Acosta-Ramirez v. Banco Popular de Puerto Rico , 712 F.3d 14 ( 2013 )

United States Court of Appeals
For the First Circuit
No. 12-1887
ELADIO ACOSTA-RAMÍREZ ET AL.,
Plaintiffs, Appellants,
v.
BANCO POPULAR DE PUERTO RICO,
Defendant, Appellee,
FEDERAL DEPOSIT INSURANCE CORPORATION,
as Receiver of Westernbank Puerto Rico,
Intervenor Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Carmen Consuelo Cerezo, U.S. District Judge]
Before
Lynch, Chief Judge,
Selya and Lipez, Circuit Judges.
Héctor E. Pedrosa-Luna, for appellants.
Enrique R. Padró Rodríguez, with whom Pedro J. Manzano Yates
and Fiddler González & Rodríguez, PSC were on brief, for appellee
Banco Popular de Puerto Rico.
Kathleen V. Gunning, Counsel, with whom Kathryn R. Norcross,
Acting Assistant General Counsel, Lawrence H. Richmond, Senior
Counsel, Ana B. Rosado-Frontanes, and Schuster Aguilo LLP were on
brief, for appellee Federal Deposit Insurance Corporation.
April 3, 2013
-2-
LYNCH, Chief Judge. Former employees of Westernbank, a
failed bank taken into receivership by the Federal Deposit
Insurance Corporation ("FDIC"), sued Banco Popular de Puerto Rico
("BPPR"), a bank that subsequently acquired Westernbank's deposits
and certain assets, but not the FDIC, on claims for severance pay
under Law 80, P.R. Laws Ann. tit. 29, § 185a et seq. The FDIC has
intervened and asserted that under 12 U.S.C. § 1821(d)(13)(D) "no
court shall have jurisdiction over" the claims because the
plaintiffs either failed to file administrative claims with the
FDIC or failed to challenge in federal court the FDIC's
disallowance of their administrative claims. At oral argument, the
plaintiffs' counsel conceded that the FDIC's position is correct.
Because the case must be remanded for dismissal for lack of
subject-matter jurisdiction, the issues presented are likely to
recur, and an opinion will provide useful precedent, we explain why
there was no jurisdiction here.
This case raises several issues of first impression for
us under the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat.
183. We hold that the plaintiffs' failures to comply with the FDIC
administrative claims process trigger the statutory bar, and we
join a number of circuits in holding that they may not avoid the
jurisdictional bar by failing to name the FDIC as a defendant.
Accordingly, we vacate entry of summary judgment for the defendants
-3-
and remand with instructions to dismiss for lack of subject-matter
jurisdiction.
I.
A. Factual Background
On April 30, 2010, the Puerto Rico Office of the
Commissioner for Financial Institutions ("OCFI") closed the
insolvent Westernbank and appointed the FDIC as receiver. That
same day, the FDIC informed all Westernbank employees that they had
been terminated because Westernbank was permanently closed. The
FDIC notified the employees that they had a right to submit any
claims that they may have had against Westernbank or the FDIC to
the FDIC under the mandatory administrative claims process, 12
U.S.C. § 1821(d)(3)-(13), established by FIRREA. The plaintiffs
neither pled nor produced evidence that they filed any such claims.
All seventy-six plaintiffs worked for Westernbank at the time of
its closure, with start dates ranging from 1978 to 2005.
The FDIC sold Westernbank's deposits and loans under a
Purchase and Assumption Agreement ("P&A Agreement") to BPPR on
April 30, 2010.1 In the P&A Agreement, BPPR agreed to assume all
1
We have explained before that:
Although there are many options available to the FDIC
when a bank fails, these options generally fall within
two categories of approaches, either liquidation or
purchase and assumption. The liquidation option is the
easiest method, but carries with it two major
disadvantages. First, the closing of the bank weakens
confidence in the banking system. Second, there is often
substantial delay in returning funds to depositors. The
-4-
of the failed bank's insured deposits and to purchase certain
assets formerly held by Westernbank. BPPR did not assume any
liability to Westernbank employees for severance pay, and sections
12.1(a)(3) and (4) of the P&A Agreement provided that the FDIC
would indemnify BPPR for liabilities of the failed bank not assumed
under the P&A Agreement, including claims based on the rights of or
actions/inactions of an employee of the failed bank. The P&A
Agreement specifically contemplated claims being brought by former
employees under Law 80 for severance or enhanced severance pay, and
provided that the FDIC would indemnify BPPR for any employee claim
under Law 80 based on successor liability.
Many of the plaintiffs in this case became employees of
BPPR. Between April 30 and June 17, 2010, these plaintiffs signed
temporary employment agreements with BPPR2 containing termination
dates and acknowledgments by the plaintiffs that: their employment
relationship with Westernbank had ended; Westernbank had ceased to
exist; and their temporary employment with BPPR was new and did not
preferred option when a bank fails, therefore, is the
purchase and assumption option. . . . Generally, the
purchase and assumption must be executed in great haste,
often overnight.
Timberland Design, Inc. v. First Serv. Bank for Sav., 932 F.2d 46,
48 (1st Cir. 1991) (per curiam) (citations omitted).
2
Plaintiffs José Pérez-Valentín and Arnaldo González-González
never became employees of BPPR. One plaintiff, Fernando Cruz-
González, became a regular employee of BPPR, but was terminated on
August 13, 2010, because of disrespectful behavior toward a trainer
during his new employee training in violation of BPPR's Employee
Manual.
-5-
constitute a continuation of their prior employment with
Westernbank. Of the plaintiffs who had become BPPR employees, all
eventually left BPPR, either through voluntary resignations or
termination.
B. Procedural History
The plaintiffs sued BPPR on October 18, 2010 in a Puerto
Rico court for unjust termination in violation of Law 80 and sought
severance payments based on their time employed at BPPR and at
Westernbank.3 The employees asserted that BPPR was liable as a
successor employer because BPPR acquired the assets of Westernbank,
an ongoing business, and essentially continued the same identity
and business activity as before.
On November 19, 2010, BPPR removed the case to federal
court based on federal question jurisdiction4 and the FDIC moved to
intervene on February 14, 2011, because it retained certain
liabilities at issue (if any actually existed). The district court
granted the motion to intervene on April 15, 2011.
BPPR moved for summary judgment on August 26, 2011,
arguing that it was not liable for any severance claims based on
the plaintiffs' employment at Westernbank for at least three
3
On November 18, 2010, the number of plaintiffs reached the
current number of seventy-six when the employees filed an amended
complaint.
4
Because we determine that this case should in all events
have been dismissed for want of subject-matter jurisdiction, we
take no view as to the propriety of removal.
-6-
different merits-based reasons, which are not pertinent to our
disposition of this appeal.
The FDIC moved for dismissal on the ground that the court
lacked subject-matter jurisdiction to decide the plaintiffs' claims
for severance pay based on their employment at Westernbank. Fed.
R. Civ. P. 12(b)(1).5 The FDIC argued that it had retained any
potential liability for such severance claims in the P&A Agreement.
The employees had been terminated on the closing date and notified
of their right to file a claim against the FDIC. The FDIC provided
unrebutted information that some did not file any such claim, and
those who did failed to file any challenge (let alone timely) to
the FDIC's disallowance of their claims in the proper federal
court. As a result, the FDIC argued that the court lacked
jurisdiction to hear the claims.
The district court granted BPPR's motion for summary
judgment on March 30, 2012, based on BPPR's arguments,6 and did not
5
The FDIC also moved to dismiss under Fed. R. Civ. P.
12(b)(6) on the ground that the plaintiffs' employment at
Westernbank was terminated for "just cause" because of
Westernbank's insolvency, and thus they had no claim for relief
under Law 80.
6
The court held on the merits that BPPR was not a successor
employer, that Westernbank's closure provided just cause for the
plaintiffs' termination, that any liability for severance claims
related to the plaintiffs' employment at Westernbank remained with
the FDIC under the terms of the P&A Agreement, and that BPPR was
not liable for severance pay to the plaintiffs for the time they
worked for BPPR because they worked under fixed-term contracts to
perform a temporary job. Acosta-Ramirez v. Banco Popular de P.R.,
Civil No. 10-2131CCC, 2012 WL 1123602, at *8-10 (D.P.R. Mar. 30,
-7-
address the antecedent question of whether it had jurisdiction.
Acosta-Ramirez v. Banco Popular de P.R., Civil No. 10-2131CCC, 2012
WL 1123602, at *11 (D.P.R. Mar. 30, 2012). The plaintiffs filed a
timely notice of appeal. On appeal, they have expressly abandoned
any claims against BPPR that do not depend on their Westernbank
tenure.
II.
Federal courts are obliged to resolve questions
pertaining to subject-matter jurisdiction before addressing the
merits of a case. Donahue v. City of Boston, 304 F.3d 110, 117
(1st Cir. 2002) (citing Steel Co. v. Citizens for a Better Env't,
523 U.S. 83, 101-02 (1998)); see Sinochem Int'l Co. v. Malaysia
Int'l Shipping Corp., 549 U.S. 422, 430-31 (2007); see also Arbaugh
v. Y&H Corp., 546 U.S. 500, 514 (2006) (discussing importance of
determining if an issue is one of subject-matter jurisdiction
because it creates an independent obligation for the court, allows
courts to resolve disputed evidence, and requires dismissal of the
complaint in its entirety if subject-matter jurisdiction is
lacking). We independently determine the existence of subject-
matter jurisdiction. See Alphas Co. v. Dan Tudor & Sons Sales,
Inc., 679 F.3d 35, 38 (1st Cir. 2012); Nat'l Union Fire Ins. Co. of
Pittsburgh v. City Sav., F.S.B., 28 F.3d 376, 383 (3d Cir. 1994)
2012). The district court noted that Cruz was not a temporary
employee, but became a regular employee. However, the district
court found his termination to be for good cause. Id. at *10-11.
-8-
(appeals courts exercise plenary review over question of whether
subject-matter jurisdiction exists). In deciding the question, we
may consider whatever evidence has been submitted in the case. See
Aversa v. United States, 99 F.3d 1200, 1210 (1st Cir. 1996); see
also Alicea-Hernandez v. Catholic Bishop of Chi., 320 F.3d 698, 701
(7th Cir. 2003).
A. The FDIC Assumed and Retained Severance Liability for
The Plaintiffs' Tenure at Westernbank
Congress adopted FIRREA in response to the savings and
loan crisis in the 1980s. Tellado v. IndyMac Mortg. Servs., 707
F.3d 275, 279 (3d Cir. 2013). FIRREA gives the FDIC authority to
act as receiver or conservator for failed institutions. Benson v.
JPMorgan Chase Bank, N.A., 673 F.3d 1207, 1211 (9th Cir. 2012).
"Congress wanted to facilitate takeovers of insolvent financial
institutions and smooth the modalities by which rehabilitation
might be accomplished." Marquis v. FDIC, 965 F.2d 1148, 1154 (1st
Cir. 1992).
As part of the rehabilitative process, the FDIC, as
receiver, succeeds as a matter of law to the rights, titles, powers
and privileges of the failed bank, along with the responsibility to
pay the failed bank's valid obligations. 12 U.S.C.
§ 1821(d)(2)(A), (d)(2)(H). The FDIC may merge the failed
institution with a healthier institution, and in doing so, may
transfer "any asset or liability" of the failed institution. Id.
§ 1821(d)(2)(G)(i)(I)-(II). Through a different non-FIRREA
-9-
statutory provision, Congress permits the FDIC "in its sole
discretion and upon such terms and conditions as the [FDIC] may
prescribe," to assume liabilities of the failed institution. Id.
§ 1823(c)(2)(A)(i).
Here, the FDIC, through the P&A Agreement, retained
liabilities as to any claims by former Westernbank employees
arising from their employment with Westernbank, which the FDIC
assumed by becoming receiver. See Lawson v. FDIC, 3 F.3d 11, 16
(1st Cir. 1993); Payne v. Sec. Sav. & Loan Ass'n, F.A., 924 F.2d
109, 111-12 (7th Cir. 1991). Article IV of the P&A Agreement sets
forth the liabilities assumed by BPPR, and does not include
liabilities under Law 80. Moreover, subject to limitations not
relevant here, section 12.1 of the P&A Agreement indemnifies BPPR
against liabilities it did not assume through the P&A Agreement,
including claims based on rights of employees of Westernbank. In
addition, section 12.9 of the P&A Agreement specifically
contemplates a claim of successor liability against BPPR by former
Westernbank employees and indemnifies BPPR against such claims,
providing more proof that BPPR did not assume such liability.
Hence, any claim for severance pay for the plaintiffs' tenure at
Westernbank is ultimately against the FDIC.
-10-
B. The Plaintiffs' Failures to Comply with FIRREA's
Administrative Claims Process Create a Jurisdictional
Bar
Because Congress wanted the FDIC to be able to deal
expeditiously with failed depository institutions, see Meliezer v.
Resolution Trust Co., 952 F.2d 879, 881 (5th Cir. 1992), FIRREA was
also "designed to create an efficient administrative protocol for
processing claims against failed banks," Marquis, 965 F.2d at 1154.
This was achieved through the statutory claims process.
FIRREA's statutory claims process requires the FDIC, upon
appointment as receiver, to publish notice that the failed
institution's creditors must file claims with the FDIC by a
specified date, which must be at least ninety days after
publication of the notice. 12 U.S.C. § 1821(d)(3)(B)(i).7 If a
claim is filed, the FDIC has 180 days to determine whether to
approve or disallow the claim. Id. § 1821(d)(5)(A)(i). Claimants
then have sixty days from the date of disallowance or from the
expiration of the 180-day administrative decision deadline to seek
judicial review in an appropriate federal district court (or to
seek administrative review). Id. § 1821(d)(6)(A).8
7
Notice must also be mailed to all known creditors of the
institution. 12 U.S.C. § 1821(d)(3)(C).
8
Failure to seek administrative review or judicial review
within the sixty-day period means any portion of the claim not
allowed is deemed disallowed and "such disallowance shall be final,
and the claimant shall have no further rights or remedies with
respect to such claim." 12 U.S.C. § 1821(d)(6)(B).
-11-
Moreover, FIRREA imposes limits on the jurisdiction of
courts to hear certain claims where the plaintiff has not complied
with the statutory claims process. Section 1821(d)(13)(D) states:
(D) Limitations on judicial review
Except as otherwise provided in this
subsection, no court shall have jurisdiction
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.
"[T]his subsection" refers to § 1821(d) in its entirety. Marquis,
965 F.2d at 1153. As a result, in a case in which subsection (i)
applied, we held that "[f]ailure to comply with the [statutory
claims process] deprives the courts of subject matter
jurisdiction." Simon v. FDIC, 48 F.3d 53, 56 (1st Cir. 1995). The
same deprivation of jurisdiction holds true under subsection (ii).
We discuss later why failure to name the FDIC as a defendant does
not affect this conclusion.
1. Claims of Those Who Did Not File Administrative
Claims Are Barred
The parties asserting jurisdiction, here the plaintiffs,
have the burden of demonstrating the existence of federal
-12-
jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994); Fábrica de Muebles J.J. Álvarez, Inc. v.
Inversiones Mendoza, Inc., 682 F.3d 26, 32 (1st Cir. 2012). Here,
it is undisputed that many of the plaintiffs never made any effort
to follow the statutory claims process. These plaintiffs have
obviously failed to meet the burden. See Inversiones Mendoza, 682
F.3d at 32.
2. The Plaintiffs Who Filed an Administrative Claim
But Did Not Seek Timely Judicial Review Under
FIRREA Are Barred
There is another wrinkle based on information in the
FDIC's brief, which informs us that many of the plaintiffs actually
filed for severance pay with the FDIC following the Westernbank
receivership. Their claims were denied and the plaintiffs never
filed suit against the FDIC seeking review of the denials. The
FDIC argues that failure to file suit within the sixty-day
requirement of § 1821(d)(6) deprives the court of subject-matter
jurisdiction.
A number of courts that have considered the question have
held that failure to comply with the sixty-day limit operates as a
jurisdictional bar. See, e.g., Home Capital Collateral, Inc. v.
FDIC, 96 F.3d 760, 763-64 (5th Cir. 1996); Astrup v. Resolution
Trust Corp., 23 F.3d 1419, 1421 (8th Cir. 1994) (per curiam);
Capitol Leasing Co. v. FDIC, 999 F.2d 188, 193 (7th Cir. 1993).
Our decision in Simon v. FDIC, 48 F.3d 53, also appears to place
-13-
the sixty-day requirement within the jurisdictional sweep of
§ 1821(d)(13)(D), although in that case the plaintiffs never even
filed administrative claims. See 48 F.3d at 56.
We agree with the FDIC that the failure of the plaintiffs
to comply with the sixty-day requirement to seek judicial review of
the denial of their administrative claims also deprives courts of
jurisdiction. FIRREA's plain language states that except as
otherwise provided, no court has jurisdiction over the relevant
types of claims, 12 U.S.C. § 1821(d)(13)(D)(i)-(ii), and the only
judicial review provided for here is for suits filed within sixty
days of the disallowance or the expiration of the decision period,
id. § 1821(d)(6). We think that the provision's plain language
makes it clear that Congress wanted the rule to be
"jurisdictional," see Henderson ex rel. Henderson v. Shinseki, 131
S. Ct. 1197, 1203 (2011). Moreover, the sixty-day limit is part of
a comprehensive scheme designed to create an efficient process, see
Marquis, 965 F.2d at 1154, which buttresses our view that failure
to comply with the sixty-day requirement, like failure to file an
administrative claim, triggers FIRREA's jurisdictional limitation.
3. The Plaintiffs May Not Avoid the Jurisdictional
Bar by Strategically Naming BPPR as the Sole
Defendant
Had this suit been brought originally against the FDIC,
it would clearly have been jurisdictionally barred. See Simon, 48
F.3d at 56. We consider whether the jurisdictional limitation
-14-
applies to suits seeking to make an end run around FIRREA's
statutory claims process by suing the third-party purchasing bank.
It does.
As the Seventh Circuit summarized in Farnik v. FDIC, 707
F.3d 717 (7th Cir. 2013), the circuits that have considered whether
FIRREA's judicial review restriction applies to third-party
assuming banks "have interpreted it as focusing on the substance of
a claim rather than its form." Id. at 722. Therefore, "the FIRREA
administrative exhaustion requirement is based not on the entity
named as defendant but on the actor responsible for the alleged
wrongdoing." Id. at 723.
Other circuits agree. In Village of Oakwood v. State
Bank & Trust Co., 539 F.3d 373 (6th Cir. 2008), the Sixth Circuit
reasoned that even if the FDIC was not the named defendant, the
claims related to acts or omissions of the FDIC as receiver and so
the failure to comply with the statutory claims process barred the
claim. Id. at 386.
In Benson v. JPMorgan Chase Bank, N.A., 673 F.3d 1207,
the Ninth Circuit stated, "[l]itigants cannot avoid FIRREA's
administrative requirements through strategic pleading." Id. at
1209. The court found the plaintiffs' claims against the
purchasing bank related to an act or omission of a depository
institution for which the FDIC had been appointed receiver,
triggering the jurisdictional bar. Id. at 1215.
-15-
Finally, in Tellado v. IndyMac Mortgage Services, 707
F.3d 275, the Third Circuit held that because the plaintiffs' claim
against the assuming bank was "not a claim of independent
misconduct by [the assuming bank]," but existed "only because [the
failed institution] had failed to provide proper notice of the
right to cancel [the mortgage]," id. at 280, the jurisdictional
limitation applied, id. at 281.
Looking to the substance rather than the form, the
plaintiffs' claims are indeed really claims against the
receivership. They turn on: (1) the FDIC's decision, as receiver,
to terminate the plaintiffs upon the closing of Westernbank; and/or
(2) the FDIC's decision, as receiver, not to transfer to BPPR any
liability for employees' severance pay based on their employment at
Westernbank in the P&A Agreement. The plaintiffs' counsel conceded
at oral argument that there are no independent claims against BPPR
for actions it took post-receivership. That concession, coupled
with our finding that jurisdiction is lacking on the severance
claims related to the plaintiffs' employment at Westernbank,
disposes of this appeal in its entirety. The plaintiffs may not
avoid that reality though strategic pleading. Their claims are
jurisdictionally barred.
-16-
III.
For the reasons set forth above, we vacate the district
court's order granting summary judgment and remand this case with
instructions to dismiss for lack of subject-matter jurisdiction.
No costs are awarded.
-17-