Allen v. Federal Deposit Insurance , 710 F.3d 978 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TRACY ALLEN , No. 11-55129
Plaintiff-Appellee,
D.C. No.
v. 2:10-cv-09356-
JFW-JEM
FEDERAL DEPOSIT INSURANCE
CORPORATION ,
Intervenor-Appellant, OPINION
ONE UNITED BANK,
Defendant.
Appeal from the United States District Court
for the Central District of California
John F. Walter, District Judge, Presiding
Argued and Submitted
January 8, 2013—Pasadena, California
Filed March 15, 2013
Before: Alex Kozinski, Chief Judge, M. Margaret
McKeown, and Milan D. Smith, Jr., Circuit Judges.
Opinion by Judge McKeown
2 ALLEN V . FDIC
SUMMARY*
FDIC
The panel affirmed the district court’s order remanding
the case to state court where the Federal Deposit Insurance
Corporation was not authorized under 12 U.S.C.
§ 1819(b)(2)(B) to remove the action to federal court.
The panel explained that 12 U.S.C. § 1819(b)(2)(B),
which grants the FDIC broad removal authority, is triggered
by the filing of a suit against the FDIC or when the FDIC is
substituted as a party. In the underlying case in state court,
the FDIC had neither been sued nor was it a party. The panel
held that § 1819(b)(2)(B) authorized removal by the FDIC
only after it had obtained party status, and simply filing a
motion to intervene did not open the removal window.
COUNSEL
Colleen J. Boles, Lawrence H. Richmond, Jaclyn C. Taner,
Federal Deposit Insurance Corporation, Arlington, Virginia
for Invervenor-Appellant.
Daniel M. Graham, Torrance, California for Plaintiff-
Appellee.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
ALLEN V . FDIC 3
OPINION
McKEOWN, Circuit Judge:
This appeal involves the straightforward construction of
a statute that gives the Federal Deposit Insurance Corporation
(“FDIC”) the right to remove actions from state court to
federal court:
the Corporation may, without bond or
security, remove any action, suit, or
proceeding from a State court to the
appropriate United States district court before
the end of the 90-day period beginning on the
date the action, suit, or proceeding is filed
against the Corporation or the Corporation is
substituted as a party.
12 U.S.C. § 1819(b)(2)(B). The statute and its timeline are
triggered by the filing of a suit against the FDIC or when the
FDIC is substituted as a party. Here, in the underlying case
in state court, the FDIC had neither been sued nor was it a
party. Rather, it jumped the gun to remove the suit to federal
court while the state court was considering its motion to
intervene for the limited purpose of protecting bank
documents in a discovery dispute. We affirm the district
court’s order remanding the case to state court.
BACKGROUND
The underlying action was brought in California state
court by Tracy Allen, who sued OneUnited Bank (“the
Bank”), a federally-insured, FDIC-supervised bank, for
wrongful termination stemming from her complaints about
4 ALLEN V . FDIC
the Bank’s lending practices. In discovery, Allen requested
documents relating to lending practices, including annual
FDIC exams/audits. The Bank objected on the basis that the
information was confidential under FDIC rules and
regulations.1 The court rejected this argument and granted
Allen’s motion to compel production of the records. The
California Court of Appeal denied the Bank’s petition for a
writ of mandate to set aside the ruling. Soon thereafter, the
FDIC began negotiations with Allen’s counsel to resolve the
discovery dispute. The parties agreed that the FDIC would
disclose certain documents if the court would enter a
stipulated protective order.
The court, however, declined to enter the agreed-upon
order, expressing concern that it limited the court’s review of
confidential information and disclosure of information
relevant to trial. The court permitted the parties to modify the
protective order to make it workable and “allow[ed] [the]
lawyers to keep dealing” with any grievances by the FDIC.
While negotiations of a revised protective order were
ongoing, Allen filed a motion for sanctions against the Bank
for failing to comply with the court’s earlier order compelling
production of the FDIC documents. About a week before the
hearing on that motion, the FDIC moved ex parte for leave to
file a complaint in intervention or, alternately, for an order
shortening the time for consideration of its motion for
intervention to a date before the hearing on Allen’s sanctions
motion. The judge rejected the request to shorten time for
consideration of intervention, characterizing it as “complete
1
FDIC regulations prohibit disclosing reports of examination or other
reports of supervisory activity prepared by the FDIC except in accordance
with specific disclosure procedures. 12 C.F.R. §§ 309.6, 350.9.
ALLEN V . FDIC 5
hogwash” since the FDIC had “not act[ed] in a way that was
in harmony with the dates that were going on in the case.”
He also noted that the FDIC’s reasons for seeking expedited
relief “don’t satisfy any kind of standard concerning
timeliness . . . or . . . satisfy the requirements of the California
Rules of Court showing an emergency.” The judge denied
relief without prejudice to consideration on a non-expedited
basis and set a hearing on the intervention motion for about
a month later.
The FDIC removed the action to federal district court
under 12 U.S.C. § 1819(b)(2). Upon removal, the FDIC
moved to intervene before the district court. Allen
successfully moved to remand. The district court concluded
that the FDIC could not remove the case because it was not
a party to the state court action and denied as moot the
FDIC’s intervention motion.
The FDIC appealed, and we granted the FDIC’s motion
to stay the remand order pending appeal. The FDIC and
Allen engaged in protracted negotiations under the auspices
of a Ninth Circuit mediator. The parties reached a settlement
under which they would jointly request the district court to
remand the case to state court with “special instructions” for
the state court to enter a new stipulated protective order. The
Ninth Circuit dismissed the appeal without prejudice to
reinstatement should the district court not grant the joint
motion for remand or if upon remand the state court did not
enter the agreed-upon protective order.
The district court granted the joint motion for remand
with special instructions. On remand, however, the state
court “respectfully decline[d] to enter the order” because, in
its opinion, “the order . . . raise[d] significant and deep issues
6 ALLEN V . FDIC
of federalism and the relationship between state and local
government and relationship between courts.” The court was
of the “view . . . that a district court may not enjoin or stay
proceedings in any state court except as expressly authorized
by Act of Congress, or where necessary in aid of its
jurisdiction, or to protect or effectuate its judgments.” The
court further expressed that its approval was not automatic
simply because the parties had agreed to the order.
ANALYSIS
I. THE FDIC’S SPECIAL REMOVAL AUTHORITY
Without doubt, Congress granted the FDIC broad removal
authority in 12 U.S.C. § 1819(b)(2)(B) (“subpart (2)(B)”).
The provision “confers several procedural advantages on the
FDIC that go beyond the general removal authorization found
in 28 U.S.C. §§ 1441–1452.” Bullion Servs., Inc. v. Valley
State Bank, 50 F.3d 705, 707 (9th Cir. 1995). The FDIC can
remove a case under subpart (2)(B) even as a plaintiff and
even after a state court has entered judgment. Id. (citing
FSLIC v. Frumenti Dev. Corp., 857 F.2d 665, 666–67 n.1 (9th
Cir. 1988), and Resolution Trust Corp. v. BVS Dev., Inc.,
42 F.3d 1206, 1211 (9th Cir. 1994)). Congress established a
removal period of ninety days in subpart (2)(B), rather than
the thirty days provided in the general removal statute. Id.(citing FDIC v. S & I 85-1, Ltd., 22 F.3d 1070, 1074 (11th
Cir. 1994)).
In considering whether this provision permits removal
where the FDIC is not a party at the time of the removal, we
need look no further than the language of the statute. See
Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 951 (9th
Cir. 2009). Removal is authorized in two situations:
ALLEN V . FDIC 7
(1) where an “action, suit, or proceeding is filed against the
Corporation,” and (2) where the FDIC is “substituted as a
party” in the state court action. 12 U.S.C. § 1819(b)(2)(B).
Subpart (2)(B), although granting the FDIC procedural
advantages, ties removal authority to party status.
The first circumstance involves claims brought against the
FDIC as a defendant. In Bullion Services, for instance, we
readily determined that “[FDIC-Corporate] was made a party
to the present action” when the plaintiff amended the
complaint to add it as a defendant. 50 F.3d at 706–07.2 We
went on to note that it was “[o]bvious[]” that “before being
added as a party, FDIC Corporate lacked the ability to
remove the case to federal court.” Id. at 709 (emphasis
added).
The second scenario, where “the Corporation is
substituted as a party,” is typically invoked when the FDIC,
in its receiver capacity, is substituted for a failed bank in
litigation—either as plaintiff or defendant. Not surprisingly,
courts have held that the filing of a notice of substitution,
which makes the FDIC a party to the action, immediately
triggers the right to remove under subpart (2)(B). See, e.g.,
Buczkowski v. FDIC, 415 F.3d 594, 597 (7th Cir. 2005)
(“Any litigant, or the court on its own motion, can substitute
the FDIC for the failed bank as a party. That would open the
2
The remaining question we considered was whether the removal
provision applied independently to the FDIC in both its corporate capacity
and its receiver capacity, where the removal provision referred only to
“the Corporation,” in contrast to the reference in the original jurisdictional
provision to “the Corporation, in any capacity.” In recognition of the
“different functions” of the FDIC, and to effectuate Congress’s goal that
claims against the FDIC be heard in federal court, we determined the
removal provision is applicable to each entity independently. Id. at 709.
8 ALLEN V . FDIC
90-day window for removal.”); Diaz v. McAllen State Bank,
975 F.2d 1145, 1147–48 (5th Cir. 1992) (noting that after
appointment as receiver for a defendant bank, “the FDIC
removed the case on the same day it intervened [and]
therefore the removal was within the 90-day period”). The
term “substituted as a party” is also broad enough to embrace
situations in which the FDIC becomes party to litigation in
capacities other than as receiver—so long as it obtains party
status in accordance with the governing law. See generally
Buczkowski, 415 F.3d at 596 (“The FDIC may be a bank’s
receiver or insurer or regulator (its three statutory capacities)
but is not a ‘party’ to anything in particular in any of these
capacities. It becomes a ‘party’ only in court.”).
We emphasize that a substitution motion, however styled,
is distinct from the FDIC’s motion to intervene in this case.
Often, the FDIC, having been appointed receiver for a failed
bank embroiled in litigation, will move to “intervene” in an
action in place of the bank. The cases sometimes use the
terms substitution and intervention interchangeably, although
the terms are not co-extensive. See, e.g., Diaz, 975 F.2d at
1147 (holding, in case addressing FDIC’s right to remove
following appointment as receiver, that subpart (2)(B) “makes
it clear that the time period begins to run from the date the
FDIC ‘is substituted as a party’ (i.e. intervenes)”) (emphasis
added); see also FDIC v. Loyd, 955 F.2d 316, 327 (5th Cir.
1992) (addressing FDIC’s removal under 28 U.S.C. § 1446and holding that “the FDIC did not become a ‘defendant’ for
the purpose of starting the thirty-day removal clock of
§ 1446(b) until it filed its motion to intervene” in place of
failed bank taken into receivership) (emphasis added).
Substitution of the FDIC for a failed bank is essentially a
ministerial matter, unlike affirmative intervention for other
ALLEN V . FDIC 9
purposes. The FDIC is appointed receiver when a bank has
failed and the FDIC, upon substitution, immediately becomes
the real party in interest. As the FDIC recognized in its
briefing, “a state court can have no basis at all for denying a
receiver’s substitution motion.” The same cannot be said for
the FDIC’s motion to intervene in this case, which rests on its
interest in discovery between third parties, and is subject to
the procedural and substantive requirements of state law. See
Cal. Code Civ. Proc. § 387 (setting forth requirements for
permissive and mandatory intervention). The case law
regarding the effect of filing for a substitution thus does not
support the proposition that a motion by the FDIC to
intervene for other purposes automatically triggers the right
to remove.
We conclude that § 1819(b)(2)(B) authorizes removal by
the FDIC only after it has obtained party status. Simply filing
a motion to intervene does not open the removal window.
Our position is consistent with the Sixth Circuit’s
interpretation of subpart (2)(B) in Village of Oakwood v. State
Bank and Trust Co., 481 F.3d 364 (6th Cir. 2007). There, the
FDIC moved to intervene in an action brought in Ohio court
against a bank and then attempted to remove the case to
federal court before the state court had ruled on the motion.
Id. at 366. The FDIC was not the receiver of the bank, and
the plaintiff had no claims against the FDIC. Id. Upon
removal, the district court allowed the FDIC to intervene in
the suit and exercised jurisdiction over the action. Id.The Sixth Circuit reversed, “read[ing] § 1819(b)(2) in
harmony with the longstanding rule that intervention requires
an existing claim within the court’s jurisdiction and hold[ing]
that the FDIC’s intervention cannot create jurisdiction where
none existed.” Id. at 368. The court reasoned that because
10 ALLEN V . FDIC
the FDIC was not yet a party to the suit, it could not remove
the suit from state court, and there was therefore no action
properly before the district court in which the FDIC could
intervene. Id. at 367–68. The result “might be . . . different
[however] . . . if State Bank had impleaded the FDIC as a
third-party defendant,” id. at 369, and the case may have been
different had the Ohio court granted the FDIC’s motion to
intervene before the attempted removal. In both alternatives,
the FDIC would have had status as a party to the litigation.
As in the Village of Oakwood case, the FDIC here is not a
party under § 1819.
II. THE FDIC’S EFFORTS TO EXTEND THE REACH OF
§ 1819
In the absence of statutory language favoring its position,
the FDIC offers two avenues to extend the reach of the
removal statute: (1) permitting removal where there is a threat
to federal interests; or (2) invoking the provision granting the
FDIC original jurisdiction in federal court. We are persuaded
by neither rationale.
In Village of Oakwood, the Sixth Circuit suggested that,
notwithstanding a state court’s failure to grant an intervention
motion, the FDIC might be permitted to remove a state action
that poses a threat to federal interests. The court explained:
[T]here may be an instance in which the
FDIC, recognizing that it has a substantial
interest in the litigation, wishes to intervene in
a state court proceeding between nondiverse
parties, but the state court denies its motion to
intervene. In such a case, the FDIC—despite
its status as a federal institution, and despite
ALLEN V . FDIC 11
the threat to its interests—would not be able
to protect those interests because a state court
has refused to crown the FDIC with the
requisite “party” status, thus preventing
removal to federal court.
Id. at 369 n.3. The court accordingly “le[ft] open the
possibility that a federal court could determine that the FDIC
is a party under § 1819(b)(2),” and thus supplant state rules,
in a case presenting a “significant conflict with or threat to a
federal interest.” Id. Although the FDIC urges that this case
presents exactly such a serious threat, the record presents a
more complicated and different picture. This is not a case
that requires us to determine whether the statute has some
give in the joints. Nothing that happened here rises to the
level of a “significant conflict with or threat to” federal
interests.
Importantly, the state court never denied the FDIC’s
motion to intervene. Contrary to FDIC’s characterization, the
court’s refusal to grant the FDIC’s motion to intervene on an
expedited basis does not reflect serious adversity to federal
interests. The FDIC was on notice for months that the
confidentiality of its examination reports was at issue.
Nonetheless, it did not seek to intervene and remove the
dispute to a federal forum until late in the game, when it
perceived that Allen was committed to pursuing sanctions for
the Bank’s failure to produce the reports.
Although the FDIC reasonably explains that it delayed
seeking intervention because it hoped for a negotiated
resolution, the FDIC’s miscalculation did not oblige the state
court to leap to its rescue. The court denied the ex parte
motion without prejudice to the merits, which it was prepared
12 ALLEN V . FDIC
to consider approximately one month later. The FDIC argues
that this ruling was patently unreasonable in light of the
impending motion for sanctions. But it is speculation to
assume that disposition of that motion would have resulted in
the immediate disclosure of the reports or serious damage to
federal interests, particularly because the federal regulations
on FDIC records do not provide for a blanket blackout on
disclosure but rather permit disclosure under certain
conditions. See 12 C.F.R. § 309.6(b).
In short, the record does not support the FDIC’s picture
of a “recalcitrant state court.” Respect for the state court
system counsels strongly against micro-managing the state
court’s scheduling decisions and imputing to the court a
nefarious motive of obstructing federal interests. See
generally Yellow Freight Sys., Inc. v. Donnelly, 494 U.S. 820,
823 (1990) (“Under our system of dual sovereignty, we have
consistently held that state courts have inherent authority, and
are thus presumptively competent, to adjudicate claims
arising under the laws of the United States.”) (internal
quotation marks and citation omitted). Thus, even if the
potential carve out suggested by Village of Oakland is
sound—a question we need not resolve—the present appeal
does not warrant its invocation.3
3
W e do not perceive the state court’s refusal to adopt the stipulated
protective order facilitated by the Ninth Circuit’s mediation program as
evidence of adversity to federal interests. At a hearing after remand, the
state court concluded the federal district court had no authority to issue
“special instructions” to the state court and noted that the parties had not
independently established the propriety of the order. W e can hardly say
that the state court flouted any federal interest in declining to enter an
order negotiated by the parties.
ALLEN V . FDIC 13
Finally, we reject the FDIC’s proposition that remand is
precluded because the district court has jurisdiction under
§ 1819(b)(2)(A), which grants original jurisdiction in federal
district court over civil suits “to which the Corporation, in
any capacity, is a party.” 12 U.S.C. § 1819(b)(2)(A)
(“subpart (2)(A)”). The FDIC argues that “[t]he FDIC’s party
status . . . confers instant federal jurisdiction” under this
provision and that “[b]y tying removal rights to ‘party’ status
Congress could only have intended that the FDIC be entitled
to remove when it is entitled to intervention.” The FDIC
accordingly contends that, where a state court has not granted
intervention, the district court must determine upon removal
whether the FDIC is entitled to intervene and, if so, exercise
jurisdiction. The text of subpart (2)(A) refutes this argument:
it is a grant of original jurisdiction in federal district court
and does not expand removal jurisdiction.
The FDIC urges us to adopt the Fifth Circuit’s approach
in Heaton v. Monogram Credit Card Bank of Georgia,
297 F.3d 416 (5th Cir. 2002). There, the court considered
whether the FDIC’s attempted intervention in federal district
court empowered that court to maintain jurisdiction over an
action improperly removed by the defendant bank. Id. at
419–20. No claims were asserted against the FDIC, but the
Corporation wanted to intervene to advocate for a particular
interpretation of a statute relevant to the outcome of the suit.
Id. at 424. Although the grounds for the defendant’s removal
were indisputably unsound, the Fifth Circuit evaluated the
merits of the FDIC’s intervention under Federal Rule of Civil
Procedure 24 and decided that “the remand order was wrong
because the FDIC was entitled to intervene in the case,
conferring instant federal subject matter jurisdiction under the
broad rubric of 12 U.S.C. § 1819(b)(2)(A).” Id. at 420; see
also id. at 421 n.4 (reasoning that “[a] district court has no
14 ALLEN V . FDIC
discretionary authority to remand a case over which it has
subject matter jurisdiction”) (internal quotation marks and
citation omitted).
We decline to embrace Heaton. To begin, its analysis is
in tension with the established proposition that federal
jurisdiction is determined at the time of removal, not after a
case has been removed. See, e.g., Hukic v. Aurora Loan
Servs., 588 F.3d 420, 427 (7th Cir. 2009) (holding that
jurisdiction must be analyzed “at the time of removal, as that
is when the case first appears in federal court”); Local Union
598 v. J.A. Jones Construction Co., 846 F.2d 1213, 1215 (9th
Cir. 1988), aff’d, 488 U.S. 881 (1988) (recognizing that
“removability is generally determined as of the time of the
petition for removal,” and noting exceptions not relevant
here, such as when a “case has been tried on the merits and
the federal court would have had original jurisdiction had the
case been filed in federal court in the posture it had at the
time of the entry of final judgment”). Although the FDIC in
Heaton moved to intervene “immediately” after the defendant
removed the action, Heaton, 297 F.3d at 420, its attempted
intervention was ancillary and subsequent to the notice of
removal. Embracing the Heaton rationale risks sanctioning
improper removals, as the decision sidestepped the critical
fact that the federal claim forming the asserted basis for the
defendant’s notice of removal had been dismissed, albeit
without the defendant’s knowledge, by the time of the notice.
Id.4
4
Heaton relied on FDIC v. Loyd to explain the “jurisdictional
significance of the motion to intervene,” and appears to endorse the
proposition that a mere attempt by the FDIC to intervene, regardless of the
merits of the intervention motion, is enough to confer party status to
support the FDIC’s own removal of a case. Heaton, 297 F.3d at 421. As
ALLEN V . FDIC 15
Under the Heaton approach, there is nothing to stop the
FDIC from, for instance, filing a notice of removal beyond
the clear 90-day time limitation specified in subpart (2)(B)
and then arguing that remand is nonetheless precluded
because the federal court has original jurisdiction under
subpart (2)(A). Accepting this argument would read the
requirements of the removal provision out of § 1819 entirely.
We agree with the Sixth Circuit: “Heaton errs by putting the
intervention cart before the jurisdiction horse.” Village of
Oakwood, 481 F.3d at 369.
In sum, Congress granted the FDIC far broader access to
the federal courts than is available to ordinary litigants, but
that access is not unlimited. Whether the FDIC’s access
should be broader is a question for Congress, not the court.
As drafted, 12 U.S.C. § 1819(b)(2)(B) does not authorize
removal by the FDIC where it is not a party to the state court
action and its role in the litigation is limited to a prospective,
would-be intervenor.5
AFFIRMED.
noted above, Loyd addressed a motion for substitution as receiver for a
defendant bank, and its reasoning does not extend to intervention for other
purposes.
5
At oral argument, the FDIC raised for the first time the proposition
that, were the court to consider removal improper under § 1819, the court
could conclude that the general removal provisions, 28 U.S.C. § 1441 et
seq., authorized the removal. W e ordinarily decline to consider arguments
not raised in an appellant’s opening brief. See Entm’t Research Grp., Inc.
v. Genesis Creative Grp., Inc., 122 F.3d 1211, 1217 (9th Cir. 1997).
Regardless, the general removal provision does not save the FDIC here.
It authorizes defendants to remove under certain circumstances, but the
FDIC never was a defendant in the state action.