Yeomalakis v. Federal Deposit Insurance , 562 F.3d 56 ( 2009 )

United States Court of Appeals
For the First Circuit
No. 08-1444
JAMES YEOMALAKIS, on behalf of himself and all
others similarly situated,
Plaintiff, Appellant,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nancy Gertner, U.S. District Judge]
Before
Torruella and Boudin, Circuit Judges,
and Schwarzer,* District Judge.
Barry L. Kramer with whom Law Offices of Barry L. Kramer,
David Pastor and Gilman and Pastor, LLP were on brief for
appellant.
John A. Houlihan with whom Gail Elise Cornwall and Edwards
Angell Palmer & Dodge LLP were on brief for appellee.
April 3, 2009
*
Of the Northern District of California, sitting by
designation.
BOUDIN, Circuit Judge. James Yeomalakis, a resident of
Massachusetts, has or had a credit card account with Washington
Mutual Bank1, which was a federally chartered savings association
with its principal place of business in Nevada. Credit card
holders customarily pay an interest charge on unpaid balances.
Washington Mutual increases the applicable annual percentage
interest rate ("APR") for cardholders who default on one of the
obligations created under their account agreement (for example by
making a required payment late).
Washington Mutual, assertedly in line with industry
custom, backdates its APR increase to the start of the existing
month's billing cycle. Thus, if Washington Mutual determines on
the last day of a billing cycle to increase a cardholder's APR
because of a default on the prior day, the new rate is applied
starting with the first day of the existing cycle. To challenge
this practice, Yeomalakis brought suit against Washington Mutual in
the Massachusetts Superior Court, but the case was removed by the
latter to the federal district court. 28 U.S.C. § 1332(d)(2)
(2006).
1
On December 19, 2008 we granted the motion of the Federal
Deposit Insurance Corporation, as Receiver for Washington Mutual
Bank to be substituted as the party in interest and stayed the case
for 90 days. See 12 U.S.C. § 1821(d)(12)(A)(ii). In discussing
the facts and arguments, the opinion refers to Washington Mutual as
it is their (now past) practices that are at issue.
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Yeomalakis' complaint had two counts: the first accused
Washington Mutual of "Imposing and Enforcing an Illegal Penalty"
through "retroactive" rate increases, although it did not explain
whether federal or state law underlay the claim (or, if the latter,
which state). The second count alleged that Washington Mutual's
actions were unfair and deceptive acts and practices in violation
of M.G.L. c. 93A, § 2--essentially, that the retroactive increases
were unfair and had not been adequately disclosed.
Washington Mutual moved to dismiss under Fed. R. Civ. P.
12(b)(6), alleging that both counts were preempted by the Home
Owners' Loan Act of 1933 ("HOLA") 12 U.S.C. § 1461 et seq. (2006),
and various regulations promulgated thereunder by the federal
Office of Thrift Supervision ("OTS"). Section 4(g)(1) of HOLA, 12
U.S.C. § 1463(g)(1) (2000), preempts state usury laws and allows
credit card companies to charge an interest rate at:
not more than 1 percent in excess of the
discount rate on 90-day commercial paper in
effect at the Federal Reserve Bank in the
Federal Reserve district in which such savings
association is located or at the rate allowed
by the laws of the State in which such savings
association is located, whichever is greater.
Under OTS regulations, "interest" includes payments to a
credit card company for "any default or breach by a borrower of a
condition upon which credit was extended." 12 C.F.R. §
560.110(a)(2008). OTS regulations also preempt state laws that
"impose requirements regarding . . . [d]isclosure and advertising,
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including laws requiring specific statements, information, or other
content to be included in ... billing statements, credit contracts,
or other credit-related documents." Id. § 560.2(b)(9).
Following Yeomalakis' opposition, the district court
granted the motion to dismiss. It said that HOLA clearly preempted
an attack under state law on the level of interest rates, even if
labeled "a penalty" by Yeomalakis. As to his chapter 93A claim,
the court held that it was preempted to the extent it sought
recovery based on the notion that some different rate should have
been charged; and, so far as it rested on the inadequacy of
disclosure, it fell under the OTS regulation forbidding states from
regulating pertinent "[disclosure and advertising."
Yeomalakis then filed a motion under Fed. R. Civ. P.
59(e) to amend the judgment, requesting the opportunity to file an
amended complaint asserting a federal cause of action under the
Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. (2006).
The motion was denied by the district court. Yeomalakis now
appeals both the dismissal of his state law claims and the denial
of his motion to amend.
Before turning to the merits, developments subsequent to
the district court proceedings have to be recounted. On September
25, 2008, Washington Mutual was closed, the Federal Deposit
Insurance Corporation ("FDIC") was appointed as receiver and many
of WaMu's assets were sold to Chase Bank. On December 18, 2008,
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the FDIC notified the court, and the next day we granted, the
FDIC's motion to substitute for WaMu as the successor in interest
and issued a 90-day stay of the above-captioned action. See 12
U.S.C. § 1821(d)(12)(B).
Yeomalakis then moved to substitute Chase Bank as the
appropriate successor in interest to Washington Mutual and/or add
Chase Bank as a necessary party defendant. The FDIC in turn, now
seeks an additional 180-day stay and a ruling that we require
Yeomalakis to exhaust his claims through the FDIC Receiver's
administrative process mandated by 12 U.S.C. §§ 1821(d)(3)-(13),
enacted by Financial Institutions Reform, Recovery and Enforcement
Act of 1989, Pub. L. No. 101-73, 103 Stat. 183 ("FIRREA"). In
subsequent filings, Yeomalakis objected to the FDIC request for a
further stay and Chase objected to being added or substituted for
the FDIC.
We deal first with the FDIC's motion. FIRREA is a
procedural muddle. The statute both limits court jurisdiction over
claims against the FDIC, see 12 U.S.C. § 1821(d)(13)(D)(i), and
also contains of provisions that could arguably be read to create
a different regime for cases that were commenced in court before
the FDIC was named as a receiver. See, e.g., § 1821(d)(6)(A). We
wrestled through the problem in Marquis v. FDIC, 965 F.2d 1148 (1st
Cir. 1992), and adopted a pragmatic interpretation that is
governing law in this circuit.
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Normally the FDIC argues for an expansive reading of
FIRREA that would strip federal courts of all jurisdiction, and the
opposing party argues for a narrow interpretation that preserves
the right to proceed in court without resorting to administrative
exhaustion. In Marquis, we rejected the FDIC's most sweeping
claims, confirmed that federal courts retain jurisdiction of cases
brought before the receivership, but said that courts would usually
stay pending cases to allow for administrative exhaustion of
claims. 965 F.2d at 1155.
Ordinarily, upon the FDIC's appearance as a receiver, a
district court would stay a claim it had not yet decided. However,
in this instance the district court has already issued a decision
adverse to the claimant, the case had already been briefed and
argued and we had already agreed to affirm the judgment below. The
decision would have been issued months ago but for the belated
notice from the FDIC and our deferral of the decision pursuant to
the stay. The stay has now expired and under Marquis the court
retains discretion as to what to do. 965 F.2d at 1153-54.
In the present case, as will shortly become clear,
Yeomalakis' claims are either barred, un-preserved or unpersuasive.
To send the case back to the FDIC for administrative proceedings
that could take additional time, followed by review in federal
court once again, 12 U.S.C. § 1821(7)(A), makes no sense and would
hardly advance Congress' purpose in enacting FIRREA of promptly
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disposing of claims against failed financial institutions. See
H.R. Rep. No. 101-54(I), 101 Cong., 1st Sess., at 418-19, reprinted
in 1989 U.S.C.C.A.N. 86, 214-15.
As for Yeomalakis' motion to substitute Chase Bank as a
party, it too fails. When Washington Mutual failed, Chase Bank
acquired many assets but its agreement with the FDIC retains for
the FDIC "any liability associated with borrower claims for payment
of or any liability to any borrower for monetary relief, or that
provide for any other form of relief to any borrower."2 Thus the
FDIC was and remains the appropriate party in interest. See 12
U.S.C. § 1821(d)(2)(A)(i); see also In re Community Bank of N.
Virginia, 418 F.3d 277, 293 n.6 (3d Cir. 2005).
Turning to the merits, we begin with the count I penalty
claim. In the district court, Yeomalakis scarcely responded at all
to Washington Mutual's contention that the penalty claim was
preempted by HOLA. The only discussion of the penalty claim was
located under a header entitled "Defendant Misstates What This Case
Is About." In that section, Yeomalakis argues that Washington
Mutual's interpretation of the illegal penalty claim is mistaken
because his allegations are not about the legality of the interest
rates or the manner they are calculated.
2
Purchase and Assumption Agreement Among Federal Deposit
Insurance Corporation and JP Morgan Chase Bank, National
Association, quoted by the FDIC in its motion and available at
http://www.fdic.gov/about/freedom/Washington_Mutual P_and_A.pdf
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Yet Yeomalakis never explained how his penalty claim
should be interpreted or why the penalty claim would not be
preempted. Even on appeal, no coherent explanation of this claim
is provided. At best, Yeomalakis suggests that Nevada law was
violated, depriving the interest rate of protection under section
1463(g)(1). Whatever his theory, the claim, not seriously defended
in the district court, cannot be resuscitated now. Daigle v. Maine
Med. Ctr., Inc., 14 F.3d 684, 687 (1st Cir. 1994).
As to Yeomalakis' count II claim under chapter 93A, HOLA
does not preempt ordinary contractual claims based on state law;
Yeomalakis could have argued that Washington Mutual's account
agreement did not permit the "retroactive" increase. Similarly,
while the OTS regulation purports to preempt state regulation of
disclosure and advertising, it is debatable how far HOLA supersedes
ordinary fraud claims under state law. See In re Ocwen Loan
Servicing, 491 F.3d 638 (7th Cir. 2007) (Posner, J.).
Yet neither in the district court nor on appeal does
Yeomalakis explain the gravamen of his chapter 93A claim or how it
avoids preemption. Yeomalakis' summary of argument refers
cursorily to various bodies of law (Massachusetts law, common law,
Nevada law, TILA and a Federal Reserve Board regulation). The
brief's argument section is a scatter-gun collection of assertions
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some sense of which is supplied by a sampling from among the
sixteen headings in the argument section.3
It is possible that somewhere in this morass is a version
of a claim under chapter 93A that might avoid preemption but there
is no indication that it was presented to the district court and it
certainly is not illuminated for us. It is not our job, especially
in a counseled civil case, to create arguments for someone who has
not made them or to assemble them from assorted hints and
references scattered throughout the brief. See U.S. Healthcare,
Inc. v. Healthsource, Inc., 986 F.2d 589, 595 (1st Cir. 1993).
Yeomalakis' final claim is that the district court should
have given him the opportunity to amend his complaint to allege
additional claims under federal and Nevada law. Review is for
"manifest abuse of discretion." Council of Ins. Agents & Brokers
v. Juarbe-Jimenez, 443 F.3d 103, 111 (1st Cir. 2006) (internal
quotation omitted). A Rule 59(e) motion is not properly used to
"raise arguments which could, and should, have been made before
judgment issued." Harley-Davidson Motor Co. v. Bank of New
England, 897 F.2d 611, 616 (1st Cir. 1990).
3
"The District Court Concluded that the Wrongdoing Alleged Was
Subject Only to the Control of Federal Law and Regulations Under 12
U.S.C. § 1463(g)(1)"; "A Further Explanation of § 1463(g)(1), A
Statute which Is Confusingly Labeled"; "The District Court Treated
§ 1463(g)(1) as a Federal Preemption Defense to the Conduct
Alleged"; "The Ninth Circuit Cases Cited by the Court Are Not
Authority for this Court"; "Massachusetts G.L. c. 93A Can Borrow
from Federal and Nevada State Law"; "WaMu Fails to Cite any State
Law that Would Conflict with Applicable Federal Law."
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In this instance, Yeomalakis' counsel, Barry Kramer, has
extensive experience with challenges to the very practice at issue
in this case, having brought a number of suits in other courts on
the same subject. The claims he now wants to add could have been
asserted in the original complaint or by amendment after the case
had been removed. It was not an abuse of discretion for the
district court to deny Yeomalakis yet another bite at the apple.
In sum, Yeomalakis' merits claims are denied as is his
motion to substitute or add Chase Bank as a real party in interest.
We also deny the FDIC's request for an additional 180-day stay to
allow for the completion of any administrative claims. The
district court decision is affirmed.
It is so ordered.
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