Doral Bank v. Martinez-Luna, 3:15-cv-01689

FDIC, as receiver for Doral Bank, is plaintiff in a Puerto Rico mortgage foreclosure action against Edgardo Martínez-Luna and Conchita Verdejo-Osorio (and their conjugal partnership).
Doral Bank filed the foreclosure action in the Court of First Instance; later defendants moved to dismiss for lack of standing and pending related litigation in a separate court.
Doral Bank argued it had standing to foreclose; defendants argued the mortgage validity was litigated in another suit and questioned possession of the original promissory note.
In 2015, the Puerto Rico banking supervisor closed Doral Bank and FDIC was substituted as receiver; FDIC moved to remove the counterclaim to federal court under 12 U.S.C. § 1819(b)(2)(B).
FDIC removed only the counterclaim, not the foreclosure action, to this court; the court stayed proceedings for 90 days but no status reports were filed.
The counterclaim attacks Doral Bank’s standing to foreclose and seeks declaratory relief; the court must determine if it should stay/remand under the state-law exception to removal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the counterclaim falls within the § 1819(b)(2)(D) exception	FDIC contends the counterclaim fits the exception as a matter of local law only.	Defendants argue the counterclaim raises Puerto Rico law issues on standing and should be remanded.	Yes; the counterclaim involves only Puerto Rico law interpretation.
Whether exhaustion of administrative remedies applies to the counterclaim	FDIC asserts claims must be exhausted under 12 U.S.C. § 1821; the board may raise defenses.	Defendants argue exhaustion is not applicable to mere standing challenges or defenses to foreclosure.	No; exhaustion does not apply to the counterclaim’s standing defense and related declaratory relief.
Whether remand to the Court of First Instance is appropriate	FDIC claims removal was proper but defenses could be adjudicated here.	Remand would prejudice federal defenses and risk res judicata concerns; federal retention is needed.	Remand is required to provide clarity and because the core issues are state-law and tied to the underlying state action.
Whether the court should adjudicate standing and related defenses in lieu of remand	FDIC seeks to adjudicate standing and D’Oench-like defenses in federal court.	Defendants want to litigate standing in Puerto Rico court and avoid federal interference with state litigation.	The court should not adjudicate these in federal court; the issues belong in the state proceeding.

Capizzi v. Fed. Deposit Ins. Corp., 937 F.2d 8 (1st Cir. 1991) (colorable federal defenses defeat remand under § 1819(b)(2)(D))
Baker v. GMC, 522 U.S. 222 (U.S. 1998) (counterclaim posture treated as plaintiff in counterclaim)
Bolduc v. Beal Bank, SSB, 167 F.3d 667 (1st Cir. 1999) (exhaustion considerations; D&O doctrine limitations)
Demelo v. U.S. Bank Nat’l Ass’n, 727 F.3d 117 (1st Cir. 2013) (exhaustion applies to claims against the bank, not to claims by the bank)
Reiter v. Cooper, 507 U.S. 258 (U.S. 1993) (declaratory judgments should not interfere with ongoing state litigation)
Merit Constr. Alliance v. City of Quincy, 759 F.3d 122 (1st Cir. 2014) (res judicata and collateral estoppel considerations in state-federal interplay)
Colón-Fontánez v. Municipality of San Juan, 660 F.3d 17 (1st Cir. 2011) (certified translations requirement for non-English documents in court)