Lexon Ins v. FDIC
7 F.4th 315
5th Cir.2021Background
- Lexon issued performance bonds (~$11M) as surety for Linder Oil and required collateral; Linder obtained two standby letters of credit from First NBC totaling $9,985,500 naming Lexon beneficiary.
- Letters of credit automatically renewed annually unless the bank gave notice of nonrenewal; Lexon could draw at its "sole judgment" for protection against bond claims.
- Regulators placed First NBC under a consent order in Nov. 2016; FDIC corporate control preceded the bank’s seizure and FDIC-R appointment on April 28, 2017.
- FDIC-R warned Lexon (June & August 2017) that the letters of credit might be repudiated; FDIC-R negotiated resolution of Linder’s problematic ~$100M loan portfolio and sold it on Sept. 28, 2017, the same day it repudiated the letters; Lexon never drew or replaced the LOCs.
- Lexon sued under FIRREA alleging improper repudiation and claimed damages equal to the LOC value; it also sued FDIC-C under the FTCA for negligent supervision. District court converted a motion to dismiss into summary judgment (without formal notice), granted summary judgment for FDIC-R, and dismissed the FTCA claim for lack of jurisdiction. Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether district court erred by sua sponte converting motion to summary judgment without notice | Lexon: court deprived it of opportunity to submit additional or different evidence (e.g., lower damage valuation) | FDIC: Lexon had ample discovery time and submitted extensive exhibits; any notice error was harmless | Court: Notice requirement was breached but error harmless—Lexon had months of discovery and no material factual dispute shown |
| Whether a letter of credit is a "contract or lease" under 12 U.S.C. §1821(e)(1) | Lexon: LOCs are commercial undertakings, not "contracts" for §1821(e) purposes | FDIC: LOCs are contractual obligations between issuer and beneficiary and fall within "any contract" language | Court: LOCs are contracts under ordinary/common-law meaning and thus repudiable under §1821(e)(1) |
| Whether FDIC-R repudiated within a "reasonable period" under §1821(e)(2) | Lexon: 153‑day delay was unreasonable; early FDIC-R communications suggested repudiation earlier | FDIC: Delay was justified by active negotiations to resolve Linder’s loan portfolio; Lexon was warned and suffered no prejudice | Court: 153 days reasonable given active negotiations, lack of bad faith, warnings to Lexon, and no prejudice to Lexon |
| Whether Lexon suffered "actual direct compensatory damages" as of receiver appointment under §1821(e)(3)(A) | Lexon: Value of lost collateral (the LOCs) equals compensable damages ($9,985,500) | FDIC: Damages under §1821(e) must be actual and realized by appointment date; mere lost collateral or future harms are not compensable | Court: Lexon had no actual direct compensatory damages realized by appointment date and cannot recover LOC face value |
| Whether FDIC-C is liable under FTCA (negligent control/supervision) | Lexon: FDIC-C negligently allowed LOCs to renew and failed in supervisory duties | FDIC: No analogous private‑person tort duty exists; regulatory/immunity considerations bar FTCA liability | Court: FTCA claim dismissed—Lexon failed to identify a private‑law analogue; Good Samaritan theory fails (no physical harm; no duty to third parties) |
Key Cases Cited
- Leatherman v. Tarrant Cnty. Narcotics Intel. & Coord. Unit, 28 F.3d 1388 (5th Cir. 1994) (procedural requirement to give notice before converting motion to summary judgment)
- D’Onofrio v. Vacation Publ’ns, Inc., 888 F.3d 197 (5th Cir. 2018) (strict enforcement of notice requirement; harmless‑error standard)
- Granite Re, Inc. v. Nat’l Credit Union Admin. Bd., 956 F.3d 1041 (8th Cir. 2020) (letters of credit are contracts for purposes of receiver‑repudiation provisions)
- United States v. Shabani, 513 U.S. 10 (1994) (adoption of ordinary/common‑law meanings absent contrary indication)
- Perrin v. United States, 444 U.S. 37 (1979) (statutory terms interpreted by ordinary meaning at enactment)
- United States v. Olson, 546 U.S. 43 (2005) (limits on implying state‑law tort duties against federal entities; guidance on FTCA private‑analogue requirement)
- FDIC v. McFarland, 243 F.3d 876 (5th Cir. 2001) (context on FIRREA’s purpose and FDIC powers)
- Boudreaux v. Swift Transp. Co., 402 F.3d 536 (5th Cir. 2005) (summary judgment standard—actual controversy requires contradictory evidence)
- McCarty v. Hillstone Restaurant Grp., Inc., 864 F.3d 354 (5th Cir. 2017) (summary judgment not defeated by metaphysical doubt or only a scintilla of evidence)