Danner Constr., LLC v. Bebermeyer

• Decision Date: 17 September 2012
• Docket Number: No. 2:12-CV-04076-CV-C-NKL,2:12-CV-04076-CV-C-NKL
• Court: U.S. District Court — Western District of Missouri
• Parties: DANNER CONSTRUCTION, LLC, Plaintiff, v. DANIEL BEBERMEYER, D & D DEVELOPMENT, LLC, and FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR SUN SECURITY BANK, Defendants.

DANNER CONSTRUCTION, LLC, Plaintiff,

v.DANIEL BEBERMEYER, D & D DEVELOPMENT, LLC, andFEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR SUN SECURITY BANK, Defendants.

No. 2:12-CV-04076-CV-C-NKL

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI CENTRAL DIVISION

Dated: September 17, 2012

ORDER

Defendant Federal Deposit Insurance Corporation as Receiver for Sun Security Bank ("the FDIC-R") moves to dismiss Plaintiff Danner Construction, LLC ("Danner")'s claims against the FDIC-R for lack of subject matter jurisdiction. [Doc. # 19]. The FDIC-R argues that Danner's claims are barred by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1821, because Danner failed to file a timely administrative claim with the FDIC. Danner concedes that the Court lacks subject matter jurisdiction, but argues that the proper relief is remand to state court. [Doc. # 22]. Danner seeks remand solely because it would allow the Court, in its discretion, to award Danner attorney's fees based on the FDIC-R's allegedly unreasonable removal. The FDIC-R replies that remand is inappropriate because, underthe FIRREA, all courts, including Missouri state courts, lack jurisdiction to hear Danner's claims.

For the reasons set forth below, the Court DENIES the FDIC-R's motion to dismiss [Doc. # 19], REMANDS the case to the Circuit Court of Morgan County, Missouri, and DENIES Danner's request for attorney's fees [Doc. # 22].

I. Background and Procedural History

Danner's claims against the FDIC-R arise from an alleged embezzlement scheme perpetrated by one of Danner's employees. Sun Security Bank was one of the banks the Danner employee allegedly used to embezzle the money. Danner filed this suit against Sun Security Bank and others on January 19, 2010, in the Circuit Court of Morgan County, Missouri.

On October 7, 2011, the Missouri Commissioner of Finance closed Sun Security Bank and appointed the FDIC as Receiver for Sun Security Bank. As such, the FDIC-R stands in the shoes of Sun Security Bank with respect to all matters, including the present litigation. On February 16, 2012, Judge Stan Moore in the Circuit Court of Morgan County entered an order substituting the FDIC-R in the place and stead of Sun Security Bank in the suit initiated by Danner.

Prior to this, on October 7, 2011, the FDIC issued a press release about the appointment of the FDIC as Receiver for Sun Security Bank. This press release contained an administrative Claims Bar Deadline of January 11, 2012. The FDIC also published several notices about the Receivership in generally circulated newspapers in Missouri, which was the principal place of business of Sun Security Bank. These noticesalso contained the Claims Bar Deadline of January 11, 2012. Danner was not sent an individual mailed notice of the Receivership, however, because Danner was not listed as a creditor of Sun Security Bank at the time the FDIC accepted the Receivership. Danner never filed an administrative claim with the FDIC.

The FDIC-R removed the present case on March 20, 2012, pursuant to the FDIC's statutory right to removal under 12 U.S.C. § 1819(b)(2(B). On July 2, 2012, the FDIC-R filed this motion to dismiss for lack of subject matter jurisdiction, relying on Danner's failure to file an administrative claim prior to the January 11, 2012 Claims Bar Deadline.

II. Discussion

The parties agree that the Court lacks subject matter jurisdiction to hear Danner's claims against the FDIC-R. Under 12 U.S.C. § 1821(d)(13)(D), an administrative claim must be filed before any court may establish jurisdiction over a claim against a failed financial institution or its successor. It is undisputed that Danner did not file an administrative claim prior to the Claims Bar Deadline. Danner does not contest the sufficiency of the notice it received, and instead concedes that this Court does not have subject matter jurisdiction to hear Danner's claims against the FDIC-R. Consequently, the only issue is the proper relief.

A. Whether Remand or Dismissal is Proper

The FDIC-R seeks dismissal of Danner's claims and Danner requests remand to state court. Where a case is removed from state court and it later becomes apparent that the district court lacks subject matter jurisdiction, "the case shall be remanded." 28 U.S.C. § 1447(c) (emphasis added). On the other hand, "no court" has jurisdiction tohear a claim brought against the appointed receiver for a failed banking institution unless administrative procedures are first exhausted. 12 U.S.C. § 1821(d)(13)(D); Tri-State Hotels, Inc. v. FDIC, 79 F.3d 707, 712 (8th Cir. 1996) ("Judicial review of claims governed by FIRREA is contingent on the completion of the administrative review process. . . . '[A]dministrative exhaustion is required before any court acquires subject matter jurisdiction over a claim' against the FDIC as receiver for a failed thrift." (quoting Bueford v. Resolution Trust Corp., 991 F.2d 481, 484 (8th Cir. 1993) (emphasis added)). Danner apparently does not intend to challenge this jurisdictional bar to its claims in state court because, wholly irrespective of the jurisdictional defect, Danner considers any further prosecution of its claims against the FDIC-R to be "an exercise in futility." [Doc. # 22 at 2] (citing the FDIC-R's insufficient assets).

The sole issue, then, is whether there is a futility exception to the nondiscretionary language contained in 28 U.S.C. § 1447(c).¹

Although remand is required by statute when the federal district court lacks subject-matter jurisdiction over a removed case, a minority of courts have recognized an exception to this rule, allowing dismissal of a case rather than remand for cases in which remand would be futile. Most courts hold, however, that if the district court lacks subject-matter jurisdiction of a removed action, dismissal is inappropriate, and the court must remand the action.

14 Fed. Proc. Forms § 58:97 (2012) (citations omitted). The Eighth Circuit has apparently never specifically addressed this issue. But it has held generally that, where a federal court "determines that no federal jurisdiction exists, it must remand the case back to state court." First Nat'l Bank of Salem v. Wright, 775 F.2d 245, 246 (8th Cir. 1985) (citing 28 U.S.C. § 1447) (emphasis added).

The majority of other circuits do not recognize a futility exception. The Third, Fourth, Seventh, and Eleventh Circuits have expressly rejected this exception. See Bromwell v. Michigan Mut. Ins. Co., 115 F.3d 208, 213-14 (3rd Cir. 1997); Roach v. West Virginia Reg'l Jail & Corr. Facility Auth., 74 F.3d 46, 49 (4th Cir. 1996); Smith v. Wisconsin Dep't of Agric., Trade & Consumer Prot., 23 F.3d 1134, 1139 (7th Cir. 1994); Univ. of S. Alabama v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999). In an unpublished opinion, the Tenth Circuit likewise declined to recognize the existence of such an exception. See Jepsen v. Texaco, Inc., No. 94-6429, 1995 WL 607630, at *3 (10th Cir. 1995). Although the First and Second Circuits have discussed the possibility of a futility exception, neither adopted this exception when given the opportunity to do so. See Maine Ass'n of Interdependent Neighborhoods v. Comm'r, Maine Dep't of Human Servs., 876 F.2d 1051, 155-56 (1st Cir. 1989); Barbara v. New York Stock Exchange, Inc., 99 F.3d 49, 56 n.4 (2d Cir. 1996). Furthermore, in dicta cited by many of the decisions addressing this issue, the Supreme Court noted that "'the literal words of § 1447(c), . . . give . . . no discretion to dismiss rather than remand an action.'" Int'lPrimate Prot. League v. Adm'rs of Tulane Educ. Fund, 500 U.S. 72, 89 (1991) (quoting Maine Ass'n of Interdependent Neighborhoods, 876 F.2d at 1054).

Only the Ninth and Fifth Circuits have adopted the futility exception. See Asarco, Inc. v. Glenara Ltd., 912 F.2d 784, 787 (5th Cir. 1990); Bell v. City of Kellog, 922 F.2d 1418, 1425 (9th Cir. 1991); see also Randolph v. ING Life Ins. & Annuity Co., 486 F. Supp. 2d 1, 11 (D.D.C. 2007) (surveying the case law and concluding that only the Ninth and Fifth Circuits recognize the futility exception). However, "later decisions by the Ninth Circuit called its Bell decision into question." Russell's Garden Ctr., Inc. v. Nextel Commc'n of Mid-Atlantic, Inc., 296 F. Supp. 2d 13, 19-20 (D. Mass. 2003) (citing Albingia Versicherungs A.G. v. Schenker Int'l, Inc., 344 F.3d 931, 938 (9th Cir. 2003); Bruns v. Nat'l Credit Union Admin., 122 F.3d 1251, 1257-58 (9th Cir. 1997)). This led one court considering this issue to conclude, "The Fifth Circuit . . . is the only remaining circuit to endorse unambiguously the futility exception in a published opinion—and it rendered its decision before the Supreme Court decided Int[ernational] Primate." Russell's Garden Ctr., 296 F. Supp. 2d at 20. The weight of authority is thus substantially against recognizing a futility exception.

The inherent danger of adopting a futility exception is that it would permit a federal court to impermissibly speculate about how a state court will resolve a particular question. See, e.g., Maine Ass'n of Interdependent Neighborhoods, 876 F.2d at 1055-56 ("But the fact that we believe a certain legal result unlikely . . . is not sufficient grounds for reading an exception into the absolute statutory words 'shall be remanded.' . . . We therefore conclude that the district court ought to have followed the statute, 28 U.S.C. §1447(c), as written, and remanded the case, . . . ."); Univ. of S. Alabama v. Am. Tobacco Co., 168 F.3d at 410-11 ("This provision [§ 1447(c)] is mandatory and may not be disregarded based on speculation about the proceeding's futility in state court. . . . Because removal jurisdiction raises significant federalism concerns, federal courts are directed to construe removal statutes strictly.").

In the present case, as acknowledged by the FDIC-R, Danner could argue that the lack of individual notice regarding the Claims Bar Deadline...