City of New York v. F.D.I.C.
| Decision Date | 10 March 1999 |
| Docket Number | No. 97 Civ. 6351(DC).,No. 97 Civ. 6880(DC).,No. 97 Civ. 6879(DC).,No. 97 Civ. 6878(DC).,97 Civ. 6351(DC).,97 Civ. 6878(DC).,97 Civ. 6879(DC).,97 Civ. 6880(DC). |
| Citation | 40 F.Supp.2d 153 |
| Parties | THE CITY OF NEW YORK and the New York City Department of Finance, Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for Freedom National Bank, Goldome Federal Savings Bank, American Savings Bank, and First New York Bank for Business, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Nixon, Hargrave, Devans & Doyle LLP by Ealy A. Bennett, Carolyn G. Nussbaum, Constance M. Boland, Melynda G. Broomfield, New York City, for defendant.
In these four related cases, plaintiffs the City of New York and the New York City Department of Finance (together, the "City") challenge the disallowance of their claims for taxes allegedly owed by the Federal Deposit Insurance Company (the "FDIC"), as receiver for four failed banks — Freedom National Bank ("Freedom"), Goldome Federal Savings Bank ("Goldome"), American Savings Bank ("American"), and First New York Bank For Business ("First New York"). The City contends that it is owed more than $82 million from the FDIC in unpaid taxes, interest, and penalties. The FDIC moves in each case to dismiss for lack of subject matter jurisdiction. For the reasons set forth below, the motions are granted and the complaints are dismissed.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") was enacted by Congress in 1989. It sets forth the powers of the FDIC as receiver to wind up the affairs of a failed financial institution. FIRREA was intended to provide "`a detailed regulatory framework so as to restore the financial integrity of the thrift industry's deposit insurance fund and to ... "deal expeditiously with failed depository institutions."'" Betancourt v. FDIC, 851 F.Supp. 126, 129 (S.D.N.Y.1994) (quoting Circle Indus. Div. of Nastasi-White, Inc. v. City Fed. Savings Bank, 749 F.Supp. 447, 451 (E.D.N.Y.1990), aff'd, 931 F.2d 7 (2d Cir.1991) (citing P.L. 101-73, 103 Stat. 183, § 101[8])).
Essentially, FIRREA grants the FDIC "broad powers in its capacity as receiver" to decide claims against a failed financial institution. Id. It sets forth a "comprehensive administrative claim process, adherence to which is a prerequisite to judicial review." Id. As discussed in greater detail below, any creditor with a claim against a failed financial institution is required to file a proof of claim with the FDIC by a certain date, the "bar date." In addition, creditors whose claims are disallowed must seek administrative or judicial review within certain time periods.
On November 9, 1990, the Comptroller of the Currency declared Freedom insolvent, closed the bank, and appointed the FDIC as its receiver. The FDIC published more than one notice of Freedom's closing in several newspapers pursuant to § 1821(d)(3)(B) of FIRREA. As set forth in these notices, the bar date for filing proofs of claim against Freedom was February 22, 1991.
On or about November 10, 1990, the FDIC mailed the City (Department of Finance) a letter entitled "Notice of Financial Institution Closing and Request for Tax Information." On or about November 15, 1990, the FDIC mailed the City (Finance Administrator) a "Notice to Creditors" letter. The November 10th letter advised the City it had to file a proof of claim within ninety days and the November 15th letter advised the City it had to file a proof of claim by February 22, 1991. The City received both letters2 but did not file a proof of claim with the FDIC on or before February 22, 1991.
On or about July 15, 1991, the FDIC again mailed a letter to the City (Department of Finance) notifying it of Freedom's closing and enclosing a copy of Freedom's Commercial Rent Tax ("CRT") return.3 The letter again notified the City that it had to file a claim within ninety days of receipt to be considered. On or about August 15, 1991, the FDIC mailed another "Notice to Creditors" letter to the City (Department of Finance), notifying the City of Freedom's closing and informing the City that a proof of claim had to be filed. The August 15th letter did not set a deadline for filing a proof of claim. Again, the City received both letters.
Arguably, these additional letters set new bar dates. The City did not, however, file a proof of claim with the FDIC within 90 days of its receipt of the July 15th or August 15th letter. Rather, the City did not file a proof of claim with the FDIC for almost five years — until July 2, 1996. At that time, the City filed a proof of claim for $26,944.98, representing $3,857 in CRT for June 1, 1990 to November 9, 1990, $11,157.40 in Bank Tax4 for January 1, 1989 to November 9, 1990, and $11,930.58 in penalties and interest. Because the FDIC did not act on the claim within 180 days after it was filed, the proof of claim was "deemed denied."5 (Shea Freedom Aff. ¶ 13).
On May 31, 1991, the New York State Superintendent of Banks declared Goldome insolvent, closed the bank, and appointed the FDIC as its receiver. The FDIC published more than one notice of Goldome's closing in several newspapers pursuant to § 1821(d)(3)(B) of FIRREA. As set forth in these published notices, the bar date for filing proofs of claim against Goldome was September 13, 1991.
On or about May 31, 1991 the FDIC mailed the City (Water Board) a copy of the notice of Goldome's closing. The May 31st transmittal letter advised that the bar date was September 13, 1991. On or about June 3, 1991, the FDIC mailed the City (Department of Finance) a letter entitled "Notice of Financial Institution Closing and Request for Tax Information." The June 3d letter advised the City that it had to submit a proof of claim within ninety days. On or about June 6, 1991, the FDIC mailed another letter entitled "Notice to Creditors" to the City (Department of Finance). The City received all three letters. The City did not file a proof of claim with the FDIC within ninety days of any of these letters or before the September 13, 1991 bar date.
On November 26, 1996, some five years later, the City sent the FDIC a notice of proposed Bank Tax due against Goldome in the amount of $114,224.02 for the period January 1, 1991 to May 31, 1991. In response to the City's November 26, 1996 notice, "and pursuant to the policy that the FDIC-Receiver seeks to review every potential claim," on December 19, 1996, the FDIC forwarded a "Notice to File Late Claim" to the City, enclosing a proof of claim form. (FDIC Mem. at 11 and Shea Goldome Aff. Ex. 20; see also FDIC Mem. at 7 n. 3 and Shea First New York Aff. ¶¶ 9, 14 ()). The FDIC notice stated inter alia that "[u]nder applicable law, the Receiver must disallow claims which are not filed by the bar date, except the Receiver may consider a claim filed after the bar date if it is shown that the claimant did not receive notice of the appointment of the Receiver in time to file such claim before the bar date, and such claim is filed in time to permit payment of the claim." (Shea Goldome Aff. Ex. 20 (emphasis in original)).
On March 6, 1997, the City filed a proof of claim with the FDIC seeking $2,319,577.00 in Bank Tax allegedly due for the fiscal year ending May 31, 1991, and $2,233,869.60 in interest and penalties. (Id. Ex. 21). In a letter dated July 17, 1997, the FDIC disallowed the claim as untimely pursuant to 12 U.S.C. § 1821(d)(5)(C). (Id. Ex. 22).
On June 12, 1992, the New York State Superintendent of Banks declared American insolvent, closed the bank, and appointed the FDIC as its receiver. The FDIC published more than one notice of American's closing in several newspapers pursuant to § 1821(d)(3)(B) of FIRREA. As set forth in these published notices, the bar date for filing proofs of claim against American was September 18, 1992.
On or about June 12, 1992, the FDIC mailed the City two letters entitled "Notice of Financial Institution Closing and Request for Tax Information." One letter was addressed to the Bureau of Tax Operations at the Department of Finance. The other was addressed to the CRT Taxpayer Correspondence Unit at the Department of Finance. Both letters advised the City that a proof of claim "should" be submitted within ninety days. The City received one or both of these letters.6
On or about August 14, 1992, the FDIC mailed a copy of American's CRT return to the City. The City filed a timely proof of claim with the FDIC on September 15, 1992 for unpaid CRT for June 1-12, 1992 of $7,330 and unpaid Bank Tax for January 1, 1989 through December 31, 1991 of $200,000 with interest of $60,000 for a total of $267,330. (Shea American Aff. ¶ 7 and Ex. 38). The City did not file a proof of claim for Bank Tax for the period January 1, 1992 through June 12, 1992, or any part thereof.
On or about December 13, 1993, the FDIC mailed the City two letters informing it that the FDIC was only partially allowing the City's claim for American's purported unpaid taxes. (Id. Ex. 39). The letters informed the City that if it wished to challenge the partial disallowance, it had to do so within sixty days by commencing suit in the appropriate district court. (Id.). The City received both letters, but did not challenge the partial disallowance within sixty days.
On December 4, 1996, some three years later, the City notified the FDIC of proposed Bank Tax due for 1992, claiming that American owed a total of $14,453,064.21, representing $8,425,973.94 in Bank Tax, $3,077,999.39 in...
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