IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

BALDEV RAJ BHUTANI, ) 

 ) 

 Plaintiff, ) 

 ) 

 vs. ) 

 ) No. 12 C 5320 

BARRINGTON BANK AND TRUST ) 

COMPANY and FEDERAL DEPOSIT ) 

INSURANCE CORPORATION, ) 

 ) 

 Defendants. )

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge: 

 Baldev Bhutani filed suit in Illinois state court against the Federal Deposit 

Insurance Corporation (FDIC), in its capacity as receiver for the failed Charter National 

Bank and Trust (Charter Bank), and against Barrington Bank and Trust Company 

(Barrington Bank), which acquired the assets and liabilities of Charter Bank. Bhutani 

sought to recover funds he had deposited into a money market account at Charter 

Bank. The FDIC removed the case to this Court pursuant to 28 U.S.C. § 1442 and then 

moved to dismiss for lack of subject matter jurisdiction. Barrington Bank has also 

moved to dismiss for lack of subject matter jurisdiction, and for failure to state a claim. 

For the reasons stated below, the Court grants defendants’ motions. 

Background 

 The Court takes the following facts from the allegations in Bhutani’s complaint 

and the parties’ submissions on the motions to dismiss. 

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 In August 2007, Bhutani – as manager of Avtar LLC –obtained a loan from 

Charter Bank in the amount of $1,650,000, secured by a mortgage on real estate in 

Gurnee, Illinois. The terms of the loan required Bhutani to sign as guarantor and to 

open a money market account in his name. The loan further provided for a right to setoff from accounts held by Avtar LLC and required Bhutani’s guaranty to remain in place 

until all mortgage obligations were satisfied. Pursuant to the agreement, Bhutani 

deposited a total of $325,505.12 into his money market account from August 2007 

through October 2009. 

 On May 17, 2011, Charter Bank served Bhutani with a state court complaint for 

foreclosure alleging that Avtar LLC was behind in its interest payments on the loan. On 

November 23, 2011, the court in foreclosure action entered a default judgment against 

Avtar LLC. Approximately one month later, Charter Bank stated in court that the funds 

in Bhutani’s money market account had been applied toward payments on the loan to 

Avtar LLC. The Sheriff of Lake County conducted a foreclosure sale of the Gurnee 

property, and Charter Bank purchased the property. 

 On February 10, 2012, the Office of the Comptroller of the Currency (OCC) 

closed Charter Bank and appointed the FDIC as receiver.1

 Bhutani alleges that on the 

same day, the FDIC transferred Charter Bank’s assets and liabilities to Barrington Bank. 

 Bhutani filed a timely administrative claim with the FDIC as receiver in which he 

asserted that Charter Bank had wrongfully set off funds in his money market account 

against the Avtar LLC loan. He attached to his claim documents he had filed in the 

 

1

 The FDIC operates in two separate capacities. In its corporate capacity, the FDIC insures the 

deposits in banks and supervises and regulates their operation. 12 U.S.C. § 1821(f)(1). As 

receiver, the FDIC acts as receiver for failed banks, liquidates their assets and liabilities, and 

has the authority to repudiate their contracts. See id. §§ 1821(c)-(e). 

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state court foreclosure case in January 2012 in which he alleged that Charter Bank had 

denied his requests to withdraw funds in 2010 and 2011 claiming that the “funds were 

all used up.” FDIC’s Opening Br., Ex. B. By letter dated April 11, 2012, the FDIC as 

receiver informed Bhutani that his claim was disallowed. The FDIC’s notice further 

stated: 

Pursuant to 12 U.S.C. Section 1821(d)(6), if you do not agree with this 

disallowance, you have the right to file a lawsuit on your claim . . . in the 

United States District (or Territorial) Court for the District within which the 

failed institution’s principal place of business was located or the United 

States District Court for the District of Columbia within 60 days from the 

date of this notice. 

Id.., Ex. C. The letter explained that any failure to file a lawsuit pursuant to the statute 

would make the disallowance final and would forever bar Bhutani’s claim. 

 Despite what the notice stated, Bhutani did not file suit in federal district court. 

Rather, on or about May 4, 2012, he filed suit in Illinois state court seeking to obtain the 

funds from the money market account. As indicated earlier, the FDIC then removed the 

case to federal court. In his complaint, Bhutani alleges that defendants have refused 

him access to his funds; they (more specifically Charter Bank) were not permitted to a 

right of set-off from his money market account; and they have improperly refused to 

account for how his funds were used. 

Discussion 

On a motion to dismiss for lack of subject matter jurisdiction, the Court accepts 

the factual allegations in the complaint as true and draws reasonable inferences in favor 

of the plaintiff. Rueth v. EPA, 13 F.3d 227, 229 (7th Cir. 1993). The Court is not 

restricted to the jurisdictional contentions asserted in the complaint, however; it may use 

other submitted evidence to determine whether it has subject matter jurisdiction. 

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Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995). The party asserting jurisdiction 

bears the burden of persuasion on that issue. United Phosphorus Ltd. v. Angus Chem. 

Co., 322 F.3d 942, 946 (7th Cir. 2003). 

 The FDIC contends that the Court lacks subject matter jurisdiction pursuant to 

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

specifically, 12 U.S.C. § 1821. FIRREA establishes an administrative procedure for 

making claims against the FDIC when, as in this case, it is sued in its capacity as 

receiver for a failed depository institution. Under this procedure, a person with a claim 

against a seized depository institution or its receiver must first file a proof of claim with 

the FDIC, which must adjudicate the claim within 180 days. See 12 U.S.C. §§ 

1821(d)(3) & (5). If the agency disallows the claim or fails to rule within 180 days, the 

claimant has sixty days to file an action for de novo review in the appropriate federal 

district court. Id. § 1821(d)(6)(A). The statute provides that such an action is to be filed 

in the United States district court “within which the depository institution’s principal place 

of business is located or the United States District Court for the District of Columbia.” 

Id. § 1821(d)(6)(A). If the claimant fails to take action on the claim pursuant to these 

requirements, the agency’s disallowance of the claim is final, and the claimant loses all 

rights and remedies with respect to the claim. Id. § 1821(d)(6)(B); see Capitol Leasing 

Co. v. FDIC, 999 F.2d 188, 193 (7th Cir. 1993) (affirming district court’s dismissal of 

plaintiff’s claim for failure to follow the procedures mandated by 12 U.S.C. § 1821(d)(6)). 

 Bhutani did not comply with the procedure required by statute. He filed his 

complaint challenging the FDIC’s disallowance determination in Illinois state court rather 

than in one of the two appropriate federal district courts –the United States District Court 

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for this district or the District of Columbia. And Bhutani did so despite the fact that the 

FDIC gave him clear an unambiguous written notice that he had to file any suit 

challenging its disallowance of the claim in one of those two federal district courts. See 

Capitol Leasing Co., 999 F.2d at 193 (suggesting that there is no excuse for failure to 

comply with FIRREA, particularly if the disallowance notice sets forth the procedure for 

contesting the FDIC’s decision). 

 A plaintiff’s failure to follow the administrative claims process outlined in FIRREA 

deprives a court of subject matter jurisdiction over the plaintiff’s claim. 12 U.S.C. § 

1821(d)(6); Maher v. FDIC, 441 F.3d 522, 525 (7th Cir. 2006) (dismissing suit for lack of 

subject matter jurisdiction when claimant did not meet time limits for filing suit in court 

after administrative denial of claim). Bhutani filed his case in a court that lacked 

jurisdiction to consider it. The jurisdiction of a federal court upon removal of a case 

under 28 U.S.C. § 1442 is derivative of that of the state court from which the case was 

removed. Edwards v. U.S. Dep't of Justice, 43 F.3d 312, 316 (7th Cir. 1994) (citing 

Arizona v. Manypenny, 451 U.S. 232, 242 n. 17 (1981)). “Where the state court lacks 

jurisdiction of the subject matter or of the parties, the federal court acquires none, 

although in a like suit originally brought in federal court it would have had jurisdiction.” 

Minnesota v. United States, 305 U.S. 382, 389 (1939). The Court therefore lacks 

subject matter jurisdiction over Bhutani’s claim against the FDIC. 

 Bhutani’s failure to comply with FIRREA similarly deprives the Court of subject 

matter jurisdiction over his claim against Barrington Bank. The Seventh Circuit has not 

specifically addressed whether FIRREA applies to claims against purchasing banks, but 

other circuits have found, and this Court agrees, that the statute’s administrative claim 

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process applies to a claim asserted against a purchasing bank that is based on the 

conduct of a failed bank. See Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1142 (D.C. 

Cir. 2011) (“Where a claim is functionally, albeit not formally, against a depository 

institution for which the FDIC is receiver, it is a ‘claim’ within the meaning of FIRREA’s 

administrative claims process.”); Vill. of Oakwood v. State Bank & Trust Co., 539 F.3d 

373, 386 (6th Cir. 2008) (requiring compliance with FIRREA where claims against 

purchasing bank were related to FDIC’s acts as receiver of the failed bank); Am. First 

Fed., Inc. v. Lake Forest Park, Inc., 198 F.3d 1259, 1263 n.3 (11th Cir. 1999) (noting 

that holder of promissory note obtained from failed bank’s receiver “stands in the shoes 

of the [failed bank] and acquires its protected status under FIRREA”). 

 Bhutani’s claim against Barrington Bank is based on Charter Bank’s alleged 

failure to allow him to withdraw funds from his money market account and its application 

of those funds to the Avtar LLC loan. Bhutani argues that prior to FDIC’s receivership, 

Charter Bank stated in court that the funds in his money market account had been 

applied toward payments on that loan. In filing his administrative claim with the FDIC as 

receiver, Bhutani similarly alleged that Charter Bank refused him access to funds in his 

money market account in both 2010 and 2011 because the “funds were all used up.” 

FDIC’s Opening Br., Ex. B. In his complaint in the present case, Bhutani alleges that 

defendants have not shown that Charter Bank was authorized to use his money market 

funds to satisfy Avtar LLC’s loan payments. These allegations plainly rely on Charter 

Bank’s alleged conduct, not Barrington Bank’s post-purchase actions. For this reason, 

and because Bhutani did not meet the requirements of FIRREA in pursuing his claim in 

court, the Court lacks subject matter jurisdiction over his claim against Barrington Bank. 

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Conclusion

 For the foregoing reasons, the Court grants defendants’ motions to dismiss 

Bhutani’s complaint for lack of subject matter jurisdiction [docket nos. 6 & 22]. The 

Court denies Barrington Bank’s motion to dismiss pursuant to Rule 12(b)(6) as moot. 

The Court directs the Clerk to enter judgment dismissing this case for lack of subject 

matter jurisdiction. 

 

 MATTHEW F. KENNELLY 

 United States District Judge 

Date: December 10, 2012 

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