Waterview Management Co. v. F.D.I.C., 96-5110
| Decision Date | 31 January 1997 |
| Docket Number | No. 96-5110,96-5110 |
| Citation | 105 F.3d 696 |
| Parties | , 65 USLW 2522 WATERVIEW MANAGEMENT COMPANY, et al., Appellants, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeal from the United States District Court for the District of Columbia (No. 94cv01930).
James T. Lewis, argued the cause and filed the briefs, for appellants.
Thomas C. Bahlo, Counsel, Federal Deposit Insurance Corporation, argued the cause for appellee, with whom Ann S. DuRoss, Assistant General Counsel, and Colleen B. Bombardier, Senior Counsel, were on the brief. Jeffrey P. Bloom, Washington, DC, entered an appearance.
Before: EDWARDS, Chief Judge, GINSBURG and RANDOLPH, Circuit Judges.
This case concerns, inter alia, the status of a purchase option and marketing agreement for a tract of land when the Resolution Trust Corporation ("RTC") is acting as conservator or receiver for the financial institution that signed the agreement. The agreement at issue, between PortAmerica Associates and HomeFed Bank ("HomeFed"), gave Waterview Management Company ("Waterview") an exclusive option to market and purchase the "HomeFed tract" in Prince George's County, Maryland.
Waterview brought suit in District Court on claims arising out of the RTC's post-receivership breach of this agreement and another agreement allegedly entered into by Waterview and the RTC acting as conservator and receiver for HomeFed. The District Court dismissed three claims for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1): a request for declaratory relief and the creation of a constructive trust; misappropriation of trade secrets; and misappropriation of trademark. The District Court dismissed four additional claims for failure to state a claim on which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6): fraud; breach of contract; breach of fiduciary duty and the covenant of good faith; and negligence.
We affirm the District Court's rulings on almost all issues arising out of the alleged agreements, with the sole exception being the question whether the RTC as conservator and receiver for HomeFed effectively "repudiated" the purchase option and marketing agreement when it advertised the HomeFed tract for sale. We find that the District Court erred as a matter of law in concluding that the Financial Institutions Reform Recovery and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1821(d)(2)(G)(i)(II) (1994), preempted the agreement and made repudiation unnecessary.
Pre-receivership purchase option and marketing contracts create valid state law rights that are not inconsistent with the RTC's power as a conservator or receiver under 12 U.S.C. § 1821(d)(2)(G)(i)(II) to transfer the assets of the failed institution without consent. The RTC can repudiate such contracts under FIRREA, 12 U.S.C. § 1821(e)(1) (1994), but it cannot simply claim that they are preempted. Federal law preempts state law only where there is a conflict between them. Here state law defines the scope of the pre- receivership contract asset held by the failed institution. Federal law simply provides that the RTC can transfer the asset held by the failed institution without consent. State contract law thus defines the nature of the asset that federal law allows the agency to transfer without consent. A federal agency cannot use 12 U.S.C. § 1821(d)(2)(G)(i)(II) to avoid pre-receivership contracts in an effort to increase the asset beyond what was held by the failed institution. When the RTC acted in defiance of the pre-receivership contract, it effectively repudiated the agreement. This was lawful so long as the RTC adhered to the terms of 12 U.S.C. § 1821(e). We therefore remand this case to the District Court to determine whether Waterview is entitled to any damages resulting from the RTC's repudiation of its purchase option agreement.
On January 15, 1992, HomeFed and PortAmerica Associates reached a settlement agreement in negotiations arising out of a mortgage default by PortAmerica, the "HomeFed Agreement." PortAmerica Associates had defaulted on a loan of $20,685,000 from HomeFed for the development of an area of Prince George's County immediately across the Woodrow Wilson bridge. The project included two major land masses, the "HomeFed tract," which was purchased with the loan from HomeFed and used to secure the note, and the "Upper tract." By virtue of the settlement agreement, HomeFed foreclosed upon and took title to the HomeFed tract. The agreement also established Waterview, permitted Waterview to proceed with obtaining the necessary permits and approvals for the development of the HomeFed tract, and gave Waterview exclusive marketing rights and an exclusive option to purchase the HomeFed tract for a period of eighteen months from the date of the HomeFed Agreement with three possible extensions of six months each.
On July 6, 1992, by order of the Office of Thrift Supervision, the RTC was appointed receiver for HomeFed Bank, F.S.B. and conservator for HomeFed Bank, F.A. In February 1993, representatives of the RTC and Waterview held a meeting. The RTC indicated that it was interested in a quick sale of the HomeFed tract rather than the long-term option held by Waterview under the HomeFed Agreement. The RTC advertised the land by listing it for sale in its Winter/Spring 1993 catalogue for six million dollars. Waterview claims that advertisement violated its marketing and purchase option rights under the HomeFed Agreement.
Waterview brought a variety of claims arising out of the HomeFed Agreement and another agreement allegedly entered into by the RTC in which it agreed to sell the HomeFed tract to Waterview for the highest of six million dollars or one of two appraisals. Specifically, Waterview sued the RTC alleging: (i) the court should impose a constructive trust and grant declaratory relief and specific performance of the agreements; (ii) fraud, misrepresentation, and concealment during the appraisal process; (iii) breach of fiduciary duty and the covenant of good faith; (iv) breach of contract; (v) negligence; (vi) misappropriation of trade secrets and proprietary information during the appraisal process; and (vii) misappropriation of trademark.
The District Court dismissed all of Waterview's claims against the Federal Deposit Insurance Corporation ("FDIC") 1 arising out of the two alleged agreements. Most importantly, it found the HomeFed Agreement incapable of supporting a breach of contract claim. In the District Court's view, FIRREA, 12 U.S.C. § 1821(d)(2)(G)(i)(II) (1994), preempted the HomeFed Agreement. See Waterview Management Co. v. RTC, No. 94-1930 (D.D.C. Mar. 11, 1996) (mem.), reprinted in Joint Appendix ("J.A.") 69. On the other claims, the District Court found: (i) under FIRREA, 12 U.S.C. § 1821(j), it lacked the authority to order declaratory relief or specific performance; (ii) because of Waterview's failure to exhaust its administrative remedies, it lacked subject matter jurisdiction over Waterview's misappropriation of trade secrets and trademark claims arising out of the appraisal process; (iii) the alleged agreement entered into by the RTC violated the Statute of Frauds and was therefore invalid; (iv) any duties of good faith arising out of the contracts were not enforceable, and there was no breach of fiduciary duty; (v) Waterview's complaint of fraud was stated with particularity only with regard to its claim that an RTC attorney said that the 1993 appraisals had been done for park or conservation uses of the property, but even with regard to this claim, Waterview failed to show the requisite detrimental reliance; and finally, (vi) Waterview failed to state a claim for negligence, because it failed to show the RTC owed it a duty of care. Id.
The dismissal of a complaint under Federal Rule of Civil Procedure 12(b) is reviewed de novo. See, e.g., Yamaha Corp. of America v. United States, 961 F.2d 245, 253-54 (D.C.Cir.1992).
The District Court dismissed appellant Waterview's claim of breach of the HomeFed Agreement because it found that FIRREA, 12 U.S.C. § 1821(d)(2)(G)(i)(II), which permits a federal agency acting as conservator or receiver to "transfer any asset or liability of the institution in default ... without any approval, assignment, or consent with respect to such transfer," preempts Waterview's purchase option and marketing rights created under state law. The District Court adopted the RTC's argument that this section should be construed to preempt any state law right that affects the receiver's ability to sell the property. Under this analysis, the District Court determined that, because Waterview's contract rights are preempted, the RTC owes Waterview no damages. See Cipollone v. Liggett Group, Inc., 505 U.S. 504, 521, 112 S.Ct. 2608, 2619-20, 120 L.Ed.2d 407 (1992) (). We reject the District Court's view of the statute.
FIRREA does not provide a blanket "preemption" of all valid pre-receivership contracts. Indeed, to hold that the federal government could simply vitiate the terms of existing assets, taking rights of value from private owners with no compensation in return, would raise serious constitutional issues. We do not read the statute in this way. Rather, under the statute, the RTC can avoid the obligations imposed by such agreements only by repudiating them in accord with FIRREA, 12 U.S.C. § 1821(e)(1), and paying damages in accord with FIRREA, 12...
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