Shaw v. Bank of Am. Corp.

• Decision Date: 27 December 2019
• Docket Number: No. 17-56706,17-56706
• Citation: 946 F.3d 533
• Parties: Norman SHAW, Plaintiff-Appellant, v. BANK OF AMERICA CORPORATION; U.S. Bank, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

946 F.3d 533

Norman SHAW, Plaintiff-Appellant,

v.BANK OF AMERICA CORPORATION; U.S. Bank, Defendants-Appellees.

No. 17-56706

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 24, 2019 Pasadena, California

Filed December 27, 2019

Norman Shaw (argued), Solana Beach, California, pro se; Chris Ford, Ford Law AZ, Phoenix, Arizona; for Plaintiff-Appellant.

Alan E. Schoenfeld (argued), Wilmer Cutler Pickering Hale and Dorr LLP, New York, New York; Albinas J. Prizgintas and Arpit K. Garg, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C.; Bryant S. Delgadillo and Mariel Gerlt-Ferraro, Parker Ibrahim & Berg LLP, Costa Mesa, California; for Defendants-Appellees.

Before: Andrew J. Kleinfeld, Consuelo M. Callahan, and Ryan D. Nelson, Circuit Judges.

R. NELSON, Circuit Judge:

Plaintiff Norman Shaw appeals from the district court’s dismissal of his Truth in Lending Act ("TILA") claim for lack of subject matter jurisdiction based on the jurisdiction-stripping provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). Because we agree that the district court lacked subject matter jurisdiction, we affirm the district court’s dismissal.

I

Plaintiff Norman Shaw owns a home in Solana Beach, California. In 2006, he refinanced his home loan, borrowing $1.26 million from Washington Mutual Bank ("WaMu"). One month later, LaSalle Bank, N.A. allegedly became the trustee of his loan, although WaMu continued to service it. WaMu was later closed and placed into the receivership of the Federal Deposit Insurance Corporation ("FDIC"). At that time, JPMorgan Chase Bank acquired WaMu’s assets via a Purchase and Assumption Agreement with the FDIC.

In 2009, Mr. Shaw defaulted on his home loan and a foreclosure date was set. A month before foreclosure, Mr. Shaw sent notices of loan rescission to WaMu, JP Morgan Chase, and Bank of America pursuant to instructions in his loan documents. Mr. Shaw sought rescission, claiming that WaMu violated TILA by providing him with defective notice of the right to cancel when the loan was signed. None of the institutions contacted by Mr. Shaw rescinded the loan.

Being "short on options to save [his] home," Mr. Shaw declared bankruptcy, which halted foreclosure proceedings. He then filed a TILA lawsuit as an adversary proceeding in bankruptcy court. By that point, the trustee of the loan was U.S. Bank, a successor in interest to Bank of America. U.S. Bank moved to dismiss Mr. Shaw’s adversarial action for lack of jurisdiction. The bankruptcy court agreed.

Mr. Shaw then brought this action in May 2012, seeking rescission of the loan under TILA. After several years of litigation, including an appeal to this court, U.S. Bank moved to dismiss Mr. Shaw’s claim for lack of jurisdiction, arguing he failed to exhaust administrative remedies through the FDIC as required by FIRREA. Mr. Shaw responded that FIRREA did not apply and further discovery was needed to make that showing. The district court rejected these arguments, granted U.S. Bank’s motion, and entered judgment. This appeal followed.

While this appeal was pending, Mr. Shaw sent the FDIC a letter explaining the alleged TILA violations and requesting assistance in rescinding the loan. Mr. Shaw told the FDIC that his loan was owned by "either LaSalle Bank, Bank of America, or both."¹ The FDIC responded a week later, explaining it was "unable to process" his request because "[t]he financial institution referenced in your request, LaSalle Bank, is not a FDIC Receivership."

II

"We review de novo the district court’s dismissal for lack of jurisdiction." Rundgren v. Wash. Mut. Bank, FA , 760 F.3d 1056, 1060 (9th Cir. 2014) (dismissal for failure to exhaust under FIRREA). A district court’s discovery order is reviewed for abuse of discretion. United States v. Bourgeois , 964 F.2d 935, 937 (9th Cir. 1992).

III

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183, was enacted "in an effort to prevent the collapse of the [savings and loan] industry in the late 1980s." Rundgren , 760 F.3d at 1060 (internal quotation marks omitted). "[T]o enable the federal government to respond swiftly and effectively to the declining financial condition of the nation’s banks and savings institutions," FIRREA granted "the FDIC, as receiver, broad powers to determine claims asserted against failed banks." Henderson v. Bank of New Eng. , 986 F.2d 319, 320 (9th Cir. 1993).

To that end, FIRREA "provides detailed procedures to allow the FDIC to consider certain claims against the receivership estate." Benson v. JPMorgan Chase Bank, N.A. , 673 F.3d 1207, 1211 (9th Cir. 2012). "The comprehensive claims process allows the FDIC to ensure that the assets of a failed institution are distributed fairly and promptly among those with valid claims against the institution, and to expeditiously wind up the affairs of failed banks without unduly burdening the District Courts." Rundgren , 760 F.3d at 1060 (internal citations omitted).

As part of this process, the FDIC must "publish a notice to the depository institution’s creditors" with instructions "to present their claims, together with proof, to the receiver," by a specific date. 12 U.S.C. § 1821(d)(3)(B)(i). Once a claim is filed, the FDIC is given authority to "determine" claims. Id. § 1821(d)(3). This authority includes, inter alia, "allow[ing]" claims, "disallow[ing]" claims, and "pay[ing] creditor claims." Id. § 1821(d)(5)(A)(i), (10)(a). If the FDIC disallows a claim, "the claimant may request administrative review of the claim ... or file suit on such claim" in the district court whose jurisdiction covers the depository institution. Id. § 1821(d)(6)(A)(ii).

If a claim has not been exhausted through this process, FIRREA strips courts of jurisdiction over:

(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the [FDIC] has been appointed receiver, including assets which the [FDIC] may acquire from itself as such receiver; or

(ii) any claim relating to any act or omission of such institution or the [FDIC] as receiver.

12 U.S.C. § 1821(d)(13)(D). The Ninth Circuit has interpreted this provision to be a jurisdictional exhaustion requirement. E.g. , Benson , 673 F.3d at 1211–12.

For FIRREA’s jurisdictional bar in clause (ii) of 12 U.S.C. § 1821(d)(13)(D) to apply, three elements must be met. There must be (1) a "claim" that (2) relates to "any act or omission" of (3) "an institution for which the [FDIC] has been appointed receiver." Rundgren , 760 F.3d at 1061. Here, these elements are met. FIRREA’s exhaustion requirement therefore applies.

A

A "claim" under FIRREA is "a cause of action ... that gives rise to a right to payment or an equitable remedy." Id. Mr. Shaw has a "claim" because his cause of action gives right to an equitable remedy—rescission.

Mr. Shaw disagrees. He argues that he does not have a "claim" under FIRREA because his demand for rescission of his loan under TILA is "not susceptible of resolution through the claims procedure." He relies on language used in some of our cases to this effect. E.g. , Henderson , 986 F.2d at 321 ("The statute bars judicial review of any non-exhausted claim, monetary or nonmonetary, which is susceptible of resolution through the claims procedure.") (internal quotation marks omitted); In re Parker N. Am. Corp. , 24 F.3d 1145, 1150 (9th Cir. 1994) (same). A survey of some of the cases applying this language is instructive.

The Third Circuit was the first court to use the term "susceptible of resolution through the claims procedure" to interpret the word "claim" in FIRREA. Rosa v. Resolution Tr. Corp. , 938 F.2d 383, 394 (3d Cir. 1991). There, the administrator of a retirement savings plan failed, and the Resolution Trust Corporation ("RTC") was appointed as the receiver. Id. at 388–89. Later, when the RTC terminated the plan, the plan participants did not bring a claim under FIRREA’s administrative process. Id. at 389–90. Instead, they sued the RTC and related entities, seeking, among other things, an order preventing the RTC from terminating the plan. Id. at 394–95. In deciding whether this type of request for relief was a "claim" under FIRREA, the Third Circuit analyzed FIRREA’s claims procedure. Id. Because there was no indication that this claims procedure contemplated the RTC determining a claim involving the termination of a retirement savings plan, the participants’ claim was "not susceptible of resolution through the claims procedure" and exhaustion was not required. Id.

A few years later, we applied the rationale behind this rule for the first time in In re Parker , 24 F.3d at 1152. In that case, a debtor filed a preference action in bankruptcy court seeking recovery of money owed it by a failed bank for which a receiver had been appointed. Id. at 1148–49. He did not file a "claim" via FIRREA’s claims process before doing so. Id. We recognized that the preference action would seem to be a "claim" under the plain language of FIRREA, thereby requiring exhaustion. See id. at 1152–53. But because the broader statutory scheme of FIRREA made clear that the statute does not apply to claims of debtors in bankruptcy proceedings, we held that the debtor’s "claim" was not "susceptible of resolution through FIRREA claims procedures," meaning exhaustion was not required. Id.

We used this same framework in McCarthy v. FDIC , 348 F.3d 1075 (9th Cir. 2003). There, a homeowner sought damages against the FDIC for its conduct after it was appointed as receiver for a failed bank. Id. at 1077. In opposing dismissal, the homeowner argued that his claim was not "susceptible of resolution through the administrative claims procedure because [it] arose after the FDIC was appointed receiver." Id. at 1080–81. But we rejected this argument, holding that nothing in FIRREA’s claims procedure suggested the...