Opinion ID: 6761
Heading Depth: 2
Heading Rank: 2

Heading: Waiver of the Exhaustion Requirement

Text: DeCell begins its brief by suggesting, through a number of arguments, that FDIC-Corporate waived its right to rely upon DeCell's failure to file a deposit insurance claim. To support this contention, DeCell argues that the FDIC, in both its corporate and receivership capacities, has been involved in the case since FDIC-Receiver's intervention. DeCell seems to assert that because 8 FDIC-Receiver intervened in the state court lawsuit without expressly limiting its appearance to that of Receiver, the FDIC waived its right to claim that FDIC-Corporate was not presented with, and was unaware of, the deposit insurance claim.5 As Decell itself summarized: Because of FDIC's knowledge of the state court suit, and because of its participation in the case for 22 months without a Rule 12 motion, plea in abatement, answer alleging estoppel for failure to participate in the claims process or other indication that DeCell should seek administrative remedies, it has waived any right to complain about DeCell's lack of filing for determination of insured depositor status th[r]ough the administrative process. DeCell's waiver arguments are without merit. First, DeCell's contention that the FDIC's intervention was a general appearance because it did not expressly limit its appearance to that of Receiver is misguided. It is well-settled that the FDIC operates in two separate and legally distinct capacities, each with very different responsibilities. See Aztec General Agency v. Federal Deposit Ins. Corp., No. 93-1424, slip op. at 2 n. 1 (5th Cir. Feb. 7, 1994) (per curiam) (unpublished opinion) (FDIC-Receiver and FDIC-Corporate are distinct legal entities.); Texas Am. Bancshares, Inc. v. Clarke, 954 F.2d 329, 335 (5th Cir.1992) (The separateness of these dual identities of the FDIC has been well respected by federal courts.); Federal Deposit Ins. Corp. v. Condit, 861 F.2d 853, 854, 858 (5th Cir.1988). FDIC-Receiver is charged with the responsibility of winding up the affairs of failed 5 Similarly, DeCell seems to contend that the FDIC waived its right to argue that it appeared in the limited capacity of Receiver because the FDIC did not specifically raise a lack of capacity defense when it intervened in the lawsuit. 9 institutions, including selling assets and paying creditors' claims. See 12 U.S.C. § 1821(d); Aztec General Agency v. Federal Deposit Ins. Corp., No. 93-1424, slip op. at 2 (5th Cir. Feb. 7, 1994) (per curiam) (unpublished opinion). FDIC-Corporate functions as an insurer of bank deposits, and is charged with paying the insured deposits of failed banks within a reasonable time. See 12 U.S.C. § 1821(a); Aztec General Agency v. Federal Deposit Ins. Corp., No. 93-1424, slip op. at 2 (5th Cir. Feb. 7, 1994) (per curiam) (unpublished opinion). Only FDIC-Receiver intervened in DeCell's state court lawsuit against Guaranty. As a wholly distinct entity, there was no need for FDIC-Receiver to expressly designate itself as separate from FDIC-Corporate; mere designation of the Receiver status in the pleadings was enough. No lack of capacity allegations or special appearance motions were needed. Only FDIC-Receiver intervened, and because FDIC-Receiver has no authority to make deposit insurance determinations, FDIC-Corporate did not waive its statutory right to require presentation of a deposit insurance claim. See Aztec General Agency v. Federal Deposit Ins. Corp., No. 93-1424, slip op. at 6-7 (5th Cir. Feb. 7, 1994) (per curiam) (unpublished opinion) (noting that even though FDIC-Receiver was aware of a claim for payment of a letter of credit, the court lacked jurisdiction because a claim had not been submitted to FDIC-Corporate for payment of an insured deposit). As the FDIC noted in its brief, DeCell simply failed to sue the correct party, FDIC Corporate, on its claim for deposit insurance and neglected to file a claim for 10 deposit insurance with FDIC Corporate. A review of the record strengthens the conclusion that the exhaustion requirement has not been waived. After a thorough examination of the pleadings, we find that the FDIC originally intervened solely as FDIC-Receiver. The pleadings, in both the captions and the substance, denominate that the FDIC was appearing in its receivership capacity. In fact, the Magistrate granted DeCell permission to amend its complaint to include FDIC-Corporate in a November 18, 1992 order—more than three years after FDICReceiver had intervened as defendant on November 14, 1989. We agree with the district court's conclusion that [t]he notice of removal and the intervenor's amended answer make it abundantly clear ... that there was only one intervenor, FDIC-Receiver. Thus, we disagree with DeCell's assertion that FDIC-Corporate was a party to this litigation from the beginning.6 6 DeCell's contention that FDIC-Corporate must have intervened because only FDIC-Corporate could have removed under 12 U.S.C. § 1819 is also unpersuasive. Although § 1819(b)(2)(B) allows for removal, removal is not proper when: 1) the FDIC is a party to the lawsuit, other than as a plaintiff, in its capacity as Receiver of a state bank, and designated as the Receiver by the exclusive appointment of State authorities; 2) the lawsuit involves only the rights or obligations of depositors and the bank itself; and 3) the lawsuit only involves the interpretation of state law. See 12 U.S.C. § 1819(b)(2)(D). DeCell argues that these three conditions are met in this case; thus, because removal was allowed, it must have been undertaken by FDICCorporate, as FDIC-Receiver would have been statutorily precluded from removing. Unfortunately for DeCell, the Magistrate allowed FDICReceiver to remove because the FDIC has been given latitude in circumventing subparagraph (D) exceptions, and because federal issues were involved in the lawsuit. We agree with these conclusions. Thus, DeCell cannot assert that the mere act of removal was proof that FDIC-Corporate was involved in 11 In addition, the record clearly demonstrates that FDICReceiver and FDIC-Corporate timely raised their jurisdictional challenges as soon as they became aware that DeCell was claiming the letter of credit as an insured deposit. Initially, DeCell's actions were only against Guaranty and JRL, as the original petition and the first amended original petition did not make an insurance deposit claim. After the intervention of FDIC-Receiver, DeCell's lawsuit was viewed as a claim against the receivership estate, rather than as a claim for deposit insurance. Therefore, FDIC-Receiver appropriately asserted in its answer that DeCell was an unsecured creditor entitled only to a pro rata asset distribution, if entitled to any recovery at all. Our review of the record indicates that DeCell's first assertion that it was an insured depositor was in pre-trial proceedings in October of 1991. As soon as this deposit insurance claim was made, FDIC-Receiver filed a Memorandum of Authorities contending that DeCell had not raised an insured deposit claim in its pleadings, that the district court had no jurisdiction over insured deposit claims, and that FDIC-Corporate was the proper party to be sued. Moreover, as soon as FDIC-Corporate was joined as a defendant, it too raised the same jurisdictional and exhaustion defenses. Simply put, there is nothing in the record to indicate that FDIC-Corporate was present in the lawsuit from the initial intervention, nor does the record indicate that FDICCorporate waived its right to require submission of a deposit the lawsuit at that time. 12 insurance claim. Finally, any assertion that the FDIC's alleged waiver allowed the district court to exercise jurisdiction is wholly without merit. As mentioned, even if we assume that FDIC-Corporate waived its statutory right to make a final determination, § 1821(f)(4) clearly provides for review only in the circuit courts of appeal, not in the district courts. Inasmuch as DeCell is making a subject matter jurisdiction argument, the law is clear that subject matter jurisdiction cannot be waived. See Warren v. United States, 874 F.2d 280, 281-82 (5th Cir.1989); Forsythe v. Saudi Arabian Airlines Corp., 885 F.2d 285, 289 n. 6 (5th Cir.1989). C. District Court Designation Under § 1821(f)(3)(B) DeCell also contends that by removing the case, then failing to object to the pendency of DeCell's request for deposit insurance for almost 2 years, FDIC had made a de facto designation of the district court to hear the case. DeCell relies on the language of § 1821(f)(3)(B) which notes that the Corporation may require the final determination of a court of competent jurisdiction before paying any such claim. For many of the reasons already discussed, this contention is without merit. First, as mentioned, both FDIC-Receiver and FDIC-Corporate made timely jurisdictional objections to DeCell's failure to file a deposit insurance claim with FDIC-Corporate. Contrary to DeCell's assertion that two years had passed before an objection was made, our review of the record indicates that jurisdictional objections were made as soon as DeCell first claimed to be an 13 insured depositor. Neither FDIC-Receiver nor FDIC-Corporate invoked § 1821(f)(3)(B) in any other manner. Second, FDIC-Receiver's removal to federal court cannot be construed as a de facto designation of district court jurisdiction over FDIC-Corporate. As discussed, FDIC-Receiver and FDICCorporate are wholly separate entities with wholly separate functions. Moreover, we have previously held that removing a suit instigated by [the plaintiff] to federal court is not the functional equivalent of voluntarily requesting judicial determination under § 1821(f)(3)(B). Aztec General Agency v. Federal Deposit Ins. Corp., No. 93-1424, slip op. at 7 n. 5 (5th Cir. Feb. 7, 1994) (per curiam) (unpublished opinion). In short, DeCell's de facto designation argument is not supported by the facts or the law. D. Due Process It is undisputed that FDIC-Corporate has not promulgated regulations establishing procedures for resolving deposit insurance claims. DeCell contends that requiring the formal submission of a deposit insurance claim to FDIC's administrative process—a process with admittedly no regulations—amounts to an unconstitutional denial of due process and a taking of private property for public use without just compensation. At best, however, DeCell's position is premature. As an initial matter, the statutory language of § 1821(f) clearly states that the promulgation of regulations is not mandatory. Section 1821(f)(3)(A) provides that in the case of disputed deposit 14 insurance claims, the Corporation may resolve such disputed claim in accordance with regulations prescribed by the Corporation establishing procedures for resolving such claims (emphasis added). Similarly, § 1821(f)(3)(B) begins [i]f the Corporation has not prescribed regulations establishing procedures for resolving disputed claims.... Thus, the statutory language contemplates that formal regulations might not be prescribed. Second, our cases have previously found that the deposit insurance claims process can withstand constitutional scrutiny. See Kershaw v. Resolution Trust Corp., 987 F.2d 1206, 1210 (5th Cir.1993) (per curiam); Nimon v. Resolution Trust Corp., 975 F.2d 240, 247-48 (5th Cir.1992). In Nimon, the petitioners claimed that their due process rights were violated in a deposit insurance dispute because the Resolution Trust Corporation (RTC) failed to prescribe formal procedural rules; instead, the petitioner's claim was handled through informal procedures. See Nimon, 975 F.2d at 247. Although we acknowledged that RTC's decision affects a property right of the [plaintiffs], implicating the [D]ue [P]rocess [C]lause of the U.S. Constitution, id., we found no due process violation, even though we explicitly noted that the RTC has no regulations formalizing insurance dispute resolution, and that FIRREA does not require FDIC to prescribe regulations governing the resolution of these disputes. Id. at 247-48. In Nimon, however, we did examine whether the RTC's informal procedures satisfied the demands of due process. See id. at 247. As we noted: 15 We make three inquiries in determining the requirements of due process in a particular case: (1) the private interests that will be affected by the agency's action; (2) the risk of erroneous deprivation due to the procedures used and the reduction of that risk through additional or substitute procedures; and (3) the interests of the government, including the burden that would be imposed by additional or substitute procedures. Id. (quoting Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976)) (emphasis added). In the present case, DeCell has not submitted a formal deposit insurance claim to FDICCorporate; thus, the administrative procedures, formal or informal, have not been invoked. We cannot entertain a due process claim in this particular case because we have no informal procedures to evaluate under the Mathews framework; simply put, DeCell's due process claim is premature because no claim has been submitted for FDIC-Corporate's determination. Cf. Metro County Title, Inc. v. Federal Deposit Ins. Corp., 13 F.3d 883, 887-88 (5th Cir.1994) (finding no due process violation after evaluating the FDIC's informal handling of a claim under the Mathews framework). With respect to both formal and informal procedures in this case, we cannot find a violation of DeCell's due process rights.7 7 DeCell's reliance on the Supreme Court's decision in Coit Independence Joint Venture v. Federal Savings and Loan Insurance Corp. (FSLIC), 489 U.S. 561, 109 S.Ct. 1361, 103 L.Ed.2d 602 (1989), does not further its argument. In Coit, the Supreme Court held that Coit was not required to exhaust the administrative procedures of the FSLIC because they were inadequate. See id. at 587, 109 S.Ct. at 1374-75. The Court noted that there was a formal regulation allowing the FSLIC to retain a claim for further review for an indefinite period of time. See id. at 586, 109 S.Ct. at 1375 (Under the current regulations, ... no time limit is established for FSLIC's consideration of those claims retained for further review.). In addition, the Court observed that Coit's claim had been under consideration for thirteen months, yet the FSLIC had still not 16 E. Informal Proof of Claim Even though DeCell admits in its brief that it did not file any proof of claim with FDIC at any time, DeCell argues that its suit against Guaranty sufficed as an informal proof of claim to invoke FDIC-Corporate's administrative procedures. For a number of reasons, we find this argument unpersuasive. First, as mentioned, only FDIC-Receiver initially substituted for Guaranty, and at that time, DeCell's petition did not make a deposit insurance claim. Thus, DeCell's lawsuit against Guaranty failed to provide notice that the § 1821(f) deposit insurance procedures were applicable. Second, even if the lawsuit did provide notice of a deposit insurance claim, only FDIC-Receiver would have had that notice. FDIC-Corporate, the entity responsible for handling the deposit insurance claims, was not joined in the lawsuit until a later time. Finally, even if we assume (without deciding) that an informal proof of claim is legitimate, the made a determination. See id. In Coit, however, these facts led the Supreme Court to waive the exhaustion requirement; a due process violation was neither mentioned nor addressed by the Court. Moreover, unlike the FSLIC regulation that was facially inadequate in Coit, FDIC-Corporate has no formal regulations regarding the time periods for consideration of claims. Similarly, in contrast to Coit's submission of its claim to the FSLIC, DeCell has not yet submitted its claim to FDIC-Corporate; thus, we cannot evaluate whether the informal procedures used by FDIC-Corporate are inadequate. Finally, we have previously affirmed the deposit insurance exhaustion requirement, see Aztec General Agency v. Federal Deposit Ins. Corp., No. 93-1424, slip op. at 6-7 (5th Cir. Feb. 7, 1994) (per curiam) (unpublished opinion), and even if we were to waive it, § 1821(f) does not provide for review in the district courts. 17 district court would still not have jurisdiction; first, because FDIC-Corporate has yet to make a final determination, and second, because § 1821(f)(4) provides for review only in the circuit courts of appeal. Based on this analysis, the informal proof of claim argument is not helpful to DeCell.