Delta Savings Bank v. USA.

• Decision Date: 12 July 2001
• Docket Number: DEFENDANTS-APPELLEES,No. 98-56775,PLAINTIFFS-APPELLANTS,98-56775
• Citation: 265 F.3d 1017
• Parties: (9th Cir. 2001) DELTA SAVINGS BANK, A CALIFORNIA SAVINGS ASSOCIATION; YOUNG I. KIM, AN INDIVIDUAL AND SHAREHOLDER,, v. UNITED STATES OF AMERICA; DAVID HENRY; JENNIFER JONES,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1017

265 F.3d 1017 (9th Cir. 2001)

DELTA SAVINGS BANK, A CALIFORNIA SAVINGS ASSOCIATION; YOUNG I. KIM, AN INDIVIDUAL AND SHAREHOLDER, PLAINTIFFS-APPELLANTS, v. UNITED STATES OF AMERICA; DAVID HENRY; JENNIFER JONES, DEFENDANTS-APPELLEES.

No. 98-56775

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted October 10, 2000

Filed July 12, 2001

[Copyrighted Material Omitted] Timothy J. Gorry, Gorry & Meyer, Los Angeles, California, for the plaintiffs-appellants.

Sushma Soni, United States Department of Justice Civil Division; Mary Hampton Mason, Civil Division; Richard Montague, Esq., Civil Division; Mark B. Sterns, Civil Division, Washington, D.C., for the defendants-appellees.

Appeal from the United States District Court for the Central District of California William Matthew Byrne, Jr., District Court Judge, Presiding. D.C. No. CV-94-06621-WMB

Before: Betty B. Fletcher, Sidney R. Thomas, and Kim McLane Wardlaw, Circuit Judges.

B. Fletcher, Circuit Judge

Plaintiffs-appellants Delta Savings Bank ("Delta") and Young Il Kim ("Kim") appeal two of the district court's orders granting a motion for partial summary judgment and a motion for summary judgment in favor of the defendant-appellee United States. These rulings dispose of all issues and all parties. We affirm in part and reverse in part. Because we affirm the district court on grounds that dispose entirely of the case, we need not remand for further proceedings.

I.

This case is about a state licensed savings bank, Delta, that fell under the scrutiny and eventually the control of various agencies of the United States. On September 15, 1989, several individuals of Asian ancestry invested approximately $2.6 Million in Delta and took over management of the institution. Kim invested nearly $500,000 and assumed the presidency of the bank. At the time he did so, the bank was already failing and under investigation by the Office of Thrift Supervision ("OTS"). According to plaintiffs, the bank's condition improved almost immediately, but the bank nonetheless came under increased scrutiny by the federal regulators. Plaintiffs allege that the increased scrutiny was due to a conspiracy among two OTS employees, defendants Henry and Jones, and a Delta employee, Miller, who once worked for OTS. Supposedly, these three were motivated by their racial bias against the Asian ancestry of Delta's management. This is the central theory behind plaintiffs' causes of action. Delta requested that both the Western Regional Director of the Office of the Inspector General and the California Department of Savings and Loan investigate the OTS. Both agencies began investigations into the claims of discrimination.

On May 29, 1991, Delta's board of directors authorized "any and all action necessary to file Civil Litigation against any and all parties including the OTS, . . . J. Jones, A. Miller and D. Henry." On November 8, 1991, the OTS served Delta with notice that the Resolution Trust Corporation ("RTC") had been appointed conservator and Kim was removed as president. Despite an administrative review of this action favorable to Kim, the OTS issued a Prohibition Order which forever banned Kim from working in the American banking industry. This action was appealed to this court, and the prohibition order was vacated. Kim v. Office of Thrift Supervision, 40 F.3d 1050, 1055 (9th Cir. 1994).

Kim, Yun Suk Seo, and Michael Kim filed suit in the United States District Court for the Central District of California against the Acting Director of the OTS. The case was assigned to District Judge David V. Kenyon. The suit sought removal of Delta's conservator on the basis that its appointment stemmed from the racial conspiracy among Jones, Henry and Miller.

On April 9, 1993, the district court granted plaintiffs leave to file a Second Amended Complaint and specifically found that the Delta directors had standing to bring suit. Subsequently, all parties stipulated to dismiss the suit to allow Delta to perfect its claim under the Federal Tort Claims Act ("FTCA") and, if necessary, re-file the action.

On September 30, 1994, Delta and Kim, in his individual capacity and as a stockholder derivatively, re-filed the complaint against the United States and the OTS employees. The complaint alleged causes of action for violations of 42 U.S.C. §§ 1985(3), 42 U.S.C. §§ 1986, and 28 U.S.C. §§ 1346(b) based on the failure of the OTS to prevent the race-based conspiracy of its employees. On May 10, 1995, the district court granted defendants' 12(b)(1) motion to dismiss the causes of action that were based directly on §§ 1985(3) and§§ 1986, reasoning that the United States had not waived its sovereign immunity to suits brought under those provisions. However, the district court held that it had subject matter jurisdiction over the §§ 1346(b), FTCA, cause of action because the United States had waived its sovereign immunity to suits under that provision that were based on the combination of California's negligence per se law and §§ 1986. The district court also entered judgment in favor of defendants Jones and Henry on the ground that plaintiffs' claims against them were actually claims against the federal government. Plaintiffs subsequently dismissed the final individual defendant, Miller, on stipulation. The United States was the sole remaining defendant.

Judge Kenyon retired from the bench and the action was transferred to Judge William Matthew Byrne, Jr. On October 30, 1997, Judge Byrne granted the defendant's Motion for Partial Summary Judgment, holding that only the Federal Deposit Insurance Corporation ("FDIC"), as successor to the RTC, had standing to pursue the claims against the OTS on behalf of Delta. This ruling dismissed all of Delta's claims brought by Kim, in his capacity as a stockholder, officer, or director of Delta. The parties that remained were one plaintiff, Kim, in his individual capacity, and one defendant, the United States.

The remaining cause of action was a tort claim under the FTCA.

Judge Byrne granted defendant's Motion for Summary Judgment, holding that the district court did not have subject matter jurisdiction over the remaining claim because the United States had not waived its sovereign immunity. The district court subsequently denied Kim's motion to"amend the judgment" and this appeal was filed on September 29, 1998.

II.

A grant of summary judgment is reviewed de novo. Botosan v. Paul McNally Realty, 216 F.3d 827, 830 (9th Cir. 2000); Weiner v. San Diego County, 210 F.3d 1025, 1028 (9th Cir. 2000). The grant of "partial" summary judgment is also reviewed de novo. Adair v. City of Kirkland, 185 F.3d 1055, 1059 (9th Cir. 1999).

The appellate court's review is governed by the same standard used by the trial court under Federal Rule of Civil Procedure 56(c). Adcock v. Chrysler Corp., 166 F.3d 1290, 1292 (9th Cir.), cert. denied, 528 U.S. 816 (1999). The court must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en banc).

A. Kim's Statutory Standing to Sue on Behalf of Delta Under FIRREA

On October 30, 1997, District Court Judge Byrne granted the defendant's Motion for Partial Summary Judgment, dismissing all claims brought by Delta and those brought by Kim, in his capacity as a stockholder, officer, or director of Delta. Kim's claims brought in his individual capacity remained.

The RTC had been named the conservator and then the receiver of Delta. The district court reasoned that the clear language of the Financial Institution Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C.§§ 1821a, et seq., transferred any rights that Kim once may have had as a stockholder, officer, and director of Delta to the RTC (and then to the FDIC). According to the district court, the rights transferred included the right to sue on behalf of Delta. It reasoned that "[t]he FDIC's position as receiver or conservator provides it with the exclusive right to file suit against those who injure the institution over which it exercises supervision."

Under FIRREA, FDIC-appointed conservators and receivers "shall . . . by operation of law, succeed to -(i) all rights, titles, powers, and privileges of the insured depository institution." 12 U.S.C. §§ 1821(d)(2)(A)."It is hard to avoid the conclusion that §§ 1821(d)(2)(A)(i) places the FDIC in the shoes of the insolvent S&L, . . . except where some provision in the extensive framework of FIRREA provides otherwise." O'Melveny & Myers v. FDIC, 512 U.S. 79, 86-87 (1994). We have held that one of the rights transferred to the FDIC as receiver is the right to sue on behalf of the institution. Pareto v. FDIC, 139 F.3d 696, 700 (9th Cir. 1998) ("Congress has transferred everything it could to the FDIC, and that includes a stockholder's right, power, or privilege to demand corporate action or to sue directors or others when action is not forth-coming.").

Despite such unequivocal language, plaintiffs make a simple plea to logic: the FDIC should not have the final say on whether it is in Delta's best interests to sue the OTS. The OTS and the FDIC are interrelated agencies with overlapping personnel, structures, and responsibilities, and thus, according to plaintiffs, the FDIC faces a conflict of interests when it contemplates a suit against the OTS. Even though the FDIC, as receiver, is supposed to represent the best interest of Delta, the FDIC may be unwilling to bring a lawsuit against the OTS because of the close ties that bind the two agencies. We agree.

In First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279 (Fed. Cir. 1999), the Federal Circuit adopted a "conflict of interests" exception to the FIRREA which is similar to the exception urged by plaintiffs in this case. A...