SunSouth Bank v. First NBC Bank
678 F. App'x 811
| 11th Cir. | 2017Background
- Central Progressive Bank made three loans to Mississippi Investors VI, LLC (Loans 1–3); Loans 2 and 3 secured by Villages D and E, Loans 1 secured by other property subject to a senior interest held by Double A Firewood.
- SunSouth purchased a participation interest in Loans 2 and 3 under a Participation Agreement giving SunSouth a pro rata share of payments and priority repayment rights on default or foreclosure; the Agreement was governed by Louisiana law.
- Mississippi Investors defaulted; Central Progressive purchased the senior Double A Firewood loan after SunSouth refused to fund the purchase, and Central Progressive then foreclosed and acquired the collateral at auction.
- Central Progressive subsequently failed; the FDIC became receiver and transferred Central Progressive’s assets to First NBC under a P&A Agreement; First NBC later assigned rights to HCB.
- SunSouth sued First NBC and HCB claiming breach of the Participation Agreement (i.e., entitlement to sale proceeds), but the district court dismissed for lack of jurisdiction under FIRREA because SunSouth had not exhausted administrative remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FIRREA §1821(d) administrative-exhaustion bars SunSouth’s suit | SunSouth: claims are against successors (First NBC/HCB), not the failed bank, so exhaustion does not apply | Defendants: the claims arise from prereceivership acts of Central Progressive (the failed bank); exhaustion applies | Held: Exhaustion applies because the genesis of the claims is prereceivership misconduct by the failed bank; district court lacked jurisdiction |
| Whether plaintiff can avoid exhaustion by suing successor institutions | SunSouth: can sue successors for failure-to-cure and therefore avoid FIRREA process | Defendants: allowing that would let plaintiffs circumvent FIRREA and frustrate the statute’s purpose | Held: Plaintiffs cannot evade exhaustion by naming successors; actor responsible governs applicability |
| Whether Central Progressive’s anticipatory breach gave SunSouth an immediate cause of action under Louisiana law | SunSouth: Central Progressive’s refusal to honor the Agreement was an anticipatory breach entitling SunSouth to relief | Defendants: (implicit) even if breach existed, remedy must proceed through FIRREA administrative process because the failed bank caused the injury | Held: Court recognizes an anticipatory breach under Louisiana law but still treats the claim as one relating to the failed bank, so FIRREA exhaustion controls |
| Constitutional claims against private successors based on FDIC actions | SunSouth: FDIC actions violated Due Process and Takings, and successors are liable | Defendants: Fifth Amendment applies only to governmental actors; P&A did not assume constitutional liability | Held: Successors are not subject to the Fifth Amendment; P&A contained no assumption of constitutional liability |
Key Cases Cited
- Damiano v. FDIC, 104 F.3d 328 (11th Cir. 1997) (standard of review for FIRREA exhaustion dismissal)
- American First Fed., Inc. v. Lake Forest Park, Inc., 198 F.3d 1259 (11th Cir. 1999) (jurisdiction barred until FIRREA administrative remedies exhausted)
- Westberg v. FDIC, 741 F.3d 1301 (D.C. Cir. 2014) (actor responsible for alleged wrongdoing determines FIRREA exhaustion applicability)
- American Nat’l Ins. Co. v. FDIC, 642 F.3d 1137 (D.C. Cir. 2011) (claims functionally against failed bank fall within FIRREA claims process)
- Tri-State Hotels, Inc. v. FDIC, 79 F.3d 707 (8th Cir. 1996) (claims rooted in prereceivership misconduct subject to FIRREA exhaustion)
- B & G Crane Serv., Inc. v. Aetna Cas. & Sur. Co., 586 So. 2d 710 (La. Ct. App. 1991) (anticipatory breach under Louisiana law)
- S.F. Arts & Athletics, Inc. v. U.S. Olympic Committee, 483 U.S. 522 (U.S. 1987) (Fifth Amendment applies to governmental actors)