Ncb Management Services, Inc. v. Federal Deposit Insurance Corp.

UNITED STA'I`ES DISTRICT COURT
FOR THE DIS'I`RICT OF COLUMBIA
NCB MANAGEMENT SERVICES, INC.,
Plaintiff,
v.
Civil Action No. ll-O()70O (CKK)
FEDERAL DEPOSIT INSURANCE CORP.,
as Receiver for Advanta Bank Corp., Draper,
Utah,
Defendant.
MEMORANDUM OPINION AND ORDER
(February 14, 2012)
Plaintiff NCB Management Services, lnc. ("NCB") brings this action against the Federal
Deposit Insurance Corporation ("FDIC"), in its capacity as the receiver for Advanta Bank
Corporation ("Advanta"), a failed financial institution in Utah that was closed by state authorities
in March 20l0. In this action, NCB claims that, after the FDIC was appointed as the receiver for
Advanta, it breached a pre-existing services agreement between NCB and Advanta by failing to
submit timely payment under the terms of the agreement, breached the implied covenant of good
faith and fair dealing by attempting to "retroactively repudiate" the agreement, and improperly
denied NCB’s claim for compensation from the receivership estate. Currently before the Court
is the FDIC’s [8] Motion to Dismiss. Upon careful consideration of the parties’ submissions, the
relevant authorities, and the record as a whole, the Court shall GRANT-IN-PART and DENY-
IN-PART the FDlC’s Motion to Dismiss. Specifically, the Motion shall be GRANTED insofar
as it seeks dismissal of NCB’s claim for breach of the implied covenant of good faith and fair
dealing (Count llI) and shall be DENIED in all other respects, including insofar as it seeks
dismissal of NCB’s claim for de novo judicial review of its claim against the receivership estate
(Count I) and its claim for breach of contract (Count II).
I. BACKGROUND
Prior to its failure, Advanta was one of the largest credit card issuers in the small business
market. In furtherance of this line of business, Advanta contracted with various debt collection
companies to collect on delinquent accounts. Beginning in January 2005, NCB was one of those
debt collection companies. Compl. 11 5. Over the years, Advanta and NCB entered into a series
of written agreements defining the contours of their contractual relationship. Id. For purposes of
convenience and consistent with the parties’ usage, the Court shall simply refer to those
agreements in the singular as the "Collection Agreement." The facts stated below are gleaned
from the allegations in the Complaint and the documents attached to the Complaint or
incorporated therein.
Under the Collection Agreement, NCB was paid a base hourly rate for its debt collection
services, coupled with a potential bonus hourly rate tied to NCB’s collection performance.
Compl. Ex. A (Fifth Addendum to Collection Agreement) § 3. Advanta was required to remit
payment to NCB within ten days of receipt of an appropriate invoice. Id. Of particular
relevance to this case, the Collection Agreement contemplated that NCB would provide
collection services to Advanta for a period of indefinite duration. la’. § 6. Either party could
terminate the agreement "by giving the other party at least 90 days prior written notice of its
intent to terminate." Id. During the ninety-day termination period, NCB was obligated to
"continue to provide services to [Advanta]" and Advanta was required to "pay NCB for each
month" in accordance with the aforementioned compensation scheme. Id. § 3. In addition,
thirty days into the termination period, Advanta had the option to reduce the number of hours of
services provided by NCB each month by up to one-third of the targeted goal in place at the
beginning of the termination period Ia’.
While the Collection Agreement was still in effect, Advanta failed. On March l9, 2010,
the Utah Department of Financial institutions closed Advanta and appointed the FDIC as the
receiver. Compl. 11 8. Despite this development, NCB was still required to perform debt
collection services under the terms of the Collection Agreement. Id. 11 9. NCB did so, with the
FDIC’s full knowledge and consent. Id.
On August 2, 2010, the FDIC sent NCB a "formal termination notice" indicating that it
had "decided to exercise its option to terminate [the Collection Agreement] under the provision
found in Section 3." Decl. of Andrew J. Dober ("Dober Decl.") Ex. A (Formal Terrnination
Notice) at l.l The FDIC also indicated that it had engaged a third party to "take[] over the
servicing and administration of the Advanta Bank Corp. portfolio as of August l, 2010." Id.
Since Section 3 of the Collection Agreement obligated NCB to "continue to provide services" for
a ninety-day period after receipt of the FDIC’s formal termination notice, NCB was required to
perform debt collection services to and including October 3l, 2010. Compl. Ex. A (Fifth
Addendum to Collection Agreement) § 3. In turn, the FDIC was required to "pay NCB for each
month" during the termination period_namely, August, September, and October 2010. Id.
On August 30, 2010, NCB acknowledged receipt of the FDIC’s formal notice of
terrnination. Compl. 11 13. At the same time, NCB sent the FDIC an invoice in the amount of
$774,646, allegedly reflecting the amount due to NCB for debt collection services rendered in
the month of August 2010. Id. NCB also inquired whether the FDIC intended to reduce the
1 The notice is incorporated into the Complaint by reference. See Compl. 11 l0.
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number of hours provided by NCB for the upcoming month. Ia’. The FDIC never paid the
invoice or acknowledged NCB’s correspondence. Id. 1 14.
On September l6, 20l0, NCB sent a second invoice to the FDIC, again in the amount of
$774,646, allegedly reflecting the amount due to NCB for debt collection services rendered in
the month of September 2010. Id. NCB also included in its correspondence an account
statement showing an outstanding balance of $l,549,292, allegedly reflecting the total amounts
invoiced for August and September. Ia’. NCB also inquired again whether the FDIC intended to
reduce the number of hours provided by NCB for the upcoming month. Id. That same day, the
FDIC informed NCB that it would not be paying the outstanding invoices and that it was
considering "retroactively repudiating" the agreement pursuant to its statutory powers as the
receiver. Ia’. 1111 l5-l6. The FDIC told NCB that it should expect written notification of its
decision within three weeks. Id.
On October 4, 2010, before the FDIC sent written notification of its decision, NCB sent a
third invoice to the FDIC, again in the amount of $774,646, allegedly reflecting the amount due
to NCB for debt collection services rendered in the month of October 2010. Ia’. 11 17. ln
addition, NCB included an account statement showing an outstanding balance of $2,323,938,
allegedly reflecting the total amounts invoiced for August, September, and October. Ia’.
The next day, October 5, 2010, the FDIC formally notified NCB that it was repudiating
the Collection Agreement pursuant to its statutory powers as the receiver. Ia’. 11 18. The FDIC’s
notice provides, in part:
The Receiver has determined that [the Collection Agreement] is
burdensome and that the disaffrrmance of said agreement(s) will
promote the orderly administration of [Advanta’s] affairs. The
purpose of this letter is to inform you that the Receiver has elected
to disaffrrm the above referenced Agreement to the fullest extent,
if any, that it represents an enforceable obligation of [Advanta] or
the Receiver. * * * The disaffirrnance . . . will be effective as of
the date of this letter. However, the termination notice date under
the Agreement of August 2, 2010 remains in effect.
Dober Decl. Ex. B (Forrnal Repudiation Notice) at 1-2.2 The notice concludes by informing
NCB that the FDlC’s repudiation of the agreement "gives [NCB] a claim against the receivership
estate" and instructs NCB how to go about filing a proof of claim. Id. at 2.
On October 19, 2010, NCB filed a proof of claim with the FDIC, seeking the $2,323,938
that it claims remained outstanding on the FDlC’s account. Compl. 11 21; Dober Decl. Ex. C
(Proof of Claim) at l.3 On March 10, 2011, and again on March 17, 2011, the FDIC disallowed
NCB’s claim against the receivership estate, concluding that NCB had not satisfactorily proven
its claim. Compl. 11 25 & Exs. B-C.
NCB then commenced this action on April 8, 2011. 1ts Complaint has three counts.
Count 1 seeks de novo judicial review of the FDlC’s disallowance of NCB’s claim against the
receivership estate. Id. 1111 36-38. Count 11 alleges that the FDIC breached the Collection
Agreement by failing to submit timely payment on the three invoices issued by NCB for services
allegedly rendered in August, September, and October 2010. Ia’. 1111 39-42. Count 111 alleges that
the F D1C breached the duty of good faith and fair dealing implicit in the Collection Agreement
by attempting to "retroactively repudiate" the agreement. Ia'. 1111 43 -45.
The FDIC filed the pending Motion to Dismiss on June 24, 2011. See Mem. of P. & A.
in Supp. of FDlC-Receiver’s Mot. to Dismiss ("Def.’s Mem."). NCB filed its opposition on
August 11, 2011. See NCB Management Services, Inc.’s Opp’n to FDlC-Receiver’s Mot. to
Dismiss ("Pl.’s Opp’n"). The FDIC filed a reply on September l, 2011. See FDlC-Receiver’s
Reply to NCB’s Opp’n to its Mot. to Dismiss. Accordingly, the motion is fully briefed and ripe
2 The notice is incorporated into the Complaint by reference. See Compl. 1111 18-20.
3 The proof of claim is incorporated into the Complaint by reference. See Compl. 11 21.
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for a decision. 1n an exercise of its discretion, the Court finds that holding oral argument would
not be of assistance in rendering a decision. See LCVR 7(f).
II. LEGAL STANDARD
Under the Federal Rules of Civil Procedure, a complaint must contain "a short and plain
statement of the claim showing that the pleader is entitled to relief," FED. R. CIV. P. (S)(a), "in
order to ‘ give the defendant fair notice of what the . . . claim is and the grounds upon which it
rests,”’ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gz`bson, 355
U.S. 41, 47 (1957)). Rule l2(b)(6) provides a vehicle for parties to challenge the sufficiency of a
complaint on the ground that it "fail[s] to state a claim upon which relief can be granted." FED.
R. CIV. P. l2(b)(6). When presented with a motion to dismiss for failure to state a claim, the
district court must accept as true the well-pleaded factual allegations contained in the complaint.
Atherton v. D.C. Ojj‘z`ce ofMayor, 567 F.3d 672, 681 (D.C. Cir. 2009), cert. deniea', __ U.S. _,
130 S. Ct. 2064 (2010). Although "detailed factual allegations" are not necessary to withstand a
Rule l2(b)(6) motion to dismiss, to provide the "grounds" of "entitle[ment] to relief," a plaintiff
must fumish "more than labels and conclusions" or "a forrnulaic recitation of the elements of a
cause of action." Twombly, 550 U.S. at 555. "Nor does a complaint suffice if it tenders ‘naked
assertion[s]’ devoid of ‘further factual enhancement."’ Ashcroft v. Iqbal, 556 U.S. 662, 129 S.
Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 557). Rather, a complaint must contain
sufficient factual allegations that, if accepted as true, "state a claim to relief that is plausible on
its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged." Iqbal, 129 S. Ct. at 1949. The plaintiff must provide more than just
"a sheer possibility that a defendant has acted unlawfully." Id. at 1950. When a complaint’s
well-pleaded facts do not enable a court, "draw[ing] on its judicial experience and common
sense," "to infer more than the mere possibility of misconduct," the complaint has not shown that
the pleader is entitled to relief. ld.
III. DISCUSSION
A. The Court Shall Not Dismiss NCB’s Claim for De N0v0 RevieW of the FDIC’s
Disallowance of its Claim Against the Receivership Estate (Count I) or
NCB’s Claim for Breach of Contract (Count II)
NCB’s Counts 1 and 11 are premised on the same sequence of events. On August 2, 2010,
after assuming its role as the receiver for Advanta, the FDIC sent NCB a "formal termination
notice" expressly invoking the termination provision in the Collection Agreement, thereby
triggering a ninety-day termination period for the parties to wind down their contractual
relationship. Under the Collection Agreement, NCB was required to continue providing debt
collection services to the FDIC for the full ninety-day period, which would conclude on October
31, 2010. 1n turn, the FDIC was required to pay NCB for each of the three months comprising
the termination period--namely, August, September, and October 2010. Through Counts 1 and
11, NCB alleges that the FDIC breached the Collection Agreement, and later improperly
disallowed its parallel claim against the receivership estate, by failing to submit payment on the
three invoices that NCB issued for August, September, and October in the total amount of
$2,323,938. Count 1 seeks de novo judicial review of the FDlC’s disallowance of NCB’s claim
against the receivership estate. Compl. 1111 36-38. Count 11 alleges that the FDIC breached the
Collection Agreement by failing to submit timely payment on the three invoices. Ia'. 1111 39-42.
The F D1C tenders a series of arguments as to why Counts 1 and 11 should be dismissed.
Each argument turns on a shared premise--namely, that the FDIC properly repudiated the
Collection Agreement in accordance with its statutory authority under the Financial 1nstitutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). Enacted in response to the
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"widespread failures of savings and loan associations in the 1980s," Wells Fargo Bank, NA. v.
Fea'. Deposz`t Ins. Corp., 310 F.3d 202, 204 (D.C. Cir. 2002), FIRREA "gives the receivers of
failed [financial] institutions wide-ranging powers to consolidate and liquidate those
institutions," Nashville Loa’gz`ng Co. v. Resolution Trust Corp., 59 F.3d 236, 241 (D.C. Cir.
1995). Most notably, F1RREA confers upon the FDIC "broad authority" to repudiate contracts
that were entered into before its appointment as a receiver. Io’. The statute provides:
['l`]he conservator or receiver for any insured depository institution
may disaffirrn or repudiate any contract or lease-
(A) to which such institution is a party;
(B) the performance of which the conservator or
receiver, in the conservator’s or receiver’s
discretion, determines to be burdensome; and
(C) the disaffirmance or repudiation of which the
conservator or receiver determines, in the
conservator’s or receiver’s discretion, will promote
the orderly administration of the institution’s
affairs.
12 U.S.C. § 1821(e)(1). Assuming that the FDIC properly repudiates a contract, FIRREA limits
the universe of damages that a plaintiff can recover. See Monraa' v. Fea'. Deposit Ins. Corp., 62
F.3d 1169, 1172 (9th Cir. 1995) ("[O]nce the FDIC properly repudiates a contract, the remaining
issue is whether the claimant has suffered damages of the type allowed to be compensated by
statute."). 1n this regard, the operative provision states:
[T]he liability of the conservator or receiver for the disaffirrnance
or repudiation of any contract . . . shall be_
(i) limited to actual direct compensatory damages; and
(ii) detennined as of--
(1) the date of the appointment of the
conservator or receiver . . . .
12 U.S.C. § l821(e)(3)(A). The statute makes it clear that "the term ‘actual direct compensatory
damages’ does not include_(i) punitive or exemplary damages; (ii) damages for lost profits or
opportunity; or (iii) damages for pain and suffering." Id. § l82l(e)(3)(B).
As the United States Court of Appeals for the District of Columbia Circuit has observed,
by limiting the universe of recoverable damages to those that are (i) actual, (ii) direct, and (iii)
compensatory, "Congress appears . . . to have wished to distinguish between those damages
which can be thought to make one whole and those that are designed to go somewhat further and
put a plaintiff securely in a financial position he or she would have occupied but for the breach."
Ojj'z`ce & Prof’l Emps. Int’l Union, Local 2 v. Fed. Deposit Ins. Corp., 27 F.3d 598, 604 (D.C.
Cir. 1994); see also McMillian v. Fea'. Deposit Ins. Corp., 81 F.3d 1041, 1055 (1 lth Cir. 1996).
Accordingly, if an agreement has been properly repudiated, FIRREA prevents a plaintiff from
recovering "expectation" or "liquidated" damages. 1n the end, a plaintif "cannot recover
damages to put it in the same position it would have occupied but for the breach." MCI
Commc ’ns Servs., Inc. v. Fed. Deposit Ins. Corp., m F. Supp. 2d __, 2011 WL 3667433, at *7
(D.D.C. Aug. 22, 2011).
The FDIC argues that NCB’s Counts 1 and 11 should be dismissed because NCB does not
specifically identify any "actual direct compensatory damages" in the Complaint. According to
the FD1C, the three months of fees invoiced by NCB for the months of August, September, and
October 2010 are unrelated to actual damages suffered and thus represent an impermissible
attempt to secure "expectation" or "liquidated" damages. While the FDlC’s position may or may
not prove to be meritorious upon further development of the factual record, it is unavailing at this
procedural posture because it presupposes that the FDIC properly repudiated the Collection
Agreement in accordance with FlRREA’s requirements. The Court cannot accept that premise at
this time. lt is also unclear from the Complaint what the amounts identified in the August,
September, and October 2010 invoices actually represent.
As NCB observes, "[t]he FDIC must make the determination whether or not to repudiate
a contract within a ‘reasonable period’ following [its] appointment as receiver." Pl.’s Opp’n at
11 (quoting 12 U.S.C. § 182l(e)(2)). Deterrnining whether the FDIC has repudiated a contract
within a "reasonable period" calls for a fact-specific inquiry that is not readily reducible to
abstract formulations or principles. See N.H. Assocs. Lta’. P’Shz'p v. Feo’. Deposz`t Ins. Corp., 978
F. Supp. 650, 654 (D. Md. 1997); Monument Square Assocs., Inc. v. Resolution Trust Corp., 792
F. Supp. 874, 878 (D. Mass. 1991); Union Bank v. Fed. Sav. & Loan Ins. Corp., 724 F. Supp.
468, 471 (E.D. Ky. 1989). 1n this case, the F D1C does not suggest that it satisfied the statutory
requirements for effective repudiation when it informed NCB on August 2, 2010 that it decided
to exercise its option to terminate the Collection Agreement under the terms of that agreement,
thereby triggering a contractual ninety-day termination period. Rather, the FDIC concedes that it
first attempted to formally repudiate the Collection Agreement under FIRREA on October 5,
2010, more than six-and-a-half months after its appointment as the receiver and more than two
months after it had already told NCB that it intended to wind-down the Collection Agreement
according to the terms of the agreement. True, the FDIC is correct that, assuming its attempt to
repudiate the Collection Agreement on October 5, 2010 was effective, NCB’s potential recovery
will be limited to "actual direct compensatory damages" measured as of March 19, 2010, the
date of the FD1C’s appointment as receiver. 12 U.S.C. § 182l(e)(3)(A). But if the FDlC’s
attempted repudiation was ineffective, then the question becomes what damages NCB would be
entitled to under the Collection Agreement and ordinary principles of contract law. See Country
Club Assocs. Lto'. P’Shzp v. Fed. Deposz't Ins. Corp., 418 F. Supp. 429, 437 (D.D.C. 1996)
10
(observing that the failure to properly repudiate a contract "results in a continuation of the
contractual obligation and the application of contractual principles to the dispute."). The Court
does not doubt that the FDIC has broad authority to repudiate agreements under FIRREA. Still,
that authority must be exercised within the parameters set by Congress. Whether the FDlC’s
attempted repudiation on October 5, 2010 was effective cannot be resolved at this procedural
posture and must await further development of the factual record, Further, whether NCB is
entitled to damages, and what form those damages might take, are questions that turn on whether
the FDIC properly exercised its power of repudiation.‘l
The remaining question is whether NCB has stated a plausible claim that the FDIC failed
to adhere to the terms of the Collection Agreement such that would support Counts 1 and 11.
Under Utah law, which governs the Collection Agreement by operation of an express choice-of-
law provision, "[t]he elements of a prima facie case for breach of contract are (1) a contract, (2)
performance by the party seeking recovery, (3) breach of the contract by the other party, and (4)
damages.” Baz`r v. Axiom Desz'gn, L.L.C., 20 P.3d 388, 392 (Utah 2001). 1t is undisputed that
NCB has satisfied the first two elements. Under the Collection Agreement, NCB was required to
continue providing debt collection services to the F D1C for the full ninety-day termination period
and the FDlC, in turn, was required to pay NCB for each of the three months comprising the
termination period_namely, August, September, and October. NCB alleges that the FDIC
breached the Collection Agreement, and later improperly disallowed its claim against the
receivership estate, by failing to submit payment on the three invoices that NCB issued for
4 This observation extends to the FDIC’S argument that NCB is effectively seeking to elevate its
claims for compensation to the level of an "administrative expense" entitled to prioritized
payment. Whether NCB’s claims are entitled to such treatment turns in part on whether the
FD1C’s attempted repudiation was effective. See 12 U.S.C. § 1821(e)(7)(B).
11
August, September, and October in the total amount of $2,323,938. Meanwhile, despite the
FD1C’s assertions to the contrary, NCB has alleged that it continued to perform under the
Collection Agreement and suffered damages as result. See Compl. 1111 9, 13-14, 17, 41-42. At
this stage, NCB may allege performance in general terms and need not plead with particularity
damages that would typically be expected to flow from its claims. See FED. R. CIV. P. 8(a)(3);
FED. R. CIV. P. 9(c), (g); Browning v. Clinton, 292 F.3d 235, 245 (D.C. Cir. 2002); Haynes v.
Navy Fea'. Credit Union, _ F. Supp. 2d _, 2011 WL 5867062, at *4 (D.D.C. Nov. 23, 2011).5
The Court reiterates: the FDlC’s arguments may or may not prove to be meritorious upon
further development of the factual record. But at this early stage, NCB’s Counts 1 and 11 state
plausible claims for relief and the Court’s inquiry is therefore at an end. Accordingly, the Court
shall DENY the FDlC’s [8] Motion to Dismiss insofar as it seeks dismissal of Counts 1 and 11.
B. The Court Shall Dismiss NCB’s Claim for Breach of the Implied Covenant of
G00d Faith and Fair Dealing (Count III)
NCB’s Count 111 alleges that the FDIC breached the implied duty of good faith and fair
dealing in the Collection Agreement by attempting to "retroactively repudiate” the agreement.
Compl. 1111 43-45. To resolve this claim, the Court need not question NCB’s contention that the
FDIC may in some hypothetical circumstances be held liable for breach of the implied covenant
of good faith and fair dealing. See Pl.’s Opp’n at 13-14. Even assuming, for the sake of
argument, that such a theory is tenable in the abstract, the particular claim pressed by NCB in
5 The Court acknowledges that NCB’s opposition is somewhat cryptic in its descriptions of the
nature of its perfonnance during the termination period, see Pl.’s Opp’n at 10, but further
development of the factual record will be required before the Court can ascertain whether NCB
adequately performed under the Collection Agreement F or example, even though the Collection
Agreement appears to contemplate a variable compensation structure, it is not clear why NCB
billed the FDIC in equal amounts for August, September, and October, and seems to have billed
the FDIC for the final month at the beginning of October, before any services could have been
perforrned. But at this procedural posture, the Court credits NCB’s allegation that it continued to
perform under the Collection Agreement.
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this case must nonetheless fail. 1n enacting FIRREA, Congress conferred upon the FDIC broad
authority to repudiate burdensome contracts to promote the orderly administration of failed
institutions’ affairs. See 12 U.S.C. § 1821(e)(1). Congress decided that, when the FDIC
properly exercises its statutory authority, its decision to repudiate a contract should have a
certain measure of "retroactive" effect, insofar as it fixes the date for the determination of
damages arising from repudiation at the time of the FDlC’s appointment as receiver and not the
time of repudiation. See id, § l821(e)(3). Although NCB cloaks Count 111 in the dress of the
implied covenant of good faith and fair dealing, the claim challenges the manner in which the
FDIC exercised the broad statutory authority conferred upon it by Congress. As the factual
record in this case is developed, it may or may not turn out that the FDIC failed to properly
repudiate the Collection Agreement-for example, by failing to repudiate the agreement within a
"reasonable period." Ia’. § l821(e)(2). But even assuming that turns out to be the case, there is
no independent cause of action for the FDlC’s failure to properly repudiate an agreement
Rather, the failure to properly follow repudiation procedures merely results in the failure to
repudiate the contract and the preservation of the underlying contractual obligations. Country
Club Assocs., 418 F. Supp. at 437; accord Pageland 29 Ltd. P’Ship v. Fea'. Deposit Ins. Corp.,
Civil Action No. 91-1858, 1992 WL 391377, at *4 (D.D.C. Dec. 14, 1992); Patriot Square
Assocs. v. Fed. Deposit Ins. Corp., Civil Action No. 91-1859, 1992 U.S. Dist. LEXIS 22530, at
*6 (D.D.C. Sept. 25, 1992).6 Thus, to the extent the FDlC’s efforts to repudiate the Collection
6 Viewed from a slightly different perspective, the implied covenant of good faith and fair
dealing reflects a shared "promise not to intentionally or purposely do anything that will destroy
or injure the other party’s right to receive the fruits of the contract." Prince v. Bear River Mut.
Ins. Co., 56 P.3d 524, 433 (Utah 2002) (quotation marks and notions omitted). This principle,
unobjectionable in most contractual disputes, fundamentally conflicts with FIRREA, through
which Congress conferred upon the FDIC a unique capacity to override parties’ contractual
expectations-that is, to deprive them of the full "fruits of the contract."
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Agreement were improper, NCB’s remedy must be found in Counts 1 and 11, not in the form of
the implied covenant of good faith and fair dealing. Therefore, the Court shall GRANT the
FDlC’s [8] Motion to Dismiss insofar as it seeks dismissal of Count 111.
C. The Court Shall Not Strike Portions of the Complaint
Under Rule l2(f), a party may move the district court to "strike from a pleading an
insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." FED. R.
CIV. P. 12(f). However, courts recognize that striking portions of pleadings is a drastic remedy
and, accordingly, motions to strike are generally disfavored. Stabilisierungsfonds Fur Wein v.
Kaiser Stuhl Wz`ne Distribs. Ply. Ltd., 647 F.2d 200, 201 (D.C. Cir. 1981) (per curiam). "The
decision to grant or deny a motion to strike is committed to the trial judge’s sound discretion."
Fed. Trade Comm ’n v. Cantkier, 767 F. Supp. 2d 147, 159-60 (D.D.C. 201 1).
Here, the FDIC asks the Court to strike paragraphs from the Complaint in which NCB
describes how it submitted a proof of claim seeking compensation from the FDIC and how the
FDIC ultimately disallowed the claim. See Compl. 1111 22-29, 31, 33. 1n support, the F D1C
contends that the allegations "overlook the confusion caused by NCB’s filing of multiple proofs
of claim" and are "irrelevant, since the FD1C’s claim review process is not subject to judicial
review." Def.’s Mem. at 18. As NCB observes, "it is routine for parties to provide . . . a certain
amount of background information that is not directly relevant to the merits of the claim."
Patton Boggs, LLP v. Chevron Corp., 791 F. Supp. 2d 13, 22 (D.D.C. 201 1). 1f the allegations
challenged by the FDIC are not directly relevant to the merits of the NCB’s claims, they
nonetheless provide helpful context about the history of the parties’ dispute. Given that NCB has
unambiguously represented that it "is not seeking judicial review of the FDlC’s decision to
disallow its claims," but rather "a de novo determination of its claims," Pl.’s Opp’n at 16, the
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Court harbors no concern that permitting these allegations to stand would engender any
confusion or undue prejudice to the F D1C. Accordingly, the Court declines to exercise its
discretion to strike the referenced allegations.7
IV. CONCLUSION AND ORDER
For the reasons set forth above, it is, this 14th day of February, 2012, hereby
ORDERED that the FDIC’S [8] Motion to Dismiss is GRANTED-IN-PART and
DENlED-1N-PART. Specifically, the Motion is GRANTED insofar as it seeks dismissal of
NCB’s claim for breach of the implied covenant of good faith and fair dealing (Count 111) and
DENlED in all other respects, including insofar as it seeks dismissal of NCB’s claim for de novo
judicial review of its claim against the receivership estate (Count 1) and its claim for breach of
contract (Count 11).
lt is FURTHER ORDERED that an Initial Scheduling Conference shall be held on
March 21, 2012, at 9:30 a.m., before Judge Colleen Kollar-Kotelly in Courtroom 28A.
S() ORDERED.
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
7 The FDIC appears to be concemed that the referenced allegations may be used as a basis for
discovery requests or submitted to the jury at trial. Such concerns are premature. The FDIC will
have the opportunity to object to discovery requests and to file appropriate motions in limine in
advance of trial.