Biaggi & Biaggi, P.S.C. v. Federal Deposit Insurance Corporation (FDIC-R)

Filing 136

OPINION AND ORDER granting 128 Motion to Dismiss for Lack of Jurisdiction. Judgment shall be entered accordingly. Signed by Judge Juan M. Perez-Gimenez on 08/16/2018. (NNR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
BIAGGI & BIAGGI, P.S.C.,
Plaintiff,
v.
FEDERAL DEPOSIT INSURANCE
CORPORATION, AS RECEIVER FOR
WESTERNBANK OF PUERTO RICO,

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Defendant.
OPINION AND ORDER
Pending before the court is Defendant Federal Deposit Insurance Corporation’s (“FDIC”
or “Defendant”) Motion to Dismiss for Lack of Subject Matter Jurisdiction (Docket No. 128),
Plaintiff Biaggi & Biaggi, P.S.C.’s (“Biaggi” or “Plaintiff”) Opposition thereto (Docket No. 129),
and the FDIC’s Reply (Docket No. 130).
Biaggi’s Opposition includes a Motion for Reconsideration, where Biaggi asks the court
to reconsider the July 6, 2018 Order granting the FDIC’s Motion for Sanctions (Docket No. 126).
On August 10, 2018, the FDIC filed a Response in Opposition (Docket No. 134). However, for the
reasons discussed below, the court need not reach the Motion for Reconsideration or the
arguments raised in the FDIC’s Response.
I. BACKGROUND
On September 9, 2009, Biaggi filed suit against Westernbank in the Court of First
Instance of the Commonwealth of Puerto Rico, Mayagüez Part, seeking to collect payment of
certain invoices for notarial fees and expenses in the amount of $401,067.92. On April 12, 2010,
Biaggi filed an amended complaint increasing the amount requested to $619,626.45. On April

Civil No. 10-1671 (PG)

30, 2010, the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico
closed Westernbank and appointed the FDIC as receiver. The FDIC then removed the state court
action to this court. See Docket No. 1.
Administrative Claims Review Process under “FIRREA” 1
Simultaneously, the FDIC set the wheels of FIRREA’s mandatory claims review process
in motion. The FDIC thus established a claims bar date, and advised Biaggi to file any claims
before that deadline. Biaggi timely submitted two proof of claims. In the first, Biaggi claimed
$619,626.45 in notarial fees and expenses, for services rendered by the firm between May of
2001 to November of 2007; in the second, $50,320.06 in notarial fees and expenses, for services
rendered by the firm from 1999 to 2000. As part of the administrative review process, the FDIC
requested that Biaggi provide all information and documentary evidence to substantiate its
claims. Biaggi complied. In the following month or so, the FDIC disallowed the claims and so
notified Biaggi. Biaggi proceeded to litigate the existing suit, as allowed under FIRREA’s §
1821(d)(6)(B)(ii). To date, Biaggi seeks payment of $619,626.45 in notarial fees and expenses,
plus interest.
Relevant Procedural Events
Under Puerto Rico law, a three-year statute of limitations governs collection claims for
payment of attorney and notarial fees. See P.R. LAWS ANN. tit. 31, § 5297. Since Biaggi’s claim
stemmed from alleged notarial services performed from 2001 until 2007, the FDIC moved for
summary judgment arguing that the claim was time-barred. See Docket No. 19. Biaggi never
opposed the FDIC’s summary judgment motion. Subsequently, Magistrate Judge Justo Arenas

1

“FIRREA” is short for the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
2

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issued a Report and Recommendation siding with the FDIC and recommending dismissal of the
case. See Docket No. 23. Then, on May 5, 2011, Biaggi filed an “Opposition to Report and
Recommendation and Opposition to Motion for Summary Judgment” (“Opposition to R&R”)
(Docket No. 29). To avoid dismissal, Biaggi restyled its claim as one arising under a “depositum”
agreement. To be precise, Biaggi argued that:
this case is not properly one of a collection of notarial fees and
expenses as the FDIC believes. Although it is true that the claim
asserted had its origin in notarial services and expenses that were
rendered or paid by Biaggi & Biaggi, this is not an action to collect
the fees and expenses of a notary. Said fees and expenses were
already paid by the bank’s clients through deduction from the
proceed of the loans. Instead, this is an action to collect from a bank
funds that were held by Westernbank to be remitted to Biaggi &
Biaggi. That relationship entailed either an agency or a depositum
contract pursuant to the laws of Puerto Rico.
Id. at 6-7.
In the Opinion and Order from July 11, 2011, this court noted Biaggi’s change of tune and
indicated “this is the first time that Biaggi has advanced such a claim and neither the complaint
nor the amended complaint mentioned the existence of an agency or depositum contract.”
(Docket No. 34 at 8). Now the FDIC moves for dismissal under Rule 12(b)(1), arguing that
Biaggi’s failure to exhaust administrative remedies on the depositum contract theory or claim
deprives the court of subject matter jurisdiction. See Docket No. 128.
II. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(1), a defendant may seek dismissal of an
action for lack of subject matter jurisdiction. Rule 12(b)(1) is a “large umbrella, overspreading a
variety of different types of challenges to subject-matter jurisdiction.” Valentín v. Hosp. Bella
Vista, 254 F.3d 358, 362–363 (1st Cir. 2001).

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In any case, motions to dismiss brought under Rule 12(b)(1) and 12(b)(6) are subject to the same
standard of review. See Negrón–Gaztambide v. Hernández–Torres, 35 F.3d 25, 27 (1st Cir.
1994). “When a district court considers a Rule 12(b)(1) motion, it must credit the plaintiff's wellpled factual allegations and draw all reasonable inferences in the plaintiff's favor.” Merlonghi v.
United States, 620 F.3d 50, 54 (1st Cir. 2010) (citing Hosp. Bella Vista, 254 F.3d at 363); see also
De Leon v. Vornado Montehiedra Acquisition L.P., 166 F. Supp. 3d 171, 173 (D.P.R. 2016)
(quoting Aversa v. United States, 99 F.3d 1200, 1210 (1st Cir. 1996)) (courts may also consider
whatever evidence has been submitted, including depositions and exhibits). Moreover, if the
motion to dismiss is based on the failure to exhaust administrative remedies, the court may
resolve factual disputes, as long as they do not entail adjudication on the merits and the parties
have had an opportunity to develop the record. See Bryant v. Rich, 530 F.3d 1368, 1376 (11th Cir.
2008) (emphasis added).
“As courts of limited jurisdiction, federal courts have the duty to construe their
jurisdictional grants narrowly.” De Leon, 166 F. Supp. 3d at 173 (citing Destek Grp. v. State of
N.H. Pub. Utils. Comm'n., 318 F.3d 32, 38 (1st Cir. 2003)). “A case is properly dismissed for lack
of subject matter jurisdiction when the court lacks statutory or constitutional power to
adjudicate the case.” Prestige Capital Corp. v. Pipeliners of Puerto Rico, Inc., 849 F. Supp. 2d
240, 247 (D.P.R. 2012) (citing Home Builders Ass'n of Mississippi, Inc. v. City of Madison,
Miss., 143 F.3d 1006, 1010 (5th Cir. 1998)). Federal subject matter jurisdiction cannot be
presumed and the party invoking it has the burden of demonstrating its existence. See Fabrica
de Muebles J.J. Alvarez, Incorporado v. Inversiones Mendoza, Inc., 682 F.3d 26, 32 (1st Cir.
2012).

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III.

DISCUSSION

A. FIRREA Framework
Where, as here, the FDIC acts as receiver, it “succeeds to all the rights, titles, powers,
privileges, and assets of the insured depository institution.” Maldonado–Torres v. F.D.I.C. ex rel.
R–G Premier Bank, 839 F. Supp. 2d 511, 515 (D.P.R. 2012) (alteration in original) (citing 12
U.S.C. § 1821(d)(2)(A)(i)). “FIRREA establishes a mandatory claims process, which must be
exhausted by every claimant seeking payment from the assets of the affected institution.” Id.
(citing 12 U.S.C. § 1821(d)(13)(D)) (alteration in original). That process was “designed to create
an efficient administrative protocol for processing claims against failed banks.” Fed. Deposit Ins.
Corp. for Doral Bank v. Pedreira-Perez, Civil No. 15-2590 (FAB), 2018 WL 3388509, at *2
(D.P.R. July 11, 2018) (quoting Marquis v. FDIC, 965 F.2d 1148, 1154 (1st Cir. 1992)). Like several
other circuits, the First Circuit Court of Appeals has held that compliance with and exhaustion
of FIRREA’s administrative remedies is mandatory. See, e.g., Proal v. JPMorgan Chase Bank,
N.A., 641 F. App'x 9, 10 (1st Cir. 2016); Marquis, 956 F.2d at 1151 (stating that the claims review
process is “mandatory for all parties asserting claims against failed institutions, regardless of
whether lawsuits to enforce these claims were initiated prior to the appointment of a receiver”).2
FIRREA’s claim review process requires the FDIC to “publish notice that the failed
institution’s creditors must file [proof of] claims with the FDIC by a specified date, which must
be at least ninety days after publication of the notice.” Acosta-Ramirez v. Banco Popular de
Puerto Rico, 712 F.3d 14, 19 (1st Cir. 2013) (citing 12 U.S.C. § 1821(d)(3)(B)(i)). See also 12 U.S.C

2 Although not relevant here, an exception to the administrative claim requirement is reserved for claimants
that do not receive notice of the appointment of the receiver in time to file their claims before the claims bar date.
See, e.g., FDIC v. Estrada Colon, 848 F. Supp. 2d 206, 210 (D.P.R. 2012); but see Lozada v. FDIC, Civil No. 10-1644
(JAG), 2011 WL 2199369, at * 1 (D.P.R. June 6, 2011) (stating that the exception does not apply to claimants who
are aware of the appointment of a receiver but do not receive notice of the filing deadline).

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§ 1821(d)(3)(C) (setting forth notice-mailing requirement with respect to creditors that appear
on the depository institution’s books). The deadline to file proof of claims is also known as the
claims bar date. If a timely claim is filed, then the FDIC has 180 days to approve or disallow it.
See Acosta-Ramirez, 712 F.3d at 19 (citing 12 U.S.C. § 1821(d)(5)(A)(i)).
“Claimants then have sixty days from the date of the disallowance or from the expiration
of the 180-day administrative decision deadline to seek judicial review in an appropriate federal
district court (or to seek administrative review).” Id. (citing 12 U.S.C. § 1821(d)(6)(A)). After the
sixty-day judicial or administrative review deadline expires, the FDIC’s disallowance becomes
final and “claimant[s] shall have no further rights or remedies with respect to such claim.” Id. at
n.8 (citing 12 U.S.C. § 1821(d)(6)(B)).
As relevant here, FIRREA curbs district courts’ jurisdiction over claims or actions where
the plaintiffs fail to comply with the administrative claims review process explained above. See
12 U.S.C. § 1821(d)(13)(D). Specifically, the statute provides 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 [FDIC] has been appointed receiver, including assets which the [FDIC]
may acquire itself as such receiver; or
(ii) any claim relating to any act or omission of such institution or the [FDIC]
as receiver.
12 U.S.C. § 1821(d)(13)(D). “In other words, failure to file a claim prior to the bar date, or
otherwise exhaust FIRREA’s statutory claims process, strips courts of the power to hear the
claim.” Fed. Deposit Ins. Corp. v. Caban-Muniz, 216 F. Supp. 3d 255, 258 (D.P.R. 2016) (citing
Demelo v. U.S. Bank Nat. Ass'n, 727 F.3d 117, 122 (1st Cir. 2013)). In such cases, courts should
dismiss the claims with prejudice. See Fed. Deposit Ins. Corp. for Doral Bank v. Pedreira-Perez,
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Civil No. 15-2590 (FAB), 2018 WL 3388509, at *3 (citing, among others, FDIC v. Negron-Ocasio,
Civil No. 15-1888 (PAD), 2016 WL 3920173 (D.P.R. July 18, 2016); Estrada-Colon, 848 F. Supp.
2d at 212-13; FDIC v. Estrada-Rivera, 813 F. Supp. 2d 256, 269-79 (D.P.R. 2011)).
B. The Dismissal Debate
The FDIC raises several key points in support of its dismissal request (Docket No. 128 at
4-7 and 16). First, that Biaggi neither specified a depositum contract theory or claim
administratively nor alleged one in the original or amended complaint. Second, that when
Plaintiff articulated the theory at issue in the Opposition to the R&R filed on May 5, 2011 (Docket
No. 29), it had already submitted and completed FIRREA’s claims review process. Third, that
the record contains several admissions from Biaggi that confirm so.
As previously noted, the court long ago found that neither the complaint nor amended
complaint filed by Biaggi mentioned the existence of an agency or depositum contract, but
rather, that Biaggi first advanced such claim or theory in the Opposition to the R&R (Docket No.
34 at 8). Shortly thereafter, Biaggi agreed with the court and stated:
[T]he court is absolutely correct that the argument that defendant’s
obligation is one of agency or bailee was first raised by the
undersigned in the opposition to the motion for a summary
judgment.
Docket No. 35 at 3 ¶ 5 (a).
Recently, Biaggi said that “[s]aid statement is still correct since the undersigned
[attorney] did not file or participated in the proceedings in local court.” Docket No.
129 at 9 (emphasis added). However, it is well settled that “the neglect, of an attorney acting
within the scope of his or her authority is attributable to the client.” Rivera-Velazquez v. Hartford
Steam Boiler Inspection & Ins. Co., 750 F.3d 1, 6 (1st Cir. 2014) (quoting Nansamba v. N. Shore

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Med. Ctr., Inc., 727 F.3d 33, 38 (1st Cir. 2013)). In other words, attorneys act for their clients and
parties are accountable for the acts or omissions of their counsel. See Skrabec v. Town of N.
Attleboro, 878 F.3d 5, 9 n. 2 (1st Cir. 2017) (citing Pioneer Inv. Servs. Co. v. Brunswick Assocs.
Ltd. P'ship, 507 U.S. 380 (1993)); Nansamba, 727 F.3d at 38. Accordingly, the court shall not
turn a blind eye to the facts or the record on account of a former counsel’s oversights. In this
regard, the court finds Biaggi’s latest excuse in support of its effort to avoid dismissal unavailing.
Now, Biaggi also posits that “[a]lthough the amended complaint did not expressly
mention a bailment or depositum contract, it did state sufficient facts to reach that legal
conclusion.” Docket No. 129 at 9. Biaggi further argues that insofar as the amended complaint
was attached to the proof of claim filed with the FDIC, it exhausted FIRREA’s administrative
remedies with respect to the contract or theory in question. 3 The court disagrees.
Even after an expansive reading of Biaggi’s amended complaint, the court finds that it did
not set forth allegations referring to a depositum contract claim. See Am. Complaint (Docket No.
7-1 at 36-40). It simply did not contain sufficient well-pleaded facts to allow the court (or the
FDIC) to infer Plaintiff’s newly concocted theory of recovery. 4 Merely attaching the amended

3 The court notes that Biaggi, despite having the burden to demonstrate the existence of subject matter
jurisdiction, did not cite or discuss a single case or legal authority in support of its arguments. This pales in
comparison to the panoply of on-point cases and reasoned analysis offered by the FDIC in the motion to dismiss
and the reply. The problem for Biaggi is that “[j]udges are not mindreaders. Consequently, a litigant has an
obligation to spell out its arguments squarely and distinctly, or else forever hold its peace.” Echevarría v.
AstraZeneca Pharmaceutical LP, 856 F.3d 119, 139 (1st Cir. 2017) (quoting United States v. Zannino, 895 F.2d 1, 17
(1st Cir. 1990)). This includes “highlighting the relevant facts and analyzing on-point authority.” Rodriguez v. Mun.
of San Juan, 659 F.3d 168, 175 (1st Cir. 2011) (citation omitted). The upshot is that “issues adverted to in a
perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived.” Zannino,
895 F.2d at 17.

According to the Civil Code of Puerto Rico, “[a] depositum is constituted from the time a person receives
a thing belonging to another with the obligation of keeping and returning it.” P.R. LAWS ANN. tit. 31, § 4621. See
Jewelers Mut. Ins. Co. v. N. Barquet, Inc., 410 F.3d 2, 12 (1st Cir. 2005) (discussing elements of a depositum contract
under Puerto Rico law and mentioning several contexts in which such contracts can arise).
4

As the parties may recall, the court previously determined that there was a depositum contract between
Biaggi and Westernbank, and thus, dismissal of Biaggi’s interest claim was inappropriate. See Docket No. 38 at 7.
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complaint to the administrative proof of claim could not have given, and did not give the FDIC
fair notice of the legal theory on which Plaintiff now seeks relief. For this reason, Biaggi did not
exhaust administrative remedies on the depositum contract claim or theory, and thus, the court
lacks jurisdiction to consider it. See Font-Llacer-de-Pueyo v. FDIC, 932 F. Supp. 2d 265, 269–
70 (D.P.R. 2013) (finding that former employee of failed bank for which the FDIC was appointed
receiver failed to exhaust FIRREA’s administrative remedies with respect to retaliation claim
under Puerto Rico law, where proof of claim described claim as one of “discrimination in
employment due to age,” and did not mention or allege retaliation); Coleman v. FDIC, 826 F.
Supp. 31, 32 (D. Mass. 1993) (dismissing new claims and legal theories asserted in amended
complaint that had not been presented first to the FDIC through FIRREA’s administrative claims
process); Hibyan v. FDIC, 812 F. Supp. 271, 275 (D. Me. 1993) (dismissing claims based on one
contractual provision where plaintiff had presented another contractual provision to the FDIC
as basis for claim); see also Winkal Management, LLC v. FDIC, 288 F. Supp. 3d 33 (D.D.C. 2017)
(dismissing claims based on theories of unjust enrichment and promissory estoppel and finding
that plaintiff could not sidestep FIRREA’s statutory limitations by raising alternative contract
claims); Westberg v. FDIC, 926 F. Supp. 2d 61, 70–71 (D.D.C. 2013), aff'd, 741 F.3d 1301 (D.C.
Cir. 2014) (quoting BHC Interim Funding II, L.P. v. FDIC, 851 F. Supp. 2d 131, 138, n. 4 (D.D.C.
2012)) (citing cases) (“Where a FIRREA complaint alleges entirely new legal theories that are
different than those reflected in the administrative proof of claim, the Court is without subject
matter jurisdiction to consider the new causes of action.”); Jahn v. FDIC, 828 F. Supp. 2d 305,
317 (D.D.C. 2011) (dismissing claims for civil conspiracy and conversion where only a fraudulent
transfer claim was submitted to the FDIC as part of claims review process).

Nevertheless, upon analyzing the allegations in Biaggi’s amended complaint, the court now concludes that the
elements of a depositum contract were not plead.
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It is pellucid that Biaggi made a strategic decision to press a depositum contract theory or
claim in order to avoid dismissal of the collection claim on statute of limitations grounds. But
since the depositum contract claim was not administratively exhausted, this strategy fails as well.
Biaggi, grasping at straws when all other avenues of relief have been closed, “cannot now disavow
[its] earlier decision and attempt to change horses midstream in hopes of finding a swifter steed.”
Genereux v. Raytheon Co., 754 F.3d 51, 59 (1st Cir. 2014).
IV.

CONCLUSION

For the reasons explained above, the court finds that it lacks subject matter jurisdiction
over Biaggi’s purported depositum contract claim. The FDIC’s motion to dismiss under Rule
12(b)(1) (Docket No. 128) is thus GRANTED, and the case is hereby DISMISSED WITH
PREJUDICE. Judgment shall be entered accordingly.
IT IS SO ORDERED
In San Juan, Puerto Rico, August 16, 2018.

S/ JUAN M. PÉREZ-GIMÉNEZ
JUAN M. PEREZ-GIMENEZ
SENIOR U.S. DISTRICT JUDGE

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