Opinion ID: 1458245
Heading Depth: 2
Heading Rank: 2

Heading: The district court properly calculated the amount of the performance guaranty

Text: The district court adopted the FDIC's calculation of Imperial's deficit under the performance guaranty at $18,375,800. The Trustee argues 1) that the district court erred in relying on SPB's June 30, 2002 Call report data, because the guaranty required any liability be calculated as of July 22, 2002; and 2) that a $5 million payment it made to SPB on July 30, 2002, should reduce any liability under the guaranty.
The Trustee contests the district court's calculation as improperly relying on SPB's June 30 Call report data. He argues that the plain language of the guaranty required the FDIC to calculate the amount of the obligation as of July 22, 2002. The FDIC counters that neither the performance guaranty nor the regulation it recites dictates the source from which the FDIC must draw its data, and therefore the district court properly held that the FDIC's use of the June 30, 2002 data was entitled to administrative deference. The performance guaranty, in language nearly identical to the FDIC regulation, 12 C.F.R. § 325.104(h)(1)(i)(B), limited Imperial's liability to the lesser of 5% of SPB's assets as of December 31, 2001, or the amount necessary to restore SPB's relevant capital measures to the levels required for SPB to be adequately capitalized, as those capital measures and levels are defined at the time that [SPB] initially fails to comply with its approved Capital Plan. It is undisputed that SPB initially failed to comply with the May 24 plan on July 22, 2002, the deadline by which it was to have raised $55 million. Accordingly, Wolkowitz argues that any liability on Imperial's part should have been calculated as of July 22, 2002. [8] As the FDIC argues, the Trustee conflates the words defined and calculated. The performance guaranty and the regulation in question simply state that the definitions of the capital measures and levels based upon which the FDIC measures a bank's liability must be those in place at the time of the bank's failure. Neither the performance guaranty nor the regulation says anything about how Imperial's liability should be calculated, nor states that the calculation must occur as of the date SPB fails to comply with the plan. As a result, the district court correctly held that the performance guaranty and the corresponding regulation failed to clearly define how Imperial's obligation should be calculated. Finding the contract and the identical regulation ambiguous, the district court granted deference to the FDIC's reasonable interpretation of its own regulation as authorizing it to calculate Imperial's obligation based on SPB's June 30, 2002 call report  the latest data in its possession. See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). The Trustee attacks the district court's deference to the FDIC's interpretation on a number of fronts, but we find his arguments unpersuasive. For example, the Trustee argues that because the performance guaranty was a contract, and not a regulation, agency deference was inappropriate. Though we have held that deference is not appropriate solely because the contract signed by the parties contains the same language as [a statute], Clay Tower Apts. v. Kemp, 978 F.2d 478, 480(9th Cir.1992), we agree with the district court that deference is proper here, because the agreement in question stemmed from and was designed to resolve an ongoing proceeding and included intrinsically regulatory terms of a type that the agency frequently employs its expertise in reviewing, MCI Telecomms. Corp. v. F.C.C., 822 F.2d 80, 84-85(D.C.Cir.1987). [9] Wolkowitz next contends that deference is inappropriate because the FDIC stands to benefit from its own interpretation. See Chickaloon-Moose Creek Native Ass'n v. Norton, 360 F.3d 972, 980 (9th Cir.2004). However, the FDIC does not necessarily stand to gain if deficits are calculated by reference to banks' call reports, even if it did so here. In fact, it is unclear whether Imperial's obligation would increase or decrease if the calculation date were changed to July 22. The Trustee's last argument is that even if the FDIC had nothing to gain from its interpretation of the regulation, its position in litigation is still not entitled to deference because it is unsupported by a regulation, ruling, or established administrative practice. However, Smiley v. Citibank, N.A., 517 U.S. 735, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996), only forbids deference to agency litigating positions that are wholly unsupported by regulations, rulings, or administrative practice. Id. at 741, 116 S.Ct. 1730(internal quotation marks omitted). The FDIC is certainly not litigating a wholly unsupported position here. The FDIC's reliance on quarterly bank Call reports is established in its regulations and its administrative practice. Several federal regulations require federally insured banks to file quarterly Call reports to the federal banking agencies, see, e.g., 12 U.S.C. §§ 161, 248(a), 1817(a), and those agencies, including the FDIC, consistently rely on that data for a variety of regulatory purposes, see, e.g., 12 C.F.R. §§ 1.4, 3.2, 8.2, 362.3(a)(2)(iii)(C), 303.14(c). For example, the FDIC relies on Call reports in determining the capital level of a bank, 12 C.F.R. § 6.2(j)(bank's total assets defined by information in Call report), in determining the date of a bank's effective capital category, 12 C.F.R. §§ 325.102, 6.3, and in approving or disapproving capital restoration plans, 12 C.F.R. § 208.44(b) (capital restoration plans must be prepared in accordance with instructions on the Call report). Thus, the FDIC's calculation of Imperial's liability as of SPB's latest Call report data is supported by its general practice of relying on Call reports for regulatory purposes. [10] In light of the above, we affirm the district court's calculation of Imperial's liability under performance guaranty using SPB's June 30, 2002 Call report data.
The district court held that a $5 million transfer Imperial made to SPB on July 31, 2002, could not reduce Imperial's liability under the performance guaranty because the contract stated that Imperial's liability could not be released, discharged, or in any way affected by any circumstance, condition, or matter ... including (v) any counterclaim, set-off, deduction or defense [Imperial] may have against [SPB]. The Trustee contends that the $5 million payment was not a set-off or deduction but a partial payment towards its liability. He also argues that if the $5 million payment to SPB is a barred deduction, then no payment could ever reduce Imperial's liability under the guaranty. We disagree. The $5 million payment to SPB clearly meets the definition of a deduction, which the Trustee himself defines as an act of taking away or something that can be subtracted. WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 589 (2002). Moreover, just because this $5 million transfer to SPB does not reduce Imperial's liability does not mean that no payment could reduce its liability. Had Imperial made a payment to SPB upon demand by the FDIC or as directed by the agency, as required by the language of the guaranty, the payment should have been properly credited toward its liability. [11] However, it is entirely implausible that Imperial intended a $5 million payment made to SPB in July of 2002 to reduce its obligation to the FDIC when the FDIC did not demand payment until September 2003, and Imperial was allegedly unaware of any obligation until the FDIC's demand. Therefore, we affirm the district court's calculation of Imperial's deficit at $18,375,800.