Federal Deposit Insurance Corporation as Receiver for Doral Bank v. MAPFRE PRAICO Insurance Company of Puerto Rico et al
Filing
109
OPINION AND ORDER re 88 Motion in Compliance, re 89 Motion for Reconsideration re 84 Opinion and Order. The FDIC-R'S motion for reconsideration is DENIED, (Docket No. 89), and its motion for substitution (Docket No. 88) is referred to the arbitration panel. Judgment shall be entered accordingly. Signed by Senior Judge Francisco A. Besosa on 10/31/2022. (brc)
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 1 of 16
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
FEDERAL
DEPOSIT
INSURANCE
CORPORATION, AS RECEIVER FOR
DORAL BANK
Plaintiff/CounterDefendant
v.
Civil No. 18-1107 (FAB)
MAPFRE PRAICO INSURANCE COMPANY
OF PUERTO RICO;
CONSTRUCTORA JAPIMEL, INC.,
Defendants/CounterClaimants
MAPFRE PRAICO INSURANCE COMPANY
OF PUERTO RICO
Third—Party Plaintiff
v.
ECHANDI GUZMÁN & ASSOCIATES,
INC.; EFRAÍN ECHANDI-OTERO; ACE
INSURANCE COMPANY,
Third—Party Defendants
OPINION AND ORDER
BESOSA, District Judge.
Before
the
Court
is
Plaintiff/Counter-Defendant
Federal
Deposit Insurance Corporation, as receiver for Doral Bank (“FDICR”)’s motion for reconsideration pursuant to Federal Rule of Civil
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 2 of 16
Civil No. 18-1107 (FAB)
2
Procedure 59(e), (Docket No. 89), and the FDIC-R’s motion in
compliance with the Court’s July 20, 2022 order.
For
the
reasons
set
forth
below,
the
(Docket No. 88.)
FDIC-R’s
motion
for
reconsideration is DENIED and its motion in compliance, which the
Court construes as a motion for substitution, is referred to the
arbitration panel.
I.
Background
The Court will assume familiarity with the facts of this case,
apart from recounting some relevant details that will put its
decision in context.
Doral Bank (“Doral”) financed the building
of a housing project in Carolina, Puerto Rico, to be built by
contractor Constructora Japimel, Inc. (“Japimel”), whose work was
guaranteed
with
performance
bonds
by
Company of Puerto Rico (“Mapfre”).
various
reasons
the
Praico
Insurance
(Docket No. 1 at p. 1.)
construction
eventually fell apart.
Mapfre
stalled,
and
the
For
project
(Docket Nos. 12-1 at pp. 3—4 and 12-4 at
pp. 14—16.)
On
October
2,
2009,
after
assuming
the
rights
to
the
construction contract, 1 Doral sued Mapfre and Japimel in the Court
of
First
No. 12-1.)
Instance
of
Puerto
Rico
(“state
court”).
(Docket
Japimel counterclaimed, alleging breach of contract.
There were two contracts executed for the construction project between Japimel
and the original developer, Pórticos del Sol.
Docket No. 1 at p. 1.
For
simplicity’s sake, the Court will refer to these as “the construction contract.”
1
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 3 of 16
Civil No. 18-1107 (FAB)
(Docket No. 12-4.)
3
On February 9, 2012, the state court referred
the breach of contract claim to arbitration based on an arbitration
clause in the construction contract and stayed the state court
proceedings.
(Docket No. 11-1.)
On February 27, 2015, while the arbitration was on-going, the
Office
of
the
Commissioner
of
Financial
Institutions
of
the
Commonwealth of Puerto Rico closed Doral and appointed the FDIC as
receiver for the failed bank.
(Docket No. 1 at p. 2.)
On June 4,
2015, Japimel submitted its claims to the FDIC-R in compliance
with the required administrative claims process of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, Pub. L.
No. 101-73, 103 Stat. 183 (“FIRREA”).
(Docket No. 7 at p. 4.)
What followed next was a prolonged litigation over who should
be substituted as the plaintiff in the arbitration and the state
court case.
On June 15, 2015, Bautista REO PR Corp. (“Bautista”)
moved to substitute Doral in the arbitration proceeding, stating
it had a “bill of sale” with the FDIC-R by which it had acquired
the credit facilities between Doral and the project developer.
(Docket No. 11-3.)
Bautista then filed a motion to substitute
Doral before the state court on June 23, 2015.
(Docket No. 12-7.)
Japimel opposed the substitution of Bautista in both the
arbitration and the state court unless Bautista was ordered to
disclose
the
terms
of
the
bill
of
sale,
based
on
Japimel’s
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 4 of 16
Civil No. 18-1107 (FAB)
4
intention to exercise its litigious redemption right pursuant to
Puerto Rico law.
(Docket No. 30-1; Docket No. 30-5.)
The
arbitration panel held that the state court was the proper forum
to determine the substitution.
(Docket No. 91-2.)
The state
court, however, on November 23, 2015, analyzed the construction
contract
and
Puerto
Rico
law
and
determined
that
it
lacked
jurisdiction to grant Bautista’s substitution request because the
broad
arbitration
clause
required
all
construction contract to be arbitrated.
p. 6-8.)
issues
related
to
the
(Docket No. 12-8 at
The court noted that it had already dismissed the case
without prejudice after referring it to arbitration.
Id. at
pp. 7-8.
On
December
2,
2015,
the
FDIC-R
disallowed
Japimel’s
administrative claim, stating that the claim was “[n]ot proven to
the satisfaction of the FDIC as Receiver for Doral Bank” and that
“[t]he liability or obligation, if any, related to your claim has
been assumed by:
No. 7-2.)
Bautista Finance Holdings . . .”
(Docket
Japimel did not seek an administrative appeal of the
disallowance but proceeded with the arbitration, filing a “motion
in compliance with order” on December 11, 2015 in response to the
arbitration panel’s prior order to inform it of the state of the
substitution proceedings before the state court.
p. 5.)
(Docket No. 8 at
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Civil No. 18-1107 (FAB)
5
On February 9, 2016, Bautista again requested substitution
from the arbitration panel, notifying it of the state court’s
decision that it had no jurisdiction to decide the substitution.
(Docket No. 30-6 at p. 19—22.)
The panel ordered Bautista to
provide information about its purchase of loans from the FDIC.
Id. at pp. 77—78.
Bautista moved the panel to reconsider its
decision on September 30, 2016, (id. at pp. 80—88), and then turned
to the state court for an injunction against the arbitration
panel’s order.
Id. at p. 1—2.
The state court denied the request
on August 7, 2017, stating that because Bautista was not a party
to the state court proceedings, the court had no jurisdiction to
address its request.
(Docket No. 30-8 at p. 3.)
Bautista asked
the state court to reconsider its decision, (Docket No. 30-9),
which the court denied.
(Docket No. 30-11.)
Bautista does not appear to have taken any further action to
substitute itself, and the failed bank Doral remained the plaintiff
in the arbitration and state court proceeding until February 23,
2018, when the FDIC-R filed a notice of substitution in the state
court.
(Docket No. 12-17.)
After removing to federal court, the
FDIC-R filed a motion to dismiss based on Japimel’s alleged noncompliance
No. 7.)
with
the
administrative
claims
process.
(Docket
The FDIC-R argued that Japimel had not complied with
FIRREA’s requirement to ‘continue’ a previously filed action, or
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 6 of 16
Civil No. 18-1107 (FAB)
6
file a new case in the district court, within 60 days of the FDICR’s notice of disallowance.
holding
that
Japimel’s
Id.
motion
The Court denied this motion,
filed
in
the
arbitration
on
December 11, 2015 was sufficient because an arbitration could be
considered an ‘action’ pursuant to FIRREA and Japimel’s motion was
sufficiently affirmative.
(Docket No. 84.)
In its order, the
Court instructed the FDIC-R to advise it on how the case should
proceed, and specifically whether the case should be referred back
to the arbitration panel.
Id. at pp. 18—19.
The FDIC-R now moves the Court to reconsider its denial of
the motion to dismiss, (Docket No. 89), and states to the Court
that the proper next move is to substitute Bautista as plaintiff.
(Docket No. 88.)
Coming back to the heart of the dispute that led
to years of litigation in the arbitration and state court, Japimel
states that it does not oppose substitution of Bautista per se,
but that Bautista must be ordered to disclose the information
necessary for Japimel to exercise the redemption of the litigious
credit pursuant to Puerto Rico law.
(Docket No. 94 at pp. 1—2.)
The FDIC-R states that Japimel has misunderstood the requirements
of the litigious credit process and does not need the specific
price in order to assert a timely redemption claim. (Docket No. 98
at pp. 7—8.)
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 7 of 16
Civil No. 18-1107 (FAB)
The
Court
will
7
first
address
the
FDIC-R’s
motion
for
reconsideration, (Docket No. 89), and then the FIDC-R’s motion in
compliance
with
its
order,
(Docket
No.
88),
which
the
Court
construes as a motion for substitution.
II.
Motion for Reconsideration
A.
Applicable Law
The
specifically
Federal
Rules
provide
for
reconsideration.”
of
the
Civil
filing
Procedure
of
“do
motions
not
for
Sánchez-Pérez v. Sánchez-González, 717 F. Supp.
2d 187, 193-94 (D.P.R. 2010) (Besosa, J.) (citation omitted).
“[I]t is settled in this circuit[, however,] that a motion which
ask[s] the court to modify its earlier disposition of a case
because of an allegedly erroneous legal result is brought under
Fed. R. Civ. P. 59(e).”
Appeal of Sun Pipe Line Co., 831 F.2d 22,
24 (1st Cir. 1987).
Pursuant to Federal Rule of Civil Procedure 59(e), a
district court will alter its original order only if it “evidenced
a manifest error of law, if there is newly discovered evidence, or
in certain other narrow situations.”
Biltcliffe v. CitiMortgage,
Inc., 772 F.3d 925, 930 (1st Cir. 2014) (quoting Global Naps, Inc.
v. Verizon New England, Inc., 489 F.3d 13, 25 (1st Cir. 2007)).
“Likewise, a motion for reconsideration should be granted if the
court ‘has patently misunderstood a party . . . or has made an
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 8 of 16
Civil No. 18-1107 (FAB)
8
error not of reasoning but apprehension.’”
Ruiz Rivera v. Pfizer
Pharm., LLC, 521 F.3d 76, 82 (1st Cir. 2008) (quoting Sandoval
Díaz v. Sandoval Orozco, 2005 WL 1501672, at *2 (D.P.R. June 24,
2005)) (Gelpí, J.). A motion for reconsideration does “not provide
a vehicle for a party to undo its own procedural failures [or]
allow a party [to] advance arguments that could and should have
been presented to the district court prior to judgment.”
Iverson
v. City of Bos., 452 F.3d 94, 104 (1st Cir. 2006) (citation
omitted).
“Rule 59(e) does not exist to allow parties a second
chance to prevail on the merits . . . [and] is not an avenue for
litigants to reassert arguments and theories that were previously
rejected by the Court.”
Johnson & Johnson Int’l v. P.R. Hosp.
Supply, Inc., 322 F.R.D. 439, 441 (D.P.R. 2017) (Besosa, J.)
(citations omitted).
In deciding a motion for reconsideration, the reviewing
court has considerable discretion.
Venegas-Hernández v. Sonolux
Records, 370 F.3d 183, 190 (1st Cir. 2004).
“As a general rule,
motions for reconsideration should only be exceptionally granted.”
Villanueva-Méndez v. Nieves Vázquez, 360 F. Supp. 2d 320, 323
(D.P.R. 2005) (Domínguez, J.).
B.
Discussion
The FDIC-R argues that the Court’s order misstated the
FDIC-R’s argument about the proper forum for Japimel to ‘continue
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 9 of 16
Civil No. 18-1107 (FAB)
9
the action,’ and that the Court did not address relevant authority
cited by the FDIC-R.
(Docket No. 89 at pp. 4—6.)
Japimel argues
that the decisions of the state court made it clear that the
arbitration
was
the
correct
venue
in
which
to
‘continue
the
action,’ and that the authority pointed to by the FDIC-R is
distinguishable.
i.
(Docket No. 95 at pp. 4—7.)
Misapprehension of FDIC-R’s Argument That the Case
Should Be Continued in State Court
At issue in the motion to dismiss was whether
Japimel complied with FIRREA’s obligation either to “file suit on
such claim (or continue an action commenced before the appointment
of the receiver) . . . .” within 60 days of the notice of
disallowance.
See Docket No. 7; 12 U.S.C. § 1821(d)(6)(A).
The
FDIC-R argued in its motion to dismiss that Japimel’s filing of a
motion in the arbitration proceeding could not be considered
“continu[ing] an action” based on the plain meaning of the statute,
the
context
of
FIRREA
legislative intent.
as
a
statutory
whole,
(Docket No. 7 at pp. 9—16.)
and
from
its
The Court’s order
held that an arbitration could be considered an “action” within
the meaning of FIRREA based on the policy reasons for the statute
and persuasive First Circuit Court of Appeals precedent.
No. 84 at pp. 12—17.)
(Docket
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Civil No. 18-1107 (FAB)
10
The FDIC-R now argues that the Court misunderstood
the FDIC-R’s argument, because the Court stated in its order that
requiring a party to file a new case in the district court when
there is an arbitration on-going does not serve the policy goals
of FIRREA.
(Docket No. 89 at p. 3.)
The FDIC-R argues that its
argument was that Japimel was always required to file its motion
in the state court proceeding, not file a new case in district
court.
Id. at p. 4.
The
mischaracterized
Court
the
disagrees
FDIC-R’s
that
argument.
its
First,
analysis
the
Court
addressed and rejected the FDIC-R’s argument that an arbitration
could not be considered an ‘action’ within the meaning of the
statute.
(Docket No. 84 at pp. 12—17.)
Once the Court had decided
that question, it had determined the dispositive question of law.
Nonetheless, the Court did proceed to explain why filing a motion
in the arbitration over the state court served the policy goals of
the statute, namely that, “[c]onsidering that the Court of First
Instance in this case compelled the parties to arbitrate based on
their
contract
and
denied
Bautista’s
motion
for
substitution
stating it had no jurisdiction to rule on the case, the Court is
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Civil No. 18-1107 (FAB)
11
at a loss to see why Japimel was wrong to file motions in the
arbitration following the FDIC-R’s denial.”
Id. at pp. 16—17. 2
The Court therefore denies the FDIC-R’s motion for
reconsideration on the ground that it misunderstood the FDIC—R’s
argument.
ii.
The Sufficiency of Japimel’s Motion and Whether a
Motion to Renew was Required
In the FDIC-R’s motion to dismiss, it explained
that courts in this district interpret ‘continu[ing] an action’ as
requiring “an affirmative act,” and noted that that conclusion
stems from a district court case in Florida, First Union Nat. Bank
of Fla. v. Royal Tr. Tower, Ltd., 827 F. Supp. 1564, 1567–68 (S.D.
Fla. 1993).
(Docket No. 7 at pp. 16—17.)
The FDIC-R explained
that that case traced the legislative history and similar sections
of FIRREA and found they suggested that Congress saw a motion to
renew as the means of ‘continuing’ a previously filed action.
at p. 17.
Id.
The FDIC-R argues in its motion to reconsider that the
Court failed to address this interpretation of the words ‘continue
2
The FDIC-R states in its motion for reconsideration that “the State Court case
was reopened on multiple occasions to adjudicate numerous issues that the
arbitration panel could not determine such as Bautista’s substitution request,
the injunction requested by Bautista, and the redemption claim by Japimel.”
(Docket No. 89 at p. 4.) This stretches the meaning of the word “adjudicate”
beyond its capacity when in each of those instances the state court in fact
rejected that it had the power to decide those issues. See Docket Nos. 12-8
and 12-13.
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 12 of 16
Civil No. 18-1107 (FAB)
12
an action,’ that is, as requiring a motion to renew.
(Docket
No. 89 at p. 6.)
The Court finds nothing in Royal Tr. Tower that
suggests it made a manifest error of law.
Contrary to what the
FDIC-R states, the conclusion of the Royal Tr. Tower court was not
that a motion to renew is always required, but to “hold[] that 12
U.S.C. § 1821(d)(6)(B) requires some timely, formal affirmative
action ‘to continue’ a claim filed before FDIC receivership.”
Royal Tr. Tower, Ltd., 827 F. Supp. at 1568.
See
The Royal Tr. Tower
court never went so far as to say a motion to renew was the only
means to continue an action, stating only that the construction of
the statute “indicate[s] that Congress likened ‘continuing’ with
‘moving to renew’ a previously filed suit.”
Id. at 1567—68.
The
Royal Tr. Tower court clarified that the minimum required of a
claimant to ‘continue an action’ is taking some affirmative action.
See id. at 1567 (“[E]ven if continuing the litigation does not
require
a
affirmative
‘motion
to
action,
meaningless.”).
renew,’
or
it
the
must
require
statutory
least
some
requirement
is
Requiring some affirmative action is the standard
that the Court cited and applied in its opinion.
at p. 17.
at
See Docket No. 84
The Court therefore denies the FDIC-R’s motion for
reconsideration on the ground that it made a manifest error of
law.
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Civil No. 18-1107 (FAB)
13
III. Substitution of Bautista
After denying the FDIC-R’s motion to dismiss, the Court
instructed the parties to brief it on how to proceed with the case,
and whether the case should be referred to the arbitration panel.
(Docket No. 84 at p. 17—18.)
The FDIC-R states the proper next
step is substitution of Bautista as plaintiff.
(Docket No. 88 at
p. 1.) Japimel does not oppose substitution on certain conditions,
but notes that the state court’s resolution of November 23, 2015
already analyzed the prior substitution request of Bautista for
Doral, and held that it did not have jurisdiction to address the
request.
(Docket No. 94 at p. 1—3.)
The state court held that
the decision to substitute instead must be made by the arbitration
panel.
Id.
The FDIC-R argues that the Court can decide the issue
of substitution because caselaw states that even while a case is
stayed, courts retain jurisdiction over collateral matters that do
not go to the merits of the case, and substitution is one such
collateral matter.
(Docket No. 98 at p. 2—3.)
The FDIC-R became the plaintiff following substitution, but
steps into the shoes of Doral, the prior plaintiff.
See O'Melveny
& Myers v. F.D.I.C., 512 U.S. 79, 86–87 (1994); see also Fed.
Deposit Ins. Corp. v. Ernst & Young LLP, 374 F.3d 579, 581 (7th
Cir. 2004) (“FDIC-Receiver steps into the shoes of the failed bank
and is bound by the rules that the bank itself would encounter in
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Civil No. 18-1107 (FAB)
14
litigation.”) (citing O’Melveny, 512 U.S. 79).
The state court
found it did not have jurisdiction to decide the substitution issue
because
the
construction
contract
required
arbitration
of
“anything relative to the construction contracts[,]” and that the
issue of substitution “is not connected with the lawsuit originally
brought before this Court.”
(Docket No. 12-8 at p. 7—8.)
Under the law of the case doctrine, “unless corrected by an
appellate tribunal, a legal decision made at one stage of a civil
or criminal case constitutes the law of the case throughout the
pendency of the litigation.”
Ellis v. United States, 313 F.3d
636, 646 (1st Cir. 2002) (quoting Flibotte v. Pa. Truck Lines,
Inc., 131 F.3d 21, 25 (1st Cir. 1997)).
“This means that a court
ordinarily ought to respect and follow its own rulings, made
earlier in the same case.”
U.S. 605, 618 (1983)).
Id. (citing Arizona v. California, 460
The decision should only be reconsidered
if the initial ruling was made on an inadequate record, was
designed to be preliminary or tentative, there has been a material
change in controlling law, if newly discovered evidence bears on
the question, or to avoid manifest injustice, which is something
beyond just an erroneous ruling.
Id. at 647—48.
Applying these factors, there is no indication that the prior
ruling by the state court should be disrupted.
See id.
The state
court made its determination after analyzing the construction
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Civil No. 18-1107 (FAB)
15
contract and Puerto Rico law.
(Docket No. 12-8.)
The decision
was not a preliminary ruling; in fact, the state court considered
a second request from Bautista regarding the substitution question
and refused to deviate from its initial decision.
8 at p. 3.)
(Docket No. 30-
There has been no material change in the law since
the time of the state court’s decision, or new evidence.
Ellis, 313 F.3d at 646.
Court
re-visit
the
See
While the parties may prefer that this
substitution
question
in
light
of
the
significant stand-still they appear to have reached, that does not
make the current situation a manifest injustice.
See id. at 648
(“Th[e] standard [for manifest injustice] is difficult to achieve:
a finding of manifest injustice requires a definite and firm
conviction that a prior ruling on a material matter is unreasonable
or obviously wrong.”)
Because there is no factor pointing to deviating from the
decision of the state court on the substitution of Bautista, the
Court applies the law of the case and holds that it is without
jurisdiction to determine the substitution.
Docket No. 12—8.
The FDIC-R is thus referred to the arbitration
panel to make its substitution motion.
IV.
See id. at 647—48;
See 9 U.S.C. § 3.
Conclusion
For the reasons set forth above, the FDIC-R’S motion for
reconsideration is DENIED, (Docket No. 89), and its motion for
Case 3:18-cv-01107-FAB Document 109 Filed 10/31/22 Page 16 of 16
Civil No. 18-1107 (FAB)
substitution
is
referred
16
to
the
arbitration
panel.
(Docket
No. 88.)
Judgment shall be entered accordingly.
IT IS SO ORDERED.
San Juan, Puerto Rico, October 31, 2022.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
SENIOR UNITED STATES DISTRICT JUDGE
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