Harris Baking Company v. Darby Bank & Trust Co. et al
Filing
21
ORDER granting 6 Motion for Summary Judgment; denying 11 Motion to Remand. Signed by Judge William T. Moore, Jr on 3/28/2012. (loh)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
HARRIS BAKING CO., f/k/a
Regency Baking Co.;
Plaintiff,
V.
CASE NO. CV411-171
FEDERAL DEPOSIT INSURANCE
CORP., as receiver of the
business and property of
Darby Bank & Trust Co.;
DRAYPROP, LLC; DARBY BANK &
TRUST CO.; MICHAEL BROWN;
RUBEN CROLL; and MARLEY
MANAGEMENT INC.;
Defendants.
ORDER
Before the Court is Plaintiff's Motion to Remand (Doc.
11) and Defendant Federal Deposit Insurance Corporation's,
acting as receiver for Defendant Darby Bank and Trust
("FDIC-R"), Motion for Summary Judgment (Doc. 6). For the
following reasons, Plaintiff's motion is DENIED and
Defendant FDIC-R's motion is GRANTED. Because there is no
longer any federal issue in this case, the Court declines
to exercise its supplemental jurisdiction over Plaintiff's
remaining claims. As a result, Plaintiff's complaint is
DISMISSED. The Clerk of Court is DIRECTED to close this
case.
BACKGROUND
This case stems from Plaintiff leasing commercial
space in the Drayton Tower Building in Savannah, Chatham
County, Georgia.' (Doc. 7 at 1-2.) Plaintiff contends that
the owner of the building has failed to provide the
necessary services for Plaintiff to operate its bakery.
(Doc. 1, Attach. 2 ¶ 5.) When signing the lease, Plaintiff
allegedly relied on representations made by Defendants that
they would make capital improvements to the building.
(Doc. 11 at 1-2.) In addition, Plaintiff contends that
Defendant Darby Bank and Trust (DBT") guaranteed the
availability of up to $1,500,000 for the renovations.
(Id.
at 2.)
Ultimately, Defendant DBT was closed by the Georgia
Department of Banking and Finance and placed under the
receivership of Defendant FDIC-R. (Id.) As a result,
Defendant DET did not disburse any of the funds allegedly
promised for improvements and renovations, which were never
completed.
(Id.) According to Plaintiff, it has suffered
' Because Defendant did not respond to Plaintiff's motion,
the Court accepts as true Plaintiff's factual statements
for the purpose of ruling on its motion. See S.D.L.R. 7.5
("Failure to respond within the applicable time period
shall indicate that there is no opposition to a motion.");
Id. 56.1 ("All material facts set forth in the statement
[of material facts] required to be served by the moving
party will be deemed to be admitted unless controverted by
a statement served by the opposing party.").
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no less than $300,000 in damages based on Defendants'
failures.
(Doc. 7 at 2.)
On August 12, 2010, Plaintiff filed a complaint in the
State Court of Chatham County. (Id. at 1.) In the
complaint, Plaintiff offers no legal theory with respect to
how Defendants are liable to Plaintiff.
(Doc. 1, Attach.
2.) However, Plaintiff claims that it suffered damages by
the combined acts of Defendants.
(Id. ¶ 8.)
On July 1,
2011, Defendants removed the case to this Court. 2 (Doc. 1.)
On July 13, 2011, Defendant FDIC-R filed a Motion for
Summary Judgment. (Doc. 6.) In the motion, Defendant
FDIC-R argues that Plaintiff's claims against it are
precluded under federal law because those claims are not
based on a fully executed, properly documented agreement
that is an official record of Defendant DBT. (Doc. 7 at 47.) Plaintiff failed to file any response.
On July 26, 2011, however, Plaintiff filed a Motion to
Remand. (Doc. 11.) In the motion, Plaintiff contends that
this Court lacks jurisdiction because its claims satisfy
the state-law exception to the statute conferring subject
matter jurisdiction on this Court.
(Id. at 3-8); see 12
2 This was Defendants' second removal, as the Court remanded
the first because Defendant FDIC-R had not been properly
substituted as a party prior to removal. (See CV410-301,
Doc. 25.)
3
t.LS.C. § 1819(b) (2). In response, Defendant FDIC-R reasons
that removal is proper because it has colorable defenses to
Plaintiff's claims that are based on federal law. (Doc. 12
at 4-11.)
ANALYSIS
I.
PLAINTIFF'S MOTION TO REMAND
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. § 1447(c). When a case
originally filed in state court is removed by the
defendant, the defendant normally has the burden of proving
that federal subject matter jurisdiction exists. Williams
v. Best Buy Co., 269 F. 3d 1316, 1319 (11th Cir. 2001).
Normally, 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). As
further discussed below, however, these general principles
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are modified by statute and case law in an action where
jurisdiction exists because the Federal Deposit Insurance
Corporation ("FDIC") is a party.
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 statute, 28 U.S.C.
§ 1441, allows the FDIC to remove "all 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.
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12 U.S.C. § 1819(b) (2) (D) (emphasis added) . If the removal
provision of FIRREA is satisfied, then the case 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 would be improper.
As the sole basis for remand, Plaintiff cites 12
U.S.C. 1819(b) (2) (D) and contends that this Court lacks
jurisdiction over this action because the "claims are not
deemed to arise under the laws of the United States."
(Doc. 11 at 5 (emphasis in original) (internal quotations
omitted).) Before the merits of this argument are
addressed, an overview of the modified procedural rules
applicable to removal under FIRREA is needed. 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
6
773, 785 (11th Cir. 2005) ("[E]ach of these three prongs
must be established by a party to defeat removal.").
Further, once the FDIC appropriately removes, a presumption
arises that the removal of the case was proper. Lazukav.
FDIC, 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.")
Defendants oppose Plaintiff's motion on the basis that
the state-law exception is inapplicable. (Doc. 12 at 4-6.)
This state-law exception applies only if all three prongs
in 12 U.S.C. § 1819(b) (2) (D) are satisfied, so a failure
with respect to any of the three is fatal to a claim that
the exception applies to defeat removal. Castleberry, 408
F.3d at 785 (citing Motorcity of Jacksonville, Ltd. v. Se.
Bank, N.A., 83 F.3d 1317, 1323 n.3 (11th Cir. 1996) (en
banc) (finding that the state-law exception was
inapplicable because not all three prongs were satisfied),
vacated on other grounds by Hess v. FDIC, 519 U.S. 1087
(1997)) . Because both the parties and this Court find the
third prong of the state-law exception dispositive of this
motion, only that issue will be discussed.
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I
After reviewing the parties' relative arguments and
the undisputed facts of this case, the Court finds that
Plaintiff cannot establish the third prong of the state-law
exception, requiring that "only the interpretation of the
law
of
such
State
necessary."
is
12
U.S.C.
1819(b) (2) (D) (iii) . As another variation of normal rules
on remand, "Courts must look beyond the plaintiff's
complaint to any defenses in order to determine if only
state law issues are present." Reding v. FDIC, 942 F.2d
1254, 1257 (8th Cir. 1991) ; accord Lazuka, 931 F.2d at 1532
(noting that FIRREA "overcomes the 'well-pleaded complaint'
rule by permitting the FDIC to assert a federal question in
its answer") . Defendant FDIC-R asserts several defenses
grounded solely on federal law. These defenses include the
doctrine presented in D'Oench Duhme & Co. v. FDIC, 315 U.S.
447 (1942) as codified by 12 U.S.C. § 1821(d) (9) (A) and
1823(e), which precludes application of the state-law
exception. See Lopez v. Bank of Hiawassee, 2010 U.S. Dist.
LEXIS 106872, at *4 (N.D.
Ga. Oct. 5, 2010) (unpublished)
(denying a motion to remand because "defenses raised by the
FDIC-R which require the interpretation of federal law
authorized removal of this action")
Plaintiff argues that the state-law exception does not
apply because Defendant FDIC-R's proffered federal defenses
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are not colorable. (Doc. 11 at 5-7.) The Court, however,
finds this argument to be without merit. Plaintiff bases
this argument on the novel reasoning that Defendant IJET
carried insurance that would completely cover the money
damages sought by Plaintiff. Plaintiff concludes,
therefore, that the federal defenses are inapplicable
because insurance will cover any judgment awarded to
Plaintiff, meaning that there will be no diminution of
Defendant FDIC-R's assets.
(Id.)
The problem with
Plaintiff's argument is that, regardless of its normative
merits, it finds no basis in law.
Therefore, the Court
finds that the federal defenses offered by Defendant FDIC-R
are,
at the very least,
colorable.
Accordingly,
Plaintiff's Motion to Remand is DENIED.
II. DEFENDANT FDIC-R'S MOTION FOR SUMMARY JUDGMENT
According to Fed. R. Civ. P. 56(a), '[a] party may
move for summary judgment, identifying each claim or
defense—or the part of each claim of defense—on which
summary judgment is sought." Such a motion must be granted
"if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as
a matter of law." Id. The "purpose of summary judgment is
to 'pierce the pleadings and to assess the proof in order
to see whether there is a genuine need for trial.'
I
Matsushita Elec. Indus. Co. v. Zenith Radio
574, 587 (1986)
., 475 U.S.
(quoting Fed. R. Civ. P. 56 advisory
committee notes)
Summary judgment is appropriate when the nonmovant
"fails to make a showing sufficient to establish the
existence of an element essential to that party's case, and
on which that party will bear the burden of proof at
trial."
Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986) . The substantive law governing the action
determines whether an element is essential. DeLong Equip.
Co. v. Wash. Mills Abrasive Co., 887 F.2d 1499, 1505 (11th
Cir. 1989)
As the Supreme Court explained:
[A] party seeking summary judgment always bears
the initial responsibility of informing the
district court of the basis for its motion, and
identifying those portions of the pleadings,
depositions, answers to interrogatories, and
with
the
file,
together
on
admissions
affidavits, it any, which it believes
demonstrate the absence of a genuine issue of
material fact.
Celotex, 477 U.S. at 323. The burden then shifts to the
nonrnovant to establish, by going beyond the pleadings, that
there is a genuine issue as to facts that are material to
the nonmovants case.
Clark v. Coats & Clark, Inc., 929
F.2d 604, 608 (11th Cir. 1991)
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The Court must review the evidence and all reasonable
factual inferences arising from it in the light most
favorable to the nonmovant. Matsushita, 475 U.S. at 58788. However, the nonmoving party "must do more than simply
show that there is some metaphysical doubt as to the
material facts."
Id. at 586.
A mere "scintilla" of
evidence, or simply conclusory allegations, will not
suffice.
See, e.g., Tidwell v. Carter Prods., 135 F.3d
1422, 1425 (11th Cir. 1998) . Nevertheless, where a
reasonable fact finder may "draw more than one inference
from the facts, and that inference creates a genuine issue
of material fact, then the Court should refuse to grant
summary judgment."
Barfield v. Brierton, 883 F.2d 923,
933-34 (11th Cir. 1989)
Even though a motion requesting summary judgment is
unopposed, it may only be granted when appropriate—there
must be an evidentiary showing that the moving party is
entitled to judgment as a matter of law. United States v.
One Piece of Real Property Located at 5800 SW 74th Ave.,
Miami, Fla., 363 F.3d 1099, 1101 (11th Cir. 2004). To this
end, a district court cannot simply accept the factual
statements in the unopposed motion as true, "but must
ensure that the motion itself is supported by evidentiary
materials." Id. It is only when the court concludes that
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the moving party's factual statements find evidentiary
support in the record that the court may grant an unopposed
request for summary judgment. See Id.
In its motion, Defendant FDIC-R argues that the
doctrine laid out in D'Oench Duhme, 315 U.S. 447, codified
in 12 U.S.C. § 1821(d) (9) and 1823(e), precludes
Plaintiff's claim against it because the claim was not
fully executed and properly documented by Defendant DBT.
(Doc. 18 at 4-7.) When the FDIC acts as a receiver, the
D'Oench Duhme doctrine acts to preclude a private party
from enforcing against the FDIC "any obligation not
specifically memorialized in a written document such that
the agency would be aware of the obligation when conducting
an examination of the institution's records." Baumann v.
Savers Fed. Say . & Loan Ass'n, 934 F.2d 1506, 1515 (11th
Cir. 1991) .
To effectuate this purpose, the statute
provides that
No agreement which tends to diminish or defeat
the interest of the Corporation in any asset
acquired by it under this section or section 1821
of this title, either as security for a loan or
by purchase or as receiver of any insured
depository institution, shall be valid against
the Corporation unless such agreement
(A) is in writing,
(B) was executed by the depository institution
and any person claiming an adverse interest
the
obligor,
thereunder,
including
12
I
contemporaneously with the acquisition of the
asset by the depository institution,
(C) was approved by the board of directors of the
depository institution or its loan committee,
which approval shall be reflected in the minutes
of said board or committee, and
(D) has been, continuously, from the time of its
execution, an official record of the depository
institution.
12 U.S.C. § 1823(e). The Eleventh Circuit Court of Appeals
has previously determined that, under § 1823(e), a document
must be signed to be executed. Twin Const., Inc. v. Boca
Raton, Inc., 925 F. 2d 378, 384 (11th Cir. 1991) . In
addition, the party advancing the adverse interest bears
the burden of establishing that an agreement satisfies the
requirements of § 1823(e). See FDIC v. Oldenburg, 34 F. 3d
1529, 1551 (10th Cir. 1994) ; Hanson v. FDIC, 13 F.3d 1247,
1253 (8th Cir. 1994)
In this case, the Court concludes that Plaintiff's
claims against Defendant FDIC-R are barred by § 1823(e).
There is no agreement executed by both the lender and the
party bringing the adverse claim against the FDIC.
12
U.S.C. § 1823(e) (B). Furthermore, there is no indication
that the agreement was either approved by Defendant DBT's
Board of Directors, id. § 1823 (e) (C), or kept as an
official record of Defendant DBT, id. § 1823(e) (IJ).
In
light of these shortcomings, the Court concludes that
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I
A
Plaintiff's claim against Defendant FDIC-R is precluded by
§ 1823(e).
III. PLAINTIFF'S STATE-LAW CLAIMS AGAINST THE REMAINING
DEFENDANTS
In light of the Court dismissing the only federal
issue present in this case, the Court will now sua sponte
examine
whether
it
should
exercise
supplemental
jurisdiction, pursuant to 28 U.S.C. § 1367, over
Plaintiff's claims against the remaining Defendants. While
Plaintiff failed to label any of its claims, the Court
assumes that they are all based on state law,
Under
§ 1367(c), the Court may decline to exercise supplemental
jurisdiction over a claim . . . if [] the district court
has dismissed all claims over which it has original
jurisdiction." 28 U.S.C. § 1367(c)(3). Factors the Court
should consider in determining whether to exercise its
discretion and decline supplemental jurisdiction include
judicial economy, convenience, fairness, and comity.
Palmer v. Hosp. Auth. of Randolph Cnty., 22 F.3d 1559, 1569
(11th Cir. 1994).
After careful consideration, the Court finds no reason
to exercise its supplemental jurisdiction over Plaintiff's
remaining state-law claims. In the Court's opinion, having
these state-law issues heard in state court economizes
14
judicial resources and is more convenient to the parties.
In addition, notions of fairness and comity would suggest
that a case now composed of claims based entirely on state
law should be tried in a state court. Therefore, the Court
will exercise its discretion under 28 U.S.C. § 1367(c) and
DISMISS Plaintiff's remaining claims against Defendants
DBT, Drayprop, Brown, Croll, and Marley Management.
CONCLUSION
For the foregoing reasons, Plaintiff's Motion to
Remand (Doc. 11) is DENIED and Defendant FDIC-R's Motion
for Summary Judgment (Doc. 6) is GRANTED. Because there is
no longer any federal issue in this case, the Court
declines to exercise its supplemental jurisdiction over
Plaintiff's remaining claims. As a result, Plaintiff's
complaint is DISMISSED. The Clerk of Court is DIRECTED to
close this case.
SO ORDERED this Z &
day of March 2012.
WILLIAM T. MOORE, J'
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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