UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 93-2104

JAMES B. WHATLEY, ET AL.,

Plaintiffs-Appellants,

versus

RESOLUTION TRUST CORPORATION as

Receiver for Continental Savings,

a Federal Savings and Loan

Association,

Defendant-Appellee.

Appeal from the United States District Court

for the Southern District of Texas

( September 7, 1994 )

Before POLITZ, Chief Judge, GARWOOD and DUHÉ, Circuit Judges.

POLITZ, Chief Judge:

James Whatley, John Rowley, Philip Solomon, Myra Beth Whatley,

and Dan Bensimon appeal the district court's dismissal of their

claims against Resolution Trust Corporation and Continental

Savings, AFSLA, for lack of subject matter jurisdiction. For the

reasons assigned we vacate and remand for further proceedings.

BACKGROUND

On December 17, 1990 the plaintiffs filed suit in state court
 

1"After the appointment of a conservator . . . for an insured

depository institution, the conservator . . . may request a stay

for a period not to exceed -- (i) 45 days, in the case of any

conservator, . . . in any judicial action or proceeding to which

such institution is or becomes a party." 12 U.S.C.

§ 1821(d)(12)(A)(i).

 

2"After the appointment of a . . . receiver of an insured

depository institution, the . . . receiver may request a stay for

a period not to exceed . . . (ii) 90 days, in the case of any

receiver, in any judicial action or proceeding to which such

institution is or becomes a party." 12 U.S.C.

§ 1821(d)(12)(A)(ii).

 

3See 12 U.S.C. § 1821(d)(3)(B), requiring that such notice be

published.

2

in Travis County, Texas against Continental Savings, AFSLA for

breach of fiduciary duty, breach of contract, and tortious

interference with contractual relations. RTC, as conservator for

Continental, intervened on January 16, 1991 and removed to federal

court. The conservator was substituted as party defendant and

requested and received a stay of proceedings pursuant to 12 U.S.C.

§ 1821(d)(12)(A)(i).1 This stay expired in March of 1991.

Six months later, on August 16, 1991, the Office of Thrift

Supervision declared Continental insolvent and appointed RTC as

receiver. RTC filed pleadings to reflect its capacity as receiver

but did not request a stay of proceedings, although part (ii) of

subsection 1821(d)(12)(A) permits of such.2 RTC initiated the

administrative claims process by publishing notice in the Houston

Chronicle directing Continental's creditors to submit their claims

to RTC by November 18, 1991.3 RTC did not publish this notice in

Travis County where the plaintiffs lived and originally had filed

their suit. Nor did RTC provide the plaintiffs with personal
 

4 The receiver shall mail a notice similar

to the notice published under [subsection B]

at the time of such publication to any

creditor shown on the institution's books --

(i) at the creditor's last address

appearing in such books; or

 (ii) upon the discovery of the name and

address of a claimant not appearing on the

institution's books within 30 days after the

discovery of such name and address.

12 U.S.C. § 1821(d)(3)(C) (emphasis added).

3

notice of the filing procedures and deadline as required by

12 U.S.C. § 1821(d)(3)(C).4 Unaware of the procedure for filing an

administrative claim, on September 27, 1991 the plaintiffs sent RTC

a letter advising of the claims made in their pending lawsuit.

RTC, obviously fully cognizant of the pending lawsuit, made no

attempt whatsoever to communicate with plaintiffs or their counsel.

Instead, on January 15, 1992 -- after the time for filing

administrative claims had expired -- RTC filed a motion to dismiss

the plaintiffs' complaint for failure to exhaust administrative

remedies. In response the plaintiffs asserted that: (1) the

administrative claims process of the Financial Institutions Reform

and Recovery Enforcement Act of 1989 (FIRREA) does not apply to

lawsuits filed before the appointment of the receiver; (2) the

receiver's failure to give the plaintiffs proper notice of the

claims process exempted them from the exhaustion requirement; and

(3) the plaintiffs notified the receiver of their claim by the

September 1991 letter.

The district court initially denied RTC's motion to dismiss.

RTC then filed a motion for summary judgment contending that the
 

5Matter of Bradley, 989 F.2d 802 (5th Cir. 1993).

 

6No. 93-1329, 1994 WL 126745 (5th Cir. April 14, 1994).

 

7Carney.

4

plaintiffs' unsecured claims were prudentially moot because the

value of the secured claims exceeded the value of the bank's

assets. Before ruling on the summary judgment motion, however, the

district court reversed its position on the motion to dismiss,

vacated its prior orders, and dismissed the plaintiffs' case for

lack of subject matter jurisdiction. The plaintiffs timely

appealed.

ANALYSIS

We review dismissals for lack of subject matter jurisdiction

de novo,

5 applying the same standard as that applied by the

district court. The district court determined that the plaintiffs'

failure to file an administrative claim with RTC deprived the court

of jurisdiction. Concluding that FIRREA provides otherwise with

respect to lawsuits filed before the receivership, we vacate and

remand for further proceedings.

Pre- Versus Post-receivership Claims

We noted the differences between pre- and post-receivership

claims in Carney v. Resolution Trust Corporation.

6 Because subject

matter jurisdiction is tested as of the time of the filing of the

complaint,7 district courts presiding over actions properly filed

prior to the appointment of a receiver continue to be vested with
 

8See Rosa v. Resolution Trust Corp., 938 F.2d 383 (3d Cir.),

cert. denied, 112 S.Ct. 582 (1991); see also Praxis Properties,

Inc. v. Colonial Sav. Bank, S.L.A., 947 F.2d 49 (3d Cir. 1991).

 

9952 F.2d 879 (5th Cir. 1992).

 

10Id. at 882.

 

11"This subsection" refers to section 1821(d) as a whole.

Marquis v. F.D.I.C., 965 F.2d 1148 (1st Cir. 1992) (en banc).

 

1212 U.S.C. § 1821(d)(13)(D).

5

jurisdiction.8 The situation differs when the receiver is

appointed before the filing of an action against a failed financial

institution. As explained in Meliezer v. Resolution Trust

Company,

9 "FIRREA contains no provision granting federal

jurisdiction to claims filed after a receiver is appointed but

before administrative exhaustion."10

By contrast, several sections of FIRREA provide that federal

jurisdiction over pre-receivership claims continues after the

appointment of a receiver. Subsection 1821(d), which governs the

powers and duties of a receiver, states:

Except as otherwise provided in this subsection,11

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 . . .; or

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

such institution or the Corporation as receiver.12

Paragraph (5)(F)(ii) of the subsection provides otherwise, stating

that "[s]ubject to paragraph (12), the filing of a claim with the

receiver shall not prejudice any right of the claimant to continue

any action which was filed before the appointment of the
 

1312 U.S.C. § 1821(d)(5)(F)(ii).

 

1412 U.S.C. § 1821(d)(12)(A)(ii).

 

15For example, paragraphs (6)(A) and (8)(C) permit a claimant

to continue a suit filed before the appointment of a receiver after

its administrative claim has been disallowed. 12 U.S.C.

§ 1821(d)(6)(A) and (8)(C).

 

16See Brady Development Co. v. Resolution Trust Corp., 14 F.3d

998 (4th Cir. 1994); Carney; Marquis; Praxis; Rosa; see also

F.D.I.C. v. Glynn, 1993 WL 413958 (N.D.Ill. October 15, 1993);

Lanigan v. Resolution Trust Corp., 1992 EL 130075 (N.D.Ill. June 9,

1992); Guidry v. Resolution Trust Corp., 790 F.Supp. 651 (E.D.La.

1992); Coston v. Gold Coast Graphics, Inc., 782 F.Supp. 1532

(S.D.Fla. 1992).

6

receiver."13 Paragraph (12) explains that after its appointment,

a receiver "may request a stay for a period not to exceed . . .

(ii) 90 days, . . . in any judicial action or proceeding to which

such institution is or becomes a party."14

This circuit, and the others addressing the issue, have

interpreted these and other paragraphs15 of subsection 1821(d) to

mean that a separate scheme exists for the disposition of lawsuits

filed pre-receivership.16 Those claims, based on valid federal

jurisdiction when filed, may be affected only through the stay

provision detailed in paragraph (12)(A)(ii). This

legislatively-created framework strikes a fair balance between the

goals of efficiency and expediency underlying FIRREA and the

interests of creditors who, having invoked the proper procedures

for protecting their rights, have expended time, money, and energy

in properly asserting their claims.

Pre-receivership Claims and Exhaustion

There is an added odious dimension when the receiver, with
 

17See Carney (allowing simultaneous pursuit of administrative

and judicial remedies thwarts the congressional purpose for

enacting FIRREA); accord Brady.

7

full knowledge of the pending lawsuit, foregoes a request for a

stay and waits until the time for the administrative claims process

has expired to appear in court requesting dismissal because of the

plaintiffs' supposed failure to exhaust administrative remedies.

In the eyes of the claimant -- especially one who receives no

actual notice of the administrative process -- his lawsuit is

awaiting disposition: the receiver, having intervened and been

substituted as party defendant, ostensibly joins him in awaiting a

hearing on the merits. In reality, however, the receiver lies in

ambush, awaiting expiration of the administrative deadline so that

it may dispose of the claim without consideration of its merits.

We neither find nor assign any such intent to Congress in its

enactment of FIRREA.

Congress created a separate scheme for the handling of

pre-receivership actions, giving the receiver the privilege, but

not the duty, to request a stay of judicial proceedings so that it

might first consider the pending claim administratively. Neither

a request for a stay nor the failure to request a stay deprives the

district court of jurisdiction. Rather, if the receiver requests

a stay, the court will defer action temporarily. If the receiver

does not timely seek a stay, the judicial action will routinely

proceed. This does not mean that the judicial process runs

concurrently with the administrative remedy.17 Congress has given

the receiver the option to either request a stay, and proceed
 

18See Praxis (analyzing the legislative history and the

language of 12 U.S.C. § 1821(d)(12)(A) and concluding that Congress

intended that the receiver request the stay within the first 90

days of its appointment). Otherwise, the receiver would have

"carte blanche to stay a judicial proceeding at any time it feels

it needs a 90-day break from the rigors of litigation." Id. 947

F.2d at 69. We agree with the analysis of our colleagues on the

Third Circuit that the privilege to request a stay must be

restricted to the first 90 days after appointment to prevent abuse.

 

1912 U.S.C. § 1821(d)(3)(A) (entitled "Authority of receiver

to determine claims") (emphasis added).

 

2012 U.S.C. § 1821(d)(12)(A)(ii) (emphasis added).

 

21Rose v. Rose, 481 U.S. 619 (1987) (Congress' use of word

"may" does not imply exclusivity; it establishes only a

8

administratively based on the claimant's complaint or any

substitute or supplemental filing it may request, or forego the

privilege of requesting a stay and thus proceed judicially. Should

the receiver choose to proceed administratively, it must request

the stay within 90 days of its appointment;18 thereafter no stay may

be sought and the judicial action is to proceed.

As in any case of statutory interpretation, we look to the

plain language of the statute, reading it as a whole and mindful of

the linquistic choices made by Congress. The language of

subsection 1821(d) is clear: "The Corporation may, as receiver,

determine claims in accordance with the requirements of this

subsection."19 "After . . . appointment . . . [as] receiver for an

insured depository institution, . . . [it] may request a stay for

a period not to exceed . . . 90 days, . . . in any judicial action

or proceeding to which such institution is or becomes a party."20

The term "may" is permissive; it neither indicates nor requires an

exclusive means of action -- it is discretionary.21 Paragraph
discretionary power); accord F.D.I.C. v. McSweeney, 976 F.2d 532

(9th Cir. 1992), cert. denied, 113 S.Ct. 2440 (1993); F.D.I.C. v.

Canfield, 967 F.2d 443 (10th Cir.), cert. dismissed, 113 S.Ct. 516

(1992); Resolution Trust Corp. v. Lightfoot, 938 F.2d 65 (7th Cir.

1991).

 

22See also 12 U.S.C. § 1821(d)(6)(A)(i) (the receiver may opt

out of the administrative process after an administrative claim is

filed by refusing to act on the claim for 180 days at which point

the claimant is free to proceed in federal court).

 

23See also Brady (concluding stay provision of paragraph

(12)(A)(ii) is optional and discretionary).

 

24See e.g., 12 U.S.C. § 1821(d)(5)(A)(i) (establishing time

period in which receiver shall determine administrative claims);

(8)(A) (receiver shall establish an expedited claims process for

certain claimants); (15)(A) and (B) (receiver shall make an

accounting).

 

25See Carney; see also Brady.

9

(3)(A) allows, but does not require, the receiver to determine

claims in accordance with FIRREA;22 paragraph (12)(A)(ii) grants the

receiver the privilege, should it choose to proceed

administratively, to request a stay of judicial proceedings.23

Neither provision is mandatory. The use of the term "shall" in

other paragraphs of subsection 1821(d) supports this analysis.24

The language of subsection 1821(d), and its legislative

history, lends support to our conclusion. Absent a request for a

stay pursuant to paragraph (12)(A)(ii), no provision of the

subsection exists by which the judicial proceeding may be stayed.

As congressional goals of efficiency and expediency would be

prejudiced if administrative and judicial processes were allowed to

proceed simultantously,25 Congress obviously intended to grant the

receiver the option to use initially either the administrative or

judicial mechanism. If Congress had intended the administrative
 

26See e.g., 11 U.S.C. § 362(a)(1) (imposing automatic stay in

the bankruptcy context).

 

27Matter of Meyerland Co., 960 F.2d 512 (5th Cir. 1992), cert.

denied, 113 S.Ct. 967 (1993). See also Lightfoot; McSweeney;

Canfield.

 

28See Brady; Carney; Marquis; Meliezer.

10

procedure to be exclusive for pre-receivership actions, it would

not have provided for the permissive stay. It would have been a

simple matter to provide for an automatic, mandatory stay of all

pending judicial actions.26 This Congress did not do; this we will

not do under the guise of statutory interpretation.27

Finally, the purposes of FIRREA and basic notions of fair play

militate against the procedure followed by the receiver -- awaiting

expiration of the time allowed for initiating claims and then

moving to dismiss the pending judicial actions. FIRREA seeks the

efficient and expedient handling of claims.28 Efficiency and

expediency, however, are not justifications for vitiating the

primary purpose of FIRREA. Congress intended to establish a scheme

for fairly adjudicating claims against failed financial

institutions. It did not structure a system for the sandbagging of

valid claims. The statute is not to be used as an easy means of

avoiding consideration of claims on their merits. As demonstrated

by the special provisions governing pre-receivership suits,

Congress had the rights of claimants in mind when it enacted

FIRREA. RTC may not distort the provisions designed to facilitate

the processing of claims into a tool for subverting the right of

claimants to present their claims on the merits.
 

29In so holding, we recognize that other circuits are not in

accord. See Brady Development Co. V. Resolution Trust Corp., 14

F.3d 998 (4th Cir. 1994); see also Bueford v. Resolution Trust

Corp., 991 F.2d 481 (8th Cir. 1993); Resolution Trust Corp. v.

Mustang Partners, 946 F.2d 103 (10th Cir. 1991).

11

We therefore hold that with regard to actions filed before the

receivership, the receiver may opt either for the judicial route,

by allowing the action to continue, or it may choose the

administrative process, by moving for a stay within 90 days of its

appointment.29 In the instant case, RTC did not timely request a

stay of the plaintiffs' pre-receivership proceeding and it is

therefore deemed to have determined to proceed with the litigation

in federal court.

The decision of the district court is VACATED and the case is

REMANDED for further proceedings consistent herewith.

DUHÉ, Circuit Judge, concurring: 

I agree that the receiver's failure to invoke the optional

stay simultaneously with the giving of notice to creditors means

that the pending action was not suspended under § 1821(d)(12) but

continued under § 1821(d)(5)(F)(ii). (Paragraph (5)(F)(ii)

recognizes that a claimant's right to continue a pre-appointment

law suit is not prejudiced unless the receiver requests a stay

under paragraph (12)). A plaintiff whose suit continues cannot

have his claim disallowed for failure to continue his suit. 

I write separately to express my opinion that RTC's failure to

mail the notice required under § 1821(d)(3)(C) is also dispositive,

for two reasons. 

First, the failure to mail notice left the receiver without
 

30 Meliezer, 952 F.2d at 883. Unlike the Meliezer panel, I

find sound statutory basis for the argument that the receiver's

very authority to determine claims hinges on its compliance with

the notice requirements. See § 1821(d)(3)(A) (receiver may

determine claims in accordance with "requirements" of § 1821(d));

§ 1821(d)(3)(B) (receiver "shall" publish notice); § 1821(d)(3)(C)

(receiver "shall" mail a similar notice to creditors shown on the

institution's books and claimants who become known); see also

Meliezer, 952 F.2d at 881 (recognizing that under § 1821(d)(3) it

is the new claims procedure which "gives the Receiver . . .

authority to review claims"); id. at 880 (recognizing that by

publishing the notice and establishing a claims deadline the RTC

"implement[s] the administrative claims process"); Brady Dev. Co.

v. RTC, 14 F.3d 998, 1001 (4th Cir. 1994) (noting that RTC "began

its claims process" by publishing the required notice). Because

the notice provisions are mandatory under paragraph (3)(B) & (C),

I consider them a "requirement" of subsection (d). I also

interpret paragraph (3)(A) as conferring authority to determine

claims only if the receiver satisfies such "requirements."

Accordingly, the statutory scheme does provide a consequence for

the failure of compliance with the notice requirement.

 

31 See § 1821(d)(5)(C)(i) (providing for final disallowance

of claims filed after the date given in the published notice,

unless clause (ii) applies, i.e., claimant does not have notice of

the power to determine the plaintiffs' claim administratively and,

therefore, exempted plaintiffs from the exhaustion requirement

notwithstanding Meliezer. In Meliezer, a suit filed against the

receiver post-appointment, the receiver's failure to mail notice

upon learning the identity of the claimant (under subsection

(d)(3)(C)(ii)) did not relieve the claimant from the obligation to

exhaust administrative remedies, because subsection (d)(3)(C) does

not impose "a consequence for failure of compliance."30 The

Meliezer claimant was a debtor of the institution, not shown on the

institution's books as a creditor, and the claim became known to

the receiver only upon the filing of the suit after the bar date

for filing claims had passed. The plaintiff could have filed an

administrative claim belatedly at the time of its complaint which

the receiver would likely have disallowed.31 I would not extend the
the appointment of the receiver in time to file a claim before the

bar date but files in time to permit payment). 

 

32 Meliezer is again distinguishable. This Court never

considered the effect of the constitutional requirement of due

13

holding of Meliezer to a creditor suit filed against the

institution before appointment of the receiver. In the case of a

claimant with a suit pending when the receiver is appointed, I

would hold that if the receiver fails to give notice of the claimsfiling deadline as required under § 1821(d)(3)(C), it lacks

authority to determine the claim under § 1821(d)(3)(A). 

Chief Judge Politz's opinion recognizes, at least implicitly,

that the receiver's notice to a claimant with a suit pending

against the receiver is important. I consider his reference to the

receiver's "request [for a] substitute or supplemental filing" an

allusion to the receiver's duty to notify a plaintiff of any

administrative filing requirements. Thus if the receiver requests

a stay of a suit without requesting from the claimant a "substitute

or supplemental filing," the receiver must consider the claim

administratively based solely on the complaint. The mailing of

notice under § 1821(d)(3)(C) would constitute such a request for

substitute or supplemental presentation of the claim at the address

given in the notice. 

Second, I would hold that the Due Process Clause requires

mailed notice to a claimant known to the receiver by virtue of his

having filed suit against the institution before the appointment of

the receiver. For such claimants, publication of notice (which is

sufficient for unknown claimants32) is constitutionally infirm. See
process on the statutory notice provisions in that case. The

Meliezer plaintiff apparently received constitutionally adequate

notice via the newspaper publication. Meliezer at 883 n.7. Until

suit was filed after the receiver was appointed and indeed after

the bar date had passed, the Meliezer plaintiff was not a known

claimant and was known only as a debtor of the institution. Id. at

880.

14

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 317-20,

70 S. Ct. 652 (1950) (holding that notice by newspaper publication,

which is sufficient for unknown or missing claimants, is

unconstitutional with respect to known persons whose whereabouts

are also known); Mennonite Bd. of Missions v. Adams, 462 U.S. 791,

798-800, 103 S. Ct. 2706, 2711-12 (1983) (requiring under the Due

Process Clause that a proceeding affecting the property of a party

whose name and address are reasonably ascertainable be preceded by

personal service or mailed notice). These fundamental principles

of due process dictate that a claimant known because of a pending

law suit enjoys the protection of § 1821(d)(3)(C) (mailed notice to

creditors shown on the institution's books or to claimants who

become known) as a constitutional minimum. 

I nevertheless concur. Regardless of the adequacy of the

notice given by the receiver under either the constitution or

FIRREA itself, the receiver must also request a stay to suspend

judicial action in a case filed pre-appointment. Otherwise, the

jurisdiction of the court continues.