935 F.3d 844
9th Cir.2019Background
- Venture Bank failed in 2009; FDIC was appointed receiver and sought amended consolidated tax refunds from the IRS on behalf of the bank, receiving about $8.47 million.
- Venture Financial Group, Inc. (VFG) was the bank’s parent and had a 1993 tax allocation agreement allocating refunds to the parent and subsidiaries.
- VFG filed Chapter 7 bankruptcy in October 2013; Mark Waldron was the chapter 7 trustee and filed a preference action in August 2014 to recover the tax refunds from the FDIC as preferential transfers.
- FDIC filed a protective proof of claim in the bankruptcy proceeding and argued the trustee failed to exhaust administrative remedies required by FIRREA before filing suit. The bankruptcy court denied FDIC’s jurisdictional challenge and ruled for the trustee; the district court affirmed.
- FDIC appealed within 42 days of the district court’s judgment; the Ninth Circuit held the appeal timely because the FDIC, even as receiver, qualifies as a "United States agency" under Federal Rule of Appellate Procedure 4.
- On the merits, the Ninth Circuit held FIRREA stripped the bankruptcy court of subject-matter jurisdiction because the trustee did not exhaust the FIRREA administrative process and the Parker exception did not apply.
Issues
| Issue | Plaintiff's Argument (Waldron) | Defendant's Argument (FDIC) | Held |
|---|---|---|---|
| Whether FDIC as receiver qualifies as a "United States agency" for Rule 4 timeliness | FDIC acting solely as receiver is not a U.S. agency, so appeal was untimely (30-day rule) | FDIC is a U.S. agency even as receiver; gets 60 days to appeal under Rule 4 | FDIC is a U.S. agency for Rule 4 purposes; appeal timely (60-day period) |
| Whether FIRREA divests bankruptcy court of jurisdiction absent exhaustion | Trustee argued FIRREA exhaustion not required for this preference action (bankruptcy court has jurisdiction) | Trustee failed to exhaust FIRREA administrative remedies; FIRREA bars court jurisdiction until exhaustion | FIRREA bars jurisdiction; trustee failed to exhaust; bankruptcy court lacked subject-matter jurisdiction |
| Whether Parker exception to FIRREA exhaustion applies | Trustee invoked Parker (preference actions may be exempt where FDIC's proof of claim exceeds amount sought) | Parker limited to narrow facts where preference is a partial affirmative defense arising from FDIC collection efforts; does not apply here | Parker does not apply because FDIC never initiated collection such that the preference was an affirmative defense; exception not expanded |
| Whether to expand Parker to cover these facts | Trustee urged expansion because bankruptcy courts have expertise and fairness concerns | Court declined to expand; statutory text and dual (D)(i)/(D)(ii) applicability counsel against expansion | Court declined to expand Parker; exhaustion required before suit on ownership of refunds |
Key Cases Cited
- Diaz v. McAllen State Bank, 975 F.2d 1145 (5th Cir. 1992) (FDIC acting as receiver is a United States agency for procedural purposes)
- In re Hoag Ranches, 846 F.2d 1225 (9th Cir. 1988) (multi-factor test for determining whether an entity is a "United States agency" under Rule 4)
- In re Parker N. Am. Corp., 24 F.3d 1145 (9th Cir. 1994) (narrow exception to FIRREA exhaustion where preference action functions as an affirmative defense to FDIC collection efforts)
- McCarthy v. FDIC, 348 F.3d 1075 (9th Cir. 2003) (limits Parker’s rationale and holds FIRREA’s bar applies to debtors as well as creditors)
- In re Bob Richards Chrysler-Plymouth Corp., 473 F.2d 262 (9th Cir. 1973) (federal default rule on ownership of tax refunds for consolidated groups)