Fed. Deposit Ins. Corp. v. N. Savannah Props., LLC

• Decision Date: 12 July 2012
• Docket Number: No. 11–12784.,11–12784.
• Citation: 686 F.3d 1254,23 Fla. L. Weekly Fed. C 1299
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant–Appellant, v. NORTH SAVANNAH PROPERTIES, LLC, et al., Plaintiffs–Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

686 F.3d 1254

23 Fla. L. Weekly Fed. C 1299

FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant–Appellant,

v.NORTH SAVANNAH PROPERTIES, LLC, et al., Plaintiffs–Appellees.

No. 11–12784.

United States Court of Appeals, Eleventh Circuit.

July 12, 2012.

Ashleigh Ruth Madison, Brent J. Savage, Jr., Brent J. Savage, Karl Christian Zipperer, Savage, Turner, Pinckney & Madison, Steven E. Scheer, Savannah, GA, for Plaintiffs–Appellees.

Jerome A. Madden, FDIC App. Lit. Unit, Arlington, VA, Glen M. Darbyshire, Kathleen Horne, Inglesby, Falligant, Horne, Courington & Chisholm, PC, Edward J. Tarver, Savannah, GA, for Defendants–Appellants.

Appeal from the United States District Court for the Southern District of Georgia.

Before CARNES, MARTIN and JORDAN, Circuit Judges.

JORDAN, Circuit Judge:

The Federal Deposit Insurance Corporation, as receiver for Darby Bank & Trust Co., appeals an order of the district court remanding the action to state court. The district court determined that it did not have subject-matter jurisdiction because the FDIC had not been formally substituted as a party in the state court action prior to removal. After review, and with the benefit of oral argument, we vacate the district court's remand order. We hold that, as a matter of federal law, the FDIC is “substituted as a party” in a state court proceeding under 12 U.S.C. § 1819(b)(2)(B) once it is appointed receiver and files a notice of substitution, and may at that point remove the action to federal court.

I

In October of 2010, North Savannah Properties, LLC and two of its members filed suit against Darby in Georgia state court. The complaint asserted only state law claims against Darby and sought equitable relief, damages, and attorney's fees. While the litigation was pending, the Georgia Department of Banking and Finance closed Darby and appointed the FDIC as receiver. On November 12, 2010, the FDIC accepted its appointment pursuant to 12 U.S.C. § 1821(c)(3)(A), and a Georgia court entered a consent order appointing the FDIC as receiver.

The FDIC filed a notice of its appointment as Darby's receiver in the North Savannah action on December 10, 2010, and filed a notice of substitution for Darby on December 21, 2010. The day after filing its notice of substitution, the FDIC removed the case to federal district court pursuant to 28 U.S.C. § 1441 and 12 U.S.C. § 1819(b)(2)(A)-(B). The FDIC indicated in its notice of removal that it had filed a notice of substitution in the state court, but did not provide the district court with a copy of the notice of substitution.¹

The plaintiffs filed a motion to remand based on 12 U.S.C. § 1819(b)(2)(D), arguing that the action could not be removed because it involved only pre-closing claims based on state law. The plaintiffs also later asserted that the district court lacked subject-matter jurisdiction because the FDIC had not been formally substituted as a party for Darby in the state court action prior to removal.

The district court granted the plaintiffs' motion to remand. See North Savannah Properties, LLC v. Darby Bank & Trust Co., 2011 WL 1806989 (S.D.Ga. May 11, 2011). The district court determined that the FDIC had not been substituted as a party in the state action because the FDIC had not filed a motion for substitution, and, even if it had done so, the state court had not entered an order substituting the FDIC as a party, as would have been required under Federal Rule of Civil Procedure 25(c). Because the FDIC's party status was the only basis for federal jurisdiction, the district court concluded that it did not have subject-matter jurisdiction. See id. at *2–*3. The district court did not address whether remand was appropriate under the exemption to FDIC removal for actions involving only pre-closing claims based on state law. The FDIC appealed.

II

We have jurisdiction to hear this appeal pursuant to 12 U.S.C. § 1819(b)(2)(C), which provides that “[t]he [FDIC] may appeal any order of remand entered by any United States district court.” See Buczkowski v. FDIC, 415 F.3d 594, 595 (7th Cir.2005) (“[The FDIC's] authority to [appeal a remand order], granted by 12 U.S.C. § 1819(b)(2)(C), is yet another difference from normal removal practice, where 28 U.S.C. § 1447(d) forbids most appeals.”); FDIC v. S & I 85–1, Ltd., 22 F.3d 1070, 1072 (11th Cir.1994) (noting that § 1819(b)(2)(C) is an exception to the general rule barring appeals of remand orders). Whether the district court had subject-matter jurisdiction following the FDIC's removal is a question over which we exercise plenary review. See Henson v. Ciba–Geigy Corp., 261 F.3d 1065, 1068 (11th Cir.2001).

A

Federal-question jurisdiction generally exists whenever the FDIC is a party to litigation. See12 U.S.C. § 1819(b)(2)(A) (“[A]ll suits ... to which the Corporation, in any capacity, is a party shall be deemed to arise under the laws of the United States.”). The FDIC has the statutory right to remove to federal court certain state court actions within 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) (emphasis added), and this right of removal exists “irrespective of [the FDIC's] alignment as plaintiff or defendant.” S & I 85–1, 22 F.3d at 1073. The critical question for us in this appeal is the meaning of the phrase “substituted as a party” in § 1819(b)(2)(B).

The FDIC first asks us to incorporate the definition of the same phrase found in a now-repealed Resolution Trust Corporation statute. See12 U.S.C. § 1441a( l )(3)(C) (repealed). For the reasons that follow, we decline the FDIC's invitation to engage in this type of statutory borrowing.

The RTC, established in 1989, was “responsible for reducing the cost of the savings and loan crisis to the government.” Centex Corp. v. United States, 395 F.3d 1283, 1302 (Fed.Cir.2005). Like the FDIC, the RTC could be appointed as receiver for failed financial institutions, and, when it was involved in litigation as a party, had a similar right to remove state court actions to federal court. And, like the FDIC, the RTC's right to remove was triggered in relevant part by its substitution as a party in the state court action. See RTC v. Fragetti, 49 F.3d 715, 717–18 (11th Cir.1995) (citing 12 U.S.C. § 1441a( l )(3)(A)(i) (repealed)). In 1991, Congress amended § 1441a to define the phrase “substituted as a party” insofar as the RTC was concerned. Pursuant to this amendment, the RTC was deemed substituted as a party “upon the filing of a copy of the order appointing the [RTC] as conservator or receiver for that party, or the filing of such other pleading informing the court that the [RTC] has been appointed conservator or receiver for such party.” 12 U.S.C. § 1441a( l )(3)(B) (repealed).

Although it would certainly be easy to use the definition set forth in the former § 1441a( l )(3)(B), there are good reasons not to do so. First, § 1441(a)( l )(3)(B) was repealed in 2010, see Dodd–Frank Wall Street Reform and Consumer Protection Act, Pub.L. No. 111–203, 124 Stat. 1555 (2010), and we know of no authority that permits (much less encourages) defining an existing statutory term or phrase by reference to a definition in a separate statute that is no longer on the books.² Second,there is the messy fact that Congress did not define the phrase “substituted as a party” for the FDIC as it had for the RTC. Because we do not know whether Congress' failure to provide a parallel definition of the phrase for the FDIC was intentional, or just simply an oversight, this is one of those cases where the “views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one.” Russello v. United States, 464 U.S. 16, 26, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) (citations and internal quotation marks omitted). In sum, although applying the former § 1441a( l )(3)(B)'s definition of the phrase “substituted as a party” to § 1819(b)(2)(B) would make things more simple, there is no persuasive legal basis to opt for simplicity here.

The FDIC next argues that, even without statutory borrowing, it was entitled to remove the North Savannah action to federal court once it was appointed receiver for Darby and filed a copy of the appointment order with the state court. We reject this argument because it is contrary to the text of § 1819(b)(2)(B) and inconsistent with our precedent. We concur with the Seventh Circuit's observation that the language of § 1819(b)(2)(B) cannot bear the weight of the FDIC's interpretation. Simply stated, “[the FDIC] becomes a ‘party’ only in court[,]” and the phrases “ ‘[s]ubstituted as a party’ and ‘appointed as a receiver’ are too different to equate.” Buczkowski, 415 F.3d at 596. And we have previously said that the phrase “substituted as a party” does not mean “the date [the] FDIC is appointed receiver.” S & I 85–1, 22 F.3d at 1074.

B

Rule 25(c) of the Federal Rules of Civil Procedure, which governs the substitution of parties upon a transfer of interest, provides as follows:

If an interest is transferred, the action may be continued by or against the original party, unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party. The motion must be served as provided in Rule 25(a)(3).

Because state procedural law “cannot control the privilege of removal granted by [a] federal statute,” Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 580, 74 S.Ct. 290, 98 L.Ed. 317 (1954), the district court properly looked to Rule 25(c) for guidance as to the meaning of the phrase “substituted as a party” in § 1819(b)(2)(B). And because being appointed as receiver is not the same thing as being substituted as a party, the district court correctly required the FDIC to take some affirmative action beyond its appointment as receiver (such as filing a notice of substitution) in order to be “substituted as a party.” See Bu...