FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
August 16, 2011
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
AVIVA LIFE & ANNUITY COMPANY;
AMERICAN INVESTORS LIFE
INSURANCE COMPANY,
Plaintiffs - Appellants,
v. No. 10-3163
FEDERAL DEPOSIT INSURANCE
CORPORATION,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. No. 5:09-CV-04025-SAC-KGS)
Jodi M. Hoss (Bruce E. Baty, with her on the briefs), SNR Denton US LLP, Kansas City,
Missouri, for Plaintiffs-Appellants.
Minodora D. Vancea, Counsel, Federal Deposit Insurance Corporation, Arlington,
Virginia (Barry R. Grissom, United States Attorney, and Jackie A. Rapstine, Assistant
United States Attorney, District of Kansas, Department of Justice, Topeka, Kansas;
Colleen J. Boles, Assistant General Counsel, and Lawrence H. Richmond, Senior
Counsel, Federal Deposit Insurance Corporation, Arlington, Virginia, with her on the
brief), for Defendant-Appellee.
Before MURPHY, McKAY, and O’BRIEN, Circuit Judges.
MURPHY, Circuit Judge.
Aviva Life & Annuity Company and American Investors Life Insurance Company
(together, “Plaintiffs”) contend the Federal Deposit Insurance Corporation (“FDIC”)
acted in an arbitrary and capricious manner in rendering insurance determinations
concerning certain of Plaintiffs’ bank deposit accounts. They appeal from the district
court’s order upholding the FDIC’s determinations. Exercising jurisdiction pursuant to
28 U.S.C. § 1291, this court AFFIRMS.
I. Background
The pertinent facts are undisputed. On August 22, 2008, the Kansas Bank
Commissioner closed Columbian Bank & Trust Company (“Columbian”) and appointed
the FDIC as receiver. At that time, Plaintiffs maintained twelve deposit accounts at
Columbian, containing approximately $11.3 million. The bulk of those funds were held
in two accounts (the “Challenged Accounts”): the “Aviva Life & Annuity Operating
Account,” containing $4,242,854.60; and the “American Investors Life Ins Co Inc.
Operating Account,” containing $7,098,344.56. The remaining accounts contained either
$1,000 or $10,000 each and bore a variety of titles. Shortly after its appointment as
receiver, the FDIC determined that each Plaintiffs’ respective accounts identified as
“operating” accounts, which included the Challenged Accounts, would be aggregated as
corporate accounts pursuant to 12 C.F.R. § 330.11. The FDIC further determined that the
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accounts designated as “benefits” accounts would be separately insured as annuity
contract accounts pursuant to 12 C.F.R. § 330.8.
Plaintiffs filed the underlying action, asserting that the FDIC’s insurance
determination was arbitrary and capricious because the Challenged Accounts should
properly have been treated as annuity contract accounts. The district court issued a
written order rejecting Plaintiffs’ arguments, affirming the FDIC’s determination, and
dismissing the action. It is from this order that Plaintiffs now appeal.
II. Standard of Review
Under 12 U.S.C. § 1821(f)(4), “[a] final determination made by the [FDIC]
regarding any claim for insurance coverage shall be a final agency action reviewable in
accordance with” the Administrative Procedure Act (“APA”). The APA provides that the
reviewing court shall “hold unlawful and set aside agency action, findings, and
conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” 5 U.S.C. § 706(2)(A). Review under this standard is “highly
deferential” to the agency’s determination. Ecology Ctr., Inc. v. U.S. Forest Serv., 451
F.3d 1183, 1188 (10th Cir. 2006). “The duty of a court reviewing agency action under
the ‘arbitrary and capricious’ standard is to ascertain whether the agency examined the
relevant data and articulated a rational connection between the facts found and the
decision made.” Citizens’ Comm. To Save Our Canyons v. Krueger, 513 F.3d 1169, 1176
(10th Cir. 2008) (quotation omitted). A presumption of validity attaches to agency
action, and the burden is on the party seeking review to establish that the challenged
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agency action is arbitrary or capricious. Id. Furthermore, “[j]ust as we defer to an
agency’s reasonable interpretations of [its authorizing] statute when it issues regulations
in the first instance, the agency is entitled to further deference when it adopts a
reasonable interpretation of regulations it has put in force.” Fed. Express Corp. v.
Holowecki, 552 U.S. 389, 397 (2008) (citation omitted).
III. Regulatory Framework and the FDIC’s Determination
The FDIC serves as an insurance company created by Congress to promote
stability and soundness in the nation’s banking system. Jones v. FDIC, 748 F.2d 1400,
1402 (10th Cir. 1984). Accordingly, one of the FDIC’s principal duties when it acts as
receiver is to make insurance payments to the depositors of the failed institution. Id. The
FDIC is required by the Federal Deposit Insurance Act to “aggregate the amounts of all
deposits in the insured depository institution which are maintained by a depositor in the
same capacity and the same right,” and insure them up to the standard maximum deposit
insurance amount (“SMDIA”). 12 U.S.C. § 1821(a)(1)(C).1 The statute, however does
not define “capacity” or “right.” Instead, Congress authorized the FDIC to promulgate
regulations to define any terms necessary to implement the statute. Id. § 1819(a).
1
At the time of Columbian’s closing, the SMDIA was $100,000. See 12 U.S.C. §
1821(a)(1)(E) (2008). Congress has since increased the SMDIA to $250,000. Dodd-
Frank Wall Street Reform and Consumer Protection Act, Pub L. No. 111-203, § 335, 124
Stat. 1376, 1540 (2010) (codified at 12 U.S.C. § 1821(a)(1)(E) (2010)). This increase
was made retroactively applicable to the period when the FDIC was appointed as receiver
for Columbian. 12 U.S.C. § 1821(a)(1)(E). The parties have made no reference to these
statutory changes, and the court has not considered those changes in resolving the issue
presented in this appeal.
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The FDIC chose to effectuate its congressional mandate by erecting a regulatory
framework based on “ownership rights and capacities”:
The insurance coverage provided by the Act . . . is based upon the
ownership rights and capacities in which deposit accounts are maintained at
depository institutions. All deposits in an insured depository institution
which are maintained in the same right and capacity . . . shall be added
together and insured in accordance with this part. Deposits maintained in
different rights and capacities, as recognized under this part, shall be
insured separately from each other.
12 C.F.R. § 330.3(a). The deposit account “rights and capacities” recognized in the
FDIC’s regulations pertinent to the instant appeal are (i) corporate accounts, id. §
330.11(a); and (ii) annuity contract accounts, id. § 330.8. Deposit accounts falling into
the corporate account category “shall be added together and insured up to the SMDIA in
the aggregate.” Id. § 330.11(a)(1). By contrast, “[f]unds held by an insurance company
or other corporation in a deposit account for the sole purpose of funding life insurance or
annuity contracts and any benefits incidental to such contracts, shall be insured separately
in the amount of up to the SMDIA per annuitant,” provided certain additional
requirements are satisfied. 2 Id. § 330.8 (emphasis added). That is to say, corporate
accounts are only eligible for insurance coverage up to the SMDIA, while funds held in
an annuity contract account could potentially be insured for many multiples of that
2
Annuity contract accounts are entitled to per annuitant coverage “provided that,
pursuant to a state statute: (1) The corporation establishes a separate account for such
funds; (2) The account cannot be charged with the liabilities arising out of any other
business of the corporation; and (3) The account cannot be invaded by other creditors of
the corporation in the event that the corporation becomes insolvent and its assets are
liquidated.” 12 C.F.R. § 330.8.
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amount.
Shortly after Columbian went into receivership, the FDIC began an investigation
to determine the insurance treatment appropriate for Plaintiffs’ various accounts.
Plaintiffs indicated the Challenged Accounts were maintained for and on behalf of their
annuity customers, to fund annuity contracts and the benefits incidental to such contracts,
and that they therefore constituted annuity contract accounts, entitled to per annuitant
insurance under C.F.R. § 330.8. The FDIC, however, concluded the Challenged
Accounts would be insured according to their denomination on the Bank’s records:
because the Challenged Accounts were each entitled “operating account,” they were to be
aggregated as corporate accounts and insured, together with each Plaintiffs’ other
respective corporate accounts, up to the SMDIA of $100,000. Consequently, the
approximately $11.3 million in deposits contained in the Challenged Accounts were
entitled to merely $200,000 total insurance, with the remainder to be paid on a pro rata
basis from Columbian’s liquidated assets. Had the Challenged Accounts been deemed
eligible for per annuitant coverage under § 330.8, it appears they would have been
insured in the total amount of $8,605,261.94.
The FDIC’s final determination does not explicitly state as much,3 but the parties
3
Although a reviewing court “may not supply a reasoned basis for the agency’s
action that the agency itself has not given,” it may “uphold a decision of less than ideal
clarity if the agency path may reasonably be discerned.” Motor Vehicle Mfrs. Ass’n of
U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S 29, 43 (1983) (quotation and citation
omitted).
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agree its conclusion was predicated upon an application of 12 C.F.R. § 330.5(a)(1), which
provides that:
[I]n determining the amount of insurance available to each depositor, the
FDIC shall presume that deposited funds are actually owned in the manner
indicated on the deposit account records of the insured depository
institution. If the FDIC, in its sole discretion, determines that the deposit
account records of the insured depository institution are clear and
unambiguous, those records shall be considered binding on the depositor,
and the FDIC shall consider no other records on the manner in which the
funds are owned. If the deposit account records are ambiguous or unclear
on the manner in which the funds are owned, then the FDIC may, in its sole
discretion, consider evidence other than the deposit account records of the
insured depository institution for the purpose of establishing the manner in
which the funds are owned. Despite the general requirements of this
paragraph . . . if the FDIC has reason to believe that the insured depository
institution’s deposit account records misrepresent the actual ownership of
deposited funds and such misrepresentation would increase deposit
insurance coverage, the FDIC may consider all available evidence and pay
claims for insured deposits on the basis of the actual rather than
misrepresented ownership.
“Deposit account records” are defined as “account ledgers, signature cards . . . and other
books and records of the insured depository institution . . . which relate to the insured
depository institution’s deposit taking function.” 12 C.F.R. § 330.1(e). In the case of the
Challenged Accounts, the signature cards indicated that the “ownership of the account”
was a “corporation” for “business purpose,” and Columbian’s account ledgers described
the Challenged Accounts as “operating” accounts. Exercising its prerogative under §
330.5, the FDIC determined these deposit accounts records clearly and unambiguously
indicated the Challenged Accounts were corporate accounts, and refused to consider
Plaintiffs’ evidence to the contrary.
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Plaintiffs contend the FDIC acted arbitrarily and capriciously in relation to the
Challenged Accounts because § 330.5 is inapplicable to the determination whether a
deposit account is entitled to per annuitant coverage under § 330.8. They assert that the
touchstone of an annuity contract account under FDIC regulations is its intended purpose.
See id. § 330.8(a) (defining annuity contract accounts as “[f]unds held by an insurance
company . . . in a deposit account for the sole purpose of funding life insurance or
annuity contracts” (emphasis added)). Section 330.5, by contrast, provides a rule
governing the evidence the FDIC may consider when determining a deposit account’s
ownership. Id. § 330.5(a)(1) (providing that “the FDIC shall presume that deposited
funds are actually owned in the manner indicated on the deposit account records”
(emphasis added)). Because the two regulations, in their reading, have nothing to do with
one another, Plaintiffs assert it was arbitrary and capricious for the FDIC to artificially
restrict its analysis of the Challenged Accounts to Columbian’s deposit account records.
Plaintiffs’ preferred reading conflicts with the plain language of the contested
regulations. Section 330.3(a) provides that FDIC insurance coverage “is based upon the
ownership rights and capacities in which deposit accounts are maintained.” (emphasis
added). There is no indication that annuity contract accounts under § 330.8 are exempted
from this general maxim. Section 330.5(a)(1), in turn, directs the FDIC to “presume that
deposited funds are actually owned in the manner indicated on the deposit account
records of the insured depository institution.” Nothing in § 330.5 indicates that funds
purportedly held in an annuity contract account are exempted from this rule. Finally, §
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330.8(a) describes the manner of ownership that must be present in order for a deposit
account to be insured on a per annuitant basis: the funds in that account must be “held by
an insurance company . . . for the sole purpose of funding life insurance or annuity
contracts.” In the final analysis, the regulatory framework is seamless. No plausible
reading of these regulations supports Plaintiffs’ contention that a depositor, simply by
claiming his deposit account was owned with the intention of funding annuity payments,
can evade § 330.5’s requirement that such intention be clearly and unambiguously
indicated upon the bank’s deposit account records.
If there were any doubt this reading is correct, such doubt is obviated by the
FDIC’s longstanding interpretation of the regulations. See Bell v. FDIC (In re Collins
Secs. Corp.), 998 F.2d 551, 554 (8th Cir. 1993) (discussing the “FDIC’s longstanding
practice of looking primarily at the failed bank’s deposit account records in determining
insurance claims”). In promulgating § 330.5, the FDIC explained that its record-keeping
and evidentiary regulations were “based upon a basic principle: In paying insurance, the
FDIC is entitled to rely on the account records of the failed depository institution.”
Simplification of Deposit Insurance Rules, 63 Fed. Reg. 25750, 25751 (May 11, 1998)
(codified at 12 C.F.R. pt. 330) (emphasis added). The highlighted language indicates that
the evidentiary rule of § 330.5 was meant to apply universally. As the FDIC explained,
its policy of “strict reliance on the account records serves multiple purposes,” allowing
the FDIC to quickly estimate its insurance liability and pay insured depositors, while
limiting the opportunities for depositors to fraudulently increase their insurance coverage.
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Id. 4 The rationale for § 330.5 applies with equal force to all categories of deposit
account ownership, including annuity contract accounts.
Because the FDIC’s position that § 330.5 operates to restrict the evidence that may
be considered when determining whether a deposit account qualifies for per annuitant
insurance under § 330.8 is reasonable, it must be accepted. Fed. Express Corp., 552 U.S.
at 397; see also Jones 748 F.2d at 1405 (“When an agency is interpreting its own
regulation, the Courts have given added deference to the agency’s construction and the
standard of review . . . is [the] plainly erroneous or inconsistent standard.”). We therefore
reject Plaintiffs’ contrary reading of the regulations. Furthermore, because the FDIC’s
final determination regarding the Challenged Accounts comports with its reasonable
interpretation of the regulations, that determination was neither arbitrary nor capricious.
IV. The FDIC’s Reversal of Position
Plaintiffs alternately contend that, even if the FDIC was correct in its belief that §
330.5 applies to determinations of coverage under § 330.8, it acted in an arbitrary and
capricious manner in reversing the determinations made by lower-level FDIC agents
prior to the final decision. These intermediate determinations, which concluded the
4
The FDIC’s decision to effectuate its statutory mandate by assigning dispositive
weight to clear and unambiguous deposit account records has been repeatedly upheld by
the courts. See, e.g., Jones v. FDIC, 748 F.2d 1400, 1405 (10th Cir. 1984); Villafañe-
Neriz v. FDIC, 75 F.3d 727, 731-32 (1st Cir. 1996); Raine v. Reed, 14 F.3d 280, 283 (5th
Cir. 1994) (describing the “well-grounded history of permitting the FDIC to rely
exclusively on the books and records of an insolvent institution . . . in making [its] many
deposit insurance determinations”); Bell v. FDIC (In re Collins Secs. Corp.), 998 F.2d
551, 554 (8th Cir. 1993).
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Challenged Accounts did constitute annuity contract accounts, were apparently
communicated to Plaintiffs at various times before the FDIC ultimately reached its final,
contrary, determination. Based on these communications, Plaintiffs infer the FDIC had,
at one point, concluded the deposit accounts records were “ambiguous or unclear on the
manner in which the funds were owned,” thereby allowing it to consider certain
supplementary materials offered by Plaintiffs as proof of the Challenged Accounts’ true
nature. See 12 C.F.R. § 330.5 (“If the deposit account records are ambiguous or unclear
on the manner in which the funds are owned, then the FDIC may, in its sole discretion
consider evidence other than the deposit account records. . . .”). Having previously made
the decision to consider extrinsic evidence, and having concluded based on that evidence
that the Challenged Accounts constituted annuity contract accounts, Plaintiffs assert it
was arbitrary and capricious for the FDIC to reverse course without articulating a reason
for its decision.5
5
Citing the intermediate determinations as proof, Plaintiffs also contend the
FDIC’s consideration of the extrinsic evidence gave it “reason to believe that
[Columbian]’s deposit account records misrepresent the actual ownership of” the
Challenged Accounts, thereby permitting the FDIC to “consider all available evidence
and pay claims . . . on the basis of the actual rather than the misrepresented ownership.”
12 C.F.R. § 330.5 (emphasis added). This exception to § 330.5’s general rule, however,
is only applicable if the suspected misrepresentation in the deposit account records
“would increase deposit insurance coverage.” Id. (emphasis added). The deposit
account records here indicate that the Challenged Accounts were general corporate
accounts. If this were a misrepresentation, and the Challenged Accounts were actually
annuity contract accounts, then the misrepresentation would have the effect of decreasing
their deposit insurance coverage. Consequently, the exception is inapplicable.
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There is no provision within the Federal Deposit Insurance Act authorizing federal
court review of intermediate FDIC determinations. Cf. 12 U.S.C. § 1821(f)(4)
(authorizing judicial review of “final agency actions”). Plaintiffs acknowledge as much,
but assert it is this court’s duty to nevertheless “ascertain whether the agency examined
the relevant data and articulated a rational connection between the facts found and the
decision made.” Citizens’ Comm. To Save our Canyons, 513 F.3d at 1176. Presumably,
they mean to say that the extrinsic evidence allegedly considered by the FDIC in forming
its intermediate determinations constitutes “relevant data” and that it was incumbent upon
the FDIC to explain how this data can be harmonized with the final insurance
determination. There is no question, however, that the FDIC ultimately concluded the
deposit account records clearly and unambiguously indicated the Challenged Accounts
were owned in the manner of “corporate accounts,” per § 330.11. Having reached that
conclusion, the FDIC’s controlling regulations expressly prohibited it from considering
any “other records on the manner in which the funds [were] owned.” 12 C.F.R. § 330.5.
Plaintiffs’ extrinsic evidence was not, therefore, “relevant data” for purposes of the
FDIC’s final insurance determination. The absence of any discussion pertaining to this
evidence in the FDIC’s final determination is therefore unsurprising, and in no way
arbitrary or capricious.6
6
Plaintiffs also briefly contend the FDIC acted in an arbitrary and capricious
manner by failing to include a certain email communication, in which Columbian
allegedly indicates the Challenged Accounts constituted annuity contract accounts, in its
Continued . . .
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V. Conclusion
For the foregoing reasons, the judgment of the district court is AFFIRMED.
review of the deposit account records. Plaintiffs raised this contention for the first time in
their reply brief and the issue is therefore waived. See Anderson v. U.S. Dep’t of Labor,
422 F.3d 1155, 1174-75 (10th Cir. 2005) (noting “the general rule that appellate courts
will not entertain issues raised for the first time on appeal in an appellant’s reply [brief].”
(alteration in original) (quotation omitted)).
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