Quintero Community Ass'n v. Federal Deposit Insurance
2015 U.S. App. LEXIS 11721
| 8th Cir. | 2015Background
- Investors in the Quintero golf-course/residential development sued Hillcrest Bank and its directors/officers after the developer (McClung) failed and investors lost money; plaintiffs alleged the Bank and its directors aided McClung’s fraud and improperly handled letters of credit.
- Hillcrest Bank was seized by the Kansas Banking Commissioner; the FDIC was appointed receiver and later substituted as defendant and removed the consolidated state-court actions to federal court under 12 U.S.C. § 1819(b)(2)(B).
- Plaintiffs moved to remand, arguing the FDIC’s removal was untimely; the district court denied remand.
- The district court dismissed 14 of 16 counts for failure to state a claim (Rule 12(b)(6)), leaving a breach-of-contract claim against the Bank and a conversion claim against the Director Defendants (for copying Bank records).
- After the FDIC determined the failed bank had no assets for unsecured creditors, the court dismissed the FDIC as prudentially moot and later granted summary judgment to the Director Defendants on conversion and denied leave to amend to add a spoliation claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of FDIC removal under 12 U.S.C. § 1819(b)(2)(B) | FDIC took "affirmative actions" (appearance, motion to substitute, opposing default) before June 9, so the 90-day removal window closed before FDIC removed on Sept. 6 | Removal was timely if measured from the state court substitution order (June 9) | Court declined to decide timeliness; under Caterpillar doctrine, any erroneous denial of remand was not reversible because federal jurisdiction existed when final judgment was entered, so denial not reviewed further |
| Sufficiency of pleading (Rule 12(b)(6)) for multiple tort claims (fraud, aiding/abetting, breach of fiduciary duty, conspiracy, negligent mismanagement, interference) | Complaint alleges directors and Bank knowingly prolonged McClung’s scheme, falsified books, canceled letters of credit, and thereby caused investors’ losses | Allegations are conclusory, vague, and group-pleaded; fail Iqbal/Twombly and Rule 9(b) particularity; no facts showing individual directors’ personal participation, knowledge, or proximate causation | Affirmed dismissal of 14 counts for failure to state a claim; complaints were shotgun/group pleadings lacking specific factual allegations |
| Conversion claim based on directors copying and transmitting Bank records | Copying and transmitting records amounted to conversion of plaintiffs’ property interest in those records | Copying did not deprive owner of possession or prevent use; under controlling law, copies are not conversion | Summary judgment for Director Defendants affirmed; copying files is not conversion where owner retains possession/use |
| Leave to amend to add spoliation claim | QCA sought to add independent tort for spoliation of evidence allegedly copied/transferred during litigation | Defendants argued undue delay, prejudice, and likely futility; Kansas has not recognized an independent spoliation tort | District court did not abuse discretion in denying leave; amendment unduly delayed, prejudicial, and likely futile given Kansas law |
Key Cases Cited
- Caterpillar Inc. v. Lewis, 519 U.S. 61 (Sup. Ct. 1996) (district court error denying remand not reversible if federal jurisdiction exists when judgment entered)
- Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (Sup. Ct. 2004) (jurisdictional defects cured by facts at time of judgment)
- Buffets, Inc. v. Leischow, 732 F.3d 889 (8th Cir. 2013) (Caterpillar rule applies to summary-judgment final judgments)
- E-Shops Corp. v. U.S. Bank Nat’l Ass’n, 678 F.3d 659 (8th Cir. 2012) (Rule 9(b) particularity applies to aiding-and-abetting fraud claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (Sup. Ct. 2009) (complaint must plead facts making claims plausible; conclusory allegations insufficient)
- Wagner v. Campbell, 779 F.3d 761 (8th Cir. 2015) (declining remand review where federal jurisdiction existed)
- Adams v. RTC, 927 F.2d 348 (8th Cir. 1991) (prudential mootness where receiver determines no assets for unsecured creditors)
- Streambend Props. II, LLC v. Ivy Tower Mpls., LLC, 781 F.3d 1003 (8th Cir. 2015) (group pleading insufficient under Rule 9(b))