Coston v. Gold Coast Graphics, Inc., 91-2267-CIV.

• Decision Date: 14 January 1992
• Docket Number: No. 91-2267-CIV.,91-2267-CIV.
• Citation: 782 F. Supp. 1532
• Parties: James COSTON, et al., Plaintiffs, v. GOLD COAST GRAPHICS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

782 F. Supp. 1532

James COSTON, et al., Plaintiffs, v. GOLD COAST GRAPHICS, INC., et al., Defendants.

No. 91-2267-CIV.

United States District Court, S.D. Florida.

January 14, 1992.

Karen A. Curran, Coral Gables, Fla., for plaintiffs.

Frank R. Rodriguez, Adorno & Zeder, P.A., Miami, Fla., for FDIC as Receiver.

Thomas R. Spencer, Spencer & Klein, Miami, Fla., for defendants.

ORDER

MARCUS, District Judge.

THIS CAUSE comes before the Court on Defendant Federal Deposit Insurance Corporation ("FDIC") as Receiver for Southeast Bank, N.A.'s Partial Objection to Magistrate Judge Garber's Report and Recommendation (the "Objection"). Upon the observation that Defendant objects only to language in footnote 8 of the Report, and that Defendant characterizes the language as "merely dicta", Objection at 2, it is hereby

ORDERED THAT the Report and Recommendation's conclusion is adopted and that this action shall be stayed until the earlier of the following: (1) 180 days have elapsed from the date claimants against Southeast in this action filed claims with FDIC; or (2) the FDIC has disallowed these claims.

The parties are directed to notify the Court in writing when it is appropriate to lift the stay.

Additionally, this cause is hereby set for status conference before the undersigned on June 1, 1992 at 9:00 a.m. at the United States Courthouse, 5th Floor, 301 North Miami Avenue, Miami, Florida.

DONE AND ORDERED.

REPORT AND RECOMMENDATION

BARRY L. GARBER, United States Magistrate Judge.

This cause comes before the Court pursuant to an Order of Reference entered on October 25, 1991 by the Honorable Stanley Marcus, United States District Judge. In accordance with the Order of Reference, the following Report and Recommendation is hereby submitted on the Motion of the Federal Deposit Insurance Corporation as Receiver for Southeast Bank, N.A. to Dismiss, Without Prejudice, for Lack of Subject Matter Jurisdiction, or in the Alternative for Stay of Action and All Associated Proceedings.

I. BACKGROUND

Originally filed in state court in early 1991, this action for fraud and breach of fiduciary duty arises from the failure of a business, Gold Coast Graphics, Inc. ("Gold Coast"), and is brought by Gold Coast employees against Gold Coast, its owners, and its lender, Southeast Bank, N.A. ("Southeast"). On September 19, 1991, the Office of the Comptroller of the Currency found Southeast to be insolvent and appointed the FDIC as receiver pursuant to 12 U.S.C. § 1821(c)(2)(A)(ii) (1989).

On the same date, the FDIC entered into a Purchase and Assumption Agreement with First Union National Bank of Florida ("First Union"), whereby First Union assumed certain assets and liabilities of Southeast. The claims asserted against Southeast in this action were not among the liabilities assumed by First Union. The FDIC has consequently retained those asserted liabilities.

As receiver for Southeast, the FDIC has removed this action to federal court and filed a motion to dismiss without prejudice or stay the entire action until claimants have complied with the administrative review process set forth in 12 U.S.C. §§ 1821(d)(3)-(8).¹

II. ISSUES PRESENTED

The FDIC's motion presents issues of first impression in this Circuit, and requires the reconciliation of apparently inconsistent provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"):²

(1) Does FIRREA deprive the Court of subject matter jurisdiction over this action brought against Southeast before the FDIC was appointed as receiver; and

(2) If not, does FIRREA provide for a stay until all claimants against Southeast have complied with FIRREA's administrative review process?

The undersigned finds that the Court is not technically deprived of subject matter jurisdiction in this action but that a stay is required until all claimants against Southeast have complied with FIRREA's administrative review process.

III. DISMISSAL OR STAY

Section 1821(d)(13)(D) of FIRREA provides:

(D) Limitation on judicial review

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.

The FDIC argues that because § 1821(d)(13)(D) prohibits judicial determination of any claims against an insolvent bank, except as otherwise specifically permitted by § 1821(d), all action on any claims against Southeast (where the FDIC has assumed liability as receiver) must be dismissed or stayed until FIRREA's administrative review process has been completed.³

Although the claims against Southeast clearly constitute claims under § 1821(d)(13)(D), the undersigned is not persuaded that § 1821(d)(13)(D) deprives the Court of subject matter jurisdiction because other FIRREA sections provide for continuing jurisdiction over actions filed before the FDIC's appointment as receiver. Section 1821(d)(5)(F)(ii) states:

Subject to paragraph (12), the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver.⁴

Courts differ on whether § 1821(d)(5)(F)(ii) permits actions filed before the appointment of a receiver to continue concurrently with the administrative review process or whether it merely amplifies § 1821(d)(6)(A), which allows a claimant to "continue an action commenced before the appointment of a receiver" after the administrative review process has been completed.⁵ Compare In re FDIC, 762 F.Supp. 1002, 1005 (D.Mass.1991) (continuation only after administrative review) with Marc Dev., Inc. v. FDIC, 771 F.Supp. 1163 (D.Utah 1991) (concurrent pursuit of action and administrative review).

Regardless of how that issue is decided, the use of the term "continue" in both § 1821(d)(5)(F)(ii) and § 1821(d)(6)(A) indicates that the Court is not deprived of jurisdiction over the action. Rather, as the Marc court reasons:

The term "continue" implies that a party is proceeding forward in an ongoing case without an interruption in the court's jurisdiction. A claimant could not "continue" an action over which the court has been deprived of subject matter jurisdiction. The claimant would have to "refile" such a lawsuit because the suit would have been dismissed due to lack of subject matter jurisdiction.

Marc, 771 F.Supp. at 1164-65.

Further, the apparent conflict between the deprivation of jurisdiction in § 1821(d)(13)(D), on the one hand, and "continuing" a previously filed action in §§ 1821(d)(5)(F)(ii), 1821(d)(6)(A), and 1821(d)(8)(E)(ii), on the other, can be reconciled by treating § 1821(d)(13)(D) as expressing Congress' intention to insulate FDIC's administrative review process from judicial review in all cases until the administrative review process is completed. Section 1821(d)(13)(D)'s effect on jurisdiction, however, would depend on whether an action was filed before or after the FDIC's appointment as receiver.

A. Actions Brought After the FDIC's Appointment

If no lawsuit had been filed prior to the FDIC's appointment and the claimant initially files a claim with the FDIC, the FDIC is completely insulated from judicial interference with the ongoing administrative review process and no district court can acquire any jurisdiction over the claim. See, e.g., Circle Indus. v. City Fed. Sav. Bank, 749 F.Supp. 447, 451 (E.D.N.Y.1990), aff'd, 931 F.2d 7 (2d Cir.1991); Yumukoglu v. Resolution Trust Corp., Civ.A. No. 91-0002, 1991 WL 68322 (E.D.La. Apr. 19, 1991). If the FDIC disallows the claim, the claimant is entitled to essentially begin again in the district court, unhindered by the FDIC's disallowance. 12 U.S.C. § 1821(d)(6)(A).

B. Actions Brought Before the FDIC's Appointment

On the other hand, if the claimant filed a lawsuit prior to the FDIC's appointment as receiver, the court does not technically lose jurisdiction and the claimant may fully "continue" its lawsuit after disallowance.⁶ 12 U.S.C. § 1821(d)(6)(A). Until that time, however, the court is similarly barred from taking action that interferes with the ongoing administrative review process. 12 U.S.C. § 1821(d)(13)(D).

Both legislative history and precedent support this analysis. Courts directly facing this issue have relied on the discussion of the administrative review process located in House Report No. 54(I), 101st Congress, 1st Session, reprinted in 1989 U.S.C.C.A.N. 86. That House Report states:

After exhaustion of streamlined administrative procedures, a claimant has a choice to either bring a claim de novo in the District Court ... or have the claim determination reviewed by one or more administrative processes.... Any suit (or motion to renew a suit filed prior to the appointment of the receiver) must be brought by the claimant within 60 days after the denial of the claim. Resort to either the District Courts or administrative review process is available only after the claimant has first presented its claim to the FDIC.

Id. at 214 (emphasis added).

Additionally, the House Report explains that "exhaustion is a proper prerequisite to further action by a claimant," and "there shall be no judicial review of the administrative determination not to allow a claim. Rather, the claimant must ... continue a previously filed suit to establish a disallowed claim." Id. at 215 (emphasis added). This is because "Congress has determined that these administrative procedures are the most efficient way to resolve the hundreds of claims with which a receiver might be confronted." Tuxedo Beach Club Corp. v. City Fed. Sav. Bank, 737 F.Supp. 18, 20 (D.N.J.1990).

Based on the above-quoted language and the structure of FIRREA, the undersigned...