Albright v. FDIC

April 1, 1994 [NOT FOR PUBLICATION]

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 93-1683
LAURENCE ALBRIGHT, ET AL.,

Plaintiffs, Appellants,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION, ETC., ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]

Before

Cyr, Circuit Judge,

Aldrich, Senior Circuit Judge,

and Stahl, Circuit Judge.

Michael E. Chubrich, with whom Eldredge, Chubrich & Harrigan was

on brief for appellants.
Gregory E. Gore, with whom Ann S. DuRoss and Robert D. McGillicu-

ddy were on brief for appellees.

CYR, Circuit Judge. Plaintiffs-appellants, one hun-
CYR, Circuit Judge.

dred-sixty charter members of a defunct health club, challenge a

district court decision granting summary judgment to defendants-

appellees, various entities that later acquired interests in the

real property upon which the health club facility was located.

Finding no error, we affirm.

I

BACKGROUND

In 1987, Amoskeag Bank ("the Bank") loaned $7.5 million

to Greenleaf Investment Group ("the Developer") to construct a

commercial condominium and health club facility (the "Property")

in Portsmouth, New Hampshire. The note was secured by a first

mortgage on the Property. After the Developer completed con-

struction in 1988, it "leased" the health club facility to a

corporation called Greenleaf Sports and Fitness Club, Inc. ("the

Health Club"), which sold long-term charter health club member-

ships to appellants, at prices ranging from $2500 to $3500.1 In

April 1990, the Developer defaulted on the note.2 The Bank

later exercised its power of sale under the first mortgage, and

the Property was acquired by appellee A.B. Club Holdings (-

1The charter memberships entitled appellants to use the club
facilities, subject to their payment of annual renewal fees
substantially below the annual fee for non-"charter" members.

2The Developer eventually initiated a chapter 11 reorganiza-
tion proceeding, which was later converted to chapter 7. There
is no evidence that appellants filed proofs of claim in the
bankruptcy proceedings.

2

"ABCH"), the Bank's wholly-owned subsidiary.

The Health Club vacated the leased premises five months

after the Developer's default, but the Bank and ABCH continued to

operate a health club facility on the premises, with appellee

Club Sports International ("CSI") as its managing entity. During

a six-month transitional period following the Health Club's

closure, appellants were permitted to use the health club facili-

ties under the terms of their alleged Health Club contracts. In

February 1991, however, CSI informed appellants that they must

pay higher fees, equaling fifty percent of the fee for new club

members.

Appellants promptly filed a three-count complaint in

New Hampshire Superior Court against, inter alia, the Bank, ABCH,

and CSI. Count 1 sought a judicial declaration that appellants

held a "unique contractual property right" by virtue of their

charter club memberships, and that appellees were either the

Developer's successors-in-interest or its third-party benefi-

ciaries, and therefore were contractually obligated to honor the

charter membership contracts, see Cyr v. B. Offen & Co., 501 F.2d

1145, 1152 (1st Cir. 1974) (noting indicia of successor

liability). Count 2 sought the imposition of a constructive

trust upon all charter membership fees still held by appellees,

on the ground that the Bank had been aware from the outset that

the Developer used $200,000 of appellants' charter membership

fees to repay its construction loan, in violation of the Devel-

oper's contractual promise to appellants to segregate their fees

3

in a trust fund. Finally, Count 3 sought compensatory damages

(or a refund of all membership fees) and/or treble damages for

appellees' unfair and deceptive trade practices in willful

violation of the New Hampshire Consumer Protection Act ("NHCPA"),

see N.H. Rev. Stat. Ann 358-A:2, 358-A:10 (1993). The Bank's

motion to dismiss counts 1 and 3 for failure to state a claim was

denied by the superior court.3

In October 1991, the Bank was declared insolvent and

the Federal Deposit Insurance Corporation ("FDIC"), as receiver,

removed the case to federal district court. See 12 U.S.C.

1819(b)(2)(B) (1993). Appellants promptly moved for remand to

the state court, arguing that resolution of the suit would

require "only the interpretation of the law of [New Hampshire]."

Id. 1819(b)(2) (D)(iii). FDIC opposed remand, citing its

intention to rely on various federal-law defenses, including the

unenforceability of the alleged club membership contracts under

D'Oench Duhme & Co. v. FDIC, 315 U.S. 447 (1942), as codified at

12 U.S.C. 1823(e), and FDIC's immunity from suit for compensa-

tory damage claims under the NHCPA, cf. Timberland Design, Inc.

v. First Serv. Bank for Sav., 932 F.2d 46, 50 (1st Cir. 1991)

(D'Oench defense may also foreclose tort-based claims against

FDIC based on "secret" agreements), and from "punitive" treble

3The superior court granted the motion to dismiss Count 2
(constructive trust), citing appellants' failure to allege that
the Bank owed appellants a fiduciary duty. As appellants have
not reasserted their constructive trust claim, we disregard case
law cited by appellants to the extent it relates to the imposi-
tion of constructive trusts under New Hampshire law. See, e.g.,

Milne v. Burlington Homes, Inc., 117 N.H. 813 (1977).

4

damage awards under the NHCPA, see, e.g., FDIC v. Claycomb, 945

F.2d 853, 861 (5th Cir. 1991), cert. denied, 112 S. Ct. 2301

(1992). While the remand motion awaited decision, FDIC filed its

motion for summary judgment.

The district court later rejected a magistrate-judge's

recommendation that the case be remanded to state court for lack

of subject matter jurisdiction pursuant to 12 U.S.C. 1819(b)(2)

(D)(iii),4 and granted FDIC's motion for summary judgment on the

two remaining counts in appellants' complaint. Appellants appeal

from the summary judgment order, and from the district court

order denying their motions for reconsideration.

II

DISCUSSION

A. Removal Jurisdiction

Appellants argue that FIRREA 1819(b)(2)(D)(iii) ousts

the district court of jurisdiction because their complaint

alleged one dispositive state-law claim unaffected by any federal

defense advanced by FDIC. Specifically, drawing on an oblique

4As a threshold argument, appellants claim that the
magistrate-judge's report and recommendation issued pursuant to a
referral under 28 U.S.C. 636(b)(1)(A), rather than subsection
636(b)(1)(B), because a motion to remand to state court for
lack of federal jurisdiction is "nondispositive." Appellants
argue that the district court improperly reviewed the magistrate-
judge's findings de novo, rather than for "clear error" or as

"contrary to law." We disagree. The magistrate-judge's report
resolved no disputed jurisdictional facts. Instead, it dealt
with a pure issue of law whether FDIC's anticipated defenses
were legally sufficient to foreclose remand to the state court.
Under either subsection 636(b)(1)(A) or (B), the recommended

conclusions of law were subject to de novo review by the district

court, and, in turn, by the court of appeals.

5

mention in Count I that their charter memberships confer a

"unique contractual property right," appellants now argue that

these memberships are roughly akin to mechanic's liens under New

Hampshire law.

We have held that FDIC may not invoke the D'Oench Duhme

defense to avoid certain state-law liens which attach to a failed

bank's assets prior to FDIC's appointment as receiver. See

Bateman v. FDIC, 970 F.2d 924, 927 (1st Cir. 1992) (Maine mechan-

ic's lien not an "agreement" within meaning of D'Oench doctrine).

In Capizzi v. FDIC, 937 F.2d 8 (1st Cir. 1991), however, we held

that FIRREA 1819(b)(2)(D)(iii) embodies a deliberate congres-

sional abrogation of the "well-pleaded complaint" rule, see

Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463

U.S. 1, 9-10 (1983) (defining phrase "arising under" federal

law), which in other contexts permits a district court to invoke

its nondiversity removal jurisdiction only if the complaint

alone, without reference to the character of any anticipated

defense under federal law, discloses that the state-law claim

implicates a substantial federal question. Capizzi, 937 F.2d at

11 (noting that 1819(b)(2)(D) (iii) "expanded the FDIC's

powers, and . . . federal jurisdiction") (emphasis added); see

Diaz v. McAllen State Bank, 975 F.2d 1145, 1149 (5th Cir. 1992);

Reding v. FDIC, 942 F.2d 1254, 1258 (8th Cir. 1991); Lazuka v.

FDIC, 931 F.2d 1530, 1535 (11th Cir. 1991). Thus, FIRREA

1819(b)(2) (D)(iii) directs the district court "to consider the

case as a whole complaint and likely defenses" and "to

6

gauge [the] . . . likely significance" of those defenses.

Capizzi, 937 F.2d at 10, 11 (emphasis added); see Diaz, 975 F.2d

at 1149-50 ("[A]sserting a federal defense will not alone prevent

remand . . . [,] the FDIC must assert a defense that raises

colorable issues of federal law.") (emphasis added).

The district court relied on several reasoned grounds

for its ruling disallowing appellants' motion for remand. We

affirm on a singularly sufficient ground. The complaint asserts

several alternative claims for relief. Even if their so-called

property-right or "mechanic's lien" claim were sound on the

merits, and further, assuming it were found invulnerable to the

D'Oench Duhme defense by reason of the Bateman exception, appel-

lants also asserted willful violations of the NHCPA for which

treble damages might be recoverable because of appellees' interim

refusal to permit them to use the health club facilities under

the terms of their original membership contracts. In turn, the

treble-damages demand under the NHCPA would implicate FDIC's two

federal defenses to any NHCPA recovery. See Timberland Design,

932 F.2d at 50; Claycomb, 945 F.2d at 861. On the other hand, if

appellants' "mechanic's lien" claim were found nonmeritorious,

the court would be required to rule on their claim for compensa-

tory damages for breach of their membership contracts, based on

appellees' alleged liability as the contractual successors of the

Developer or the Health Club. In the latter event, the court

would be required to rule on the D'Oench Duhme defense.

Finally, even at the preliminary jurisdictional stage,

7

FDIC's various federal defenses, see supra p. 4, and particularly

its D'Oench Duhme defense, were more than colorable. See Bate-

man, 970 F.2d at 926-27 (under D'Oench Duhme, alleged "agreement"

must be in writing, executed by bank, approved by bank's board of

directors, and kept continuously in bank records from date of

execution). Even as late as summary judgment, for example,

appellants had yet to produce a copy of the charter membership

contract, let alone a copy of the construction loan agreement,

although the former document presumably was within their control,

and the existence and whereabouts of both documents form the crux

of their alleged contract, "equitable lien," and NHCPA claims.

Moreover, given appellees' allegations that the Health Club was a

corporate entity distinct from the Developer, and never directly

contracted with the Bank in any capacity, FDIC's claim that no

written "agreement" appeared in the Bank's records on the date of

FDIC's appointment is far from frivolous. The district court

correctly denied the motion for remand.

B. Summary Judgment

A summary judgment ruling is reviewed de novo, employ-

ing the same standards incumbent on the district court, and

resolving all evidentiary issues in the light most favorable to

appellants. Gaskell v. The Harvard Coop. Soc'y, 3 F.3d 495, 497

(1st Cir. 1993).5

5The district court made four relevant determinations in
granting summary judgment for FDIC. First, appellants generated
no trialworthy factual claim that appellees (by acquiring title
to the real property which the Health Club leased from the

8

At the outset, we note that appellants' claims based on

their alleged status as contractual successors to, and third-

party beneficiaries of, the Health Club have been waived, as has

their NHCPA claim, because of their failure to present any

developed argument on these issues in their appellate brief. See

Rhode Island Hosp. Trust Nat'l Bank v. Howard Communications

Corp., 980 F.2d 823, 828 n. 8 (1st Cir. 1992) (issues raised in

appellate brief in a perfunctory manner, without any attempt at

developed argumentation, are deemed waived). Moreover, appel-

lants concede that these issues were "never raised" in the only

two pertinent memoranda submitted to the district court. Brief

for Appellants at 12; see Vanhaaren v. State Farm Mut. Auto. Ins.

Co., 989 F.2d 1, 4-5 (1st Cir. 1993) (issues raised for the first

time on appeal are deemed waived for failure to preserve).

Appellants fare little better on their only remaining

claim; viz., their alleged "lien" on the Property, roughly

analogous to a state-law mechanic's lien, assertedly entitled to

priority over the legal title acquired by the Bank through

Developer) became contractual successors of the Health Club, or
ever acquired the Health Club's assets or assumed its liabili-
ties. Second, appellants, as alleged third-party beneficiaries,
could not enforce the Health Club membership contracts against
appellees, since third-party beneficiaries may sue, but may not
be sued, for contract damages. Third, appellants cited no legal

authority or supporting facts for their novel state-law theory
that their charter membership contracts were akin to mechanic's
liens; that is, property interests "running" with the land.
Specifically, plaintiffs failed to show that they supplied the
Developer with labor or materials, or perfected their alleged
"lien" as required under New Hampshire law. Finally, because
appellees were not contractually bound to the terms of the Health
Club contracts, appellees could not have violated the NHCPA.

9

foreclosure. Although appellants continued to press this highly

dubious claim even at oral argument, as though it were founded on

some straightforward extrapolation from New Hampshire law,

neither at argument nor in their appellate brief have appellants

articulated any rationale for their claim, or cited to any New

Hampshire state court decision offering the remotest support.6

If a claimant cannot, or will not, attempt a succinct and cogent

articulation of its claim in its appellate brief, it may not

expect the court to supply it.7

Even assuming their chameleonic liability theories were

preserved below, and raised on appeal, summary judgment was

warranted. Appellants premised their "mechanic's lien" theory on

a basic maxim of New Hampshire law: "It is well settled that if

a party [viz., the Bank] is present and sees another [viz., the

6Instead, their appellate brief refers to a nine-page memor-
andum of law in opposition to the Bank's motion to dismiss which

appellants submitted to the New Hampshire Superior Court almost
three years ago, before FDIC ever removed the case. But see Fed.

R. App. P. 28(a)(5) (appellate brief "shall contain the conten-
tions of the appellant with respect to the issues presented, and
the reasons therefor, with citations to the authorities . . .
relied on"); cf. Katz v. King, 627 F.2d 568, 575 (1st Cir. 1980)

("[T]he argument must appear within the four corners of the brief

filed in this court. Attorneys cannot circumvent FRAP 28(g) by
incorporating by reference another brief filed in another fo-
rum.") (emphasis added). Furthermore, procedural lapses aside,
nowhere in their three-year-old state court memorandum does the
key phrase in their "moving target" offensive "mechanic's
lien" ever appear.

7Appellants further argue that the superior court's denial
of appellees' motion to dismiss Count 1 was somehow dispositive
on the question whether their "mechanic's lien" analogy is viable
under New Hampshire law. We disagree. The state court premised
its ruling on the ground that Count 1 stated a valid claim for
contractual successor liability only, not an equitable estoppel

or mechanic's lien claim.

10

Developer or Health Club] sell and convey property [viz., member-

ship contracts] to which he may assert title, without disclosing

his title, or objecting to the conveyance, and the sale is made

with full knowledge on his part, he will be estopped by his

silence from setting up his title thereafter." Corbett v.

Norcross, 35 N.H. 99, 115 (1857) (emphasis added).

In their state court memorandum, see supra note 6,

appellants cite a string of New Hampshire cases containing

general discussions of the equitable estoppel and good faith

purchaser doctrines. Appellants attempt to predicate the appli-

cability of those broad doctrines in the present case on four

core allegations: (1) the Bank knew before the Developer execut-

ed its mortgage that the Developer intended to sell charter

memberships to finance its repayment of the construction loan;

(2) the construction loan agreement contained a provision wherein

the Bank "agreed" to accept club membership fee proceeds in

repayment of the loan; (3) after June 1988, the Bank learned (or

should have learned) that the Developer had promised appellants

it would establish a segregated trust fund to hold all membership

fees, and that the Developer willfully failed to abide by this

promise; and (4) the Bank knowingly received $200,000 in member-

ship fee proceeds in repayment of its loan.8

8Appellants now concede that their charter memberships
cannot meet the literal requirements of a mechanic's lien under

New Hampshire law, since appellants neither supplied labor or
materials, nor perfected their alleged "liens." See supra note

5. Appellants present no argumentation or authority which would
indicate that perfection is a dispensable requisite to mechanic's
lien priority over a duly recorded mortgage lien. See N.H. Rev.

11

The fundamental problem for appellants is their failure

to produce competent evidence supporting these crucial factual

allegations. See Town of Nottingham v. Lee Homes, Inc., 118 N.H.

438, 442 (1978) ("the party asserting [equitable] estoppel bears

the burden of proving it"); see also Celotex Corp. v. Catrett,

477 U.S. 317, 322 (1986) (where nonmovant under Rule 56 would

bear the burden of proof at trial, its failure to produce suffi-

cient evidence to generate a trialworthy issue warrants summary

judgment). Most conspicuously, appellants have yet to proffer

the alleged charter membership contracts, presumably accessible

to them without resort to discovery.9 Nor have they presented

Stat. Ann. 447:10 (1993). Thus, appellants' Bateman exception

claim, see supra at p. 6, fails as a matter of law.

9Even if they had presented competent Rule 56 evidence on
these factual matters, appellants would still face three
considerable hurdles on the merits. See also note 10 infra.

First, unlike all of the aggrieved parties in the cited New
Hampshire cases, appellants have not made the threshold showing
that the law of any state recognizes health club memberships as
"property" interests. The only case appellants cite is wholly
unsupportive. See Silver Hills Country Club v. Sobieski, 361

P.2d 906, 907 (Cal. 1961) (considering analytically distinct
question whether the sales of club memberships were "securities"
subject to regulation California's Corporate Securities Act).
Second, the New Hampshire cases appellants cite involve a
narrow and distinctive species of fraud; namely, omissions and
other misleading conduct (e.g., silence, execution of releases,

sharing in sale proceeds) by a defendant which lead the party
acquiring the property to believe that the defendant neither has
nor will assert any claim, superseding title, or competing
interest in the property conveyed. See, e.g., New Hampshire Sav.

Bank v. National Rockland Bank, 93 N.H. 326, 329 (1945) (estop-

ping executor of decedent owner of passbook savings account,
where decedent had made inter vivos transfer of passbook to

daughter-in-law, along with a withdrawal form endorsed in blank,
and daughter-in-law pledged passbook as collateral for personal
loan). Appellants' promised evidence would not show that the
Bank concealed its interest in the Property, nor can appellants

plausibly dispute that they were at all times on constructive

12

any other evidence to rebut appellees' proof, in the form of a

sworn affidavit by the Bank's former vice-president, that the

Developer did not directly contract with appellants, but leased

the health club facilities to a distinct corporate entity (i.e.,

the Health Club) which in turn entered into club membership

contracts with the appellants. Further, appellants' sole evi-

dence of the alleged agreements and communications between the

Bank and the Developer is an affidavit by appellants' attorney,

generally relating evidence appellants would present at trial.

But see, e.g., Garside v. Osco Drug, Inc., 895 F.2d 46, 49 (1st

Cir. 1990) ("[A] mere promise to produce admissible evidence at

trial does not suffice to thwart the summary judgment ax."). The

affidavit is unaccompanied by documentary support. See Fed. R.

Civ. P. 56(e); 10A Charles A. Wright, Arthur R. Miller & Mary K.

Kane, Federal Practice and Procedure 2722, at 56-58 (2d ed.

1983) (averments made in Rule 56 affidavit to unattached con-

tracts and documents may be sufficient to establish a triable

issue as to their existence, but not as to their terms). Nor

does the affidavit present any other basis for evaluating the

affiant-attorney's personal knowledge of contractual transactions

notice of the Bank's recorded mortgage.
Finally, even if the Bank might be estopped from asserting

its mortgage and power of sale, appellants offer no explanation
as to how such an estoppel would insulate them from the defenses
of the Bank's successors particularly the FDIC with its

D'Oench Duhme defense absent evidence that these grantees knew

of the facts giving rise to a bar to the Bank's claim. See,

e.g., International Chimney Corp. v. 26 West Spring St. Assocs.,

561 N.Y.S.2d 933, 934 (App. Div. 1990) ("[E]quitable estoppel
should be applied with . . . even greater caution when sought to

be invoked against a subsequent owner.") (emphasis added).

13

between the Bank and the Developer, the Developer and the Health

Club, or the Health Club and appellants. Cf. Postscript Enters.

v. City of Bridgeton, 905 F.2d 223, 226 (8th Cir. 1990) ("'Attor-

neys' affidavits not based upon personal knowledge have been held

not to comply with Rule 56(e).'") (citing Kamen v. American Tel.

& Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986)).10

The district court judgment must be affirmed.

Affirmed.

10Nor does the record indicate that appellants ever request-
ed "a continuance to permit affidavits to be obtained or deposi-
tions to be taken or discovery to be had." Fed. R. Civ. P.
56(f). See, e.g., De la Torre v. Continental Ins. Co., 15 F.3d

12, (1st Cir. 1993) [1994 U.S. App. LEXIS 1502, at p*9 (1st
Cir. Jan. 31, 1993)].

14