Abrams v. Federal Deposit Ins. Corp., 1626

• Decision Date: 28 June 1991
• Docket Number: D,No. 1626,1626
• Parties: Robert ABRAMS, Attorney General of the State of New York; Central Brooklyn Coordinating Council, Inc., a New York Not-for-Profit Corporation; Fort Greene Senior Citizens Council, Inc., a New York Not-for-Profit Corporation; National Urban League, Inc., a New York Not-for-Proft Corporation, Petitioners, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Respondent. ocket 91-4027.
• Court: U.S. Court of Appeals — Second Circuit

Page 22

938 F.2d 22

Robert ABRAMS, Attorney General of the State of New York Central Brooklyn Coordinating Council, Inc., a New York Not-for-Profit Corporation; Fort Greene Senior Citizens Council, Inc., a New York Not-for-Profit Corporation National Urban League, Inc., a New York Not-for-Proft Corporation, Petitioners, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Respondent.

No. 1626, Docket 91-4027.

United States Court of Appeals Second Circuit.

Argued June 3, 1991.

Decided June 28, 1991.

Susan A. Glover, Dept. of Law, New York City (Robert Abrams, Atty. Gen., of Pamela A. Mann, of counsel), for petitioners Central Brooklyn Coordinating Council, Inc., and Nat. Urban League, Inc.

Daniel L. Alterman, New York City (Alterman & Boop, of counsel), for petitioner Fort Greene Senior Citizens Council, Inc.

Thomas L. Holzman, Counsel, Federal Deposit Ins. Corp., Washington, D.C. (Thomas A. Schulz, Asst. Gen. Counsel, Robert G. Clark, Sr. Counsel, Roger A. Hood, of counsel), for respondent Federal Deposit Ins. Corp.

Before OAKES, Chief Judge, PRATT and ALTIMARI, Circuit Judges.

OAKES, Chief Judge:

In this case, petitioners, the Attorney General for the State of New York (the "Attorney General") and various not-for-profit corporations, seek review of a determination by the Federal Deposit Insurance Corporation (the "FDIC") that New York's not-for-profit corporations neither hold their assets in trust for charitable beneficiaries nor maintain separate accounts in different capacities or for different rights, and therefore are not entitled to more than $100,000 per depositor in federal deposit insurance. Because the FDIC has not adequately explained the basis for its conclusions, and has failed to place documents in the record that are necessary for proper consideration of this dispute, we cannot accurately evaluate the validity of its determination. As a result, we remand with instructions to the FDIC, and retain jurisdiction to decide the merits of the petition at a later date.

BACKGROUND

This dispute arises out of the financial problems of Freedom National Bank of New York ("Freedom Bank"). After the Comptroller of the Currency declared Freedom Bank insolvent in November 1990, the FDIC informed numerous depositors, including many not-for-profit corporations, that their deposits in excess of $100,000 would not be federally insured. Among the depositors affected by this decision are petitioner Central Brooklyn Coordinating Council, Inc. ("CBCC"), a not-for-profit corporation that operates and funds numerous community-based social services agencies The named not-for-profit corporation plaintiffs, as well as other such corporations not named (collectively, the "not-for-profit depositors"), maintain separate accounts (1) in a fiduciary capacity (2) earmarked for different purposes or (3) earmarked for different sources of funds or year's owing to the source of the funds or (2) and (3). Examples of accounts carried in a fiduciary capacity are tenants' security accounts in Bedford Stuyvesant Restoration Corporation ("BSRC") and escrow accounts in the name of the Concord Nursing Home. Examples of not-for-profit depositors holding earmarked accounts are CBCC's accounts for "Housing Program," "Neighborhood Rehabilitation," "Victim Assistance Program," and Fort Greene's accounts for "In Center," "Weekend Meals," "Breakfast Brunch Program

petitioner Fort Greene Senior Citizens Council, Inc. ("Fort Greene"), a not-for-profit corporation that operates several day care and senior citizen centers, and petitioner National Urban League, a nationally known not-for-profit corporation that provides social services and advocates on behalf of civil rights. Each of these organizations had maintained numerous deposit accounts in excess of $100,000 at Freedom Bank.

1990." Examples reflecting different years or sources are BSRC's "DOE/PVE," "HEAP 1990-91," and Fort Greene's "DFA Account 90-91," "Title 20. 1990-91," "DFY 1990," "Contributions and Fundraising" accounts. Examples of depositors holding accounts reflecting a combination of charitable purpose and source of funds are BSRC's "Commercial Revitalization/VIG" and Fort Greene's "USDA-GDC," "Young Minds Day Care USDA." We read the FDIC's actions in this case not to differentiate but rather to aggregate these accounts.

After learning of the FDIC's position, the Attorney General wrote numerous letters to the FDIC requesting that it re-evaluate its position concerning the insurance status of the not-for-profit depositors with multiple accounts at Freedom Bank. According to the Attorney General, these not-for-profit depositors deserved to be insured up to $100,000 on each account rather than per depositor because they did not hold their accounts in their own capacity, but instead as implied trustees for those who ultimately benefited from the funds, and at the least hold earmarked separate accounts for different programs in different capacities. After months of silence, the FDIC finally on March 7, 1991, informed the Attorney General in a two-page letter that, in its view, Freedom Bank's not-for-profit depositors did not hold their assets as "trust funds" or "trust interests" for beneficiaries under 12 C.F.R. Sec. 330.11, and therefore they qualified under 12 C.F.R. Sec. 330.9 for only $100,000 of insurance per depositor. The letter did not differentiate between depositors with earmarked accounts and those without or make any reference thereto. The letter did note, however, that the FDIC was requesting additional information from some of Freedom Bank's depositors in order to determine whether other bases existed to expand insurance coverage.

On or about the time that the FDIC informed the Attorney General of its position, petitioners initiated this suit pursuant to 12 U.S.C. Sec. 1821(f)(4), which authorizes the federal courts of appeals to review final FDIC determinations regarding insured deposits. According to the petition, the FDIC's determination that New York's not-for-profit corporations did not qualify for up to $100,000 of insurance on each account at Freedom Bank is "not in accordance with law." 5 U.S.C. Sec. 706(2)(A). The FDIC responds that we do not have subject matter jurisdiction to hear this petition, and that, in any event, its determination is fully supported by the statutory scheme.

DISCUSSION

I. Jurisdiction

The FDIC argues that subject matter jurisdiction is lacking for three reasons, none of which we find persuasive. First, it asserts that because no federal regulations have been promulgated to resolve deposit insurance claims, 12 U.S.C. Sec. 1821(f)(3) requires a federal district court to decide this dispute before it is presented to a federal court of appeals. This argument, however, misconstrues the unambiguous statutory framework. Under section 1821(f)(3), the FDIC may resolve a dispute regarding insured deposits either according to its regulations, see 12 U.S.C. Sec. 1821(f)(3)(A), or, if such regulations do not exist, by submitting the claim to a court of competent...