Opinion ID: 821441
Heading Depth: 2
Heading Rank: 1

Heading: firrea

Text: The FDIC alleged in its Rule 12(b)(1) motion that the district court did not have subject matter jurisdiction over the requests for injunctive relief due to the operation of the anti-injunction provisions in FIRREA. In its capacity as receiver of a failed institution, the FDIC is shielded from judicial action that restrains or affects the exercise of its powers as receiver. The anti-injunction provisions in FIRREA state: Except as provided in this section, no court may take any action, except at the request of the Board of Directors by regulation or order, to restrain or affect the exercise of powers or functions of the Corporation as a conservator or a receiver. 12 U.S.C. § 1821(j). This section has been construed broadly to constrain the court's equitable powers. Hanson v. FDIC, 113 F.3d 866, 871 (8th Cir. 1997). Part of the relief Dittmer seeks in its complaint–that the original note be declared void as to Dittmer, and that the bank be enjoined from selling the subject property–are requests for injunctive relief that would normally be barred by § 1821(j). Tri-State Hotels, Inc. v. FDIC, 79 F.3d 707, 715 (8th Cir. 1996). However, Dittmer points out that the FDIC is no longer the holder of the note because it sold the note to CADC.5 Dittmer argues that CADC does not receive the same protections from the 5 The FDIC remains a party in one of these two cases, it seems, because the district court simply did not rule on the FDIC's motion to substitute CADC before the court dismissed the suit pursuant to Rule 12(b). As best we can tell, everyone agrees -6- anti-injunction provisions of § 1821(j) as does the FDIC. On the other hand, the FDIC argues that the transfer of the note to CADC does not render § 1821 moot or meaningless because the transfer was an exercise of its statutory powers, set forth in § 1821(d) and protected by § 1821(j), and any declaration that the note was void as against the original signer would unduly restrain its powers as receiver. Accordingly, we believe we must determine whether Dittmer's lawsuit restrain[s] or affect[s] the FDIC's powers as receiver, even though the FDIC has already disposed of the asset in question. We have not had the occasion to construe the effect of § 1821(j) when the receiver has disposed of an asset to a remote thirdparty purchaser. Other circuits have held that the inquiry is two-fold: the court must first determine whether the challenged action is within the receiver's power or function; if so, it then determines whether the action requested would indeed restrain or affect those powers. Bank of Am. Nat'l Ass'n v. Colonial Bank, 604 F.3d 1239, 1243 (11th Cir. 2010). Here, the challenged action–enforcing the note against the signers and the ability to sell the mortgaged property–is unquestionably within the receiver's duties and powers. See 12 U.S.C. § 1821(d)(2)(A) & (E) (setting forth the duties of the FDIC as receiver of a failed bank, including that it succeeds to the assets of the institution, and may place the institution in liquidation and realize upon the assets of the institution). Next, we look to whether the challenged action would indeed restrain or affect the FDIC's receivership powers. Colonial Bank, 604 F.3d at 1243. Dittmer asked the court to declare the original note void as to Dittmer. Even though the FDIC has apparently already sold the note in question, if plaintiffs such as Dittmer are allowed to attack the validity of a failed institution's assets by suing the remote purchaser, such actions would certainly restrain or affect the FDIC's powers to deal that the FDIC has, indeed, conveyed this note to CADC for valid consideration. Because of the outcome of our analysis, it does not matter whether the FDIC, CADC, or both, are the named parties in the suits. -7- with the property it is charged with disbursing. [A]n action can 'affect' the exercise of powers by an agency without being aimed directly at [the agency]. Hindes v. FDIC, 137 F.3d 148, 160 (3d Cir. 1998). In Hindes, the Third Circuit held that the protections afforded to receivers in § 1821(j) extend to third parties. In rejecting the argument that § 1821(j) does not apply to a non-FDIC third party, the court stated, the statute, by its terms, can preclude relief even against a third party, including the FDIC in its corporate capacity, where the result is such that the relief 'restrain[s] or affect[s] the exercise of powers or functions of the [FDIC] as a conservator or a receiver.' Id. (alterations in original) (quoting 12 U.S.C. § 1821(j)). Cf. Telematics Int'l, Inc. v. NEMLC Leasing Corp., 967 F.2d 703, 707 (1st Cir. 1992) (holding that § 1821(j) applied to bar a claim seeking to attach a lien to a certificate of deposit in which the FDIC had a security interest because the attachment would ultimately have an effect upon the FDIC's exercise of its powers as receiver). We agree with the reasoning in Hindes and find that Dittmer's request for injunctive relief is barred by § 1821(j), even though the FDIC is no longer the holder of the note, because the relief requested–a declaration that the note is void as to Dittmer–affects the FDIC's ability to function as receiver in the case. The disposition of a failed [bank's] assets . . . is one of the quintessential statutory powers of the [FDIC] as a receiver. Pyramid Constr. Co. v. Wind River Petroleum, Inc., 866 F. Supp. 513, 517 (D. Utah 1994). If an asset sold to a third-party purchaser is subject to dilution in a later judicial proceeding, there would be a substantial chilling effect upon the receiver's ability to perform its statutory functions. In Pyramid, the court rejected the argument that § 1821(j) did not apply because a plaintiff sought relief against the receiver's successor. The plaintiff's argument in Pyramid sounded much like Dittmer's here–because the receiver had already liquidated the subject property and realized the profits therefrom, the receiver had no remaining interest in the property. Id. at 518. The Pyramid court disagreed, finding that the plain language of the statute reflected Congress's intent to prohibit any interference, direct or indirect, with the functions of the receiver. Id. And, like Dittmer's lawsuit, the Pyramid court found that the plaintiff's suit would have the effect of rescinding the transfer of -8- property from the receiver to the purchasing company, a move that would undoubtedly 'restrain or affect' the [receiver] in the performance of its statutory duties. Id. at 519. Other lower courts are in accord with the reasoning of Hindes and Pyramid. See, e.g., Hoxeng v. Topeka Broadcomm, Inc., 911 F. Supp. 1323, 1334-35 (D. Kan. 1996) (holding that the FDIC's agent could assert § 1821(j) to bar a claim for specific performance even when the FDIC was not, and could not have been, a party to the case); Furgatch v. Resolution Trust Corp., No. 93-20304, 1993 WL 149084, at  (N.D. Cal. April 30, 1993) (unpublished) (holding that § 1821(j) barred a claim to enjoin a bank and its trustee from conducting a foreclosure sale because enjoining these parties indirectly enjoins [the receiver], which a district court has no power to do). Of the many cases Dittmer cites in support of its argument that the protections of § 1821(j) end when the receiver transfers or distributes an asset at issue, the closest one purportedly on point is Henrichs v. Valley View Development, 474 F.3d 609 (9th Cir. 2007). However, that case still misses the mark. Henrichs involved a rather convoluted land deal gone awry. The underlying dispute was over two tracts of land that could not be sold separately because there was no recorded tract map delineating the boundaries of the tracts. A limited partnership desired to buy one of the tracts, and, anticipating a delay in the ability to obtain an approved, recorded tract map, the partnership bought both tracts. However, the buyer leased the second tract back to the seller and gave the seller the option to buy back the second tract for $1, free of all liens and encumbrances, once the tract map was recorded. The seller exercised the option once the tract map was recorded, but in the meantime, both of the tracts were encumbered by a mortgage, unbeknownst to the seller. Ultimately, the bank that made the mortgage loan failed, and shortly thereafter, the partnership defaulted on the loan. Pursuant to FIRREA, the FDIC became the bank's receiver and acquired the bad loan. When the seller realized that the second tract was encumbered by a lien a few years later, it sued the members of the limited partnership in California state court to quiet -9- title. The seller successfully quieted title in the second tract. Unhappy with this result, one of the limited partners sued the original seller in federal court, in relevant part asking the federal court to void the state court quiet title judgment. The district court dismissed this claim on Rooker-Feldman6 grounds. On appeal, seeking to avoid the Rooker-Feldman bar, the partner asserted that the state court never properly had jurisdiction over the quiet title suit because FIRREA vested exclusive jurisdiction in the federal courts over the claim. The Henrichs court rejected the exclusive jurisdiction argument, noting that FIRREA's jurisdictional bars in § 1821(d) and (j)7 were not applicable because the FDIC was not a party to the state court quiet title litigation instigated by the seller against the original purchasers of the tracts of land. 474 F.3d at 614. Seizing upon this not applicable language, Dittmer argues that Henrichs stands for the proposition that the jurisdictional bar in § 1821(j) is not operable once the FDIC has conveyed receivership property to a third-party purchaser. However, we find that the rather elaborate factual scenario in Henrichs is distinguishable from the transactions at issue here. First, the FDIC was a party in one of these cases, and remains a party in the first case. And, in Henrichs, the subject matter of the underlying state court litigation was the title to the second tract of land, not the note formerly held by the FDIC. Id. Here, 6 This is the doctrine that prevents a losing state court party from seeking what in substance would be appellate review of the state court judgment in federal court, based upon District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983) and Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923). 7 Section 1821(d) and § 1821(j) both contain jurisdictional bars to judicial review. Subsection (d) is the section of FIRREA that, in addition to setting forth the rights and duties of the receiver, provides for mandatory administrative review and the exhaustion of claims with the FDIC before judicial review. 12 U.S.C. § 1821(d)(3)- (13). Subsection (j), of course, contains the anti-injunction provision at play here. Although (d) is not directly implicated here because administrative exhaustion has occurred, many of the cases discuss both (d) and (j) in the context of the jurisdictional bars present in FIRREA. -10- the subject of the litigation is and always has been Dittmer's attempts to avoid its obligations on the original note from Premier to Barkley. That the FDIC succeeded to title of the note (and ultimately sold it to a willing buyer) in its role as the bank's receiver is of the utmost relevance. Indeed, the Ninth Circuit itself recognized the distinction between the situation in Henrichs and a situation where the subject of the underlying lawsuit relates to the act or omission of a failed banking institution. See Benson v. JPMorgan Chase Bank, N.A., 673 F.3d 1207, 1213 (9th Cir. 2012) ([N]othing in Henrichs suggests that the quiet title action could have been related to the acts or omissions of a failed bank or the FDIC.). Accordingly, Henrichs is distinguishable. Dittmer also argues that its claim deals with assets rather than the functions of the FDIC in its capacity as receiver, and, therefore, the provisions of § 1821(j) are inapposite, citing Tri-State Hotels, 79 F.3d 707. Tri-State involved an investor who had entered into agreements with various banks to purchase and finance distressed hotel properties. The banks allegedly promised to provide further financing when needed, and agreed to limit the investor's liability in the event of default. Ultimately, one of the banks stopped providing financing to the investor, and the FDIC was appointed receiver when the bank failed. The investor brought suit against the FDIC, the banks, and several bank officers, asking for rescission of the purchase agreement and loan documents, and for declaratory relief with respect to those same documents. A few months later, and while the investor's action was still pending, the FDIC in turn sued the investor for defaulting on the note. Pursuant to FIRREA, the district court dismissed the investor's claims against the FDIC. The investor had not submitted its claims through the administrative process pursuant to § 1821(d), and the investor argued on appeal that it was not required to do so. We disagreed and found that the exhaustion requirements of § 1821(d) and the anti-injunction provision in § 1821(j) barred the investor's claim against the FDIC, and further rejected the argument that the investor's inability to obtain declaratory and rescissory relief in its lawsuit would render the investor defenseless in the FDIC's lawsuit. Tri-State, 79 F.3d at 714-15. -11- Regarding the defenseless argument, we noted that because the suit by the FDIC was against the investor, the investor's affirmative defenses would not be subject to the exhaustion requirements of § 1821(d), as they would be responses, not claims or actions, against the FDIC. Id. at 715 & n.13. The language of FIRREA precludes claim[s] against or action[s] seeking a determination of rights against a receiver without first submitting the claim for administrative review. 12 U.S.C. § 1821(d)(13)(D). After this review has occurred, or if it is the FDIC bringing the claim, the jurisdictional bars in § 1821(d) are no longer in play. In discussing the reach of subsection (d), we noted, when the FDIC has completed its administrative review, and has chosen a judicial forum in which to prosecute its rights, the policy of avoiding unnecessary litigation is no longer applicable, and the party's Due Process rights to defend the claims in the FDIC's lawsuit become paramount. Tri-State, 79 F.3d at 715 n.13. Attempting to apply this reasoning to § 1821(j) and this case, Dittmer argues that Tri-State stands for the proposition that so long as the exhaustion requirements of § 1821(d) are satisfied, the anti-injunction provisions of § 1821(j) are not implicated. We do not think this quote from Tri-State bears the weight that Dittmer asks us to place upon it. Tri-State simply stands for the unremarkable proposition that claims must be exhausted in front of the FDIC pursuant to § 1821(d) before there can be judicial review of those claims, and that if the FDIC or other receiver chooses to bring suit, the defendant in that suit may properly assert an affirmative defense untethered to the jurisdictional bar in § 1821(d). 79 F.3d at 714-15. Footnote 13 from Tri-State, upon which Dittmer relies, does not discuss or even contemplate the antiinjunction jurisdictional bar of § 1821(j). Id. at 715 n.13. Accordingly, we find that under 12 U.S.C. § 1821(j), the district court correctly dismissed Dittmer's claims for injunctive and declaratory relief. -12-