Vistas de Canovanas I, Inc. v. Federal Deposit Insurance Corporation et al
Filing
21
OPINION AND ORDER re 3 Informative Motion and re 7 Motion to Remand. Bautista's motion to alter or amend the August Order is DENIED WITH PREJUDICE. Vistas motion to remand is DENIED WITH PREJUDICE. Signed by Judge Francisco A. Besosa on 07/18/2017. (brc)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
VISTAS DE CANOVANAS I, INC.,
Plaintiff,
v.
Civil No. 16-2568 (FAB)
FEDERAL
DESPOSIT
INSURANCE
CORPORATION, as Receiver of
Doral Bank
Defendant.
OPINION AND ORDER 1
BESOSA, District Judge.
Before
the
Court
is
Bautista
Cayman
Asset
Company
(“Bautista”)’s unopposed motion to alter or amend the August 8,
2016, Puerto Rico Court of First Instance “Minutes Resolution”
pursuant to Federal Rule of Civil Procedure 59(e) (“Rule 59(e)”)
and Vistas de Canovanas I, Inc. (“Vistas”)’s motion to remand
pursuant to 12 U.S.C. § 1819.
(Docket Nos. 7 at p. 2; 3 at p. 1.)
For the reasons set forth below, the Court DENIES Bautista’s motion
to alter or amend the judgment, and DENIES Vistas’ motion to
remand.
I.
FACTUAL AND PROCEDURAL BACKGROUND
In 2009 Vistas filed a complaint against Doral Bank (“Doral
Bank”) in the Court of First Instance, San Juan Superior Division
1
Ian Joyce, a second-year student at Vanderbilt University Law School, assisted
in the preparation of this Opinion and Order.
Civil No. 16-2568 (FAB)
2
(“state court”), 2 seeking damages related to an alleged breach of
contract regarding a loan Vistas obtained from Doral Bank to
construct a housing project in Canovanas, Puerto Rico (“loan”).
(Docket Nos. 1 at p. 1; 3 at p. 2.)
Doral Bank asserted a
counterclaim against Vistas seeking collection of the loan and a
third party complaint against Ramon MacCrohon (“MacCrohon”), the
guarantor of the loan.
(Docket No. 1 at p. 1.)
During proceedings in state court, Doral Bank transferred the
loan to a subsidiary, Doral Recovery II, LLC (“Doral Recovery”).
(Docket Nos. 1 at pp. 1-2; 3 at p. 2.)
Doral Recovery was
subsequently joined to the state court action as a counterclaimant
(for repayment of the loan) and as a third party plaintiff (in the
action against MacCrohon).
In
prohibit
September
transfer
2014,
of
(Docket No. 1 at p. 2.)
Vistas
the
loan.
requested
(Docket
the
No.
state
court
to
3
p.
3.)
at
Notwithstanding this motion, Doral Recovery transferred the loan
back to Doral Bank on October 31, 2014.
3 at p. 4; 3-1 at p. 3.)
(Docket Nos. 1 at p. 2;
The state court issued an order in
November 2014, prohibiting Doral Recovery from selling the loan.
(Docket No. 3 at pp. 4-5.)
2 The Commonwealth of Puerto Rico is considered a “state” in removal actions.
Kane v. Republica De Cuba, 211 F. Supp. 855, 856 (D.P.R. 1962) (Ruiz-Nazario,
J.).
Civil No. 16-2568 (FAB)
3
The Office of the Commissioner of Financial Institutions of
the Commonwealth of Puerto Rico closed Doral Bank on February 27,
2015.
(Docket No. 3 at p. 5.)
The Federal Deposit Insurance
Corporation (“FDIC”) became Doral Bank’s receiver.
(Docket No. 1
at p. 2.)
The
FDIC
published
a
notice
in
El
Nuevo
Dia
newspaper
requiring Doral’s creditors to submit their claims to the FDIC.
(Docket No. 7 at p. 8.)
Vistas did so, after which the FDIC
disallowed its claim (“disallowance letter”).
p. 9.)
(Docket No. 7 at
In the disallowance letter, the FDIC informed Vistas that
“[p]ursuant to 12 U.S.C. § 1821(d)(6), if you do not agree with
this disallowance, you have the right to file a lawsuit on your
claim (or continue any lawsuit commenced before the appointment of
the Receiver).”
Id.
The FDIC, as Doral Bank’s receiver, promptly sold the loan to
Bautista.
(Docket Nos. 3 at p. 6; 7 at p. 10.)
Bautista then
moved to substitute itself for Doral Bank in the state court action
as owner of the contested loan.
(Docket No. 3 at p. 6.)
Vistas
opposed, arguing that the transfer of the loan from Doral Recovery
to Doral Bank violated the state court’s November order, rendering
the transfer from the FDIC to Bautista void.
Id.
Civil No. 16-2568 (FAB)
4
Bautista requested documentation from the FDIC to confirm its
ownership of the loan.
Id.
Bautista received a number of
documents from the FDIC, and submitted these documents to the state
court during an August 8, 2016 hearing.
(Docket No. 3 at p. 7.)
The state court noted that the promissory note at issue lacked
endorsement from Doral Bank to Doral Recovery, casting doubt on
the validity of the transfer.
(Docket No. 10-5 at p. 3.)
In the
same decision, the state court disqualified the attorneys for Doral
Bank and Doral Recovery, and subsequently, because the FDIC had
not yet appeared in the litigation, denied the motion to substitute
(“August Order”). 3
2017.
Id.
The state court continued trial for March
(Docket Nos. 3 at p. 8; 10-5 at p. 3.)
Bautista requested more information from the FDIC, and on
September 1, 2016 the FDIC provided Bautista with a sworn affidavit
from Edward M. Mertic, declaring that the loan had, indeed, been
transferred
to
Doral
Bank
transfer (the “affidavit”). 4
before
the
state
court
prohibited
(Docket Nos. 3 at p. 8; 3-1 at p. 3.)
3
“Given that defendant does not have counsel at this time, and the FDIC has
not appeared in this case, which told the plaintiff to continue with the claim,
the substitution of party requested by Bautista Cayman Assets Company is
denied.” (Docket No. 10-5 at p. 3.)
4 In its motion for reconsideration, Bautista claims that the affidavit consists
of a declaration by “Alex R. Greenberg.” (Docket No. 3 at p. 8.) The affidavit
exhibit indicates it is, in fact, a deposition of “Edward M. Mertic.” (Docket
No. 3-1 at p. 1.) At this juncture, this difference is immaterial.
Civil No. 16-2568 (FAB)
5
That same day, September 1, 2016, the FDIC filed a notice of
substitution of party in the state court to take the place of Doral
Bank in the litigation and then removed the case to federal court.
(Docket Nos. 1 at pp. 1 and 2.)
remand.
No. 10.)
(Docket No. 7.)
Vistas timely filed a motion to
The FDIC filed an opposition.
(Docket
untimely.
Vistas’ motion for leave to file a reply was denied as
(Docket No. 20.)
Additionally, on September 1, Bautista timely filed a motion
requesting that this Court reconsider the August Order.
No. 3.)
Vistas did not file an opposition.
(Docket
Civil No. 16-2568 (FAB)
II.
6
DISCUSSION
A.
Motion to Reconsider 5
1.
Initial Adoption of State Court Ruling
Upon removal, the federal court essentially “takes
the case up where the State court left it off.”
Granny Goose
Foods, Inc. v. Bhd. of Teamsters and Auto Truck Drivers Local No.
70
of Alameda Cty., 415 U.S. 423, 436, 94 S.Ct. 1113, 1122, 39
L.Ed.2d 435 (1974) (citations omitted).
To that end, district
courts adopt “all injunctions, orders, and other proceedings”
5
Bautista requests the Court to substitute Bautista for the FDIC in the
litigation. (Docket No. 3 at p. 11.) This action was removed to the Court by
the FDIC pursuant to its inherent power to do so as set forth in 12 U.S.C.
section 1819(b)(2)(B). (Docket No. 1 at 1.) If Bautista is substituted for the
FDIC, the Court may lack subject matter jurisdiction to hear this case. See
Scotiabank of Puerto Rico v. Sanchez-Castro, Civil No. 16-1026, 2017 WL 56893,
at *2 n. 1 (D.P.R. 2017) (Besosa, J.) (“As Sanchez himself acknowledges, the
mortgage notes originally held by Doral have since been assigned to other
entities [...] This transfer — and the resulting substitution of the failed
bank as a plaintiff — effectively removed the FDIC as receiver from the
consolidated actions.
Section 1819 therefore, no longer bestows upon the
federal courts original jurisdiction over those cases.”). Accordingly, the Court
first addresses Bautista’s Rule 59(e) motion.
See Acosta-Ramirez v. Banco
Popular de Puerto Rico, 712 F.3d 14, 18 (1st Cir. 2013) (“Federal courts are
obliged to resolve questions pertaining to subject-matter jurisdiction before
addressing the merits of a case.”)
Civil No. 16-2568 (FAB)
7
present in the state court action at the time of removal. 6
28
U.S.C. § 1450.
2.
Analysis
Bautista argues that the state court denied its
motion
to
substitute
because
Bautista’s
lawyers
failed
to
demonstrate that Doral Recovery transferred the loan to Doral Bank
before the November order.
(Docket No. 3 at p. 8.)
Bautista avers
that because the FDIC affidavit clarified that certain transfers
were not endorsed, the Court should amend the August Order and
grant Bautista’s motion to substitute.
(Docket No. 3 at p. 8.)
The motion for reconsideration is unopposed by Vistas.
Rule 59(e) is “an extraordinary remedy which should
be used sparingly.”
Palmer v. Champion Mortg., 465 F.3d 24, 30
(1st Cir. 2006) (citations omitted).
Motions to amend judgment
are only appropriate “if they seek to correct manifest errors of
law, present newly discovered evidence, or when there exists an
6
There is some debate as to how a district court, upon removal of a state
action, should evaluate motions to reconsider judgments rendered in state court.
See Breedlove v. Cabou, 296 F. Supp. 2d 253, 263-65 (N.D.N.Y. 2003) (describing
the approaches taken by the Third, Fifth, Ninth, and Eleventh Circuit Courts of
Appeals). While the First Circuit Court of Appeals has not directly addressed
the issue before the Court — a motion to reconsider a state court denial of a
motion made by a third party — it has suggested in dicta that a district court
has authority to consider timely motions for post-judgment relief of state court
decisions after the action has been removed to federal court.
F.D.I.C. v.
Keating, 12 F.3d 314, 317 at n.4. (1st Cir. 1993). Accordingly, the Court may
decide Bautista’s motion.
Civil No. 16-2568 (FAB)
8
intervening change in law.”
Citizens of Karst, Inc. v. United
States Army Corps of Engineers, Civil No. 14-1592, 2017 WL 773597,
at *1 (D.P.R Feb. 28, 2017) (Besosa, J.) (citing Rivera-Surillo &
Co. v. Falconer Glass Indus., Inc., 37 F.3d 25, 29 (1st Cir.
1994)).
Rule 59(e) is not “a vehicle for a party to undo its own
procedural failures, and it certainly does not allow a party to
introduce new evidence or advance arguments that could and should
have been presented to the district court prior to the judgment.”
Aybar v. Crispin-Reyes, 118 F.3d 10, 16 (1st Cir. 1997) (citations
omitted).
The
Court
first
notes
that
even
if
Bautista
prevailed on the motion to reconsider, the Court would only clarify
that the state court “denial” of the motion to substitute was a
“denial without prejudice.”
Granted, Bautista is correct in that
the state court mentions a lack of evidence in the August Order; 7
however, the
state
court
reserved
Bautista’s substitution motion.
judgment
on
the
See Docket No. 10-5.
merits
of
Indeed, the
August Order contains no legal discussion or analysis of Puerto
Rico law governing substitution of parties, much less an analysis
7
“Today, the Court’s attention is brought to the matter of two (2) Promissory
Notes, that are part of the chose in action of this case, which upon being
examined by the FDIC, one of said Promissory Notes appears on Doral Bank books,
and none of the attorneys can clarify what happened, for which Bautista Cayman
Asset Company is not authorized to appear as a party in this case.” (Docket
No. 10-5 at p. 3.) (emphasis added).
Civil No. 16-2568 (FAB)
of Bautista’s motion.
from
the
August
9
See id.
Order
is
The most the Court can decipher
that
the
state
court
denied
the
substitution motion because Doral’s lawyers had been disqualified
and the FDIC had not yet appeared — leaving plaintiff Vistas and
third party Bautista as the only parties with counsel present at
the hearing.
(Docket No. 10-5 at p. 3.)
(“Given that defendant
[Doral] does not have counsel at this time, and the FDIC has not
appeared in this case [. . .] the substitution of party requested
by Bautista Cayman Assets Company is denied.”)
Because removal to
federal court occurred before the Court of First Instance addressed
the merits of the substitution motion, there is no analysis from
the state court upon which the Court may “alter or amend.” 8
Bautista
may
not
avoid
an
adjudication
on
merits of its substitution motion by invoking Rule 59(e). 9
the
The
8
In its motion to reconsider, Bautista requests that the Court grant the motion
to substitute, but submits no precedent or legal argument as to why it should
be substituted. See Docket No. 7.
9
The Court also notes that Rule 59(e) “appl[ies] only to final judgments”, that
is, “order[s] from which an appeal lies.”
Portugues-Santa v. B. Fernandez
Hermanos, Inc., 614 F. Supp. 2d 221, 226 (D.P.R. 2009) (Besosa, J.) (quoting
Fed. R. Civ. P. 54(a)); Municipality of San Sebastian v. Puerto Rico, 116 F.
Supp. 3d 49, 53 (D.P.R. 2015) (Besosa, J.). The Court is not entirely convinced
the August Order constitutes a final judgment, but declines to evaluate the
issue because Bautista’s motion is unopposed and there are alternative grounds
for denial. See Laguer v. United States, Civil No. 16-2852, 2017 WL 2691191,
at *3 at n.8. (D.P.R. June 22, 2017) (Besosa, J.) (declining to evaluate multiple
arguments when one was sufficient for dismissal); Cf. Grasso v. Dudek, Case No:
6:13-cv-1536-Orl-28GJK, 2014 WL 12622475, slip op. at *1 at n.1 (M.D.Fla.
Feb. 14, 2014) (declining to evaluate an unclear area of law when the moving
party had not raised the issue.)
Civil No. 16-2568 (FAB)
proper
pleading
to
litigate
10
this
issue
is
substitution, not a motion for reconsideration.
a
motion
for
See e.g., Fed. R.
Civ. P. 25(c).
With regard to the Rule 59(e) motion, aside from
stating in a conclusory manner that “the newly discovered evidence
[was] not previously available,” Bautista offers no substantive
reason why it could not have presented the FDIC affidavit to the
state court. 10
Bautista received evidence from the FDIC before the
state court hearing.
(Docket No. 3 at pp. 6-7.)
Bautista could
have requested the affidavit regarding possession of the loan at
that time.
motion.
This deficiency alone merits denial of the Rule 59(e)
See Mas Marques v. Digital Equip. Corp., 637 F.2d 24, 29-
30 (1st Cir. 1980) (“A defeated litigant cannot set aside a
judgment [. . .] because he failed to present on a motion for
summary judgment all of the facts known to him that might be useful
to the court.”); Shell Co., Ltd. v. Los Frailes Serv. Station,
Inc., 596 F. Supp. 2d 193, 201 (D.P.R. 2008) (Besosa, J.) (denying
a motion to alter judgment when defendant’s new evidence was not
10
Bautista also failed to provide the Court with any of the pertinent state
court decisions used to supplement its case. See Docket No. 3 at p. 5 (“As it
was drafted, it appears that neither the November 10, 2014 nor the April 20,
2015 Order/Resolution applied to Doral bank.”). Indeed, the August Order was
supplied by the FDIC, not Bautista, in its own motion to oppose remand. (Docket
No. 10-5.)
Civil No. 16-2568 (FAB)
11
material and “LFSS had ample opportunity to present Mr. Rosa’s
evidence earlier.”)
Accordingly,
the
Court
DENIES
with
prejudice
Bautista’s motion to alter or amend the state court judgment.
B.
Motion to Remand
Vistas moves to remand this action on three grounds: (1)
the removal was barred by 12 U.S.C. section 1819(b)(2)(D), (2) the
FDIC waived its right to removal, and (3) the notice of removal
was untimely.
(Docket No. 7 at pp. 1-2.)
The FDIC opposed.
(Docket No. 10.)
1.
Legal Standard
28 U.S.C. section 1441 governs the removal of an
action to federal court and provides in pertinent part, “any civil
action brought in a State court of which the district courts of
the United States have original jurisdiction, may be removed by
the defendant or the defendants, to the district court of the
United States for the district and division embracing the place
where such action is pending.”
28 U.S.C. § 1441.
Removal, then,
is contingent on whether the case originally could have been
brought in this federal court.
City of Chicago v. Int’l Coll. of
Surgeons, 522 U.S. 156, 163, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997);
Scotiabank of Puerto Rico v. Sanchez-Castro, Civil No. 16-1026,
Civil No. 16-2568 (FAB)
12
2017 WL 56893, at *1 (D.P.R. 2017) (Besosa, J.).
When the FDIC is
involved as a party, original jurisdiction is premised on federal
question jurisdiction pursuant to 12 U.S.C. section 1819(b)(2)(A).
See 12 U.S.C. § 1819(b)(2)(A); Scotiabank of Puerto Rico, 2017 WL
56893 at *1.
2.
Analysis
a.
12 U.S.C. § 1819(b)(2)(D)
When the FDIC is appointed receiver of a bank,
it has wide authority to remove cases to federal court.
U.S.C. § 1819(b)(2)(B).
See 12
Vistas, however, argues that remand is
appropriate pursuant to the “state law exception” to the FDIC’s
removal authority because the complaint is premised entirely on
Puerto Rico law.
p. 7.)
12 U.S.C. § 1819(b)(2)(D); (Docket No. 7 at
The FDIC counters that forthcoming federal law defenses
predicated on 12 U.S.C. § 1821(i),(j) and the D’Oench doctrine 11
renders the state law exception inapplicable.
(Docket No. 10 at
p. 15.)
11
The D’Oench doctrine is a federal common law form of estoppel that “prohibits
bank borrowers and others from relying upon secret pacts or unrecorded side
agreements to diminish the FDIC’s interest in an asset [. . .]” Vasapolli v.
Rostoff, 39 F.3d 27, 33 (1st Cir. 1994); see D’Oench, Duhme & Co. v. FDIC, 315
U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). The D’Oench doctrine has been
codified in 12 U.S.C. sections 1823(e) and 1821(d)(9)(A), and the FDIC plans on
raising a defense premised on those statutes as well. (Docket No. 10 at pp. 1314.); Bolduc v. Beal Bank, SSB, 167 F.3d 667, 673 (1st Cir. 1999).
Civil No. 16-2568 (FAB)
13
The state law exception in 12 U.S.C. section
1819(b)(2)(D) (“section 1819”) sets forth a three pronged test:
(i)
To which the Corporation, in the Corporation’s
capacity as receiver of a State insured
depository
institution
by
the
exclusive
appointment by State authorities, is a party
other than as a plaintiff
(ii)
Which involves only the preclosing rights
against
the
State
insured
depository
institution,
or
obligations
owing
to,
depositors, creditors, or stockholders by the
State insured depository institution; and
(iii)
In which only the interpretation of the law of
such State is necessary.
No litigant disputes that the first two prongs
are satisfied.
(Docket Nos. 7 at p. 3; 10 at p. 10.)
The First
Circuit Court of Appeals examined the third prong in Capizzi v.
Fed. Deposit Ins. Corp.
The Capizzi court emphatically ruled that
the third prong is negated when the FDIC plans to assert federal
defenses, specifically the D’Oench defense.
See Capizzi v. Fed.
Ins. Corp., 937 F.2d 8, 10 (1st Cir. 1991) (“In our view, however,
the language here at issue does not instruct the court to look
only to the complaint.
Rather, it intends the courts to consider
the case as a whole — complaint and likely defenses as well.”)
(emphasis added).
Because the FDIC will purportedly raise several
federal defenses, the state law exception is inapposite.
(Docket
No. 10 at pp. 12-15); see Capizzi, 937 F.2d 8, 10-11; Roman-Lanzo
Civil No. 16-2568 (FAB)
14
v. Guzman, Civil No. 15-2309, slip op. at 1 (D.P.R June 23, 2016)
(Delgado-Hernandez, J.)
b.
Waiver
Vistas argues that the FDIC waived removal by
providing Vistas with the disallowance letter.
(Docket No. 7 at
p. 8); see supra p. 2. Vistas further argues that the FDIC
manifested an intent to waive removal by neglecting to litigate in
state court. 12
(Docket No. 1 at p. 11.)
The FDIC counters that
by not litigating in the state court, the FDIC manifested a desire
to exercise its right to removal.
(Docket No. 10 at p. 20.)
Moreover, the FDIC contends that the disallowance letter merely
informed Vistas that it was free to continue its action in state
court.
(Docket No. 10 at p. 22.)
A party may waive removal to federal court by
litigating in the state court in such a manner that “invoke[s] the
jurisdiction
of
the
state
court”
or
engages
in
actions
that
“manifest the defendant’s intent to have the case adjudicated in
12 Vistas also vaguely references an “estoppel” argument.
(Docket No. 7 at
p. 11.) Even if the doctrine of estoppel pertains to this case, the Court will
not consider it — Vistas merely mentions the term “estoppel” in passing, setting
forth no legal argument as to why estoppel bars removal. (Docket No. 7 at p.
11) (“[The FDIC’s inaction] is a waiver of its right of removal in and of itself
or estoppel and is also consistent with its original waiver [. . .]”); see U.S.
v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (“[I]ssues adverted to in a
perfunctory manner, unaccompanied by some effort at developed argumentation,
are deemed waived.”).
Civil No. 16-2568 (FAB)
state court.”
15
Hernandez-Lopez v. Com. Of Puerto Rico, 30 F. Supp.
2d 205, 209 (D.P.R. 1998) (Perez-Giminez, J.). A waiver of removal
may take multiple forms.
Montanez v. Solstar Corp., 46 F. Supp.
2d 101, 105 (D.P.R. 1999) (Dominguez, J.).
A waiver, however,
must be “clear and unequivocal” and the parties’ actions must be
inconsistent with the right to remove.
Supp. 2d at 209.
removal:
Hernandez-Lopez, 30 F.
The following actions have failed to waive
filing a motion for extension of time, Malave v. Sun
Life Assur. Co. of Canada, 392 F. Supp. 51, 52 (D.P.R 1975)
(Pesquera, J.), answering a complaint, Montanez, 46 F. Supp. 2d at
105, and submitting an answer, motion, memorandum, an order to
show cause, and an interrogatory, Hernandez-Lopez, 30 F. Supp. 2d
at 209.
Here, the FDIC sent an administrative letter
and refrained from litigating in the state court proceeding until
filing the motion to remove.
Declining to appear in state court
does not constitute a waiver of removal.
Furthermore, as noted by
the FDIC, precedent cited by Vistas supports the FDIC’s argument
and undermines Vistas’ assertions.
See, e.g., Tedford v. Warner-
Lambert Co., 327 F.3d 423, 428-29 (5th Cir. 2003) (“[T]he right to
removal is not lost by participating in state court proceedings
short of seeking an adjudication on the merits.”); Mancari v. AC
Civil No. 16-2568 (FAB)
16
& S Co., 683 F. Supp. 91, 94 (D. Del. 1988) (“In almost all of the
cases where waiver has been found, the courts have concluded that
the defendant manifested an intention to remain in state court by
either
asserting
its
rights
affirmative action [. . .]”).
in
the
court
or
by
some
other
The Court is satisfied that the
FDIC maintained its right to removal.
c.
Timeliness
Vistas’
final
argument
challenges
removal
because, according to Vistas, the FDIC’s motion was untimely.
Specifically, Vistas argues that the 90-day limitations period to
file for removal pursuant to section 1819 began when the FDIC
became the receiver — one year and seven months before removal to
this Court.
(Docket No. 7 at p. 11.)
The FDIC counters that the
90-day period began on September 1, 2016, the same day the FDIC
filed for removal.
(Docket No. 10 at p. 19.)
In this district, “[i]t is not entirely clear
. . . if the ninety-day removal clock should [start] running when
the FDIC [is] appointed as a receiver, or . . . substituted as a
party.”
See La Fosse v. Fed. Deposit Ins. Corp. for Doral Bank,
Civil No. 15-2427, 2016 WL 8674487, slip op. at 2 (D.P.R. Apr. 29,
2016) (Garcia-Gregory, J.) (holding that removal was time barred
whether
tolling
of
the
limitations
period
commenced
on
the
Civil No. 16-2568 (FAB)
17
receivership date or substitution date).
The First Circuit Court
of Appeals ruled previously that tolling begins when the FDIC
becomes receiver of a failed bank.
Woburn Five Cents Sav. Bank v.
Robert M. Hicks, Inc., 960 F.2d 965, 971 (1st Cir. 1991).
Tolling
the period when the FDIC becomes receiver is consistent with the
liberal philosophy of the Federal Rules of Civil Procedure and
prevents the FDIC from engaging in “tactical removals.”
960 F.2d at 969-71.
Woburn,
Statutory amendments occurring after the
Woburn decision, however, indicate that the limitations period
commences when the FDIC enters the litigation, not when the FDIC
becomes receiver.
In
1991,
the
year
Woburn
was
published,
section 1819 lacked a limitations period for removal.
Courts
instead relied on 28 U.S.C. section 1446(b) (“section 1446”). 13
Id. at 968.
The relevant statute in this action, section 1819,
has since been amended to include its own 90-day limitations
period:
“Except as provided in subparagraph (D), 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,
13
At the time, the controlling language was located in section 1446(b). Section
1446(b) has been amended 3 times (October 1996, November 2011, December 2011).
The language now resides in 12 U.S.C. section 1446(b)(3), but remains the same.
Civil No. 16-2568 (FAB)
18
or proceeding is filed against the Corporation
or the Corporation is substituted as a party.”
12 U.S.C. § 1819(b)(2)(B) (emphasis added); see Buczkowski v.
F.D.I.C., 415 F.3d 594, 596 (7th Cir. 2005).
The First Circuit
Court of Appeals has not addressed the limitations period to
removal pursuant to the amended section 1819.
In FDIC v. Keating,
however, the First Circuit Court of Appeals evaluated removal
pursuant to section 1819.
Cir. 1993).
FDIC v. Keating, 12 F.3d 314, 315 (1st
In that case, the FDIC filed a motion for removal
eighty-nine days after substituting as a party and roughly 105
days after being appointed receiver.
Keating, 12 F.3d at 315;
FDIC v. Keating, 812 F. Supp. 8, 9 (D. Mass 1993).
Keating was held to be “timely.”
The removal in
12 F.3d at 315.
The language of section 1819(b)(2)(B) states
unambiguously
that
the
limitations
period
begins
when
“the
Corporation is substituted as a party.” 12 U.S.C. § 1819(b)(2)(B).
As the FDIC notes, every circuit court examining the 90-day period
set forth in section 1819 interpreted the limitations period to
begin when the FDIC is substituted as a party.
See, e.g., F.D.I.C.
v. N. Savannah Props., LLC, 686 F.3d 1254, 1259 (11th Cir. 2012)
(“[B]eing appointed as receiver is not the same thing as being
substituted as a party [. . .] [a party must] take some affirmative
action beyond its appointment as receiver (such as filing a notice
Civil No. 16-2568 (FAB)
19
of substitution) in order to be ‘substituted as a party.’”);
Buczkowski, 415 F.3d at 596 (“Substitution ‘as a party’ must mean
‘as a party to the litigation.’
Reading this language to mean
‘substituted as the failed bank’s receiver’ would turn the word
‘party’ into mush”); Dalton v. FDIC, 987 F.2d 1216, 1221 (5th Cir.
1993) (“Most cases concerning removal by the FDIC [. . .] involve
the question whether the FDIC’s time to remove began to run when
it became receiver or when it was substituted as a party [. . .]
We have held that the time for removal begins to run “from the
date the FDIC ‘is substituted as a party’”).
The Court is
persuaded that the language of section 1819 indicates that the
limitations period is triggered by the FDIC’s substitution, not by
the FDIC’s receivership.
Vistas urges the Court to ignore the statutory
text, and instead apply Woburn, noting that this precedent has not
been explicitly overturned.
Woburn,
however,
is
(Docket No. 7 at pp. 12 and 17.)
distinguishable
from
this
case.
See
Buczkowski, 415 F.3d at 596 (“[T]here is no conflict — not, at
least, at the appellate level.
1991,
before
the
amendment
Woburn [. . .] [was] decided in
that
gave
§
1819(b)
its
current
Civil No. 16-2568 (FAB)
text.”). 14
20
In Woburn, the First Circuit Court of Appeals examined
28 U.S.C. § 1446(b), not the significantly different language found
in
12
U.S.C.
§
1819(b)(2)(B). 15
Additionally,
this
Court
emphasizes that in Woburn the First Circuit Court of Appeals stated
that
while
the
Financial
Institutions
Reform,
Recovery,
and
Enforcement Act of 1989 provided an alternative means of removing
a case to the Resolution Trust Corporation, 28 U.S.C. § 1446(b)
still governed removal of FDIC cases.
Woburn, 930 F.2d at 968.
The First Circuit Court of Appeals explained that “Congress could
have drafted a similar provision for the FDIC if it wished similar
treatment
for
that
entity.”
Id.
Congress
has
provided
an
alternative removal provision for the FDIC in the interim, thus,
Woburn is inapplicable to this case. Although Vistas argues that
section 1819 permits the FDIC to engage in practices contrary to
the policy considerations in Woburn, Congress authorized the FDIC
to engage in such practices.
See F.D.I.C v. Loyd, 955 F.2d 316,
14
In Buczkowski, a district court, relying heavily on the policy considerations
discussed in Woburn, began the section 1819(b)(2)(B) time period when the FDIC
was appointed receiver. Buczkowski, 415 F.3d at 595. The Seventh Circuit Court
of Appeals reversed, finding Woburn inapplicable and noting that because
Congress amended section 1819(b)(2)(B), the FDIC need no longer “play by the
normal rules.” Id. at 596.
15
Compare 28 U.S.C. section 1446(b)(3) (“a notice of removal may be filed within
30 days after receipt by the defendant [. . .] from which it may first be
ascertained that the case is one which is or has become removable.”) with 12 §
U.S.C. 1819(b)(2)(B) (“the Corporation may [. . .] remove any action [. . .]
before the end of the 90-day period beginning on the date [. . .] the Corporation
is substituted as a party.”) (emphasis added)
Civil No. 16-2568 (FAB)
21
328 (5th Cir. 1992) (noting the concerns presented in Woburn but
stating “[the substitution approach is] a more practical means to
accomplish
the
tasks
Congress
has
set
for
the
FDIC.”);
see
generally In re Rudler, 576 F.3d 37, 50 (1st Cir. 2009) (“[the
court] cannot
rewrite
the
statute
simply
because
we
think
a
different method [. . .] would be more effective.”)
Because
the
state
law
exception
is
inapplicable, the FDIC did not waive removal, and the FDIC timely
filed the motion to remove, the Court has no basis to remand this
action.
Accordingly, Vistas motion to remand is DENIED.
III. CONCLUSION
Bautista’s motion to alter or amend the August Order is DENIED
WITH PREJUDICE.
Vistas motion to remand is DENIED WITH PREJUDICE.
IT IS SO ORDERED.
San Juan, Puerto Rico, July 18, 2017.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE
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