Rivera-Alvarado v. Federal Deposit Insurance Corporation, 3:16-cv-01612

Background

Plaintiffs (Rivera-Alvarado et al.) were defendants in a Puerto Rico foreclosure action initiated by Doral Bank arising from a 2003 mortgage loan; Banco Popular later substituted as plaintiff in the state action and obtained summary judgment.
The Commonwealth closed Doral Bank and appointed the FDIC as receiver (FDIC-R) in February 2015.
Plaintiffs filed a pro se federal complaint in April 2016 seeking set-off and challenging ownership/standing with respect to the mortgage note; they later filed an amended complaint through counsel naming FDIC-R, Banco Popular and others and seeking a declaratory judgment on note ownership.
FDIC-R and Banco Popular moved to dismiss under Rules 12(b)(1) and 12(b)(6), arguing lack of subject-matter jurisdiction, failure to state a claim, and other defenses.
FDIC-R argued plaintiffs failed to exhaust the mandatory administrative claims process required by FIRREA; plaintiffs had submitted a proof of claim by the claims bar date, FDIC-R disallowed it, but plaintiffs’ amended complaint asserted different relief that had not been presented administratively.
The district court concluded it lacked subject-matter jurisdiction over FDIC-R (for failure to exhaust FIRREA’s administrative remedy and because no claim was properly asserted against FDIC-R) and declined to exercise supplemental jurisdiction over the remaining state-law claims; the amended complaint was dismissed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether federal court has jurisdiction because FDIC-R is a party under 12 U.S.C. § 1819	Presence of FDIC-R invokes federal-question jurisdiction	FDIC-R argues no claims were properly asserted by/against it so FIRREA’s jurisdictional provisions do not confer jurisdiction	Court: Mere presence of FDIC-R is insufficient; plaintiffs asserted no claim against FDIC-R and FDIC-R made no claim against parties, so no jurisdiction on that basis
Whether plaintiffs exhausted FIRREA administrative claims process (12 U.S.C. § 1821)	Plaintiffs filed a proof of claim by the bar date and received disallowance; action followed	FDIC-R argues amended complaint seeks different relief not presented administratively, so plaintiffs failed to exhaust mandatory process	Court: Plaintiffs failed to exhaust administrative process for the new claim; lack of exhaustion bars jurisdiction over FDIC-R
Whether the court should retain jurisdiction over remaining defendants if FDIC-R is dismissed	Plaintiffs invoke 28 U.S.C. § 1367 to exercise supplemental jurisdiction over state-law claims	Defendants argue once FDIC-R is dismissed, federal jurisdiction over those claims disappears and court should not retain jurisdiction	Court: Declines to exercise supplemental jurisdiction; dismisses the entire amended complaint
Whether state-court judgment affects federal proceedings	Plaintiffs suggested set-off and challenges to note ownership	Defendants point out state court already entered summary judgment for Banco Popular and plaintiffs’ counsel failed to disclose that	Court notes existing adverse state-court judgment and affirms dismissal without reaching further preclusion arguments

Key Cases Cited

Merlonghi v. United States, 620 F.3d 50 (1st Cir.) (court must credit well-pled facts on Rule 12(b)(1))
Valentin v. Hospital Bella Vista, 254 F.3d 358 (1st Cir.) (same standard on factual inferences for jurisdictional challenges)
McCulloch v. Vélez, 364 F.3d 1 (1st Cir.) (district court must dismiss if subject-matter jurisdiction is lacking)
Village of Oakwood v. State Bank & Trust Co., 481 F.3d 364 (6th Cir.) (FDIC’s presence alone does not create federal jurisdiction for state-law claims)
Maldonado-Torres v. F.D.I.C., 839 F. Supp. 2d 511 (D.P.R.) (describing FIRREA mandatory administrative claim process)
Marquis v. F.D.I.C., 965 F.2d 1148 (1st Cir.) (exhaustion of FDIC administrative procedure is mandatory)
Simon v. F.D.I.C., 48 F.3d 53 (1st Cir.) (§ 1821 bars claims against failed institution’s assets not presented administratively)
Lindley v. F.D.I.C., 733 F.3d 1043 (11th Cir.) (discussion on district-court jurisdiction after FDIC removal)
Casey v. F.D.I.C., 583 F.3d 586 (8th Cir.) (same)
Adair v. Lease Partners, Inc., 587 F.3d 238 (5th Cir.) (same)
New Rock Asset Partners, L.P. v. Preferred Entity Advancements, Inc., 101 F.3d 1492 (3d Cir.) (discusses district court’s options when FDIC is no longer a party)
Destfino v. Reiswig, 630 F.3d 952 (9th Cir.) (addresses jurisdictional effects of FDIC’s removal)