Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-01033/USCOURTS-ca10-90-01033-0/pdf.json

Parties Involved:
Resolution Trust Corporation
Appellant
Westgate Corporation
Appellee
Westgate Partners
Appellee

Document Text:

PUBLISH 

UNITED STATE COURT OF APPEALS 

TENTH CIRCUIT 

RESOLUTION TRUST CORPORATION, as ) 

Conservator for American Savings & ) 

Loan Association of Colorado; RESOLUTION ) 

TRUST CORPORATION, as Receiver for ) 

American Federal Savings and Loan ) 

Association of Colorado, successors ) 

in interest to the Federal Savings ) 

and Loan Insurance Corporation, ) 

) 

Plaintiffs-Appellants, ) 

) 

v. ) 

) 

WESTGATE PARTNERS, LTD., a Colorado ) 

limited partnership, and WESTGATE ) 

CORPORATION, a Colorado corporation, ) 

) 

Defendants-Appellees. ) 

, . I-~lLED Uoued Scace~ Court of Appeals 

Tenth Circuit 

JUN 2 71991 

ROBERT L. HOECKER 

Clerk 

No. 90-1033 

Appeal from the United States District Court 

for the District of Colorado 

(D.C. No. 89-M-1750) 

Ann S. Duross, Assistant General Counsel, Joan E. Smiley, Senior 

Counsel, and Daniel H. Kurtenbach, Senior Attorney, Federal 

Deposit Insurance Corporation, Washington, D.C., for PlaintiffsAppellants. 

George V. Chasteen and James A. Halpin of Chasteen & Halpin, 

Littleton, Colorado, for the Defendants-Appellees. 

Before TACBA, EBEL, Circuit Judges, and VAN BEBBER, District 

Judge.* 

* Honorable G. Thomas van Bebber, District Judge for the United 

States District Court for the District of Kansas, sitting by 

designation. 

Appellate Case: 90-1033 Document: 01019297102 Date Filed: 06/27/1991 Page: 1 
EBEL, Circuit Judge. 

The issue we decide is whether the Resolution Trust 

Corporation ("RTC"), acting as receiver for a failed savings 

institution in a case in which it replaced the Federal Savings and 

Loan Insurance Corporation ("FSLIC") as the plaintiff, properly 

removed the case to the federal district court in the district 

where the institution's principal place of business was located 

("local federal district court"). The district court held that 

under the applicable removal statute, removal to the local federal 

district court was improper. We agree with the district court's 

interpretation of the statute and, therefore, AFFIRM. 

FACTS 

On April 5, 1989, the Federal Home Loan Bank Board appointed 

the FSLIC as conservator for American Federal Savings and Loan 

Association of Colorado ("American Federal"). On June 21, 1989, 

the FSLIC, acting on behalf of American Federal, filed suit in the 

District Court for Jefferson County, Colorado, against Westgate 

Partners, Ltd. and Westgate Corporation (collectively "Westgate"), 

the defendants-appellees. The gravamen of the complaint against 

Westgate was that Westgate had defaulted on a $8,700,000 note owed 

to American Federal. 

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On August 9, 1989, the RTC replaced the FSLIC as 

conservator. 1 On September 27, 1989, the RTC was appointed 

receiver for American Federal. Simultaneously, the RTC was 

appointed conservator for a newly created institution, American 

Savings of Colorado ("American Savings"). On September 28, 1989, 

American Savings purchased substantially all the assets of 

American Federal. 

On October 10, 1989, the RTC filed a notice of removal of its 

suit on behalf of American Savings against Westgate to the United 

States District Court for the District of Colorado. The United 

States District Court remanded the case on the grounds that 

removal in this case was proper only to the United States District 

Court for the District of Columbia. The RTC appeals the district 

court's remand order. 

DISCUSSION 

We begin with the language of the relevant statutory 

provision: 

1 

POWER TO REMOVE; JURISDICTION.--

(1) IN GENERAL.--Notwithstanding any other prov~s~on of 

law, any civil action, suit, or proceeding to which the 

Corporation2 is a party shall be deemed to arise under 

the laws of the United States, and the United States 

Pursuant to the Federal Institutions Reform, Recovery, and 

Enforcement Act of 1989 ("FIRREA"), the RTC succeeded the FSLIC as 

conservator or receiver for those institutions for which the FSLIC 

had been appointed conservator or receiver on or after January 1, 

1989. FIRREA, Pub. L. No. 101-73, 103 Stat. 183, 369 (1989) 

(codified at 12 u.s.c.A. § 1441a(b)(6) (West 1989 & Supp. 1991)). 

2 The term "Corporation," used throughout 12 u.s.c. § 1441a, 

refers to the Resolution Trust Corporation. § 144la(!)(2). 

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district courts shall have original jurisdiction over 

such action, suit, or proceeding. 

(2) CORPORATION AS PARTY.--The Corporation shall be 

substituted as a party in any civil action, suit, or 

proceeding to which its predecessor in interest was a 

party with respect to institutions which are subject to 

the management agreement dated February 7, 1989, among 

the Federal Savings and Loan Insurance Corporation, the 

Federal Home Loan Bank Board and the Federal Deposit 

Insurance Corporation. 

(3) REMOVAL AND REMAND.--The Corporation may, without 

bond or security, remove any such action, suit, or 

proceeding from a State court to the United States 

District Court for the District of Columbia, or if the 

action, suit, or proceeding arises out of the actions of 

the Corporation with respect to an institution for which 

a conservator or a receiver has been appointed, the 

United States district court for the district where the 

institution's principal business is located. The 

removal of any action, suit, or proceeding shall be 

instituted--

(A) not later than 90 days after the date the 

Corporation is substituted as a party, or 

(B) not later than 30 days after the date suit is 

filed against the Corporation, if such suit is filed 

after August 9, 1989 [the date of enactment of the 

Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989]. 

The Corporation may appeal any order of remand entered 

by a United States district court. 

FIRREA, 103 Stat. at 389-90 (1989) (codified 12 u.s.c.A. 

§ 1441a(l) (West 1989 & Supp. 1991)). 3 

The controlling language is contained in the third paragraph. 

Paragraph three contains references to two different federal 

district courts--the United States District Court for the District 

of Columbia and the local federal district court. The reference 

to the United States District Court for the District of Columbia 

3 Unless otherwise stated, citations to § 1441a will refer to 

Title 12 of the United States code and should not be confused with 

§ 1441 of Title 28, which deals with removal in general. 

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is found in the first clause of paragraph three, which states that 

"[t]he Corporation may, without bond or security, remove any such 

action, suit, or proceeding from a State court to the United 

States District Court for the District of Columbia . . . " 

§ 144la(!.)(3)(emphasis added). "[S]uch action, suit, or 

proceeding" must refer to the preceding paragraph in the statute, 

§ 1441a(!.)(2), which provides for the substitution of the RTC in 

ongoing litigation in which its predecessor in interest was a 

party. Thus, when read together, the first clause of paragraph 

three provides that the RTC may remove a case to the District of 

Columbia federal court when the RTC has been substituted as a 

party in a "civil action, suit, or proceeding" where the FSLIC was 

its predecessor in interest ("substitution case"). 

The reference to the local federal district court is found in 

the second clause in paragraph three, which states, "or if the 

action, suit, or proceeding arises out of the actions of the 

Corporation with respect to an institution for which a conservator 

or a receiver has been appointed, [then removal is proper to] the 

United States District Court for the district where the 

institution's principal business is located." Id. (emphasis 

added). Thus, pursuant to this second clause of paragraph three, 

the RTC can remove a case to the local federal district court if 

two conditions are met: (1) the "action, suit, or proceeding" 

must arise out of the actions of the RTC; and (2) the RTC must be 

acting in a conservatorship or receivership capacity with respect 

to the failed institution ("RTC actions case"). 

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Clearly, the statute does not permit the RTC to remove a 

substitution case to the local federal district court under the 

second clause of paragraph three because such an "action, suit, or 

proceeding" cannot possibly have arisen out of the actions of the 

RTC; all such suits would predate the entry of the RTC, and the 

RTC would come into the suit only as a substituted party for its 

predecessor in interest. Similarly, the RTC could not remove an 

RTC actions case to the District of Columbia because in those 

cases where the "action, suit, or proceeding" does arise out of 

the RTC's actions, the RTC will be an initial party and not merely 

a substituted party as required to invoke the first clause of 

paragraph three. In other words, for purposes of removal under 

§ 1441a(1)(3), the substitution cases and the RTC actions cases 

are mutually exclusive. 4 

The RTC argues that we should abandon this plain language 

interpretation of§ 144la(1)(3), and should adopt, in its place, a 

reading that would allow it to remove this substitution case to 

the local federal district court. Specifically, the RTC urges us 

to adopt a broad interpretation of the word "arises" such that 

even though the RTC was substituted for the FSLIC in this case 

after the suit was filed, the "action, suit, or proceeding" could 

still be said to "arise[] out of the actions of the Corporation." 

No ordinary or customary definition of the words used has been 

advanced in support of that interpretation nor are any such 

4 We need not in this case address the situation of a suit which, 

through amendment or otherwise, might involve the RTC in both 

capacities as a substituted party and as a direct actor on behalf 

of a failed institution. 

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definitions apparent to us. It is not just the word "arises" that 

stands in the way of the RTC's argument: the immediately following 

phrase, "actions of the Corporation with respect to an 

institution," presents similar difficulties to the RTC. This 

phrase specifically limits the word "actions" to actions of the 

RTC: actions completed by the institution before the RTC became 

substituted as a party would not appear to satisfy the literal 

language of that phrase. The exceptions to our obligation to 

interpret a statute according to its plain language are few and 

far between. See, ~' United States v. Ron Pair Enterprises, 

489 U.S. 235, 242 (1989) ("The plain meaning of legislation should 

be conclusive, except in the rare cases in which the literal 

application of a statute will produce a result demonstrably at 

odds with the intention of its drafters." (quotations and brackets 

omitted)): United States v. Brown, 333 u.s. 18, 27 (1948) (a court 

can reject the plain language interpretation of a statute if such 

an interpretation would lead to "patently absurd consequences"): 

Love v. Thomas, 858 F.2d 1347, 1354 (9th Cir. 1988), cert. denied, 

490 u.s. 1035 (1989) (when two provisions whose meanings, if 

examined individually, are clear, but whose meanings, when read 

together, conflict, it is up to the court to interpret the 

provisions so that they make sense). 

In support of its interpretation, the RTC seeks to invoke the 

"absurdity" exception to the plain meaning rule of statutory 

construction. See Public Citizen v. United States Dep't of 

Justice, 491 u.s. 440, 454-55 (1989); Brown, 333 u.s. at 27; 

Church of the Holy Trinity v. United States, 143 U.S. 457, 461 

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(1892). We do not find the "absurdity" exception to be applicable 

in this case. The "absurdity" exception to the plain language 

rule is a tool to be used to carry out Congress' intent--not to 

override it. Indeed, so long as Congress remains faithful to the 

Constitution, it is free to enact any number of foolish statutes. 

It is only where a plain language interpretation would lead to an 

outcome so "absurd" that Congress clearly could not have intended 

such an outcome, that we will employ the "absurdity" exception in 

order to avoid the harsh result. In effect, we presume that 

Congress would intend that courts not apply the plain language of 

a statute where it would otherwise lead to an absurdity. This 

link between the "absurdity" exception and congressional intent is 

crucial. It is not enough for a court to find that upon 

application of the plain meaning of a statute, a given outcome is 

foolish. Instead, a court so finding must be convinced that the 

result is so absurd that Congress, not the court, could not have 

intended such a result. 

The Supreme Court in Holy· Trinity, provided two excellent 

examples of this analysis: 

"The common sense of man approves the judgment mentioned 

by Puffendorf, that the Bolognian law which enacted 

'that whoever drew blood in the streets should be 

punished with the utmost severity,' did not extend to 

the surgeon who opened the vein of a person that fell 

down in the street in a fit. The same common sense 

accepts the ruling, cited by Plowden, that the statute 

of 1st Edward II., which enacts that a prisoner who 

breaks prison shall be guilty of felony, does not extend 

to a prisoner who breaks out when the prison is on fire, 

'for he is not to be hanged because he would not stay to 

be burnt.' ..• " 

Holy Trinity at 461 (citing United States v. Kirby, 7 Wall. 482, 

486-87 (1868)). In these two cases it could not be said, without 

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evidence to the contrary, that the legislative bodies intended 

the plain language to lead to such absurd results. Therefore, 

while the courts invoked the "absurdity" exception to avoid 

applying the plain language of the statutes at issue, they were, 

nonetheless, attempting to carry out the legislative intent. 

We are not persuaded that were we to apply the plain 

language to the facts of this case, that Congress would deem the 

result so absurd that it could not possibly have intended such 

results. Indeed, were we to adopt the broad interpretation of 

the word "arises" proffered by the RTC, it would completely 

obliterate the mutual exclusivity between substitution cases and 

RTC actions cases--a dichotomy that Congress so clearly 

fashioned. We cannot say that Congress could not have intended 

to treat the removal of substitution cases differently from the 

removal of RTC actions cases. 

Further, we do not agree with the RTC that the plain 

language interpretation of § 1441a(l) leads to absurd 

consequences in the sense of a patently and materially 

unreasonable result or a result that is contrary to the purpose 

of the statute. There is nothing "absurd" about Congress' 

apparent desire to allow the RTC to remove substitution cases to 

the District of Columbia. Similarly, there is nothing "absurd" 

about Congress' apparent desire to allow for the removal of RTC 

actions cases to the local federal district court. The RTC 

argues that these plain meaning interpretations of§ 1441a(l)(3) 

lead to absurd consequences because they may lead to a forum 

which is not convenient to the litigants and the witnesses. 

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However, there is no evidence that Congress was concerned with 

anyone's convenience when it enacted§ 1441a(l). Indeed, in the 

legislative history, there is no evidence of Congressional intent 

whatsoever with respect to§ 144la(l). 5 Nor are we empowered to 

redraft the third paragraph of § 144la(l) simply because we might 

agree with the RTC that the world would be a better place if the 

removal location were more convenient for litigants and 

witnesses. 6 

The RTC argues that it is absurd to interpret§ 1441a(l)(3) 

as requiring the RTC to remove substitution cases to the District 

of Columbia when, in general, the RTC, as a plaintiff, could not 

directly bring such a suit in that district. 7 It is claimed that 

5 The House Report merely paraphrases§ 1441a(l): 

[This subsection] provides that suits by or against the 

RTC shall arise under the laws of the United States and 

can be removed to the District Court of the District of 

Columbia or if the suit arises out of actions by the RTC 

with respect to an institution for which a conservator 

or receiver has been appointed in the District Court in 

which the institution's principal place of business is 

located. 

H.R. Rep. No. 101-54(I), 101st Cong., 1st Sess. at 362 (1989). 

6 In any event, 28 u.s.c. § 1404(a) is available for transfer of 

a case to another proper federal district court "for the 

convenience of parties and witnesses." That provision is now 

frequently being invoked by the United States District Court for 

the District of Columbia to transfer RTC cases to local federal 

district courts. See, ~, United Sav. Bank v. Rose, 752 F. 

Supp. 506, 508 (D.D.C. 1990); Asbury v. Germania Bank, 752 F. 

Supp. 503, 505 (D.D.C. 1990); Belgiovine Enterprises v. City 

Federal Sav. Bank, 748 F. Supp. 33, 36 (D.D.C. 1990); Piekarski v. 

Home Owners Sav. Bank, 743 F. Supp. 38, 43 (D.D.C. 1990). 

7 Although Congress specified in § 1441a(l) which federal courts 

can try removal cases, it did not specify which federal courts can 

try cases originally brought by the RTC as a plaintiff. Instead, 

in that situation we must look to the general venue provision of 

footnote continued . . . -10-

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the same public policy concerns should be served by both the 

removal provision contained in§ 1441a(1)(3) and the original 

venue provision of 28 U.S.C. § 1391, and it is argued that it is 

preferable to have these cases proceed in the local federal 

district court because the defendants ordinarily will reside in 

the local district and the events that gave rise to the 

litigation generally occur in the local district. We disagree. 

We note first that if a suit is brought against the RTC as a 

defendant, there is harmony between§ 1391 and§ 1441a(1)(3) 

because it is likely such a suit could be brought in the first 

instance in the District of Columbia under § 1391, and that it 

could be removed by the RTC to the District of Columbia under 

§ 1441a(1)(3). 8 In addition, there is no evidence whatsoever 

that Congress intended§ 1441a(1)(3) to serve the same public 

policy served by 28 U.S.C. § 1391. Indeed, Congress chose to use 

very different language for§ 1441a(1)(3) than the pre-existing 

. . . footnote continued 

28 U.S.C. § 1391. Under 28 U.S.C. § 1391(b), unless the defendant 

resides in the District of Columbia, or unless "a substantial part 

of the events or omissions giving rise to the claim occurred, or a 

substantial part of property that is the subject of the action is 

situated" in the District of Columbia, or unless the defendant may 

be found in the District of Columbia and there is "no district in 

which the action may otherwise be brought," the RTC, as plaintiff, 

could not bring an action in the District of Columbia. 

8 It is far more likely that§ 1441a(1)(3) will be invoked by the 

RTC as a defendant than as a plaintiff. It is true that under § 

1441a(1)(3)(A), the RTC, as a plaintiff, may remove a case within 

ninety days after it replaces the FSLIC. However, the RTC 

replaced the FSLIC in all cases on August 9, 1989. Section 

1441a(b)(6). Therefore, because ninety days has long since 

passed, this particular clause, in all likelihood, will never 

again be invoked. Instead, § 1441a(l)(3) will be invoked only in 

cases where a "suit is filed against the Corporation •••• " 

§ 1441a(l)(3)(B) (emphasis added). 

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language found in 28 u.s.c. § 1391. Finally, even if we were to 

focus solely on 28 u.s.c. § 1391 venue where the RTC files suit 

as a plaintiff, there is nothing irreconcilably inconsistent 

between 28 U.S.C. § 1391 and§ 144la(!)(3). One would apply the 

literal interpretation of§ 144la(!)(3) to all such removed 

actions involving the RTC, and the venue provisions of 28 u.s.c. 

§ 1391 would be applied to original actions brought by the RTC as 

a plaintiff. There is no conflict, and therefore, no 

irreconcilable inconsistency. 

Courts should follow the literal language of a statute when 

it is clear and when it does not lead to irreconcilable 

inconsistencies or clearly absurd results that Congress could not 

have intended. It is the function of the legislative branch, not 

the judicial branch, to make the laws. See u.s. Canst. art. I, 

§ 1. Cf. Demarest v. Manspeaker, 884 F.2d 1343, 1346 (lOth Cir. 

1989), reversed, 111 S. Ct. 599 (1991) (Courts "have no authority 

to modify the plain language of a statute based upon what [they] 

wish[] it said •... ") (Ebel, J. dissenting)). There is a 

heavy presumption that Congress meant what it said, particularly 

when the words are clear and not ambiguous when given their 

ordinary meaning. See, ~, American Tobacco Co. v. Patterson, 

456 u.s. 63, 68 (1982) (there is an assumption that the 

legislative intent is expressed by the ordinary meaning of the 

words used by Congress): Consumer Product Safety Comm'n v. GTE 

Sylvania, 447 u.s. 102, 108 (1980) ("Absent a clearly expressed 

legislative intention to the contrary, [the language of the 

statute itself] must ordinarily be regarded as conclusive."). 

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The words chosen by Congress are a restraint upon the courts, and 

if we are not tethered by them in all but the most compelling of 

cases, then there is left no restraint effectively to corral the 

power of the courts from substituting their judgment of proper 

public policy for that of the legislature's. 

Given the clarity of the language employed by Congress in 

§ 1441a(l)(3), and given the lack of any irreconcilable 

inconsistencies between the various paragraphs and subparagraphs 

that make up§ 1441a(l), and given the RTC's failure to point to 

any truly absurd results that would ensue from a reliance upon 

the plain language of§ 1441a(l)(3) when interpreting its 

meaning, we conclude that the proper course is to interpret 

§ 1441a(l)(3) by relying upon the plain meaning clearly suggested 

from the words themselves. If this statute as written poses 

significant problems for the RTC, it is always open to the RTC to 

return to Congress to seek an amendment. Therefore, we agree 

with the district court that this case was improperly removed to 

the United States District Court for the District of Colorado. 

The RTC, in its reply brief, requests that we remand the 

case to the district court with instructions that it consider 

transferring the case to the District of Columbia pursuant to 28 

9 U.S.C. S 1406(a) or 28 u.s.c. § 1631. While we agree with the 

RTC that the district court could have transferred this case to 

9 Under 28 u.s.c. § 1406(a), if the district court finds that "it 

be in the interest of justice," a party can cure a venue defect by 

transferring the case to the district of proper venue. Similarly, 

under 28 u.s.c. § 1631, if the district court finds that "it is in 

the interest of justice," a party can cure a jurisdictional defect 

by transferring the case to the court of proper jurisdiction. 

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the District of Columbia in the interest of justice, the RTC 

never made such a request of the district court. In the absence 

of such a request and on this record, we cannot say that it was 

plain error for the district court simply to have remanded the 

case to the state district court. Therefore, we decline the 

RTC's request that we remand with instructions that the district 

court consider this option. The district court's decision to 

remand this case is AFFIRMED. 

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