WMI LIQUIDATING TRUST, Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant.
Civil Action No. 14-1816 (RBW)
United States District Court, District of Columbia.
Signed June 9, 2015
REGGIE B. WALTON, United States District Judge
The Supreme Court has long recognized the general rule that a party must exhaust its administrative remedies before seeking relief from federal courts. See McCarthy v. Madigan, 503 U.S. 140, 144-45, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992). The exhaustion doctrine serves the interests of judicial economy, by offering an agency the opportunity to correct its own errors and to develop an administrative record, and separation of powers, by assuring that courts do not unduly intrude into the operations of executive branch administrative agencies. Id.
While Crowe suggests that a party‘s failure to comply with Touhy is not always fatal to a subpoena, it provides limited support for this proposition. See Crowe Opp‘n at 31 (citing Forstmann Leff Assocs. v. American Brands, 1991 WL 168002, at *2 (S.D.N.Y. Aug. 16, 1991)); OCC Reply at 13. In any case, Crowe has not presented exceptional circumstances that would warrant an exception to the requirement that it exhaust its administrative remedies.
In light of Crowe‘s failure to comply with the OCC, FDIC, and Board‘s administrative requirements, the OCC and FDIC‘s Motions to Quash are granted with regard to the three Deposition Subpoenas. Because the Motions are quashed on other grounds, the Court need not determine whether the proposed deponents are protected under the high government official doctrine at this time.
III. Conclusion
For the foregoing reasons, Defendant‘s Motion to Quash shall be granted in part and denied in part. An Order shall accompany this Memorandum Opinion.
REGGIE B. WALTON, United States District Judge
The plaintiff, WMI Liquidating Trust, the successor-in-interest to Washington Mutual, Inc., a now-defunct multiple savings and loan holding company that owned Washington Mutual Bank (“WMB“) and WMI Investment Corporation (“WMI“),1 filed this civil suit against the defendant, the Federal Deposit Insurance Corporation (“FDIC“), seeking judicial review under the Administrative Procedure Act (“APA“),
David Bruce Hird, Weil, Gotshal & Manges, L.L.P., Washington, DC, Brian S. Rosen, Cheryl A. James, John P. Mastando, III, Weil, Gotshal & Manges, LLP, New York, NY, for Plaintiff.
Erik Bond, Federal Deposit Insurance Corporation, Arlington, VA, for Defendant.
A. Statutory And Regulatory Background
The Federal Deposit Insurance Act (“FDIA“) gives the FDIC the power to “prohibit or limit, by regulation or order, any golden parachute payment.”
any payment (or any agreement to make any payment) in the nature of compensation by any insured depository institution or covered company for the benefit of any institution-affiliated party 3 pursuant to an obligation of such institution or covered company that—
(i) is contingent on the termination of such party‘s affiliation with the institution or covered company; and—
(ii) is received on or after the date on which—
(I) the insured depository institution or covered company, or any insured depository institution subsidiary of such covered company, is insolvent;
(II) any conservator or receiver is appointed for such institution;
(III) the institution‘s appropriate Federal banking agency determines that the insured depository institution is in a troubled condition (as defined in the regulations prescribed pursuant to section 1831i(f) of this title);
(IV) the insured depository institution has been assigned a composite rating by the appropriate Federal banking agency or the Corporation of 4 or 5 under the Uniform Financial Institutions Rating System; or
(V) the insured depository institution is subject to a proceeding initiated by the Corporation to terminate or suspend deposit insurance for such institution.
(A) [w]hether there is a reasonable basis to believe that the institution-affiliated party has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the depository institution or covered company that has had a material [e]ffect on the financial condition of the institution[;]
(B) [w]hether there is a reasonable basis to believe that the institution-affiliated party is substantially responsible for—
(i) the insolvency of the depository institution or covered company;
(ii) the appointment of a conservator or receiver for the depository institution; or
(iii) the troubled condition of the depository institution (as defined in the regulations prescribed pursuant to section 1831i(f) of this title)[;]
(C) [w]hether there is a reasonable basis to believe that the institution-affiliated party has materially violated any applicable [f]ederal or [s]tate banking law or regulation that has had a material [e]ffect on the financial condition of the institution[;]
(D) [w]hether there is a reasonable basis to believe that the institution-affiliated party has violated or conspired to violate—
(i) section[s] 215, 656, 657, 1005, 1006, 1007, 1014, 1032, or 1344 of Title 18; or
(ii) section[s] 1341 or 1343 of such title affecting a federally insured financial institution[;]
(E) [w]hether the institution-affiliated party was in a position of managerial or fiduciary responsibility[; and]
(F) [t]he length of time the party was affiliated with the insured depository institution or covered company, and the degree to which—
(i) the payment reasonably reflects compensation earned over the period of employment; and
(ii) the compensation involved represents a reasonable payment for services rendered.
(1) [t]he appropriate federal banking agency, with the written concurrence of the [FDIC], determines that such a payment or agreement is permissible4; or
(2) [s]uch an agreement is made in order to hire a person to become an IAP either at a time when the insured depository institution or depository institution holding company satisfies or in an effort to prevent it from imminently satisfying any of the criteria set forth in § 359.1(f)(1)(ii), and the institution‘s appropriate federal banking agency and the [FDIC] consent in writing to the amount and terms of the golden parachute payment. Such consent by the FDIC and the institution‘s appropriate federal banking agency shall not improve the IAP‘s position
in the event of the insolvency of the institution since such consent can neither bind a receiver nor affect the provability of receivership claims. In the event that the institution is placed into receivership or conservatorship, the FDIC and/or the institution‘s appropriate federal banking agency shall not be obligated to pay the promised golden parachute and the IAP shall not be accorded preferential treatment on the basis of such prior approval5; or
(3) [s]uch a payment is made pursuant to an agreement which provides for a reasonable severance payment, not to exceed twelve months salary, to an IAP in the event of a change in control of the insured depository institution; provided, however, that an insured depository institution or depository institution holding company shall obtain the consent of the appropriate federal banking agency prior to making such a payment and this paragraph (a)(3) shall not apply to any change in control of an insured depository institution which results from . . . the insured depository institution being placed into conservatorship or receivership. . . .6
(4) [a]n insured depository institution, depository institution holding company or IAP making a request pursuant to paragraphs (a)(1) through (3) of this section shall demonstrate that it does not possess and is not aware of any information, evidence, documents or other materials which would indicate that there is a reasonable basis to believe, at the time such payment is proposed to be made, that:
(i) The IAP has committed any fraudulent act or omission, breach of trust or fiduciary duty, or insider abuse with regard to the depository institution or depository institution holding company that has had or is likely to have a material adverse effect on the institution or holding company;
(ii) The IAP is substantially responsible for the insolvency of, the appointment of a conservator or receiver for, or the troubled condition, as defined by applicable regulations of the appropriate federal banking agency, of the insured depository institution, depository institution holding company or any insured depository institution subsidiary of such holding company;
(iii) The IAP has materially violated any applicable federal or state banking law or regulation that has had or is likely to have a material effect on the insured depository institution or depository institution holding company; and
(iv) The IAP has violated or conspired to violate section[s] 215, 656, 657, 1005, 1006, 1007, 1014, 1032, or 1344 of title 18 of the United States Code, or section[s] 1341 or
1343 of such title affecting a federally insured financial institution as defined in title 18 of the United States Code.
Second, and notwithstanding the fact that the applicant has met its burden as outlined in
(1) [w]hether, and to what degree, the IAP was in a position of managerial or fiduciary responsibility;
(2) [t]he length of time the IAP was affiliated with the insured depository institution or depository institution holding company, and the degree to which the proposed payment represents a reasonable payment for services rendered over the period of employment; and
(3) [a]ny other factors or circumstances which would indicate that the proposed payment would be contrary to the intent of section 18(k) of the [FDIA] or this part.
B. Factual And Procedural Background
On September 25, 2008, the Office of Thrift Supervision closed WMB and appointed the FDIC as receiver of the bank.7 Compl. ¶ 16; see also J.A. at AR 0003, 0964-66. Immediately thereafter, the FDIC “sold substantially all of the assets of WMB to JPMorgan Chase Bank, [National Association],” Compl. ¶ 16; see also J.A. at AR 0003, and the debtors commenced Chapter 11 bankruptcy proceedings, Compl. ¶ 17; see also J.A. at AR 0967-78. As part of the bankruptcy proceedings, many former officers and employees of the debtors filed claims (the “claimants“) against the debtors, “seeking recovery from the WMI estate . . . , asserting that WMI owed them unearned severance and special bonus payments . . . .” Def.‘s Mem. at 6 (citing J.A. at AR 0315, 0318); see also Compl. ¶ 21. Such recovery is sought by the claimants pursuant to various “employment contracts and employee benefit plans” that they executed with the debtors, Compl. ¶ 24, specifically “Change in Control Agreements,” “Retention Bonus Agreements,” “Severance Plans,” “Signing Bonus Agreements,” and “Equity Incentive Plans,” J.A. at AR 1006–09; see also Compl. ¶ 24.
Years later, on March 6, 2012, the plaintiff assumed responsibility for the administration of the debtors’ bankruptcy cases
“[The plaintiff] sought to obtain regulatory approval for paying the [s]ettled [c]laims through a multi-step process” with the FDIC. Def.‘s Mem. at 9 (citing J.A. at AR 0001-310). Through this process, the FDIC advised the plaintiff that it “was a covered company subject to the [g]olden [p]arachute] [r]egulations” and that because the settlement agreements “provided for golden parachute payments,” the payments “required regulatory approval.” Id. (citing J.A. at AR 0311-13); see also J.A. at AR 0312 (“[T]he [plaintiff] must file an application for regulatory approval to pay the settlements in accordance with [
II. STANDARD OF REVIEW
In a case involving review of final administrative action, the summary judgment standard of review set forth in Federal Rule of Civil Procedure 56 does not apply. E.g., Se. Conference v. Vilsack, 684 F.Supp.2d 135, 142 (D.D.C. 2010). Rather, a court must “decid[e], as a matter of law, whether an agency action is supported by the administrative record and consistent with the . . . [arbitrary and capricious] standard of review [under the APA].” Loma Linda Univ. Med. Ctr. v. Sebelius, 684 F.Supp.2d 42, 52 (D.D.C. 2010) (citing Stuttering Found. of Am. v. Springer, 498 F.Supp.2d 203, 207 (D.D.C. 2007)), aff‘d, 408 Fed.Appx. 383 (D.C. Cir. 2010); see also Richards v. INS, 554 F.2d 1173, 1177 & n. 28 (D.C. Cir. 1977).
“Arbitrary and capricious” review is “highly deferential” and “presumes the agency‘s action to be valid.” Envt‘l. Def. Fund, Inc. v. Costle, 657 F.2d 275, 283 (D.C. Cir. 1981). “The scope of review under the ‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment for that of the agency.” Mo-tor Vehicle Mfrs. Ass‘n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). Rather, “court[s] consider[] whether the agency acted within the scope of its legal authority, whether the agency has explained its decision, whether the facts on which the agency purports to have relied have some basis in the record, and whether the agency considered the relevant factors.” Fund for Animals v. Babbitt, 903 F.Supp. 96, 105 (D.D.C. 1995) (citing Marsh v. Or. Natural Res. Council, 490 U.S. 360, 378, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989)). Courts “will uphold a decision of less than ideal clarity if the agency‘s path may reasonably be discerned.” Pub. Citizen, Inc. v. FAA, 988 F.2d 186, 197 (D.C. Cir. 1993) (internal quotation marks omitted). In sum, “when a party seeks review of agency action under the APA, the district . . . [court] sits as an appellate tribunal,” and “[t]he ‘entire case’ on review is a question of law.” Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (footnote and citations omitted).
III. ANALYSIS
A. Count One Of The Plaintiff‘s Complaint
Count one of the plaintiff‘s complaint seeks to set aside the FDIC‘s wholesale denial of the plaintiff‘s payment application and its proposed payments to the claimants. Compl. ¶¶ 50-58. In making this challenge, the plaintiff does not dispute that the golden parachute regulations promulgated by the FDIC are a reasonable interpretation of the FDIA, and thus they are entitled to deference from the Court. E.g., Fogo De Chao (Holdings) Inc. v. U.S. Dep‘t of Homeland Sec., 769 F.3d 1127, 1135 (D.C. Cir. 2014) (“We generally accord substantial deference to an agency‘s interpretation of both a statute it administers and its own implementing regulations.“). The plaintiff admits that under the FDIC‘s regulations it “is subject to the [g]olden [p]arachute [r]egulations” and “cannot make the . . . [proposed] [p]ayments . . . as set forth in the . . . [a]pplication without the regulatory approval that it has sought” from the FDIC. Pl.‘s Mem. at 13-14. And the plaintiff concedes that, in the context of its application, the “only relevant exception” to the prohibition against golden parachute payments is the permissibility exception under
1. The FDIC‘s 12 C.F.R. 359.4(a)(4) Analysis
Even where an agency has adopted a reasonable construction of a governing statute, the Court “still must ensure that [the agency‘s] action is not otherwise arbitrary and capricious.” Int‘l Union, United Mine Workers of Am. v. Mine Safety & Health Admin., 626 F.3d 84, 90 (D.C. Cir. 2010). An agency may be said to have acted arbitrarily or capriciously when it disregards its established policy without adequate explanation. See INS v. Yang, 519 U.S. 26, 32, 117 S.Ct. 350, 136 L.Ed.2d 288 (1996) (“Though the agency‘s
Here, in considering whether the plaintiff fulfilled its burden under
a. 12 C.F.R. 359.4(b)(1) Analysis
As an initial matter, in examining the relevant data submitted by the plaintiff in support of its application, the Court finds that the FDIC reasonably concluded that the claimants had either managerial or fiduciary responsibilities while employed by the debtors.11 See J.A. at AR 1011–14 (describing managerial and fiduciary responsibilities of claimants); see also
The plaintiff contends that the FDIC clearly erred in its analysis under
b. 12 C.F.R. 359.4(b)(2) Analysis
In October 2010, the FDIC published a Financial Institution Letter entitled “Guidance on Golden Parachute Applications”
Here, the Court finds that the FDIC examined the relevant data and reasonably concluded that the component of any proposed payment attributable to a claim under a Change in Control Agreement (“Change in Control component“) was not reasonable.12 J.A. at AR 1002; id. at 1016-17. Notably, the plaintiff does not challenge the FDIC‘s conclusion that “the Change in Control . . . [Agreements] were voided by operation of law under [
The plaintiff is nonetheless adamant that the FDIC‘s analysis is flawed in this instance because while the FDIC “reli[ed] on the [Change in Control] [e]xception,” it also claimed that the Change in Control exception was “not at issue here.” Pl.‘s Mem. at 19-21 (internal quotation marks omitted). However, the Court sees nothing clearly erroneous with the FDIC‘s analysis. Neither the FDIA nor the implementing regulations bars the FDIC from considering whether a proposed payment would satisfy
The plaintiff also argues that the FDIC denied payment of any Change in Control component of the proposed payments solely because the component did not qualify for the Change in Control exception under
ponent of the proposed payments did not qualify for the Change in Control exception was just one factor that made this component of the proposed payments impermissible. See J.A. at AR 1015-19 (conducting
Count two of the plaintiff‘s complaint “seek[s] a declaration, under the applicable standard of review for an APA action, of the same rights that it seeks in [count] [one].” Pl.‘s Opp‘n at 16; see also Compl. ¶¶ 59-67. The FDIC moves to dismiss count two of the complaint because, inter alia, it is duplicative of count one. See Def.‘s Mem. at 32. The Court agrees with the FDIC.
A court may dismiss duplicative claims in its discretion. See, e.g., Wultz v. Islamic Republic of Iran, 755 F.Supp.2d 1, 81 (D.D.C.2010) (stating that, “[a]s a matter of judicial economy, courts should dismiss” duplicative claims). Claims are duplicative when they “stem from identical allegations, that are decided under identical legal standards, and for which identical relief is available.” Id. at 81. Here, because count two “does not present any legal or factual theories that are not already subsumed in . . . [count one],” Rodriguez v. Lab. Corp. of Am. Holdings, 13 F.Supp.3d 121, 128 (D.D.C. 2014), the Court will dismiss count two.
IV. CONCLUSION
For the foregoing reasons, the Court concludes that it must remand this case to the FDIC so that it can, at a minimum: (1) clarify why the plaintiff‘s apparent failure to comply with the certification requirements of
SO ORDERED this 9th day of June, 2015.17
Notes
REGGIE B. WALTON
United States District Judge
INDIAN RIVER COUNTY, et al., Plaintiffs, v. Peter M. ROGOFF, et al., Defendants. Martin County, Florida, et al., Plaintiffs, v. Department of Transportation, et al., Defendants.
Case No. 1:15-cv-00460 (CRC), Case No. 1:15-cv-00632 (CRC)
United States District Court, District of Columbia.
Signed June 10, 2015