First Pac. Bancorp, Inc., v. Helfer

Decision Date05 January 2000
Docket Number98-56942,Nos. 98-55634,s. 98-55634
Citation224 F.3d 1117
Parties(9th Cir. 2000) FIRST PACIFIC BANCORP, INC., ADA P. SANDS, MICHAEL ZUGSMITH, and LEONARD S. SANDS, Plaintiffs-Appellants, v. RICKI HELFER, Chairman, Federal Deposit Insurance Corp., FEDERAL DEPOSIT INSURANCE CORPORATION as Receiver for FIRST PACIFIC BANK, and FEDERAL DEPOSIT INSURANCE CORPORATION in its Corporate capacity, Defendants-Appellees. FIRST PACIFIC BANCORP, INC., Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Receiver for FIRST PACIFIC BANK, Defendant-Appellee
CourtU.S. Court of Appeals — Ninth Circuit

Bancorp I: Leonard S. Sands, Sands & Sands, Los Angeles, California, for the plaintiffs.

Ann S. Duross, Colleen J. Boles, Thomas C. Bahlo, Washington, D.C., for Federal Deposit Insurance Corporation.

Bancorp II: Leonard S. Sands, Sands & Sands, Los Angeles, California, for the plaintiffs.

Appeal from the United States District Court for the Central District of California James G. Davies, District Judge, Presiding D.C. No. CV 96-6999-JGD

Appeal from the United States District Court for the Central District of California William M. Byrne, District Judge, Presiding D.C. No. CV 98-5050-WMB

Before: Stephen S. Trott and William A. Fletcher, Circuit Judges, and Donald W. Molloy, District Judge.*

OPINION

MOLLOY, District Judge:

BACKGROUND

Plaintiff First Pacific Bancorp, Inc. ("Bancorp"), a Delaware corporation, is a one-bank holding company and the sole shareholder of First Pacific Bank ("the Bank"). Plaintiffs Ada P. Sands, Leonard S. Sands and Michael Zugsmith are shareholders of Bancorp.

On August 7, 1990, the California Department of Banking appointed the Federal Deposit Insurance Corporation ("FDIC") as Receiver for the Bank. Sometime around May 7, 1996, nearly six years after the Bank went into receivership, the FDIC notified Plaintiffs that it was terminating its receivership of the Bank. Along with the notice, the FDIC gave Plaintiffs two pages of unaudited financial information covering the period from August 10, 1990, through December 31, 1995. One report was entitled "Statement of Financial Condition," and reported the assets, liabilities, and equity of the bank as of August 10, 1990 and as of December 31, 1995. The other statement, "Financial Condition and Liquidation Activity," reported aggregated amounts of receipts and disbursements of the Bank between August 10, 1990, and December 31, 1995.1 The information contained in these two skeletal reports spanned a period of over five years. No detailed information was given for interim dates or time periods.

Struck by the lack of meaningful information within the reports, the Plaintiffs requested additional financial information from the FDIC. Plaintiff Leonard Sands drafted a letter to the FDIC, objecting to the termination of the receivership. In the letter, he asked for detailed information regarding the receipts and disbursements described in the bare-bones accounting statements. Plaintiffs sought additional information not only to better comprehend the financial position of the Bank, but also to assist in defending a directors' and officers' liability suit brought against them by the FDIC. In response to Mr. Sands' letter, the FDIC provided the Plaintiffs with four additional pages of information: an unaudited, onepage "Statement of Income and Expenses," detailing total liquidation income and expense, loss on assets, and net loss from liquidation; an unaudited, one-page "Statement of Cash Receipts and Disbursements," detailing liquidation receipts and disbursements; and an unaudited, two-page document entitled "Supplemental Information." All documents involved the period from August 10, 1990 through December 31, 1995.

Unsatisfied with the financial information provided by the FDIC and unable to obtain any further details of the Bank's financial picture through informal means, the Plaintiffs filed suit in the U.S. District Court for the Central District of California on October 4, 1996 (Bancorp I). In their complaint, the Plaintiffs requested an accounting of the Bank's financial condition beginning with the FDIC's appointment as receiver. This attempt at procuring the information also failed. On December 1, 1997, the District Court granted summary judgment in favor of the FDIC, finding no authority that would allow plaintiffs to pursue a private cause of action under 12 U.S.C. S 1821(d)(15) by questioning the adequacy of the FDIC's financial reports.

Plaintiffs appeal the decision of the district court. The issue we confront is whether 12 U.S.C. S 1821(d)(15) gives Bancorp, as shareholder of a bank in receivership,2 a private right of action against the FDIC to compel it to provide a financial accounting in conformity with the FDIC's own accounting and reporting practices and procedures.

While the appeal for Bancorp I was pending, Bancorp filed a complaint against the FDIC in state court alleging breach of fiduciary duty, unjust enrichment, and intentional misrepresentation and demanding an accounting pursuant to state law (Bancorp II). The FDIC removed the action to federal district court and filed a motion to dismiss for failure to state a claim. The district court granted the FDIC's motion on August 28, 1998. Bancorp also appeals this decision, raising the issue of whether Bancorp's claims for relief under state law are barred by the doctrine of res judicata because they mirror the federal law claims in Bancorp I. For the purposes of this appeal, the two cases have been consolidated.

For the reasons set forth below, we reverse the district court's decision in Bancorp I and affirm Bancorp II.

ANALYSIS
I. Bancorp I

A district court's grant of summary judgment is reviewed de novo. Murphy v. Shaw, 195 F.3d 1121, 1124 (9th Cir. 1999). We also review a district court's interpretation of a statute de novo. Battista v. Federal Deposit Ins. Corp., 195 F.3d 1113, 1115 (9th Cir. 1999).

The statute in question here is 12 U.S.C. S 1821(d) and is a part of the statutory scheme governing the FDIC. The FDIC was originally created as part of the Federal Reserve Act in 1933. In 1950, the section of the Federal Reserve Act relating to the FDIC was withdrawn and incorporated in a separate Act known as the "Federal Deposit Insurance Act" (the "Act"). The Act has been amended several times since its original adoption. The specific language in S 1821(d)(15)(B) was inserted as part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA").

Generally, the Act vests the FDIC, in its capacity as receiver, with a broad range of powers and duties designed to ensure maintenance of the going concern value of failed banks and to avoid significant disruption in banking services. See Jones v. FDIC, 748 F.2d 1400, 1402 (10th Cir. 1984). For example, the FDIC has the power to make rules governing the conduct of conservatorships or receiverships, to take title to the assets and assume the rights of the shareholders, depositors, officers, and directors of the institution, to operate the institution in receivership, to liquidate the institution, to organize a new one, to effect mergers, and to determine claims. See 12 U.S.C. S 1821(d)(1), (2)(A), (B), (E), (G), and (3). The FDIC also has the duty, in its capacity as receiver, to pay all valid claims made against the bank "in accordance with the prescriptions and limitations of this Act." Id. S 1821(d)(2)(H).

Measured against these broad powers are certain accounting and reporting requirements that strike a balance between power and duty. For example, the priority for payment of claims against the institution is set forth at S 1821(d)(11)(A). In connection with that prioritization, subsection (d)(11)(C) requires that "the report described in subsection (d)(15)(B)" accompany distributions to shareholders or members of the bank. Independently of any payment of claims, S 1821(d)(15) imposes accounting and recordkeeping requirements as follows:

(A) In general.

The Corporation as conservator or receiver shall, consistent with the accounting and reporting practices and procedures established by the Corporation, maintain a full accounting of each conservatorship and receivership or other disposition of institutions in default.

(B) Annual accounting or report.

With respect to each conservatorship or receivership to which the Corporation was appointed, the Corporation shall make an annual accounting or report, as appropriate, available to the Secretary of the Treasury, the Comptroller General of the United States, and the authority which appointed the Corporation as conservator or receiver.

(C) Availability of reports.

Any report prepared pursuant to subparagraph (B) shall be made available by the Corporation upon request to any shareholder of the depository institution for which the Corporation was appointed conservator or receiver or any other member of the public.

(D) Recordkeeping requirements.

After the end of the 6-year period beginning on the date the Corporation is appointed as receiver of an insured depository institution, the Corporation may destroy any records of such institution which the Corporation, in the Corporation's discretion, determines to be unnecessary unless directed not to do so by a court of competent jurisdiction or governmental agency, or prohibited by law.

12 U.S.C. S 1821(d)(15) (emphasis added).

Shareholders of an institution in receivership, therefore, have a right to receive the reports prepared in accordance with subparagraph (15)(B) both under subparagraph (15)(C) and under subparagraph (11)(C), along with any payment of claims.

In this case, Plaintiffs complain that the FDIC did not compile reports on the statutorily required annual basis and did not comply with its own accounting and reporting requirements. None of the entities named in subsection (d)(15)(B) has attempted to compel the FDIC...

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