Bishop et al v. Darby Bank & Trust Co. et al
Filing
55
ORDER granting 13 Motion to Remand. Signed by Judge William T. Moore, Jr on 9/27/2011. (loh)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF GEORGIA 'r!I "-'
LJU .
2'SAVANNAH DIVISION
J
r• ".
iii
DR. RANDOLPH C. BISHOP; DRB
ACQUISITIONS, LLC; DR. CLIFF L.
CANNON, JR.; STEPHEN CANNON;
JOSEPH E. VALLOTTON, III; ALLEN
EAGER; ALVA HOLDINGS, LLC; and
SCC ACQUISITIONS, LLC;
Plaintiffs,
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DARBY BANK & TRUST CO.; FEDERAL
DEPOSIT INSURANCE CORPORATION,
as Receiver of the business and
property of Darby Bank & Trust
Co.; DOMINIC N. APPLEGATE;
APPLEGATE INDUSTRIES, INC.; ABL
LOFTS, LLC; APPLEGATE BRENNAN
CONSTRUCTION, Inc.; and BAKER
B. LEAVITT;
CASE NO. CV410-295
Defendants.
BAKER B. LEAVITT;
Third Party Plaintiff,
V.
REAR BRENNAN, BRAD HUNNINGS,
and NAVIGATORS INSURANCE
COMPANY;
Third Party Defendants
ORDER
Before the Court is Plaintiffs' Motion to Remand. (Doc. 13.)
For the reasons that follow, this motion is GRANTED, and this case
is remanded to the State Court of Chatham County for further
proceedings.
BACKGROUND
This case arises from a failed project to construct and sell
condominiums in downtown Savannah, Georgia. Plaintiffs allege that
Defendants Applegate and Leavitt, aided by Defendant Darby and the
remaining defendants, misappropriated and converted the assets of
300 West Broughton, LLC, a limited liability corporation formed to
construct the condominiums and owned by Plaintiffs. (Doc. 13 at
3.) On October 29, 2009, Plaintiffs filed a complaint in the State
Court of Chatham County, naming Darby Bank & Trust Co. ("Darby")
and other parties as Defendants. (Doc. 1, Ex. 2.) In the
complaint, Plaintiffs assert state law claims for breach of
fiduciary duty, aiding and abetting a breach of fiduciary duty,
civil conspiracy, breach of contract, fraud, misrepresentation,
conversion, unjust enrichment, money had and received, negligence,
and promissory estoppel. (Doc. 1, Ex. 2.) Plaintiffs seek both
money damages and a declaratory judgment that loans made by
Defendant Darby are not secured by property owned by Plaintiffs.
On November 12, 2010, Darby was closed by the Georgia
Department of Banking and Finance ("GDBF"), who appointed the
Federal Deposit Insurance Corporation ('FDIC") as Receiver.
(Doc.
1 ¶ 3-4.) On December 21, 2010, the FDIC contemporaneously filed
both a Notice of Substitution (Doc. 13, Ex. 2) and a Notice of
Removal (Doc. 1) . On January 20, 2011, Plaintiffs filed a Motion
to Remand (Doc. 13), which raises a question as to whether these
claims are properly before the Court.
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ANALYSIS
In general terms, Federal courts are courts of limited
jurisdiction: they may only hear cases that they have been
authorized to hear by the Constitution or Congress. See Kokkonen
v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994). For cases
first filed in state court, a defendant may remove the matter to
federal court only if the original case could have been brought in
federal court.
28 U.S.C.
1441(a).
Conversely, if no basis for
subject matter jurisdiction exists, a party may move to remand the
case back to state court. See 28 U.S.C. 9 1447(c). When a case
originally filed in state court is removed by the defendant, it is
the defendant's burden to prove that federal subject matter
jurisdiction exists. Williams v. Best Buy Co., 269 F.3d 1316, 1319
(11th Cir. 2001) . All doubts about federal jurisdiction should be
resolved in favor of a remand to state court.
Burns v. Windsor
Ins. Co., 21 F.3d 1092, 1095 (11th Cir. 1994)
However, these general principles are modified by statute and
case law in an action where jurisdiction exists because the FDIC is
a party. For example, the burden of proving a lack of federal
jurisdiction in this action rests on the plaintiff opposing removal
and not the FDIC.
Castleberry v. Goldome Credit Corp., 408 F.3d
773, 785 (11th Cir. 2005) (placing the burden on the party seeking
to defeat removal) . Further, once the FDIC appropriately removes,
a presumption arises the that removal of the case was proper.
Lazuka v. Fed. Deposit Ins. Corp., 931 F.2d 1530, 1535 (11th Cir.
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1991) (superseded on other grounds by 12 U.S.C. § 1819(b)) ("We
interpret this section creating a rebuttable presumption of federal
jurisdiction. Therefore, absent some showing of an exception,
according to section 1819 (b) (2) (B) the FDIC may remove a case to
federal district court.")
All parties agree that this Court has jurisdiction, if at all,
under a statute created by Congress—The Financial Institutions
Reform, Recovery, and Enforcement Act ("FIRREA"), 12 U.S.C. § 1819.
This statute, when read in conjunction with the general removal
code section, 28 U.S.C. § 1441, allows the FDIC to remove '1a11
suits of a civil nature at common law or in equity to which the
Corporation,
in any capacity,
is a party."
12 U.S.C.
§ 1819(b) (2) (A). However, removal is prohibited if the "state law"
exception to FIRREA removal applies, which is satisfied only if the
action is one
(i)
to which the Corporation, in the Corporation's
capacity as receiver of a State insured
depository institution by the exclusive
appointment by State authorities, is a party
other than as a plaintiff;
(ii)
which involves only the preclosing rights
against
the
State
insured
depository
institution, or obligations owing to,
depositors, creditors, or stockholders by the
State insured depository institution; and
(iii)
in which only the interpretation of the law of
such State is necessary.
12 U.S.C. § 1819(b) (2) (D)
(emphasis added) .
Unless all three
prongs of FIRREA's removal provision are satisfied, then the case
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is "deemed to arise under the laws of the United States," as a
matter of statue. 12 U.S.C. § 1819(b) (2) (A). This result triggers
the availability of removal under 28 U.S.C. § 1441(b), which allows
for removal of "any civil action of which the district courts have
original jurisdiction founded on a claim or right arising under the
laws of the United States." However, if the above "state
law" exception to FIRREA removal applies, then the action "shall
not be deemed to arise under the laws of the United States." 12
U.S.C. § 1819(b) (2) (D) . As a result, removal on the basis of
FIRREA alone is not permitted.
However, the Court need not reach the "state law" exception
issue to decide this motion. As a separate ground for remand,
Plaintiffs contend that Defendant FDIC's Notice of Removal was
ineffective because the FDIC removed this case prior to being
properly made a party to the State Court action.
10.)
(Doc. 13 at 9-
Plaintiffs argue that "the Court should remand because the
Superior Court did not enter an order substituting the FDIC as a
party in the state-court action."
(Id.)
For the reasons that
follow, the Court agrees.
The statute providing the basis for removal in this case
provides that the FDIC may "remove any action, suit, or proceeding
from a State court to the appropriate United States district court
before the end of the 90-day period beginning on the date the
action, suit, or proceeding is filed against the Corporation or the
Corporation is substituted as a party."
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12 U.S.C. § 1819(b) (2) (B)
(emphasis added) . Defendant FDIC bases its removal in this case on
the latter portion of the statute. However, Defendant FDIC removed
prior to actually being substituted as a party in the case.
Accordingly, its removal was premature and defective, and this
Court is without jurisdiction in this matter.
Under the Georgia Civil Practice Act, a party is not
substituted in a case unless and until the state court enters an
order resulting in the substitution of an entity as a party in a
case. See O.C.G.A. § 9-11-25(c) ("In case of any transfer of
interest, the action may be continued by or against the original
party unless the court, upon motion, directs the person to whom the
interest is transferred to be substituted in the action or joined
with the original party.") . No such order was entered in this case
in state court prior to its removal, so the FDIC was not
"substituted as
a party"
as required.
See
12
U.S.C.
§ 1819 (b) (2) (B) (emphasis added)
Although no Eleventh Circuit decision has directly answered
this question, the principles in Castleberry, 408 F.3d 773, provide
ample guidance. In that case, the Court noted that it "must look
to the Federal Rules of Civil Procedure to determine whether [a
party] filed an action against the FDIC under § 1819." Id. at 78384. Even looking to those federal rules, a court order was still
required to substitute the FDIC as a party in this action.
Fed. R. Civ. P. 25
(C) .
See
Therefore, neither the state nor federal
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procedural rule provide for automatic substitution of a party
without a court order.
Where neither the state nor federal rule allows for an
automatic substitution without a court order upon a transfer of
interest, the FDIC has not been substituted as a party as required
by the statute. See Vision Bank v. Bama Bayou, LLC I 1022 U.S.
Dist. LEXIS 14237, at *5 (S.D. Ala. Feb. 14, 2011) (unpublished);
see also Minker v. Wash. Mut. Bank, N.A., 2010 WL 376964, at
*3 (D.
Ariz. Jan 25, 2010) (unpublished) ('Defendants do not explain how
succeeding to rights and privileges necessarily inserts the FDIC as
a party in a lawsuit."); J.E. Dunn Nw., Inc. V. Salpare Bay, LLC,
2009 WL 3571354 (D. Or. Oct. 26, 2009) (unpublished)
CONCLUSION
For the reasons above, Plaintiffs' Motion to Remand (Doc. 13)
is GRANTED, and this case is remanded to the State Court of Chatham
County for further proceedings. Accordingly, the Clerk of Court is
DIRECTED to close this case.
SO ORDERED this
W.
27day of September 2011.
WILLIAM T.MOORE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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