Brandt v. First Union Corp. , 93 F.3d 750 ( 1996 )

United States Court of Appeals,
Eleventh Circuit.
No. 95-4655.
In re SOUTHEAST BANKING CORPORATION, Debtor.
William A. BRANDT, Jr., Plaintiff-Appellant, Cross-Appellee,
v.
FIRST UNION CORP., First Union National Bank of Florida,
Defendants-Appellees, Cross-Appellants,
Federal Deposit Insurance Corporation, Third-Party Defendant-
Appellee.
Sept. 3, 1996.
Appeals from the United States District Court for the Southern
District of Florida. (No. 94-1803-CIV-DTKH), Daniel T.K. Hurley,
Judge.
Before TJOFLAT, Chief Judge, BLACK, Circuit Judge, and REAVLEY*,
Senior Circuit Judge.
PER CURIAM:
Brandt is the Chapter 7 bankruptcy trustee for the estate of
Southeast Bank Corporation (the Holding Company). The Holding
Company owned all of the shares of the now defunct Southeast Bank.
On September 19, 1991, Southeast Bank was closed by federal and
state regulators, and the F.D.I.C. was named as its receiver.
First Union purchased a majority of Southeast Bank's assets at the
F.D.I.C. sponsored auction. Brandt filed the instant action on
behalf of the shareholders (i.e., the Holding Company) of Southeast
Bank against First Union Corporation and First Union National Bank
(collectively, First Union) for breach of contract and various
statutory and common law torts. The F.D.I.C. intervened, and First
*
Honorable Thomas M. Reavley, Senior U.S. Circuit Judge for
the Fifth Circuit, sitting by designation.
Union filed a third-party complaint against the F.D.I.C. seeking
contribution for any liability owed to the Holding Company. The
cause found its way to district court where both the third-party
complaint and the Holding Company's complaint were dismissed. Both
the Holding Company and First Union appeal.
We review the district court's dismissal under Rule 12(b)(6),
accepting as true the plaintiffs' allegations. South Florida Water
Management Dist. v. Montalvo, 84 F.3d 402, 406 (11th Cir.1996). We
affirm the district court's dismissal of the Holding Company's
complaint. The third-party complaint is therefore moot.
In 1991, due to impending financial troubles of Southeast
Bank, the Holding Company sought capital infusion through a merger
with First Union. The parties entered into an agreement to explore
such a possibility. The agreement permitted First Union to examine
the internal financial documents of Southeast Bank on the condition
that the information remain confidential. The agreement also
precluded First Union from obtaining a financial position in the
Holding Company or its subsidiaries, which included Southeast Bank.
The only exception to this standstill provision was that First
Union was able to bid at any F.D.I.C. auction.
The Holding Company alleged that First Union leaked financial
information concerning Southeast Bank to bank regulators resulting
in the closure of the bank. The claim was that, after forcing
Southeast Bank into receivership, First Union, acting on superior
information, could acquire the bank. While there was a contractual
relationship between First Union and the Holding Company, the
Holding Company's injury, if any, was the result of the Comptroller
of the Currency's decision to close Southeast Bank. In paragraph
39 of its complaint, the Holding Company alleges that when
Southeast Bank was taken over in September of 1991, it was "solvent
and profitable, with capital reserves substantially in excess of
those required by law." This was clearly not the view of federal
or state regulators who declared the bank insolvent.
Contending that Southeast Bank was liquid and should not have
been closed by regulators, and being unable to sue federal
regulators for their discretionary act of closing the bank, the
Holding Company instead claims that the closure was precipitated by
First Union's disclosures of confidential information to the
federal regulators. Nevertheless, "[o]nly the Comptroller's final
decision damaged [the Holding Company,] and no prior act or acts
could have so caused the damage [alleged to have occurred by First
Union] without the ultimate declaration of insolvency." FDIC v.
Irwin, 916 F.2d 1051, 1055 (5th Cir.1990). The Comptroller's
decision is not an act for which First Union can be held liable.
See id., at 1053-56.
The Holding Company is attempting to do what it otherwise
could not do, sue for its damages as a result of the government's
alleged improper closure of Southeast Bank. During oral arguments
and in its brief, the Holding Company half-heartedly recognizes its
inability to sue federal regulators for their decision to close the
bank. They have couched their suit in terms of the timing of the
regulators' decision to close the bank, that is, that because of
First Union's prompting the government officials decided to close
the bank sooner than otherwise would have occurred. But underlying
this claim (and throughout their complaint) is the Holding
Company's belief that Southeast Bank was solvent and should not
have been closed by federal regulators. Despite these efforts, the
Holding Company cannot sue for the discretionary act of federal
regulators in closing the bank. Nor can they sue First Union for
"precipitating" the government's ultimate action by disclosing
information the government was entitled to have.
AFFIRMED.