128 U.S.C. §§ 1346, 2671-80.

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 93-2556

Summary Calendar

ALX EL DORADO, INC., ET AL.,

Plaintiffs-Appellants,

versus

SOUTHWEST SAVINGS AND LOAN 

ASSOCIATION/FSLIC, ET AL.,

Defendants,

UNITED STATES OF AMERICA,

Defendants-Appellees.

Appeal from the United States District Court

For the Southern District of Texas

(August 30, 1994)

Before DUHÉ, WIENER, and STEWART, Circuit Judges.

PER CURIAM:

Plaintiffs-Appellants ALX El Dorado, Inc., El Dorado

Associates, LTD., Red Top Inc., and Edward L. Whittenburg

(collectively, plaintiffs) sued Defendant-Appellee the United

States under the Federal Tort Claims Act (FTCA).1 Plaintiffs

allege that the United States))through its agencies the Federal
 

2499 U.S. 315 (1991).

 

328 U.S.C. § 2680(a). 

 

4In addition, plaintiffs alleged and eventually obtained

judgments against certain financial institutions and their

officers. These defendants and plaintiffs' judgments against

them are not part of this appeal.

2

Deposit Insurance Corporation (FDIC), the Federal Savings and Loan

Insurance Corporation (FSLIC), the Federal Home Loan Bank Board

(FHLBB), the Federal Home Loan Bank Board-Dallas (FHLBB-D), and the

Office of Thrift Supervision (OTS)))negligently supervised two

failed thrift institutions, Southwest Savings and Loan Association

(Southwest) and Vernon Savings and Loan Association (Vernon).

The district court dismissed plaintiffs' suit against the

United States pursuant to Rule 12(b)(6), concluding that under

United States v. Gaubert2 their claims were barred by the

"discretionary function" exception to the FTCA.3 Finding no

reversible error, we affirm.

I

FACTS AND PROCEEDINGS

This case arises out of two errant real estate transactions

involving plaintiffs, Vernon, and Southwest. Plaintiffs alleged,

inter alia, that, as part of those transactions, the officers of

Vernon and Southwest engaged in fraudulent misrepresentations and

extensively breached various loan agreements and other contracts.4

Of significance here, plaintiffs also allege that part of this

misconduct occurred during the United States's "watch," i.e., when

Vernon and Southwest were under the guidance and eventual
 

5The district court's conclusion that the "discretionary

function" exception applied divested it of jurisdiction over the

United States; thus, the proper ground for dismissal should have

been Rule 12(b)(1). See McNeily v. United States, 6 F.3d 343,

347 (5th Cir. 1993). Such technical error does not, of course,

affect the disposition of this appeal. 

 

6Cooper v. Sheriff, Lubbock County, Texas, 929 F.2d 1078,

1082 (5th Cir. 1991). 

 

7Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Cooper, 929

F.2d at 1082.

3

receivership of the "supervisory agent," the FSLIC. 

The United States contended that the claims against it were

barred by the "discretionary function" exception to the FTCA. The

district court agreed, and dismissed those claims pursuant to Rule

12(b)(6). Plaintiffs timely appealed. 

II

ANALYSIS

In reviewing a Rule 12(b)(6) dismissal,5 we accept all well

pleaded averments as true and we view them in the light most

favorable to the plaintiff.6 We do not affirm such a dismissal

unless it appears beyond doubt that the plaintiff could prove no

set of facts in support of his claim that would entitle him to

relief.7 Here, plaintiffs allege that the FHLBB placed the FSLIC

as "supervisory agent" at Vernon and Southwest. Plaintiffs alleged

in paragraph 125 of their complaint that

Defendant United States was negligent by allowing loans

in the amount of $25 million to inflate and expand to

$195 million without the knowledge or consent of

Plaintiffs all the while the United States Regulators

were in charge of the failed institutions Vernon and

Southwest; failing to monitor the loans at Vernon and

Southwest; failing to follow its own procedures regarding

advances of funds while the Defendants Vernon and the
 

8Paragraph 125 also concluded with the allegation that

"[a]ll of such negligence was a proximate cause of actual damage

to Plaintiffs."

 

9499 U.S. 315 (1991).

 

10Id. at 319-20. The regulators in Gaubert were involved in

everything from arranging for the hiring of consultants on

operational and financial matters to reviewing and "approving"

the institutions' litigation choices.

 

11Id. at 325. 

4

former Defendant Southwest were in receivership; failing

to supervise its regulators; failing to enforce cease and

desist orders; and failing to follow supervisory orders

and agreements.8

The Supreme Court recently addressed the application of the

"discretionary function" exception of the FTCA to the oversight,

supervision, and management of financial institutions in United

States v. Gaubert.

9 The FHLBB in Gaubert))like the FSLIC here))was

extensively involved in the oversight and management of a soon-tobe failed financial institution.10 The Supreme Court emphatically

rejected any claim that "management" or "operational" decisions are

excluded from the ambit of the "discretionary function" exception:

A discretionary act is one that involves choice or

judgment; there is nothing in that description that

refers exclusively to policymaking or planning functions.

Day-to-day management of banking affairs, like the

management of other businesses, regularly requires

judgment as to which of a range of permissible courses is

the wisest.11

The Court devised a two-part test for applying the "discretionary

function" exception: (1) the challenged conduct must involve an

element of judgment or choice, and 2) the judgment or choice must
 

12Id. at 322, 323; McNeily, 6 F.3d at 348 (describing

Gaubert test). 

 

13The plaintiff must allege a claim sufficient to survive a

motion to dismiss based on the "discretionary function"

exception. E.g., Gaubert, 499 U.S. at 327; McNeily, 6 F.3d at

347-49. 

 

14Gaubert at 329. During the relevant period in the

complaint, Vernon and Southwest were regulated by the FHLBB and

were subject to the statutes discussed in Gaubert. Among other

things, the FHLBB had sole discretion to allow troubled

institutions to operate under FHLBB supervision or to determine

that an institution was insolvent and to place it into

receivership. 12 U.S.C. § 1464. The "supervisory agent" and the

ultimate receiver here, the FSLIC, had broad powers to liquidate

such institution in an orderly manner or to make such other

disposition of the matter as it deemed to be in the best

interests of the institution, its savers, and the Corporation. 

12 U.S.C. § 1729(b)(1). The foregoing statutes have since been

amended or repealed by the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989 (FIRREA), which has placed

similar discretion in different federal banking agencies. See

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

 

15The only "mandatory-sounding" items in this complaint

involve the FHLBB's purported negligent failure to supervise,

i.e., failure to require Vernon and Southwest to comply with the

FHLBB's procedures, cease and desist orders,and supervisory

orders. Such a claim is frivolous. We held even before Gaubert

that the claimed failure of a banking agency to supervise is

protected by the "discretionary function" exception. FDIC v.

Mmahat, 907 F.2d 546, 552 (5th Cir. 1990), cert. denied, 499 U.S.

5

be based on considerations of public policy.12

Plaintiffs' averments fail the Gaubert test.13 Regarding the

first step, as the Gaubert Court itself noted, the relevant

statutes provided the banking agencies with broad authority to

supervise financial institutions; such statutes were not couched in

mandatory terms.14 In contrast, the plaintiffs here have alleged

only some generalized failures to follow mandatory rules; they have

failed))either in the complaint or here on appeal))to point to even

one relevant mandatory limitation on that statutory discretion.15
936 (1991).

Plaintiffs also complain that the district court abused its

discretion in denying them leave to amend their complaint. As

plaintiffs have failed to identify even one thing regarding any

supposed "mandatory" limits that would have been alleged

differently, we find this contention to be without merit. 

 

16Cf. McNeily, 6 F.3d at 349 (affirming Rule 12(b) dismissal

based on holding that "vague and conclusory" [sic] allegations

are insufficient to defeat the sovereign immunity of the United

States). 

 

17Gaubert, 499 U.S. at 324-25 (emphasis added).

6

Such averments are insufficient, in themselves, to defeat the first

part of the Gaubert test.16

As for the second element, Gaubert instructs that

[w]hen established governmental policy, as expressed or

implied by statute, regulation, or agency guidelines,

allows a Government agent to exercise discretion, it must

be presumed that the agent's acts are grounded in policy

when exercising that discretion. For a complaint to

survive a motion to dismiss, it must allege facts which

would support a finding that the challenged actions are

not the kind of conduct that can be said to be grounded

in the policy of the regulatory regime.17 

Here, the plaintiffs have alleged nothing that would suggest that

the statutory discretion exercised by the banking agencies))whether

or not exercised negligently))was not based on considerations of

public policy. Accordingly, plaintiffs' averments fail the second

part of the Gaubert test.

III

CONCLUSION

The claimed negligent conduct of the banking agencies of the

United States falls within the "discretionary function" exception

to the FTCA. Therefore, the judgment of the district court

dismissing all claims against the United States is
7

AFFIRMED.