Federal Deposit Ins. Corp. v. Loyd

• Decision Date: 02 August 1990
• Docket Number: Civ. A. No. CA3-88-2758-D.
• Citation: 744 F. Supp. 126
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for First RepublicBank Dallas, N.A., f/k/a First RepublicBank Oak Cliff, N.A. f/k/a InterFirst Bank Oak Cliff, N.A., and NCNB Texas National Bank, N.A., Plaintiffs, v. James A. LOYD, Johnny Barnes, and Bobbie N. Barnes, Defendants.
• Court: U.S. District Court — Northern District of Texas

744 F. Supp. 126

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for First RepublicBank Dallas, N.A., f/k/a First RepublicBank Oak Cliff, N.A. f/k/a InterFirst Bank Oak Cliff, N.A., and NCNB Texas National Bank, N.A., Plaintiffs, v. James A. LOYD, Johnny Barnes, and Bobbie N. Barnes, Defendants.

Civ. A. No. CA3-88-2758-D.

United States District Court, N.D. Texas, Dallas Division.

August 2, 1990.

William Frank Carroll of Baker, Glast & Middleton, Dallas, Tex., for plaintiffs FDIC and NCNB.

James F. Mobley, Cedar Hill, Tex., for defendants Johnny Barnes and Bobbie N. Barnes.

FITZWATER, District Judge:

In this case the court holds that it retains the power to remand sua sponte an untimely removed civil action, notwithstanding a recent amendment to 28 U.S.C. § 1447(c), and that the action should be remanded.

I

On March 8, 1985 InterFirst Bank Oak Cliff, N.A. ("InterFirst") filed this suit in Texas state court against defendants James A. Loyd,¹ Johnny Barnes, and Bobbie N. Barnes, alleging claims for fraudulent removal of funds from certain accounts. Defendants counterclaimed against InterFirst's successor, First RepublicBank Oak Cliff, N.A. ("RepublicBank"), on February 8, 1988. On July 29, 1988 the Comptroller of the Currency declared RepublicBank insolvent and appointed the Federal Deposit Insurance Corporation ("FDIC") as its receiver. RepublicBank's immediate successor, NCNB Texas National Bank ("NCNB"), appeared in the state court action on September 28, 1988.

Acting as receiver for RepublicBank, the FDIC intervened in the state court action on November 4, 1988. On the same date the FDIC and NCNB filed their notice of removal in this court. The FDIC and NCNB thereafter moved for partial summary judgment. In the course of considering the motion, the court noted for the first time that the removal may have been untimely. The court therefore pretermitted consideration of the summary judgment motion and sua sponte raised the question whether removal of the action was timely within the meaning of 12 U.S.C. § 1819(b)(2)(B) and 28 U.S.C. § 1446(b). The parties have addressed the question in letter briefs, and the FDIC additionally argues that the court lacks authority to remand the case even if it was untimely removed.

II

A

The court first determines whether removal was timely. Prior to enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 1989 U.S.Code Cong. & Admin. News (103 Stat.) 183 (1989), the FDIC's removal powers were set forth in 12 U.S.C. § 1819(Fourth). Section 1819 provided the FDIC the right to remove state court actions by "following any procedure for removal now or hereafter in effect." This court has interpreted § 1819 to require the FDIC to remove a case within the 30-day time limit imposed by 28 U.S.C. § 1446(b). See, e.g., FDIC v. Brooks, 652 F.Supp. 744, 745 (N.D.Tex. 1985) (Woodward, C.J.). This 30-day time limit remains applicable to the FDIC subsequent to the enactment of FIRREA.² MTech Corp. v. FDIC, 729 F.Supp. 1134, 1136-37 (N.D.Tex.1990) (Sanders, C.J.); see also Resolution Trust Corp. v. Key, 733 F.Supp. 1086, 1090 n. 6 (N.D.Tex.1990) (Fitzwater, J.); FDIC v. Norwood, 726 F.Supp. 1073, 1075-76 (S.D.Tex.1989).

Because the 30-day time limit embodied in § 1446(b) regulates the FDIC's removal right, and since the FDIC often becomes a party to otherwise non-removable litigation only after a bank that is already a litigant has been placed in receivership, a question presented in many cases removed by the FDIC is whether removal was effected "within 30 days after the receipt by the FDIC ... of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable." 28 U.S.C. § 1446(b) (Supp.1990). Construing the analogous removal provision³ applicable to the Federal Savings and Loan Insurance Corporation ("FSLIC"), this court determined in Addison Airport of Tex., Inc. v. Eagle Inv. Co., 691 F.Supp. 1022, 1025 (N.D.Tex.1988) (Fitzwater, J.), that "when the FSLIC is appointed receiver for a failed thrift that is a party to litigation, the first `paper' that informs the FSLIC that the case is removable is the FHLBB's order appointing it as receiver." Several courts have applied similar analysis. See, e.g., FSLIC v. Browning, 732 F.Supp. 690, 691 (N.D.Tex.1989) (Sanders, J.) (FSLIC required to remove action within 30 days of its appointment as receiver); Norwood, 726 F.Supp. at 1075-76 (FDIC required to remove action within 30 days of its appointment as receiver); American Sav. & Loan Ass'n of Brazoria County v. Hoss, 716 F.Supp. 979, 980-81 (S.D.Tex. 1989) (same holding regarding FSLIC removal); Woodlands II on the Creek Homeowners Ass'n, Inc. v. City Sav. & Loan Ass'n of San Angelo, 703 F.Supp. 604, 606-07 (N.D.Tex.1989) (Fish, J.) (same).

Applying the holding and reasoning of Addison Airport to this case makes clear that removal was untimely. RepublicBank was a party to the state court litigation on the date the FDIC was appointed as its receiver. The removal clock thus began to tick on the date of appointment —July 29, 1988. The FDIC did not remove the action until November 4, 1988, well over 30 days later. Removal was therefore untimely under § 1446(b).

The FDIC argues, however, that the removal clock did not commence until November 4, 1988, the date the FDIC formally intervened in the state action. This proposition does not square with Addison Airport, which the court finds no occasion to reexamine.

The FDIC essentially asks the court to accept these inconsistent propositions: On the one hand, the court should follow the general rule that the FDIC becomes a party to a suit involving a failed institution at the moment of its appointment as receiver and need not formally intervene in order to remove a state action. See, e.g., North Miss. Sav. & Loan Ass'n v. Hudspeth, 756 F.2d 1096, 1100 (5th Cir.1985), cert. denied, 474 U.S. 1054, 106 S.Ct. 790, 88 L.Ed.2d 768 (1986), overruled in part on other grounds, Coit Indep. Joint Venture v. FSLIC, 489 U.S. 561, 109 S.Ct. 1361, 103 L.Ed.2d 602 (1989). On the other hand, the court should use the date of intervention as the relevant date for determining when the FDIC became a party for purposes of the 30-day requirement imposed by § 1446(b). To state the FDIC's positions is to demonstrate the tension between them. According to the FDIC, it need not intervene in order to remove a case because it automatically becomes a party when appointed as receiver. Nevertheless, if the FDIC chooses to intervene, it is not deemed to be a party for purposes of § 1446(b) until the date of intervention. The court finds no support for this rationale in § 1446(b) or FDIC removal jurisprudence.

Accordingly, the court holds that when the FDIC is appointed as receiver for a failed institution that is already a party to on-going litigation in state court, the 30-day time limit of § 1446(b) begins to run upon the FDIC's receipt of notice of appointment. See Addison Airport, 691 F.Supp. at 1025. Removal of the present action was therefore untimely.⁴

B

The conclusion that removal was untimely does not end the court's inquiry. The court must also decide whether the enactment in 1988 of the Judicial Improvements and Access to Justice Act (the "Judicial Improvements Act"), Pub.L. No. 100-702, 102 Stat. 4642 (1988), pursuant to which Congress amended 28 U.S.C. § 1447(c), precludes the court from remanding the case. This requires the court to resolve whether the Act, which took effect on November 19, 1988, controls as to a civil action removed on November 4, 1988.

The Judicial Improvements Act contains no express effective date for amended § 1447(c). Certain courts have followed the general rule that "federal legislation becomes effective on the day of enactment" and have concluded the amended version of § 1447(c) became effective November 19, 1988. E.g., Air Shields, Inc. v. Fullam, 891 F.2d 63, 65 (3d Cir.1989); Wilson v. General Motors Corp., 888 F.2d 779, 780-81 (11th Cir.1989); Bryant v. Ford Motor Co., 886 F.2d 1526, 1528 (9th Cir. 1989), cert. denied, ___ U.S. ___, 110 S.Ct. 1126, 107 L.Ed.2d 1033 (1990); Greer v. Skilcraft, 704 F.Supp. 1570, 1573 (N.D.Ala. 1989) (en banc). The substantial majority of courts to consider the question have held that amended § 1447(c) must be applied retroactively to cases pending on the effective date of the Act. E.g., Air Shields, 891 F.2d at 65; Leidolf by Warshafsky v. Eli Lilly & Co., 728 F.Supp. 1383, 1387 (E.D. Wis.1990); Strickland v. A.P. Propane, Inc., 721 F.Supp. 284, 285 (M.D.Fla.1989); Coman v. Int'l Playtex, Inc., 713 F.Supp. 1324, 1328 (N.D.Cal.1989); Gray v. Moore Business Forms, Inc., 711 F.Supp. 543, 545-46 (N.D.Cal.1989). Defendants offer no basis for concluding amended § 1447(c) should not be applied. The court accordingly follows the Supreme Court's instruction that "even where the intervening law does not explicitly recite that it is to be applied in pending cases, it is to be given recognition and effect." Bradley v. School Board of City of Richmond, 416 U.S. 696, 715, 94 S.Ct. 2006, 2018, 40 L.Ed.2d 476 (1974).

C

Having determined that the amended version of § 1447(c) applies, the court must decide whether the case can be remanded. Prior to its amendment by the Judicial Improvements Act, § 1447(c) provided, in pertinent part, that if "at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case...." 28 U.S.C. § 1447(c) (1973). As amended, § 1447(c) now provides, in pertinent part:

A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case

...