Opinion ID: 673431
Heading Depth: 3
Heading Rank: 2

Heading: Application of Section 1821(d)(13)(D) to the Declaratory Judgment Action

Text: 33 We first address the jurisdictional bar as it applies to the declaratory judgment action. The language of Sec. 1821(d)(13)(D) appears to include a bar to declaratory judgment actions: [N]o 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.... Sec. 1821(d)(13)(D)(i) (emphasis added). The plain meaning of the emphasized words quoted immediately above includes declaratory judgment actions: a declaratory judgment action is an action seeking a determination of rights. Black's Law Dictionary defines declaratory judgment, in relevant part, as follows: 34 Statutory ... remedy for the determination of a justiciable controversy where the plaintiff is in doubt as to his [or her] legal rights. A binding adjudication of the rights and status of litigants even though no consequential relief is awarded. 35 Black's Law Dictionary 409 (6th ed. 1990). The same dictionary defines action, in part, as a lawsuit brought in a court; a formal complaint within the jurisdiction of a court of law. Id. at 28. When one initiates a declaratory judgment, one brings a lawsuit in court and files a complaint. National Union and Gulf did exactly that in this case. An action for declaratory judgment is plainly an action. No reasonable argument can be offered that the plain meaning of the any action seeking a determination of rights language of Sec. 1821(d)(13)(D) does not include complaints requesting declaratory relief. Therefore, unless it appears that interpreting Sec. 1821(d)(13)(D) would produce a result demonstrably at odds with the general purpose of FIRREA, Ron Pair Enter., 489 U.S. at 242, 109 S.Ct. at 1031, we will conclude that declaratory judgment actions are barred by Sec. 1821(d)(13)(D). 36 An argument can be made that interpreting Sec. 1821(d)(13)(D) to include a bar to National Union and Gulf's declaratory judgment action produces an odd result when Sec. 1821(d)(13)(D) is not viewed in isolation, but with reference to the administrative claims procedure of FIRREA set out in Sec. 1821(d)(3), (d)(5) and (d)(6). This argument begins by pointing out that National Union and Gulf's declaratory judgment action is not a creditor's claim. Since National Union and Gulf will owe the RTC money if it is determined that the RTC may collect under the insurance policies, they are potential debtors, and their action seeking a declaration that the insurance policies are rescinded is therefore a potential debtor's claim, not a creditor's claim. The argument continues as follows: Section 1821(d)(13)(D) acts as a jurisdictional bar to claims, but there is an exception to this jurisdictional bar in that claims which have been properly submitted through the administrative claims procedure may be tried de novo in federal court. Sec. 1821(d)(6)(A); Rosa, 938 F.2d at 391-92. Therefore, it is contended that since the jurisdictional bar of Sec. 1821(d)(13)(D) contains an exception for claims submitted through the administrative claims procedure, Sec. 1821(d)(13)(D) must be read and interpreted with reference to the administrative claims procedure contained in Sec. 1821(d)(3), (d)(5) and (d)(6). Under 1821(d)'s administrative claims procedure, creditors, not debtors, are given notice to file claims with the receiver. Sec. 1821(d)(3)(B), (C). After a determination has been made with regard to a claim that has been submitted, the claimant may request administrative review of the claim or file suit in federal court. Sec. 1821(d)(6)(A). Since under Sec. 1821(d)(3)(B), (C), only creditors are given notice to submit claims to the RTC, the argument goes, the jurisdictional bar contained in Sec. 1821(d)(13)(D) could not have been intended to deprive jurisdiction for actions brought by non-creditors. In other words, the argument concludes, only holders of creditors' claims, for whom the statute provides notice and who may present their claims in the administrative claims procedure, are meant to be jurisdictionally barred by Sec. 1821(d)(13)(D) if the claimant has not in fact exhausted the administrative remedies. 37 That Sec. 1821(d)(13)(D)'s ouster of jurisdiction should be limited to suits otherwise governed by the administrative claims procedure set out in Sec. 1821(d) is a position that has been advanced, or at least suggested, by several courts. 8 National Union and Gulf advocate a version of that position in this appeal. They accurately point out that their declaratory judgment action is not a creditor's claim and therefore they argue their action is not the type of claim for which FIRREA's administrative claims procedure was established. Furthermore, Gulf was never put on notice that it had to submit claims to the RTC by the March 17, 1990 bar date. Therefore, Gulf contends that it especially cannot be held to have been bound by the requirement to exhaust the administrative claims procedure as a prerequisite to federal court jurisdiction. Assuming that exhaustion of the administrative claims procedure was not applicable to their action for declaratory judgment, National Union and Gulf conclude that the jurisdictional bar cannot apply. 38 However, we reject the suggestion that the broad bar to jurisdiction indicated by the plain language of Sec. 1821(d)(13)(D) should be strained and limited by referring to the administrative claims procedure of Sec. 1821(d)(3), (d)(5) and (d)(6). Although there is surely an interrelationship between the jurisdictional bar contained in Sec. 1821(d)(13)(D) and the administrative claims procedure, this does not mean that the class of actions addressed by the jurisdictional bar is necessarily identical to the class of actions addressed by the administrative claims procedure. As explained below, even assuming that Sec. 1821(d)(13)(D)'s ouster of jurisdiction affects actions not otherwise governed by the administrative claims procedure, such a regime would not be at odds with the intentions of Congress in passing FIRREA. 39 The language barring jurisdiction over any action seeking a determination of rights contained in Sec. 1821(d)(13)(D) would appear to cover a larger class of actions than does the language contained in Sec. 1821(d)(3), (d)(5), and (d)(6), concerning the administrative claims procedure. For example, in the administrative claims procedure portion of FIRREA, Sec. 1821(d)(3)(B) and (C) require notice to be given only to claims of creditors, and Sec. 1821(d)(5) and (d)(6) refer only to any claim; in contrast, the jurisdictional bar of Sec. 1821(d)(13)(D) refers to any action seeking a determination of rights, and does not limit such actions to actions concerning creditors' claims. In making this comparison, a definition of claim and creditor would be useful. Unfortunately, neither the text of FIRREA nor its legislative history provide an explicit definition of the term claim or creditor as they are used in FIRREA. 9 In light of FIRREA's lack of definitions of these terms, the Court of Appeals for the District of Columbia Circuit has suggested that the Bankruptcy Code is a promising source to turn to in defining claim and creditor as those terms are used in FIRREA. Office & Professional Employees Int'l Union, Local 2 v. FDIC, 962 F.2d 63, 68 (D.C.Cir.1992). Because the administrative claims procedure of FIRREA contained in Sec. 1821(d)(3), (d)(5) and (d)(6) addresses a debtor-creditor relationship, we agree with the D.C. Circuit in this regard. For the sake of argument, and in the absence of more specific legislative authority, in interpreting FIRREA we will apply the definition of claim and creditor contained in the Bankruptcy Code, 11 U.S.C. Sec. 101(5), (10)(A). 10 The Bankruptcy Code defines claim as follows: 40 claim means-- 41 (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured[.] 42 11 U.S.C. Sec. 101(5) (emphasis added). The term creditor is defined in relevant part as an entity that has a claim against the debtor. Sec. 101(10)(A). Hence a claim or a creditor's claim is essentially an action asserting a right to payment. In contrast, the phrase any action 11 does not contain any limitations, and plainly denotes any affirmative action taken by a party to commence any suit in any court, whether or not such an action asserts a right to payment, and whether or not such an action is brought by a creditor or a debtor. 43 With these definitions in mind, and for the purposes of argument, we will assume that the terms claims and creditors['] ... claims as used in Sec. 1821(d)(3) denote a smaller class of actions than does the any action seeking a determination of rights language of Sec. 1821(d)(13)(D)(i). 12 For instance, under these definitions, National Union and Gulf's declaratory judgment action for rescission of insurance policies which they issued would not be a claim addressed in the administrative claims procedure, but would be an action jurisdictionally barred by Sec. 1821(d)(13)(D). Yet we do not see why a jurisdictional bar which might cover a larger class of actions than would be addressed by the administrative claims procedure would be inconsistent with the general goals of Congress in passing FIRREA. One of the important goals of FIRREA is to enable the receiver to efficiently determine creditors' claims and preserve assets of the failed institution without being burdened by complex and costly litigation. 13 With this goal in mind, it would be perfectly consistent for Congress to provide a scheme wherein a holder of a claim for payment from the assets of the failed institution would be provided an administrative remedy and de novo court review, while the holder of a claim not asserting a right of payment and who wanted only a declaration of rights against the failed bank would be provided no administrative remedy or court access. 44 The rationale for this treatment of actions which do not seek payment from the assets of the failed institution would be that if the RTC leaves the party wishing to bring an action not seeking payment alone, that party should also leave the RTC alone. Accordingly, a party wishing to bring an action not seeking payment cannot summon the RTC into court to adjudicate a declaration of rights against the RTC. Rather, the party wishing to bring an action not for payment must instead wait and see if the RTC will sue her. If it does, then she will be able to defend herself against the RTC's action at that time. According to this rationale, the crisis facing failed banks is so extreme that the receiver is to focus on preserving the failed bank's assets, without the distraction and substantial cost of defending itself in court against declaratory judgment actions which do not seek a right to payment from the failed institution's assets. Indeed, since the RTC might never choose to sue the party wishing to obtain a declaratory judgment that it is not liable to the RTC, it may turn out that such declaratory judgment relief will be unnecessary. 45 It may be objected that such a scheme would be unfair to a party wishing to obtain a declaration of rights vis-a-vis the RTC. By stripping the party of its right to obtain a declaratory judgment, the party must live indefinitely with the threat that litigation might at any time be commenced against it by the RTC. But FIRREA was in fact passed to give the receiver extraordinary powers. We acknowledge that the ability to obtain a declaratory judgment is a valuable right in that it enables a party to ascertain its rights and obligations sooner than would be possible if the party were forced to await a lawsuit by an opposing party. However, simply because the right to bring a declaratory judgment action is valuable does not mean that Congress cannot take it away consistent with due process. Congress apparently has determined that the societal benefits resulting from the right to bring actions for a determination of rights, including declaratory judgments, are outweighed by the societal benefits resulting from the RTC being able to avoid costly and perhaps unnecessary litigation. 14 If the crisis facing failed institutions is so severe that Congress decides that it does not want the RTC spending limited time and resources processing declaratory judgment actions in its administrative claims procedure or defending declaratory judgment actions in court, it has the power to act accordingly. We believe that the broad jurisdictional bar contained in the plain language of Sec. 1821(d)(D)(13) reveals that Congress did in fact make this determination. 46 Congress could easily have limited Sec. 1821(d)(13)(D)'s jurisdictional bar to claims, thereby limiting the jurisdictional bar to the same class of actions dealt with in the administrative claims procedure. But it did not. The jurisdictional bar goes further and, in addition to barring any claim ... for payment, Sec. 1821(d)(13)(D)(i), it contains a bar against any action seeking a determination of rights with respect to [ ] the assets of any depository institution for which the Corporation has been appointed receiver, id. In construing a statute we are obliged to give effect, if possible, to every word Congress used, Reiter v. Sonotone Corp., 442 U.S. 330, 339, 99 S.Ct. 2326, 2331, 60 L.Ed.2d 931 (1979), and without good reason, we will not assume that a portion of a statute is superfluous, void or insignificant, see 2A Norman J. Singer, Statutes and Statutory Construction Sec. 46.06, at 119-20 (5th ed. 1992). 47 We therefore assume Congress meant what it said when it included a jurisdictional bar to any action. The term any action includes actions by debtors as well as creditors, and is not limited to actions asserting a right to payment. Absent a clearly expressed legislative intention to the contrary, [the statutory] language must ordinarily be regarded as conclusive. Consumer Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). Because a jurisdictional bar to declaratory judgment actions is consistent with Congress' intention in passing FIRREA, we give effect to the plain language of Sec. 1821(d)(13)(D) and hold that it bars National Union and Gulf's declaratory judgment action, regardless of whether National Union and Gulf are characterized as creditors or debtors, and despite the fact that National Union and Gulf do not assert a right to payment. 48 It could be argued that if Congress did in fact intend that actions seeking a determination of rights but which do not seek a right to payment, such as National Union and Gulf's declaratory judgment action for rescission, would be jurisdictionally barred from both administrative proceedings and courts of law, that this complete bar to administrative and court access would result in an unconstitutional deprivation of due process under the Fifth Amendment. If this objection were valid, we might eschew interpreting the any action seeking a determination of rights language of Sec. 1821(d)(13)(D) so as to cover a larger class of actions than might be covered under the administrative claims procedure of Sec. 1821(d)(3), (d)(5) and (d)(6). This is because where an otherwise acceptable construction of a statute would raise serious constitutional problems, the [c]ourt will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress. Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568, 575, 108 S.Ct. 1392, 1397, 99 L.Ed.2d 645 (1988). 49 However, we do not believe that barring jurisdiction over declaratory judgment actions not seeking a right to payment in both administrative proceedings and courts of law would violate the Due Process Clause. This is because it appears that whatever rights a party wishes to have announced in a declaratory judgment action may later be adjudicated in the administrative claims procedure or in an action with the RTC. Thus, the party stripped of her right to bring a declaratory judgment action gets her chance for a hearing--her opportunity to be heard 15 --even though her hearing may be delayed. For instance, if the inability to have a court declare rights in advance leads to the RTC violating a party's rights causing actual damages, then that party will have a claim--a right to payment--which may be submitted in the administrative claims procedure. 16 That this delay in obtaining relief does not violate the Due Process Clause is made clear from the teaching of the Supreme Court in Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974). 50 In Bob Jones University, the Supreme Court addressed a due process challenge to the Anti-Injunction Act of the Internal Revenue Code, 26 U.S.C. Sec. 7421(a). The Anti-Injunction Act provides in part that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court. Id. The Supreme Court held that Sec. 7421(a) barred suit by Bob Jones University to enjoin the Internal Revenue Service (IRS) from revoking a favorable ruling letter concerning tax-deductible contributions which the IRS had previously issued. 416 U.S. at 727-50, 94 S.Ct. 2041-52. The University argued that by barring suit for injunctive relief, it would either be forced to await assessment of taxes before being able to challenge the assessed taxes in administrative proceedings, or else it would have to pay income taxes and commence a refund proceeding. Id. at 746-48, 94 S.Ct. at 2050-51. This delay in adjudicating whether the ruling letter should be revoked or not would allegedly have caused serious financial harm to the University because revocation of the ruling letter would result in the loss of many donations from contributors who depended on tax deductible status when making those contributions. The University contended that such serious financial hardship resulting from the jurisdictional bar resulted in a deprivation of due process. 51 The Supreme Court rejected the due process challenge: 52 This is not a case in which an aggrieved party has no access at all to judicial review. Were that true, our conclusion might well be different.... [Petitioner] may ... petition the Tax Court to review the assessment of income taxes. Alternatively, petitioner may pay income taxes, ... exhaust the Service's internal refund procedures, and then bring suit for a refund. These review procedures offer petitioner a full, albeit delayed, opportunity to litigate the legality of the Service's revocation of tax-exempt status.... 53 We do not say that these avenues of review are the best that can be devised. They present serious problems of delay, during which the flow of donations to an organization will be impaired and in some cases perhaps even terminated.... [A]lthough the congressional restriction to postenforcement review may place an organization claiming tax-exempt status in a precarious financial position, the problems presented do not rise to the level of constitutional infirmities, in light of the powerful governmental interests in protecting the administration of the tax system from premature judicial interference. 54 Id. (emphasis added). Thus, even assuming that the jurisdictional bar contained in the Anti-Injunction Act would have caused the University to suffer a delay in bringing its action, which delay in itself would have resulted in substantial economic injury, the Supreme Court rejected the due process challenge to the limitation on court jurisdiction. 55 The holding in Bob Jones University indicates that no viable due process challenge can be made to the jurisdictional limitation contained in Sec. 1821(d)(13)(D) as applied to National Union and Gulf's declaratory judgment action. Because National Union and Gulf, as explained below, will have an opportunity to raise their right to rescission as an affirmative defense to the RTC's counterclaim, they too will have a full, although delayed, opportunity to litigate the rescission issue. 17 In light of the important government interests in addressing the crisis of insolvent thrift institutions, even if declaratory judgment actions not asserting a right to payment were completely jurisdictionally barred from the administrative claims procedure and courts of law, this would not present a due process violation. In contrast, where an action is not merely declaratory in nature, but rather asserts a right to payment, a complete bar to such a right-to-payment action in administrative proceedings and in courts of law would appear to constitute an unconstitutional deprivation of due process, since the holder of the right to payment would never have an opportunity to be heard concerning property already allegedly owed her. See, e.g., id.; see also Coit Independence Joint Venture v. FSLIC, 489 U.S. 561, 583-87, 109 S.Ct. 1361, 1374-76, 103 L.Ed.2d 602 (1989); Logan v. Zimmerman Brush Co., 455 U.S. 422, 429-30, 102 S.Ct. 1148, 1154, 71 L.Ed.2d 265 (1982); Mathews v. Eldridge, 424 U.S. 319, 332-49, 96 S.Ct. 893, 901-10, 47 L.Ed.2d 18 (1976); supra note 16. Cf. Lawrence Gene Sager, Foreword: Constitutional Limitations on Congress' Authority to Regulate the Jurisdiction of the Federal Courts, 95 Harv.L.Rev. 17, 68-74 (1981). 56 Finally, we note that if a complete jurisdictional bar to actions not seeking a right to payment were deemed a violation of the Due Process Clause, then it must follow that litigants have a constitutional right to declaratory judgments. This conclusion is not feasible. Far from being constitutionally required, for some years the Supreme Court had raised serious doubts about whether an action for a declaratory judgment was [permitted as] a 'case or controversy' within the jurisdiction of the federal courts, Charles Alan Wright, The Law of Federal Courts Sec. 100, at 670 (4th ed. 1983), and [a]ctions for declaratory judgments represent a comparatively recent development in American jurisprudence, id. 57 Although it is possible to find elements of the declaratory judgment in ancient procedures, the remedy as it is now known has been recognized in the United States only since 1919 when legislatures began to adopt statutes similar to those still in effect authorizing the declaratory judgment.... 58 Constitutional doubts deterred adoption of a federal statute authorizing declaratory judgments but when these were quieted by the Supreme Court in 1933, Congress responded promptly by passing the Federal Declaratory Judgment Act in 1934. 59 Charles Alan Wright et al., 10A Federal Practice and Procedure Sec. 2752, at 571-72 (2d ed. 1983) (footnotes omitted). In light of the history of the Declaratory Judgment Act, 18 it seems that the right to bring a declaratory judgment action is not a constitutional right, but rather a remedy provided as a matter of grace by the legislature; accordingly, the legislature has the power to abolish that form of remedy. 19 60 Since a complete bar of jurisdiction in the administrative claims procedure and courts of law over declaratory judgment actions not asserting a right to payment would comport with due process, National Union and Gulf's argument that they did not receive proper notice from the RTC concerning the submission of claims pursuant to the administrative claims procedure is irrelevant. That is, Congress need not have provided an administrative remedy as an alternative to its barring jurisdiction in courts of law over declaratory judgment actions not asserting a right to payment, so notice of any administrative remedies a fortiori is not required. 61 In holding that Sec. 1821(d)(13)(D)'s ouster of jurisdiction is not necessarily limited to suits otherwise governed by the administrative claims procedure set out in Sec. 1821(d)(3), (d)(5) and (d)(6), 20 we acknowledge that it is possible that in some factual settings the broad bar to jurisdiction contained in Sec. 1821(d)(13)(D) could raise constitutional concerns. Such a situation could arise if the holder of an action asserting a right to payment were not provided reasonable notice and an opportunity to be heard in the administrative claims procedure. In such a setting, application of the broad jurisdictional bar, as stated above, would appear to be unconstitutional. But simply because Sec. 1821(d)(13)(D)'s application in imaginary future cases would be unconstitutional is not a good reason to interpret its jurisdictional bar narrowly, as some courts have suggested. 21 Rather, if and when the RTC seeks to use Sec. 1821(d)(13)(D) unconstitutionally, it would seem that the courts should deem application of Sec. 1821(d)(13)(D) unconstitutional as applied in that case, and take jurisdiction over the case. 22 62 We conclude that Sec. 1821(d)(13)(D) bars jurisdiction in any court over National Union and Gulf's declaratory judgment action, regardless of whether the declaratory judgment action could have been submitted to the RTC pursuant to the administrative claims procedure. We do not reach the issue of whether National Union and Gulf's action could have qualified for the exception to the jurisdictional bar for claims that have been submitted through the administrative claims process had they filed a timely administrative claim. We hold that the language contained in Sec. 1821(d)(13)(D) barring any action seeking a determination of rights is not limited in its application to actions brought by creditors; it applies to debtors as well, and applies regardless of whether the action is asserting a right to payment. It is therefore irrelevant that National Union and Gulf claim to be potential debtors of the RTC. Accordingly, we will affirm the district court's holding that it lacked jurisdiction to hear National Union and Gulf's declaratory judgment action. 23 63