Federal Sav. and Loan Ins. Corp. v. Shelton, Civ. A. No. 86-393-B.

• Citation: 789 F. Supp. 1367
• Decision Date: 09 March 1992
• Docket Number: Civ. A. No. 86-393-B.
• Parties: FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Receiver for Sun Belt Federal Bank, F.S.B. v. Wendell P. SHELTON, et al.
• Court: United States District Courts. 5th Circuit. Middle District of Louisiana

789 F. Supp. 1367

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Receiver for Sun Belt Federal Bank, F.S.B. v. Wendell P. SHELTON, et al.

Civ. A. No. 86-393-B.

United States District Court, M.D. Louisiana.

March 9, 1992.

John M. Wilson, Frederick W. Bradley, James D. McMichael, Liskow & Lewis, New Orleans, La., for plaintiffs.

Phillip W. Preis, Scott H. Crawford, Preis & Crawford, Baton Rouge, La., for Robert N. Amacker, Jr., Robert B. Holt, Harold Dennis, Reynold Minsky, Bruce Betts.

Franklin Moore, Ray C. Dawson, Mark D. Mese, Baton Rouge, La., for INA.

Ronald Ravikoff, Douglas Roberts, Coral Gables, Fla., for Wendell P. Shelton.

Gregory Odom, McGlinckey, Stafford, Cellini & Lang, New Orleans, La., for Flournoy Guenard.

William A. Hargiss, Monroe, La., for Glenn D. Tanner.

Sam J. D'Amico, D'Amico, Curet & Dampf, Baton Rouge, La., for A. Larry Tullos.

Gerald L. Walter, Jr., Schwab & Walter, Baton Rouge, La., for Howard Kindig.

C. Michael Hill, Juneau, Hill, Judice, Marquet, Hill & Adley, Lafayette, La., for John Martin Marron.

J. Michael Johnson, Galloway, Johnson, Tompkins & Burr, Patricia Stone, co-counsel, New Orleans, La., for Frederick Duplanti.

RULING ON FDIC'S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING AFFIRMATIVE DEFENSES OF CONTRIBUTORY NEGLIGENCE, FAILURE TO MITIGATE DAMAGES AND ESTOPPEL

POLOZOLA, District Judge.

The Federal Deposit Insurance Corporation ("FDIC") as receiver for Sun Belt Federal Bank, F.S.B. ("Sun Belt") has moved for partial summary judgment as to the affirmative defenses of contributory negligence, failure to mitigate damages and estoppel.¹ In response to plaintiff's complaint, the defendants asserted the affirmative defenses set forth above.

Defendants contend their contributory negligence defense is based upon the alleged negligence by federal banking agencies in the examination, regulation and supervision of Sun Belt. Defendants base their affirmative defense of failure to mitigate damages upon alleged negligence of federal banking agencies in their post takeover efforts to recover the unpaid loans made by Sun Belt's directors and officers. The defense of estoppel is urged because some defendants² complied with the requests of regulators and reasonably relied on the words, conduct and writing of the federal banking regulators.

Defendants also argue that plaintiff's motion for partial summary judgment is not timely. Specifically, defendants contend that the legal sufficiency of an affirmative defense can only be tested by a motion to strike filed within 20 days after service of the relevant affirmative defenses. This contention is without merit. Indeed, this Court has sanctioned the use of summary judgment to dispose of affirmative defenses.³ Therefore, the Court finds that plaintiff's motion for partial summary judgment on defendants' affirmative defenses was timely and procedurally proper.

THE AFFIRMATIVE DEFENSE OF CONTRIBUTORY NEGLIGENCE

The examination, regulation, and supervision of banks by federal banking agencies are solely for the purpose of protecting federal deposit insurance funds and not for the purpose of protecting bank management. It is clear that the FDIC owes no duty to manage a bank or to bring to the attention of its officers and directors any wrongdoing during its regulatory activities.⁴

Indeed, the United States Supreme Court has recently held that the actions of federal banking agencies in regulating and supervising banks and thrifts are necessarily "discretionary" functions and are not actionable under the Federal Torts Claims Act.⁵ This Court believes a similar analysis should be applied when determining whether an affirmative defense based upon contributory negligence is valid. The defendants in this case are doing the very thing which the Supreme Court found improper in Gaubert — attempting to litigate whether the federal banking agencies acted prudently in their regulatory activities involving Sun Belt. The defendants in this case should not be allowed to do indirectly what Gaubert was not permitted to do directly.⁶

Therefore, the Court finds plaintiff's motion for partial summary judgment on the affirmative defense of contributory negligence arising from the Corporation's pre-receivership activities should be granted.

THE "NO DUTY" RULE

Defendants have plead as an affirmative defense that the plaintiff failed to mitigate damages. There is a split of authority regarding the FDIC's duty to mitigate damages. In Louisiana, three cases decided in the Western District have prohibited former directors from raising the defense of post-receivership negligence.⁷ However, a district court in the Eastern District of Louisiana has allowed mitigation as a defense to allow the defendants to rebut "causation" for the bank's failure.⁸

This Court rejected a mitigation defense which asserted that the federal banking agency was allegedly negligent in failing to safeguard collateral in a note collection case filed by the FDIC in Federal Deposit Ins. Corp. v. Fortenberry.⁹ In Fortenberry, this Court relied heavily on Federal Deposit Ins. Corp. v. Carlson,¹⁰ which defined the scope of the FDIC's duty in its capacity as receiver. In Carlson, a bank director and officer liability action, the defendants argued that the FDIC had negligently failed to mitigate damages. The court found no such duty was owed by federal banking receivers to officers and directors of failed financial institutions. The court stated:

Defendants must establish that the FDIC as receiver owed a duty to the officers to collect bad loans without negligence. The authority cited by plaintiff, and even that cited by defendants, specifically holds that the statutory authority under which the FDIC acts creates no duty of care toward bank officers and directors.¹¹

Even assuming for purposes of this motion that the FDIC owed a duty of care to the failed bank and its former officers and directors, the defendants are not entitled to an offset by proving simple negligence by the FDIC in operating the bank. This Court has ruled in a separate opinion that the applicable standard of care for directors and officers is gross negligence.¹² The FDIC, in its capacity as receiver, inherits all of the bank's rights and obligations.¹³ The standard of care which the FDIC inherits is the same standard imposed on the directors and officers in carrying out their respective duties. Thus, the defendants' claim that the FDIC was guilty of simple negligence in operating the failed bank does not offset any gross negligence committed by the defendants.

The clear weight of authority holds that federal banking receivers owe "no duty to those institutions or to those whose negligence has brought them to the brink of disaster."¹⁴ This Court joins with the majority of courts which have considered this issue and finds the "failure to mitigate damages" and "estoppel" defenses to be legally insufficient.¹⁵

SUBJECT MATTER JURISDICTION OVER CLAIMS ARISING FROM POST-TAKEOVER FDIC ACTIVITY

Federal courts are courts of limited jurisdiction and may only hear cases where the court has subject matter jurisdiction. Thus, the Court questions whether it has subject matter jurisdiction to consider the affirmative defenses arising from post-takeover activity.¹⁶ "The United States, as sovereign, `is immune from suit save as it consents to be sued ... and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit.'"¹⁷ In its enactment of FIRREA, Congress provided the FDIC with the initial power and authority to adjudicate claims which pertain to failed financial institutions or the FDIC as receiver. Congressional intent to remove the federal courts from the initial consideration of these claims is clearly set forth in 12 U.S.C. § 1821(d) which provides for de novo district court jurisdiction only after the filing of a claim with, and the processing of that claim by, the FDIC.

Thus, in determining whether this Court has subject matter jurisdiction over the affirmative defenses or counterclaims, the Court must consider 12 U.S.C. § 1821(d)(13)(D) which provides:

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 Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or

(ii) any claim relating to any such act or omission of such institution or the Corporation as receiver.

Prior to the enactment of FIRREA, the Fifth Circuit had held that federal courts were divested of subject matter jurisdiction over all claims against thrift receiverships until the administrative claims process involving those claims was completed.¹⁸ In 1989, the Supreme Court rejected this analysis holding "that Congress has not granted FSLIC the power to adjudicate claims against the assets of a failed savings and loan association under FSLIC receivership".¹⁹ The Court refused to find that the FSLIC had the initial adjudicatory authority from the language in 12 U.S.C. § 1464(d)(6)(C), which provided that "no court may ... restrain or affect the exercise of power or function of a conservator or receiver."²⁰

However, the plain language of 12 U.S.C. § 1821(d)(13)(D) supports and requires this Court's finding that it has no subject matter jurisdiction over the affirmative defenses at issue in this motion. One appellate court has "confirmed recently that the statute means just what it says, and, accordingly, that a claimant must first present its case to the RTC under the administrative procedure erected by FIRREA before seeking relief in federal court."²¹ Since the claims against the former directors and officers are assets of the failed Sun Belt bank, the Court finds that the affirmative defenses asserted by the defendants seek a "determination of...