Federal Deposit Insurance Corporation, as Receiver for SouthwestUSA Bank, N.A. v. KC2-2, LLC, a Nevada limited liability company et al

Filing 17

ORDER Denying 8 Motion to Remand. Signed by Judge Gloria M. Navarro on 9/23/2011. (Copies have been distributed pursuant to the NEF - SLR)

UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver for
SOUTHWESTUSA BANK, N.A., a
Nevada banking association,

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Plaintiff,
vs.
KC2-2, LLC et al.,
Defendants.

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Case No.: 2:10-cv-02103-GMN-RJJ
ORDER

Before the Court is Defendants KC2-2, LLC et al.’s Motion to Remand (ECF No. 8).

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Plaintiff, Federal Deposit Insurance Corporation (“FDIC”) filed a Response (ECF No. 9) and

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Defendants filed a Reply (ECF No. 12). For the following reasons the Court Grants the Motion

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to Remand.

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This action was commenced in the Eighth Judicial District Court of the State of Nevada

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on July 14, 2009. (Response 2:14–20, ECF No. 9.) On July 23, 2010, SouthwestUSA Bank

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was closed and the FDIC was appointed a receiver of the institution. (Id. at 2:26–28.) On

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August 11, 2010 FDIC was substituted as a party to the Counterclaims only. (Id. at 3:1–3.) On

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October 20, 2010 FDIC was substituted as a party to all remaining claims. (Id. at 3:3–5.) FDIC

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filed a notice of removal on December 3, 2010 (ECF No. 1).

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12 U.S.C. §1819(b)(2)(B) confers several procedural advantages for FDIC to remove an
action when it becomes a party to a case. It provides:
. . . the Corporation may, without bond or security, 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). The Ninth Circuit has acknowledged that when Congress amended

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the FDIC’s enabling statute by enacting the Financial Institutions Reform, Recovery and

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Enforcement Act (FIRREA), “it greatly expanded the FDIC’s ability to remove cases to federal

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court.” Bullion Services, Inc. v. Valley State Bank, 50 F.3d 705, 707 (9th Cir. 1995). In 12

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U.S.C. § 1819(b)(2)(B), Congress “confer[red] several procedural advantages on the FDIC that

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go beyond the general removal authorization found in 28 U.S.C. §§ 1441-1452.” Id. There is

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no doubt that enacting FDIC’s removal statute evidences Congress’s desire that cases involving

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the FDIC should generally be heard and decided by the federal courts. Id.

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In this case, FDIC was substituted as a party twice, once on August 11, 2010 and once

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on October 20, 2010. FDIC argues that being substituted twice gives it two opportunities to

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remove the action to federal court. Defendants argue that there is only one chance for FDIC to

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remove the case, based on the first instance it is substituted as a party. It is unclear based on

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the statutory language if the right to remove is renewable and the Ninth Circuit has not

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addressed this issue specifically.

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A district court in Wisconsin held that the right to remove was renewable under the

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statute. In FDIC v. First Mortgage Investors, 459 F.Supp. 880 (E.D. Wisconsin 1978), the

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FDIC participated as the plaintiff (after being appointed as receiver) in the underlying state

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court action without removing to federal court. After the FDIC lost a motion for summary

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judgment in state court and the defendant filed a counterclaim. After the filing of the

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counterclaim, the FDIC moved for removal. The court held that even if the FDIC waived its

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rights to remove, “its right was renewed when the defendant filed its counterclaim.” Id. at 882.

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Other courts have appeared to follow suit. See e.g., F.D.I.C. v. S& I 85-1, Ltd., 22 F.3d 1070,

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1072 (11th Cir. 1994)(FDIC, as original plaintiff in state court proceeding, had additional

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removal rights accrue upon the filing of the counterclaims against it); Yankee Bank for Finance

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& Sav., FSB v. Hanover Square Associates-One Ltd. Partnership, 693 F.Supp.1400, 1411

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(N.D.N.Y. 1988) (FDIC’s removal rights were renewed when party served amended answers

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and counterclaims upon the FDIC).

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These cases are distinguishable from the present suit, because in the present suit, FDIC

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was first substituted as a party to the counterclaims and subsequently substituted as a party to

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the remaining claims. Regardless, it does not change the reasoning why other courts have held

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that the right to remove is renewable. The FDIC’s decision to remove or not remove a case will

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depend on what claims it is substituted as a party for. Given that the FDIC cannot predict what

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kinds of claims it will face it should be allowed to remove within 90 days after it is substituted

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as a party for any claim. Accordingly the Court finds that FDIC is allowed to remove the

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action within ninety days after it was substituted as a party on all the remaining claims on

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October 20, 2010. FDIC removed this action on December 3, 2010 and it is therefore timely

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under 12 U.S.C. § 1819(b)(2)(A).

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IT IS HEREBY ORDERED that Defendants KC2-2, LLC, et al.’s Motion to Remand
(ECF No. 8) is DENIED.
DATED this 23rd day of September, 2011.

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Gloria M. Navarro
United States District Judge

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