative Action Analysis
I appreciate that when Suess’ standing was attacked in the Court of Federal Claims by the
United States, that court held that Suess and his fellow shareholders could press a derivative
action on behalf of Benj. Franklin but that they lacked standing to press individual claims. See
Suess, 33 Fed. Cl. at 93-94. I also appreciate that the Supreme Court has stated the following:
Other cases have departed further from the traditional metes and
bounds of the [common fund] doctrine, to permit reimbursement in
cases where the litigation has conferred a substantial benefit on the
members of an ascertainable class, and where the court's
jurisdiction over the subject matter of the suit makes possible an
award that will operate to spread the costs proportionately among
them. This development has been most pronounced, in
shareholders’ derivative actions, where the courts increasingly
have recognized that the expenses incurred by one shareholder in
the vindication of a corporate right of action can be spread among
all shareholders through an award against the corporation,
regardless of whether an actual money recovery has been obtained
in the corporation’s favor. For example, awards have been
sustained in suits by stockholders complaining that shares of their
corporation had been issued wrongfully for an inadequate
consideration. A successful suit of this type, resulting in
cancellation of the shares, does not bring a fund into court or add
to the assets of the corporation, but it does benefit the holders of
the remaining shares by enhancing their value. Similarly, holders
of voting trust certificates have been allowed reimbursement of
their expenses from the corporation where they succeeded in
terminating the voting trust and obtaining for all certificate holders
13
the right to vote their shares. In these cases there was a ‘common
fund’ only in the sense that the court’s jurisdiction over the
corporation as nominal defendant made it possible to assess fees
against all of the shareholders through an award against the
corporation.
Mills v. Electric Auto-Lite Co., 396 U.S. 375, 394-95 (1970).
But, in Mills, the Supreme Court spoke of successful suits that benefitted the
stockholders. Once again, Suess’s efforts on appeal were of no benefit to the Benjamin Franklin
stockholders nor to the FDIC in its capacity as Receiver. The law is clear: “A plaintiff should
not receive a fee in derivative litigation unless the corporation, by judgment or settlement,
receives some of the benefit sought in the litigation or obtains relief on a significant claim in the
litigation.” Zucker v. Westinghouse Elec. Corp., 265 F.3d 171, 176 (3d Cir. 2001). Accord: In re
Schering-Plough Corp. Shareholders Derivative Litig., No. 01-CIV-1412, 2008 WL 185809, at
*1 (D.N.J. Jan. 14, 2008) (under Supreme Court decision in Mills, corporation must receive
substantial benefit from a derivative suit); Laprade v. Blackrock Fin. Mgmt., Inc., No. 99-CIV-
9288, 2002 WL 31499244, at *5 (S.D.N.Y. 2002) (same). Success in achieving that benefit in
the derivative action is crucial. Henss v. Schneider, 132 F. Supp. 60, 63 (S.D.N.Y. 1955) ( if
derivative corporate claim fails, claims for attorney’s fees fails with it); Gottlieb v. Heyden
Chem. Corp., 105 A.2d 461 (Del. 1954) (same); Eriksson v. Boynum, 184 N.W. 961 (Minn.
1921) (same).
This principle is analogous to the law in this circuit that a party who seeks recovery from
a common fund must prove that his efforts created a fund from which others will benefit, thereby
justifying his being reimbursed some fair share of the fees for securing it. Suess’ unsuccessful
14
efforts on appeal benefitted no one and therefore he cannot possibly qualify for reimbursement
of his attorney’s fees and costs.
Finally, Suess insists that he provided his fellow stockholders, represented by the FDIC
in its role as Receiver, with the benefit of a voice during the unsuccessful appeal. See Plaintiff
C. Robert Suess’ Opposition to FDIC’s Cross Motion for Summary Judgment (“Plains. Opp.’)
[#12] at 3. He expressly relies on cases that stand for the proposition that rendering a substantial
benefit to others through a derivative or class action may justify awarding attorney’s fees to
prevent a free ride to those who benefitted, whether stockholders or not, even if the benefit was
not pecuniary.8 Here, however, there was no benefit whatsoever conferred on his fellow
stockholders or the FDIC, let alone one that can be described as substantial. Indeed, if Suess
were to prevail, it would be the first instance in American legal history where an unsuccessful
litigant, one who conferred absolutely no benefit on another person or entity, was permitted to
recover attorney’s fees from that entity. There is no warrant in precedent or common sense for
such a remarkable conclusion.
Since the only possible exceptions to the American rule are unavailable, Suess can
prevail only if he can premise liability on an implied contract between himself and the FDIC or
on a so called “quasi-contract,” where a court will impute to the FDIC an obligation to pay the
fees.
8
I note that Suess relies on Lewis v. Anderson, 692 F.2d 1267 (9th Cir. 1982) for the proposition
that “the exercise of important shareholder rights, even if they do not result in monetary benefits,
justifies an award of attorneys fees.” Plains. Opp. at 3. In fact, in that case, the court held that
the derivative action had yielded a benefit that justified the awarding of attorney’s fees. See
Lewis, 692 F.2d at 1271. If merely “providing a voice” to stockholders justified an award of
attorney’s fees to those stockholders, every derivative action would always yield such an award,
rendering the “substantial benefit” requirement imposed by the Mills case a nullity.
15
3. There Was No Implied-In-Fact Contract Between Plaintiff and the
Receiver
Next, plaintiff argues that there was an implied-in-fact contract between the parties,
citing the following factors identified in Bloomgarden v. Coyer, 479 F.2d 201 (D.C. Cir. 1973):
It is well settled that, in order to establish an implied-in-fact
contract to pay for services, the party seeking payment must show
(1) that the services were carried out under such circumstances as
to give the recipient reason to understand (a) that they were
performed for him and not for some other person, and (b) that they
were not rendered gratuitously, but with the expectation of
compensation from the recipient; and (2) that the services were
beneficial to the recipient.
Id. at 208-09.
If the parties dispute the material facts related to the existence of a contract, that dispute
requires the finder of fact to determine what disputed facts are true. This is nothing more than
the application of the principle that the existence of a genuine issue of material fact defeats a
motion for summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986);
Pitney Bowes, Inc. v. U.S. Postal Serv., 27 F. Supp. 2d 15, 23-24 (D.D.C. 1998). But, if there is
no dispute as to what occurred between the parties, then whether the agreed facts brought an
enforceable contract into existence is a question of law for the court. Bus. Sys. Eng’g, Inc. v.
IBM Corp., 547 F.3d 882, 887 n.2 (7th Cir. 2008); Eastbanc, Inc. v. Georgetown Park Assocs. II,
LP, 940 A.2d 996, 1002 (D.C. 2008). See also 1st Home Liquidating Trust v. United States, 581
F.3d 1350, 1355 (Fed. Cir. 2009) (whether contract exists is mixed question of law and fact, but
determination by lower court that contract existed was reviewed de novo as a matter of law when
summary judgment was granted).
16
The only fact upon which Suess relies in support of his contention that there exists an
implied in fact contract is a provision in the settlement agreement approved by Judge Sullivan, in
which the FDIC agreed to pay the attorney’s fees and costs incurred by Suess in the Court of
Federal Claims and in the matter before Judge Sullivan. From this, Suess claims a contractual
right to be similarly reimbursed for the costs of appeal.
First, the matter before Judge Sullivan was resolved by a written agreement that was
made a part of Judge Sullivan’s Order. See United States v. FDIC, Civil Action No. 02-1427 at
[#33]. There is nothing in that agreement, however, that speaks to whether Suess would be
reimbursed for fees and costs in defending the Court of Federal Claims’ judgment in the Federal
Circuit. It is neither fair, just, nor reasonable to infer from that integrated written document a
promise to pay the fees incurred in the appeal by invoking a principle of law that only pertains to
a situation where the parties do not have a written agreement and it is therefore necessary to
deduce their intent from their actions alone.
Second, one cannot infer from the FDIC’s payment of attorney’s fees for the lower court
work, pursuant to a comprehensive settlement, that the FDIC should have expected to also
reimburse Suess for his defense of the judgment in the Federal Circuit. All the FDIC could have
reasonably expected was that Suess, having secured a substantial judgement in the Court of
Federal Claims, was (to put it mildly) more likely than not to defend that judgment aggressively
to preserve the substantial judgment he and his fellow stockholders had been awarded. From
those facts and the parties’ silence about who would pay the costs of the appeal, one cannot infer
that the FDIC agreed to bear those costs. To find a contract between the parties on such a
gossamer basis is to convert a gratuitous assumption into a contract.
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4. Plaintiff Is Not Entitled to an Award Based on Unjust Enrichment
“A quasi-contract . . . is not a contract at all, but a duty thrust under certain conditions
upon a party to requite another to avoid the former’s unjust enrichment.” Bloomgarden v. Coyer,
479 F.2d at 208. In order to obtain restitution, plaintiff must prove not only that he has conferred
some benefit or advantage on the Receiver but also that it would be unjust not to order
reimbursement. See id. at 211. “Unjust enrichment occurs when 1) the plaintiff conferred a
benefit on the defendant; 2) the defendant retained the benefit; and 3) under the circumstances,
the defendant's retention of the benefit is unjust.” McWilliams Ballard, Inc. v. Level 2 Dev., 697F. Supp. 2d 101, 106 (D.D.C. 2010) (internal citations omitted). It further “depends on whether
it is fair and just for the recipient to retain the benefit, not on whether the person or persons who
bestowed the benefit had any duty to do so.” 4934, Inc. v. D.C. Dep’t of Emp’t Servs., 605 A.2d
50, 56 (D.C. 1992). Finally, “a promise to pay will be implied in law when the party renders
valuable services that the other party knowingly and voluntarily accepts.” Brown v. Brown, 524
A.2d 1184, 1186 (D.C. 1987).
As explained above, in 1996, the Court of Federal Claims held that the government had
breached two contracts with plaintiffs. See Suess v. United States, 535 F.3d at 1356. The
United States, however, only appealed the decision as to one of those contracts. Id. Thus, the
only issue before the Federal Circuit was whether the trial court’s decision that there existed a
contract between Franklin and the government with respect to the treatment of goodwill arising
out of Franklin’s acquisition of Equitable was erroneous. Id. In reversing the trial court’s
determination, the Federal Circuit ruled completely in the government’s favor. Plaintiff,
therefore, cannot argue that he successfully defended the government’s appeal or that he
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conferred any benefit on the FDIC. If no benefit was conferred, the FDIC was not enriched, and
plaintiff is not entitled to reimbursement of attorney’s fees.
Plaintiff would counter that, even if unsuccessful, the FDIC got the benefit of his services
for which it should now pay. But, as I have previously explained, plaintiff had a powerful
financial motivation to defend the judgment and unquestionably exerted substantial efforts to
preserve it. The FDIC, having read plaintiff’s brief, accepted the validity of the arguments and so
advised the Federal Circuit. Although plaintiff and the FDIC did not prevail, there is no basis
from those facts to describe the FDIC as retaining a benefit that it must now disgorge in the same
sense as a person who was, for example, paid money by mistake. It would appear fundamental
that the enrichment is unjust only when the party who has conferred the benefit acted either
graciously or altruistically without an obvious, personal motivation to do what he did. In such a
situation, permitting the party who received that benefit to retain it may be unfair or unjust.
When the party conferring the benefit has an obvious, self-serving motivation to perform the
action that may have benefitted the other party, it is hard to describe the result to be unfair when
the party conferring the benefit had at least as much if not more to gain from the efforts she
expended. That situation hardly warrants my taking the fees that Suess incurred and shifting
them to the FDIC when Suess had as much interest in winning the appeal as did the FDIC.
Moreover, accepting Suess’ position means that, under the guise of preventing an unjust
enrichment, the courts would have to force one party to pay another party’s legal fees when both
of them were on the same side of a case that was unsuccessful, based on the court’s perception of
who did more. The amount of time spent by the court doing that, at the taxpayers’ expense, is
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hardly justified when, as was true here, the parties were perfectly free to negotiate a division of
the work prior to its undertaking.
CONCLUSION
Plaintiff has failed to establish 1) that there was an express agreement, 2) that the
Receiver breached any fiduciary or statutory obligation to the shareholders, 3) that there was an
implied-in-fact agreement, or 4) that there should be implied was a quasi-contract between the
parties regarding the reimbursement of attorney’s fees incurred by plaintiff in defense of the
government’s appeal. Plaintiff therefore is not entitled to any compensation for those efforts.
An Order, granting the FDIC’s motion for summary judgment and directing the Clerk to
enter judgment in its favor, accompanies this Memorandum Opinion.
SO ORDERED.
Digitally signed by John M.
Facciola
DN: c=US, st=DC, ou=District of
Columbia,
email=John_M._Facciola@dcd.u
scourts.gov, o=U.S. District
Court, District of Columbia,
cn=John M. Facciola
Date: 2011.03.14 14:18:46 -04'00'
_____________________________
JOHN M. FACCIOLA
UNITED STATES MAGISTRATE JUDGE
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