Feldman v. Fed. Deposit Ins. Corp.
| Decision Date | 21 December 2016 |
| Docket Number | Civil Action No. 09–2152 (ESH) |
| Citation | 568 B.R. 543 |
| Parties | Lynn FELDMAN, as Chapter 7 Trustee of the Estate of Image Masters, Inc., et al., Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Washington Mutual Bank, Defendant. |
| Court | U.S. District Court — District of Columbia |
David M. DeVito, Brian L. Watson, Steven M. Coren, Kaufman Coren & Ress PC, David Dormont, Montgomery McCracken Walker & Rhoads, LLP, Philadelphia, PA, for Plaintiffs.
John Warshawsky, Bethesda, MD, Sam Jack Alberts, Dentons US LLP, Washington, DC, for Defendant.
This matter concerns mortgage payments that six bankrupt businesses made to a failed bank in connection with a Ponzi scheme. Plaintiff Lynn Feldman, Chapter 7 Trustee of the estates of the businesses, filed this lawsuit against the Federal Deposit Insurance Corporation ("FDIC"), as receiver for the bank, to avoid and recover approximately $11,894,719.17 in transfers Feldman alleges the bank knew or should have known were fraudulent. (Am. Compl. ¶¶ 49–53, ECF No. 18.)
The FDIC moves the Court to dismiss the amended complaint on multiple grounds: lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), failure to state a claim upon which relief can be granted under Rule 12(b)(6), failure to plead facts with sufficient particularity under Rule 9(b), and failure to join required parties under Rule 12(b)(7). (Def.'s Mot., Sept. 1, 2016, at 2–3, ECF No. 19). The FDIC further requests that the Court strike Feldman's demand for a jury trial. (Id. at 28.)
Upon consideration of the pleadings and for the reasons that follow, the FDIC's motion to dismiss will be granted. Because the Court finds that it does not have jurisdiction, it need not address the FDIC's other arguments in favor of dismissal or its argument that the jury demand should be stricken.
The FDIC challenges this Court's jurisdiction on administrative-exhaustion grounds, and for similar reasons, it argues that Feldman's claim is time-barred. The sequence of events leading up to the lawsuit is therefore relevant to the disposition of the motion.
Wesley Snyder was the sole owner and operator of Image Masters, Inc., and five other businesses through which Snyder perpetuated a multi-million dollar Ponzi scheme from 1988 to 2007. (Am. Compl. ¶¶ 5, 10, 44.) As part of the illegal scheme, Snyder convinced homeowners with existing mortgages to take out new, larger mortgages and give the proceeds of the refinancing to Snyder. (Id. ¶ 20.)1 Snyder did not use the proceeds of refinancing to make investments or to immediately pay down the principal on the new mortgages, as the homeowners believed he would. (Id. ¶ 21.) Instead, Snyder used the money to perpetuate his scheme, ultimately stealing tens of millions of dollars from more than 800 homeowners. (Id. ¶¶ 23–24, 44.) Washington Mutual Bank was one of the banks that extended new mortgages to the victims of Snyder's scheme. (Id. ¶ 12.)
On September 18, 2007, after the Ponzi scheme collapsed, Snyder's business entities each filed a voluntary petition for Chapter 7 bankruptcy. (Id. ¶ 2.)2 Feldman was appointed as interim Chapter 7 Trustee of the estates of Snyder's businesses on September 19, 2007, the day after they filed for bankruptcy. (Id. ¶ 3.)3
On September 25, 2008, over a year after Feldman became the Chapter 7 Trustee, the Office of Thrift Supervision closed Washington Mutual and appointed the FDIC as receiver pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), Pub. L. No. 101–83, 103 Stat. 183 (1989) (). (Def.'s Mot. at 10; see Am. Compl. ¶ 7.) The FDIC set December 30, 2008, as the deadline for filing administrative claims in the receivership and published notices of the receivership and claims deadline in the Wall Street Journal on October 1, 2008, and October 31, 2008. .
On October 8, 2008, less than two weeks after Washington Mutual closed, Feldman sent a letter addressed to Mr. David Schneider, President of Washington Mutual Home Loan, Inc., to "advise[ ] Washington Mutual of her ... claims." (Am. Compl. ¶ 54.) Feldman did not receive a response to her letter from the former bank or from the FDIC. (See id. ¶¶ 54–55.)
Just under ten months after sending the letter to Schneider, Feldman filed a proof of claim with the FDIC, as receiver for Washington Mutual, on August 3, 2009. (Id. ¶ 55.) On or about September 18, 2009, the FDIC sent a letter to Feldman, which she received on September 24, 2009, disallowingthe claim as untimely. (See id. ¶ 56.) Finally, on November 16, 2009, Feldman brought this action against the FDIC, seeking review of the FDIC's decision to disallow her claims. (Id. ¶¶ 49–53.)4
The FDIC has moved, inter alia , to dismiss for lack of subject-matter jurisdiction. When presented with a motion to dismiss on jurisdictional and other grounds, courts should first consider the Rule 12(b)(1) jurisdictional challenge. See Loughlin v. United States , 393 F.3d 155, 170 (D.C. Cir. 2004) ; United States ex rel. Settlemire v. Dist. of Columbia , 198 F.3d 913, 920–21 (D.C. Cir. 1999) (citation omitted) (declining to issue a ruling on the merits after holding the court lacked jurisdiction).
A jurisdictional challenge under Rule 12(b)(1) may be either facial or factual. "If a defendant mounts a 'facial' challenge to the legal sufficiency of the plaintiff's jurisdictional allegations, the court must accept as true the allegations in the complaint and consider the factual allegations of the complaint in the light most favorable to the non-moving party." Erby v. United States , 424 F.Supp.2d 180, 182 (D.D.C. 2006) (citing I.T. Consultants, Inc. v. Pakistan, 351 F.3d 1184, 1188 (D.C. Cir. 2003) ). In a factual challenge, "the court may not deny the motion to dismiss merely by assuming the truth of the facts alleged by the plaintiff and disputed by the defendant." Phoenix Consulting Inc. v. Republic of Angola , 216 F.3d 36, 40 (D.C. Cir. 2000). It must "go beyond the pleadings and resolve any disputed issues of fact the resolution of which is necessary to a ruling upon the motion to dismiss." Id.
Where, as here, the moving party has raised a factual challenge, "the plaintiff bears the burden of establishing the factual predicates of jurisdiction by a preponderance of the evidence." See Erby, 424 F.Supp.2d at 182 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ). "While the district court may consider materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction, the court must still accept all of the factual allegations in [the] complaint as true." Jerome Stevens Pharm., Inc. v. FDA , 402 F.3d 1249, 1253 (D.C. Cir. 2005) (citations and quotation marks omitted) (alteration in original).
Feldman invokes FIRREA as the basis of federal jurisdiction in this case. (See Am. Compl. ¶ 1 (citing 12 U.S.C. § 1821(d)(6) ).) The FDIC argues that this Court is deprived of jurisdiction because, by not filing a timely claim with the FDIC, Feldman failed to exhaust the administrative remedies available to her.5 Feldman contends that her failure to file a claim by the FDIC's deadline is excused by the late-filed claims exception, 12 U.S.C. § 1821(d)(5)(C)(ii), and that she therefore fully complied with FIRREA's administrative-claims process. The Court disagrees.
As "courts of limited subject-matter jurisdiction," federal courts have "the power to decide only those cases over which Congress grants jurisdiction." Al–Zahrani v. Rodriguez , 669 F.3d 315, 317 (D.C. Cir. 2012) (citing Micei Int'l v. Dep't of Commerce, 613 F.3d 1147, 1151 (D.C. Cir. 2010) ). Under FIRREA, Congress has circumscribed federal jurisdiction over claims against failed banks that are in receivership with the FDIC. See 12 U.S.C. § 1821(d)(13)(D) ; id. § 1821(d)(6). In Freeman v. FDIC , the D.C. Circuit explained that "where a claimant has ... failed to initiate an administrative claim within the filing period, the claimant necessarily forfeits any right to pursue a claim against the failed institution's assets in any court." 56 F.3d 1394, 1400 (D.C. Cir. 1995) (quoting Marquis v. FDIC , 965 F.2d 1148, 1151–52 (1st Cir. 1992) ).
12 U.S.C. § 1821(d)(13)(D). Notwithstanding § 1821(d)(13)(D), "[u]nder § 1821(d)(6) both the United States District Court for the District of Columbia and the district court for the district where the financial institution has its principal place of business have jurisdiction to review de novo claims filed with, and processed by, the FDIC under its administrative claims process." Freeman , 56 F.3d at 1400 (citation omitted). Thus, as a prerequisite to judicial review, a claimant must first exhaust the administrative remedies available to her under FIRREA by filing an administrative claim with the FDIC. Id. at 1399.
FIRREA empowers the FDIC to decide "claims [against the assets of failed banks held by the FDIC as receiver] under a process established by statute and FDIC...
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Feldman v. Fed. Deposit Ins. Corp.
...granted the motion to dismiss the amended complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1). Feldman v. FDIC , 568 B.R. 543 (D.C.C. 2016). It found that Feldman was not entitled to notice by mail because she was not a creditor shown on the institution's books when ......