Arroyo v. FDIC et al

Filing 103

OPINION AND ORDER re 34 Motion to Dismiss for Lack of Jurisdiction; Motion to Dismiss for Failure to State a Claim; Motion to Dismiss Case as Frivolous; and motion for summary judgment; re 40 Motion to Dismiss; re 82 Motion for summary judgment . The Court GRANTS defendants' motion to dismiss pursuant to Rule 12(b)(1). Accordingly, the plaintiff's claims against the FDIC, BPPR, and all other defendants except for defendants Velazquez and Morales are DISMISSED with prejudice. Be cause no federal claim remains upon to ground jurisdiction over plaintiff's Commonwealth law claims, the Court also DISMISSES plaintiff Arroyo's legal malpractice claim against defendants Velazquez and Morales without prejudice. The Court finds MOOT the motions for summary judgment. (Docket Nos. 34 and 82.) Judgment shall be entered accordingly. Signed by Judge Francisco A. Besosa on 08/16/2013. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
ABIGAIL ARROYO,
Plaintiff,
CIVIL NO. 12-1433 (FAB)

v.
FDIC, et al.,
Defendants.

OPINION AND ORDER
BESOSA, District Judge.
Before

the

Court

is

defendant

Camilo

Velazquez-Velez

(“Velazquez”), defendant Banco Popular’s (“BPPR”), and defendant
Luis F. Carlo-Mendoza’s (“Carlo”) motions to dismiss the case and
motions for summary judgment.

(Docket Nos. 34 & 40.)

Also before

the Court is plaintiff Abigail Arroyo’s (“Arroyo”) motion for
summary judgment.

(Docket No. 82.)

After reviewing the motions

and the relevant responses and replies, the Court GRANTS defendants
Velazquez’s and BPPR’s motion to dismiss, (Docket Nos. 34 & 40).
The Court finds MOOT the motions for summary judgment.

(Docket

Nos. 34 & 82.)
DISCUSSION
I.

Background
The Court declines to rehash all of the facts.

Background

information or facts will be recounted as needed in the Court’s

Civil No. 12-1433 (FAB)

2

subsequent legal analysis of particular issues.

See United States

v. Stierhoff, 549 F.3d 19, 21 (1st Cir. 2008).
On June 4, 2012, plaintiff Arroyo filed a pro se complaint
requesting

a

fair

trial

for

“violation of civil

rights”

and

alleging that “[p]laintiff’s lawsuit pertains to the FDIC in its
corporate capacity . . .”

(Docket No. 1 at pp. 1 & 12.)

In the

complaint, plaintiff Arroyo describes how on November 10, 2008, he
filed a lawsuit in the Puerto Rico Court of First Instance in
Aguadilla (“the Puerto Rico trial court”) against certain parties,
including Westernbank,1 regarding a sales-purchase agreement on a
piece of property.
p. 2.)

(Docket No. 1 at pp. 1-5; Docket No. 48-1 at

Specifically, plaintiff Arroyo argued that all defendants

were “jointly and severally liable for having made him to believe
that the transaction that was carried out was lawful and correct.”
(Docket No. 48-1 at p. 2.)

The parties agree that on April 30,

2010, while this case was ongoing in the Puerto Rico trial court,
the Office of the Commissioner of Financial Institutions of the

1

In support of his claim, plaintiff Arroyo submitted
untranslated Spanish language documents, which indicate that
defendant BPPR was also listed as a defendant in the Commonwealth
case. (See Docket No. 50-1 at pp. 28 & 31.) Although the Court
does not consider Spanish language documents, see Puerto Ricans for
Puerto Rico Party v. Dalmau, 544 F.3d 58, 67 (1st Cir. 2008), the
Court is not relying on the documents for their actual substance.
The Court can read BPPR’s name, which is listed in the caption of
the case, as a defendant. Furthermore, both parties agree that
defendant BPPR took over certain assets and liabilities of
Westernbank when the Commissioner of Financial Institutions ordered
it closed.
(See Docket No. 1 at p. 5; Docket No. 34 at p. 3;
Docket No. 40 at p. 1.)

Civil No. 12-1433 (FAB)
Commonwealth

of

3

Puerto

Rico

(“OCFIC-PR”)

determined

that

Westernbank was not in good financial condition and could not
continue its business.
p. 3.)

(See Docket No. 1 at p. 5; Docket No. 34 at

Therefore, the OCFIC-PR closed the bank and appointed the

Federal Deposit Insurance Corporation as receiver of the failed
bank.

Id.
On June 7, 2011, the Puerto Rico trial court substituted the

defendant Westernbank2 with the FDIC.

(Docket No. 48-1 at p. 4.)

On July 15, 2011, instead of choosing to remove the case to federal
court,3 the FDIC filed a motion to dismiss the case before the
Puerto Rico trial court, alleging that plaintiff Arroyo failed to
exhaust

administrative

Institutions

Reform,

remedies

Recovery

pursuant

and

(“FIRREA”), 12 U.S.C. § 1821(d)(6).

to

Enforcement

the
Act

Financial
of

1989

(Docket No. 48-1 at p. 4.)

The Puerto Rico trial court agreed with the FDIC and on October 24,
2011, it issued a “Report of Proceedings, Factual Determinations,

2

As stated earlier, BPPR was also listed as a defendant in
the Commonwealth case. The Puerto Rico trial court, therefore,
substituted both Westernbank and BPPR with the FDIC.
3

The Federal Deposit Insurance Act (“FDIC Act”), 12 U.S.C.
§ 1819, states that all civil lawsuits in which the FDIC is a
party, in any capacity, “shall be deemed to arise under the laws of
the United States.” The FDIC Act also provides, however, that if
any action, suit, or proceeding against it is filed in state court,
the FDIC “may . . . remove . . . 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.”
12
U.S.C. § 1819(b)(2)(B).

Civil No. 12-1433 (FAB)

4

Legal Conclusions and Partial Summary Judgement,” which dismissed
plaintiff Arroyo’s complaint with respect to the FDIC in its
capacity as Westernbank’s receiver.

Id. at pp. 5-7.

Notably, the

Puerto Rico trial court determined that plaintiff Arroyo received
proper notice of (1) the FDIC’s appointment as the receiver for
Westernbank,

and

(2)

the

fact

that

a

plaintiff

must

exhaust

administrative remedies before pursuing his or her claim in any
court.
exhaust

Id.
his

Furthermore, it found that plaintiff Arroyo failed to
administrative

remedies

pursuant

to

FIRREA,

and,

therefore, it had no jurisdiction over plaintiff Arroyo’s case. On
November 28, 2011, plaintiff Arroyo appealed the Puerto Rico trial
court’s decision.

Id. at p. 7.

On March 28, 2012, the Puerto Rico

Court of Appeals affirmed the Puerto Rico trial court’s decision.
Id. at pp. 23-25.
Plaintiff Arroyo also alleges that he did not receive proper
notice of the FDIC’s appointment and of the requirement to exhaust
administrative remedies. (Docket No. 1 at pp. 9-10.) In addition,
plaintiff

Arroyo

describes

how

he

enlisted

the

help

of

two

attorneys to help him with his case in the Puerto Rico courts.
(Docket No. 1 at p. 11.)

He states that he hired defendant

Velazquez as his second lawyer on September 21, 2011.

Id.

He

argues, however, that defendant Velazquez failed to help plaintiff
Arroyo with his contentions.

Id.

Given these facts, plaintiff

Arroyo argues that the Puerto Rico trial court, the FDIC, and

Civil No. 12-1433 (FAB)

5

various officers, including those who worked for the FDIC and
Westernbank, and two lawyers, defendant Luis F. Morales-Gonzalez
(“Morales”) and defendant Velazquez; violated his civil rights.
(Docket No. 1 at pp. 6 & 12.)
On November 9, 2012, defendant Velazquez filed a motion to
dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1)
(“Rule 12(b)(1)”) for lack of subject-matter jurisdiction and
12(b)(6) (“Rule 12(b)(6)”) for failure to state a claim.

(Docket

No. 34.) On that same day, defendant Velazquez also filed a motion
for summary judgment. Id. He contends that plaintiff’s claims are
barred under the Rooker-Feldman doctrine. Id. at pp. 6-7.

He also

argues that plaintiff Arroyo’s legal action against the FDIC and
its federal officers is barred by res judicata and collateral
estoppel. Id. at pp. 7-8. In the alternative, defendant Velazquez
argues that plaintiff’s claims should be dismissed for failure to
exhaust administrative remedies pursuant to FIRREA.4
Furthermore,

defendant

Velazquez

argues

that

Id. at p. 8.

the

remaining

malpractice claim against him is based in tort under Commonwealth

4

Because the Court determines that plaintiff Arroyo’s claims
are jurisdictionally barred under the Rooker-Feldman doctrine, it
declines to address the other arguments presented by defendant
Velazquez regarding why plaintiff’s claim cannot proceed in federal
court. See Badillo-Santiago v. Naveira-Merly, 378 F.3d 1, 7 (1st
Cir. 2004) (discussing how Rooker-Feldman is a jurisdictional issue
and “if the district court determines that it does have
jurisdiction over the suit, then it should address the res judicata
and issue preclusion effects (if any) of the judgment by the
Commonwealth’s highest court.”)

Civil No. 12-1433 (FAB)

6

law, and, therefore, should be dismissed because no federal cause
of

action

exists.

alternative,

he

(Docket

also

No.

argues

34

that

at

pp.

even

15-16.)

if

this

In

the

Court

has

jurisdiction over plaintiff Arroyo’s case, plaintiff Arroyo has
failed to state a claim against defendant Velazquez given the facts
that were stated in the complaint.

Id. at pp. 16-19.

On November 20, 2012, defendant BPPR filed a motion to join
defendant Velazquez’s motion to dismiss and his motion for summary
judgment.

(Docket No. 40.)

In that motion, BPPR reiterates the

arguments that defendant Velazquez stated in his motion, (Docket
No. 34), regarding the Rooker-Feldman doctrine and res judicata.
(Docket No. 40.)

On December 4, 2012, plaintiff Arroyo filed a

response

in

opposition

to

motions.

(Docket No. 50.)

defendants

Velazquez’s

and

BPPR’s

On December 24, 2012, defendant Carlo

also requested to join both defendants Velazquez’s and BPPR’s
motions, (Docket Nos. 34 & 40).

(Docket No. 59.)

On December 26,

2012, the Court granted defendant Carlo’s motion. (Docket No. 61.)
On January 3, 2013, the Court reminded plaintiff that the Court may
appoint pro bono counsel for him.
After

reviewing

all

of

the

(Docket No. 70.)
relevant

motions,

responses,

replies, and exhibits, the Court agrees with defendants Velazquez,
BPPR and Carlo.

Therefore, the Court GRANTS defendants’ motion to

dismiss. Defendants’ and plaintiff’s motions for summary judgment,

Civil No. 12-1433 (FAB)

7

(Docket Nos. 34 & 82), and plaintiff Arroyo’s motion for summary
judgment, are deemed MOOT.
II.

Legal Standards
A.

Pro Se
“As the [Supreme] Court unanimously held in Haines v.

Kerner,

404

U.S.

519

(1972),

a

pro

se

complaint,

‘however

inartfully pleaded,’ must be held to ‘less stringent standards than
formal pleadings drafted by lawyers’ . . .”
U.S. 5, 10 (1980).
se

plaintiff’s

Hughes v. Rowe, 449

Therefore, a district court must construe a pro

pleadings

somewhat

liberally.

Instituto

de

Education Universal Corp. v. U.S. Dept. of Educ., 209 F.3d 18, 23
(1st Cir. 2000) (“The Supreme Court has long held that complaints
drafted by non-lawyers are to be construed with some liberality.”)
Pro se status, however, “does not exempt a party from compliance
with relevant rules of procedural and substantive law.”

Velez-

Villaran v. Carico Int’l., Inc., 715 F.Supp.2d 250, 252 (D.P.R.
2010) (citing Triestman v. Federal Bureau of Prisons, 470 F.3d 471,
477 (2d Cir. 2006)).
B.

Legal Standard Under Rule 12(b)(1) and Rule 12(b)(6)
Federal

courts

are

courts

of

limited

jurisdiction.

Destek Grp. v. State of N.H. Pub. Utils. Comm’n., 318 F.3d 32, 38
(1st Cir. 2003).

Accordingly, “federal courts have the duty to

construe their jurisdictional grants narrowly.”

Fina Air, Inc. v.

United States, 555 F.Supp.2d 321, 323 (D.P.R. 2008) (citing Alicea-

Civil No. 12-1433 (FAB)

8

Rivera v. SIMED, 12 F. Supp. 2d 243, 245 (D.P.R. 1998)).

Because

federal courts have limited jurisdiction, the party asserting
jurisdiction carries the burden of showing the existence of federal
jurisdiction.

Viqueira v. First Bank, 140 F.3d 12, 16 (1st Cir.

1998) (internal citations omitted).
Pursuant to Rule 12(b)(1), a party may move to dismiss an
action for lack of subject-matter jurisdiction.

Fed. R. Civ.

P. 12(b)(1); see also Valentin v. Hosp. Bella Vista, 254 F.3d 358,
362 (1st Cir. 2001) (discussing how Rule 12(b)(1) is the “proper
vehicle for challenging a court’s subject-matter jurisdiction.”)
Motions brought pursuant to Rule 12(b)(1) are subject to a similar
standard as Rule 12(b)(6) motions. Defendants move to dismiss this
action pursuant to both Rules 12(b)(1) and 12(b)(6).5
Subject-matter jurisdiction is properly invoked when a
colorable claim “arising under” the Constitution or laws of the
United States is pled.

28 U.S.C. § 1331; Arbaugh v. Y&H Corp., 546

U.S. 500, 513 (2006) (internal citation omitted). Usually, a claim
arises pursuant to federal law if a federal cause of action emerges

5

Defendants Velazquez, BPPR, and Carlo state that they move
to dismiss under both Rules 12(b)(1) and 12(b)(6). Because the
standard is almost identical for both rules, the Court will focus
its analysis on the defendants’ Rule 12(b)(1) argument, which is
dispositive in this case. Furthermore, these defendants also move
for summary judgment pursuant to Federal Rule of Civil Procedure
56. (See Docket No. 34.) As stated earlier, because the Court
grants defendants’ motion to dismiss, it declines to address either
defendants’ or plaintiff’s arguments regarding summary judgment.

Civil No. 12-1433 (FAB)

9

from the face of a well-pleaded complaint.

See Viqueira, 140 F.3d

at 17 (internal citations omitted).
III. Analysis
A.

Rooker-Feldman Doctrine
Federal district courts lack jurisdiction over complaints

that invite review of state or Commonwealth court judgments under
the Rooker-Feldman doctrine.6

See Coggeshall v. Massachusetts Bd.

of Registration of Psychologists, 604 F.3d 658, 663 (1st Cir. 2010)
(discussing how the Rooker-Feldman doctrine prevents “the losing
party in state court from filing suit in federal court after the
state proceedings have ended, complaining of an injury caused by
the state-court judgment and seeking review and rejection of that
judgment.” (internal citation and quotation marks omitted)); see
also Puerto Ricans for P.R. Party v. Dalmau, 544 F.3d 58, 68 (1st
Cir. 2008) (citing Badillo-Santiago v. Naveira-Merly, 378 F.3d 1,
6 (1st Cir. 2004) (discussing how Puerto Rico is treated as a state
for the Rooker-Feldman doctrine)).

The doctrine applies, however,

only when state proceedings have ended.

Federacion de Maestros de

P.R. v. Junta de Relaciones del Trabajo de P.R., 410 F.3d 17, 24
(1st Cir. 2005) (“If federal litigation is initiated before state
proceedings have ended, then–even if the federal plaintiff expects

6

This doctrine was enunciated by the United States Supreme
Court in Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and in
District of Columbia Court of Appeals v. Feldman, 460 U.S. 462
(1983).

Civil No. 12-1433 (FAB)

10

to lose in state court and hopes to win in federal court–the
litigation is parallel, and the Rooker-Feldman doctrine does not
deprive the court of jurisdiction.”). Therefore, four factors must
be met before a federal court can decide that it lacks jurisdiction
over the federal complaint:
the

losing

party

in

state

(1) the complaints must be brought by
court;

(2)

the

federal

plaintiff

complains of injuries caused by state court judgments; (3) the
state court judgment must be rendered before the district court
proceedings have started; and (4) the federal plaintiff must
request that the district court review and reject the state court
judgment.

Echevarria-Chaparro v. Banco Popular of Puerto Rico,

2010 WL 1416742, at *1 (D.P.R. March 31, 2010) (citing Silva v.
Commonwealth of Massachusetts, 351 Fed. Appx. 450, 454 (1st Cir.
2009) and Lance v. Dennis, 546 U.S. 459, 464 (2006)).

The doctrine

is “jurisdictional in nature; if a case is dismissed because the
Rooker-Feldman doctrine applies, it means the court has no subject
matter jurisdiction to hear the case.”

In re Middlesex Power

Equip. & Marine, Inc. 292 F.3d 61, 66 n.1 (1st Cir. 2002).
First, it is clear from the allegations in Arroyo’s
complaint that he was the unsuccessful party in the Commonwealth
Court action.

The Puerto Rico trial court dismissed plaintiff

Arroyo’s complaint with respect to his claims against the FDIC on
October 24, 2011.

(Docket No. 48-1 at p. 7.)

On March 28, 2012,

the Puerto Rico Court of Appeals affirmed the Puerto Rico trial

Civil No. 12-1433 (FAB)
court’s decision.

Id.

11
The second factor is also met because

plaintiff alleges that the Puerto Rico courts incorrectly decided
his case, which is what caused his injury.7

See Davison v. Gov’t.

of Puerto Rico–Puerto Rico Firefighters Corps., 471 F.3d 220, 223
(1st Cir. 2006) (discussing how the Rooker-Feldman doctrine applies
when “the only real injury to plaintiff is ultimately still caused
by

a

state-court

judgment”,

regardless

of

how

the

claim

is

phrased.)
With regard to the third factor, the state court judgment
was sufficiently final for Rooker-Feldman to apply.

The First

Circuit Court of Appeals has indicated that state or Commonwealth
proceedings could be considered to have “ended” for Rooker-Feldman
purposes “if the state court proceedings have finally resolved all
the federal questions in the litigation . . .”
Maestros de P.R., 410 F.3d at 25.

Federacion de

The Puerto Rico trial court

issued its opinion regarding plaintiff’s federal questions on
October 24, 2011, almost one year before plaintiff filed his
complaint in federal court on June 4, 2012.

Next, the Puerto Rico

appeals court issued its opinion on March 28, 2012, nearly three
months before plaintiff filed his complaint in federal court.

The

Puerto Rico appeals court attached a “Notice of Judgment” to the

7

For example, in his complaint, plaintiff Arroyo states that
“. . . on October 24, 2011, lawsuit ADP 2008-0045 was revoked by
the Court of First Instance Aguadilla Part in violation of my civil
rights.” (Docket No. 1 at p. 6.)

Civil No. 12-1433 (FAB)

12

opinion, indicating that the parties have a right to appeal.
(Docket No. 48-1 at p. 25.)

In Puerto Rico, however, parties have

thirty days to appeal an opinion issued by the Commonwealth courts
of appeals and that period expired before plaintiff filed his claim
in federal court.
20(A)(1).
any

See P.R. Laws Ann. Tit. 32, Ap. III. R.

Plaintiff Arroyo also does not indicate that he filed

request

for

review

in

the

Puerto

Rico

Supreme

Court.

Therefore, the state court judgment is final and has “ended” for
Rooker-Feldman purposes.
Finally, with regard to the fourth factor, plaintiff
Arroyo’s federal complaint requests that the Court review and
reject the state court judgment.

While plaintiff Arroyo adds a

number of defendants that were not present in his Commonwealth
court case, including individual attorneys who worked for the FDIC
and Westernbank, to grant plaintiff’s request for relief, the Court
would have to “declare that the state court wrongly decided” the
state action.

See e.g., Davison, 471 F.3d at 223.

Plaintiff

Arroyo’s federal complaint focuses entirely on facts dealing with
the Commonwealth proceedings and how he did not receive the proper
notice that he needed to exhaust administrative remedies; the
latter issue was discussed at length by both the Puerto Rico trial
court and the Puerto Rico court of appeals.

Thus, not only does

this Court have to review all of the factual findings that the
Puerto Rico trial court and the Puerto Rico court of appeals made,

Civil No. 12-1433 (FAB)

13

but it would also need to determine that all of their legal
conclusions were incorrect in order for plaintiff to obtain relief.
Those determinations are prohibited by the Rooker-Feldman doctrine,
which states that a federal district court lacks subject matter
jurisdiction over lawsuits that seek to reverse or modify statecourt judgments.
Therefore, the Court GRANTS the defendants’ motion to
dismiss the case for lack of subject matter jurisdiction with
respect to defendant FDIC and its attorneys, defendant Westernbank
and its officers, defendant BPPR, defendant OCFIC-PR and its
officers, and all other defendants except for defendant Velazquez
and defendant Morales.
B.

Plaintiff’s Claim Against Defendant Velazquez
As

stated

earlier,

plaintiff

Arroyo

alleges

that

“Mr. Velazquez had the opportunity to help the plaintiff with his
legal controversy . . . but Mr. Velazquez remained silent and
didn’t contribute to the plaintiff’s contentions.”
at

p.

11.)

Thus,

plaintiff

Arroyo

contends

(Docket No. 1
that

defendant

Velazquez was negligent in his duties as an attorney.

From what

the Court can glean from the federal complaint, plaintiff Arroyo
makes a similar argument for defendant Morales, another attorney
who was employed by him before he retained defendant Velazquez.
(Docket No. 1 at pp. 10-12.)

Even though plaintiff Arroyo argues

that he is not bringing a tort action, (see e.g., Docket No. 50 at

Civil No. 12-1433 (FAB)

14

p. 21), such a claim can only be brought as a legal malpractice
claim under Puerto Rico tort law.
defendants’

motion

to

dismiss

Because the court grants the
for

lack

of

subject

matter

jurisdiction, however, no federal claim remains upon which to
ground

jurisdiction

plaintiff Arroyo.
supplemental

over

any

Commonwealth

claims

alleged

by

Furthermore, the Court declines to exercise its

jurisdiction

over

those

claims.

See

28

U.S.C.

§ 1367(c). Accordingly, plaintiff Arroyo’s legal malpractice claim
against defendants Velazquez and Morales, which is a Commonwealth
law claim, is DISMISSED WITHOUT PREJUDICE pursuant to 28 U.S.C.
§

1367(c)(3),

which

permits

plaintiff

Arroyo

to

bring

his

malpractice claims against attorneys Velazquez and Morales in the
Commonwealth Courts, not in Federal Court.
CONCLUSION
Having considered the defendants’ motion to dismiss and all of
the relevant responses, replies, and exhibits, the Court GRANTS
defendants’

motion

to

dismiss

pursuant

to

Rule

12(b)(1).

Accordingly, the plaintiff’s claims against the FDIC, BPPR, and all
other defendants except for defendants Velazquez and Morales are
DISMISSED with prejudice. Because no federal claim remains upon to
ground jurisdiction over plaintiff’s Commonwealth law claims, the
Court also DISMISSES plaintiff Arroyo’s legal malpractice claim
against defendants Velazquez and Morales without prejudice.

The

Civil No. 12-1433 (FAB)

15

Court finds MOOT the motions for summary judgment. (Docket Nos. 34
and 82.)
Judgment shall be entered accordingly.
IT IS SO ORDERED.
In San Juan, Puerto Rico, August 16, 2013.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
United States District Judge