GARY ALLEN FEESS, District Judge.
Deutsche Bank brings suit on behalf of itself and as trustee for numerous investors who hold mortgage-backed securities issued by IndyMac Bank, FSB. The suit asserts claims against the Federal Deposit Insurance Corporation ("FDIC") in various capacities
Before the recent collapse of the real estate market, IndyMac Bank, FSB, ("IndyMac") aggressively marketed mortgage-backed securities that were sold to investors seeking an income-producing product. These mortgage backed securities consisted of mortgage pools evidenced by certificates held in a trust managed by Deutsche Bank National Trust Company ("Deutsche Bank") as trustee. The securities were created through complex contracts, so-called "Pooling and Servicing Agreements" ("PSAs"), that govern the relationship among Deutsche Bank, the trusts it managed, the investors in the certificates held in those trusts, IndyMac, and certain IndyMac affiliates. One such agreement was created for each pool of mortgages.
For some period of years, the PSAs functioned without any notable difficulty; the mortgages were serviced in the usual course and investors received their periodic payments. But then the real estate market collapsed, mortgage loan defaults skyrocketed, and IndyMac failed. At the direction of the Office of Thrift Supervision ("OTS"), which declared IndyMac insolvent, the Federal Deposit Insurance
At the time of the seizure, OTS authorized the creation of a new federally-chartered savings bank, IndyMac Federal, to which FDIC-R as receiver for IndyMac transferred substantially all of IndyMac's assets. FDIC operated the business of IndyMac for eight months and then sold a substantial portion of IndyMac's assets, including the right to service the mortgage loans deposited into the trusts, to a newly formed financial institution, OneWest Bank. OneWest acquired these rights without being required to assume liabilities that IndyMac had undertaken to maintain the quality of the mortgage loans that had been deposited into the trusts. Deutsche Bank contends that, under the terms of its agreements with IndyMac, the FDIC could not sell the servicing rights without Deutsche Bank's consent, and that the sale of these rights, particularly without requiring an accompanying assumption of liabilities, constitutes a breach of the agreement. Deutsche Bank further contends the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA") does not preempt contractual rights of consent and does not authorize FDIC to breach contracts without paying damages.
The FDIC moves to dismiss all claims related to the sale of assets to OneWest Bank. The FDIC asserts that Deutsche Bank's claims are barred by FIRREA, which it contends preempts any contractual obligation under the PSAs to obtain Deutsche Bank's consent to the sale of the servicing rights. The FDIC also contends that Deutsche Bank, the trusts, and the trust beneficiaries are, at best, third-tier creditors, and that, given the limited assets available for distribution, the Court should dismiss the case on prudential mootness grounds because no recovery is possible. FDIC also argues that FIRREA bars Deustche Bank from pursuing any equitable claims arising out of its seizure of IndyMac. Finally, FDIC contends that Deutsche Bank cannot maintain claims for breach of the covenant of good faith and fair dealing or breach of fiduciary duty and that FDIC's conduct did not constitute a taking or violate due process under the Fifth Amendment of the United States Constitution.
Deutsche Bank vigorously opposes the motion. Deutsche Bank argues that FIRREA does not preempt contractual rights of consent, that the FDIC had the option under FIRREA of performing or repudiating the agreements, and that, having failed to repudiate, it must answer for its breach. Deutsche Bank also contends that, because the PSAs constituted so-called "Qualifying Financial Contracts" under FIRREA, the FDIC acted in violation of FIRREA in transferring PSA assets while retaining the liabilities in an insolvent institution. Deutsche Bank also contends that, because FIRREA does not give the FDIC the authority to breach a failed institution's contracts without paying damages, it is entitled to assert remedies, including equitable remedies, that will allow it to achieve proper compensation for the contract breach.
The motion therefore presents the following issues for resolution:
The first issue is the most important, and the Court resolves the question in favor of Deutsche Bank. The Court concludes that FIRREA Section 1821(d)(2)(G) does not permit FDIC to circumvent its statutory obligation either to honor a failed institution's contracts, or to repudiate them and pay damages. The Court provides a fuller discussion of this, and of the other claims, below.
In considering a Rule 12(b)(6) motion to dismiss, the Court must accept as true all factual allegations pleaded in the complaint and construe them "in the light most favorable to the nonmoving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996); see also Stoner v. Santa Clara County Office of Educ., 502 F.3d 1116, 1120-21 (9th Cir. 2007). Dismissal under Rule 12(b)(6) may
To plead sufficient facts to survive a motion to dismiss, a complaint must allege facts that, "accepted as true, ... `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," the complaint has not sufficiently established that the pleader is entitled to relief. Id. at 1950. And although the Court's consideration of the facts is ordinarily limited to the allegations of the complaint, documents to which a complaint refers and which are not reasonably contested may be considered in ruling on a 12(b)(6) motion. Inlandboatmens Union of Pac. v. Dutra Group, 279 F.3d 1075, 1083 (9th Cir.2002); Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir.1994), cert. denied, 512 U.S. 1219, 114 S.Ct. 2704, 129 L.Ed.2d 832.
The present motion focuses on those claims arising out of the sale of IndyMac assets to One West Bank. Although the sale implicates several legal theories, the arguments center primarily around Deutsche Bank's assertion that the sale breached the terms of the PSAs that governed the relations between IndyMac and Deutsche Bank in regard to the sale and servicing of the mortgage backed securities. Though the terms of the PSAs are lengthy and complex, the terms at issue here are relatively straightforward. Deutsche Bank alleges that IndyMac was given the right and obligation to service the mortgage loan pools for which it received servicing fees (Compl. ¶¶ 35c. & d.; 37-38; Docket No. 46, Opp., Ex. A at 59-74, Article 3); that IndyMac made certain warranties and representations regarding the mortgage pools and promised to take curative steps to maintain the quality of the mortgage pools (Compl. ¶¶ 49-51; Docket No. 46, Opp., Ex. A at 56-57, § 2.03.); that if IndyMac defaulted on its obligations, only Deutsche Bank had the power to act as or hire a successor servicer under the terms of the agreement (Compl. ¶ 56; Docket No. 46, Opp., Ex. A at 60-61, § 3.05); and that, except in limited circumstances not pertinent to this motion, IndyMac could not assign any of its rights under the PSAs without the written consent of the trustee and others. (Compl. ¶ 55; Docket No. 46, Opp., Ex. A at 111, § 10.07.)
Deutsche Bank contends that FDIC violated the contract by transferring the servicing rights to One West without transferring IndyMac's liabilities and obligations to honor the warranties and representations. (Compl. ¶¶ 147, 149.) In addition, they contend that the PSAs constituted "qualified financial contracts," which § 1821(e)(9) of FIRREA required to be conveyed in whole or not at all. (Compl. ¶¶ 147-50.)
Deutsche Bank also contends that FDIC, in its capacities as receiver and
Deutsche Bank contends that in transferring servicing rights to OneWest without also transferring all of IndyMac's obligations under the PSAs amounted to a breach of contract both because it violated the terms of the PSAs and because it violated § 1821(e)(9) of FIRREA. Deutsche Bank cannot prevail under either of these theories.
First, although Deutsche Bank's complaint alleges that the PSAs permit succession "only by a person or entity assuming all of IndyMac's business," no such provision appears in the sample agreement that Deutsche Bank provided the Court. (See generally Docket No. 46, Opp., Ex. A.) The Court may properly refer to this sample PSA in deciding the motion to dismiss. See Branch, 14 F.3d at 453-54. To the extent that Deutsche Bank suggests that IndyMac made other "representations and promises" that a single entity would service the loans and bear the curative obligations (Compl. ¶ 31), it cannot pursue a breach of contract claim on that basis because only written agreements executed by the bank are enforceable against FDIC. 12 U.S.C. § 1823(e)(1).
Second, Deutsche Bank cannot pursue its claim on the theory that the transfer violated § 1821(e)(9). This provision places special limitations on the FDIC's ability to transfer certain "qualified financial contracts," or "QFCs." In particular, it provides that, "[i]n making any transfer of assets or liabilities of a depository institution in default which includes any qualified financial contract," the FDIC as conservator or receiver must either:
12 U.S.C. § 1821(e)(9)(A). QFCs include "any securities contract," which includes "a contract for the purchase, sale, or loan of... a mortgage loan [or] any interest in a mortgage loan." Id. § 1821(e)(8)(D). Such contracts also include:
Id. § 1821(e)(8)(D)(ii)(XI). Deutsche Bank contends that the PSAs constitute QFCs, and that FDIC accordingly violated § 1821(e)(9), and thus breached the contract, by conveying the servicing rights without the related obligations to maintain the quality of the mortgage pools.
As an initial matter, Deutsche Bank cites no authority allowing it to pursue a breach of contract claim on the ground that FDIC failed to comply with statutory restrictions. The Court, however, will consider this claim in substance and analyze it as a freestanding claim for violation of the statute. Even assuming that FIRREA's provisions on the transfer of QFCs gave rise to a private right of action, Deutsche Bank could not prevail because the Court concludes that FDIC did not breach those provisions here. Although each PSA is contained in a single document, the document contains two agreements that IndyMac entered into in two different capacities: as "Seller" and as "Master Servicer." (See Docket No. 46, Opp., Ex. A at 14, 25.) In its capacity as "Seller," IndyMac received money for selling, transferring, and assigning to the Deutsche Bank trusts certain mortgage loans. (Compl. ¶ 36; Docket No. 46, Opp., Ex. A at 34.) In its capacity as "Seller," IndyMac also made certain "representations and warranties," including that "(2) [a]ll regularly scheduled monthly payments due ... have been made"; that "(4) [i]mmediately before the assignment of the Mortgage Loans to the Depositor, the Seller had good title to ... each Mortgage Loan"; that "(6) [t]here is no valid offset, defense or counterclaim to any Mortgage Note or Mortgage"; that "(9) [e]ach Mortgage Loan at origination complied in all material respects with applicable local, state and federal laws and regulations"; and that "(11) [a] lender's policy of title insurance ... was effective on the date of the origination of each Mortgage Loan and each such policy is valid and remains in full force and effect." (Id. at 39, S-III-1-2.) The PSAs further provide that if any party discovered a breach of any of those representations and warranties, IndyMac in its capacity as "Seller" had to cure the breach or substitute or repurchase the affected mortgage loan or loans. (Id. at 39.) In its capacity as "Master Servicer," Indy-Mac agreed to collect and process mortgage payments in return for servicing fees and other compensation. (Id. at 44, 55.) The PSAs do not require IndyMac, in its capacity as Master Servicer, to substitute or repurchase non-performing mortgages.
The agreement under which IndyMac, as Seller, transferred the mortgage loans to the Deutsche Bank trusts clearly constitutes a QFC. See 12 U.S.C. § 1821(e)(8)(D)(ii)(I). The agreement under which IndyMac, as Master Servicer, assumed servicing rights, however, does not. It does not qualify as a sale or transfer of a mortgage loan, or as any other type of agreement constituting a QFC under FIRREA. Section 1821(e) provides that a "master agreement shall be deemed to be a qualified financial contract only with respect to those transactions that are themselves qualified financial contracts." Id. § 1821(e)(8)(D)(vii). Because the servicing transaction does not constitute a QFC, § 1821(e)(9) does not bar FDIC from transferring the servicing rights without also transferring the obligations to substitute and repurchase bad mortgages, which were part of the QFC transferring the mortgage loans. Deutsche Bank therefore cannot succeed on its claim that FDIC's sale of the servicing rights to
Deutsche Bank also bases its breach of contract claim on FDIC's failure to obtain Deutsche Bank's consent to the transfer of the servicing rights, in violation of the PSAs' provision barring IndyMac from assigning any of its rights under the PSAs without the written consent of the trustee and others. (Complaint ¶ 55; Opp., Ex. A at 94.) This states a valid claim.
The FDIC argues that the contract claim, and those causes of action that are essentially derivative of the contract claim, fail in their entirety because FIRREA preempts any contractual provision that would require it to obtain consent before selling a failed institution's assets. For this proposition, it relies on 12 U.S.C. § 1821(d)(2)(G)(i)(II), which provides:
12 U.S.C. § 1821(d)(2)(G)(i)(II) (emphasis added). According to the FDIC, the language of this provision of FIRREA conclusively ends Deutsche Bank's claim for damages arising out of the sale of assets to OneWest without obtaining consent. For this proposition, the FDIC relies in significant part on the Ninth Circuit's decision in Sahni v. American Diversified Partners, 83 F.3d 1054 (9th Cir.1996).
In Sahni, the FDIC undertook a receivership of a failed bank's assets, which included general-partnership interests in certain limited partnerships. Sahni, 83 F.3d at 1056. The FDIC then transferred the general partnership interests without obtaining the consent of the partnerships' limited partner. Id. at 1059. The limited partner cried foul, sued the FDIC, and claimed that "the FDIC violated California Corporations Code § 15509 by failing to attain [his] consent, as limited partner, to the sale of the ... partnerships." Id. The Circuit held that Corporations Code section 15509 was "preempted by federal law" as embodied by section 1821(d)(2)(G)(i)(II), and that the FDIC was "exempted ... from having to obtain any consent." Id. It is clear, however, that Sahni's reasoning was directed to the issue of preemption of state partnership statutes, not state contract law. While § 1821(d)(2)(G)(i)(II) unmistakably preempts state statutory consent requirements, other provisions of FIRREA and later circuit decisions treat contracts differently.
Section 1821(e) expressly addresses the treatment of contracts made by a failed institution prior to its seizure. It provides in pertinent part:
(1) Authority to repudiate contracts
12 U.S.C. § 1821(e). The FDIC must exercise its power to repudiate within "a reasonable period following [its appointment]," id. § 1821(e)(2), and where the FDIC has exercised its power of repudiation, the injured contracting party has the right to recover damages subject to the measure established by FIRREA. Id. § 1821(e)(3). There can be no doubt that those acting on behalf of the FDIC in this case understood the requirements of § 1821(e) because the FDIC expressly repudiated three PSAs on the basis that they were "burdensome" and that repudiation would "promote the orderly administration of the institution's affairs." (Compl. ¶ 76.) Having decided not to repudiate the remaining agreements, FDIC was under an obligation to adhere to their terms and conditions. The failure to meet that obligation amounts to a breach of those agreements.
The D.C. Circuit came to this conclusion in Waterview Management Co. v. FDIC, 105 F.3d 696 (D.C.Cir.1997). In that case, the failed institution had given Waterview Management Company an "exclusive option to market and purchase" certain real estate in Maryland. Id. at 697. Subsequently, the Resolution Trust Corporation ("RTC") was appointed receiver for the bank, and decided to advertise the real estate, in violation of the bank's contractual obligations. Id. at 698. Waterview sued, and on appeal, the D.C. Circuit held that the RTC had to comply with the contractual limitations. Noting that the District Court had dismissed on the basis of 12 U.S.C. § 1821(d)(2)(G)(i)(II), the D.C. Circuit noted that "[t]he District Court adopted the RTC's argument that this section should be construed to preempt any state law right that affects the receiver's ability to sell the property.... We reject the District Court's view of the statute." Id. at 699. Rejecting a claim of preemption, the Circuit further observed:
Id. at 699-700 (emphasis added).
The Ninth Circuit adopted the reasoning of Waterview in Sharpe v. F.D.I.C., 126 F.3d 1147 (9th Cir.1997). In that case, the plaintiffs had entered into a settlement agreement with Pioneer Bank on July 8, 1994, which at the end of the business day was declared insolvent and seized by regulators who appointed the FDIC as receiver. When the FDIC failed to honor the settlement agreement, the plaintiffs brought a breach of contract claim against the FDIC and sought the equitable remedies of declaratory relief and rescission
The Ninth Circuit decision expressly rejected the notion that the FDIC may breach contracts with impunity. "[T]o allow the FDIC to avoid its contractual obligations by invoking the FIRREA administrative claims process would effectively preempt state contract law. The statute does not indicate that Congress intended to preempt state law so broadly." Id. at 1157. The Court wrote:
Id. at 1156-57.
Based on the foregoing authorities, the Court concludes that the FDIC cannot, on the basis of federal preemption, avoid the terms and conditions of IndyMac's agreements with Deutsche Bank. The FDIC had the option of repudiating those agreements and paying damages under § 1821(e)(3). But the FDIC chose to repudiate only three of the 240 trust agreements with Deutsche Bank. Accordingly, Deutsche Bank may proceed with its breach of contract claim arising out of the sale of assets to OneWest Bank.
The FDIC also contends that Deutsche Bank cannot seek remedies of rescission, restitution, or constructive trust because FIRREA bars the Court from granting any injunction with respect to the actions of the FDIC except as provided in the statute. The FDIC cites to 12 U.S.C. § 1821(j), which provides:
12 U.S.C. § 1821(j). The FDIC essentially contends that the equitable remedies sought — namely, a constructive trust on the proceeds of the sale of the servicing rights to OneWest — amount to injunctive relief that is banned under § 1821(j). However, Sharpe provides the answer to the FDIC's argument and allows for the remedies sought in this case. There, the Circuit held:
Sharpe, 126 F.3d at 1155. Because FIRREA "does not authorize the breach of contracts" and "does not preempt state law so as to abrogate state law contract rights," the FDIC does not act "within its statutorily granted powers in breaching" a valid contract between the failed institution and a third party. Id. In such circumstances, claims for equitable relief are not barred by § 1821(j). See id.
Accordingly, the Court concludes that Deutsche Bank may seek equitable remedies arising out of the FDIC's breach of the PSAs.
FDIC argues that any claim that Deutsche Bank may have should be dismissed under principles of prudential mootness based on several decisions from this district. E.g., Nasoordeen v. F.D.I.C, No. 08-5631, 2010 WL 1135888 (C.D.Cal. Mar. 17, 2010). In Nasoordeen, Judge Morrow discussed the doctrine in considerable detail:
Nasoordeen, 2010 WL 1135888, at *6. Although the Ninth Circuit has never applied the doctrine, it has been adopted by the First, Third, Fourth, Fifth, Sixth, Eighth,
FDIC argues that all of Deutsche Bank's claims are prudentially moot because the receiverships of IndyMac and IndyMac Federal have insufficient funds to meet any general unsecured claims. (Docket No. 23, Mem. at 3); see also Fed. Deposit Ins. Corp., Notice, Determination of Insufficient Assets to Satisfy Claims Against Financial Institution in Receivership, 74 Fed.Reg. 59,540 (Nov. 18, 2009). Therefore, FDIC contends, Deutsche Bank will not be able to recover any money or property, even if it prevails on its claims. Deutsche Bank, however, maintains that it can recover because its claims are not general unsecured claims, and that its claims are therefore not prudentially moot. In particular, Deutsche Bank contends that its claims must be paid by the FDICR either as administrative expenses or from the proceeds of the sale of the servicing rights and by the FDIC-C from its own funds. (Docket No. 47, Opp. at 14.)
FIRREA provides for a priority order in which "amounts realized from the liquidation or other resolution of any insured depository institution" must be "distributed to pay claims." 12 U.S.C. § 1821(d)(11). Under this priority order, FDIC-R must pay claims in the following order: "(i) [a]dministrative expenses of the receiver[,] (ii) [a]ny deposit liability of the institution[,] (iii)[a]ny other general or senior liability of the institution...." Id. at § 1821(d)(11)(A). When the FDIC, acting as receiver, repudiates a contract, it must pay damages as a third-priority general liability of the institution. See Battista v. F.D.I.C., 195 F.3d 1113, 1120 (9th Cir.1999) (holding that claims for damages resulting from repudiation are subject to the § 1821(d)(11) distribution priority and, unlike administrative expenses, are not entitled to "super priority"). Thus, here, if FDIC had repudiated the Deutsche Bank contracts, it would have owed damages as general liabilities. Because of IndyMac's insufficient assets, Deutsche Bank would not have actually recovered any amount of these damages.
FDIC did not repudiate the contracts, however, but rather breached them. The statute does not address the consequences of the FDIC's breach of a failed institution's contract. Sharpe, 126 F.3d at 1157. The Ninth Circuit's decision in Sharpe, however, makes clear that damages resulting from the FDIC's breach of a contract are not subject to the § 1821(d)(11) distribution priority scheme. In Sharpe, the court held that a claim against the FDIC for breach of a pre-receivership contract did not qualify as a "claim" for purposes of FIRREA's administrative exhaustion requirement. Sharpe, 126 F.3d at 1157. Just as FIRREA's administrative exhaustion requirement applies only to "claims," the § 1821(d)(11) priority scheme applies only to "claims." See § 1821(d)(11)(A) (providing that "amounts realized ... shall be distributed to pay claims ..." (emphasis added)). Because Sharpe establishes that a claim against the FDIC for post-seizure breach of contract does not constitute a "claim"
At this juncture, it is enough to conclude that Deutsche Bank's claim for damages is not subject to the § 1821(d)(11) distribution priority, and the Court need not determine at this stage whether damages will ultimately be payable from the receivership or from FDIC-C's own funds. Even if the damages will come from the receivership, Deutsche Bank's claim will take priority over the categories identified in § 1821(d)(11), and there is accordingly a possibility of recovery. The Court likewise need not determine the measure of damages at this juncture. No binding authority identifies the measure of damages, see Sharpe, 126 F.3d at 1157, but the D.C. Circuit has indicated that a party injured by the FDIC's breach of a pre-receivership contract is at least entitled to damages equal to the damages it would have received had FDIC repudiated the contract. Waterview, 105 F.3d at 702. Such damages are limited to "actual direct compensatory damages." Id. at 702 n. 4; 12 U.S.C. § 1821(e)(3)(A)(i). Deutsche Bank might also be entitled to full damages, including consequential damages, resulting from FDIC's breach, as FIRREA limits damages only when FDIC repudiates a contract, and does not address the consequences of a breach by the FDIC. Regardless, because under Sharpe, Deutsche Bank's claim for damages is not subject to the § 1821(d)(11) distribution priority, it can recover damages — whatever their measure — ahead of the third-priority general creditors who will recover nothing. Because there is a possibility that they can recover, their claims are not prudentially moot.
For the foregoing reasons, Deutsche Bank may proceed with its breach of contract claim arising out of the sale of assets to OneWest Bank. FDIC-R's motion to dismiss this claim is
The FDIC-C also brings a separate motion to dismiss the contract claim as against the FDIC in its corporate capacity. In its motion, FDIC-C contends (1) that it is not liable for the actions that FDIC takes in its capacity as receiver, and (2) that it cannot be liable for breach of a contract to which it was not a party, and Deutsche Bank fails to adequately allege that FDIC-C was party to the contracts allegedly breached.
Deutsche Bank does not dispute that FDIC-C is legally distinct from FDIC-R, and that actions taken by FDIC-R are not attributable to FDIC-C. See Bullion Servs., Inc. v. Valley State Bank, 50 F.3d 705, 709 (9th Cir.1995) (noting that, "[b]ecause FDIC Corporate and FDIC Receiver perform two different functions and protect wholly different interests, courts have been careful to keep the rights and liabilities of these two entities legally separate"); FDIC v. Roldan Fonseca, 795 F.2d 1102 (1st Cir.1986) ("Corporate FDIC is not liable for wrongdoings by Receiver FDIC."); ABI Inv. Grp. v. FDIC, 860 F.Supp. 911, 916 (D.N.H.1994) ("FDIC/Corporate cannot be held liable for the failure of FDIC/Receiver to disaffirm or repudiate a contract."). Thus, FDIC-C cannot be liable for any wrongdoing by FDIC-R.
Deutsche Bank contends that FDIC-C is nonetheless liable because it "participated
These allegations do not suffice to state a breach of contract claim against FDIC-C. Under the applicable New York law
Finally, the allegation that FDIC-C benefitted from the sale to OneWest is not sufficient to render it liable for the breach of contract resulting from that sale. In support of its argument to the contrary, Deutsche Bank points to two cases in which non-signatories to a contract were held susceptible to breach of contract claims. See Impulse Mktg. Grp. v. Nat'l Small Bus. Alliance, Inc., No. 05-CV-7776, 2007 WL 1701813, at *6 (S.D.N.Y. June 12, 2007); Dial-A-Mattress Operating Corp. v. Mattress Madness, Inc., 847 F.Supp. 18, 20 (E.D.N.Y.1994). In Impulse Marketing, the court held that allegations that the non-signatory defendant had "played a considerable role in the management and performance of the contract,"
Because Deutsche Bank has alleged insufficient facts under which FDIC-C could be liable for breach of the PSAs, the breach of contract claim against it is
FDIC next moves to dismiss Deutsche Bank's claim for breach of the implied covenant of good faith and fair dealing on the ground that New York law requires such a claim to be dismissed as duplicative where it is based on the same facts underlying a breach of contract claim. (Docket No. 23, Mem. at 13); see also Harris v. Provident Life and Accident Ins. Co., 310 F.3d 73, 81 (2d Cir.2002) ("New York law ... does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled."). New York law, however, recognizes an exception to this general rule when the breach of the implied covenant of good faith and fair dealing and breach of contract claims are brought in the alternative. Fantozzi v. Axsys Techs., Inc., No. 07 Civ. 02667, 2008 WL 4866054, at *7 (S.D.N.Y. Nov. 6, 2008). "[W]here there is a dispute over the existence, scope, or enforceability of the putative contract," a plaintiff can bring these claims in the alternative. Id. at *8 (quoting Reilly v. Natwest Markets Grp., Inc., 181 F.3d 253, 263 (2d Cir.1999)). A plaintiff can prevail on a claim for breach of the implied covenant of good faith and fair dealing where it proves that the defendant "act[ed] in a manner that, although not expressly forbidden by any contractual provision, ... deprive[d] the other party of the right to receive the benefits under their agreement." Id. at *7 (quoting Aventine Inv. Mgmt, Inc. v. Canadian Imperial Bank of Commerce, 265 A.D.2d 513, 697 N.Y.S.2d 128, 130 (2nd Dept.1999)).
Here, the parties dispute the enforceability of the contractual provisions requiring Deutsche Bank's consent for the transfer of the servicing rights and dispute the existence of any contractual provision barring the transfer of some benefits of the PSAs without transferring all the obligations imposed by the PSAs. Deutsche Bank therefore can appropriately plead its
FDIC-R next seeks dismissal of Deutsche Bank's constructive trust claim on the grounds that (1) § 1821(j) bars such relief, and (2) constructive trust is a remedy, not an independent claim for relief. (Docket No. 23, Mem. at 28-29.) These arguments fail.
First, as explained above, the Ninth Circuit established in Sharpe that "the bar imposed by § 1821(j) does not extend to situations in which the FDIC as receiver asserts authority beyond that granted to it as receiver." Sharpe, 126 F.3d at 1155. Where, as here, the FDIC breaches, rather than repudiates, a contract, it does not act within its statutorily granted powers, and § 1821(j) therefore does not apply. Id. Section 1821(j) therefore does not preclude Deutsche Bank from pursuing its claim for a constructive trust.
Second, FDIC-R is correct that a constructive trust is a remedy, not a free-standing substantive claim. See Lund v. Albrecht, 936 F.2d 459, 464 (9th Cir.1991). Nonetheless, "as a matter of practice constructive trust commonly is pleaded as a separate claim." Microsoft Corp. v. Suncrest Enter., No. 03-5424, 2006 WL 1329881, at *8 (N.D.Cal., May 16, 2006). Because Deutsche Bank's substantive claim for breach of contract survives the FDIC-R's motion to dismiss, the Court will not dismiss the claim for constructive trust as a remedy for the breach of contract claim. For these reasons, the Court
In its complaint, Deutsche Bank also asserts a claim against FDIC-R for breach of fiduciary duty. (Compl. ¶¶ 166-74.) In particular, Deutsche Bank alleges that FDIC-R breached its duties "to manage the assets of the receivership in a manner that `maximizes the net present value return from the sale or disposition' and `minimizes the amount of any loss realized'" (id. ¶ 167 (quoting 12 U.S.C. § 1821(d)(13))); to "act for the benefit of all parties who may establish rights during the administration of the receivership" (id. ¶ 168); and "to act in good faith, to act in accordance with the laws that establish its authority, to preserve the property in its possession, and to act in a manner that maximizes potential recovery by those claimants and to allocate the proceeds of such assets impartially and in accordance with rights established by claimants, and statutory priorities" (id. ¶ 169). Deutsche Bank alleges that FDIC breached these duties by "furthering its interests in its other capacities ... at the expense of the
The FTCA waives sovereign immunity in tort actions brought against any governmental employee acting within the course and scope of his employment. 28 U.S.C. § 1346(b). The act further provides that no agency can be sued in its own name for claims cognizable under 28 U.S.C. § 1346(b). 28 U.S.C. § 2679(a). Such claims must be brought against the United States and include "claims against the United States, for money damages ... for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred." 28 U.S.C. § 1346(b). Section 1346(b) applies only to claims sounding in tort, not in contract. Davis v. United States, 961 F.2d 53, 56 (5th Cir.1991). Where the United States, if a private person, would not be liable to the claimant under analogous state law, § 1346(b) does not apply, and the agency can be sued in its own name. See FDIC v. Meyer, 510 U.S. 471, 477-78, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994).
Here, Deutsche Bank contends that its claims are not barred by the FTCA because its claims (1) sound in contract, not tort, and (2) because the United States, if it were a private person, would not be liable under analogous state law. The Court agrees.
First, to the extent that Deutsche Bank alleges that FDIC breached a fiduciary duty by violating provisions of the PSAs, its claim arises from contract. See Davis, 961 F.2d at 56 (holding that claim for breach of fiduciary duty did not fall within FTCA where claim was "predicated upon the breach of a condition in the promissory note"). Because such claims are not cognizable under FTCA's § 1346(b), they may be brought against an agency in its own name.
Second, to the extent that Deutsche Bank alleges the breach of an independent fiduciary duty that arises not from its contracts, but from FIRREA, its claim has no state-law analog applicable to private parties. Deutsche Bank contends that FDIC owed it a duty under 12 U.S.C. § 1821(d)(13)(E), which requires the FDIC acting as receiver to "maximize[] the net present value return from the sale or disposition of ... assets [of a failed bank]" and to "minimize[] the amount of any loss realized in the resolution of cases," among other things. 12 U.S.C. § 1821(d)(13)(E). This provision plainly applies only to the FDIC-R, and FDIC points to no analogous state law imposing similar duties on private parties. Because this provision applies only to the FDIC-R, and because there is no state-law analog, it does not fall within § 1346(b). See FDIC v. Meyer, 510 U.S. at 477-78, 114 S.Ct. 996 (holding that constitutional due process claim did not fall under § 1346(b) because federal law provided the "source of liability for [the]
To the extent that Deutsche Bank bases its breach of fiduciary duty claim on the "inherent" duties of receivers (see Docket No. 47, Opp. at 20-21), however, the Court concludes that the FTCA does bar its claim. A common law breach of fiduciary duty claim sounds in tort. See McNeil v. United States, 78 Fed. Cl. 211, 236 (Fed.Cl.2007). In addition, such duties arise from state law and apply to private parties acting as receiver as well. See Landeen v. Riley Bennet Egloff LLC, No. 1:07-cv-0534, 2008 WL 1766961, at *1-2 (S.D.Ind. Apr. 11, 2008) (discussing breach of fiduciary duty claim against private parties acting as receiver for corporation). Thus, the United States, if a private party, could be liable under state law. Because the FTCA therefore applies, Deutsche Bank cannot pursue a claim based on the "inherent" duties of receivers against FDIC-R, but rather must bring it against the United States. If Deutsche Bank wishes to pursue its breach of fiduciary claim based on the alleged inherent duties, it must comply with the FTCA.
However, because Deutsche Bank asserts theories supporting its breach of fiduciary duty claim that are not barred by the FTCA, the FTCA does not mandate dismissal of all theories of relief. The Court must therefore address the question of whether Deutsche Bank has a private right of action to pursue such claim.
FDIC further contends that, even if the FTCA does not bar Deutsche Bank's breach of fiduciary duty claim, Deutsche Bank has no private right of action allowing it to pursue that claim. Deutsche Bank counters that a private right of action is both inherent in the FDIC's role as receiver and implied by § 1821(d)(13)(E) of FIRREA. (Docket No. 47, Opp. at 20.)
First, the Court concludes that Deutsche Bank cannot pursue its claim on the basis that a private right of action is inherent in the FDIC's role as receiver. Even if any such "inherent" private right of action existed, Deutsche Bank could not pursue its breach of fiduciary duty claim under it because, as explained above, its claims based on "inherent" duties sound in tort and are barred by the FTCA.
Second, the Court concludes that § 1821(d)(13)(E) does not create an implied private right of action. That section provides:
12 U.S.C. § 1821(d)(13)(E). Although this provision may impose a fiduciary duty on the FDIC-R, it does not create an implied right of action for breach of that duty.
In determining whether a statute gives rise to an implied private right of action, the Court employs the test set forth in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). Under Cort, the Court examines "(1) whether the plaintiff is `one of the class for whose especial benefit the statute was enacted'; (2) whether there is `any indication of legislative intent, explicit or implicit, either to create or to deny [a private right of action]'; (3) whether it is `consistent with the underlying purposes of the legislative scheme to imply' a private right of action; and (4) whether `the cause of action [is] one traditionally relegated to state law.'" Nisqually Indian Tribe v. Gregoire, 623 F.3d 923, 929 (9th Cir.2010) (quoting Cort, 422 U.S. at 78, 95 S.Ct. 2080) (alterations in original). Under this analysis, "the key inquiry is whether Congress intended to provide the plaintiff with a private right of action." First Pac. Bancorp, Inc. v. Helfer, 224 F.3d 1117, 1121 (9th Cir.2000).
All courts that have considered whether § 1821(d)(13)(E) gives rise to a private right of action have concluded it does not. See Hindes v. FDIC, 137 F.3d 148, 170 (3d Cir.1998) (holding that § 1821(d)(13)(E) confers no private right of action on shareholders of a failed bank); Mosseri v. FDIC, No. 95 Civ. 0723, 2001 WL 1478809, at *6 (S.D.N.Y. Nov. 20, 2001) (holding that § 1821(d)(13)(E) confers no private right of action on disappointed bidders for FDIC assets); Pen-Del Mortg. Assocs. v. FDIC, No. 94-0067, 1994 WL 675502, at *3 (E.D.Pa. Nov. 23, 1994) (holding that substantially identical provision applicable to the Resolution Trust Corporation, § 1441 a(b), did not give rise to private cause of action for disappointed bidders); RTC v. Villa Este Apartments P'ship, 806 F.Supp. 594, 597-98 (E.D.La.1992) (holding that § 1441a(b) did not give a private right of action to party that defaulted on a mortgage loan held by the failed bank to pursue claim that RTC breached duties by selling other properties in neighborhood, thereby decreasing property value); Donnelly Inv. Sec. Corp. v. FDIC, No. 3:96-CV-2730-R, 1998 WL 460289, at *4 (N.D.Tex. Aug. 5, 1998) (holding that §§ 1821(d)(13)(E) and 1441a(b) do not create a private cause of action). To be sure, none of these cases specifically addresses whether § 1821(d)(13)(E) gives rise to a private cause of action for creditors of a failed institution. And the cases holding that the provision does not create a private right of action for, e.g., disappointed bidders are of limited persuasive value. The Third Circuit's decision in Hindes v. FDIC, 137 F.3d 148, holding that shareholders of a failed bank had no private cause of action under § 1821(d)(13)(E) is sufficiently analogous to the issue presented here, and the Court finds its reasoning particularly persuasive.
In Hindes, the Third Circuit discussed the Cort factors. First, the court held that the shareholders were not "members of a class for whose special benefit Congress
Hindes's analysis persuades the Court that FIRREA creates no private right of action in these circumstances. First, creditors like Deutsche Bank are not members of a class for whose special benefit Congress created § 1821(d)(13)(E). Like the shareholders in Hindes, creditors stand to benefit from the duties imposed by § 1821(d)(13)(E) because compliance with those duties increases the amount of available assets from which they can recover. Also as with the shareholders in Hindes, this benefit is only incidental to the benefits the section intends to confer on the fund and the taxpayers. See id. at 170. The Ninth Circuit has explained that the first factor of the Cort test is satisfied "when there is an explicit reference to the individuals for whose benefit the statute was enacted," as opposed to a "generic imperative." Helfer, 224 F.3d at 1122-23 (recognizing a private right of action for shareholders to enforce § 1821(d)(15), which entitles shareholders to accounting reports). Section 1821(d)(13)(E) does not mention creditors. The subsections requiring FDIC-R to maximize gains and minimize losses does not identify any beneficiaries at all. See 12 U.S.C. § 1821(d)(13)(E)(i)-(ii).
Second, the Court finds no indication of any legislative intent to create a private right of action under § 1821(d)(13)(E) for creditors. Deutsche Bank is correct that FIRREA expressly disclaims a private cause of action elsewhere. 12 U.S.C. § 1831g(d). FIRREA, however, also expressly grants private rights of action in other provisions. See id. §§ 1441a(c)(11)(B), 1441a(q). Because Congress has both expressly granted and disclaimed private causes of action in other parts of the statute, the Court cannot infer anything from the statute's silence on the availability of a private right of action to enforce § 1821(d)(13)(E).
Deutsche Bank also contends that provisions setting the FDIC's maximum liability for claims by creditors, providing claimants with a right to an accounting, and recognizing the FDIC's duty to receivership claimants are indicia of congressional intent to create a private right of action here. (Docket No. 47, Opp. at 23); see 12 U.S.C. §§ 1821(i)(2); 1821(d)(15); 1823(d)(3)(C). These provisions, however, do not actually suggest that Congress intended a private right of action to enforce the duties imposed by § 1821(d)(13)(E). Although the provision setting FDIC's maximum liability does contemplate suits against the FDIC, it does not specifically contemplate suits by creditors to enforce the duties imposed by § 1821(d)(13)(E). Although the provision requiring FDIC to make accounting reports available to any
Third, the Court concludes that implying a private right of action would be inconsistent with the statute's purposes. As the Southern District of New York noted in Mosseri, FIRREA "repeatedly reaffirm[s] that the FDIC has broad discretion in discharging its statutory responsibilities." Mosseri, 2001 WL 1478809, at *5. Recognizing a private right of action for creditors to enforce § 1821(d)(13)(E) would be "fundamentally inconsistent with the extensive latitude granted by Congress to the FDIC in the exercise of its statutory powers." Id. Were the Court to recognize such a private right of action, every disposition of assets by the FDIC would be subject to challenge by every party having a potential claim on the assets of the failed bank. This would impose substantial burdens. In this way, the private right of action that Deutsche Bank asks the Court to imply here differs from the private right of action under § 1821(d)(15) that the Ninth Circuit recognized in Helfer, 224 F.3d at 1126-27. In Helfer, the court noted that implying a private right of action to enforce the provision requiring the FDIC to provide an annual accounting would not impose any additional burden. Id. at 1127. Rather, it would require the FDIC only to "provide a copy of the report it is already obliged to prepare" under the statute. Id. In contrast, implying a private right of action here could impose substantial new burdens: it would impede the FDIC's discretion in disposing of assets, and there would be no clear-cut way of ensuring that parties would deem the statutory obligations satisfied. While whether FDIC has provided the required report is easy to establish, parties could easily dispute whether any given transaction maximized gains and minimized losses. The Court is disinclined to subject the FDIC to the burden of defending against these potentially numerous claims. Finally, the Court acknowledges that the court in Helfer implied a private right of action in part because "where no enforcement mechanism is explicitly provided by Congress or an administrative agency, it is appropriate to infer that Congress did not intend to enact unenforceable requirements." Id. at 1126. Although the parties have not identified any mechanism to enforce § 1821(d)(13)(E), the Court nonetheless concludes that this lack of an enforcement mechanism does not support implying a private right of action here. Because FDIC has an inherent incentive to maximize gains and minimize losses to ensure adequate compensation for the insurance funds, the lack of private enforcement is
Finally, the fourth Cort factor is satisfied here. Clearly, an action against a federal entity to enforce a right created by federal law is not "traditionally relegated to state law." Cort, 422 U.S. at 78, 95 S.Ct. 2080. However, this fact does not support implying a private right of action where the other Cort factors are absent.
Because, for the reasons set forth above, the Court concludes that Deutsche Bank has no private right of action not barred by the FTCA to enforce any fiduciary duties, the Court
Deutsche Bank also asserts claims against FDIC under the Fifth Amendment for takings and violations of due process. (Compl. ¶¶ 175-205.) In particular, Deutsche Bank contends that FDIC effected a taking and violated due process by selling the servicing rights without also transferring the obligations to replace or repurchase bad mortgage loans and without obtaining Deutsche Bank's consent. (Id.) FDIC moves to dismiss these claims.
The Court
Further, Deutsche Bank cannot amend its complaint in this case to assert its takings claims against the United States. Under the Tucker Act, 28 U.S.C. § 1491(a)(1), the Court of Federal Claims has exclusive jurisdiction to render judgment on any takings claim for money damages exceeding $10,000. E. Enters. v. Apfel, 524 U.S. 498, 520, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998). "Accordingly, a claim for just compensation under the Takings Clause must be brought to the Court of Federal Claims in the first instance, unless Congress has withdrawn the Tucker Act grant of jurisdiction in the relevant statute." Id. It has not. Because Deutsche Bank must assert its takings claims against the United States and in the Court of Federal Claims, this Court
Deutsche Bank also alleges that FDIC violated its due process rights under the Fifth Amendment by depriving it of its property without due process of law. (Compl. ¶¶ 198-205.) Deutsche Bank, however, cannot maintain this claim against an agency. A party can sue for a
For the foregoing reasons, the Court
The Court also
Finally, the Court
