JP Morgan Chase Bank, N.A. v. First American Title Ins. Co., CASE NO. 09-14891

• Court: United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
• Parties: JP MORGAN CHASE BANK, N.A., Plaintiff, and FEDERAL DEPOSIT INSURANCE CORPORATION, Intervenor Plaintiff, v. FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant / Intervenor Defendant.
• Docket Number: CASE NO. 09-14891
• Decision Date: 30 January 2012

JP MORGAN CHASE BANK, N.A., Plaintiff,
and FEDERAL DEPOSIT INSURANCE CORPORATION, Intervenor Plaintiff,
v.
FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant / Intervenor Defendant.

CASE NO. 09-14891

UNTIED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

DATE: January 30, 2012

HON. MARIANNE O. BATTANI
OPINION AND ORDER SUSTAINING FIRST AMERICAN'S OBJECTIONS TO FDIC'S PROPOSED JUDGMENT

This matter is before the court on First American Title Insurance Company's objections to FDIC's proposed judgment. (Doc. 145). For the reasons that follow, First American's objections are SUSTAINED.

I. BACKGROUND

Following a trial in which a jury awarded FDIC $2,263,510.78 in damages on its closing protection letter claim, FDIC filed a proposed judgment pursuant to Local Rule 58.1(c). (Doc. 144). First American filed objections to FDIC's proposed judgment. (Doc. 147). FDIC filed a response (Doc. 147); First American filed a reply (Doc. 147). First American's objections are now before the Court.

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II. ANALYSIS

A. First American's Objection to FDIC's Proposed Judgment

First American's sole objection to the proposed judgment relates to the provision providing that FDIC "be awarded accruing post-complaint pre-judgment interest pursuant to MCL § 600.6013(8)." (Doc. 145, p. 2). First American argues that FDIC is not entitled to interest under M.C.L. § 600.6013(8) because this is a federal question case, not a diversity case. The distinction between the two sources of subject matter jurisdiction is significant for purposes of determining FDIC's ability to collect post-complaint pre-judgment interest.

If this is a diversity case, the Court applies Mich. Comp. Laws § 600.6013(8) because state law governs the prevailing party's ability to collect post-complaint pre-judgment interest. See Estate of Riddle ex rel. Riddle v. Southern Farm Bureau Life Ins. Co., 421 F.3d 400, 409 (6th Cir. 2005) ("In diversity cases in this Circuit, federal law controls postjudgment interest but state law governs the award of prejudgment interest."); see also Stryker Corp. v. XL Ins. America Inc., 726 F.Supp.2d 754, 769 (W.D. Mich. 2010) ("Mich. Comp. Laws § 600.6013(8) allows the prevailing party to recover prejudgment interest on a money judgment."). If this is a federal question case, the Court awards post-complaint pre-judgment interest upon its discretion. See E.E.O.C. v. Wooster Brush Co. Employees Relief Assoc., 727 F.2d 566, 579 (6th Cir. 1984) (explaining that an award of pre-judgment interest in a federal question case is addressed to the sound discretion of the trial court). The jurisdictional distinction also affects the rate at which post-complaint pre-judgment interest accrues.

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B. Source of Subject Matter Jurisdiction

The parties dispute whether this is a federal question case or a diversity case. First American points out that FDIC invoked this Court's federal question jurisdiction by alleging in paragraph five of its complaint in intervention that subject matter jurisdiction exists under "28 U.S.C. § 1331 because all cases to which the FDIC is a party are deemed to arise under the laws of the United States, by virtue of 12 U.S.C. § 1819(b)(2)(A)." (Doc. 33, ¶ 5). FDIC cannot deny it pled federal question jurisdiction; however, in the same paragraph, it further alleged that "[t]he Court also has jurisdiction pursuant to 28 U.S.C. §§ 1332 and 1367(a)." Id. Thus, on the face of the complaint, FDIC has alleged both federal question and diversity jurisdiction. First American's objection tasks the Court with deciding which of these two alleged bases provides the jurisdictional foundation of this matter.

The Court finds this is a federal question case. The plain language of 12 U.S.C. § 1819(b)(2)(A) provides "[e]xcept as provided in subparagraph (D), all suits of a civil nature at common law or in equity to which the [FDIC], in any capacity, is a party shall be deemed to arise under the laws of the United States." In other words, if FDIC is a party in any capacity, and subparagraph (D) does not apply, the Court must treat this case as one arising under federal law. One district court has observed that such treatment is "of course, a legal fiction, because the disputes presented in such suits can ordinarily be matters of state law." RES-NC Settlers Edge, L.L.C. v. Settlers Edge Holding Co., L.L.C., No. 10-173, 2011 WL 3897729, *3 (W.D. N.C. September 6, 2011).

The application of §1819(b)(2)(A) is straightforward in this case: FDIC is suing First American for money damages in its capacity as a receiver for WaMu. The statute

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unambiguously requires the Court to characterize this matter as one "arising under" federal law unless subparagraph (D) applies. Subparagraph (D) provides an exception to the federal question classification. It reads: "any action . . . to which the [FDIC] in [its] capacity as receiver of a State insured depository institution by the exclusive appointment by State...