FDIC v. Hartford Ins. Co. of Illinois

• Decision Date: 27 July 1988
• Docket Number: No. 87 C 8682.,87 C 8682.
• Citation: FDIC v. Hartford Ins. Co. of Illinois, 692 F.Supp. 866 (N.D. Ill. 1988)
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. HARTFORD INSURANCE COMPANY OF ILLINOIS, Insurance Company of North America, the American Insurance Company, the Aetna Casualty and Surety Company, and Reliance Insurance Company, Defendants. The AMERICAN INSURANCE COMPANY, Third-Party Plaintiff, v. UNITED STATES of America, Third-Party Defendant.
• Court: U.S. District Court — Northern District of Illinois

692 F. Supp. 866

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. HARTFORD INSURANCE COMPANY OF ILLINOIS, Insurance Company of North America, the American Insurance Company, the Aetna Casualty and Surety Company, and Reliance Insurance Company, Defendants.

The AMERICAN INSURANCE COMPANY, Third-Party Plaintiff, v. UNITED STATES of America, Third-Party Defendant.

No. 87 C 8682.

United States District Court, N.D. Illinois, E.D.

July 27, 1988.

Fern C. Bomchill, Robert J. Kriss, Herbert L. Zarov, Rosanne J. Faraci, Benjamin D. Gibson, Susan Tone Pierce, Mayer, Brown & Platt, Christopher T. Van Wagner, for plaintiff.

Michael J. Merlo, Richard S. Wisner, Craig A. Chapello, Priscilla Rellas Scoco, Michael J. Weber, Charles F. Redden, Pretzel & Stouffer, Chtd., Douglas M. Reimer, Janet M. Koran, Nancy Mackevich, McDermott, Will & Emery, Donald Clark, Jr., Chicago, Ill., for defendants.

Dina L. Biblin, Trial Atty., and Jeffrey Axelrod, Director, Torts Branch, U.S. Dept. of Justice; Washington, D.C., Frederick Branding, and Eileen M. Marutzky, Asst. U.S. Attys., Chicago, Ill., for third party defendant.

ORDER

NORGLE, District Judge.

The United States of America has moved to dismiss American Insurance Company's ("American") third-party complaint. The United States argues the third-party complaint is not subject to the court's jurisdiction and it fails to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(1), 12(b)(6). For the following reasons, the motion is denied.

FACTS

On August 23, 1984, Continental illinois National Bank and Trust Company of Chicago ("Continental") assigned to the Federal Deposit Insurance Corporation ("FDIC"), in its corporate capacity, the claims arising from its fidelity bond coverage with defendant insurance companies. The FDIC, in its corporate capacity, brings this action seeking recovery in Count I against the insurance companies for failure to settle Continental's claims arising under the bonds for losses sustained due to the dishonest and/or fraudulent acts of Continental employee(s). In Count II, the FDIC alleges American provided financial assistance to the indicted Continental employee whose acts form the basis of the FDIC's claim for bond coverage.

American filed this third-party complaint against the United States alleging jurisdiction under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 1346(b), 2671 et seq. American alleges that on July 5, 1982, the FDIC was appointed receiver of the Penn Square Bank, a national bank, whose assets and liabilities included loans under which Continental was the participating bank and which now constitute the losses claimed against American in the underlying complaint. American alleges that the Receiver-FDIC tortiously mismanaged the assets and liabilities of Penn Square. Those assets and liabilities remained with the Receiver-FDIC until July 28, 1983 when they were transferred to Continental.

American asserts this third-party claim against the United States, alleging the Receiver-FDIC was acting as an agency of the United States. The third-party claim sounds in recoupment against the United States for that portion of American's liability in damages attributable to the Receiver-FDIC's contributory fault.

DISCUSSION

The issue before the court is whether American has sued the proper party in its third-party complaint. It is well-established that the United States is immune from money damages suits except where it has statutorily consented to be sued. United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1976); United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941); Ogden v. United States, 758 F.2d 1168, 1177 (7th Cir.1985); Clark v. United States, 691 F.2d 837, 839-40 (7th Cir.1982). Any consent to be sued or waiver of immunity will not be implied but must be unequivocally expressed and strictly construed. Lehman v. Nakshian, 453 U.S. 156, 161, 101 S.Ct. 2698, 2701, 69 L.Ed.2d 548 (1981); Ogden, 758 F.2d at 1177. Such consent cannot be inferred from an ambiguous statute, and any ambiguity must be resolved against consent. See United States v. King, 395 U.S. 1, 89 S.Ct. 1501, 23 L.Ed.2d 52 (1969); United States v. Shaw, 309 U.S. 495, 60 S.Ct. 659, 84 L.Ed. 888 (1940); Garcia v. United States, 776 F.2d 116, 118 (5th Cir.1985).

A person who sues the United States has the burden of pointing to a congressional act which gives the consent to be sued. Cole v. United States, 657 F.2d 107, 109 (7th Cir.), cert. denied, 454 U.S. 1083, 102 S.Ct. 639, 70 L.Ed.2d 618 (1981). American has designated the FTCA as the act which allows the United States to be sued in this case. The court must determine whether the FTCA permits suits against the United States when the FDIC's actions as a receiver for a failed bank form the basis for the action.

Under the FTCA, if a plaintiff brings a tort claim against a federal agency, he must sue the United States. 28 U.S.C. § 2679(a). The issue here is whether the FDIC, acting as a receiver, is an agency for purposes of the FTCA. The FTCA provides:

As used in this chapter and sections 1346(b) and 2401(b) of this title, the term "Federal agency" includes the executive departments, the military departments, independent establishments of the United States, and corporations primarily acting as instrumentalities or agencies of the United States....

28 U.S.C. § 2671. In this case, the FDIC must have been acting primarily as an agency of the United States government in order for American to be able to sue the United States under the FTCA for the FDIC's acts.

The FDIC is authorized by statute to act in two separate and distinct capacities: as a corporate entity and as a receiver. See 12 U.S.C. § 1811, 1821(c), 1822, 1823(e). The courts have consistently recognized this dual capacity, treating the FDIC acting within these two roles as two distinct entities. See e.g. FDIC v. Roldan Fonseca, 795 F.2d 1102, 1109 (1st Cir.1986); FDIC v. LaRambla Shopping Center, 791 F.2d 215, 218-19 (1st Cir.1986); FDIC v. Hatmaker, 756 F.2d 34, 36 n. 2 (6th Cir.1985); In re F & T Contractors, Inc., 718 F.2d 171, 176 (6th Cir.1983); Gunter v. Hutcheson, 674 F.2d 862, 873-74 (11th Cir.), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63 (1982); Gilman v. FDIC, 660 F.2d 688 (6th Cir.1981); FDIC v. Godshall, 558 F.2d 220 (4th Cir.1977); Freeling v. Sebring, 296 F.2d 244 (10th Cir.1961). American, recognizing the separateness of the two entities, rather than filing a counterclaim against the plaintiff Corporate-FDIC, has instead filed a third-party complaint against the Receiver-FDIC, in the name of the United States. Having found the Receiver-FDIC to be a distinct entity, the court must focus on whether the FDIC acting in that capacity is an agency of the United States.

In FDIC v. C.H. Butcher, 660 F.Supp. 1274 (E.D.Tenn.1987), the court discussed the two statutorily mandated functions as they relate to the overall purpose of the FDIC:

The purpose of the FDIC is to promote stability and confidence in the nation's banking systems. Gunter v. Hutcheson, 674 F.2d 862 (11th Cir.), cert. denied, 459 U.S. 826, 103 S.Ct. 60, 74 L.Ed.2d 63, reh denied, 459 U.S. 1059, 103 S.Ct. 477, 74 L.Ed.2d 624 (1982); First State Bank of Hudson County v. United States, 599 F.2d 558 (3d Cir.1979). This purpose is achieved in two ways, first by providing insurance for payment to depositers of banks (sic) in case of failure and second by providing a method of handling failed banks. In the first instance, the FDIC in its corporate capacity acts as insurer of the deposits of the bank. In the second instance, the FDIC acts in a separate capacity as receiver of the insolvent bank.

660 F.Supp. at 1279. Statutorily, however, the primary function of the FDIC is to promote banking stability by insuring deposits of banks. 12 U.S.C. § 1811; First State Bank of Hudson County v. United States, 599 F.2d 558, 562 (3d Cir.1979), cert. denied, 444 U.S. 1013, 100 S.Ct. 662, 62 L.Ed.2d 642 (1980). Nonetheless, the relevant inquiry under the FTCA is not what the primary function of the FDIC is, but whether it was acting primarily as an agency of the United States.

The court has found no case which has directly held that the Receiver-FDIC is an agency of the United States, and thus the United States may be sued for the tortious acts of the FDIC acting in that capacity. Caselaw exists in other jurisdictions, however, with language which implicitly supports the United States' argument that the Receiver-FDIC is not an agency of the United States.

In FDIC v. Smith, 466 F.Supp. 843 (N.D. Ga.1979), the district court addressed the distinction between the dual roles of the FDIC:

As a receiver of the insolvent bank, the FDIC becomes a representative of that bank and is required to marshall the assets of that bank for its shareholders and creditors. In its corporate capacity, the FDIC functions separately as a federal insurer of bank deposits, each capacity designed to secure a different purpose and each is governed by an express statute.

Id. at 845 (emphasis added), quoting, FDIC v. Abraham, 439 F.Supp. 1150, 1151 (E.D. La.1977). Utilizing these principles, the court dismissed counterclaims against the Corporate-FDIC for claims which should have been asserted against the FDIC acting as a receiver.

In Sarraga v. Girod Vela & Co., 649 F.Supp. 11 (D.P.R.1986), the court dismissed a claim against the FDIC acting in its corporate capacity as barred by the FTCA and remanded to state court a claim against the Receiver-FDIC. Concerning the latter claim, the court noted that 12 U.S.C. § 1819 Fourth recognizes an exception to federal jurisdiction in cases where the FDIC is a party. It provides that when the FDIC is acting as a receiver for a failed state bank, an action involving "only the rights or obligations of depositors, creditors ...", those state law claims are not subject to federal question jurisdiction in...