Murphy v. FDIC

• Decision Date: 07 April 2000
• Docket Number: No. 98-5292,98-5292
• Citation: 208 F.3d 959
• Parties: (11th Cir. 2000) Bruce G. MURPHY, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for Southeast Bank, N.A.; Jeffrey H. Beck, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 959

208 F.3d 959 (11th Cir. 2000)

Bruce G. MURPHY, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for Southeast Bank, N.A.; Jeffrey H. Beck, Defendants-Appellees.

No. 98-5292.

United States Court of Appeals, Eleventh Circuit.

April 7, 2000.

Appeal from the United States District Court for the Southern District of Florida.

Before BIRCH and MARCUS, Circuit Judges, and ALAIMO^*, Senior District Judge.

MARCUS, Circuit Judge:

Plaintiff-Appellant Bruce G. Murphy ("Murphy") appeals the district court's order dismissing his amended complaint against Defendant Jeffrey Beck, as Successor Agent for the Federal Deposit Insurance Company, ("FDIC"). Among other things, the district court held that Murphy's claims against the FDIC were barred by the federal common law D'Oench, Duhme doctrine first expounded by the Supreme Court in D'Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). Because acceptance of the D'Oench, Duhme doctrine is well-settled in this Circuit, and because we can discern no sound reason for not applying the doctrine in this case, we affirm the district court's order dismissing Murphy's complaint.

I.

The facts underlying this case are straightforward, but the procedural history of the case is both unusual and important. In June 1989, Murphy received a letter from Robert H. Haines, III, a general partner in Orchid Island Associates Limited Partnership ("Orchid"), soliciting Murphy's investment in Orchid's development of the Orchid Island Golf and Beach Club Project (the "Project") located in Indian County, Florida. The letter projected a 6.1 multiple return on investments. Soon thereafter, on August 18, 1989, Murphy invested $515,672.37 in a limited partnership interest in Orchid.

Southeast Bank provided several loans for the Project from the fall of 1988 until the beginning of 1991. These loans totaled approximately $50 million. Orchid eventually defaulted on its loans and Southeast foreclosed on the property. Southeast itself was declared insolvent on September 19, 1991 and placed in FDIC receivership.

On August 20, 1992, Murphy filed suit in the United States District Court for the District of Columbia against the FDIC, as receiver for Southeast, alleging that Southeast asserted extensive control over the Project and that Southeast knew about and participated in the fraudulent activities of Orchid's principals. According to the complaint, Murphy was induced to invest by a solicitation letter from Orchid which falsely represented that projections by Arthur Anderson & Co. reflected a "6.1 multiple return on [ ][his] investment." Murphy claimed that Southeast acted in concert with Orchid in making decisions pertaining to the Orchid development, and that these decisions were separate and apart from Southeast's role as a mere lender to Orchid. Murphy added that Southeast's actions as a joint venturer with Orchid in the Project caused the loss of his financial investment. Accordingly, Murphy sued for breach of fiduciary duty, breach of contract, accounting deficiencies, fraud, negligent misrepresentation and securities violations.

The FDIC moved to dismiss the complaint on the grounds that Murphy's claims were barred by the federal common law doctrine of D'Oench, Duhme. On August 10, 1993, the district court, treating the FDIC's motion as a motion for summary judgment, granted summary judgment on all counts. The district court ruled that under the D'Oench, Duhme doctrine, Murphy could not assert a claim against the FDIC based on the theory that Southeast was a joint venturer with Orchid in the Project because there was no written joint venture agreement between the two. Murphy v. FDIC, 829 F.Supp. 3, 5-6 (D.D.C.1993). In fact, the written agreements between the bank and Orchid denied such a relationship. Id. On appeal the Court of Appeals for the D.C. Circuit reversed the district court's decision on all but two counts,¹ holding that the D'Oench, Duhme doctrine had been preempted by the Financial Institutions Reform, Recovery, and Enhancement Act of 1989 (FIRREA) and did not, therefore, bar Murphy's claims. See Murphy v. FDIC, 61 F.3d 34, 39 (D.C.Cir.1995) (concluding that "the inclusion of 1821(d)(9) in the FIRREA implies the exclusion of overlapping federal common law defenses not specifically mentioned in the statute-of which the D'Oench doctrine is one").

After remand to the district court, the FDIC again moved to dismiss the complaint for failure to state a claim. Without ruling on the motion, the district court transferred the case to the Southern District of Florida, concluding that the Southern District of Florida was a more convenient location for the case because the Plaintiff and the majority of witnesses resided in the district and both the Project and Southeast Bank had been located there. The district court for the Southern District of Florida substituted Jeffrey H. Beck as successor agent for the FDIC and, thereafter, granted the FDIC's Motion to Dismiss. The district court offered three alternative grounds for its decision: first, loan agreements between Orchid and Southeast disclaiming the existence of a joint venture barred Murphy, as a limited partner in Orchid and therefore a party to the agreements, from asserting such a joint venture; second, even if Murphy were not a party to the agreements, he failed to prove the existence of a joint venture relationship between Orchid and Southeast; and finally, the federal common law D'Oench, Duhme doctrine barred Murphy's claim.

II.

We review a district court's order granting a motion to dismiss for failure to state a claim de novo. Beck v. Deloitte & Touche, 144 F.3d 732, 736 (11th Cir.1998); McKusick v. City of Melbourne, 96 F.3d 478, 482 (11th Cir.1996). When considering a motion to dismiss for failure to state a claim, a court must accept the allegations in the complaint as true, construing them in the light most favorable to the plaintiff. Kirby v. Siegelman, 195 F.3d 1285, 1289 (11th Cir.1999).

On appeal, we need only consider the district court's third reason for dismissal. Plainly, the D'Oench, Duhme doctrine was intended "to protect [the FDIC] and the public funds which it administers against misrepresentations as to the securities or other assets [and liabilities] in the portfolios of the banks which [the FDIC] insures." D'Oench, Duhme, 315 U.S. at 457, 62 S.Ct. at 679, 86 L.Ed. 956. The doctrine originated more than half-a-century ago in the case of D'Oench, Duhme & Co., Inc. v. FDIC where a securities dealer who executed a demand note with a bank tried to prevent the FDIC, which had acquired the note, from enforcing it because of the dealer's separate agreement with the bank that the note would not be called for payment. The Supreme Court rejected the defense and squarely held that a secret agreement not on the bank's records could not operate as a defense against the FDIC's suit. Id. at 459, 62 S.Ct. at 680.²

The Eleventh Circuit has described the scope of the D'Oench, Duhme doctrine in these terms:

In a suit over the enforcement of an agreement originally executed between an insured depository institution and a private party, a private party may not enforce against a federal deposit insurer any obligation not specifically memorialized in a written document such that the agency would be aware of the obligation when conducting an examination of the institution's records.

Baumann v. Savers Federal Sav. and Loan Ass'n, 934 F.2d 1506, 1515 (11th Cir.1991). See also Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A., ("Motorcity I"), 83 F.3d 1317, 1326 (11th Cir.1996) (en banc), vacated and remanded by Hess v. FDIC, 519 U.S. 1087, 117 S.Ct. 760, 136 L.Ed.2d 708 (1997), reinstated by Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A., ("Motorcity II"), 120 F.3d 1140 (11th Cir.1997), (en banc), cert. denied, Hess v. FDIC, 523 U.S. 1093, 118 S.Ct. 1559, 140 L.Ed.2d 791 (1998).³ We have held that the doctrine " 'applies in virtually all cases where a federal depository institution regulatory agency is confronted with an agreement not documented in the institution's records.' " OPS Shopping Ctr., Inc. v. FDIC, 992 F.2d 306, 308 (11th Cir.1993) (quoting Baumann, 934 F.2d at 1510). We have also made clear that the doctrine applies when the FDIC is acting as a receiver. See FSLIC v. Two Rivers Assocs., Inc., 880 F.2d 1267, 1274, 1276-77 (11th Cir.1989) (holding that the federal common law D'Oench, Duhme doctrine protects the FSLIC and the FDIC in both receiver and corporate capacities); Timberland Design, Inc. v. First Serv. Bank for Sav., 932 F.2d 46, 49 (1st Cir.1991) (per curiam) (citing cases for the proposition that "courts have consistently applied the [D'Oench, Duhme ] doctrine to those situations where the FDIC was acting in its capacity as receiver").

Because no written agreement exists between Southeast and Orchid, if the D'Oench, Duhme doctrine applies in this case, it bars Murphy's claims against the FDIC which are based on his allegations that Orchid and Southeast were acting as joint venturers. Murphy argues, however, that there are four independent reasons why the D'Oench, Duhme doctrine should not be applied in this case: first, the choice of law doctrine requires application of D.C. Circuit law rather than Eleventh Circuit law; second, the D.C. Circuit's decision that the D'Oench, Duhme doctrine has been preempted by the FIRREA should be accepted as law of the case; third, the doctrine should not be applied to cases in which the receivership has generated a surplus; and finally, the doctrine is no longer valid in light of recent Supreme Court rulings. We are not persuaded by any of these arguments and address each in turn.

A.

We have had occasion recently to disagree with the D.C. Circuit as to the continued viability of the D'Oench, Duhme doctrine. In its consideration of this case before transfer, the D.C. Circuit held that the...