Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-02059/USCOURTS-casd-3_11-cv-02059-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

RICHARDS INDUSTRIAL PARK, LP, a

California limited partnership; and MARC

BARMAZEL, an individual,

Plaintiffs,

CASE NO. 11cv2059-LAB (DHB)

ORDER OF DISMISSAL

vs.

FEDERAL DEPOSIT INSURANCE

CORPORATION, as receiver for La Jolla

Bank, FSB; and NATIONSTAR

MORTGAGE, a business entity,

Defendants.

Richards Industrial Park, LP and its general partner, Marc Barmazel, brought this

lawsuit against the Federal Deposit Insurance Corporation (FDIC) based on its alleged

breach of a real estate related agreement. (Docket no. 33.) Plaintiffs' remaining claims are

for breach of contract and breach of the covenant of good faith and fair dealing. The FDIC

has filed a motion to dismiss. (Docket no. 34.)

I. Factual Background

A. Pre-Receivership Claims

In their First Amended Complaint (FAC), Plaintiffs contend that ALB Properties and

La Jolla Bank made misrepresentations in the course of several real estate transactions,

causing Plaintiffs damages. (Docket no. 33, ¶¶ 6-10.) Thereafter, the FDIC was appointed

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receiver for La Jolla Bank. (Id., ¶ 11.) Based on La Jolla Bank's alleged pre-receivership

misrepresentations, Plaintiffs filed with the FDIC a timely administrative claim for fraud and

misrepresentation. (Id.) The FDIC denied Plaintiffs' administrative claim. (Id., ¶ 24.)

B. Post-Receivership Claims

The FAC contains claims arising out of alleged post-receivership conduct by the

FDIC. Plaintiffs allege that, in an effort to resolve their dispute with the FDIC without

litigation, they negotiated, and reached an agreement for, a ten percent discount on certain

real estate loans. (Id., ¶¶ 12-23.) Plaintiffs allege that, in reliance on their agreement with

the FDIC, they changed their marketing, pricing, and strategy for the sale of one of their

properties. (Id., ¶ 25.) They allege further that, after Plaintiffs found a buyer for the property,

the FDIC refused to honor its earlier agreement to offer a ten percent discount. (Id., ¶¶ 26-

27.) Based on these allegations regarding the FDIC's post-receivership conduct, the FAC

asserts claims for breach of contract and breach of the implied covenant of good faith and

fair dealing.

C. Exhaustion of Administrative Remedies 

The FAC alleges that Plaintiffs "have complied with any pre-ligitation requirement that

they submit a claim for breach of the Agreement by complying with the criteria set forth in

Heno v. FDIC, 20 F.3d 1204 (1st Cir. 1994) (Heno II) for submitting a post receivership claim

to the FDIC." (Id., ¶ 28.) However, Plaintiffs don't explain what they did to comply with Heno

II, or even what they think Heno II requires. Thus, the FAC doesn't make clear whether

Plaintiffs have filed an administrative claim dealing with their claims for breach of contract

and breach of the implied covenant of good faith and fair dealing. 

D. The FDIC's Motion to Dismiss

The FDIC contends that Plaintiffs are relying on their initial administrative claim for

pre-receivership fraud and misrepresentation to exhaust their post-receivership causes of

action. Thus, they argue that the Court lacks jurisdiction over the claims in the FAC because

they haven't been administratively exhausted, and the FAC should be dismissed under Fed.

R. Civ. P. 12(b)(1). In response, Plaintiffs contend that no post-receivership administrative

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claim was required because the May 26, 2010 claims bar date expired before their claims

arose and, in any event, the FAC sufficiently alleges that they submitted a post-receivership

administrative claim. (Docket no. 35.)

The FDIC's motion also seeks dismissal of Plaintiffs' breach of the implied covenant

of good faith and fair dealing claim under Fed. R. Civ. P. 12(b)(6). The FDIC contends this

claim should be dismissed because it's either based in contract, and therefore coextensive

with Plaintiffs' breach of contract claim, or it's based in tort, and not available under California

law.

II. Discussion

A. Legal Standard

Federal courts are courts of limited jurisdiction. Owen Equip. & Erection Co. v.

Kroger, 437 U.S. 365, 374 (1978). "A federal court is presumed to lack jurisdiction in a

particular case unless the contrary affirmatively appears." Stock W., Inc. v. Confederated

Tribes of the Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989). Lack of subject

matter jurisdiction may be raised at any time by any party or by the court. See Fed. R. Civ.

P. 12(h). "A party invoking the federal court's jurisdiction has the burden of proving the

actual existence of subject matter jurisdiction." Thompson v. McCombe, 99 F.3d 352, 353

(9th Cir. 1996). "If the court determines at any time that it lacks subject-matter jurisdiction,

the court must dismiss the action." Fed. R. Civ. P. 12(h)(3).

"A Rule 12(b)(1) jurisdictional attack may be facial or factual." Safe Air for Everyone

v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). "In a facial attack, the challenger asserts that

the allegations contained in a complaint are insufficient on their face to invoke federal

jurisdiction. By contrast, in a factual attack, the challenger disputes the truth of the

allegations that, by themselves, would otherwise invoke federal jurisdiction." Id. at 1039. 

The FDIC asserts that the allegations contained in the FAC are insufficient on their face to

invoke federal jurisdiction because Plaintiffs have not adequately alleged that they have

exhausted the FDIC administrative claims process. (Docket no. 34 at 2.) Thus, the FDIC's

Rule 12(b)(1) motion is a facial rather than a factual attack on Plaintiffs' FAC, and the Court

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must accept the factual allegations in the FAC as true. See Mapoy v. Washington Mut.

Bank, FA, 2011 WL 2580655, at *4 (N.D. Cal. June 29, 2011); Miranda v. Reno, 238 F.3d

1156, 1157 n.1 (9th Cir. 2001).

Under Rule 12(b)(6), a district court must dismiss a complaint if it fails to state a claim

upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff

must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 570 (2007). This "facial plausibility" standard requires the

plaintiff to allege facts that add up to "more than a sheer possibility that a defendant has

acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 697 (2009). While courts do not require

"heightened fact pleading of specifics," a plaintiff must allege facts sufficient to "raise a right

to relief above the speculative level." Twombly, 550 U.S. at 555. In deciding whether the

plaintiff has stated a claim upon which relief can be granted, the court must assume that the

plaintiff's allegations are true and must draw all reasonable inferences in the plaintiff's favor. 

See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court is

not required to accept as true "allegations that are merely conclusory, unwarranted

deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d

1049, 1055 (9th Cir. 2008).

If the court dismisses the complaint, it must then decide whether to grant leave to

amend. The Ninth Circuit has "repeatedly held that a district court should grant leave to

amend even if no request to amend the pleading was made, unless it determines that the

pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203

F.3d 1122, 1130 (9th Cir. 2000) (citations and quotation omitted).

B. Exhaustion of Administrative Remedies

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA)

strips courts of jurisdiction over claims that have not been exhausted through the FDIC's

administrative process:

/ / /

/ / /

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Except as otherwise provided in this subsection, 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 [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 FDIC seeks dismissal of the FAC based on this provision.

Plaintiffs argue (1) no post-receivership administrative claim was required because the

claims bar date expired before the facts underlying their claims occurred and (2) the FAC

sufficiently alleges that Plaintiffs did submit a post-receivership administrative claim.

1. Exhaustion Requirement for Post-Receivership Claims

When liquidating a failed bank's assets, the FDIC must "promptly publish a notice to

the depository institution's creditors to present their claims [to the FDIC] by a specified date

in the notice[,]" otherwise known as a "claims bar date." 12 U.S.C. § 1821(d)(3)(B). Claims

must be filed by the claims bar date set by the FDIC, which must be at least 90 days after

notice is published. Id. Upon its appointment as receiver for La Jolla Bank, the FDIC

established a May 26, 2010 claims bar date. (Docket no. 35 at 3.) Because their claims

against the FDIC arose after the claims bar date expired, Plaintiffs argue that their claims

aren't "susceptible of resolution through the claims process," so they weren't required to

administratively exhaust them.

The Ninth Circuit addressed this issue in McCarthy v. FDIC, 348 F.3d 1075 (9th Cir.

2003). McCarthy held that the claims bar deadline doesn't apply to claims that arise after

the claims bar date has passed. Id. at 1080-81. The Ninth Circuit explained:

In light of this practice . . . and the plain language of § 1821(d)(13)(D), we

cannot say that McCarthy's post-receivership claims are not susceptible of

resolution through the administrative claims procedure solely because they

arose after the FDIC was appointed receiver. Therefore, we join the majority

of courts in holding that claimants such as McCarthy, who challenge conduct

by the FDIC as receiver, must exhaust administrative remedies before seeking

judicial review.

/ / /

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Id. at 1081. As in McCarthy, the claims bar deadline doesn't preclude Plaintiffs from filing

an administrative claim. Thus, just as in McCarthy, Plaintiffs must exhaust their

administrative remedies before this Court has jurisdiction.

2. Sufficiency of Plaintiffs' Exhaustion Allegations

In the alternative, Plaintiffs argue that they have exhausted their claims, and that the

FAC sufficiently alleges exhaustion. However, Plaintiffs' exhaustion allegation doesn't go

beyond citing Heno II and declaring that they have complied with that case. The FAC

doesn't explain what Plaintiffs did to comply with Heno II. Indeed, it makes no factual

allegations regarding exhaustion of post-receivership claims whatsoever. 

Failure to allege exhaustion of administrative remedies under FIRREA mandates

dismissal for lack of subject matter jurisdiction. See Parker's Model T v. FDIC, 2012 WL

359670, at *3 (D. Nev. Feb. 2, 2012); see also Madison v. First Magnus Fin. Corp., 2009 WL

648500, at *4 (D. Ariz. Mar. 12, 2009) (dismissing case where complaint failed to sufficiently

allege exhaustion of administrative process).

Plaintiffs have not sufficiently alleged exhaustion of their breach of contract and

breach of the implied covenant of good faith and fair dealing claims. The FDIC's motion to

dismiss for failure to sufficiently allege exhaustion of administrative remedies is GRANTED.

C. Breach of the Implied Covenant of Good Faith and Fair Dealing Claim

The FDIC argues that Plaintiffs fail to state a claim for breach of the implied covenant

of good faith and fair dealing because (1) the claim is improper since there's no recognized

cause of action for tortious breach of contract outside of the insurance context and (2) the

claim is superfluous because it doesn't go beyond the statement of a mere contractual

breach. Plaintiffs contend their claim is based in contract, not tort, and that it's adequately

alleged.

"Every contract imposes upon each party a duty of good faith and fair dealing in its

performance and its enforcement." Jonathan Neil & Assocs., Inc. v. Jones, 33 Cal.4th 917,

937 (2004). But, if allegations of a breach of such duty "do not go beyond the statement of

a mere contract breach and, relying on the same alleged acts, simply seek the same

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damages or other relief already claimed in a companion contract cause of action, they may

be disregarded as superfluous as no additional claim is actually stated ." Careau & Co. v.

Sec. Pac. Bus. Credit, Inc., 222 Cal.App.3d 1371, 1395 (1990). Thus, where a plaintiff has

alleged both breach of contract and breach of implied covenant of good faith and fair

dealing, "the only justification for asserting a separate cause of action for breach of the

implied covenant is to obtain a tort recovery." Id.

Plaintiffs rely on the same alleged breach by the FDIC to support both of their claims.

Thus, their breach of implied covenant of good faith and fair dealing claim is superfluous. 

The FDIC's motion to dismiss Plaintiffs' second claim for relief is GRANTED.

III. Conclusion

The FAC is DISMISSED WITHOUT PREJUDICE. If Plaintiffs think they can

successfully amend their complaint, they must seek leave by ex parte motion no later than

June 29, 2015. Their proposed second amended complaint must be attached as an exhibit

to the motion. If they file such a motion, the FDIC shall have until July 13, 2015 to oppose

it. No reply should be filed unless leave is obtained in advance.

IT IS SO ORDERED.

DATED: June 10, 2015

HONORABLE LARRY ALAN BURNS

United States District Judge

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