Court Opinion

ID: 2998046
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:40:30.495501+00
Date Added: 2024-06-11T15:03:06.607674
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 04-3365
DONALD BUCZKOWSKI and
WENDY BUCZKOWSKI,
                                             Plaintiffs-Appellees,
                                v.

FEDERAL DEPOSIT INSURANCE CORPORATION,
as receiver for Superior Bank, F.S.B.,
                                           Defendant-Appellant.
                         ____________
         Appeal from the United States District Court for
        the Northern District of Illinois, Eastern Division.
             No. 04 C 968—David H. Coar, Judge.
                         ____________
        ARGUED MAY 5, 2005—DECIDED JULY 5, 2005
                     ____________

 Before BAUER, EASTERBROOK, and MANION, Circuit
Judges.
   EASTERBROOK, Circuit Judge. An automobile accident led
to tort litigation in the Circuit Court of Cook County,
Illinois, against Elaine Oliva plus her employer Superior
Bank, said to be vicariously liable on a theory of respondeat
superior. Superior’s insurer assumed the defense. Counsel
did not keep in touch with his nominal client, because when
the Bank was dissolved in July 2001, and the Federal
2                                                No. 04-3365

Deposit Insurance Corporation became receiver of its assets
and liabilities, no one noticed. In November 2003, however,
defense counsel alerted plaintiffs and the court to Superior’s
non-existence. Counsel also notified the FDIC; that was the
first it had heard of the suit. When the state judge said in
January 2004 that he would hold a trial with “Superior
Bank” as a defendant notwithstanding these developments,
the FDIC filed a formal petition to intervene in the Bank’s
stead, a motion to dismiss, and a notice of removal to
federal court.
  Legislation enacted in 1989 and amended late in 1991
creates special removal rules for litigation involving failed
banks. With some immaterial exceptions, all suits against
the FDIC in any of its capacities “shall be deemed to arise
under the laws of the United States” (12 U.S.C.
§1819(b)(2)(A)) and hence may be removed under 28 U.S.C.
§1441(b). Although most litigants must remove within
30 days from service or a new event making the suit remov-
able, see 28 U.S.C. §1446(b), the FDIC has 90 days “begin-
ning on the date the action, suit, or proceeding is filed
against the Corporation or the Corporation is substituted as
a party.” 12 U.S.C. §1819(b)(2)(B). The FDIC contends that
this 90-day period did not begin until February 5, 2004,
when it formally intervened in the state suit. The federal
district judge, however, concluded that the 90 days began to
run in 2001. Its appointment as receiver automatically
replaced the Bank with the FDIC in litigation, the judge
wrote. 2004 U.S. Dist. LEXIS 13297 (N.D. Ill. July 14, 2004).
The FDIC has appealed from the remand order. Its author-
ity to do so, granted by 12 U.S.C. §1819(b)(2)(C), is yet
another difference from normal removal practice, where 28
U.S.C. §1447(d) forbids most appeals.
  The district judge thought that he had to choose between
conflicting lines of precedent: some courts of appeals hold
that the FDIC’s clock starts immediately on its appoint-
ment, while others hold that the time does not start until
No. 04-3365                                               3

formal substitution as a party in court. Compare Woburn
Five Cents Savings Bank v. Hicks, 930 F.2d 965, 968-71 (1st
Cir. 1991) (FDIC becomes a party and may remove on its
appointment as a receiver), and Lazuka v. FDIC, 931 F.2d
1530, 1537 (11th Cir. 1991) (same), with FDIC v. Loyd, 955
F.2d 316, 327 (5th Cir. 1992) (FDIC may wait until formal
substitution), and Diaz v. McAllen State Bank, 975 F.2d
1145, 1147-48 (5th Cir. 1992) (same). The judge favored the
former rule because it prevents the FDIC from lurking in
the background and removing only if things appear to be
going badly in state court. Removal should come as soon as
practicable, the judge believed, and no litigant should have
an option to consider rulings on the merits before deciding
which judicial system will handle the litigation. That is
indeed the normal rule, reflected in §1446(b), but given
§1819(b)(2)(B) the FDIC need not play by the normal rules.
  There is no need to choose sides in a conflict, because
there is no conflict—not, at least, at the appellate level.
Woburn and Lazuka were decided in 1991, before the
amendment that gave §1819(b) its current text. They con-
sidered the FDIC’s removal rights and obligations under
§1446, a statute of general application. Loyd and Diaz, by
contrast, were decided in 1992 and apply §1819(b)(2)(B). No
appellate court has held that the amended version of
§1819(b)(2)(B) starts the clock with the FDIC’s appointment
as a receiver. The eleventh circuit has held that the
amended §1819(b)(2)(B) abrogates Lazuka by giving the
FDIC 90 days after formal substitution to remove the case.
See FDIC v. S&I 85-1, Ltd., 22 F.3d 1070, 1073-74 (11th
Cir. 1994). The first circuit has not explicitly overruled
Woburn, but FDIC v. Keating, 12 F.3d 314 (1st Cir. 1993),
applies the amended §1819(b)(2)(B) to allow a removal long
after the FDIC’s appointment as a receiver; likely the first
circuit thought Woburn irrelevant, because it dealt with a
statute that no longer supplies the governing rule.
 Section 1819(b)(2)(B) starts the clock when “the
Corporation is substituted as a party.” Substitution “as a
4                                                 No. 04-3365

party” must mean “as a party to the litigation”. Reading
this language to mean “substituted as the failed bank’s re-
ceiver” would turn the word “party” into mush. The FDIC
may be a bank’s receiver or insurer or regulator (its three
statutory capacities) but is not a “party” to anything in
particular in any of these capacities. It becomes a “party”
only in court. “Substituted as a party” and “appointed as a
receiver” are too different to equate. Federal practice re-
quires notice and motion for all substitutions other than the
identity of an officeholder in official-capacity suits. See Fed.
R. Civ. P. 25. Section 1819(b)(2)(B) should be understood
against that background, so that substitution as a party
requires a specific filing in court. (Illinois follows the same
approach to substitution. 735 ILCS 5/2-1008. We refer to
federal practice, however, because it supplies the back-
ground for §1819(b)(2)(B), a statute that means the same in
every state.)
  The Resolution Trust Corporation, which like the FDIC
can step into the shoes of failed banks, operates under a
removal statute identical to §1819(b)(2)(B). See 12 U.S.C.
§1441a(l)(3)(A)(i). Another subsection spells out what it
means for the RTC to be “substituted as a party”: this
occurs “upon the filing [in court] of a copy of the order ap-
pointing the [RTC] as conservator or receiver for that party
or the filing of such other pleading informing the court that
the [RTC] has been appointed conservator or receiver for
such party.” 12 U.S.C. §1441a(l)(3)(B). The FDIC wants us
to apply this definition to its own removal statute despite its
absence from §1819. Perhaps that is sensible; §1819 was
amended in a “technical corrections” bill one week after
Congress enacted the RTC’s statute, and the amending
provision’s caption is “FDIC Removal Period Made Consis-
tent With RTC Removal Period.” 105 Stat. 2286. As
amended, §1819(b)(2)(B) is identical to §1441a(l)(3)(A)(i),
and reading these texts differently just because §1819 lacks
some elaboration that appears in §1441a would double-
No. 04-3365                                                 5

cross the legislature unless there is a reason to think that
the two statutes serve different ends. This is not to say that
the definition in §1441a(l)(3)(B) “applies” to §1819(b)(2)(B);
these laws do not cross-reference each other. Our point,
rather, is that the events that gave §1819(b)(2)(B) its cur-
rent form confirm the statute’s most natural reading.
  Reading §1819(b)(2)(B) to mean what it says does not
leave plaintiffs and state judges at the mercy of a poten-
tially manipulative FDIC. Any litigant, or the court on its
own motion, can substitute the FDIC for the failed bank as
a party. That would open the 90-day window for removal.
See Diaz, 975 F.2d at 1148 n.3; Loyd, 955 F.2d at 328.
Plaintiffs who fail to notice that a defendant has vanished
in a puff of smoke are poorly situated to complain when a
successor removes the suit—and the FDIC may need the
privilege of delayed removal when events of the kind il-
lustrated here keep the agency in the dark for years.
  The FDIC’s notice of removal was timely under
§1819(b)(2)(B). The judgment of the district court therefore
is vacated, and the case is remanded with instructions to
adjudicate this suit on the merits.

A true Copy:
       Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                    USCA-02-C-0072—7-5-05