Dearborn Federal Savings Bank v. Federal Deposit Insurance Corporation

Filing 22

OPINION AND ORDER granting 10 Motion to Dismiss; denying 18 Motion for Leave to File. Signed by District Judge Sean F. Cox. (JMcC)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

Dearborn Federal Savings Bank
a Federal Savings Bank,
Plaintiff,
v.

Case No.: 13-10833
Honorable Sean F. Cox

Federal Deposit Insurance Corporation, as
Receiver for Warren Bank
Defendant.
_________________________________________/
OPINION AND ORDER GRANTING DEFENDANT’S MOTION TO DISMISS AND
DENYING PLAINTIFF’S MOTION FOR LEAVE TO FILE AN AMENDED
COMPLAINT
This is a breach of contract case arising out of a mortgage priority dispute between Plaintiff
Dearborn Federal Savings Bank (“DFSB” or “Plaintiff”) and the Federal Deposit Insurance
Corporation as Receiver for the now-defunct Warren Bank (“FDIC” or “Defendant”). This case has
a long and detailed procedural history stemming from a previous state court case in which both
Plaintiff and Defendant were parties.
This matter is currently before the Court on Defendant’s Motion to Dismiss Pursuant to
Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (Doc. #10), and Plaintiff’s Motion for Leave
to File An Amended Complaint (Doc. #18). The motions have been extensively briefed by the
parties. For the following reasons, this Court GRANTS Defendant’s Motion to Dismiss Pursuant
to Fed. R. Civ. P. 12(b)(1) and DENIES Plaintiff’s Motion for Leave to File an Amended Complaint.
BACKGROUND
Plaintiff and Warren Bank both possessed mortgage interests in the same piece of residential

real property located in Dearborn, MI. (Def.’s Mo. at 1). Warren Bank had foreclosed on its
mortgage interest prior to FDIC being appointed as its receiver. (Def.’s Mo. at 1). Plaintiff
maintains that at all times it has asserted the priority of its mortgage interest over any interest held
by Warren Bank. (Pl.’s Resp. at 2-3).
On October 2, 2009, Defendant FDIC was appointed receiver for Warren Bank. As required
by the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”)1, the Defendant
published notice of claims presentment in two Detroit newspapers on October 8, 2009, November
9, 2009, and December 9, 2009. (Def.’s Mo. at 2). This explicitly notified Warren Bank’s
outstanding creditors that any and all claims against Warren Bank must be submitted to Defendant
in compliance with the statutory administrative process set forth in FIRREA. (Def.’s Mo. at 2).
Among other things, the notice stated that the Proof of Claim was required to be filed no later than
January 6, 2010. (Def.’s Mo. at 2).
Plaintiff filed its administrative Proof of Claim with the Defendant on January 12, 2010 –
six days after the deadline. (Pl.’s Resp. at 4). Plaintiff admits that it had actual notice of the
receivership as early as October 2009, but did not timely file its claim with the FDIC due to the fact
that it was allegedly misinformed of the claims bar deadline by counsel for Warren Bank. (Pl.’s
Resp. at 4).
Because Plaintiff filed its claim late, Defendant was required to, and did, in fact, disallow
Plaintiff’s mortgage priority claim. (Pl.’s Resp. at Ex. C, attached Ex. N); see also 12 U.S.C. §
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12 U.S.C. § 1811, et. seq. Section 1821(d)(3)(B) requires that “the receiver, in any case
involving the liquidation or winding up of the affairs of a closed depository institution, shall –
(i) promptly publish a notice to the depository institution’s creditors to present their
claims, together with proof, to the receiver by a date specified in the notice . . .” 12
U.S.C. § 1821(d)(3)(B)(i).
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1821(d)(5)(C)(i)2.

In its Notice of Disallowance letter, Defendant informed Plaintiff that

disallowance for untimely filing was final and not reviewable. (Pl.’s Resp. at Ex. N, attached to Ex.
C). Prior to its administrative claim being disallowed, however, Plaintiff had filed suit against
Defendant in Wayne County Circuit Court, requesting that court determine the priority of those
parties’ mortgage interests. (Def.’s Mo. at 1).
At some point after the commencement of the state court action, Plaintiff and Defendant
became aware of a lucrative opportunity to sell the property in dispute. In order to facilitate that sale
despite the pending litigation, the parties entered into an Escrow Agreement. (See generally Escrow
Agreement, attached to Pl.’s Compl. at Ex. A). This Escrow Agreement was executed by the parties
and entered by Judge Kathleen MacDonald on October 6, 2010.
On May 13, 2011, Defendant filed its Motion for Summary Disposition, by which it
challenged the state court’s subject matter jurisdiction over the mortgage priority dispute. (See
Def.’s Mo. at 5). Specifically, Defendant argued that Plaintiff had failed to follow the administrative
process for preserving its mortgage priority claim because it filed its Proof of Claim late and,
therefore, FIRREA “withdrew the power of all courts to hear the claim.” (Def.’s Mo. at 5). In other
words, Defendant argued that no court had jurisdiction to entertain Plaintiff’s claim.
Judge MacDonald of the Wayne County Circuit Court agreed. Ruling from the bench, Judge
MacDonald stated that:
because you [Plaintiff] did not file [sic] the administrative process and you didn’t
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“(C) Disallowance of claims filed after end of filing period
(i) In general
Except as provided in clause (ii), claims filed after the date
specified in the notice published under paragraph (3)(B)(i) shall be
disallowed and such disallowance shall be final.”
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appeal that denial, I think all of your claims are extinguished finally . . . the federal
statute deprives courts of jurisdiction over claims . . . in the absence of strict
compliance with an exhaustion of a statutorily mandated administrative process.
(Def.’s Mo. at Ex. 3). Judge MacDonald subsequently entered an order dismissing Plaintiff’s
complaint, and denied as futile Plaintiff’s request to amend its complaint to add a breach of contract
count. (Def.’s Mo. at Ex. 4). Plaintiff’s Motion for Reconsideration was denied, and the Michigan
Court of Appeals affirmed the lower state court’s judgment. (Def.’s Br. at Ex. 5).
Plaintiff filed the instant federal action on February 28, 2013, alleging that Defendant
breached the Escrow Agreement by seeking dismissal of the state court action for lack of subject
matter jurisdiction rather than litigating the priority dispute on the merits. (See Pl.’s Compl at ¶ 23).
Plaintiff would have brought this same count in state court, had Judge MacDonald allowed it to file
an amended complaint.
On May 30, 2013, Defendant filed a Motion for Order to Release Escrow in the state court
action, claiming that it was entitled to the escrowed funds because the court entered a final and
binding judgment dismissing Plaintiff’s claims and Plaintiff had exhausted its right to appeal that
judgment. (Def.’s Mo. at Ex. 11).
On June 7, 2013, Judge MacDonald granted Defendant’s motion and issued an order
releasing the escrow funds in Defendant’s favor. (Def.’s Supp. Br. at Ex. 13). In that Order, Judge
MacDonald stated that “all terms and conditions of the stipulated Escrow Agreement between
Plaintiff and Defendant, dated May 21, 2010, and the Stipulated Order Transferring Parties’ Interests
to Sale Proceeds and Discharging Notice of Lis Pendens, dated October 6, 2010, have been
fulfilled.” (Def.’s Supp. Br. at Ex. 14).
Defendant moved to dismiss Plaintiff’s federal Complaint on May 31, 2013, (Doc. #10), on
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the basis that Plaintiff’s claim is an impermissible collateral attack on the state court’s judgment, in
violation of the Rooker-Feldman doctrine. Defendant later filed supplemental briefing on its motion
to dismiss, (Doc. #14), arguing that the state court’s release of escrow funds collaterally estopped
Plaintiff from litigating its breach of contract claim before this Court. (See generally Def.’s Supp.
Br., Doc. #14).
On September 26, 2013, this Court heard oral argument regarding Defendant’s Motion to
Dismiss. At that time, this Court advised the parties that Defendant’s motion to dismiss would be
taken under advisement, but granted Plaintiff’s request for leave to file a Motion for Leave to File
a First Amended Complaint. (See Order of 9/27/13, Doc. #17).
Plaintiff filed its Motion for Leave to File an Amended Complaint on October 9, 2013 (Doc.
#18). Plaintiff attached its proposed amended complaint, which sets forth two new counts:
Count II - Estoppel/Reformation, and Count III - Unlawful Taking. This Court heard oral argument
on Plaintiff’s motion on January 9, 2014.
ANALYSIS
1)

This Court Dismisses Plaintiff’s Claim For Lack Of Subject Matter Jurisdiction
Pursuant to FRCP 12(b)(1)
The existence of subject matter jurisdiction may be challenged at any time, by any party. In

re Lewis, 398 F.3d 735, 739 (6th Cir. 2005). Indeed, this Court may examine its subject matter
jurisdiction to hear a claim sua sponte. Id.
Plaintiff’s claim against Defendant, as Receiver for Warren Bank, is governed by FIRREA.
FIRREA’s administrative scheme is mandatory, and it limits the jurisdiction of courts of law to
adjudicate claims against the FDIC regarding the assets of a failed banking institution.

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To begin, FIRREA states that “all suits of a civil nature at common law or in equity to which
the Corporation, in any capacity, is a party shall be deemed to arise under the laws of the United
States.” 12 U.S.C. § 1819(b)(2)(A). This section appears to establish federal question jurisdiction
in any case in which the FDIC is a party. However, a later section entitled “Limitation on judicial
review,” states that
Except as otherwise provided in this subsection, no court shall have jurisdiction
over —
(i)

any claim or action for payment from, or any action seeking a
determination of rights with respect to, the assets of any depository
institution for which the Corporation has been appointed receiver,
including assets which the Corporation may acquire from itself as
such receiver; or

(ii)

any claim relating to any act or omission of such institution or the
Corporation as receiver.

12 U.S.C. § 1821(d)(3)(D) (emphasis added). Courts have held that “the specific jurisdictional
provision of section 1821(d)(13)(D) [controls] over the more general jurisdictional grant found in
12 U.S.C. § 1819(b)(2)(A).” Lloyd v. F.D.I.C., 22 F.3d 335, 337 (1st Cir. 1994). Additionally,
section 1821(d)(13)(D) has been interpreted as “imposing a statutory exhaustion requirement” rather
than created an absolute jurisdictional bar. Village of Oakwood v. State Bank and Trust Co., 539
F.3d 373, 385 (6th Cir. 2008). Thus, this Court does not have jurisdiction to hear Plaintiff’s claim
unless it has exhausted its administrative remedies as set forth in section 1821(d). Id.
Plaintiff admits that it filed its claim after the Claims Bar Date. (Pl.’s Resp. at 4). Based
on this uncontroverted fact and pursuant to FIRREA, Plaintiff’s claim was properly disallowed and
Plaintiff had no right to appeal that disallowance. 12 U.S.C. § 1821 (d)(5)(C)(i) (stating that “claims
filed after the date specified in the notice published . . . shall be disallowed and such disallowance
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shall be final.”). This section may not apply to an untimely claim where the claimant did not have
notice of the appointment of a receiver, but this exception does not apply here given that Plaintiff
admitted it had notice of the appointment of the FDIC as Receiver as early as nearly four months
prior to the Claims Bar Date. Therefore, because Plaintiff did not follow the administrative process
for pursuing a claim against the assets of a failed bank for which the FDIC is a receiver, this Court
has no jurisdiction to hear Plaintiff’s claims against the FDIC – regardless of how Plaintiff titles its
claims. See 12 U.S.C. § 1821(d)(13)(D).
Plaintiff, at oral argument on these motions, appeared to take the position that this Court has
jurisdiction over this case pursuant to 1821(d)(6). Section 1821(d)(6) sets forth the mechanism by
which a claimant can seek review of the FDIC’s disallowance of a timely filed claim:
Before the end of the 60-day period beginning on the earlier of –
(i)

the end of the period described in paragraph (5)(A)(i) with respect to
any claim against a depository institution for which the Corporation
is receiver; or

(ii)

the date of any notice of disallowance of such claim pursuant to
paragraph (5)(A)(i),

the claimant may request administrative review of the claim in accordance with
subparagraph (A) or (B) of paragraph (7) or file suit on such claim . . . in the district
or territorial court of the United States for the district within which the depository
institution’s principal place of business is located . . . .
12 U.S.C. § 1821(d)(6)(A). Plaintiff appears to argue that its timely filing of a Second Proof of
Claim, pursuant to the FDIC’s “Notice To Discovered Claimant” letter (“the Letter”) dated April 18,
2012, confers jurisdiction on this Court because Plaintiff has followed the administrative process
with respect to the Second Proof of Claim. (See Notice to Discovered Claimant Letter, attached to
Pl.’s Mo. To Amend at Ex. C; see also Plaintiff’s Second Proof of Claim, attached to Pl.’s Mo. To
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Amend at Ex. D).
This Court finds the filing of the Second Proof of Claim inapposite. Plaintiff has not
provided this Court with any authority holding that the Letter provides the Plaintiff with a fresh start
at compliance with the administrative process, nor that its timely filing of a Second Proof of Claim
negates the untimely filing (and final disallowance) of a prior Proof of Claim.
To the contrary, the Letter expressly states that “[b]ecause the Claims Bar Date has passed,
you must prove to the Receiver’s satisfaction that you did not receive notice of the appointment of
the Receiver in time to file a claim before the Claims Bar Date in order for the Receiver to consider
your claim.” ( Pl.’s Mo. To Amend at Ex. C). The Letter further directs Plaintiff to submit a new
proof of claim with “supporting documentation regarding both your claim and your compliance with
the late-filed claim exception.” (Pl.’s Mo. To Amend at Ex. C).
Plaintiff could not, and cannot, establish that its claim falls within the late-filed exception
because it had notice of the appointment of a receiver well in advance of the Claims Bar Date. This
Court finds that section 1821(d)(6) does not resurrect Plaintiff’s otherwise permanently disallowed
claim.
FIRREA only confers subject matter jurisdiction upon this Court to adjudicate disputes
between claimants and the FDIC as Receiver in extremely limited circumstances. Plaintiff has not
shown that any of those circumstances are present here. Moreover, Plaintiff failed to follow the
administrative process in the early stages of this case, and that failure forever bars Plaintiff from
pursuing its mortgage priority claim. Therefore, this Court GRANTS Defendant’s Motion to
Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(1) because this Court finds, sua sponte,

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that it lacks subject matter jurisdiction to hear the case.3
2)

This Court Denies Plaintiff’s Motion For Leave To File An Amended Complaint As
Futile
At oral argument on Defendant's Motion to Dismiss, Plaintiff requested permission to file

a Motion for Leave to File An Amended Complaint, which this Court granted. (Doc. #17). Plaintiff
filed that motion on October 9, 2013, seeking to add two additional counts to its single count
complaint: Count II - Reformation/Estoppel, and Count III - Unlawful Taking. (Doc. #18).
Defendant filed its response in opposition to Plaintiff's motion on October 24, 2013, arguing that
Plaintiff's proposed amendments are futile. (Doc. #20). Plaintiff declined to file a reply.
Federal Rule of Civil Procedure 15(a)(2) provides that the Court "should freely give leave"
to amend a pleading "when justice so requires." Fed. R. Civ. P. 15(a)(2). The decision as to whether
justice requires the amendment is committed to the district court's sound discretion. Zenith Radio
Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330 (1971).
A motion to amend a complaint under Rule 15(a)(2) may be denied if the proposed
amendment is futile. Benzon v. Morgan Stanley Distributors, Inc., 420 F.3d 598, 613 (6th Cir.
2005); Moher v. United States, 875 F. Supp. 2d 739, 747-48 (W.D. Mich. 2012), citing Foman v.
Davis, 371 U.S. 178, 182 (1962). A proposed amendment to a complaint is futile if it would not
survive a motion to dismiss. Miller v. Calhoun County, 408 F.3d 803, 817 (6th Cir. 2005).
This Court finds that Plaintiff’s proposed amendments would be futile because this Court
lacks subject matter jurisdiction to hear Plaintiff’s claims against the FDIC as Receiver for Warren
3

Defendant argued that Plaintiff’s Complaint should be dismissed because its claim is
barred by the Rooker-Feldman doctrine and collateral estoppel. Because this Court dismisses
Plaintiff’s Complaint on independent jurisdictional grounds, it declines to opine on the merits of
Defendant’s other arguments.
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Bank. This conclusion applies with equal force to Plaintiff’s breach of contract claim, as well as its
proposed reformation and unlawful taking claims. Furthermore, Plaintiff’s proposed unlawful taking
claim is futile because “it is well settled that a plaintiff may not bring a constitutional tort claim
against a federal agency like the FDIC.” Salt Lick Bancorp v. F.D.I.C., 187 Fed. App'x. 428, 436
(6th Cir. 2006), citing FDIC v. Meyer, 510 U.S. 471, 483-86 (1994).
Based on the foregoing, this Court DENIES Plaintiff’s Motion for Leave to File An Amended
Complaint.
CONCLUSION & ORDER
For the reasons set forth above, this Court GRANTS Defendant’s Motion to Dismiss
Plaintiff’s Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and DENIES
Plaintiff’s Motion for Leave to File an Amended Complaint as futile.
IT IS SO ORDERED.
S/Sean F. Cox
Sean F. Cox
United States District Judge

Dated: January 29, 2014
I hereby certify that a copy of the foregoing document was served upon counsel of record on
January 29, 2014, by electronic and/or ordinary mail.
S/Jennifer McCoy
Case Manager

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