Applegate et al v. Darby Bank & Trust Co. et al
Filing
54
ORDER granting 17 Motion for Reconsideration and Remanding this case to the State Court of Chatham County. The Clerk is directed to dismiss any pending motions and close this case. Signed by Judge William T. Moore, Jr on 3/30/12. (bcw)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
712P1AR30 AM0:!i2
DOMINIC N. APPLEGATE; CHARLES
W. BAINES, JR.; and RYBA
ENTERPRISES,
Plaintiffs and CounterDefendants,
bw
FEDERAL DEPOSIT INSURANCE
CORP., as receiver of the
business and property of Darby
Bank & Trust Co., and DARBY
BANK & TRUST CO.,
CASE NO. CV410-302
Defendants.
AIIERIS BANK, as assignee of
the Federal Deposit Insurance
Corporation, as receiver of
the business and property of
Darby Bank and Trust Co.
Counterclaimant.
ORDER
Before the Court is Plaintiff Dominic Applegate,
Charles Baines,
and Ryba Enterprises's Motion for
Reconsideration. (Doc. 17.) For the following reasons,
Plaintiffs' motion is GRANTED and this case is REMANDED to
the State Court of Chatham County. The Clerk of Court is
DIRECTED to DISMISS any pending motions and close this
case.
BACKGROUND
This case arises from a dispute over alleged lending
commitments made by Defendant Darby Bank and Trust Company
("DBT") .
Plaintiffs have asserted state law claims for
negligent/intentional misrepresentation, breach of
contract, detrimental reliance, tortuous interference with
business and/or contractual relations, and attorneys' fees
and expenses.' (Doc. 6, Attach. 1.) As a factual basis for
recovery on these counts, Plaintiffs claim that Defendant
DBT agreed to extend construction or development loans to
Plaintiffs for certain properties Plaintiffs had acquired.
(Doc. 6, Attach. 1. ¶I 5-12.)
Plaintiffs allege that
Defendant JJBT refused to fulfill those promises, later
interfering with Plaintiffs'
properties.
attempts to sell the
(Id.)
On July 19, 2010, Plaintiffs filed their complaint in
the State Court of Chatham County, naming Defendant DBT as
the sole defendant. (Doc. 6, Attach. 1.) On November 12,
2010, Defendant DBT was closed by the Georgia Department of
Banking and Finance, who appointed Defendant Federal
Deposit Insurance Corporation as receiver of the business
' Counterclaimant Ameris Bank, who purchased the assets of
Defendant DBT, has brought claims against Plaintiffs to
recover on the promissory notes and personal guarantees
executed in connection with the loans. (Doc. 27 at 2.)
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and property of Darby Bank & Trust Co. (FDIC-R").
Afterwards, Defendant FDIC-R filed a Notice of Substitution
and a Notice of Removal. (Doc. 1.)
On April 22, 2011, this Court denied Plaintiffs'
Motion to Remand. (Doc. 16.) In this motion, Plaintiffs
argued that the case should be remanded because the statelaw exception to federal jurisdiction contained in the
Financial Reform, Recovery, and Enforcement Act ("FIRREA"),
12 U.S.C.
§ 1819(b) (2) (A),
was inapplicable to their
claims. (Doc. 6 at 2-4.) This Court disagreed, concluding
that federal jurisdiction was proper because Plaintiffs had
failed to establish the third prong of the state-law
exception—that resolution of Plaintiffs'
claims only
required interpretation of state law. (Doc. 16 at 6.) On
that basis, the Court denied Plaintiffs' Motion to Remand.
(Id.)
Plaintiffs have now filed a Motion for Reconsideration
from this Court's order denying remand. (Doc. 17.) In
this motion, Plaintiffs argue that this Court lacks subject
matter jurisdiction because Defendant "FDIC-R" was not
properly substituted for Defendant DET prior to removal.
In response, Defendant FDIC-R contends that the removal
defect was merely procedural.
(Doc. 18 at 2.) It reasons,
therefore, that Plaintiffs have waived their right to
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remand because they failed to identify the defect and
request remand within thirty days of removal.
(Id. at 2-
9.)
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 brouqht in federal court. 28 U.S.C.
§ 1441(a).
Conversely, if no basis for subject matter
jurisdiction exists, a party may move at any time to remand
the case back to state court.
See 28 U.S.C. § 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 Federal Deposit Insurance Corporation ("FDIC")
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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.
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.")
The Court previously determined that it had subject
matter jurisdiction over this matter because the state-law
exception is inapplicable to this case. (Doc. 16.) The
Court did not assess at that time, because Plaintiffs did
not raise, whether the case was properly removed from state
court. Dispositive to Plaintiffs' request is whether the
failure to properly substitute Defendant FDIC-R prior to
removal deprives this Court of subject matter jurisdiction,
or was simply a procedural defect, which must be raised by
the party seeking remand within thirty days of removal.
See 28 U.S.C. 1447(c) ("A motion to remand the case on the
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basis of any defect other than lack of subject matter
jurisdiction must be made within 30 days after the filing
of the notice of removal under section 1446(a) . If at any
time before final judgment it appears that the district
court lacks subject matter jurisdiction, the case shall be
remanded.")
It is somewhat unclear whether the failure to properly
substitute the FDIC prior to removal is a procedural or
substantive defect. Indeed, it appears that no Federal
Court of Appeals has yet to consider the issue. In Branch
v. Tifton Banking Co., 2011 WL 2939406 (M.D. Ga. July 19,
2011) (unpublished), the court concluded that the failure
to properly substitute the FDIC prior to removal was not a
procedural defect, but rather one that deprived the court
of subject matter jurisdiction. There, the court relied on
the plain language of § 1819(b) (2), reasoning that the case
is not one that arises under the laws of the United States
until the FDIC has been properly substituted as a party.
Id. at *2*3
After careful consideration, this Court is
persuaded by the reasoning in Branch.
It is important, in this case, to focus on this
Court's jurisdiction at the time of removal. When this
case was removed, Defendant FDIC-P. had not been properly
substituted as a party in the state case. Defendant FDIC-R
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spills much ink arguing that no formal court order of
substitution is required. (Doc. 18 at 3-9.) That
position, however, ignores the plain language of the
statute authorizing removal, which 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."
12 U.S.C. § 1819(b)(2)(B) (emphasis added). Defendant
FDIC-R bases its removal in this case on the latter portion
of the statute.
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.
§ 1819(b) (2) (B) (emphasis added)
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See 12 U.S.C.
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 783-84. Even
looking to those federal rules, a court order was still
required to substitute the FDIC as a party in this action.
See Fed. R. Civ. P. 25(c).
Therefore, neither the state
nor federal procedural rule provide for automatic
substitution of a party absent a court order. Because
neither the state nor federal rule allows for an automatic
substitution without a court order upon a transfer of
interest, Defendant FDIC has not been substituted as a
party as required by the statute. See Vision Bank v. Bama
Bayou, LLC, 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 (fl. 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).
As a result, Defendant FDIC-R's removal was premature and
defective.
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Armed with the conclusion that Defendant FDIC-R was
not properly added to this case prior to removal, it is
difficult to conclude that this error was merely
procedural. A defect in removal is only procedural where
the underlying case is one that could have originally been
brought in federal court. Corporate rvlgmt. Advisors v.
Artjen Complexus, Inc., 561 F.3d 1294, 1297 (11th Cir.
2009) .
The plain language of § 1819(b) (2) confers federal
jurisdiction by deeming cases where the FDIC is a party
arise under the laws of the United States.
12 U.S.C.
§ 1819. In other words, federal courts lack jurisdiction
unless and until the FDIC has been properly substituted as
a party.
In this case, however, there was no order in place at
the time of removal that substituted Defendant FDIC-R for
Defendant DET, meaning that the case was not one that arose
under the laws of the United States. As a result, the
defect cannot be procedural because the failure to properly
substitute Defendant FDIC-R in this case means that it was
not one that could have originally been brought in federal
court. Rather, the defect affects this Court's subject
matter jurisdiction and is not one that must be raised
within thirty days of removal. Based on this Court's lack
of subject matter jurisdiction to entertain this case, it
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must be remanded to state court. Accordingly, Plaintiffs'
Motion for Reconsideration is GRANTED and this case is
REMANDED to the State Court of Chatham County.
CONCLUSION
For the foregoing reasons, Plaintiffs' Motion for
Reconsideration (Doc. 17) is GRANTED and this case is
REMANDED to the State Court of Chatham County. The Clerk
of Court is DIRECTED to DISMISS any pending motions and
close this case.
SO ORDERED this J' day of March 2012.
WILLIAM T. MOORE, JR.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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