Hildenbrand v. W Holding Company, Inc. et al

Filing 207

OPINION AND ORDER denying 194 Motion to Dismiss. Signed by Judge Jay A Garcia-Gregory on 6/10/2011. (LL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
SAMUEL HILDENBRAND, et al.,
Plaintiff(s)

CIVIL NO. 07-1886 (JAG)

v.
W HOLDING COMPANY, et al.,
Defendant(s)

MEMORANDUM AND ORDER
GARCIA-GREGORY, D.J.
Before the Court is Defendant’s Motion to Dismiss for lack
of jurisdiction. (Docket No. 194). For the reasons stated below,
the motion is denied.
This case has been the object of motion practice for four
years now. The legal claims and factual issues are widely known.
Based on this knowledge, the Court writes for the parties and
recounts what is necessary to the marginal question now before
us.
DISCUSSION
This

case

was

filed

in

September

of

2007

on

behalf

of

purchasers of the publicly traded securities of W Holding Co.
(Hereinafter “W”) against the company and its executives for
several violations to securities laws and regulations. W is the

2

bank holding company of the now defunct Westernbank, which has
been

under

FDIC

receivership

since

April

30,

2010.

It

was

Westernbank’s projected failure which prompted this action.
Defendant FDIC argues that this case should be dismissed
because

several

Plaintiffs

have

failed

to

exhaust

the

administrative claims process outlined in 12 U.S.C. § 1821(d).
Plaintiffs oppose Defendant’s motion and argue that they were
under

no

obligation

to

proceed

administratively,

given

that

Defendant FDIC did not timely move for a stay. They aver that in
actions where the complaint is filed before receivership, 12
U.S.C. § 1821(d)(12) gives the FDIC two options at the point in
which it becomes receiver. It may opt for continuing judicially
by

resting,

or

it

may

require

any

claimants

to

proceed

administratively. To opt for the latter, the FDIC must move for
a stay within 90 days of its appointment as receiver. 12 U.S.C.
§ 1821(d)(12). In this case, Defendant FDIC moved for a stay on
August 27, 2010; 129 days after it was appointed receiver of
Westernbank.

Plaintiffs

argue

that

Defendant

FDIC

chose

to

proceed judicially when it failed to move the Court for a stay
within the 90 days.
Plaintiffs rest their argument on Damiano v. FDIC, 104 F.3d
328 (11th Cir. 1997) and Whatley v. RTC, 32 F.3d 905 (5th Cir.
1994). Though not factually identical to the case at bar, both
are

similar

enough.

More

importantly,

both

cases

squarely

3

address the issue now before us and hold that in cases were
Plaintiffs file suit before the FDIC is appointed receiver, the
FDIC may compel claimants to exhaust administrative remedies,
but only if it moves the court for a stay within 90 days of its
appointment as receiver. Damiano, 104 F.3d at 335; Whatley, 32
F.3d at 910.
Plaintiffs’ argument is well made, and the case law behind
it is sound. The operative language in 12 U.S.C. § 1821(d)(12),
as

analyzed

in

Damiano,

empowers

the

FDIC

to

compel

administrative exhaustion in pre-receivership cases. To do so,
it must (1) require the parties to proceed administratively by
staying the case, and (2) it must do so in a timely fashion,
that is, it must move the court for a stay within the 90 day
period of § 1821(d)(12). Damiano, 104 F.3d at 335. In the case
before us, Defendant FDIC failed to move this Court for a stay
within 90 days. Its motion to dismiss must be denied.
In

its

reasoning

reply,

should

Defendant

not

be

led

FDIC
by

argues

Damiano,

that

and

the

that

Court’s

we

should

instead follow Marquis v. FDIC, 965 F.2d 1148 (1st Cir. 1992).
The

court

in

Marquis

held

that

the

Financial

Institutions

Reform, Recovery and Enforcement Act does not command courts to
automatically dismiss all complaints filed against a failed bank
prior to receivership by the FDIC. Id. Marquis, decided prior to
Damiano,

also

stands

for

the

unremarkable

proposition

that

4

whenever the FDIC is receiver for a failed bank, claimants who
fail to initiate administrative claims within the filing period
forfeit

their

right

to

later

proceed

judicially

against

the

FDIC. Marquis, 965 F.2d at 1152.
Our
Damiano.

decision
Indeed

today

is

claimants

not

to

the

contrary;

are

generally

neither

required

to

is

file

administrative claims against the FDIC if they later wish to
have their day in court. Id. However, they need not do so if the
FDIC has not asserted its right to proceed administratively in a
timely fashion. To hold the contrary would allow the FDIC to sit
idle for an indefinite period of time, only to move the court
for a stay and compel administrative procedures at its whim at a
point when other parties, and the court, have perhaps invested
considerable time and energy in a judicial proceeding. This is
an untenable proposition.
CONCLUSION
For

the

reasons

stated

above,

the

Court

hereby

DENIES

Defendant’s Motion to Dismiss.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 10th day of June, 2011.

S/Jay A. Garcia-Gregory
JAY A. GARCIA-GREGORY
United States District Judge