Westberg v. FEDERAL DEPOSIT INSURANCE CORPORATION
759 F. Supp. 2d 38
D.D.C.2011Background
- Plaintiffs own residential property in Maricopa County, AZ and obtained a $1,318,000 construction loan from Silver State Bank in May 2008.
- They executed a Residential Construction Loan Agreement, a Promissory Note, and a Deed of Trust securing the loan; initial disbursement of $171,510.95 occurred.
- A second draw request in September 2008 was denied; no further disbursements followed.
- FDIC, as receiver for Silver State Bank, repudiated the loan in April 2009 and directed plaintiffs to repay disbursed funds while leaving the Note and Deed of Trust intact.
- FDIC later sold the loan to Multibank; plaintiffs amended the complaint to seek declaratory relief against FDIC and Multibank for discharge of obligations and damages.
- Court granted FDIC’s motion to dismiss Count I against FDIC and Count II (damages) under FIRREA; denied Multibank’s motion to dismiss Count I against Multibank.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Count I is moot as to the FDIC | Westberg contends FDIC retains rights entangling declared relief. | FDIC sold loan to Multibank, mooting the declaratory relief claim. | Count I against FDIC dismissed as moot. |
| Whether FDIC retains a legally cognizable interest in Count I | FDIC maintains entanglement or rights that make relief viable. | Any such rights do not authorize repayment enforcement or declaratory relief. | FDIC lacks interest; Count I against FDIC dismissed. |
| Whether Count I should be dismissed as to Multibank | Multibank is proper defendant for declaratory relief related to the loan. | Sale to Multibank leaves Multibank as the enforcer, but arguments depend on the FDIC’s mootness defenses. | Count I dismissed as to Multibank was denied; Multibank not properly dismissed at this stage. |
| Whether Count II fails to state a claim for damages under FIRREA | Damages for project delays and other costs are compensable and pled sufficiently. | Damages must be actual, direct, and lawfully compensable under FIRREA; plaintiffs failed to plead nexus and specifics. | Count II dismissed without prejudice for failure to state a FIRREA-allowable claim. |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (standing and jurisdiction burden on plaintiff)
- Akinseye v. District of Columbia, 339 F.3d 970 (D.C. Cir. 2003) (subject-matter jurisdiction requires proper standing)
- City of Erie v. Pap's A.M., 529 U.S. 277 (2000) (mootness and live controversy doctrine)
- 21st Century Telesis Joint Venture v. Fed. Comm'ns Comm'n, 318 F.3d 192 (D.C. Cir. 2003) (ongoing live controversy assessment for mootness)
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) (plausibility standard for pleading)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (2007) (pleading must show plausible claim, not mere speculation)
- McMillian v. FDIC, 81 F.3d 1041 (11th Cir. 1996) (FIRREA damages limited to direct compensatory damages)
- Nashville Lodging Co. v. Resolution Trust Corp., 59 F.3d 236 (D.C. Cir. 1995) (damages under FIRREA guidance on recoverable costs)