IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 96-60596

 

FEDERAL DEPOSIT INSURANCE CORPORATION,

As Manager of the FSLIC Resolution Fund

Plaintiff-Counter 

Defendant-Appellant,

versus

TOM B SCOTT, JR

Defendant-Counter ClaimantAppellee.

 

Appeal from the United States District Court

For the Southern District of Mississippi

 

October 1, 1997

Before HIGGINBOTHAM, DUHÉ, and WIENER, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

Federal Deposit Insurance Corporation appeals summary judgment

granted to Tom Scott, Jr., on his indemnification claim against the

FDIC. We find that the district court lacked jurisdiction over

Scott’s counterclaim because he failed to exhaust his

administrative remedies with the FDIC, as required by the Financial

Institutions Reform, Recovery, and Enforcement Act of 1989.

I.

This case arises out of the troubled history of a Mississippi

savings and loan association. On August 10, 1989, the Office of

Thrift Supervision appointed the Resolution Trust Corporation as

receiver for Unifirst Bank for Savings, F.A. The RTC
2

simultaneously organized Unifirst Bank for Savings, A Federal

Savings and Loan Association. As receiver for Old Unifirst, the

RTC then entered into a Purchase and Assumption Agreement with New

Unifirst for the purpose of transferring certain assets and

liabilities from the old entity to the new.

On June 15, 1990, the OTS appointed the RTC as receiver for

New Unifirst. The RTC then entered into a contract of sale with

its corporate alter ego, transferring to RTC Corporate all of the

rights, title, and interest in the claims of New Unifirst. On

December 31, 1995, pursuant to the Resolution Trust Corporation

Completion Act, 12 U.S.C. §§ 1441a(m)(1)-(2), RTC Corporate ceased

to exist. All of RTC Corporate’s assets, including its interest in

New Unifirst, were transferred to the FDIC as the manager of the

Federal Savings and Loan Insurance Corporation Resolution Fund.

On March 22, 1994, the RTC, in its capacity as receiver for

New Unifirst, filed a complaint seeking damages from Tom Scott,

Jr., the longtime president and chief executive officer of

Unifirst. The complaint alleged that Scott had breached various

duties to Unifirst in connection with his oversight of several

loans the institution had made.

Scott counterclaimed for indemnification. He asserted that an

indemnification resolution adopted by the Board of Directors of Old

Unifirst entitled him to recoup any award obtained against him, as

well as attorneys’ fees and expenses in defending against the

FDIC’s suit.
 

1After the FDIC succeeded to the RTC’s interests in New

Unifirst, the district court entered an order replacing the “RTC”

as the plaintiff in this action with the “FDIC as Manager of the

FSLIC Resolution Fund.” We hereinafter refer to the plaintiff as

the “FDIC.”

3

Thereafter, the FDIC1 moved to dismiss Scott’s counterclaim on

several grounds. First, it argued that the district court lacked

jurisdiction to hear Scott’s counterclaim because FIRREA required

Scott to exhaust his administrative remedies with the FDIC before

proceeding in court. Second, the FDIC asserted that Scott had no

grounds for seeking indemnification, either under the Old Unifirst

bylaws, OTS regulations, or the Purchase and Assumption Agreement.

In a long series of rulings, the district court disposed of

the FDIC’s and Scott’s claims. On April 18, 1995, the court denied

the FDIC’s jurisdictional defense to Scott’s counterclaim,

reasoning that Scott need not exhaust his administrative remedies

with the FDIC because the FDIC’s lawsuit against him demonstrated

official bias against his indemnification claim. At the same time,

the court ruled that the Purchase and Assumption Agreement was

ambiguous as to whether New Unifirst succeeded to Old Unifirst’s

obligation to indemnify Scott, thus requiring a trier of fact to

resolve the matter

Scott moved for summary judgment on the counterclaim, but the

district court denied his motion on July 1, 1995. After the

Mississippi legislature retroactively altered the state’s gross

negligence standard, he also moved for partial summary judgment on

four of the FDIC’s five breach-of-duty claims against him. On June
4

8, 1995, the court granted this motion, leaving only the FDIC’s

claim for gross negligence.

Scott then moved for summary judgment on the FDIC’s remaining

claim against him and on his indemnification counterclaim. On May

30, 1996, the district court granted summary judgment for Scott on

the FDIC’s last claim. Moreover, the court reversed its previous

decision on the indemnification issue, concluding that the

Partnership and Assumption Agreement was not ambiguous and that New

Unifirst had acquired Old Unifirst’s liability for indemnification.

Accordingly, it granted Scott’s motion for summary judgment on his

indemnification counterclaim, and it entered final judgment in the

case.

The FDIC timely appealed the district court’s indemnification

rulings only. On appeal, the FDIC again argues that FIRREA

withdraws jurisdiction from federal courts to hear Scott’s claim

until he exhausts his administrative remedies. Alternatively, it

contends that Scott is not owed indemnification because New

Unifirst never acquired Old Unifirst’s liability for

indemnification and because OTS regulations requiring

indemnification for thrift executives do not apply to Scott.

II.

As a threshold matter, we must first determine whether the

district court properly exercised jurisdiction. Because we find

that it did not, we need not reach the merits of Scott’s

indemnification counterclaim.

A.
5

In enacting FIRREA, Congress established a comprehensive

administrative procedure for the resolution of claims against a

failed financial institution held in receivership by the FDIC. All

creditors or other persons having such claims must first present

them to the receiver for an administrative determination of whether

they should be paid. 12 U.S.C. §§ 1821(3)-(13). Congress

explicitly deprived federal courts of subject matter jurisdiction

over claims not so presented:

(D) Limitation on judicial review

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 Corporation has been

appointed receiver, including assets which the

Corporation may acquire from itself as such

receiver; or

(ii) any claim relating to any act or omission of

such institution or the Corporation as receiver.

12 U.S.C. § 1821(d)(13)(D). The other circuits have uniformly held

that in § 1821(d)(13)(D), Congress established an administrative

exhaustion requirement; before a litigant may bring a claim in

court against the receiver, the FDIC must first administratively

deny the claimant relief. See, e.g., Simon v. FDIC, 48 F.3d 53, 57

(1st Cir. 1995); RTC v. Elman, 949 F.2d 624, 627 (2d Cir. 1991);

RTC v. W.W. Dev. & Management, Inc., 73 F.3d 1298, 1304 (3d Cir.

1996); Brady Dev. Co., Inc. v. RTC, 14 F.3d 998, 1007 (4th Cir.

1994); Bueford v. RTC, 991 F.2d 481, 484 (8th Cir. 1993).

The classification of the exhaustion requirement in §

1821(d)(13)(D) as being of congressional or judicial origin is of

major consequence. See Information Resources, Inc. v. United
6

States, 950 F.2d 1122, 1126 (5th Cir. 1992). If Congress itself

imposes an exhaustion requirement, courts must enforce its express

terms. See Coit Indep. Joint Venture v. FSLIC, 489 U.S. 561, 579,

109 S. Ct. 1361, 1372, 103 L. Ed. 2d 602 (1989). In such cases,

failure by a claimant to exhaust deprives federal courts of

jurisdiction. Information Resources, 950 F.2d at 1126.

However, where Congress has not explicitly mandated

exhaustion, “courts are guided by congressional intent in

determining whether application of the [exhaustion] doctrine would

be consistent with the statutory scheme.” Patsy v. Board of

Regents, 457 U.S. 496, 502 n.4, 102 S. Ct. 2257, 2560 n.4, 73 L.

Ed. 2d 172 (1982). If courts find that exhaustion would promote

both the Congressional goals in erecting a particular

administrative regime and judicial efficiency, they may exercise

their discretion and require claimants to exhaust administrative

remedies before proceeding in court. Coit, 489 U.S. at 579, 109 S.

Ct. at 1372 (“Where a statutory requirement of exhaustion is not

explicit, ‘courts are guided by congressional intent in determining

whether application of the doctrine would be consistent with the

statutory scheme.’”) (quoting Patsy, 457 U.S. at 502 n.4, 102 S.

Ct. at 2560 n.4). By the same token, courts can excuse such

exhaustion requirements of their own creation “where the interests

of the individual weigh heavily against requiring administrative

exhaustion.” McCarthy v. Madigan, 503 U.S. 140, 146, 112 S. Ct.

1081, 1087 (1992), 117 L. Ed. 2d 291 (1992). If an exhaustion

requirement is judicially implied, courts may decline to enforce it
7

if “requiring resort to the administrative remedy may occasion

undue prejudice to subsequent assertion of a court action,” id. 503

U.S. at 146-47, 112 S. Ct. at 1087, if there is some doubt as to

whether an agency is empowered to grant effective relief, id. 503

U.S. at 147, 112 S. Ct. at 1088, or if “an administrative remedy

may be inadequate where the administrative body is shown to be

biased or has otherwise predetermined the issue before it,” id. 503

U.S. at 148, 112 S. Ct. at 1088.

Despite the unanimity among the circuit courts in finding that

Congress in § 1821(d)(13)(D) explicitly mandated exhaustion, the

district court below construed the major Fifth Circuit case on the

issue, Meliezer v. RTC, 952 F.2d 879 (5th Cir. 1992), as holding

instead that courts have created FIRREA’s exhaustion requirement.

Accordingly, the district court concluded that it was free to

excuse exhaustion in the exercise of its judicial discretion. The

court waived exhaustion for Scott because it felt that Scott’s

administrative remedies within the FDIC would have been futile, as

the agency’s suit against Scott demonstrated that it was biased

against his indemnification counterclaim. We do not reach this

bias issue, because we disagree with the district court’s reading

of Meliezer.

In Meliezer, this court dismissed for lack of jurisdiction the

claims of two mortgage assumers who had brought suit against the

RTC but had not exhausted their administrative remedies under

FIRREA. We held that Congress unambiguously crafted an exhaustion

requirement in FIRREA:
8

Typically, exhaustion of administrative remedies is required

where Congress imposes such a requirement. If the statutory

language is not explicit, courts are guided by congressional

intent in determining whether exhaustion is required.

Although FIRREA does not explicitly mandate exhaustion of

administrative remedies before judicial intervention, the

language of the statute and indicated congressional intent

make clear that such is required. . . . [S]ection

1821(d)(13)(D) clearly establishes a statutory exhaustion

requirement.

Id. at 882 (citations omitted). The district court, pointing to

our phrase, “FIRREA does not explicitly mandate exhaustion,”

concluded that administrative exhaustion under FIRREA must be of

judicial rather than legislative origin. Relying on McCarthy, it

reasoned that the Meliezer court, in looking to congressional

intent and statutory language, must necessarily have been creating

an exhaustion requirement by judicial implication, not enforcing

one as mandated by congressional direction. See McCarthy, 503 U.S.

at 144, 112 S. Ct. at 1086 (“Where Congress specifically mandates,

exhaustion is required. But where Congress has not clearly

required exhaustion, sound judicial discretion governs.”)

(citations omitted).

We must disagree with this characterization of Meliezer. Our

statement in Meliezer, “FIRREA does not explicitly mandate

exhaustion,” was meant only to indicate that the statute did not

employ the express term, “administrative exhaustion.” Yet we did

not hesitate to recognize that FIRREA’s exhaustion requirement fell

into the first, jurisdictional category of exhaustion requirements,

as the structure of the statute evidences Congress’s intent to

erect an administrative exhaustion regime. See Meliezer, 952 F.2d

at 882 (“[T]he language of the statute and indicated congressional
9

intent make clear that [exhaustion] is required. . . . [S]ection

1821(d)(13)(D) clearly establishes a statutory exhaustion

requirement.”). Exhaustion requirements fall into the second,

judicially-created category when it is far less obvious that

Congress established an explicit system of administrative

exhaustion and it is necessary for courts to imply one to

effectuate the goals of a statute and promote judicial efficiency.

Thus, Meliezer, in finding an exhaustion requirement, found

one that was of intentional congressional design. Accordingly, we

lack jurisdiction to entertain Scott’s counterclaim against the

FDIC until Scott exhausts his administrative remedies. Although

Scott’s resort to administrative channels may be futile, we are

powerless to waive a congressionally-imposed exhaustion

requirement.

At oral argument, Scott advanced a new argument: the

administrative exhaustion requirement in the statute does not apply

to post-receivership claims that arise after FIRREA’s ninety-day,

statutory bar date for bringing actions against a receivership.

Although the statutory bar date in the case elapsed before Scott

brought his counterclaim, the FDIC has an internal claims procedure

that allows claimants to file “late claims” that arise after the

bar date. See Heno v. FDIC, 20 F.3d 1204, 1210-14 (1st Cir. 1994)

(publishing the FDIC procedures). We defer to the FDIC’s

reasonable interpretation of FIRREA as requiring administrative

exhaustion even for post-bar date claims. See Simon v. FDIC, 48

F.3d 53, 57-58 (1st Cir. 1995); Heno, 20 F.3d at 1208-10.
10

B.

Perhaps anticipating our response to the lower court’s

exhaustion ruling, Scott attempts to rescue jurisdiction by

escaping from the express language of 12 U.S.C. § 1821(d)(13)(D).

Section 1821(d)(13)(D) bars federal courts from entertaining any

“claim” made against a receiver, unless the claimant has exhausted

all administrative remedies. Scott contends that his action for

attorneys’ fees is not a “claim” under FIRREA and thus exhaustion

does not apply to him. We reject this argument as well.

Whether an indemnification action is a “claim” under FIRREA is

a matter of first impression for our circuit. The other courts

that have addressed the issue have divided over it. Compare RTC v.

Titan Fin. Corp., 22 F.3d 923, 927 (9th Cir. 1994) (holding that

attorney’s fees are not a “claim” under FIRREA), RTC v. Artley, No.

CV492-209 (S.D. Ga. Mar. 30, 1993) (same), and RTC v. Western

Techs., Inc., 877 P.2d 294, 299-304 (Ariz. Ct. App. 1994) (same),

with RTC v. Heiserman, 839 F. Supp. 1457, 1470 (D. Colo. 1993)

(holding that indemnification is a “claim” under FIRREA); and RTC

v. Youngblood, 807 F. Supp. 765, 770 (N.D. Ga. 1992) (holding that

a suit for attorney’s fees is a “claim” under FIRREA). Scott

employs a temporal argument, relying on the reasoning of Western

Technologies. According to Western Technologies, the word “claim”

means a “cause of action,” and an action for attorneys’ fees is not

an independent “cause of action,” but rather arises only after the

FDIC engages in litigation against the claimant. See Western

Techs., 877 P.2d at 300. Thus, indemnification must not be the
11

kind of “claim” contemplated by Congress in drafting FIRREA. The

Ninth Circuit employed similar analysis in Titan Financial,

reasoning that a defendant’s counterclaim against the FDIC is not

subject to the exhaustion requirement, if, prior to the present

litigation, (1) the defendant was not a creditor of the FDIC or its

predecessor-in-interests, and (2) the defendant had no independent

basis for filing a claim against either. Titan Fin. Corp., 22 F.3d

at 927.

We fail to see, however, how the temporal character of an

indemnification action affects the exhaustion question. True,

Scott’s basis for indemnity did not originate until after he was

sued by the FDIC. Recently, however, we held in Home Capital

Collateral, Inc. v. FDIC, 96 F.3d 760 (5th Cir. 1996), that

FIRREA’s exhaustion requirement applies even to claims that arise

post-receivership from the actions of the receiver, id. at 763.

Here, the fact that the FDIC created Scott’s claim for

indemnification through its own activities should not change the

nature of his cause of action, for Home Capital instructs us that

such claims are still subject to § 1821(d)(13)(D).

Admittedly, Scott’s counterclaim for indemnity is related to

the litigation that the counterdefendant, the FDIC, initiated. Yet

that relationship does not alter the fact that Scott’s request for

indemnity is an independent claim. In the end, Scott is suing to

enforce his rights under Old Unifirst’s bylaws. This indemnity

suit, therefore, is an independent claim for relief, not an
 

2Other courts have divided on the issue of whether affirmative

defenses are subject to FIRREA’s exhaustion requirement. Compare

RTC v. Midwest Federal Sav. Bank, 36 F.3d 785, 793 (9th Cir. 1993)

(holding that affirmative defenses are not subject to exhaustion),

and National Union Fire Ins. Co. v. City Sav., F.S.B., 28 F.3d 376,

393 (3d Cir. 1994) (same), with FSLIC v. McGinnis, Juban, Bevan,

Mullins & Patterson, P.C., 808 F. Supp. 1263, 1280-81 (E.D. La.

1992) (holding that some affirmative defenses are subject to

exhaustion); FSLIC v. Shelton, 789 F. Supp. 1367, 1370-71 (M.D. La.

1992) (same). We need not resolve the controversy here, for we

find that Scott’s action for indemnification is in the nature of a

counterclaim, not an affirmative defense. Courts have uniformly

held that parties must exhaust their administrative remedies under

FIRREA before proceeding on a counterclaim. See National Union, 28

F.3d at 394 n.25 (“It appears that there is a forming consensus in

the courts that counterclaims are jurisdictionally barred by §

1821(d)(13)(D), unless administrative remedies are exhausted.”);

McGinnis, 808 F. Supp. at 1280 (“Courts have, with one voice, held

that § 1821(d)(13)(D)’s jurisdictional limits apply to

counterclaims against the FDIC . . . .”).

 

3Because we dispose of this matter on jurisdictional grounds,

however, we do not express an opinion on the merits of any

indemnification claim that might be brought by Scott.

12

affirmative defense or the like.2 See A & B Constr., Inc. v. Atlas

Roofing & Skylight Co., 867 F. Supp. 100, 105 (D.R.I. 1994)

(“Indemnity . . . is an independent cause of action.”); FDIC v.

Niblo, 821 F. Supp. 441, 456 (N.D. Tex. 1993) (“[I]ndemnity is not

an affirmative defense within the purview of Federal [Rule of Civil

Procedure] 8(c), but rather a claim for recovery which must be pled

and proved”). If, for example, a third party had sued Scott for

his actions as president of Unifirst, he would be entitled to bring

a claim for indemnification against the FDIC as a separate suit,

should the FDIC refuse to pay his attorneys’ fees.3 Here, the

hypothetical third party and the FDIC are one and the same, but the

principle is no different: Scott’s counterclaim is an independent

claim, whether against a plaintiff or a third-party defendant.
13

Accordingly, Scott was obliged to present this indemnification

claim, like all others, to the FDIC for administrative review. See

National Union Fire Ins. Co. v. City Sav., F.S.B., 28 F.3d 376, 394

(3d Cir. 1994) (holding that an action “which asserts a right to

payment” is a claim subject to exhaustion under FIRREA).

That Scott’s indemnification claim is subject to FIRREA’s

exhaustion requirement is made clear by the language of the

statute. FIRREA withdraws jurisdiction, absent exhaustion, from

district courts for any claim or action for payment from the assets

of the receivership. 12 U.S.C. § 1821(d)(13)(D)(i). Were Scott to

prevail on his counterclaim, his attorneys’ fees would come from

the receivership’s assets. Although Scott also advances an

argument premised on OTS regulations, he bases his primary claim

for indemnification upon a bylaw that Old Unifirst’s Board of

Directors approved in 1984, providing for indemnification for Old

Unifirst’s officers and directors. We liken this bylaw to a

contractual provision for indemnity between two parties, as Scott

has the power to enforce it. As we held in Interfirst Bank

Abilene, N.A. v. FDIC, 777 F.2d 1092, 1097 (5th Cir. 1985),

generally, parties cannot recover attorneys’ fees against the

assets of a failed bank because doing so would violate the rule

that the assets of a failed institution should be ratably

distributed amongst its creditors holding approved or adjudicated

claims. This rule does not apply, however, where “recovery of

attorneys’ fees is [] specified in the parties’ contract or where

there is [a] collateral fund from which they can be recovered.”
14

Id. If attorneys’ fees are provided for contractually, parties may

seek them from the receivership’s assets. See RTC v. Heinhold

Commodities, Inc., 803 F. Supp. 1342, 1347 (N.D. Ill. 1992); Royal

Bank v. FDIC, 733 F. Supp. 1091, 1099 (N.D. Tex. 1990).

Furthermore, FIRREA denies jurisdiction to federal courts over

“any claim relating to any act or omission” of the receivership.

§ 1821(d)(13)(D)(ii). Here, Scott’s claim arises from an “act” of

the FDIC in its capacity as receiver — its lawsuit against him.

Thus, the plain language of the statute dictates that Scott must

first bring his claim administratively.

Scott contends, however, that classifying attorneys’ fees as

a “claim” under the statute would lead to wasteful and inefficient

piecemeal litigation. See Western Techs., 977 P.2d at 303

(“Requiring parties to pursue ‘claims’ for attorneys’ fees

administratively through RTC thus would serve only to frustrate and

delay the process. Such a requirement would be antithetical to the

statute’s purpose to ‘quickly and efficiently resolve claims

against a failed institution without resorting to litigation.’”)

(quoting Meliezer, 952 F.2d at 883). Yet subjecting an

indemnification request to the administrative process is no more

inefficient than doing the same for any other type of counterclaim.

Other courts have uniformly held that counterclaims are subject to

§ 1821(d)(13)(D). See, e.g., RTC v. W.W. Dev. & Management, Inc.,

73 F.3d 1298 (3d Cir. 1996); Heno v. FDIC, 20 F.3d 1204, 1209 (1st

Cir. 1993); FSLIC v. McGinnis, Juban, Bevan, Mullins & Patterson,

P.C., 808 F. Supp. 1263, 1280-81 (E.D. La. 1992); FSLIC v. Shelton,
15

789 F. Supp. 1367, 1372-73 (M.D. La. 1992). With all other

counterclaims, therefore, defendants must first make an

administrative demand on the FDIC before proceeding with their

cases, even if they are in the middle of litigation. We see no

reason why claims for attorneys’ fees should be any different.

III.

We recognize that our holding today makes for an inefficient

FDIC claims process. Although we do not decide the issue, counsel

at oral argument instructs us that once this appeal is disposed of,

Scott is not barred from making his administrative demand, seeing

it get rejected, and then promptly refiling his claim. Before long

we may find both parties back before this court, once again asking

us to resolve the merits of Scott’s indemnification claim.

Congress intended to create an efficient system for resolving

claims arising from the disastrous failure of savings and loan

companies. However, the statute here makes waste. Regardless, it

is not within our province to rewrite statutes simply to make them

more efficient.

For the foregoing reasons, we VACATE the judgment of the

district court and REMAND the case to the district court with

instructions to dismiss for want of jurisdiction.