Deutsche Bank National Trust Co. v. Federal Deposit Insurance
744 F.3d 1124
9th Cir.2014Background
- Deutsche Bank acted as trustee for 240+ mortgage securitization trusts for IndyMac; the trusts were governed by PSAs and related Governing Agreements that bundled servicing rights and related obligations.
- In July 2008 regulators closed IndyMac; the FDIC became receiver/conservator of IndyMac and sold many assets and servicing rights to OneWest, excluding certain indemnity and repurchase obligations.
- Deutsche Bank sued the FDIC for breach of contract, fiduciary claims, takings, due process, and sought equitable relief, alleging the FDIC split otherwise unitary contracts and transferred servicing rights without consent, causing billions in damages.
- The district court initially allowed some breach claims to proceed (relying on Sharpe), then on reconsideration held Deutsche Bank’s post‑failure breach claims were third‑tier general unsecured claims under 12 U.S.C. § 1821(d)(11) and prudentially moot given lack of receivership assets.
- Deutsche Bank appealed interlocutorily solely on the certified question whether its post‑failure breach claims are payable only as third‑tier general unsecured claims under § 1821(d)(11).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Deutsche Bank’s post‑receivership breach claims are third‑tier general unsecured claims under 12 U.S.C. § 1821(d)(11) | Deutsche Bank: FDIC exceeded statutory authority by splitting contracts and breached (not repudiated) the PSAs; Sharpe means such breach claims are not subject to FIRREA’s priority scheme and can obtain superpriority/equitable relief | FDIC: Deutsche Bank is a creditor; claims fall within § 1821(d)(11) priority and are subject to FIRREA procedures; insufficient receivership assets make claims prudentially moot | Held: Deutsche Bank is a creditor; its claims are third‑tier general unsecured liabilities under § 1821(d)(11) and prudentially moot because receivership lacks funds |
Key Cases Cited
- Sharpe v. FDIC, 126 F.3d 1147 (9th Cir. 1997) (plaintiffs who fully performed pre‑receivership contract and were not creditors could sue for breach where FDIC exceeded statutory authority)
- Battista v. FDIC, 195 F.3d 1113 (9th Cir. 1999) (claims for damages from contract repudiation under § 1821(e) are subject to the § 1821(d) priority regime)
- McCarthy v. FDIC, 348 F.3d 1075 (9th Cir. 2003) (FIRREA’s exhaustion and priority provisions apply broadly to claims asserting rights to failed bank assets; Sharpe is fact‑specific)
- Henrichs v. Valley View Dev., 474 F.3d 609 (9th Cir. 2007) (claims against a receiver are moot if the receivership distributed all assets and no funds remain to satisfy claims)
- MBIA Ins. Corp. v. FDIC, 708 F.3d 234 (D.C. Cir. 2013) (rejected treating general creditor claims tied to approved contracts as administrative expenses that avoid § 1821(d)(11) priority)