Opinion ID: 2682323
Heading Depth: 2
Heading Rank: 1

Heading: failure to exhaust administrative

Text: REMEDIES THROUGH FIRREA‘S CLAIMS PROCESS DEPRIVES THE DISTRICT COURT OF SUBJECT MATTER JURISDICTION
¶ 11 FIRREA was passed in response to the financial crisis of the 1980s.8 The purpose of FIRREA was to ―revamp[ ] the deposit insurance fund system in order to strengthen the country‘s financial system.‖9 FIRREA abolished the Federal Savings and 6 State v. Ostler, 2001 UT 68, ¶ 5, 31 P.3d 528. 7Salt Lake City Corp. v. Jordan River Restoration Network, 2012 UT 84, ¶ 47, 299 P.3d 990 (internal quotation marks omitted). 8 Tellado v. IndyMac Mortg. Servs., 707 F.3d 275, 279 (3d Cir. 2013). 9 FDIC v. Am. Cas. Co., 975 F.2d 677, 681 (10th Cir. 1992). 5 SUMMERHAZE v. FDIC Opinion of the Court Loan Insurance Corporation and created the Resolution Trust Corporation (RTC).10 FIRREA assigned the functions of handling failed financial institutions to the FDIC and RTC.11 FIRREA gave the FDIC ―the authority to act as receiver or conservator for failed institutions‖;12 and ―[a]s a receiver, the FDIC succeeds to ‗all rights, titles, powers, and privileges‘ of the failed bank.‖13 The goal of FIRREA is to expeditiously wind up the affairs of and dispose of the bulk of claims against failed financial institutions.14 ¶ 12 To aid in the winding up of and disposal of claims against a failed financial institution, FIRREA created an administrative claims review process for institutions in receivership.15 The process allows a receiver to settle claims against the institution in receivership and liquidate its assets.16 After being named, the receiver must promptly publish notice to the institution‘s creditors, informing them that claims against the bank must be presented by a deadline, which is at least ninety days from the publication notice.17 The receiver must also publish notice again at one month and two months after the initial publication.18 The receiver is also required to review and pay any claim received on or before the published deadline, provided that the claim is proven to be legitimate to the satisfaction of the receiver.19 The receiver has no discretion regarding claims filed 10 See id.; Thomas v. FDIC, 255 P.3d 1073, 1078 (Colo. 2011). 11 See Am. Cas. Co., 975 F.2d at 681; Rosa v. Resolution Trust Corp., 938 F.2d 383, 388 (3d Cir. 1991); Thomas, 255 P.3d at 1078. 12 Tellado, 707 F.3d at 279. 13 Thomas, 255 P.3d at 1078 (quoting 12 U.S.C. § 1821(d)(2)(A)(i)). 14 See Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1141 (D.C. Cir. 2011); Thomas, 255 P.3d at 1078. 15 See 12 U.S.C. § 1821(d)(3)–(13). See also Am. Nat’l Ins. Co., 642 F.3d at 1141. 16 Elmco Props., Inc. v. Second Nat’l Fed. Sav. Ass’n, 94 F.3d 914, 919 (4th Cir. 1996). 17 12 U.S.C. § 1821(d)(3)(B)(i). 18 Id. § 1821(d)(3)(B)(ii). 19 Id. § 1821(d)(5)(B). 6 Cite as: 2014 UT 28 Opinion of the Court after the published deadline and must disallow and deny any late-filed claims.20 ¶ 13 The disallowance of late-filed claims is generally final, subject to one exception: if the claimant did not receive notice of the receivership in time to file a claim by the deadline and the claim is filed in time to permit payment of the claim, it may be paid.21 The receiver is required to decide the legitimacy of any claim within 180 days of receipt and notify the claimant of its determination of the claim.22 If the receiver denies the claim, it must notify the claimant of the reason for the denial and the procedures available for obtaining either administrative or judicial review of the denial.23 Following denial, a claimant may request a review of the claim within sixty days.24 This process for a post claim denial review gives the claimant the option to seek an administrative review, file a suit, or continue an action commenced before the appointment of the receiver.25 If a 20 Id. § 1821(d)(5)(C)(i). 21 Id. § 1821(d)(5)(C)(i)–(ii). 22 Id. § 1821(d)(5)(A)(i). 23 Id. § 1821(d)(5)(A)(iv). 24Id. § 1821(d)(6)(A). This sixty-day deadline begins to run on the earlier of the date the claim is denied or 180 days after the claims deadline. See id. 25 Id. Section 1821(d)(6)(A) also states that a claimant should file suit or continue an action already commenced in the district or territorial court of the United States for the district that contains the institution‘s principal place of business. However, ―state courts have inherent authority, and are thus presumptively competent, to adjudicate claims arising under the law of the United States.‖ Tafflin v. Levitt, 493 U.S. 455, 458 (1990). ―Congress has the power to preclude state court jurisdiction over federal claims if it so chooses,‖ Holmes Fin. Assocs., Inc. v. Resolution Trust Corp., 33 F.3d 561, 564 (6th Cir. 1994), but the presumption of state court authority ―can be rebutted by an explicit statutory directive, by unmistakable implication from legislative history, or by a clear incompatibility between statecourt jurisdiction and federal interests.‖ Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478 (1981). ―Because FIRREA does not con‘t. 7 SUMMERHAZE v. FDIC Opinion of the Court claimant fails to request review of a disallowed claim within sixty days, the denial is final and the claimant forfeits all further rights and remedies with respect to the claim.26 Finally, FIRREA states that ―no court shall have jurisdiction over . . . any claim or action for payment from, or action seeking a determination of rights with respect to, the assets of any depository institution‖ that has been placed in receivership or ―any claim relating to any act or omission‖ of the failed institution or the receiver, unless specifically provided for by FIRREA.27 Stated more plainly, FIRREA precludes court jurisdiction over any claim relating to the assets, acts, or omissions of the bank or the receiver, except as the act permits.28
¶ 14 The doctrine of administrative exhaustion generally states that ―no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.‖29 ―The doctrine is applied in a number of different situations‖ and can be ―subject to numerous exceptions.‖30 We must look to the purposes of the doctrine and ―the particular administrative scheme involved‖ to determine if the doctrine is applicable to a particular claim.31 One purpose of the doctrine is ―the avoidance of premature interruption of the contain a clear and unequivocal withdrawal of state court jurisdiction, . . . state courts retain jurisdiction over cases against the [FDIC] which were pending when the [FDIC] was appointed receiver.‖ Holmes Fin. Assocs., Inc., 33 F.3d at 562. In this case, Plaintiffs filed suit in state court prior to the appointment of the FDIC as receiver. 26 12 U.S.C. § 1821(d)(6)(B). 27 Id. § 1821(d)(13)(D). 28 Office & Prof’l Emps. Int’l Union, Local 2 v. FDIC, 962 F.2d 63, 66 n.7 (D.C. Cir. 1992); see also id. 29McKart v. United States, 395 U.S. 185, 193 (1969) (internal quotation marks omitted). 30 Id. 31 Id. 8 Cite as: 2014 UT 28 Opinion of the Court administrative process‖ where the relevant agency ―is created for the purpose of applying a statute in the first instance.‖32 A closely related purpose is that the ―administrative agency is created as a separate entity and invested with certain powers and duties‖ and courts ―should not interfere with an agency until it has completed its action.‖33 ―Typically, exhaustion of administrative remedies is required where Congress imposes such a requirement.‖34 ¶ 15 The text of FIRREA creates ―a jurisdictional prerequisite by expressly providing that ‗no court shall have jurisdiction‘ over claims against the receiver outside the administrative claims process set forth in section 1821(d).‖35 Thus, we conclude that under the doctrine of administrative exhaustion, the failure to exhaust administrative remedies available through FIRREA deprives a court of subject matter jurisdiction over any action seeking a determination of rights with respect to assets of a failed bank that is in receivership. By tying timely claim application to jurisdiction, we join an overwhelming majority of federal circuits.36 This does not end our analysis, however, because the 32 Id. at 193–94. 33 Id. at 194. 34 Meliezer v. Resolution Trust Co., 952 F.2d 879, 882 (5th Cir. 1992) (citing Weinberger v. Salfi, 422 U.S. 749, 756–67 (1975)). 35 Thomas, 255 P.3d at 1080 (quoting 12 U.S.C. § 1821(d)(13)(D)). FIRREA does provide an exception allowing for payment of latefiled claims when a claimant does not receive notice of the receivership. See 12 U.S.C. § 1821(d)(5)(C). However, that exception still requires the claimant to file a claim through the administrative review process. Id. 36 See Farnik v. FDIC, 707 F.3d 717, 721–23 (7th Cir. 2013) (holding the administrative claims review process of FIRREA is mandatory for all parties bringing claims against the FDIC or RTC as receiver for a failed bank); accord Tellado, 707 F.3d at 279–80; Vill. of Oakwood v. State Bank & Trust Co., 539 F.3d 373, 386 (6th Cir. 2008); McMillian v. FDIC, 81 F.3d 1041, 1045 (11th Cir. 1996); Freeman v. FDIC, 56 F.3d 1394, 1400 (D.C. Cir. 1995); Brady Dev. Co. v. Resolution Trust Corp., 14 F.3d 998, 1006 (4th Cir. 1994); Intercontinental Travel Mktg., Inc. v. FDIC, 45 F.3d 1278, 1286 (9th Cir. 1994); Bueford v. Resolution Trust Corp., 991 F.2d 481, 484 (8th Cir. 1993); Marquis v. FDIC, 965 F.2d 1148, 1151 (1st Cir. 1992); con‘t. 9 SUMMERHAZE v. FDIC Opinion of the Court Plaintiffs‘ claim was pending in the district court at the time the Bank was placed in receivership. We now answer the question of whether exhaustion is required for a claim that is pursued before a bank is placed in receivership. C. Failure to Exhaust FIRREA’s Administrative Claims Process Divests a Court of Jurisdiction Over Prereceivership Claims ¶ 16 Plaintiffs filed their action against the Bank in the district court in February 2009, nearly three months before the FDIC was appointed receiver. Plaintiffs argue that FIRREA creates two statutory schemes, one for prereceivership claims, and another for postreceivership claims, and that administrative exhaustion is not required for prereceivership claims. We disagree. ¶ 17 We agree with those federal circuits that hold FIRREA‘s exhaustion requirements apply equally to both pre- and postreceivership claims.37 FIRREA states that a claimant may request administrative review, file suit, or ―continue an action commenced before the appointment of the receiver.‖38 This language reflects express statutory intent to conditionally recognize the viability of claims filed before a receiver is appointed. The condition for viability is that the claim must conform to FIRREA‘s procedural mandates. FIRREA contains no ―language which could be construed to support [the] argument that the claim procedures can be dispensed with in cases where suit was filed prior to the appointment of the receiver.‖39 Nevertheless, Plaintiffs attempt to point to such language. Meliezer, 952 F.2d at 883; Praxis Props., Inc. v. Colonial Sav. Bank, S.L.A., 947 F.2d 49, 63 (3d Cir. 1991); Resolution Trust Corp. v. Elman, 949 F.2d 624, 627 (2d Cir. 1991); Resolution Trust Corp. v. Mustang Partners, 946 F.2d 103, 106 (10th Cir. 1991). 37 See, e.g., Brady Dev. Co., 14 F.3d at 1005–06 (holding FIRREA‘s exhaustion requirement is mandatory for both pre- and postreceivership claims); accord Intercontinental Travel Mktg., Inc., 45 F.3d at 1282–84; Bueford, 991 F.2d at 485; Marquis, 965 F.2d at 1151; Mustang Partners, 946 F.2d at 106. 38 12 U.S.C. § 1821(d)(6)(A)(ii). 39 Mustang Partners, 946 F.2d at 106. 10 Cite as: 2014 UT 28 Opinion of the Court ¶ 18 Plaintiffs cite 12 U.S.C. § 1821(d)(5)(F)(ii) in support of their argument that FIRREA contains two statutory schemes, one for suits brought before a bank is placed in receivership and another for after receivership. We disagree. Section 1821(d)(5)(F)(ii) states, ―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 receiver.‖ The plain language of section 1821(d)(5)(F)(ii) forecloses Plaintiffs‘ argument, because it applies when a claimant has filed a claim, thus presuming the administrative claims review process was followed.40 Although section 1821(d)(5)(F)(ii) states that an existing action is not prejudiced by the filing of an administrative claim and may be ―continue[d],‖ it does not address the failure to file a claim, nor does it imply the claims process need not be followed.41 Instead, this provision is consistent with section 1821(d)(6), which permits a claimant to file suit or continue a previously filed action after exhausting the administrative claims process. ―Congress plainly intended the administrative claims process to provide a streamlined method for resolving most claims against failed institutions in a prompt and orderly fashion, without lengthy litigation.‖42 ¶ 19 FIRREA creates one scheme for both pre- and postreceivership cases under which a court retains jurisdiction. This is not to say that the mere appointment of a receiver divests a court of jurisdiction. Rather, ―FIRREA expressly allows for preexisting actions to be stayed‖ and states that ―such actions may be ‗continue[d]‘ following completion of the administrative claims process.‖43 Thus, FIRREA allows a court to suspend, rather than dismiss, suits, ―subject to a stay of [the] proceedings as may be appropriate to permit exhaustion of the administrative review process as it pertains to the underlying claims.‖44 None of the provisions diminish the importance of the statutory claim review 40 See Thomas, 255 P.3d at 1079. 41 Id. at 1079–80. 42 Id. at 1080 (internal quotation marks omitted). 43 Id. (alteration in original) (citing 12 U.S.C. §§ 1821(d)(12), (d)(5)(F)(ii), (d)(6)(A)(ii)). 44 Id. (internal quotation marks omitted). 11 SUMMERHAZE v. FDIC Opinion of the Court process. A district court acquires or retains jurisdiction only after claimants avail themselves of the administrative claims review process. ¶ 20 There is no dispute that Plaintiffs failed to file a claim by the August 5, 2009 deadline. Plaintiffs submitted their claim on October 8, 2009, sixty-five days after the deadline. The Plaintiffs‘ failure to file a claim by the administrative claims review deadline deprived the district court of subject matter jurisdiction. ¶ 21 We now turn to Plaintiffs‘ alternative arguments that (1) they are excused from the mandatory administrative claims review process and (2) the dismissal of their claims violates due process of the law.