Opinion ID: 707618
Heading Depth: 2
Heading Rank: 2

Heading: o'melveny and the federal common law

Text: 16 In O'Melveny, the Supreme Court considered whether, in a suit by the FDIC as receiver of a federally insured bank, federal or state law governed the tort liability of attorneys who provided services to the bank. --- U.S. at ----, 114 S.Ct. at 2051. After the FDIC took over as receiver, investors claiming that they had been deceived in connection with two real estate syndications operated by the failed bank demanded refunds. Id. at ----, 114 S.Ct. at 2052. The FDIC caused the bank to rescind the syndications and return the investors' money plus interest. Id. The FDIC then sued the bank's attorneys, alleging professional negligence and breach of fiduciary duty, presumably for failing to inform the bank of the ultra vires acts of its officers. Id. The attorneys moved for summary judgment claiming that, under California law, knowledge of the conduct of the bank's controlling officers must be imputed to the bank and thus to the FDIC which, as receiver, stood in the shoes of the bank. Id. The FDIC asserted that, once the FDIC became the bank's receiver, federal common law determines whether the knowledge of corporate officers acting against the corporation's interest will be imputed to the corporation. Id. The Supreme Court held that state law governs the imputation defense and remanded the case for proceedings in accordance with that determination. Id. at ----, 114 S.Ct. at 2056. 17 Although O'Melveny does not specifically involve the federal common law holder in due course doctrine, it does state some general propositions which are inconsistent with the existence of that common law doctrine. Other circuits have already recognized the significance of O'Melveny beyond the narrow area of imputation. See Murphy, 61 F.3d at 35 (holding that O'Melveny removes the federal common law D'Oench Duhme doctrine as a separate bar to claims); RTC v. Maplewood Investments, 31 F.3d 1276, 1294 (4th Cir.1994) (holding that O'Melveny creates a heavy presumption in favor of applying state law rules of negotiability); FDIC v. Massingill, 30 F.3d 601, 604 (5th Cir.1994) (holding that, in light of O'Melveny, court should not create federal common law rule of decision with respect to defendant's ability to assert the defense of impairment of collateral). 18 In O'Melveny, the Court stated that it would not adopt a court-made rule to supplement federal statutory regulation that is comprehensive and detailed; matters left unaddressed in such a scheme are presumably left subject to the disposition provided by state law. Id. at ----, 114 S.Ct. at 2054 (citing Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77, 97, 101 S.Ct. 1571, 1583, 67 L.Ed.2d 750 (1981) and Milwaukee v. Illinois, 451 U.S. 304, 319, 101 S.Ct. 1784, 1793, 68 L.Ed.2d 114 (1981)). The Court indicated that FIRREA is such a comprehensive regulation. Id. 19 The Court then turned to 12 U.S.C. Sec. 1821(d)(2)(A)(i) which, as amended by FIRREA, provides that the FDIC  'shall ... by operation of law, succeed to--all rights, titles, powers, and privileges of the insured depository institution,'  and explained that this provision appears to indicate that the FDIC as receiver 'steps into the shoes' of the failed S & L, so that  'any defense good against the original party is good against the receiver.'  Id. (citations omitted). 20 The Court noted that certain provisions of FIRREA specifically created special federal rules of decision regarding claims by, and defenses against, the FDIC as receiver. Id. After listing some of these provisions, including 12 U.S.C. Sec. 1821(d)(9)(A), the Court stated the canon of statutory construction, Inclusio unius, exclusio alterius. 7 Id. The Court concluded this portion of the opinion by stating, 21 It is hard to avoid the conclusion that Sec. 1821(d)(2)(A)(i) places the FDIC in the shoes of the insolvent S & L, to work out its claims under state law, except where some provision in the extensive framework of FIRREA provides otherwise. To create additional federal common-law exceptions is not to supplement this scheme, but to alter it. 22 Id. (emphasis added). 23 O'Melveny states that federal courts may not invoke federal common law to supplement the specific exceptions provided by FIRREA. When Congress enacted the comprehensive regulatory framework of FIRREA, it preempted the federal common law rules that restricted the claims and defenses which parties could raise against the FDIC. Accordingly, we hold that O'Melveny removes the federal common law D'Oench Duhme doctrine and the federal holder in due course doctrine as separate bars to DiVall's defense. 8 See Murphy, 61 F.3d at 38-40; FDIC v. O'Melveny & Myers, 61 F.3d 17, 18-19 (9th Cir.1995). If DiVall's defense is to be barred, it must be barred either by a specific provision of FIRREA or by state law.