Rundgren v. Wash. Mut. Bank

Decision Date29 July 2014
Docket NumberNo. 12–15368.,12–15368.
Citation760 F.3d 1056
PartiesTodd RUNDGREN; Michele C. Rundgren, individually and as Trustees respectively of the Todd Rundgren Revocable Trust, dated November 1, 2005 and the Michele C. Rundgren Revocable Trust, dated October 6, 2005, Plaintiffs–Appellants, v. WASHINGTON MUTUAL BANK, FA, a Federal Savings Bank; JPMorgan Chase Bank NA, a Delaware corporation; Does, 1–30, Defendants–Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

OPINION TEXT STARTS HERE

Gary Victor Dubin (argued) and Frederick John Arensmeyer, Dubin Law Offices, Honolulu, HI, for PlaintiffsAppellants.

Paul D. Alston (argued) and Tina L. Colman, Alston Hunt Floyd & Ing, Honolulu, HI; Jeffrey H.K. Sia, Diane W. Wong, and David A. Gruebner, Ayabe, Chong, Nishimoto, Sia & Nakamura, Honolulu, HI, for DefendantAppellee JPMorgan Chase Bank.

Appeal from the United States District Court for the District of Hawaii, J. Michael Seabright, District Judge, Presiding. D.C. No. 1:09–cv–00495–JMS–KSC.

Before: WILLIAM A. FLETCHER, SANDRA S. IKUTA, and ANDREW D. HURWITZ, Circuit Judges.

OPINION

IKUTA, Circuit Judge:

This appeal requires us to consider whether the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. No. 101–73, 103 Stat. 183, stripped the district court of jurisdiction over Todd and Michele Rundgren's claims arising out of allegedly fraudulent acts by Washington Mutual Bank (WaMu). Because WaMu was placed into the receivership of the Federal Deposit Insurance Corporation (FDIC), and the Rundgrens failed to exhaust the administrative remedies provided by FIRREA, the district court correctly determined it lacked authority to hear the Rundgrens' claims. See12 U.S.C. § 1821(d)(13)(D).

I

In considering this facial challenge to the district court's subject matter jurisdiction, we assume the veracity of the Rundgrens' allegations. See Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n. 2 (9th Cir.2003). In early 2005, the Rundgrens obtained a loan secured by a mortgage in favor of Countrywide Home Loans, Inc, on their property in Kilauea, Hawaii. Three years later, the Rundgrens refinanced their mortgage with WaMu for around $3,000,000. According to the Rundgrens, the loan refinancing was tainted by WaMu's numerous fraudulent acts. For example, the Rundgrens allege that WaMu falsified the loan application, highly exaggerated the Rundgrens' income and assets without their knowledge, misled the Rundgrens as to the terms of the note, secured a false appraisal, and rushed them through the signing process, among other things.

WaMu was later seized by the Office of Thrift Supervision and placed into the receivership of the FDIC. The FDIC then transferred certain WaMu assets, including the Rundgrens' mortgage, to defendant JPMorgan Chase Bank, N.A. (Chase) under a Purchase and Assumption Agreement. Pursuant to this agreement, the FDIC retained most liabilities associated with those assets.1

After Chase determined that the Rundgrens were in default on their loan, Chase accelerated the payments secured by the mortgage and notified the Rundgrens that a nonjudicial foreclosure sale would occur on August 26, 2009. In response, the Rundgrens sent Chase a letter stating that they each hereby timely exercise their right to cancel said referenced loan transaction and mortgage and promissory note” based on allegations that Chase and WaMu violated state and federal law.

The Rundgrens then sued Chase and WaMu in Hawaii state court. In their complaint, the Rundgrens alleged that WaMu defrauded them and breached its fiduciary duty during the refinancing negotiation. The Rundgrens sought, among other things: a declaratory judgment that the loan transaction was void and unenforceable and that Chase could not proceed with its nonjudicial foreclosure action; rescission of the loan and treble damages under state law; injunctive relief preventing Chase from attempting to foreclose on the property or “further damage their finances”; statutory damages under the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601–1667f, and other state and federal consumer protection acts; and punitive damages.

Chase then removed the action to federal court. The district court dismissed the case against Chase for lack of jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure because the Rundgrens had failed to exhaust their claims with the FDIC prior to bringing suit, as required by 12 U.S.C. § 1821(d)(13)(D). In the alternative, the court held that the Rundgrens failed to state a claim under Federal Rule of Civil Procedure 12(b)(6). This appeal followed.

II

We review de novo the district court's dismissal of a claim for lack of subject matter jurisdiction. Campbell v. Redding Med. Ctr., 421 F.3d 817, 820 (9th Cir.2005). In determining whether the Rundgrens' action against Chase is barred by the jurisdiction-stripping provisions of FIRREA, we first consider the Act's purpose and structure.

Congress enacted FIRREA “in an effort to prevent the collapse of the [savings and loan] industry” in the late 1980s. Wash. Mut. Inc. v. United States, 636 F.3d 1207, 1211 (9th Cir.2011). In order “to enable the federal government to respond swiftly and effectively to the declining financial condition of the nation's banks and savings institutions,” FIRREA granted “the FDIC, as receiver, broad powers to determine claims asserted against failed banks.” Henderson v. Bank of New Eng., 986 F.2d 319, 320 (9th Cir.1993).

To maximize the FDIC's ability to fulfill its role as claim adjudicator, FIRREA “provides detailed procedures to allow the FDIC to consider certain claims against the receivership estate.” Benson v. JPMorgan Chase Bank, N.A., 673 F.3d 1207, 1211 (9th Cir.2012). The comprehensive claims process, see12 U.S.C. § 1821(d)(3)-(10), allows the FDIC to “ensure that the assets of a failed institution are distributed fairly and promptly among those with valid claims against the institution, and to expeditiously wind up the affairs of failed banks,” Benson, 673 F.3d at 1211 (internal quotation marks omitted), “ ‘without unduly burdening the District Courts,’ ” Henderson, 986 F.2d at 320 (quoting H.R.Rep. No. 101–54(I), at 419 (1989), reprinted in 1989 U.S.C.C.A.N. 86, 215). As set forth in FIRREA, once the FDIC is appointed receiver for a failed depository institution, it must publish a notice to all of “the depository institution's creditors” with instructions “to present their claims, together with proof, to the receiver” by a specific date. 12 U.S.C. § 1821(d)(3)(B)(i). The FDIC must also mail the notice “to any creditor shown on the institution's books,” id. § 1821(d)(3)(C)(i), and “upon discovery of the name and address of a claimant not appearing on the institution's books,” the FDIC must mail the notice to the claimant “within 30 days after the discovery of such name and address,” id. § 1821(d)(3)(C)(ii). Late claims “shall be disallowed and such disallowance shall be final,” id. § 1821(d)(5)(C)(i), unless “the claimant did not receive notice of the appointment of the receiver in time to file such claim before [the designated] date,” and “such claim is filed in time to permit payment of such claim,” id. § 1821(d)(5)(C)(ii). Within 180 days (or another agreed-upon period of time) after receiving the claim, the FDIC “shall determine whether to allow or disallow the claim and shall notify the claimant of any determination with respect to such claim.” Id. § 1821(d)(5)(A); see also id. § 1821(d)(5)(D). If the claimant timely submits the claim to the FDIC and the FDIC disallows the claim, “the claimant may request administrative review of the claim ... or file suit on such claim” in the district court whose jurisdiction covers the depository institution. Id. § 1821(d)(6)(A).

FIRREA strips courts of jurisdiction over claims that have not been exhausted through this process:

Except as otherwise provided in this subsection, no court shall have jurisdiction over—

(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.

Id. § 1821(d)(13)(D).

III

In light of the exhaustion requirement set forth in § 1821(d)(13)(D), we begin by asking whether the Rundgrens' complaint alleges a “claim” and if so, whether the claim relates to “any act or omission,” id. § 1821(d)(13)(D)(ii), of an “institution for which the [FDIC] has been appointed receiver,” id. § 1821(d)(13)(D)(i).

A

FIRREA does not define the term “claim” for purposes of exhaustion, so we use the ordinary meaning of the term. See Wilderness Soc'y v. U.S. Fish & Wildlife Serv., 353 F.3d 1051, 1061 (9th Cir.2003) (en banc), as amended by360 F.3d 1374 (9th Cir.2004) (en banc). A “claim” is a cause of action or the aggregate of facts that gives rise to a right to payment or an equitable remedy. See Black's Law Dictionary 281–82 (9th ed.2009); see also Black's Law Dictionary 247 (6th ed.1991). Given this general meaning of the word claim in normal legal usage, the Rundgrens' complaint clearly raises “claims” against WaMu and Chase for monetary and nonmonetary relief.

The Rundgrens raise two arguments against this straightforward conclusion. First, the Rundgrens argue that their claims are not the sort of claims contemplated by § 1821(d)(13)(D) because the Rundgrens are not WaMu's creditors. We have previously rejected this argument as inconsistent with the statutory language. See McCarthy v. FDIC, 348 F.3d 1075, 1080 (9th Cir.2003) (holding that “the exhaustion rule ... is not limited to creditors, but applies as well to debtors”). Section 1821(d)(13)(D) is drafted broadly to preclude courts from exercising jurisdiction over “any claim or action for...

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