America West Bank Members L.C. v. State
2014 UT 49
| Utah | 2014Background
- AWBM (owner of America West Bank) sued Utah, UDFI, and UDFI's director after UDFI petitioned for and obtained a district court order seizing the bank and appointing the FDIC as receiver. Liquidation was ongoing when AWBM sued.
- AWBM's complaint asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, violations of procedural and substantive due process, and an unconstitutional taking under the Utah Constitution.
- The State moved to dismiss under Utah R. Civ. P. 12(b)(6). AWBM conceded and voluntarily dismissed some claims and failed to give required notice to one official, leading to additional dismissals.
- The district court dismissed the contract and covenant claims and the takings claim without prejudice for insufficient factual pleading, and dismissed procedural and substantive due process claims with prejudice (finding no clearly established right to a pre‑seizure hearing).
- AWBM appealed. The Utah Supreme Court affirmed dismissal of all claims, but (in a separate opinion) held the procedural due process claim should have been dismissed without prejudice rather than with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract | Complaint sufficiently alleges a contract, breach, and damages; performance can be inferred | Complaint fails to identify existence, date, terms, or specific breach of any contract | Dismissed without prejudice for failure to plead essential contract facts |
| Breach of covenant of good faith and fair dealing | Derivative of contract claim so adequately pleaded | Cannot stand without an adequately pleaded contract | Dismissed without prejudice along with contract claim |
| Procedural due process (pre‑seizure hearing) | Seizure occurred without required procedures or hearing; due process violated | Seizure of banks may be summary; no constitutional right to a pre‑seizure hearing if post‑seizure hearing available | Dismissed (majority: with prejudice error — should be without prejudice); plurality/concurring view: dismissal with prejudice proper because no clearly established right to pre‑seizure hearing |
| Takings under Utah Constitution | Seizure and receivership destroyed owners’ property interests; entitled to just compensation | Complaint fails to specify protectable interest or whether taking was physical vs regulatory or for public use | Dismissed without prejudice for failure to plead the type/nature of the taking and necessary elements |
Key Cases Cited
- Fahey v. Mallonee, 332 U.S. 245 (U.S. 1947) (upholding seizure of a bank without a pre‑seizure hearing in light of banking history and customs)
- Fuentes v. Shevin, 407 U.S. 67 (U.S. 1972) (articulating the fact‑intensive three‑part test for when seizure without prior hearing is permissible)
- Spackman ex rel. Spackman v. Bd. of Educ., 16 P.3d 533 (Utah 2000) (elements required to recover monetary damages for constitutional violations under Utah law)
- United States v. Wallace & Tiernan Co., 336 U.S. 793 (U.S. 1949) (dismissing without prejudice is appealable as a final judgment)
- Utah Dep’t of Transp. v. Admiral Beverage Corp., 275 P.3d 208 (Utah 2011) (framework for takings analysis; distinguishing physical vs regulatory takings)