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

Heading: Application of Section 1821(d)(13)(D) to the Affirmative Defense of Rescission

Text: 64 We now turn to consider whether the district court correctly determined that National Union and Gulf are jurisdictionally barred under Sec. 1821(d)(13)(D) from raising an affirmative defense of rescission to the RTC's counterclaim. We believe that the plain meaning of the language contained in Sec. 1821(d)(13)(D) indicates that the statute does not create a jurisdictional bar to defenses or affirmative defenses which a party seeks to raise in defending against a claim. 65 Section 1821(d)(13)(D) limits jurisdiction as follows: 66 Except as otherwise provided in this subsection, no court shall have jurisdiction over-- 67 (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 [RTC] has been appointed receiver, including assets which the [RTC] may acquire from itself as such receiver; or 68 (ii) any claim relating to any act or omission of such institution or the [RTC] as receiver. 69 12 U.S.C. Sec. 1821(d)(13)(D). The above language bars jurisdiction over four categories of actions: (1) claims for payment from assets of any depository institution for which the RTC has been appointed receiver; (2) actions for payment from assets of such depository institution; (3) actions seeking a determination of rights with respect to assets of such depository institution; and (4) a claim relating to any act or omission of such institution or the RTC as receiver. The issue is whether defenses or affirmative defenses to claims can be said to fall under any of the above four categories. 70 We think it is plain enough that a defense or an affirmative defense is neither an action nor a claim, but rather is a response to an action or a claim, and that therefore defenses and affirmative defenses do not fall under any of the above four categories of actions. In the interest of clarity, we explain our position in detail. 71 Black's Law Dictionary defines defense, in relevant part, as follows: 72 That which is offered and alleged by the party proceeded against in an action or suit, as a reason in law or fact why the plaintiff should not recover or establish what he seeks. That which is put forward to diminish plaintiff's cause of action or defeat recovery.... 73 . . . . . 74 A response to the claims of the other party, setting forth reasons why the claims should not be granted. The defense may be as simple as a flat denial of the other party's factual allegations or may involve entirely new factual allegations. In the latter situation, the defense is an affirmative defense. 75 Black's Law Dictionary 419 (6th ed. 1990) (emphasis added). Affirmative defense is defined in more detail as follows: 76 In pleading, matter asserted by defendant which, assuming the complaint to be true, constitutes a defense to it. A response to a plaintiff's claim which attacks the plaintiff's [legal] right to bring an action, as opposed to attacking the truth of claim. Under the Fed.Rules of Civil Procedure, and also under most state Rules, all affirmative defenses must be raised in the responsive pleading (answer).... 77 Id. at 60 (emphasis added). We have stated above that an action means a lawsuit brought in a court. Id. at 28. In the above discussion we also stated, borrowing from the Bankruptcy Code, that as used in Sec. 1821(d) the term claim essentially means an action asserting a right to payment. 78 With the aid of these definitions, it is clear that a defense or affirmative defense is not properly called an action or a claim but is rather a response to an action or a claim. When a lawyer files a responsive pleading to an action or claim, she does not say that she is bringing an action or filing a claim; instead, she says that she is answering, responding to, or defending against an action. The jurisdictional bar contained in Sec. 1821(d)(13)(D) therefore does not apply to defenses or affirmative defenses. 24 79 Of course, if in addition to raising defenses or affirmative defenses to an action or a claim, a party also raises counterclaims, such counterclaims would fall under Sec. 1821(d)(13)(D)'s jurisdictional bar, because a counterclaim is a claim. Black's Law Dictionary defines counterclaim as [a] claim presented by a defendant in opposition to or deduction from the claim of the plaintiff. Black's Law Dictionary 349 (6th ed. 1990). Therefore, unless counterclaims were properly submitted to the administrative claims procedure of FIRREA, they would be subject to the jurisdictional bar of Sec. 1821(d)(13)(D). 25 80 Whether an assertion is truly a defense, an affirmative defense, or a counterclaim is a question courts are competent to answer. As discussed above, a claim (or a counterclaim) is essentially an action which asserts a right to payment. Courts should not allow parties to avoid the procedural bar of Sec. 1821(d)(13)(D) by simply labelling what is actually a counterclaim as a defense or affirmative defense. 81 We will assume that under the state and/or federal law which ultimately will govern this case, a defense of rescission is an affirmative defense. 26 The district court has characterized rescission as an affirmative defense, and we accept that characterization. National Union and Gulf are therefore not barred by Sec. 1821(d)(13)(D) from raising rescission as an affirmative defense to the RTC's counterclaim. 82 Our interpretation of Sec. 1821(d)(13)(D) is based on the plain meaning of the language of that section. However, we point out that even if it could be argued that the jurisdictional bar of Sec. 1821(d)(13)(D) could be fairly interpreted to bar jurisdiction over defenses or affirmative defenses, we would not adopt this position. This is because interpreting the jurisdictional bar in such a manner would, in a substantial number of cases, and in this case in particular, result in an unconstitutional deprivation of due process. Property which one stands to lose as a result of a lawsuit is a property interest protected by the Due Process Clause, Logan, 455 U.S. at 428-30, 102 S.Ct. at 1154, and the Due Process Clause ... prevent[s] ... denying potential litigants use of established adjudicatory procedures, when such an action would be 'the equivalent of denying them an opportunity to be heard upon their claimed right[s],'  id. at 429-30, 102 S.Ct. at 1154. If parties were barred from presenting defenses and affirmative defenses to claims which have been filed against them, they would not only be unconstitutionally deprived of their opportunity to be heard, but they would invariably lose on the merits of the claims brought against them. Such a serious deprivation of property without due process of law cannot be countenanced in our constitutional system. 27 [W]here 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). Especially in light of the serious due process concerns which would unavoidably arise were we to interpret the jurisdictional bar of Sec. 1821(d)(13)(D) as applying to defenses and affirmative defenses, we reject such an interpretation. 83 It may be argued that barring defenses and affirmative defenses in court would not be unconstitutional because under FIRREA parties could always file potential defenses and affirmative defenses in the administrative claims procedure provided for in Sec. 1821(d)(3), (d)(5) and (d)(6). But this suggestion is not tenable. For one thing, many of the parties who would be raising defenses to RTC-initiated lawsuits would not be creditors of the thrift institution in receivership and so would not receive notice of the time within which they would be required to present information to the administrative claims procedure, as provided for in Sec. 1821(d)(3). Again, this would raise due process concerns. Moreover, even if parties received notice that they must submit potential defenses or affirmative defenses to the administrative claims procedure, such parties would often find it difficult if not impossible to do so. Since a party cannot know what her defense is until she hears the claim leveled against her, it seems that it would be nearly impossible for a party to submit future hypothetical defenses to the administrative claims procedure--defenses to lawsuits which may not yet have brought against her or which may never be brought at all. We agree with the court in RTC v. Conner, 817 F.Supp. 98 (W.D.Okla.1993), that even if the plain language of Sec. 1821(d)(13)(D) were read or understood to include affirmative defenses, an exception to the plain meaning rule of statutory construction would apply because such a literal application of the statute ... would lead to the patently absurd consequence of requiring presentment and proof to the RTC of all potential affirmative defenses that might be asserted in response to unknown and unasserted claims or actions by the RTC, id. at 102 (internal quotations and citations omitted). 84 For the above reasons, we conclude that Sec. 1821(d)(13)(D) does not bar National Union or Gulf from raising any defense or affirmative defense to the RTC's counterclaim. We will therefore reverse the district court's holding that National Union and Gulf were jurisdictionally barred from raising rescission as an affirmative defense.