Whatley v. Resolution Trust Corp.

• Decision Date: 07 September 1994
• Docket Number: No. 93-2104,93-2104
• Citation: 32 F.3d 905
• Parties: James B. WHATLEY, et al., Plaintiffs-Appellants, v. RESOLUTION TRUST CORPORATION as Receiver for Continental Savings, a Federal Savings and Loan Association, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 905

32 F.3d 905

James B. WHATLEY, et al., Plaintiffs-Appellants, v. RESOLUTION TRUST CORPORATION as Receiver for Continental Savings, a Federal Savings and Loan Association Defendant-Appellee.

No. 93-2104.

United States Court of Appeals Fifth Circuit.

Sept. 7, 1994.

Susan Henricks, Bradford G. Wiewel, Austin, TX, for appellants.

Mark S. Finkelstein, Shannon, Martin, Finkelstein & Sayre, P.C., James Haralson Pearson, Pearson & Assoc., Houston, TX, for appellee.

Appeal from the United States District Court For the Southern District of Texas.

Before POLITZ, Chief Judge, GARWOOD and DUHE, Circuit Judges.

POLITZ, Chief Judge:

James Whatley, John Rowley, Philip Solomon, Myra Beth Whatley, and Dan Bensimon appeal the district court's dismissal of their claims against Resolution Trust Corporation and Continental Savings, AFSLA, for lack of subject matter jurisdiction. For the reasons assigned we vacate and remand for further proceedings.

BACKGROUND

On December 17, 1990 the plaintiffs filed suit in state court in Travis County, Texas against Continental Savings, AFSLA for breach of fiduciary duty, breach of contract, and tortious interference with contractual relations. RTC, as conservator for Continental, intervened on January 16, 1991 and removed to federal court. The conservator was substituted as party defendant and requested and received a stay of proceedings pursuant to 12 U.S.C. Sec. 1821(d)(12)(A)(i). ¹ This stay expired in March of 1991.

Six months later, on August 16, 1991, the Office of Thrift Supervision declared Continental insolvent and appointed RTC as receiver. RTC filed pleadings to reflect its capacity as receiver but did not request a stay of proceedings, although part (ii) of subsection 1821(d)(12)(A) permits of such. ² RTC initiated the administrative claims process by publishing notice in the Houston Chronicle directing Continental's creditors to submit their claims to RTC by November 18, 1991. ³ RTC did not publish this notice in Travis County where the plaintiffs lived and originally had filed their suit. Nor did RTC provide the plaintiffs with personal notice of the filing procedures and deadline as required RTC, obviously fully cognizant of the pending lawsuit, made no attempt whatsoever to communicate with plaintiffs or their counsel. Instead, on January 15, 1992--after the time for filing administrative claims had expired--RTC filed a motion to dismiss the plaintiffs' complaint for failure to exhaust administrative remedies. In response the plaintiffs asserted that: (1) the administrative claims process of the Financial Institutions Reform and Recovery Enforcement Act of 1989 (FIRREA) does not apply to lawsuits filed before the appointment of the receiver; (2) the receiver's failure to give the plaintiffs proper notice of the claims process exempted them from the exhaustion requirement; and (3) the plaintiffs notified the receiver of their claim by the September 1991 letter.

                by 12 U.S.C. Sec. 1821(d)(3)(C). 4  Unaware of the procedure for filing an administrative claim, on September 27, 1991 the plaintiffs sent RTC a letter advising of the claims made in their pending lawsuit
                

The district court initially denied RTC's motion to dismiss. RTC then filed a motion for summary judgment contending that the plaintiffs' unsecured claims were prudentially moot because the value of the secured claims exceeded the value of the bank's assets. Before ruling on the summary judgment motion, however, the district court reversed its position on the motion to dismiss, vacated its prior orders, and dismissed the plaintiffs' case for lack of subject matter jurisdiction. The plaintiffs timely appealed.

ANALYSIS

We review dismissals for lack of subject matter jurisdiction de novo, ⁵ applying the same standard as that applied by the district court. The district court determined that the plaintiffs' failure to file an administrative claim with RTC deprived the court of jurisdiction. Concluding that FIRREA provides otherwise with respect to lawsuits filed before the receivership, we vacate and remand for further proceedings.

Pre- Versus Post-receivership Claims

We noted the differences between pre- and post-receivership claims in Carney v. Resolution Trust Corporation. ⁶ Because subject matter jurisdiction is tested as of the time of the filing of the complaint, ⁷ district courts presiding over actions properly filed prior to the appointment of a receiver continue to be vested with jurisdiction. ⁸ The situation differs when the receiver is appointed before the filing of an action against a failed financial institution. As explained in Meliezer v. Resolution Trust Company, ⁹ "FIRREA contains no provision granting federal jurisdiction to claims filed after a receiver is appointed but before administrative exhaustion." ¹⁰

By contrast, several sections of FIRREA provide that federal jurisdiction over pre-receivership claims continues after the appointment of a receiver. Subsection 1821(d), which governs the powers and duties of a receiver, states:

Except as otherwise provided in this subsection, ¹¹ no court shall have 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 Corporation has been appointed receiver ...; or

(ii) any claim relating to any act or omission of such institution or the Corporation as receiver. ¹²

Paragraph (5)(F)(ii) of the subsection provides otherwise, stating that "[s]ubject to paragraph (12), the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of the receiver." ¹³ Paragraph (12) explains that after its appointment, a receiver "may request a stay for a period not to exceed ... (ii) 90 days, ... in any judicial action or proceeding to which such institution is or becomes a party." ¹⁴

This circuit, and the others addressing the issue, have interpreted these and other paragraphs ¹⁵ of subsection 1821(d) to mean that a separate scheme exists for the disposition of lawsuits filed pre-receivership. ¹⁶ Those claims, based on valid federal jurisdiction when filed, may be affected only through the stay provision detailed in paragraph (12)(A)(ii). This legislatively-created framework strikes a fair balance between the goals of efficiency and expediency underlying FIRREA and the interests of creditors who, having invoked the proper procedures for protecting their rights, have expended time, money, and energy in properly asserting their claims.

Pre-receivership Claims and Exhaustion

There is an added odious dimension when the receiver, with full knowledge of the pending lawsuit, foregoes a request for a stay and waits until the time for the administrative claims process has expired to appear in court requesting dismissal because of the plaintiffs' supposed failure to exhaust administrative remedies. In the eyes of the claimant--especially one who receives no actual notice of the administrative process--his lawsuit is awaiting disposition: the receiver, having intervened and been substituted as party defendant, ostensibly joins him in awaiting a hearing on the merits. In reality, however, the receiver lies in ambush, awaiting expiration of the administrative deadline so that it may dispose of the claim without consideration of its merits. We neither find nor assign any such intent to Congress in its enactment of FIRREA.

Congress created a separate scheme for the handling of pre-receivership actions, giving the receiver the privilege, but not the duty, to request a stay of judicial proceedings so that it might first consider the pending claim administratively. Neither a request for a stay nor the failure to request a stay deprives the district court of jurisdiction. Rather, if the receiver requests a stay, the court will defer action temporarily. If the receiver does not timely seek a stay, the judicial action will routinely proceed. This does not mean that the judicial process runs concurrently with the administrative remedy. ¹⁷ Congress has given the receiver the option to either request a stay, and proceed administratively based on the claimant's complaint or any substitute or supplemental filing it may request, or forego the privilege of requesting a stay and thus proceed judicially. Should the receiver choose to proceed administratively, it must request the stay within 90 days of its appointment; ¹⁸ thereafter no stay may be sought and the judicial action is to proceed.

As in any case of statutory interpretation, we look to the plain language of the statute, reading it as a whole and mindful of the linguistic choices made by Congress. The language of subsection 1821(d) is clear: "The Corporation may, as receiver, determine claims in accordance with the requirements of this subsection." ¹⁹ "After ... appointment ... [as] receiver for an insured depository institution, ... [it] may request a stay for a period not to exceed ... 90 days, ... in any judicial action or proceeding to which such institution is or becomes a party." ²⁰ The term "may" is permissive; it neither indicates nor requires an exclusive means of action--it is discretionary. ²¹ Paragraph (3)(A) allows, but does not require, the receiver to determine claims in accordance with FIRREA; ²² paragraph (12)(A)(ii) grants the receiver the privilege, should it choose to proceed administratively, to request a stay of judicial proceedings. ²³ Neither provision is mandatory. The use of the term "shall" in other paragraphs of subsection 1821(d) supports this analysis. ²⁴

The language of subsection 1821(d), and its legislative history, lends support to our conclusion. Absent a request for a stay pursuant to paragraph (12)(A)(ii), no provision of the subsection exists by which the judicial proceeding may be stayed. As congressional goals of efficiency and expediency would be prejudiced if...