Feldman v. Federal Deposit Insurance Corp. , 879 F.3d 347 ( 2018 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 16, 2017 Decided January 12, 2018
No. 17-5009
LYNN FELDMAN, AS CHAPTER 7 TRUSTEE OF THE ESTATES OF
IMAGE MASTERS, INC., OPFM, INC., D/B/A PERSONAL
FINANCIAL MANAGEMENT, INC., MORTGAGE ASSISTANCE
PROFESSIONALS, INC., MORTGAGE ASSISTANCE
PROFESSIONALS, INC. II, DISCOVERED TREASURERS, INC., AND
DIVIDIT, INC.,
APPELLANT
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER
FOR BOTH INDYMAC BANK, FSB AND WASHINGTON MUTUAL
BANK,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cv-02152)
David M. DeVito argued the cause and filed the briefs for
appellant.
Michelle Ognibene, Counsel, Federal Deposit Insurance
Corporation, argued the cause for appellee FDIC. With her on
the brief were Colleen J. Boles, Assistant General Counsel, and
Kathryn R. Norcross, Senior Counsel.
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Before: ROGERS and TATEL, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge ROGERS.
ROGERS, Circuit Judge: This is an appeal from the
dismissal of a complaint for lack of subject matter jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(1). For the
following reasons, we reverse.
I.
The Financial Institution Reform, Recovery, and
Enforcement Act (“FIRREA”) governs the disposition by the
Federal Deposit Insurance Corporation (“FDIC”) of claims
against failed banks for which it is acting as receiver. As to
any creditor “shown on the [bank’s] books” or “upon discovery
of the name and address of a claimant not appearing,” the FDIC
is required to mail notice of the deadline – the “bar date” – for
filing claims. 12 U.S.C. § 1821(d)(3)(C). Late-filed claims are
allowed where “the claimant did not receive notice of the
appointment of the receiver in time to file such claim before
such date” and “such claim is filed in time to permit payment
of such claim.” 12 U.S.C. § 1821(d)(5)(C)(ii). The
administrative claims process is a prerequisite to judicial
review. Id., § 1821(d)(6),(13)(D).
Lynn Feldman, a Chapter 7 bankruptcy trustee, has
attempted to recover around twelve million dollars in allegedly
fraudulent transfers made as part of a “Ponzi” scheme in
Pennsylvania from 1988 to 2007. When the scheme collapsed
on September 18, 2007, the six businesses owned by the
architect of the scheme filed petitions for voluntary bankruptcy
under Chapter 7, 11 U.S.C. § 701 et seq., in the Eastern District
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of Pennsylvania. Washington Mutual was one of the banks that
had extended mortgages to customers of these businesses, and
upon its failure, the FDIC became receiver on September 25,
2008. See 12 U.S.C. § 1821(c). The FDIC set December 30,
2008, as the bar date for claims to be filed and published notice
of the receivership and the bar date in the Wall Street Journal
on October 1 and 31, 2008.
On October 8, 2008, Feldman sent a letter to David
Schneider, president of Washington Mutual Home Loans Inc.,
to advise of her authority as Trustee to pursue avoidance in
bankruptcy of transfers of around $12 million by the six
debtors, under sections 544, 547, 548, and 550 and state law,
unless the transfers were subject to exceptions or defenses. She
requested a response within 20 days of proof of any exception
or defense. In the absence of receiving such information, a
check for $12,034,717.15 should be made payable to her as
Trustee. Absent a timely response, Feldman further advised
she “may have no alternative but to file a complaint with the
Bankruptcy Court.” The letter showed copies to Ms. Susan R.
Taylor, Registered Agent for Washington Mutual Bank, and
Lawrence J. Kotler, Esquire, an attorney with Duane Morris
LLP, Feldman’s attorney.
On August 3, 2009, Feldman filed a proof of claim with
the FDIC. Upon the FDIC’s disallowance of her claim as
untimely, Feldman filed a complaint in the federal district court
here on November 16, 2009. Before responsive pleadings were
due, the district court granted her request for a stay to permit
her to litigate related matters against other banks in
Pennsylvania. Upon resolution of the Pennsylvania litigation,
the district court granted her request to lift the stay, and on June
30, 2016, Feldman filed an amended complaint. The complaint
described the Ponzi scheme and a series of money transfers to
Washington Mutual that the bank allegedly knew or should
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have known were fraudulent. Compl. ¶¶ 9, 49, 51, 53. Of
significance here, the complaint alleged that because her
October 8 letter to David Schneider had advised Washington
Mutual and the FDIC of her claim, she was entitled under
FIRREA to receive, and had not received, mailed notice of the
bar date. Compl. ¶ 54. The other relevant allegations were that
she filed a proof of claim with the FDIC on August 3, 2009,
and the FDIC notified her by letter of September 18, 2009, that
her claim would be disallowed as untimely. Compl. ¶¶ 55, 56.
The FDIC moved to dismiss the amended complaint
pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1),
12(b)(6), 12(b)(7), and 19. It argued that the district court
lacked subject matter jurisdiction because Feldman had filed
her claim after the bar date and had failed to allege a lack of
notice to invoke FIRREA’s late-filed claims exception. The
FDIC stated it had closed Washington Mutual on September
25, 2008, and mailed notice to all creditors appearing on its
book and records; neither Feldman’s nor the debtors’ names
appeared in Washington Mutual records. Stating further that it
had published notice of the bar date in newspapers of general
circulation in October and December 2008, the FDIC argued
that publication notice was sufficient to give Feldman “at
minimum constructive notice.” FDIC Motion to Dismiss at 10-
11 (Sept. 30, 2016). Washington Mutual was, the FDIC
asserted, “the largest bank failure in U.S. history,” id. at 12, and
at the very least Feldman was on inquiry notice of the
receivership and administrative claims process.
Feldman opposed the motion to dismiss on various
grounds, of which two are pertinent here. First, she pointed out
the FDIC’s position that the district court lacked subject matter
jurisdiction “strips all meaning from subsection
1821(d)(5)(C)(ii), which permits consideration of any claim
filed . . . after the [bar] date specified in the notice published
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under paragraph (3)(B)(i).” Pl.’s Mem. in Opp’n to Def.’s Mot.
to Dismiss the Am. Cmplt and Strike Jury Demand at 5 (Oct. 3,
2016). She cited federal appellate court decisions suggesting
that the failure to file a timely claim would not strip the court
of jurisdiction and result in dismissal with prejudice, but rather
the appropriate disposition is to dismiss the complaint so a
claim may be administratively exhausted. Id. at 6-7 (citing
Village of Oakwood v. State Bank & Trust Co., 539 F.3d 373,
385 (6th Cir. 2008); McCarthy v. FDIC, 348 F.3d 1075, 1081
(9th Cir. 2003); Carlyle Towers Condo. Ass’n, Inc. v. FDIC,
170 F.3d 301, 309 (2d Cir. 1999)). Second, she argued that her
lack of notice of the receivership was evident from her October
8, 2008 letter because as an experienced bankruptcy trustee she
would have filed the claim with the FDIC had she known of its
appointment. Id. at 8. In reply, the FDIC continued to argue
that Feldman’s claim of lack of notice of the receivership could
not be credited. See Reply to Pl.’s Opp’n, at 6 (Nov. 3, 2016).
The district court granted the motion to dismiss the
amended complaint for lack of subject matter jurisdiction
pursuant to Rule 12(b)(1). Feldman v. FDIC, 568 B.R. 543(D.C.C. 2016). It found that Feldman was not entitled to notice
by mail because she was not a creditor shown on the
institution’s books when the FDIC became receiver, and her
allegations did not show that the FDIC discovered she was a
claimant. Id. at 548. It also found that her October 8 letter
could not have put the FDIC on notice of her claim because it
was sent to David Schneider when he was “no longer an
executive with the bank” and after Washington Mutual “no
longer existed.” Id. at 548-49. And, having failed to allege
either that she lacked actual knowledge of the receivership or
the date she learned of it, the district court ruled that Feldman
did not “carry her burden of demonstrating the factual
predicates needed to invoke the late-filed claims exception,” id.
at 549. Further, the court concluded that Feldman received
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“adequate notice of the receivership by virtue of the FDIC’s
publications,” id., because Washington Mutual’s failure was
“the largest bank failure in U.S. history” and “widely
publicized in 2008,” placing Feldman “on inquiry notice of the
receivership.” Id. (internal quotations omitted). Alternatively,
the district court ruled that her claim under the Bankruptcy Act
would be barred because her untimely claim was insufficient to
toll the statute of limitations. Id. at 550.
Feldman appeals the dismissal of her complaint, and our
review is de novo, American Nat’l Ins. Co. v. FDIC, 642 F.3d
1137, 1139 (D.C. Cir. 2011).
II.
Where a motion to dismiss a complaint “present[s] a
dispute over the factual basis of the court’s subject matter
jurisdiction . . . the court may not deny the motion to dismiss
merely by assuming the truth of the facts alleged by the plaintiff
and disputed by the defendant.” Phoenix Consulting v.
Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000).
“Instead, the court must go beyond the pleadings and resolve
any disputed issues of fact the resolution of which is necessary
to a ruling upon the motion to dismiss.” Id. (citations omitted).
Although “[t]he district court ‘retains considerable latitude in
devising procedures it will follow to ferret out the facts
pertinent to jurisdiction,’ . . . it must give the plaintiff ‘ample
opportunity to secure and present evidence relevant to the
existence of jurisdiction.’” Id. (quoting Prakash v. American
University, 727 F.2d 1174, 1179-80 & nn. 36-37 (D.C. Cir.
1984)); see Hurd v. Dist. of Columbia, 864 F.3d 671, 686-87
(D.C. Cir. 2017). More particularly, in viewing the FDIC’s
motion to dismiss as presenting a factual challenge and not
merely a facial challenge, Feldman, 568 B.R. at 546, the
district court may properly consider allegations in the
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complaint and evidentiary material in the record, see Herbert
v. Nat’l Acad. of Sciences, 974 F.2d 192, 197 (D.C. Cir.1992),
but is obligated, at this threshold stage, prior to any discovery,
to accord Feldman the benefit of all reasonable inferences.
Herbert, 974 F.2d at 198 n. 6 (citing In re Swine Flu
Immunization Prod. Liability Lit., 880 F.2d 1439, 1442-43
(D.C. Cir. 1989)); see Arpaio v. Obama, 797 F.3d 11, 19 (D.C.
Cir. 2015); 5B CHARLES WRIGHT & ARTHUR MILLER, FEDERAL
PRACTICE AND PROCEDURE § 1350 at 4-5 (2017). Absent
evidentiary offering here, weighing the plausibility of her
allegations was for a later stage of the proceedings, see
Ashcroft v. Iqbal, 556 U.S. 662, 671, 678-79 (2009), as was
assessing the credibility of her allegations, see Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); see also FED. R.
CIV. P. 56 cmt. 1963 Advisory Comm.
Feldman contends that if the district court had accorded
her the benefit of favorable inferences from the allegations in
her amended complaint, then it would have found that she
lacked notice of the FDIC’s receivership of Washington
Mutual. In her view, she was statutorily entitled to mailed
notice of the bar date because her October 8, 2008 letter was
sent to the President of a former subsidiary of Washington
Mutual, and it triggered the FDIC’s obligation to mail her
notice of the bar date, which she never received. See Compl.
¶¶ 8, 54. Implicitly she maintains there was no basis in the
record to presume her letter was not duly processed in the
ordinary course of business by the bank or by the FDIC as
receiver. See 12 C.F.R. § 360.11; FED. R. EVID. 301; see
generally Legille v. Dann, 544 F.2d 1 (D.C. Cir. 1976), cited
with other circuit decisions in 21B KENNETH W. GRAHAM, JR.,
FEDERAL PRACTICE & PROCEDURE § 5125 at 17 & n. 145
(2017). The FDIC’s mere say-so in its motion to dismiss was
insufficient. See In re Swine Flu, 880 F.2d at 1442-43. Further,
Feldman contends that, given her experience as a bankruptcy
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trustee who could reasonably be expected to comply with
applicable deadlines, the record contains no basis for inferring
that she was on notice of the bar date yet chose to delay filing
her claim. Instead of crediting her allegations, the record
evidence, and her experience in her favor, Feldman maintains
that the district court used them against her in finding that “[a]s
a self-professed ‘experienced bankruptcy trustee who is
eminently familiar with how claim-filing bar dates operate,’
Feldman’s failure to file a timely claim cannot be excused,”
Feldman, 568 B.R. at 549. In these circumstances, Feldman
contends that ruling her claim was barred because she was on
inquiry notice, when there was no evidence she had actual
notice, violated her right to due process.
Doubtless the district court has an obligation to weed out
baseless claims at the outset, but at the threshold, pre-discovery
stage this can be problematic when a statutory scheme
contemplates late filed claims and includes a mandatory
administrative process. The procedure afforded to resolve
disputed facts must be sufficient to ensure the parties have an
opportunity to present evidence relevant to the resolution of a
determinative fact. See Hurd, 864 F.3d at 686-87. Precedents
cited in Feldman’s opposition to the motion to dismiss suggest
that in the absence of evidence she had notice of the bar date,
an appropriate disposition would be to dismiss her amended
complaint to allow her to exhaust FIRREA’s administrative
remedies. See, e.g., McCarthy, 348 F.3d at 1081; Carlyle
Towers Condo. Ass’n, 170 F.3d at 309. Viewing the late-filed
exception narrowly, cf. Freeman v. FDIC, 56 F.3d 1394, 1405
(D.C. Cir. 1995), such a disposition would be in accord with
FIRREA’s purpose to “promote . . . a safe and stable system of
affordable housing finance,” see Pub. L. No. 101-73 § 101
(1989), and an experienced bankruptcy trustee’s ongoing
pursuit of claims related to the Pennsylvania Ponzi scheme. Or
at least it would seem so from the complaint when there was no
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evidentiary basis to find that her October 8 letter was not duly
processed upon receipt by the FDIC even if Washington
Mutual “no longer existed.” Feldman, 568 B.R. at 549; cf. 12
C.F.R. § 360.11. Reasonable inferences in Feldman’s favor
would be either that the October 8 letter triggered the FDIC’s
statutory obligation to mail her notice of the bar date, or that
she was eligible to file under the late filed exception. Of
course, it is possible that Feldman knew of the receivership and
simply missed the bar date. All we need hold now is that it was
premature to reach that conclusion on the basis of the record at
the time the district court granted the motion to dismiss.
To the extent the district court concluded Feldman was
ineligible under FIRREA’s late-filed exception because she
“received adequate notice of the receivership,” Feldman, 568
B.R. at 549, as a result of the FDIC’s publication of
Washington Mutual’s failure and receivership, appellate courts
have been loath to conclude that inquiry notice as a result of
publication of a receivership would suffice to bar claims under
FIRREA. See Nat’l Union Fire Ins. Co. v. City Savings, FSB,
28 F.3d 376, 392 (3d Cir. 1994); Elmco Properties, Inc. v.
Second Nat’l Federal Savs. Ass’n, 94 F.3d 914, 921-22 (4th
Cir. 1996); Greater Slidell Auto Auction, Inc. v. Am. Bank &
Trust Co., 32 F.3d 939, 942 (5th Cir. 1994); Campbell v. FDIC,
676 F.3d 615, 621 (7th Cir. 2012); Intercontinental Travel
Marketing, Inc. v. FDIC, 45 F.3d 1278, 1285 & n.11 (9th Cir.
1994). Much as this court noted in Freeman, 56 F.3d at 1403
n.2 (citing Mullane v. Central Hanover Bank & Trust Co., 339
U.S. 306, 314 (1950)), the Seventh Circuit observed in
Campbell, 676 F.3d at 621, that “[i]f the Trustee did in fact lack
appropriate notice of receivership and the bar date [served] to
extinguish [her] claim, there would be an obvious due process
concern.” Similarly, the Third Circuit observed that “in some
factual settings [FIRREA’s] broad bar to jurisdiction contained
in [12 U.S.C.] §1821(d)(13)(D) . . . could raise constitutional
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concerns . . . if the holder of an action asserting a right to
payment were not provided reasonable notice and an
opportunity to be heard in the administrative claims
procedure.” Nat’l Union Fire, 28 F.3d at 392. In Freeman, 56
F.3d at 1403, this court held there was no due process violation
because the plaintiffs had received a letter from the FDIC
advising them of the FDIC receivership. Although actual
notice sufficed to eliminate a due process concern, it remains
an open question whether further proceedings in Feldman’s
case would provide an evidentiary basis to find that she had
adequate notice or was otherwise disqualified from pursuing a
claim under the late-filed exception.
Taken together, however, the allegations in the amended
complaint as supported by evidentiary record showed that
although Feldman mailed a letter to the bank’s subsidiary on
October 8, 2008, she did not receive mailed notice of the bar
date from the FDIC, and consequently she did not file her claim
with the FDIC until months after the bar date had passed,
despite being an experienced trustee actively pursuing related
bankruptcy claims. So understood, the pleading deficiency as
to notice on which the district court and the FDIC focused did
not warrant dismissal pursuant to Rule 12(b)(1). Because
Feldman was entitled to the benefit of reasonable inferences
from the allegations in the amended complaint and the record
before the district court, this court has no occasion to address
other grounds for dismissal argued by the FDIC that the district
court did not reach. Similarly, this court has no occasion to
decide whether Feldman’s bankruptcy claim was time-barred
because the district court’s alternative ruling was predicated
upon her late-filed claim not tolling the statute of limitations.
Feldman, 568 B.R. at 550.
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Accordingly, we reverse the Rule 12(b)(1) dismissal of
Feldman’s amended complaint and remand the case to the
district court for further proceedings.