First Citizens Bank and Trust Company Inc v. Spirakis

Filing 29

ORDER granting 22 Motion to Dismiss Third-Party Complaint. It is further ordered that the remaining claims be remanded to the South Carolina Court of Common Pleas for Horry County. Signed by Honorable R Bryan Harwell on 5/30/2012.(hcic, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
FLORENCE DIVISION
FIRST CITIZENS BANK AND
TRUST COMPANY, INC.,

)
)
)
Plaintiff,
)
)
v.
)
)
GEORGE N. SPIRAKIS,
)
)
Defendant/Third-Party
)
Plaintiff,
)
)
UNITED STATES DEPARTMENT )
OF THE TREASURY and THE
)
BOARD OF GOVERNORS OF
)
THE FEDERAL RESERVE
)
SYSTEM a/k/a FEDERAL
)
RESERVE BOARD,
)
)
Third-Party Defendants.
)
)

Civil Action No.: 4:11-cv-02895-RBH

ORDER

This matter is before the Court after the third-party defendants, the United States
Department of the Treasury and the Board of Governors of the Federal Reserve System (“the
Board”), filed their motion to dismiss Defendant George N. Spirakis’s third-party complaint. After
reviewing the third-party defendants’ and Spirakis’s briefs, the Court dispenses with oral
arguments1 and grants the third-party defendants’ motion to dismiss the third-party complaint.
Factual Background and Procedural History
Plaintiff First Citizens Bank and Trust Company, Inc. filed the underlying foreclosure action
against Spirakis in the South Carolina Court of Common Pleas in Horry County. Compl., ECF No.

1

Under Local Civil Rule 7.08 (D.S.C.), “hearings on motions may be ordered by the Court in its
discretion. Unless so ordered, motions may be determined without a hearing.” The Court finds a
hearing is not necessary.

1-2. Spirakis answered and filed a third-party complaint against the third-party defendants. Third
Party Compl., ECF No. 1-1.

Spirakis’s third-party complaint alleged violations of his equal

protection and due process rights by, as well as negligence of, the third-party defendants. Pursuant
to 28 U.S.C. §§ 1331, 1346(b)(1) and 1442(a)(1), all claims were removed to the Court by the thirdparty defendants, who, in turn, filed this motion to dismiss under the Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6). Notice of Removal, ECF No. 1.
In his third-party complaint, Spirakis seeks only damages, both actual and punitive, for the
third-party defendants’ failure to provide him with financial assistance under the federal Troubled
Asset Relief Program (“TARP”) established by the Emergency Economic Stabilization Act of 2008
(“the EESA”). Third Party Compl. ¶¶ 88-103, ECF No. 1-1. Specifically, he alleges that the thirdparty defendants “failed to ensure that banks using TARP funds would then use the same funds to
loan to borrowers” and, by not giving him the opportunity to participate in TARP, discriminated
against him when they distributed the funds to banks, which, as corporations, are legal persons.
Third Party Compl. ¶¶ 89-95. Spirakis also alleges that the third-party defendants’ failure to ensure
that participating banks actively loaned TARP funds rose to the level of negligence, which caused
him harm when First Citizens declined to loan him additional money. Third Party Compl. ¶¶ 98102.
In their motion to dismiss, the third-party defendants raise multiple grounds for dismissal.
First, they argue Spirakis lacks Article III standing to bring both his constitutional and negligence
claims. Mot. to Dismiss 7-12, ECF No. 22. Second, they contend this Court lacks jurisdiction to
grant Spirakis the relief he requests for his constitutional claims because money damages are not
authorized for constitutional violations arising from actions pursuant to EESA. Mot. 12-13. Third,
they argue this Court lacks jurisdiction over Spirakis’s negligence claim because he failed to

2

exhaust his administrative remedies under the Federal Tort Claims Act (“FTCA”). Mot. 14-15.
Finally, they contend Spirakis fails to state a proper equal protection claim upon which this Court
can grant relief, asserting a rational basis to distinguish consumers like Spirakis from financial
institutions. Mot. 15-18.
Jurisdiction
Federal courts are courts of limited jurisdiction and may only decide “cases” and
“controversies” consistent with the United States Constitution and Congressional authorization.
U.S. Const. art. III, § 2; Barbour v. Int’l Union, 640 F.3d 599, 605 (4th Cir. 2011). Because of the
limited jurisdiction of federal courts, a party bringing a claim has the burden of overcoming a
presumption against jurisdiction. Barbour, 640 F.3d at 605. The failure to allege sufficient facts to
support the existence of jurisdiction, thus, requires dismissal. Fed. R. Civ. P. 12(b)(1); Adams v.
Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). Under Rule 12(b)(1), a plaintiff’s allegations are
assumed to be true; however, the Court can consider evidence beyond the pleadings if the factual
allegations of the complaint are called into question. Adams, 697 F.2d at 1219.
Courts must also be hesitant to decide cases on constitutional grounds if the case can be
decided on statutory or prudential grounds. Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 1112 (2004) (citing Ashwander v. TVA, 297 U.S. 288, 346 (1936)). Here, the third-party defendants
argue Spirakis lacks standing under the Constitution’s Article III, which limits judicial power only
to cases and controversies, to bring both his claims. They also contend, however, that the relief
Spirakis seeks is barred by statute—specifically Congress’s decision not to waive the United States’
sovereign immunity to be liable for damages.

Therefore, the Court addresses the third party

defendants’ statutory arguments first.

3

Equal Protection and Due Process Clause Violations
The third-party defendants contend Spirakis’s constitutional claims must be dismissed
because the Court lacks the jurisdiction to grant the relief he seeks. The EESA includes a provision
for judicial review of actions by the Secretary of the Treasury (“the Secretary”) pursuant to the
authority of the EESA. See 12 U.S.C. § 5229. It expressly provides for judicial review “subject to
chapter 7 of Title 5.” Id. Furthermore, the Act allows limited equitable relief, authorizing only
injunctions against the Secretary in certain circumstances. Id. For example, actions for injunctive
relief against the Secretary that challenge an agency action pursuant to 12 U.S.C. § 52192 may only
be issued to “remedy a violation of the Constitution.” Id.
Chapter 7 of the Administrative Procedure Act (“the APA”) governs the judicial review of
agency decisionmaking. 5 U.S.C. §§ 701-706. The APA provides a right of review to “[a] person
suffering legal wrong because of agency action, or aggrieved by agency action within the meaning
of a relevant statute.” 5 U.S.C. § 702. Moreover, the APA specifies the right of review arises in
actions “seeking relief other than money damages.” Id. The Supreme Court has interpreted this
language as a limited waiver of sovereign immunity barring “money damages” that are “intended to
provide a victim with monetary compensation for an injury to his person, property, or reputation.”
Bowen v. Massachusetts, 487 U.S. 879, 893-95 (1988).
Here, Spirakis seeks actual and punitive damages against the third-party defendants for their
alleged actions involving the distribution of TARP funds. Nowhere in the EESA or the APA is
there a provision permitting money damages for alleged injury caused by actions taken pursuant to
2

12 U.S.C. § 5219 requires the Secretary to coordinate with the Board, among other agencies, to
“implement a plan that seeks to maximize assistance for homeowners and use the authority of the
Secretary to encourage the servicers of . . . underlying mortgages . . . to take advantage of . . .
available programs to minimize foreclosures.” It also authorizes the Secretary to “use loan
guarantees and credit enhancements to facilitate loan modifications and prevent avoidable
foreclosures.” Id.
4

the EESA; in fact, § 5229 indicates that injunctive relief is the exclusive remedy for a constitutional
violation by the Secretary under the EESA. Spirakis does not seek injunctive relief against the
third-party defendants, and his request for damages is more similar to an action at law for damages.
Cf. Bowen, 487 U.S. at 893.

Indeed, Spirakis alleges he is “entitled to . . . damages to be

determined by a jury.” Third Party Compl. ¶ 96, ECF No. 1-1 (emphasis added).
Therefore, the plain language of the EESA, when read in conjunction with the APA,
indicates Congress did not waive its sovereign immunity with respect to money damage awards
arising from agency action pursuant to the EESA. Without the statutory authorization to award
money damages, the Court lacks jurisdiction to hear Spirakis’s claims for money damages based on
a claim that the third-party defendants violated his equal protection and due process rights. See, e.g.,
United States v. Jones, 225 F.3d 468, 469 (4th Cir. 2000) (“Sovereign immunity deprives a court of
jurisdiction.”).
Negligence
The third-party defendants argue Spirakis’s negligence claim falls squarely under the FTCA,
which required him to exhaust his administrative remedies. They contend that, because he failed to
exhaust his administrative remedies, the Court lacks jurisdiction over his negligence claim. Spirakis
does not address the third-party defendants’ argument in his response.
The FTCA provides a remedy for tort claims against the United States and its agencies “in
the same manner and to the same extent as a private individual under like circumstances.” 28
U.S.C. § 2674. However, “[a]n action shall not be instituted upon a claim against the United States
for money damages . . . unless the claimant shall have first presented the claim to the appropriate
Federal agency and his claim shall have been finally denied in writing.” 28 U.S.C. § 2675(a). An

5

agency’s failure to dispose of the claim within six months after filing is also sufficient to exhaust
administrative remedies. Id.
Here, Spirakis seeks damages arising from the alleged negligence of the third-party
defendants. Nowhere in his third-party complaint, however, does he allege that he first filed his
claim with the third-party defendants, both federal agencies, as required by the FTCA, and, again,
Spirakis does not address this argument in his response. The Court, therefore, finds it lacks
jurisdiction to hear Spirakis’s negligence claim against the third-party defendants. See McNeil v.
United States, 508 U.S. 106, 113 (1993) (“The FTCA bars claimants from bringing suit in federal
court until they have exhausted their administrative remedies.”); Perkins v. United States, 55 F.3d
910, 917 (4th Cir. 1995).
Conclusion
For the foregoing reasons, the third-party defendants’ motion to dismiss Spirkakis’s thirdparty complaint is GRANTED.
IT IS THEREFORE ORDERED that Spirakis’s claim of equal protection and due process
violations be DISMISSED with prejudice and his negligence claim be DISMISSED without
prejudice.3
The claims involving the third-party defendants having been fully disposed of, IT IS
FURTHER ORDERED that the remaining claims be REMANDED to the South Carolina Court

3

Because the Court finds it lacks jurisdiction to hear the claims against the third-party defendants, it
is unnecessary to address the third-party defendants’ remaining arguments regarding a lack of
standing to bring both claims and a failure to state a claim of equal protection and due process
violations upon which relief can be granted.
6

of Commons Pleas for Horry County.4 A certified copy of this order shall be mailed by the Clerk of
this Court to the Clerk of Court for the Court of Common Pleas, Horry County, South Carolina.
IT IS SO ORDERED.

s/ R. Bryan Harwell
R. Bryan Harwell
United States District Judge
May 30, 2012
Florence, SC

4

The Court’s jurisdiction was based on the third-party defendants’ proper removal of the third-party
claims under 28 U.S.C. § 1442(a)(1). That provision gives federal agencies the right to remove
state actions brought against them to a federal district court. The dismissal of the third-party
complaint against the federal agencies gives the Court the authority to remand the remaining claims
to the state court. See 28 U.S.C. 1447(c) (“If at any time before final judgment it appears that the
district court lacks subject matter jurisdiction, the case shall be remanded.”); Jamison v. Wiley, 14
F.3d 222, 238-39 (4th Cir. 1994) (“When a case has been properly removed under § 1442(a), the
district court may remand it back to the state court only if it thereafter discovers a defect in removal
procedure or a lack of subject matter jurisdiction.”); cf. Palmer v. City National, Bank of West Va.,
498 F.3d 236, 239 (4th Cir. 2007) (affirming a district court’s dismissal, after removal, of a thirdparty complaint against a federal agency for lack of subject matter jurisdiction and remand of the
remaining claims back to state court). Indeed, without the federal agencies as parties, the only basis
for removal of the entire case no longer exists. The Court need not assert supplemental jurisdiction
over the remaining claims. See 28 U.S.C. 1367(c)(3).
7