Court Opinion

ID: 195896
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:51:46+00
Date Added: 2024-06-11T09:58:18.204851
License: Public Domain

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                         

No. 94-1649

                COMMONWEALTH OF MASSACHUSETTS,

                         Petitioner,

                              v.

            FEDERAL DEPOSIT INSURANCE CORPORATION,

                         Respondent.

                                         

            ON PETITION FOR REVIEW OF AN ORDER OF

          THE FEDERAL DEPOSIT INSURANCE CORPORATION
                                         

                            Before

                Cyr and Boudin, Circuit Judges,
                                                          

                 and Keeton,* District Judge.
                                                        

                                         

Thomas  O.  Bean, Assistant  Attorney  General,  with  whom  Scott
                                                                              
Harshbarger, Attorney General, was on brief for petitioner.
                   
Edward J.  O'Meara, Counsel,  with whom  Ann S.  Duross, Assistant
                                                                   
General Counsel, and Richard J. Osterman, Jr., Senior Counsel, were on
                                                     
brief for respondent.

                                         

                       February 8, 1995
                                         

      

*Of the District of Massachusetts, sitting by designation.

     BOUDIN, Circuit Judge.  In the  years 1990 through 1992,
                                      

the  Federal  Deposit  Insurance  Corporation  was  appointed

receiver  for  over 30  banks  principally  located or  doing

business  in Massachusetts.   Massachusetts has  an abandoned

property statute, Mass. Gen. L.  ch. 200A, that arguably gave

Massachusetts title under state law to certain of the insured

deposits  in these banks, based  on the failure  of the named

depositors to  communicate with their banks  over an extended

period.   Some of these potential claims had matured prior to

the banks' failure; others occurred during the receivership.

     In March  1994, Massachusetts  wrote to the  FDIC naming

the  banks  and asserting  that  the  Commonwealth owned  the

abandoned  deposits and  that the FDIC  was obligated  to pay

deposit    insurance   benefits   on    those   accounts   to

Massachusetts.  An FDIC attorney responded in April 1994 with

a   two-paragraph   letter  to   the   Commonwealth's  lawyer

reiterating  the  FDIC's  position  that  the  "Massachusetts

abandoned property law is preempted by federal law provisions

which  dictate  the   disposition  of  unclaimed   deposits."

Treating   this  letter   as  a   dispositive  determination,

Massachusetts in  June 1994  filed a  petition in  this court

seeking review of the FDIC's action.

     The  underlying  dispute   raises  important   questions

including interpretation of  a federal statute--the Unclaimed

Deposits  Amendments Act  of 1993--which  became law  in June

                             -2-
                                         -2-

1993.  107  Stat. 220.   The FDIC position  on the merits  is

that   federal  law  preempts   the  Massachusetts  abandoned

property statute as to abandoned deposits held by the FDIC as

receiver.  But the FDIC urges us not to reach  the merits and

instead to dismiss for lack of subject matter jurisdiction.

     We do not  reach the  merits because we  agree with  the

FDIC's  threshold defense  that direct  review of  the FDIC's

action  in this court is  not authorized by  statute and that

the  matter must  be resolved  in the  first instance  in the

district court.   The jurisdictional issue  turns, by general

agreement, on  12 U.S.C.    1821(f), whose  third and  fourth

paragraphs read as follows:

     (3) Resolution of disputes
     (A)  Resolution in accordance to corporation regulations
               In the case of  any disputed claim relating to
          any  insured  deposit   or  any  determination   of
          insurance coverage with respect to any deposit, the
          Corporation  [the FDIC]  may resolve  such disputed
          claim  in accordance with regulations prescribed by
          the   Corporation   establishing   procedures   for
          resolving such claims.

     (B)  Adjudication of claims
               If   the   Corporation   has  not   prescribed
          regulations  establishing procedures  for resolving
          disputed  claims, the  Corporation may  require the
          final   determination  of  a   court  of  competent
          jurisdiction before paying any such claim.

     (4) Review of Corporation's determination
               Final  determination  made by  the Corporation
          shall be reviewable in accordance with chapter 7 of
          Title 5 by  the United States Court  of Appeals for
          the District  of Columbia  or the court  of appeals
          for   the  Federal   judicial  circuit   where  the
          principal  place  of  business  of  the  depository
          institution is located.

                             -3-
                                         -3-

     It  is common  ground that  the FDIC  has chosen  not to

adopt   "regulations  .  .   .  establishing  procedures  for

resolving  such  claims"  to  insured  deposits  or insurance

coverage.  In these circumstances, the D.C. Circuit held that

direct court  of appeals  review under section  1821(f)(4) is

not  available and that such a dispute must first be resolved

in  a court  of  general jurisdiction,  normally the  federal

district court.  See  Callejo v. RTC, 17 F.3d 1497 (D.C. Cir.
                                                

1994).  Massachusetts, in  response, relies upon decisions of

the Second and Fifth Circuits that read section 1821(f)(4) to

permit immediate court of appeals review.1

     Our  issue  is thus  one on  which  very able  judges in

different   circuits   have  reached   opposite   results  in

construing a rather brief set of statutory provisions.  There

is  certainly  some  looseness  in the  language  of  section

1821(f); but in the end we  agree with the D.C. Circuit  that

language and policy alike favor  the FDIC's position.   Since

two other circuits disagree,  we think it fitting to  explain

our  reasoning  briefly  instead   of  relying  solely  on  a

reference to the excellent discussion in Callejo.
                                                            

                    
                                

     1Kershaw v. RTC, 987 F.2d 1206 (5th Cir. 1993); Nimon v.
                                                                      
RTC, 975 F.2d  240 (5th Cir. 1992); Abrams v.  FDIC, 938 F.2d
                                                               
22 (2d Cir. 1991).   The FDIC cites us to unpublished  orders
of the Third and Fourth Circuits that appear to coincide with
Callejo's approach  so Callejo may  represent the  "majority"
                                          
view. 

                             -4-
                                         -4-

     In  enacting section  1821(f), Congress  explicitly gave

the  FDIC two ways to resolve disputes about insured deposits

and  insurance coverage  of deposits.   First,  the FDIC  can

resolve the  disputes  itself  by  adopting  regulations  for

resolving such  claims.  Section  1821(f)(3)(A).  If  it does

so, then  under section 1821(f)(4) the  dissatisfied claimant

can  obtain  direct court  of  appeals review  of  the FDIC's

"final   determination"   pursuant   to  the   Administrative

Procedure  Act,   5  U.S.C.      701-06.    Second,  if  "the

Corporation  has  not prescribed  regulations"  for resolving

such claims, the FDIC "may require the final determination of

a  court of  competent  jurisdiction  before  resolving  such

claims."  Section 1821(f)(3)(B).

     The  phrase "court of  competent jurisdiction" assuredly

refers to a federal district court or, absent  exclusivity or

removal, a state  trial court.  The  phrase is often  used in

this manner, e.g., Watkins v. Green, 548 F.2d 1142, 1143 (4th
                                               

Cir. 1977) (construing  5 U.S.C.    703), and  this usage  is

plainly what is  intended here.   The reference  occurs in  a

section  juxtaposed with one calling for direct review in the

court of appeals;  and in context the  provision assumes that

the court of  competent jurisdiction will adjudicate  factual

disputes  when the  FDIC has  not established  procedures for

doing so.

                             -5-
                                         -5-

     Against  this  background,  we  think  that  in  section

1821(f)  Congress  deliberately  set  forth  two  alternative

methods of  resolving deposit and insurance  claims, and made

the  course to  be followed  depend on  whether the  FDIC has

established regulations  for the adjudication of such claims.

If  it has, the agency decides the factual disputes and there

is direct court of  appeals review; if  it has not, then  the

agency's less formal resolution is subject to  scrutiny in an

action brought  in a  trial court of  competent jurisdiction,

which will normally be the federal district court.2

     True,  the  statute's language  is  not  airtight.   The

direct route to  the court  of appeals is  available, as  the

statute  phrases  the  matter,   when  there  is  a  "[f]inal

determination"  by the  FDIC.   In the  abstract, the  quoted

phrase could refer either to a determination made  under FDIC

regulations as  provided  in section  1821(f)(3)(A) or  could

include  far less formal  resolutions, such as  the letter at

issue in this case.  But,  in context, the latter is surely a

less plausible reading of the words; and it becomes even less

plausible when history and function are considered.  

                    
                                

     2The  district courts have original jurisdiction of such
actions without reference to amount in controversy, 12 U.S.C.
  1819(b)(2)(A),  and the FDIC would  almost certainly remove
any   such  action  brought  in   a  state  court.     Id.   
                                                                      
1819(b)(2)(B).  Strictly speaking, section 1819(b)(2)(A) does
not confer jurisdiction; it  simply recognizes that there are
courts of general jurisdiction able to entertain such claims.

                             -6-
                                         -6-

     The tradition  of judicial review of  official action is

complex enough  that  few statements  about  it can  be  made

without   qualification.     Still,  broadly   speaking,  two

different  avenues for  judicial review  have existed  in the

federal  courts:   one  involves an  original  action in  the

district court to enjoin unlawful official action, especially

where no  other  means  is provided;  the  other,  used  with

increasing frequency where an agency has authority to resolve

factual  disputes in  the first  instance, is to  empower the

court  of  appeals  to  review  the  agency  directly.    See
                                                                         

generally Note, Jurisdiction to Review Federal Administrative
                                                                         

Action:  District Court or Court of Appeals, 88 Harv. L. Rev.
                                                       

980 (1975).

     Because of  the crisis out  of which its  present powers

have  emerged, the  FDIC  and its  companion, the  Resolution

Trust Corporation,  have  enjoyed a  succession of  statutory

favors relating  to their powers,  procedures and limitations

on judicial intervention.   As a part  of this mosaic, it  is

not at all surprising that Congress would empower the FDIC to

make the  initial choice whether to  adjudicate claims itself

or insist that this task be  performed by the courts.  In the

former  case  the  FDIC   would  have  to  expend  additional

resources but  in return it  would be more likely  to enjoy a

greater degree of deference  in its resolution of issues.   5

U.S.C.    706(2)(A), (E).

                             -7-
                                         -7-

     Thus,  in  constructing  section  1821(f)  Congress  has

simply borrowed  from  two different  traditions of  judicial

review,  indeed,  the  two   dominant  traditions.    It  has

authorized  one to be used  if the agency  configures its own

procedures  to   conform  to  the  model   of  formal  agency

adjudication; it has provided for the other to be used if the

agency chooses not  to do so but, by  some less formal means,

makes  clear  its  unwillingness  to pay.    The  puzzle fits

together quite  neatly.  Nor is it unprecedented for Congress

to deploy both methods for a single agency.  See Note, supra,
                                                                        

88 Harv. L. Rev. at 981 & n.11.

     The final  reason for resolving  any doubts in  favor of

the D.C.  Circuit's approach  is functional.   Under Callejo,
                                                                        

the court of appeals is the court of first instance where the

agency  has in  place  a procedure  to  resolve any  disputed

facts.   Alternatively,  the district  court--which  has  the

capacity for making fact findings  as a matter of  course--is

the  court of first instance where the agency has declined to

establish  an  adjudicatory procedure.   This  is not  only a

rational  plan,  but  one  that corresponds  exactly  to  the

bifurcation in the statutory language.

     Of course,  one could make the choice  of judicial forum

turn  on whether  in  a particular  case  there were  factual

disputes still to  be resolved.  But this is  a call that can

often be  made only  during the  process of judicial  review.
                                       

                             -8-
                                         -8-

Rules to determine which  court has jurisdiction ought  to be

clear  and easily  applied  at the  outset.   In  any  event,

everything  in the  statutory language  leans against  ad hoc
                                                                         

choices:   what matters under the statute is whether the FDIC

has adopted (and presumablyused) regulations foradjudication.

     In our own case  it would probably be more  efficient to

resolve  the merits in this court at once, because the merits

issues appear to be  entirely legal.  But we are dealing with

a jurisdictional statute adopted  by Congress and intended to

be observed uniformly.  On a more practical level, experience

teaches  that in  the  end, a  clear  and simple  schema  for

judicial  review saves time for  everyone.  If  this case had

begun  in the  district court,  we might  now be  deciding an

appeal by one side or the  other from summary judgment on the

merits.

     In sum, the statutory language of  section 1821(f)--read

in context--amply supports the D.C. Circuit's interpretation.

If reading the  statute in  this fashion produced  an odd  or

impractical   outcome,   one    might   search   for    other

interpretations; but the bifurcation squares with the history

of  judicial review  proceedings in  federal courts,  and the

framework  is  eminently workable.    The only  quirk  is the

initial  choice provided  to  the agency;  but  it is  easily

explained,  by  the  banking  crisis,  and  in  any case  was

explicitly conferred by Congress.

                             -9-
                                         -9-

     The  FDIC has  tendered  an  alternative  jurisdictional

defense, namely, that section 1821(f) is entirely irrelevant-

-and therefore  cannot confer  jurisdiction on the  courts of

appeals--because  Massachusetts' claims  raise a  broad legal

issue  and are thus not  claims for insurance  benefits.  The

Commonwealth's claims,  however, were explicitly  for deposit

insurance benefits.  A claim for such insurance benefits does

not cease to be so because of the substantive issue raised by

the specific claim or the number of claims made.  

     Given  that two  circuits have  read section  1821(f) to

favor direct court of appeals review, no criticism can attach

to  the   Commonwealth's  choice   in  this  case   to  begin

proceedings  in this  court.   To  avoid  any risk  that  the

Commonwealth might be prejudiced by having to start a new law

suit, we exercise our authority "in the interest  of justice"

to transfer  this  case  to the  district  court  instead  of

dismissing.  See 28 U.S.C.   1631;  Callejo, 17 F.3d at 1501.
                                                       

The district  court, of course, may require that the petition

be  reframed as  a complaint  and follow  whatever procedural

course it deems appropriate.

     Similarly,  all issues  are open  to the  district court

except the two specifically decided in this opinion.  We have

decided here  only that the Commonwealth's  claims are claims

for  insurance benefits  and that  federal-court jurisdiction

over the  FDIC's  disposition  of such  claims  lies  in  the

                             -10-
                                         -10-

district court rather than in the court of appeals.   We have

not considered  whether  the FDIC's  determinations here  are

"final" to  the extent required for  judicial intervention or

any other  such question.  Our purpose  in saying this is not

to inject new issues, but simply  to make plain that we  have

decided only the two matters actually briefed and argued.

     This case  is transferred to the  United States District
                                          

Court for the District of Massachusetts.

                             -11-
                                         -11-