-
USCA1 Opinion
May 15, 1992
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No. 92-1113
92-1179
SERGE MARQUIS, ET AL.,
Plaintiffs, Appellees,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS LIQUIDATING AGENT OF HILLSBOROUGH
BANK & TRUST COMPANY,
Defendant, Appellant.
_________________________
No. 92-1216
ELTREX INTERNATIONAL CORPORATION, ET AL.,
Plaintiffs, Appellees,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS LIQUIDATING AGENT OF
HILLSBOROUGH BANK & TRUST COMPANY,
Defendant, Appellant.
_________________________
No. 92-1217
MICHAEL M. MILLS,
Plaintiff, Appellee,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR NASHUA TRUST COMPANY,
Defendant, Appellant.
_________________________
No. 92-1218
JAMES P. GOODRICH,
Plaintiff, Appellee,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR DARTMOUTH BANK,
Defendant, Appellant.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Shane Devine, U.S. District Judge]
___________________
_________________________
Before
Selya, Circuit Judge,
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Coffin, Senior Circuit Judge,
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and Young,* District Judge.
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Michael H. Krimminger, Counsel, with whom Ann S. Duross,
______________________ ______________
Assistant General Counsel, and Richard J. Osterman, Jr., Senior
_________________________
Counsel, were on brief, for appellant Federal Deposit Insurance
Corporation.
Jay L. Hodes, with whom Heather M. Jeans and Bossie, Kelly &
____________ ________________ _______________
Hodes, P.A., were on brief, for appellees Serge Marquis, et al.
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Eleanor Dahar, with whom Victor W. Dahar, P.A., was on
______________ _______________________
brief, for appellees Eltrex International Corp., et al.
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_________________________
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*Of the District of Massachusetts, sitting by designation.
SELYA, Circuit Judge. These consolidated appeals raise
SELYA, Circuit Judge.
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an important question concerning the extent of the restrictions
on the federal courts' subject matter jurisdiction imposed by the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (FIRREA), Pub. L. No. 101-73, 103 Stat. 183, codified in
scattered sections of 12 U.S.C. (Supp. II 1990). The Federal
Deposit Insurance Corporation (FDIC) claims that FIRREA's
jurisdictional bar, 12 U.S.C. 1821(d)(13)(D), requires federal
courts to dismiss virtually all civil actions pending against a
failed financial institution at the time the FDIC is appointed as
receiver. The court below rejected this broadcast claim. After
careful consideration of the relevant portions of the Act, we
hold that FIRREA does not require courts automatically to dismiss
all actions instituted against a failed bank prior to the FDIC's
appointment as receiver of the institution.
I. BACKGROUND
I. BACKGROUND
The nature of this proceeding does not demand an
exegetic discussion of particular facts.1 It suffices to
recount seven events common to the four underlying cases:
1. The plaintiff (or co-plaintiffs, in two of the
cases) sued an FDIC-insured financial institution in a New
____________________
1In brief, appellees Serge Marquis and Gail Marquis sued
Hillsborough Bank & Trust Company for breach of contract, breach
of fiduciary duty, and misrepresentation in connection with a
second mortgage loan. Appellees Eltrex International Corp. and
Thomas Sullivan sued Hillsborough for rescission of a $400,000
promissory note and for damages in respect thereto. Appellee
Michael Mills sued Nashua Trust Company for damages stemming from
breach of fiduciary duty, misrepresentation, wrongful
foreclosure, etc. Appellee James Goodrich sued Dartmouth Bank for
indemnification.
3
Hampshire state court.
2. The pleadings stated one or more claims for money
damages, chargeable against the institution's assets, arising out
of some challenged banking practice.
3. The financial institution was declared insolvent
while the litigation was pending.
4. The FDIC was appointed as receiver, see 12 U.S.C.
___
1821(c)(3)(A), and thereupon removed the case to federal district
court. See 12 U.S.C. 1819(b)(2)(B).
___
5. Once removal was perfected, the FDIC sought
dismissal, contending that the court lacked subject matter
jurisdiction to adjudicate the creditors' claims unless and until
those claims were timely filed with, and processed through, the
administrative mechanism embodied in FIRREA. See 12 U.S.C.
___
1821(d)(3)-(10).
6. The district court denied the motion for dismissal
(but, eventually, stayed proceedings to permit resort to, and
operation of, FIRREA's administrative claims review process).
7. At the FDIC's request, the district court certified
its ruling regarding subject matter jurisdiction for
interlocutory appeal.2
Because of the importance of the jurisdictional
question, and its unsettled nature, we accepted appellate
jurisdiction, see 28 U.S.C. 1292(b) (1988), and expedited the
___
appeals.
II. ISSUE PRESENTED
II. ISSUE PRESENTED
In this case, our inquiry reduces to a single question:
do the federal courts retain subject matter jurisdiction over
actions pending against failed financial institutions once the
____________________
2Only three of the appeals were actually certified under 28
U.S.C. 1292(b) (1988). The remaining appeals, which together
implicate a single case, are before us in a more problematic
posture. Because all five appeals present the same substantive
question, however, we have concluded that the difference in how
they arrived on our doorstep need not be addressed.
4
FDIC has been appointed as receiver? We answer this query in the
affirmative, noting, moreover, that our ensuing discussion
applies equally to the Resolution Trust Corporation (RTC) in
those instances where the RTC is appointed as the receiver of a
failed financial institution in place of the FDIC, see 12 U.S.C.
___
1441a(b)(4). Ancillary to this response, we also examine, and
comment upon, the federal courts' powers to stay litigation
pending completion of FIRREA's administrative claims review
process (ACRP).
III. ANALYSIS
III. ANALYSIS
FIRREA's text comprises an almost impenetrable thicket,
overgrown with sections, subsections, paragraphs, subparagraphs,
clauses, and subclauses a veritable jungle of linguistic fronds
and brambles. In light of its prolixity and lack of coherence,
confusion over its proper interpretation is not only unsurprising
it is inevitable.
Our concern here is with 12 U.S.C. 1821(d) (Supp. II
1990), reproduced in the Appendix. This section deals,
generally, with the FDIC's powers and duties when acting as a
receiver of a failed financial institution. In the interest of
affording context, it may be noted that section 1821(d) trails
directly in the wake of statutory descriptions of the FDIC's
responsibilities for insuring deposits, 12 U.S.C. 1821(a);
intervening in bank liquidations, 12 U.S.C. 1821(b); and
becoming the receiver for failed depository institutions, 12
U.S.C. 1821(c). Section 1821(d), then, is a relatively small
5
piece of the statutory puzzle but one which exemplifies the
larger interpretive problem: section 1821(d) is comprised of
nineteen separately numbered fascicles, most with myriad
subparts, occupying seven pages of the United States Code. It
is, in short, an avalanche of words.
A.
A.
__
We begin our analysis with the rudiments of the
statutory scheme. We think that FIRREA makes participation in
the administrative claims review process mandatory for all
parties asserting claims against failed institutions, regardless
of whether lawsuits to enforce those claims were initiated prior
to the appointment of a receiver.3 See Meliezer v. RTC, 952
___ ________ ___
F.2d 879, 882 (5th Cir. 1992) ("Although FIRREA does not
explicitly mandate exhaustion of administrative remedies before
judicial intervention, the language of the statute and indicated
congressional intent make clear that such is required."); FDIC v.
____
Shain, Schaffer & Rafanello, 944 F.2d 129, 132 (3d Cir. 1991) (in
___________________________
enacting FIRREA, "Congress expressly withdrew jurisdiction from
all courts over any claim to a failed bank's assets that are made
outside the procedure set forth in section 1821."); see also RTC
___ ____ ___
v. Elman, 949 F.2d 624, 627 (2d Cir. 1991); RTC v. Mustang
_____ ___ _______
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3The courts are in some disarray as to the exact source of
this exhaustion requirement. Compare, e.g., RTC v. Elman, 949
_______ ____ ___ _____
F.2d 624, 627 (2d Cir. 1991) (citing 12 U.S.C.
1821(d)(13)(D)(i) for proposition), with, e.g., RTC v. Mustang
____ ____ ___ _______
Partners, 946 F.2d 103, 106 (10th Cir. 1991) (per curiam) (citing
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12 U.S.C. 1821(d)(3)(B)(i) for proposition). The instant
appeals do not require us either to reconcile, or to choose
among, these conflicting views.
6
Partners, 946 F.2d 103, 106 (10th Cir. 1991) (per curiam); Coston
________ ______
v. Gold Coast Graphics, Inc., 782 F. Supp. 1532, 1537 (S.D. Fla.
__________________________
1992). But see FDIC v. Grillo, ___ F. Supp. ___, ___ (D.N.H.
___ ___ ____ ______
1992) [1992 WL 70100, at *7] (holding that "utilization of the
administrative adjudication procedure is not mandatory or
exclusive"). Accordingly, we rule that, where a claimant has
been properly notified of the appointment of a federal insurer as
receiver, 12 U.S.C. 1821(d)(3)(B)-(C), and has nonetheless
failed to initiate an administrative claim within the filing
period, 12 U.S.C. 1821(d)(3)(B)(i), the claimant necessarily
forfeits any right to pursue a claim against the failed
institution's assets in any court. See 12 U.S.C.
___
1821(d)(5)(C)(i).
To this point, our analysis comports with the FDIC's
views. But at the next crossroad, we head in different
directions. The FDIC not only urges that claimants must exhaust
the remedies afforded by the ACRP, but says that, while the ACRP
runs its course, preexisting actions must be dismissed (even
though, as a practical matter, claimants can file new lawsuits if
not fully satisfied with the outcome of the administrative
proceedings, see 12 U.S.C. 1821(d)(6)(A)). This is the
___
matter's crux.
B.
B.
__
The FDIC bases its argument on the following statutory
provision:
Except as otherwise provided in this subsection, no court
shall have jurisdiction over
7
(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.
12 U.S.C. 1821(d)(13)(D). The jurisdictional bar of section
(d)(13)(D) reaches all claims seeking payment from the assets of
the affected institution; all suits seeking satisfaction from
those assets; and all actions for the determination of rights
vis-a-vis those assets. See Rosa v. RTC, 938 F.2d 383, 393 (3d
___ ____ ___
Cir.), cert. denied, 112 S. Ct. 582 (1991). Starting from this
_____ ______
baseline, the FDIC asserts that, with respect to suits pending
against financial institutions at the time an FDIC receivership
ensues, no jurisdiction inheres until after the ACRP, described
in subsections (d)(3)-(10), has run its course.4
Quite plainly, Congress intended the ACRP to provide a
streamlined method for resolving most claims against failed
institutions in a prompt, orderly fashion, without lengthy
litigation. See H.R. Rep. No. 101-54(I), 101st Cong., 1st Sess.,
___
____________________
4These subsections grant to the FDIC, acting in its capacity
as receiver, the authority to determine claims against the failed
institution. The same subsections set out basic guidelines
governing the ACRP. Among the more important provisions under
the FDIC's interpretation are subsections (d)(5)(A)(i) (requiring
that an administrative determination be made within 180 days next
following the filing of a claim), 12 U.S.C. 1821(d)(5)(A)(i);
subsection (d)(5)(A)(ii) (allowing an extension of the claims
processing period upon written agreement of the claimant and the
FDIC), 12 U.S.C. 1821(d)(5)(A)(ii); and subsection (d)(6)(A)
(authorizing further administrative review or de novo judicial
review of disallowed claims, as the claimant prefers), 12 U.S.C.
1821(d)(6)(A).
8
at 418-19, reprinted in 1989 U.S.C.C.A.N. 86, 214-15 ("The claims
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determination procedure . . . creates a system which . . .
enables the FDIC to dispose of the bulk of claims against failed
financial institutions expeditiously and fairly."). In the
FDIC's view, this intent would be thwarted if pending actions
were allowed to proceed in the district court in lieu of, or
concurrent with, the processing of administrative claims premised
on the same nucleus of operative facts.
This interpretation, however, seems inconsistent with
other parts of FIRREA. The single sentence which is most
difficult to harmonize with the FDIC's reading of the statute is
the provision which states that, subject to the 90-day stay
described elsewhere in the statute, see 12 U.S.C.
___
1821(d)(12)(A), "the filing of a claim with the receiver shall
not prejudice any right of the claimant to continue any action
which was filed before the appointment of a receiver." 12 U.S.C.
1821(d)(5)(F)(ii). What could be more prejudicial to a
claimant's right "to continue" a pending action than the outright
dismissal of the action?
The FDIC's attempted answer strikes us as lame. It
argues that 12 U.S.C. 1821(d)(5)(F)(ii) and its counterpart, 12
U.S.C. 1821(d)(8)(E)(ii) (providing a similar disclaimer of
prejudice with reference to parties proceeding under FIRREA's
expedited claims procedures), do not serve to insulate pre-
receivership suits from dismissal, but merely protect pre-
receivership litigants from actual prejudice, such as time bars,
9
pending completion of the ACRP. That asseveration, however,
fails to explain why Congress used the verb "continue" rather
than a verb such as "recommence" or "refile." Indeed, the FDIC's
recension of the law simply reads the word "continue" out of the
statute.
It is also difficult to imagine why Congress would have
felt a need to provide for stays of pending suits, 12 U.S.C.
1821(d)(12), if such suits were automatically to be dismissed.
Once again, the FDIC has an answer but not a good one. It
contends that withdrawing cases from the courts by automatic
dismissal does not make a nullity of the 90-day stay provision,
since 12 U.S.C. 1821(d)(12) applies not only to actions brought
against insolvent financial institutions but also to actions
_______
brought by those institutions (and thus, the subsection serves to
__
furnish the FDIC with an opportunity to freeze litigation for a
brief period in order to familiarize itself with claims which it
bears the burden of pursuing, if it so chooses). But, the stay
provision applies to actions in which the institution is "a
party," id., not merely to actions in which the institution is "a
___
plaintiff." And, the FDIC has pointed to nothing in FIRREA's
compendious legislative history that suggests Congress was
thinking along the lines of a plaintiff/defendant dichotomy in
fashioning FIRREA's stay provisions.
C.
C.
__
The sockdolager is that the jurisdictional bar upon
which the FDIC relies contains a specific exemption allowing
10
retention of cases if, and to the extent that, jurisdiction is
"otherwise provided in this subsection." 12 U.S.C.
1821(d)(13)(D). The reference to "this subsection," when read in
context, is clearly a reference to section 1821(d) in its
entirety.5 Accord Simms v. Biondo, ___ F. Supp. ___, ___
______ _____ ______
(E.D.N.Y. 1992) [1992 WL 41560, at *3]. Section 1821(d)'s grant
of jurisdiction is variously expressed. See, e.g., 12 U.S.C.
___ ____
1821(d)(6)(A) (conferring district court jurisdiction to
entertain suits based upon disallowed claims); 12 U.S.C.
1821(d)(7)(A) (conferring district court jurisdiction to
entertain suits based on claims which, after initial
disallowance, have undergone administrative review); 12 U.S.C.
1821(d)(8)(C) (conferring district court jurisdiction to
entertain suits based on claims disallowed under the expedited
claims procedure). In addition to these express grants of
jurisdiction over disallowed claims, however, section 1821(d)
also implies the existence of jurisdiction in other
circumstances. See, e.g., 12 U.S.C. 1821(d)(13)(B) (a
___ ____
provision that vests the FDIC, qua receiver, with "all the rights
___
and remedies available" to the failed institution to pursue
appealable judgments, and thus allows for continued appellate
jurisdiction). In much the same manner, we think that
subsections (d)(5)(F)(ii), (d)(8)(E)(ii), and (d)(12) coalesce to
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5We reject the contrary conclusion reached in New Maine
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Nat'l Bank v. Reef, 765 F. Supp. 763 (D. Me. 1991). The New
__________ ____ ___
Maine court incorrectly read the "otherwise provided in this
_____
subsection" language as referring only to 1821(d)(13)(D),
rather than to all of 1821(d). Id. at 765.
___
11
show Congress' discernible intent to preserve jurisdiction over
civil actions filed against failed institutions prior to the
FDIC's appointment as receiver.
Subsection (d)(5)(F)(ii) is part of the rubric that
establishes the ACRP.6 It states that, "[s]ubject to paragraph
(12), the filing of a claim with the receiver shall not prejudice
any right of the claimant to continue any action which was filed
before the appointment of the receiver." 12 U.S.C.
1821(d)(5)(F)(ii). The provision to which this subsection refers
is entitled "Suspension of Legal Actions." It provides in
relevant part:
After the appointment of a . . . receiver for
an insured depository institution, the . . .
receiver may request a stay for a period not
to exceed
. . .
(ii) 90 days . . . in any judicial
action or proceeding to which such
institution is or becomes a party.
12 U.S.C. 1821(d)(12)(A). The next subparagraph commands
courts to grant all such stays, when and if requested. 12 U.S.C.
1821(d)(12)(B). We read these sections, in combination, as
constructing a scheme under which courts will retain jurisdiction
over pending lawsuits suspending, rather than dismissing, the
suits subject to a stay of proceedings as may be appropriate to
permit exhaustion of the administrative review process as it
____________________
612 U.S.C. 1821(d)(8)(E)(ii), which is part of the rubric
that establishes the expedited claims procedure, is worded
identically to 12 U.S.C. (d)(5)(F)(ii) and, thus, bolsters the
view that we take of FIRREA jurisdiction.
12
pertains to the underlying claims.
In our opinion, reading FIRREA in this fashion is as
faithful as possible to the statute's text, harmonizes its
various provisions, and is consistent with the policies which
Congress sought to advance. Faced with a national banking
crisis, Congress wanted to facilitate takeovers of insolvent
financial institutions and smooth the modalities by which
rehabilitation might be accomplished. To this end, FIRREA was
designed to create an efficient administrative protocol for
processing claims against failed banks. This objective would be
disserved by forcing the courts to dismiss all pending
litigation, only to have the cases refiled when and if
administrative settlement proved impracticable. It is difficult
to conceive of anything less efficient than dismissing a suit
that has been, say, two years in process, only to have an
identical suit started afresh some six months later. By staying
all proceedings in a pending action until the administrative
claims process has run its course, efficacy will be promoted. At
that point, suits based upon resolved claims can be dismissed
outright, whereas suits based upon claims still unresolved can
simply be resumed, thereby dispelling the need to retrace steps
already completed.
By the same token, other policies which Congress
obviously sought to advance in enacting FIRREA fairness to
claimants, minimization of expense, and thoughtful husbanding of
scarce judicial resources are also furthered by reading the
13
statute as we do. Claimants will be spared the unnecessary costs
of refiling cases and bringing them up to speed. Courts will
similarly be spared the trouble of starting from ground zero in
each and every case in which an administrative settlement does
not materialize.
In short, four powerful indicators of FIRREA's meaning
the structure of the Act, its language, the underlying
legislative intent, and common sense unanimously counsel in
favor of a construction of FIRREA that permits federal courts to
retain subject matter jurisdiction in circumstances where a
bank's failure (and the FDIC's appointment as receiver) postdates
the institution of a suit against the bank.
D.
D.
__
We were informed, at oral argument, that in one of
these cases the district court entered a supplemental stay
extending the original stay from 90 days to 180 days to allow for
completion of the ACRP. This raises the related question of
whether the 90-day stay described in 12 U.S.C. 1821(d)(12)
limits the duration of stays that may be granted when FIRREA
intercepts a pre-receivership suit. We do not believe that any
such limitation exists.
It is beyond cavil that, absent a statute or rule to
the contrary, federal district courts possess the inherent power
to stay pending litigation when the efficacious management of
court dockets reasonably requires such intervention. See Landis
___ ______
v. North Amer. Co., 299 U.S. 248, 254-55 (1936); In re Ramu
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14
Corp., 903 F.2d 312, 318 (5th Cir. 1990); Harmon Kardon, Inc. v.
_____ ___________________
Ashley Hi-Fi, 602 F.2d 21, 23 (1st Cir. 1979); see also HMG
_____________ ___ ____ ___
Property Investors, Inc. v. Parque Indus. Rio Canas, Inc., 847
_________________________ _______________________________
F.2d 908, 915-16 (1st Cir. 1988) (discussing federal courts'
"inherent power to provide themselves with appropriate
instruments required for the performance of their duties")
(quoting Ex Parte Peterson, 253 U.S. 300, 312 (1920)). Of
__________________
course, stays cannot be cavalierly dispensed: there must be good
cause for their issuance; they must be reasonable in duration;
and the court must ensure that competing equities are weighed and
balanced. See, e.g., Ainsworth Aristocrat Int'l Pty. Ltd. v.
___ ____ ______________________________________
Tourism Co. of P.R., 818 F.2d 1034, 1039 (1st Cir. 1987);
______________________
Providence Journal Co. v. FBI, 595 F.2d 889, 890 (1st Cir. 1979);
______________________ ___
Chang v. Univ. of R.I., 107 F.R.D. 343, 344 (D.R.I. 1985).
_____ _____________
In our judgment, FIRREA cannot be read to foreclose
district courts from granting stays above and beyond the 90-day
automatic stay described in section 1821(d)(12). Moreover, given
Congress' insistence that virtually all claims against failed
financial institutions should be subjected to administrative
scrutiny once the FDIC steps in as a receiver, we see no reason
why, in the vast majority of leftover pre-receivership cases,
district judges would not, upon request of a party, hold pending
litigation in abeyance until the administrative review process
has run its course, or 180 days has passed, whichever first
15
occurs.7 See Simms, ___ F. Supp. at ___ [1992 WL 41560, at *3]
___ _____
(staying pending action as suggested herein); Coston, 782 F.
______
Supp. at 1533, 1536 (Congress intended that pending actions be
stayed until the ACRP was completed); In re FDIC, 762 F. Supp.
___________
1002, 1004-05 (D. Mass. 1991) (although FIRREA does not
explicitly provide for a stay greater than 90 days, a stay for
the duration of the claims processing period is necessarily
implied); Tuxedo Beach Club Corp. v. City Fed. Sav. Bank, 737 F.
_______________________ ___________________
Supp. 18, 20 (D.N.J. 1990) (Congress intended 180 day stay); see
___
also Bank of New England v. Callahan, 758 F. Supp. 61, 64 (D.N.H.
____ ___________________ ________
1991) (staying action for duration of claims processing period);
cf. Fillinger v. Cleveland Soc'y for the Blind, 587 F.2d 336, 338
___ _________ _____________________________
(6th Cir. 1978) (staying suit to permit exhaustion of
administrative and arbitral remedies under newly enacted
statute).
IV. CONCLUSION
IV. CONCLUSION
We need go no further. We hold that FIRREA did not
strip the federal courts of subject matter jurisdiction over
civil actions pending against a failed financial institution at
the time the FDIC takes over as the institution's receiver. The
court may, however, in its discretion and ordinarily should
stay proceedings for more than the 90 days specified in 12 U.S.C.
1812(d)(12) so as to permit exhaustion of the mandatory
____________________
7In the event that the claimant and the receiver agree to
extend the claims processing period, see 12 U.S.C.
___
1821(d)(5)(A)(ii), we envision that the court could extend the
stay to correspond with the elongated period.
16
administrative claims review process.8 Hence, we affirm the
district court's refusal to dismiss the underlying actions for
want of subject matter jurisdiction and remand the cases to the
court below for further proceedings not inconsistent herewith.
Costs shall be taxed in appellees' favor.
So Ordered.
So Ordered.
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____________________
8We note that, by explicitly providing for a 90-day stay in
judicial proceedings when the claims process will, in all
likelihood, require more time to run its course, Congress has
left the courts without clear direction regarding the issuance of
longer stays. In the interest of statutory housekeeping,
Congress may wish to revisit FIRREA and cure this apparent lapse.
17
Document Info
Docket Number： 92-1113
Filed Date： 5/15/1992
Precedential Status： Precedential
Modified Date： 9/21/2015