Federal Deposit Insurance v. Siegel
2014 WL 1568759
9th Cir.2014Background
- FDIC, as receiver for closed IndyMac Bank F.S.B., appealed rulings that over $55 million in tax refunds were property of the bankrupt parent, IndyMac Bancorp, Inc. (Bancorp).
- The dispute turns on a Tax Sharing Agreement (TSA) between the Bank and Bancorp governing payment of taxes and allocation of any tax refunds for consolidated returns.
- Lower courts held the TSA created a debtor-creditor relationship (Bancorp creditor of Bank) rather than a trust or principal-agent relationship, making refunds Bancorp estate property.
- The FDIC argued the TSA created trust or agency rights in the Bank (so refunds belonged to the Bank/receiver) and contended federal banking-law defenses; Bancorp relied on the TSA language granting it discretion and allocation mechanisms.
- The Ninth Circuit applied California law (per Butner) and precedent (Bob Richards) regarding allocation of subsidiary tax refunds when parties have or lack an agreement allocating refunds; found TSA unambiguous and dispositive.
Issues
| Issue | Plaintiff's Argument (FDIC) | Defendant's Argument (Bancorp) | Held |
|---|---|---|---|
| Are tax refunds property of Bancorp’s bankruptcy estate or held in trust for the Bank? | TSA creates trust/agency or otherwise gives Bank rights to refunds; refunds belong to Bank/receiver. | TSA establishes Bancorp’s entitlement/creditor right to refunds; Bancorp has discretion and allocation rules so refunds are Bancorp property. | Refunds are property of Bancorp’s estate (debtor-creditor relationship), not a trust for Bank. |
| Does the TSA create an agency/principal relationship under California law? | FDIC: language appointing Bancorp agent/attorney-in-fact makes Bank principal. | Bancorp: TSA vests sole discretion in Bancorp; Bank lacks control necessary for agency. | No agency: Bancorp has plenary discretion; appointment language insufficient to establish agency. |
| Does the TSA create a trust relationship under California law? | FDIC: parties intended to treat tax liability as Bank’s, implying trust-like allocation. | Bancorp: absence of trust language, ability to commingle/use funds, and lack of Bank’s risk of loss indicate debtor-creditor relationship. | No trust: lack of trust language and indicia point to debtor-creditor relationship. |
| Would recognizing debtor-creditor relationship violate federal banking laws? | FDIC: such a characterization conflicts with federal banking statutes/regulations. | Bancorp: the TSA dispute is a routine contract matter, not a covered transaction under cited banking statutes. | Not a violation: contract claim is not a covered transaction under cited federal banking laws. |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (federal law defers to state law to define property interests in bankruptcy)
- In re Bob Richards Chrysler-Plymouth Corp., 473 F.2d 262 (9th Cir. 1973) (parent holds refunds in trust absent agreement allocating them; parties may adjust liability by agreement or practice)
- In re Coupon Clearing Serv., Inc., 113 F.3d 1091 (9th Cir. 1997) (agency requires principal control under California law)
- Violette v. Shoup, 20 Cal. Rptr. 2d 358 (Cal. Ct. App. 1993) (agency principles and control requirement)
- Petherbridge v. Prudential Sav. & Loan Ass’n, 145 Cal. Rptr. 87 (Cal. Ct. App. 1978) (absence of trust language indicates debtor-creditor relationship)
- Kaplan v. Coldwell Banker Residential Affiliates, Inc., 69 Cal. Rptr. 2d 640 (Cal. Ct. App. 1997) (discretion in manner and means undermines agency claim)
- FDIC v. Zucker (In re NetBank, Inc.), 729 F.3d 1344 (11th Cir. 2013) (involving a different TSA incorporating Interagency Statement; distinguishable)
AFFIRMED.