PEDRO A. DELGADO-HERNÁNDEZ, District Judge.
Doral Bank initiated this action seeking declaratory and injunctive relief against enforcement of a final and non-appealable Judgment and orders of the Fajardo Part of the Court of First Instance of Puerto Rico (Docket No. 1 at ¶¶ 8 and 32).
Doral is a federally insured banking institution dully organized and authorized to do business in Puerto Rico. In 2005, it granted certain credit facilities to Social Interest Growth Associates Corporation ("SIGA") collateralized by, among other things, mortgages on certain real estate owned by SIGA. SIGA operated a wastewater treatment plant in one of the properties that served as collateral.
In November 2008, after SIGA defaulted on its obligations, Doral sued SIGA in state court for collection of monies and foreclosure. In June 2009, it obtained a Judgment in its favor. SIGA, however, failed to pay Doral the monies owed. Doral did not foreclose its mortgage on the property. Upon or immediately after SIGA's default, SIGA abandoned the property and failed to maintain or continue operation of the wastewater treatment plant. The unattended plant began to release
In February 2011, Doral initiated a different but related action against SIGA in state court, seeking entry of a preliminary and permanent injunction to avoid the deterioration of the mortgaged property.
In April 2012, the state court entered Judgment in favor of Doral, ordering SIGA, inter alia, to correct all deficiencies in the treatment plant within sixty (60) days; to operate the wastewater treatment plant; and to file periodic reports with the court stating its compliance with the terms of the Judgment (Docket No. 1, Exh. 3). Further, it stated that in the event SIGA failed to comply with the orders that were made part of the Judgment, the court would place the wastewater treatment plant under receivership and order Doral to cover the costs and expenses necessary for the implementation of the Judgment, and allow Doral to recover those expenses from SIGA. Id.
Doral did not seek review of the Judgment, which subsequently became final and non-appealable. Approximately four (4) months later, in August 2012, it entered into a Consent Order with the Federal Deposit Insurance Corporation ("FDIC") under 12 U.S.C. § 1818(b). See, In the Matter of Doral Bank San Juan, Puerto Rico (Insured State Nonmember bank), FDIC-12-134b (Docket No. 1, Exh. D). Among other things, the Consent Order prohibits Doral from extending, directly or indirectly, any additional credit to, or for the benefit of, any borrower whose loan or other credit is more than 90 days delinquent or has been classified as "Substandard," "Doubtful," or is listed for "Special Mention" in the FDIC's Report of examination. Id.
In December 2012, after SIGA notified the state court that it lacked the financial resources to comply with the Judgment, the court placed the wastewater treatment plant under receivership. As anticipated in the April 2012 Judgment, the court ordered Doral to employ a court-appointed administrator, and to perform all work necessary to ensure the operation of the wastewater treatment plant in compliance with applicable law and regulations (Docket No. 1, Exh. E). Additionally, it required Doral to disburse the monies necessary to complete all repair and maintenance work at the wastewater treatment plant.
On January 8, 2013, Doral requested reconsideration of the Order (Docket No. 41, Exh. 2), which the state court denied on January 10, 2013. Doral then sought discretionary review of the Order with the Puerto Rico Court of Appeals and the Puerto Rico Supreme Court, but neither
On March 21, 2014, the Environmental Quality Board of Puerto Rico ("EQB") moved to intervene, and requested sanctions against Doral for Doral's failure to assume financial responsibility for the operation of the wastewater treatment plant. The court ordered Doral to comply with the 2012 Order or face a daily penalty of $1,000.00 from the date it was first ordered to rehabilitate the wastewater treatment plant in 2012 (Docket No. 2 at p. 4).
On April 15, 2014, Doral filed an Urgent Motion for Relief of Judgment under Rule 49.2 of the Puerto Rico Rules of Civil Procedure and a separate Informative Motion. In these motions it informed the state court, for the first time, of the Consent Order it had entered into with the FDIC, arguing that the Consent Order barred Doral from complying with the state court's Order. In Doral's view, requiring it to disburse funds to operate the wastewater treatment plant would subject Doral to substantial monetary penalties from the FDIC for noncompliance with the Consent Order.
On May 15, 2014, the state court denied Doral's request, characterizing it as legally "inappropriate, since it was not filed within the final term of six months provided by Rule 49.2 of Civil Procedure, and in the alternative, since there [were] no legal grounds that would justify it" (Docket No. 33 at p. 23). The court stated that the Judgment untimely challenged by Doral was "final and unappealable;" noted that the Consent Order submitted by Doral in support of its motion (only a portion of which was submitted to the court) did not prohibit Doral from disbursing funds to comply with a "final and unappealable court decision;" and expressed that:
Id. at pp. 25-26.
Finally, the court reasserted Doral's obligation to comply with its order within five (5) days, warning Doral that failure to comply with the order would result in a daily penalty of $1,000.00 for each day retroactive to December 21, 2012. Id. Doral, however, failed to comply with the court's Order. On July 7, 2014, at the EQB's request, the court further ordered Doral to identify, in five (5) days, all measures taken to ensure compliance with its Order. It is unclear whether Doral complied with that Order. This suit followed.
On July 22, 2014, Doral initiated the present action against the FDIC, the Court of First Instance, the EQB, and SIGA, seeking declaratory and injunctive relief against enforcement of the state court Judgment and related orders for contravening the Consent Order entered
The same day, Doral filed an "Ex Parte Motion for Temporary Restraining Order and Motion Requesting Injunctive Relief Pursuant to Fed.R.Civ.P.65(a)" (Docket No. 2), which the Court denied on July 23, 2014, expressing doubts as to its jurisdiction (Docket No. 15). On August 4, 2014, Doral filed a "Motion for Reconsideration of Order Denying Temporary Restraining Order and Motion for Expedited Briefing Schedule" (Docket No. 19), requesting the Court to reconsider its order denying the TRO Motion, expedite the briefing schedule and set a hearing. The next day, the Court granted in part and denied in part Doral's motion (Docket No. 20).
While denying Doral's request for a reconsideration of the order denying the TRO, the Court granted Doral's request to expedite the briefing schedule before issuing a definite ruling on the jurisdictional question; ordered each party to file a memorandum of law on various jurisdiction related issues; and scheduled a hearing for August 14, 2014 at 9:30 a.m. to argue the jurisdictional question. Id.
Following an emergency motion for extension of time and continuance of the argumentative hearing filed by the Commonwealth Defendants, the Court extended the deadline to submit the memoranda until August 15, 2014 at 5:00 p.m. and rescheduled the hearing for August 20, 2014 at 9:30 a.m. All parties filed their respective memorandum of law (Docket Nos. 37, 38, 40 and 41). Defendants challenged the Court's subject matter jurisdiction. The FDIC additionally requested dismissal of the action under Fed.R.Civ.P. 12(b)(6).
During the hearing, the parties had ample opportunity to argue their respective positions, and were granted until August 25, 2014 to file supplementary briefs. Doral, in turn, was ordered to provide the Court with the date of the Supreme Court of Puerto Rico's denial of its discretionary review (Certiorari) Petition and to respond to the FDIC's arguments under Fed.R.Civ.P. 12(b)(6). The parties filed their corresponding briefs at Docket Nos. 45-47 and 49. Doral responded to the FDIC's Motion to Dismiss at Docket No. 48.
Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Erwin Chemerinsky, Federal Jurisdiction, 265 (Aspen Publishers, 5th ed.2007). They possess only that power authorized by the Constitution and statute. Willy v. Coastal Corp., 503 U.S. 131, 136-137, 112 S.Ct. 1076, 117 L.Ed.2d 280 (1992). For the same reason, they may assume only that portion of the Article III judicial power which Congress, by statute, entrusts to them. It is up to Congress to determine when, and under what conditions federal courts can hear cases. Bowles v. Russell, 551 U.S. 205, 212-213, 127 S.Ct. 2360, 168 L.Ed.2d 96 (2007).
Congressional authority includes the power of investing inferior federal courts with jurisdiction either limited, concurrent, or exclusive, and of withholding jurisdiction from them in the exact degrees and character which to Congress may seem proper for the public good. Lockerty v. Phillips, 319 U.S. 182, 187, 63 S.Ct. 1019, 87 L.Ed. 1339 (1943); Abercrombie v. Office of the Comptroller of the Currency, 833 F.2d 672, 674 (7th Cir.1987). That jurisdiction is not to be expanded by judicial decree. Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673. It is to be presumed that a cause lies outside this limited jurisdiction. Id. The burden of establishing that subject matter jurisdiction exists rests upon the party asserting jurisdiction. Viqueira v. First Bank, 140 F.3d 12, 16 (1st Cir.1998); Aversa v. United States, 99 F.3d 1200, 1209 (1st Cir.1996).
Doral contends the Court has jurisdiction pursuant to 28 U.S.C. § 1331.
In response to an epidemic of bank closures, Congress established the FDIC in 1933 to restore confidence in the nation's banking system by creating a system of deposit insurance. See, Banking Act of 1933, 48 Stat 163. Subsequent legislation has expanded the FDIC's role in this area. See e.g. FDIC Act of 1950, 64 Stat. 873; Financial Institutions Supervisory Act of 1966 ("FISA"), Pub.L. No. 89-695, 80 Stat. 1028; Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183; Federal Deposit Insurance Corporation Improvement Act of 1991("FDICIA"), Pub.L. 102-242, 105 Stat. 2236; Federal Deposit Insurance Reform Act of 2005, Pub.L. No. 109-171 ("FDIRA"); and Financial Services Regulatory Relief Act of
With this authority, the FDIC may undertake a variety of enforcement actions against institutions or affiliated parties that violate laws or engage in unsafe and unsound practices, including cease-and-desist orders, monetary penalties, termination of deposit insurance, and suspension or removal of individuals from participating in the banking industry. See, 12 U.S.C. §§ 1818(a) (termination of deposit insurance), 1818(b) (cease and desist proceedings), 1818(c) (issuance of emergency/temporary cease and desist orders), 1818(e) (initiation of proceedings to suspend or remove individuals from participation in the banking industry), 1818(g) (suspension, removal and prohibition from participation orders), 1818(i) (civil money penalties), 1818(n)(ancillary provisions). Similarly, it may enter into formal agreements with depository institutions or institution-affiliated parties in which those institutions or persons undertake action or refrain from certain action in managing the affairs of their institutions, that otherwise would lead the agency to pursue formal cease and desist proceedings through the issuance of a Notice of Charges. See, 12 U.S.C. § 1818(b).
Given the importance of the public interest underlying this legislation, Congress saw fit to prescribe specific statutory mechanisms for judicial review. To that end, it established a tripartite regime of review, found at 12 U.S.C. § 1818. First, Section 1818(c)(2) provides that, within ten (10) days after service of a temporary cease and desist order, a holding company may seek an injunction in district court restraining enforcement of the order pending completion of the related administrative process. Second, pursuant to Section 1818(h) the courts of appeals are vested with exclusive jurisdiction to review final cease and desist orders on the application of an aggrieved party. Third, Section 1818(i)(1) empowers the FDIC and other federal banking agencies (as opposed to the regulated banking entity) to apply to the district court for enforcement of any outstanding order, whether temporary or final, specifying that "except as otherwise provided in this section no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order under this section, or to review, modify, suspend, terminate, or set aside any such notice or order." 12 U.S.C. § 1818(i)(1).
Consent Orders are orders issued under the authority of Section 1818(b), and fall squarely within the scope of Section 1818(i)(1)'s prohibition. See, Henry v. Office of Thrift Supervision, 43 F.3d 507,
Doral has requested a declaration of rights and obligations under the Consent Order in light of the Judgment and subsequent orders issued by the state court. See, Docket No. 1 at pp. 8-9; and Docket No. 47 at pp. 2-3. The declaration would necessarily call for a review of the terms of the Consent Order, with the consequence of affecting its enforcement by the FDIC. The request for relief need not be in direct contravention of the Consent Order to affect enforcement of the order. Bakenie, 2012 WL 4125890 at *4. But even Doral has acknowledged that to issue the declaratory relief, the Court will necessarily have to interpret the Consent Order, and may affect the FDIC's rights and obligations under the order. See, Docket No. 19 at p. 5; and Docket No. 47 at p. 3.
In these circumstances, the statute's clear circumscription of jurisdiction would be seriously undermined, if not rendered wholly ineffectual, were it read not to apply to this action; an action having exactly the consequence the statute was meant to prohibit. Given that Doral has pointed to no other provision in Section 1818 which would enable the Court to exercise jurisdiction notwithstanding the Section's blanket prohibition, nor argued that any of the specific exceptions to judicial review delineated in the statute applies, no jurisdiction exists in this case.
Doral contends this jurisdictional bar should not be applied because doing so would leave it without a judicial forum to request a declaration of rights and obligations under the Consent Order. See, Docket No. 47 at p. 4. The jurisdictional limitation seeks to prevent regulated entities from interfering with the federal enforcement process. See, Ridder v. Office of Thrift Supervision, 146 F.3d 1035, 1039 (D.C.Cir.1998); CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 741 (D.C.Cir.1995); Groos Nat. Bank v. Comptroller of Currency, 573 F.2d 889, 895 (5th Cir.1978). Adopting Doral's interpretation would interfere with that process.
Section 1818 provides a detailed framework for regulatory enforcement and orderly review of the various stages of enforcement. If in the FDIC's opinion an insured depository institution or any of its directors have engaged in unsafe or unsound business practices or has violated a condition imposed by the FDIC, the FDIC may issue and serve upon such party a notice of charges constituting the alleged violation. 12 U.S.C. § 1818(b)(1). If so, the case is assigned to an Administrative Law Judge who conducts proceedings pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 701-706, and the FDIC's Rules of Practice and Procedure, 12 C.F.R. Pt. 308. If not decided on summary disposition pursuant to 12 C.F.R. § 308.29, the case proceeds to an evidentiary hearing at the conclusion of which the parties may file briefs with post-hearing findings of facts and conclusions of law. See, 12 C.F.R. § 308.35 and 308.36.
Within 45 days after the expiration of time allowed for the filing of post-hearing submissions, the ALJ must issue a recommended decision with findings of fact, conclusions of law, and a proposed order.
In this progression, Doral would have the opportunity to obtain judicial review if and when the FDIC makes a determination that it violated the Consent Order as a result of its compliance with the state court's Judgment of April 19, 2012. What it would not have, is access to federal court at a time of its choosing irrespective of the jurisdictional constraints Congress established in Section § 1818.
Doral argues the Court should rely on the "statutory authority exception" to jurisdictional bars first identified by the Supreme Court in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958). Otherwise, Doral posits, it will be wholly deprived of a meaningful and adequate means of vindicating its rights in violation of the Due Process Clause of the Fifth Amendment. See, Docket No. 40 at p. 10. The premise upon which the argument is construed is incorrect, since Doral may seek judicial review as part of a process with full procedural guarantees under the circumstances delineated earlier. Notwithstanding, the Kyne statutory exception does not apply.
In Kyne, the Supreme Court held that a federal district court had jurisdiction to review a certification decision issued by the National Labor Relations Board that directly conflicted with a provision of the National Labor Relations Act, despite the absence of express authorization for judicial review of such determinations. Kyne, 358 U.S. at 188-89, 79 S.Ct. 180. The Kyne "statutory exception," however, is a "narrow" one.
For the exception to apply, Congress must not have clearly intended to preclude review of the agency's particular determination. Bd. of Governors of Fed. Reserve Sys. v. MCorp Financial, Inc., 502 U.S. 32, 43, 112 S.Ct. 459, 116 L.Ed.2d 358 (1991). If Congress intended otherwise, the exception would not apply. To that end, congressional intent to preclude review must be clear and convincing; it is not enough for the agency to merely contend "that a statutory provision that provide[s] for judicial review implie[s], by its silence, a preclusion of review of the contested determination." Id.
None of the circumstances in Kyne are present here. Whereas in Kyne the National Labor Relations Act was silent as to the availability of judicial review, here Congress "spoke[] clearly and directly" in Section 1818(i)(1) that "no court shall have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any [Board] notice or order under this section." MCorp Financial, Inc., 502 U.S. at 44, 112 S.Ct. 459 (quoting Section 1818(i)(1)) (emphasis in original).
Doral claims the Puerto Rico Supreme Court held in Ponce Fed. Bank v. Chubb Life Ins. Co. 155 D.P.R. 309 (2001), that the only court with jurisdiction to enforce
In reaching that conclusion, the Court expressed that ". . . Congress specifically provided in the statute that `no court shall have jurisdiction' so that no court, federal or state, has jurisdiction to execute any order of the OTS, which arises from a consent decree, unless OT[S] itself so requests it, at its discretion, to the federal district court." Id. at 330. The holding is not only consistent with this Court's conclusion that Section 1818(i) precludes Doral from suing to affect or seek review of the Consent Order, but confirms that subject matter jurisdiction does not exist.
Doral argues jurisdiction exists under 12 U.S.C. § 1819(b)(2)(A) because it included the FDIC as a party, and all civil lawsuits in which the FDIC, in any capacity, is a party, are deemed to arise under the laws of the United States. Id.
Doral cannot circumvent the jurisdictional restrictions of Section 1818(i)(1) through the simple expedient of including the FDIC in the litigation and labeling it an indispensable party. Section 1818(i)(1) precludes the Court from "affect[ing] by injunction or otherwise the issuance of enforcement of a notice or order . . . or to review, modify, suspend, terminate, or set aside any such notice or order" except in circumstances not present in this case. 12 U.S.C. § 1818(i)(1). This is so regardless of whether the FDIC is a party. Were it not so, the inclusion of the FDIC in litigation would render meaningless the jurisdictional prohibition to reach a result Congress did not intend.
Courts should avoid interpretations which would render statutory provisions meaningless. Brown v. United Airlines, 720 F.3d 60, 68-69 (1st Cir.2013). A plaintiff may not avoid the jurisdictional bar by strategically naming a party (FDIC), to make an end run around a statutory prohibition. Acosta-Ramírez v.
When Congress decides to withdraw jurisdiction from the lower federal courts, the judicial inquiry is confined to ascertaining whether the action before the Court falls within the class of controversies that Congress intended to remove from judicial review. First Nat. Bank of Scotia v. United States, 530 F.Supp. 162, 167 (D.D.C.1982). Jurisdictional statutes are due to be construed "with precision and fidelity to the terms by which Congress has expressed its wishes." Palmore v. United States, 411 U.S. 389, 396, 93 S.Ct. 1670, 36 L.Ed.2d 342 (1972); Henry v. Office of Thrift Supervision, 835 F.Supp. 583, 584 (D.Kansas 1993).
Examination of jurisdictional authority begins, and largely ends, with the plain language of the statutory text. The Court is not free to fashion its own exception to the clear, preclusive language of the statute. Congress unequivocally divested federal courts of jurisdiction over matters such as the one Doral has brought to the Court's attention. Exercising jurisdiction would be wholly unwarranted in light of the carefully calibrated scheme established in 12 U.S.C. § 1818. The jurisdictional bar applies to actions for declaratory judgment, and for injunctive relief. Groos Nat'l Bank, 573 F.2d at 895. Therefore, the case should be dismissed for lack of subject matter jurisdiction.
Judgment shall be entered accordingly.
