Westberg v. Federal Deposit Insurance Corporation
926 F. Supp. 2d 61
D.D.C.2013Background
- In May 2008, Westbergs obtained a construction loan from Silver State Bank to build a home on real property in Arizona, with a lien on the property.
- The Westbergs received a first draw of $171,510.95, but received no further disbursements as construction could not be completed before the bank failed.
- FDIC, as receiver, repudiated the loan and instructed that outstanding funded amounts should be repaid under the loan terms.
- The Westbergs filed an FDIC administrative claim for damages related to repudiation, which the FDIC denied.
- FDIC sold the Westberg loan to Multibank in February 2010; Multibank then demanded repayment.
- The Westbergs amended the complaint to add Multibank as a defendant to the declaratory judgment claim; the court granted summary judgment against the FDIC while allowing Multibank to remain.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FIRREA bars the claim against Multibank | Westbergs: FIRREA bars suits by assignees? (implied) they seek rights against an asset. | Multibank: FIRREA jurisdiction bars claims seeking rights to assets of a failed bank unless administratively exhausted. | FIRREA applies; court lacks jurisdiction over the declaratory claim against Multibank. |
| Whether the Westbergs exhausted administrative remedies for the declaratory claim | Westbergs: damages claim exhausted remedies and the form limited to monetary relief; declaratory relief should follow. | WD: exhaustion required for each claim; damages claim does not exhaust rights determination claim. | Westbergs did not exhaust for the declaratory claim; dismissal with prejudice. |
| Whether American National Ins. Co. v. FDIC controls the outcome | Westbergs rely on American National to avoid FIRREA exhaustion for independent third-party conduct. | American National is distinguishable; claim is against Multibank as assignee seeking rights in an asset of a failed bank. | American National distinguished; no independent conduct by Multibank; FIRREA applies. |
| Whether the Westbergs’ claim is against Multibank for its own wrongdoing or a right determination about an asset | Plaintiffs argue Multibank’s independent actions support non-FIRREA relief. | Claim is a determination of rights to an asset of a failed bank, not independent acts by Multibank. | Claim seeks a determination of rights with respect to an asset; FIRREA applies and requires exhaustion. |
Key Cases Cited
- Freeman v. FDIC, 56 F.3d 1394 (D.C. Cir. 1995) (exhaustion required for claims against failed banks under FIRREA)
- Village of Oakwood v. State Bank and Trust Co., 539 F.3d 373 (6th Cir. 2008) (acquiring bank stands in the shoes of the receiver; circumventing FIRREA bar is disfavored)
- American National Ins. Co. v. FDIC, 642 F.3d 1137 (D.C. Cir. 2011) (claims against third parties for independent wrongdoing are not FIRREA 'claims' subject to admin process)
- Tri-State Hotels, Inc. v. F.D.I.C., 79 F.3d 707 (8th Cir. 1996) (declaratory judgments may be barred if not exhausted under FIRREA)
- National Union Fire Ins. Co. of Pittsburgh, Pa. v. City Sav., F.S.B., 28 F.3d 376 (3d Cir. 1994) (claims designated as determinations of rights under FIRREA)
- Nashville Lodging Co. v. Resolution Trust Corp., 59 F.3d 236 (D.C. Cir. 1995) (FDIC’s repudiation and damages framework; administrative process for claims)