Federal Deposit Insurance Corporation v. First American Title Insurance Company
611 F. App'x 522
11th Cir.2015Background
- In 2009 the FDIC, as receiver for failed BankUnited, F.S.B. (Old Bank), sold most assets to BankUnited, N.A. (New Bank) under a standard Purchase and Assumption Agreement that reserved certain rights to the FDIC (Section 3.5).
- Prior to the failure, two mortgage loans to Nathaniel Ray closed on condominium units; closings were handled by Property Transfer and insured/covered by First American via title policies and closing protection letters (CPLs).
- The down payments were falsely certified as coming from the borrower; funds actually came from Masterhost (connected to sellers), and Ray later defaulted.
- FDIC, after subpoenaing closing documents from Property Transfer in 2012, gave notice to First American and sued under the CPLs for breach (seeking “actual loss” arising from closing agent dishonesty).
- At bench trial the district court entered judgment for the FDIC; First American appealed raising (1) whether FDIC retained the CPL claims after the asset sale, (2) CPL notice-timeliness, (3) causation under “arising out of,” and (4) damages calculation and insurance offsets.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ownership/Right to sue under purchase agreement | FDIC: Section 3.5 reserves to FDIC claims against specified persons (including title insurers/underwriters and persons whose acts relate to losses), so FDIC retained CPL claims | First American: FDIC sold CPLs and related rights to New Bank under Section 3.1, so FDIC lacks right to sue | Court: Section 3.5(b)(i),(ii),(iv) reserved claims against First American; FDIC retained right to sue under CPLs; judgment affirmed |
| Timely notice under CPL (90-day rule) | FDIC: 90-day period runs from discovery of facts revealing a covered claim (not merely discovery of loss) and FDIC gave notice within 90 days after receiving subpoenaed documents that revealed the claim | First American: FDIC notified after actual loss; notice untimely because occurred years later | Court: Adopted discovery-of-claim interpretation; FDIC proved it provided notice within 90 days after discovering facts revealing claim; notice timely |
| Causation — “arising out of” requirement | FDIC: Agent’s failure/dishonesty bears at least a minimal causal connection to FDIC’s loss even though bank obtained liens and foreclosed | First American: Bank obtained first-priority liens and could pursue deficiencies, so CPL agent’s conduct did not cause the loss | Court: “Arising out of” requires a causal connection (not proximate cause); Property Transfer’s misconduct had the minimal causal relation to the loss; claim covered |
| Damages methodology & insurance offsets | FDIC: “Actual loss” can be measured as outstanding loan balance less sales proceeds; collateral source rule bars offset for FDIC’s insurance recovery | First American: Damages should reflect FDIC’s actual loss net of what New Bank recovered or the book value paid at sale; insurance proceeds should offset | Court: Damages properly computed as loan balance minus sales proceeds; FDIC met reasonable-certainty standard; Florida collateral-source rule applies to contracts so insurance benefits not offset; award affirmed |
Key Cases Cited
- Jones v. United Space Alliance, 494 F.3d 1306 (11th Cir.) (standard of review for factual and legal findings)
- Golden Door Jewelry Creations, Inc. v. Lloyds Underwriters Non-Marine Ass’n, 117 F.3d 1328 (11th Cir.) (de novo review for contract interpretation affecting damages)
- United Ben. Life Ins. Co. v. U.S. Life Ins. Co., 36 F.3d 1063 (11th Cir.) (interpretation of unambiguous contract is question of law)
- Interface Kanner, LLC v. JPMorgan Chase Bank, N.A., 704 F.3d 927 (11th Cir.) (third-party beneficiary/standing concept in FDIC transfer cases)
- Nebula Glass Int’l, Inc. v. Reichhold, Inc., 454 F.3d 1203 (11th Cir.) (reasonable-certainty rule for damages)
- Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So.2d 528 (Fla. 2005) (definition of “arising out of” — causal connection not proximate cause)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (standing framework referenced in related standing discussion)