Opinion ID: 751774
Heading Depth: 3
Heading Rank: 1

Heading: FDIC's Duty to Maximize Gain and Minimize Loss in its

Text: Disposition of Assets 97 In its September 6, 1995 order, 16 the district court dismissed appellants' claim for money damages for the FDIC-Receiver's alleged failure to comply with its statutory duty to maximize the gain and minimize the loss in the disposition of Meritor's assets. See 12 U.S.C. § 1821(d)(13)(E). 17 The district court held that this provision neither expressly nor impliedly grants a private right of action to individual shareholders. 18 See exhibit B to appellant's brief. 98 The standard announced in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), guides our inquiry into whether section 1821(d)(13)(E) impliedly grants shareholders of a failed financial institution a private right of action to enforce the FDIC-Receiver's statutory obligations. In Cort, the Court announced that courts should consider the following four factors to determine whether a statute impliedly grants a private right of action: (1) whether the plaintiff is a member of the class for whose special benefit the statute was created; (2) whether there is either an explicit or implicit legislative intent to create or deny a private remedy; (3) whether an implied remedy is consistent with underlying policies of the statute; and (4) whether the cause of action is one that traditionally is relegated to state law and the area is a state concern so that it would be inappropriate to imply a federal cause of action. See id. at 78, 95 S.Ct. at 2088. 99 In deciding whether to recognize an implied private right of action, we ascertain the intent of Congress;[u]nless such 'congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist.'  Karahalios v. National Fed'n of Fed. Employees, Local 1263, 489 U.S. 527, 532-33, 109 S.Ct. 1282, 1286, 103 L.Ed.2d 539 (1989) (quoting Thompson v. Thompson, 484 U.S. 174, 179, 108 S.Ct. 513, 516, 98 L.Ed.2d 512 (1988)). Thus, we recently have noted that we should focus our inquiry on the first two Cort factors. See Mallenbaum v. Adelphia Communications Corp., 74 F.3d 465, 469 (3d Cir.1996). 100 Appellants contend that the district court erred by failing to give proper consideration of two circumstances which distinguish this case from others involving receiverships: (1) the existence of a surplus in the Meritor receivership; and (2) the appellants, as shareholders, have an express statutory right to distribution of this surplus. According to appellants, in the context of a receivership operating with a surplus, the Cort factors are met and thus we should imply the existence of a private right of action in their favor. 101 We disagree. Our analysis of the Cort factors, with an emphasis on the first two, see Mallenbaum, 74 F.3d at 469, leads us to the conclusion that there is no evidence of a congressional intent to provide for a private remedy. Because such intent is our ultimate guidepost, we find that the shareholders of a failed financial institution do not have a private right of enforcement of the FDIC's duty to maximize gain and minimize loss in its disposition of the institution's assets. 102 First, appellants, as shareholders, are not members of a class for whose special benefit Congress created section 1821(d)(13)(E). The duty to maximize gain in the disposition of assets has implications broader than to benefit shareholders. The FDIC's duty to maximize gain and minimize loss primarily is intended to benefit the insurance fund by minimizing the claims against it, thereby reducing the cost to the taxpayers. Thus, the benefits gained by the shareholders and other claimants are incidental to the primary intended beneficiaries, the insurance fund and the taxpayers. See FDIC v. Niblo, 821 F.Supp. 441, 455 n. 59 & 456 (N.D.Tex.1993); FDIC v. Updike Bros., Inc., 814 F.Supp. 1035, 1041-42 (D.Wyo.1993). 103 In a similar context, we have noted that the FDIC does not have a duty to shareholders. See First State Bank of Hudson County v. United States, 599 F.2d 558, 563 (3d Cir.1979). In Hudson County, we held that the FDIC's duty to examine banks, see 12 U.S.C. § 1820, is intended to prevent losses which ultimately would result in claims against the insurance fund. See id. at 562-63. We also noted that while the examination incidentally might benefit the bank, its depositors, and its creditors, the primary purpose of the examination is to safeguard the insurance fund. See id. at 563. Further, our conclusion is supported by evidence in the legislative history that Congress was concerned with reducing the costs to taxpayers. See H.R.Rep. No. 101-54(I), 101st Cong., 1st Sess., 1, 514-15, reprinted in 1989 U.S.C.C.A.N. 86, 308-09. 104 In addition, the duty to maximize gain and minimize loss does not operate for the special benefit of shareholders where the receivership is operating with a surplus. Section 1821(d)(11)(B) establishes a shareholder right to distribution of funds in a case where there is a surplus after the payment of all claimants and administrative expenses. 19 Given this right to distribution, appellants argue that the FDIC fulfills its statutory duty to maximize gain in order to preserve the surplus, thus for the sole benefit of the shareholders. We disagree. 105 We recognize that the express right to distribution of surplus granted under section 1821(d)(11)(B) creates a direct interest in shareholders. See California Housing Securities, Inc. v. United States, 959 F.2d 955, 957 n. 2 (Fed.Cir.1992) (rejecting the argument that the shareholders did not have standing to claim an unconstitutional taking); Branch v. FDIC, 825 F.Supp. 384, 402-06 (D.Mass.1993) (holding that shareholders of a failed financial institution have standing to assert derivative claims because they retain the right to distribution of surplus). This right, however, does not transform the FDIC's duty to maximize gain and minimize loss into one inuring solely to the benefit of the shareholders. The FDIC performs its section 1821(d)(13)(E) duty to maximize gain intending to reduce the claims against the insurance fund, not to ensure that shareholders receive distribution. 106 Because the section clearly inures to the benefit of other classes, the first Cort factor militates strongly against granting a private remedy. Turning to the second Cort factor, the parties agree that there is no statement in the legislative history which suggests that Congress intended either to create or deny a private right of action to enforce the FDIC's duty to maximize gain and minimize loss. While congressional silence does not preclude a court from implying a private right of action where the other factors are satisfied, see Zeffiro v. First Pennsylvania Banking & Trust Co., 623 F.2d 290, 297 (3d Cir.1980), here we find that the other factors do not support finding a private right of action. 107 While we acknowledge that an action against a federal entity to enforce rights expressly granted under federal law traditionally is not relegated to state law, our inquiry ends upon our conclusion that the first two Cort factors are not met. See California v. Sierra Club, 451 U.S. 287, 298, 101 S.Ct. 1775, 1781, 68 L.Ed.2d 101 (1981) (noting that the second two factors are only of relevance if the first two factors give indication of congressional intent to create the remedy).