Golden Pacific Bancorp. v. F.D.I.C.

• Decision Date: 14 July 2004
• Docket Number: Docket No. 03-6194.
• Citation: 375 F.3d 196
• Parties: GOLDEN PACIFIC BANCORP, for its own account and derivatively on behalf of and in the name of Golden Pacific National Bank, Plaintiff-Appellant, Golden Pacific Bancorp, Counter-Defendant-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity and in its capacity as receiver for Golden Pacific National Bank, Defendant-Appellee, Federal Deposit Insurance Corporation, Counter-Claimant.
• Court: U.S. Court of Appeals — Second Circuit

375 F.3d 196

GOLDEN PACIFIC BANCORP, for its own account and derivatively on behalf of and in the name of Golden Pacific National Bank, Plaintiff-Appellant Golden Pacific Bancorp, Counter-Defendant-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity and in its capacity as receiver for Golden Pacific National Bank, Defendant-Appellee Federal Deposit Insurance Corporation, Counter-Claimant.

Docket No. 03-6194.

United States Court of Appeals, Second Circuit.

Argued: June 7, 2004.

Decided: July 14, 2004.

Elliot H. Scherker, Greenberg Traurig, P.A., (Julissa Rodriguez, Greenberg Traurig, P.A., Miami, FL, Tucker Byrd, Greenberg Traurig, P.A., Orlando, FL, Simon Miller, Greenberg Traurig, LLP, New York, NY, and Paul A. Batista, New York, NY, on the brief), Miami, FL for Appellant.

Lawrence S. Hirsch, Thelen, Reid & Priest (Ann S. DuRoss, Colleen J. Boles, J Scott Watson, and Alan L. Spear, Washington, D.C., on the brief), New York, New York, for Appellee.

Before: MINER and RAGGI, Circuit Judges, and MARRERO, District Judge.^*

MARRERO, District Judge.

This lawsuit arises from the Federal Deposit Insurance Corporation's ("FDIC") June 1985 liquidation of the Golden Pacific National Bank (the "Bank"), which was based in Manhattan's Chinatown neighborhood. The Bank's holding company, plaintiff Golden Pacific Bancorp ("Bancorp"), alleges that the FDIC should never have liquidated the Bank in the first place, and, to make matters worse, that the FDIC chose the most expensive liquidation method possible. Bancorp further alleges that the FDIC wastefully charged certain expenses to the receivership estate, and that, when the Bank's creditors were finally paid, the FDIC depleted the remaining estate by improperly paying itself interest on the insurance funds it had disbursed to depositors on the Bank's behalf. Bancorp seeks to recover against the FDIC under theories of unjust enrichment, breach of fiduciary duty, and corporate waste. The District Court granted the FDIC summary judgment on all claims.

The primary issue on appeal is whether the FDIC, as subrogee to the claims of a failed bank's FDIC-insured depositors, may collect post-insolvency interest on those claims from the failed bank's estate. We hold that such interest payments are not improper. We also hold that Bancorp's evidence suggesting that the FDIC breached its fiduciary duties by choosing an expensive wind-up method is too speculative to defeat summary judgment. Finally, we hold that Bancorp lacks standing to pursue certain waste claims because the Bank's outstanding obligations to a senior creditor, the Internal Revenue Service ("IRS"), would preclude any potential recovery for Bancorp. Accordingly, the judgment of the District Court is affirmed.

I. BACKGROUND

On June 17, 1985, officials from the Office of the Comptroller of the Currency ("OCC") and the FDIC, acting upon an informant's tip, conducted a surprise examination of the Bank for the purpose of scrutinizing certain custodial certificates — known for their color as "yellow CDs"— which the Bank had been issuing to its customers. The Bank maintained that the yellow CDs were actually investments placed with the Bank as agent, as opposed to deposits (i.e., liabilities) of the Bank. The Bank also told OCC officials that, even if the yellow CDs were considered liabilities, they were backed by sufficient assets to maintain the Bank's solvency. The OCC disagreed on both points, and, by the end of the week, closed the Bank and declared it insolvent.

The FDIC insured the Bank's depositors, and the OCC appointed the FDIC also to serve as the Bank's receiver. The FDIC's dual roles as insurer and receiver arise by statutory design, and it is not uncommon for the FDIC to serve in both capacities with respect to a single bank liquidation. See FDIC v. Bernstein, 944 F.2d 101, 106 (2d Cir.1991); see also Tex. Am. Bancshares, Inc. v. Clarke, 954 F.2d 329, 335 (5th Cir.1992) ("The separateness of these dual identities of the FDIC has been well respected by federal courts.").

As insurer, the FDIC was statutorily required to either pay depositors the insured amounts in cash, or to make the depositors' accounts available up to the insured amounts through another FDIC-insured bank. See 12 U.S.C. § 1821(f)(1) (1982). In this case, the FDIC chose to address virtually all of its insurance obligations by soliciting bids from financially healthy banks to enter into a so-called Deposit Insurance Transfer and Asset Purchase Agreement ("DITAPA"). Under a DITAPA, the healthy bank agrees to purchase certain of the failed bank's assets at a premium in exchange for the FDIC making the insured deposits of the failed bank available through the healthy bank (which presumably is interested in the depositors' business).

The FDIC ultimately entered into a DITAPA with the only bidder, Hong Kong and Shanghai Banking Corporation ("HKSB"), which paid a premium of over $6 million and agreed to purchase approximately $61 million of the Bank's assets. The FDIC covered its remaining insurance obligations (pertaining to the Bank's various loan production offices outside New York) either through a similar arrangement or by direct payment. By the end of 1986, the FDIC had paid over $140 million in insurance claims, virtually all of which went to HKSB as the Bank's paying agent under the DITAPA.

By statute, the FDIC was subrogated to the claims of insured depositors to the extent of the FDIC's insurance payments. See 12 U.S.C. § 1821(g) (1982). Beginning in July 1986, the FDIC, as receiver, began repaying its creditors, the largest of which was itself, as insurer, for having covered the insured deposits. By early 1990, the FDIC had repaid the amount of all principal owed to all the Bank's creditors.

The FDIC then began to make interest payments to creditors. Based upon New York's nine-percent statutory judgment rate, the FDIC determined that it owed itself approximately $23 million and that it owed non-FDIC creditors approximately $2.8 million.¹ By mid-1994, those creditors had received just under half of the interest payments owed. The FDIC inactivated the receivership in 1995.

Bancorp initiated this lawsuit in 1995, seeking to recover against the FDIC, in both its corporate capacity as insurer and in its capacity as the Bank's receiver, under theories of unjust enrichment, breach of fiduciary duty, and corporate waste. Bancorp contends that the June 1985 "regulatory ambush" rashly dubbed the Bank insolvent in the face of clear evidence to the contrary. See Am. Compl. ¶ 35.² Bancorp alleges that the FDIC breached its fiduciary duty to the Bank by continuing with the liquidation in light of that evidence and by choosing, before performing the customary cost evaluation, to wind up the bank by the very costly DITAPA method.

Bancorp also asserts that the FDIC breached its fiduciary duties and was unjustly enriched by awarding itself interest on its insurance payout. Bancorp contends the interest award was improper altogether and, in any event, excessive. Finally, Bancorp claims that the FDIC was wasteful in charging certain expenses to the receivership, such as professional fees and travel fees, and in paying itself the allegedly excessive interest.

In the two opinions that are the subject of this appeal, the District Court granted the FDIC summary judgment on all claims. See Golden Pac. Bancorp v. FDIC, No. 95 Civ. 9281, 2003 WL 21496842 (S.D.N.Y. June 27, 2003); Golden Pac. Bancorp v. FDIC, No. 95 Civ. 9281, 2002 WL 31875395 (S.D.N.Y. Dec.26, 2002).³

II. STANDARD OF REVIEW

On appeal, we review the District Court's grant of summary judgment de novo. See Golden Pac., 273 F.3d at 514. The Court may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

We first look to the substantive law of the action to determine which facts are material. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Even if the parties dispute material facts, summary judgment will be granted unless the dispute is "genuine," i.e., unless "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id. at 249, 106 S.Ct. 2505.

Where, as here, the non-moving party would bear the burden of persuasion at trial, the moving party must first make a prima facie case by either identifying the portions of the record "which it believes demonstrate the absence of a genuine issue of material fact" or "pointing out ... that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After such a prima facie showing, the nonmoving party must respond with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). To this end, "[t]he non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful." D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.1998). In other words, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (footnote omitted).

Throughout this inquiry, the Court must credit the non-moving party's evidence and draw all justifiable inferences in favor of that party. See Anderson, 477 U.S. at...