L & M.J. Gross Company et al v. Federal Deposit Insurance Corporation et al
MEMORANDUM OPINION OF THE COURT. Signed by District Judge Todd J. Campbell on 2/7/2014. (xc:Pro se party by regular and certified mail.)(DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(eh)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
I. & M.J. GROSS CO., et al.
) NO. 1-13-0151
) JUDGE CAMPBELL
FEDERAL DEPOSIT INSURANCE
CORPORATION, et al.
Pending before the Court is Plaintiffs’ Motion to Remand (Docket No. 9). For the reasons
stated herein, Plaintiffs’ Motion is DENIED.
This action was filed by Plaintiffs in state court against Community South Bank and others,
seeking declaratory judgment as to the parties’ rights under certain documents and alleging causes
of action for promissory estoppel, breach of contract, and conversion. After the Complaint was filed,
the Federal Deposit Insurance Corporation (“FDIC”) was appointed Receiver for Community South
Bank by the Tennessee Department of Financial Institutions and was allowed to intervene in the
action and substitute itself for Community South Bank. The FDIC then removed this action to federal
Plaintiffs seek to remand the action, claiming that the Court lacks subject matter jurisdiction
over Plaintiffs’ state law claims, pursuant to the “state law exception” of 12 U.S.C. § 1819(b)(2)(D),
which removes from this Court’s jurisdiction certain actions in which the FDIC is a party but which,
among other things, involve only the interpretation of state law. The FDIC contends that this state
law exception does not apply because it has available to it defenses which arise under federal law.
MOTIONS TO REMAND
Pursuant to 28 U.S.C. § 1441(a), any civil action brought in a state court of which the district
courts of the U.S. have original jurisdiction may be removed by the defendant to federal court. If it
appears that the district court lacks subject matter jurisdiction, the case should be remanded to state
court. 28 U.S.C. § 1447(c).
FEDERAL SUBJECT MATTER JURISDICTION
Here, the FDIC contends that the Court has subject matter jurisdiction under 12 U.S.C.
§ 1819(b)(2)(B), which provides that the FDIC may remove any action from a state court to the
appropriate U.S. District Court, and 12 U.S.C. § 1819(b)(2)(A), which provides that all suits of a
civil nature to which the FDIC is a party shall be deemed to arise under the laws of the United States.
As noted above, Plaintiffs claim that this action falls within the “state law exception” to these
statutes. That exception provides that the matter is not deemed to arise under the laws of the United
States if (1) the FDIC was appointed by state authorities and is a party other than a plaintiff; (2) the
suit 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 (3)
only interpretation of state law is necessary. 12 U.S.C. § 1819(b)(2)(D).
The FDIC asserts that Plaintiffs cannot establish the third factor, that only interpretation of
state law is necessary. Here, the FDIC claims that because it has available defenses which raise
federal issues, the state law exception does not apply. When the FDIC relies on the absence of this
third factor in attempting to prevent remand, it must assert a defense that raises colorable issues of
federal law. Diaz v. McAllen State Bank, 975 F.2d 1145, 1149-50 (5th Cir. 1992); FDIC v. McCann,
2011 WL 5039879 at * 2 (E.D. Mich. Oct. 24, 2011).
The FDIC argues that its defenses arise under the case of D’Oench Duhme & Co. v. FDIC,
315 U.S. 447 (1942), later codified in part at 12 U.S.C. § 1823(e), which provides that no agreement
which tends to diminish or defeat the interest of the FDIC in any asset acquired by it from the stateinsured bank shall be valid against the FDIC unless: (1) it is in writing; (2) it was executed by the
bank with the acquisition of the asset, (3) it was approved by the board of directors of the bank or
its loan committee, which approval shall be reflected in the minutes of the board or committee; and
(4) it has been, continuously from the time of its execution, an official record of the bank.
In D’Oench Duhme, the Court held that borrowers could not rely on unrecorded agreements
to defend against the FDIC’s collection efforts. The doctrine has been expansively interpreted to bar
the use of unrecorded agreements as the basis for either defenses or affirmative claims against the
FDIC. Reding v. FDIC, 942 F.2d 1254, 1259 (8th Cir. 1991); FDIC v. McCann, 2011 WL 5039879
at * 2 (E.D. Mich. Oct. 24, 2011).
Here, Plaintiffs have asserted a claim that Community South Bank had knowledge of the
borrower’s pledge of the equity in the subject property as referenced in an unrecorded Pledge
Agreement and assert that the Bank’s deed of trust was therefore subject to the Pledge Agreement.
The FDIC asserts that the D’Oench Duhme Doctrine and Section 1823(e) bar Plaintiffs from reliance
upon the Bank’s actual or constructive notice of this Pledge Agreement.
In addition, Plaintiffs contend that the FDIC is estopped from arguing that the Bank’s deed
of trust is senior to the Escrow Agreement and Pledge Agreement based upon alleged statements
made by the Bank’s counsel. Those statements, the FDIC argues, also fall within the scope of
Section 1823(e) and the D’Oench Duhme Doctrine.
The Court finds that at least some of the FDIC’s defenses herein are colorable and arise under
federal law. Accordingly, this action does not involve the interpretation of state law only, the Court
has subject matter jurisdiction, and Plaintffs’ Motion to Remand is DENIED.
IT IS SO ORDERED.
TODD J. CAMPBELL
UNITED STATES DISTRICT JUDGE
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