903 F. Supp. 2d 1370
N.D. Ga.2012Background
- Bank of the Ozarks sues Khan, Sabadia, and Shailendra on a promissory note renewal totaling $1.62 million, claiming nonpayment by maturity in 2009.
- Park Avenue Bank was closed in 2011, FDIC became receiver, and Bank of the Ozarks acquired the loan documents via a Purchase and Assumption Agreement.
- Sabadia and Khan counterclaimed for fraud and sought declaratory relief and setoff/recoupment; they also asserted crossclaims against Shailendra.
- Bank moves to dismiss counterclaims and strike affirmative defenses under the D’Oench Duhme doctrine, and to stay/deny various crossclaims and motions.
- Court grants in part and denies in part: Sabadia and Khan’s counterclaims barred by 1823(e); certain affirmative defenses stricken; leave to file second amended pleadings denied; Shailendra’s crossclaim motion moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sabadia and Khan’s counterclaims are barred by D’Oench Duhme/1823(e). | Sabadia and Khan’s claims rely on unrecorded side arrangements; barred by 1823(e). | Some fraud theories (fraud in the factum) fall outside 1823(e) and are not barred. | Counterclaims barred by D’Oench Duhme and 1823(e). |
| Whether Sabadia and Khan’s failure-of-consideration and fraud defenses should be struck. | These defenses are precluded by D’Oench Duhme. | Some defenses may survive if not premised on bank obligations. | Failure of consideration and fraud defenses struck; others denied. |
| Whether Sabadia and Khan’s Motion for Leave to File Second Amended Answer should be granted. | Amendment would further fraud in factum theories and 1823(e) arguments. | Amendment clarifies fraud in factum and 1823(e) considerations. | Denied. |
| Whether to dismiss Dho Shailendra’s Amended Crossclaim against Sabadia and Khan. | Crossclaim remains viable. | Amended crossclaim should be superseding and dismissed. | Denied; crossclaims remain pending.},{ |
Key Cases Cited
- Langley v. FDIC, 484 U.S. 86 (U.S. 1987) (estoppel under 1823(e) when writing not explicit, records matter for FDIC)
- D’Oench Duhme & Co. v. FDIC, 315 U.S. 447 (U.S. 1942) (foundation for estoppel against private claims to funds preserved by FDIC)
- FDIC v. McCullough, 911 F.2d 593 (11th Cir. 1990) (bilateral obligations must be explicit in bank records to survive 1823(e))
- Langley v. FDIC, 2, No. 2 (11th Cir. 2000) (clarifies that implicit agreements do not defeat 1823(e))