Lexon Insurance Company, Inc. v. Federal Deposit Insurance Corporation

Filing 34

ORDER AND REASONS: IT IS ORDERED that FDIC's 21 Motion to Dismiss is GRANTED, without prejudice to Lexon's right to bring a timely amended complaint, showing a viable claim, as set forth in document. Signed by Judge Ivan L.R. Lemelle on 9/7/2018. (jls)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
LEXON INSURANCE COMPANY, INC.

CIVIL ACTION

VERSUS

NO. 18-4245

FEDERAL DEPOSIT INSURANCE CORP.,
as receiver for FIRST NBC BANK

SECTION: “B”(1)

ORDER AND REASONS
Considering Defendant Federal Deposit Insurance Corporation’s
(“FDIC”) “Motion to Dismiss for Failure to State a Claim for
Relief”

(Rec.

Doc.

21),

Plaintiff

Lexon

Insurance

Company

Incorporated’s (“Lexon”) Memorandum in Opposition to Motion to
Dismiss (Rec. Doc. 22), FDIC’s Reply in Support of Motion to
Dismiss (Rec. Doc. 28), and Oral Argument held on August 22, 2018,
IT IS ORDERED that FDIC’s Motion to Dismiss (Rec. Doc. 21.)
is GRANTED, without prejudice to Lexon’s right to bring a timely
amended complaint, showing a viable claim.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
During March 2016, Lexon, as surety, executed eight bonds on
behalf of Linder Oil Company. See Rec. Doc. 21-1 at 5. The bonds
amounted to $11,163,300.00 and secured Linder’s lease obligation
to the United States Department of Interior, Bureau of Ocean Energy
Management (“BOEM”). See Rec. Doc. 22 at 4. To ensure that it could
be indemnified in the event of a loss, Lexon required Linder to

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post collateral. See id. In or around early April 2016, First NBC
Bank issued two letters of credit to Linder, listing Lexon as the
beneficiary. See id.
Thereafter, First NBC Bank’s financial well-being started to
deteriorate. See id. In November 2016, FDIC took total control
over First NBC Bank. See id. at 4-5. Plaintiff alleges that First
NBC Bank was to “cease lending to borrowers like Linder” because
of its Consent Order with the FDIC. Id. at 5. Plaintiff further
alleges that FDIC, through First NBC Bank, violated the Consent
Order by allowing the two letters of credit to renew. See id.
Specifically, in March 2017, the letters of credit automatically
renewed for an additional year, making them good through March
2018. See id. at 4.
On April 28, 2017, the State of Louisiana closed First NBC
Bank and appointed FDIC-R as receiver. See id. at 5. In late
September 2017, FDIC-R repudiated the letters of credit. See Rec.
Doc. 21-1 at 6. On December 1, 2017, for the first time, Lexon
sent drafts against the two letters of credit, seeking to draw
$9,985,500.00. See Rec. Doc. 22 at 5. Plaintiff alleges that the
FDIC never responded to its drafts. See id.
On December 21, 2017, Plaintiff filed proofs of claim with
the FDIC-R, relating to the repudiation of the letters of credit.

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See Rec. Doc. 21-1 at 6. The proofs of claim were disallowed by
the FDIC-R on February 26, 2018. See id.
On April 25, 2018, Plaintiff filed a four-count complaint
against FDIC, seeking “damages of $9,985,500.00 resulting from the
FDIC’s failure to honor, and improper repudiation of, [the] two
[letters of credit] issued by [First NBC Bank].” Rec. Doc. 1 ¶ 1.
Defendant moved to dismiss all claims for failure to state a claim
on July 2, 2018. See Rec. Doc. 21 at 1.
LAW AND ANALYSIS
Motion to Dismiss Standard
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a party to move for dismissal of a complaint for failure to state
a claim upon which relief can be granted. Such a motion is rarely
granted because it is viewed with disfavor. See Lowrey v. Tex. A
& M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (quoting Kaiser
Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d
1045, 1050 (5th Cir. 1982)). When reviewing a motion to dismiss,
courts must accept all well-pleaded facts as true and view them in
the light most favorable to the non-moving party. See Baker v.
Putnal, 75 F.3d 190, 196 (5th Cir. 1996). However, “[f]actual
allegations must be enough to raise a right to relief above the
speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007).

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“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.” Gonzales v. Kay, 577 F.3d
600, 603 (5th Cir. 2009)(quoting Ashcroft v. Iqbal, 129 S.Ct. 1937,
1949 (2009))(internal quotation marks omitted). A claim has facial
plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. This
is a “context-specific task that requires the reviewing court to
draw

on

its

plaintiffs

judicial

must

experience

“nudge[]

their

and
claims

common

sense.”

across

the

Id.

line

The
from

conceivable to plausible.” Twombly, 550 U.S. at 570.
Plaintiff fails to state a claim for relief because Plaintiff
fails to plead sufficient facts, showing damages recoverable under
law.
Congress authorized the FDIC to serve as receiver for failed
financial institutions. See Bldg. Four Shady Oaks Mgmt. L.P. v.
FDIC, 504 Fed. Appx. 292, 294 (5th Cir. 2012). With that authority,
the FDIC is allowed to repudiate contracts of failed institutions.
See id. The repudiation must occur within a reasonable period of
time considering surrounding facts and circumstances, including
prejudice to the parties. See id at 295 (stating that whether the
FDIC

repudiated

within

a

reasonable

period

following

its

appointment is a factual inquiry and “necessarily depends on the
surrounding facts and circumstances” of the case).
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Here, Lexon has not plead sufficient factual matter to survive
a motion to dismiss. This is not a situation where FDIC has before
it either a provable claim or an unprovable claim that would
prevent it by limited authority to repudiate a letter of credit
under which the claim or attempted draw was trying to be made and
was

rejected.

FDIC

reasonably

carried

out

its

authority

to

repudiate the letters of credit.1 Therefore, damages were fixed at
the time of the declaration of insolvency. See Credit Life Ins.
Co. v. FDIC 870 F. Supp. 417, 421 (D.N.H. 1993); see also 12 U.S.C.
§ 1821(e)(3)(stating that any claim for damages is limited to
actual direct compensatory damages and determined as of the date
of appointment of the receiver).
Looking at the surrounding facts and circumstances of this
case, it does not appear that FDIC repudiated the letters of credit
under unreasonable circumstances or in some attempt to prejudice
Lexon’s rights. Nor does it appear that FDIC repudiated the letters
of credit under any collusion or fraud. The renewal was likely a
prudent attempt to honor certain obligations and move forward.
Lexon was well aware, prior to declaration of insolvency, of
the renewal of the letters of credit and the possibility of claims
being brought against it. However, Lexon never demanded any sums

These letters of credit are viewed as contracts. See Credit Life Ins. Co.,
870 F. Supp. at 426; see also U.C.C. § 5-102(a)(10).
1

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under the standby letters of credit from First NBC Bank.2 It chose
to wait until after declaration of insolvency to assert its claim.
Lexon relies primarily on actions taken by the FDIC prior to
its

appointment

as

receiver,

while

it

was

in

its

corporate

capacity. The actions that occurred before the appointment of the
receiver, like renewal of the letters, were actions taken by the
FDIC in its corporate capacity. This motion deals with the FDIC in
its

receivership

capacity.

Therefore,

Lexon’s

reliance

is

unconvincing as the roles, obligation, and liabilities of the two
are distinct. See Credit Life Ins. Co., 870 F. Supp. at 421 (“FDICCorporate and FDIC-Receiver are distinct entities.”).
Lexon

fails

to

nudge

its

claims

across

the

line

from

conceivable to plausible. Lexon asserts that there may be losses,
that there may be a claim. We should not proceed based on the
speculative nature of possibilities. Accordingly,
IT IS ORDERED that FDIC’s Motion to Dismiss (Rec. Doc. 21.)
is GRANTED, without prejudice to Lexon’s right to bring an amended
complaint, showing a viable claim. Lexon has forty days from date
of this order to conduct discovery to make the record complete.

Even if Lexon had demanded payment from First NBC Bank, the standby letters
of credit appear to obligate Lexon to return those sums received to the extent
those funds exceed Lexon’s losses under the bonds.

2

6

If no amended complaint is brought within that period,
dismissal will be effective as of October 15, 2018.
New Orleans, Louisiana, this 7th day of September, 2018.

___________________________________
SENIOR UNITED STATES DISTRICT JUDGE

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