Adair v. Lease Partners, Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
October 28, 2009

No. 08-60674 Charles R. Fulbruge III
Clerk

GLENN ALLEN ADAIR, doing business as Super D #229; DALLAS
LITTLE, doing business as Little's Pharmacy; SOUTHERN
DISCOUNT DRUGS OF CHARLESTON, doing business as Southern
Discount Drugs/Robert T Salmon; MAY'S PHARMACY, doing
business as Coldwater Pharmacy/James A May; ANIMAL MEDICAL
CENTER OF ELLISVILLE, INC; ET AL

Plaintiffs - Appellees
v.

LEASE PARTNERS, INC; BANCORPSOUTH BANK

Defendants - Appellants

FIRST BANK RICHMOND, S B, doing business as First Federal
Leasing and Interstate Financial

Appellant

Appeal from the United States District Court for the
Southern District of Mississippi

Before REAVLEY, JOLLY, and WIENER, Circuit Judges.
REAVLEY, Circuit Judge:
This is an appeal from the district court order remanding this case to state
court. The Federal Deposit Insurance Corporation ("FDIC") – an intervening
Defendant – had removed the case to federal court but was later dismissed as a
party. The district court held that once the FDIC was dismissed, only
 No. 08-60674

supplemental jurisdiction remained over Appellees' remaining claims. The court
subsequently exercised its claimed discretion to remand the case. We reverse.
I.
This case is a collection of claims brought by many individual pharmacies,
pharmacists, veterinarians and veterinary clinics ("Plaintiffs") against
individual salesmen and different financial institutions ("Defendants").
Plaintiffs filed the case in 1996 in Mississippi state court, alleging state law
fraud, negligence, breach of contract, and usury claims. Plaintiffs allege that
Defendants participated in a Ponzi scheme in which Defendants leased Recomm
electronic advertising banners to Plaintiffs, fraudulently misrepresented their
identity as lessors, and charged usurious interest rates on the finance charges.
After more than eleven years of litigation, the FDIC entered the case in
2007 as a receiver for a successor bank to one of the original Defendants.1 The
FDIC timely removed the case to federal district court pursuant to 12 U.S.C.
§ 1819(b)(2). In 2008 Plaintiffs filed a motion to dismiss all claims against the
FDIC. Plaintiffs also filed a motion to remand the case to state court. The FDIC
joined in Plaintiffs' motion to dismiss but not in their motion to remand.
The district court granted both of Plaintiffs' motions. With the FDIC no
longer a party, the court held that no original federal jurisdiction remained over
Plaintiffs' remaining claims and that it retained only supplemental jurisdiction
over the remaining claims. As the court saw no reason to continue exercising
jurisdiction over a case composed of what it saw as predominantly state claims,
the court stated that it would exercise its discretion to remand the case to state
court.
Defendants appeal the district court's remand order.

1
By this time, the case had gone from state court to federal court and was once again
in state court.

2
 No. 08-60674

II.
An order remanding a case to state court is typically not reviewable on
appeal.2 However, this court has jurisdiction over a remand order where the
district court based its decision on an affirmative exercise of discretion rather
than on a finding of lack of jurisdiction. See Regan v. Starcraft Marine, LLC.3
A district court's remand order is final for appeal purposes. Quackenbush v.
Allstate Ins. Co.4
Whether a district court has the discretion to remand a case to state court
is a legal question this court reviews de novo. See Poche v. Tex. Air Corps, Inc.5
If the district court has the discretion to remand a case, this court reviews its
decision for abuse of discretion.6
III.
None of the parties disputes that the district court had jurisdiction over
the case at the time of remand. The issue is whether the court was obligated to
retain jurisdiction and hear the case or whether it had discretion to remand. To
answer this question, we must determine what kind of jurisdiction existed at the
time of remand. See Buchner v. FDIC.7
When the federal court has original subject-matter jurisdiction over a
claim, that jurisdiction is "not discretionary with the district court" and "can

2
See 28 U.S.C. § 1447(d).
3
524 F.3d 627, 631 (5th Cir. 2008).
4
517 U.S. 706, 715, 116 S. Ct. 1712, 1720 (1996).
5
549 F.3d 999, 1001 (5th Cir. 2008) (citing Hook v. Morrison Milling Co., 38 F.3d 776,
780 (5th Cir. 1994)).
6
See id. (citing Hook, 38 F.3d at 780).
7
981 F.2d 816, 818 (5th Cir. 1993).

3
 No. 08-60674

neither be conferred nor destroyed by the parties' waiver or agreement." 8
However, if a court has only supplemental jurisdiction over a claim, Congress
has granted authority to adjudicate the claim or remand the claim based on the
court's discretion.9 Appellants argue that the district court had no authority to
remand the case because 12 U.S.C. § 1819(b)(2) continues to provide original
jurisdiction over all claims in the case, even after the FDIC's dismissal.
Appellees argue that the district court had the discretion to remand the case
pursuant to 28 U.S.C. § 1367(c) because the court retained only supplemental
jurisdiction over the remaining claims once the FDIC was dismissed. Although
the district court had very good reasons for remanding, our precedent supports
the position of Appellants.
It is undisputed that the FDIC properly removed this case pursuant to 12
U.S.C. § 1819(b)(2). This statute states in relevant part:
(A) In general
[Except in situations irrelevant to the instant case], all suits of a
civil nature at common law or in equity to which the Corporation
[FDIC], in any capacity, is a party shall be deemed to arise under
the laws of the United States.
(B) Removal
[Except in situations irrelevant to the instant case], the Corporation
may, without bond or security, remove any action, suit, or
proceeding from a State court to the appropriate United States
district court before the end of the 90-day period beginning on the
date the action, suit, or proceeding is filed against the Corporation
or the Corporation is substituted as a party.10

8
Id. at 820-21.
9
See, e.g., 28 U.S.C. §§ 1367(c), 1441(c).
10
§ 1819(b)(2)(A)-(B).

4
 No. 08-60674

Congress enacted § 1819(b)(2) as part of the Financial Institutions Reform,
Recovery, and Enforcement Act ("FIRREA").11 FIRREA is a comprehensive
regulatory scheme that Congress passed in response to the savings-and-loan
crisis of the late 1980s and early 1990s. See In re Meyerland Co.12 Pursuant to
FIRREA, the FDIC succeeded the Federal Savings and Loan Insurance
Corporation ("FSLIC") as conservator and receiver for defaulting
federally-insured financial institutions. 13 FIRREA is specifically designed to
"'enhance and clarify enforcement powers of the financial institution regulatory
agencies,'" and "greatly expands the FDIC's role in regulating and supervising
such institutions."14
Among the many powers granted to the FDIC by FIRREA, "[t]he
power . . . to invoke federal jurisdiction and to remove from state court is
substantial." 15 Pursuant to § 1819(b)(2)(A), all suits to which the FDIC is a party
and all component claims in those suits are "conclusively presumed to arise
under the laws of the United States, and thus . . . within the original subject
matter jurisdiction of the proper federal district court." 16 Because a suit and all
its component claims are conclusively deemed to arise under federal law once the
FDIC is a party, § 1819(b)(2) provides jurisdiction over suits whose causes of

11
Pub. L. No. 101-73, 103 Stat. 183 (1989).
12
960 F.2d 512, 514-15 (5th Cir. 1992) (en banc).
13
See id.
14
Id. (quoting and citing H.R. REP . NO . 101-54(I) 291, 310-11, reprinted in 1989
U.S.C.C.A.N. 86, 106-07).
15
Id. at 515 (citing Carrolltown-Farmers Branch Indep. Sch. Dist. v. Johnson &
Cravens, 13911, Inc., 889 F.2d 571, 572 (5th Cir. 1989); Triland Holdings & Co. v. Sunbelt
Serv. Corp., 884 F.2d 205, 207 (5th Cir. 1989)).
16
Buchner, 981 F.2d at 819 (emphasis added); see also FSLIC v. Mackie, 962 F.2d 1144,
1150 (5th Cir. 1992) (recognizing removal jurisdiction over pendent party claims pursuant to
12 U.S.C. § 1730(k)(1) (repealed 1989), § 1819(b)(2)'s predecessor).

5
 No. 08-60674

action may otherwise largely depend on state law and which may not otherwise
be subject to federal-question jurisdiction under the general federal-question
statute of 28 U.S.C. § 1331.17 Ultimately, in enacting FIRREA, "Congress used
very strong language to afford the FDIC every possibility of having a federal
forum within the limits of Article III." 18
The language of § 1819(b)(2)(A) states that all claims in a suit "arise under
the laws of the United States" when the FDIC "is a party." Nothing in the
statute specifically addresses what happens to a court's jurisdiction, if anything,
when the FDIC is dismissed as a party. Consequently, the circuits are split on
whether § 1819(b)(2) continues to provide original federal subject matter
jurisdiction over a case after the FDIC is dismissed. Only three circuits have
specifically addressed this issue. In the majority are the Fifth Circuit and the
Second Circuit, which hold that § 1819(b)(2) continues to provide federal
jurisdiction after the FDIC has been dismissed from a case or has transferred its
assets to a third party. See FSLIC v. Griffin;19 FDIC v. Four Star Holding Co.20
In the minority is the Third Circuit, which holds that original federal jurisdiction
ceases with the dismissal of a FIRREA federal corporation and only

17
See Meyerland, 960 F.2d at 518-19 (comparing the grant of jurisdiction under §
1819(b)(2) to that recognized in Pacific Railroad Removal Cases, 115 U.S. 1, 5 S. Ct. 113
(1885), and Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 822 (1824)).
18
Id. at 519 (citation and footnote omitted).
19
935 F.2d 691, 697 (5th Cir. 1991).
20
178 F.3d 97, 100-01 (2d Cir. 1999).

6
 No. 08-60674

supplemental jurisdiction remains.21 New Rock Asset Partners, L.P. v. Preferred
Entity Advancements, Inc.22
In Griffin, the FSLIC entered a state court action as receiver for the
plaintiff and subsequently removed the case to federal court pursuant to
12 U.S.C. § 1730(k)(1), a statute which was later repealed and retroactively
superseded by 12 U.S.C. § 1819.23 During the pendency of the case, Congress
passed FIRREA, and the FDIC succeeded the FSLIC as receiver.24 The district
court then granted Griffin's motion to dismiss its counterclaims against the
FDIC, but the court retained jurisdiction over the case between Griffin and the
FDIC's successor in interest, who had intervened against Griffin.25 The district
court ultimately held against Griffin.26 Griffin appealed to this court, arguing
that the federal court lacked jurisdiction once the FDIC was dismissed.27
We disagreed, holding that federal jurisdiction continued to exist pursuant
to § 1819 after the FDIC's dismissal.28 The court provided two rationales for its
decision. The court first stated that "[t]he power to remove is evaluated at the

21
While not expressly addressing the issue of continuing original jurisdiction, the
Eighth Circuit has reviewed a district court's remand for abuse of discretion in a case where
the Resolution Trust Corporation ("RTC") removed the case under an analogous statute but
was later dismissed, thus implicitly adopting New Rock's holding, if not its reasoning. See
Myers v. Moore Eng'g Inc., 42 F.3d 452, 455 (8th Cir. 1994) (holding the district court did not
abuse its discretion in denying remand when the RTC had previously removed pursuant to 12
U.S.C. § 1441a(l)(1)).
22
101 F.3d 1492, 1494-95 (3d Cir. 1996).
23
See Griffin, 935 F.2d at 694-95.
24
Id.
25
Id.
26
Id.
27
Id. at 695.
28
Id. at 696.

7
 No. 08-60674

time of removal."29 Although § 1730(k)(1) controlled when the FSLIC removed,
FIRREA was enacted to "correct any possible jurisdictional defects existing at
the time of removal." 30 Accordingly, the enacting of § 1819(b)(2) after removal
and the FDIC's later dismissal from the case "cannot defeat this intent." 31 The
court then cited federal policy interests which favored recognizing jurisdiction
over the FDIC's successor in interest.32 Specifically, the court recognized the
need to provide federal protection to successors in interest to the FDIC under the
D'Oench Duhme doctrine, which is designed to "protect[] the FDIC and its
assignees from unrecorded side agreements not reflected in the bank's
records[.]"33 The court concluded its discussion of the issue by stating, "federal
jurisdiction is proper in this case because according to . . . § 1819, the case arises
under federal law. Since federal jurisdiction exists, federal law applies."34
The Second Circuit followed Griffin in Four Star Holding.35 In Four Star
Holding, the FDIC brought a foreclosure action in federal court pursuant to
§ 1819(b)(2)(A) but then transferred all its interests to a third party.36 On
appeal, the defendants argued that with the transfer of the FDIC's interest in
the case to another party, no federal jurisdiction remained.37 However, the

29
Id.
30
Id.
31
Id.
32
Id.
33
Id. at 697 (citing D'Oench Duhme & Co. v. FDIC, 315 U.S. 447, 62 S. Ct. 676 (1942)).
Congress partially codified D'Oench Duhme in 12 U.S.C. § 1823(e).
34
Id. at 696.
35
See 178 F.3d at 101.
36
Id. at 99.
37
Id. at 100.

8
 No. 08-60674

Second Circuit held that jurisdiction continued pursuant to § 1819, and it cited
both the time-of-filing doctrine and the federal policy rationales set forth in
Griffin as justifications for retaining jurisdiction.38 Synthesizing the
time-of-filing rationale with additional federal policy concerns, the Second
Circuit stated:
"Adopting a rule which would make federal jurisdiction contingent
on who owned an interest in certain property at a particular time
'could well have the effect of deterring normal business transactions
during the pendency of what might be lengthy litigation,'" CIT, Inc.
v. 170 Willow Street Assoc., No. 93 Civ. 1201 CSH, 1997 WL 528163,
at *7 (S.D.N.Y. Aug. 26, 1997) (quoting Freeport-McMoRan, Inc., 498
U.S. at 428), and could also deter transactions by FDIC that
presumably are in the public interest.39
Meanwhile, the Third Circuit expressly rejected the Griffin court's holding
that original federal jurisdiction continues pursuant to § 1819(b)(2) after the
FDIC is dismissed from a case.40 In New Rock, the Resolution Trust Corporation
("RTC"), which Congress created under FIRREA, filed a case in federal court
pursuant to 12 U.S.C. § 1441a(l)(1).41 The RTC then sold its interests to a

38
See id. (citing Griffin, 935 F.2d at 969; Newman-Green, Inc. v. Alfonzo-Larrain, 490
U.S. 826, 830, 109 S. Ct. 2218 (1989); Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S.
426, 428, 111 S. Ct. 858 (1991) (per curiam)).
39
Id. at 100-01. Although the Second Circuit follows Griffin in Four Star Holding,
other Second Circuit cases have not recognized original jurisdiction over pendent state claims.
See, e.g., King v. Crossland Sav. Bank, 111 F.3d 251, 255-56 (2d Cir. 1997) (finding exercise
of supplemental jurisdiction appropriate over pendent party claims pursuant to § 1367 in case
removed pursuant to § 1819(b)(2)); Mizuna, Ltd. v. Crossland Fed. Sav. Bank, 90 F.3d 650, 657
(2d Cir. 1996) (same). However, because original jurisdiction pursuant to § 1819 applies to all
cases in a "suit," these latter cases inconsistently apply § 1819(b)(2).
40
See New Rock Asset Partners, L.P., 101 F.3d at 1502.
41
Id. at 1495. Section 1441a(l)(1) states:

Notwithstanding any other provision of law, any civil action, suit, or proceeding
to which the Corporation is a party shall be deemed to arise under the laws of
the United States, and the United States district courts shall have original
jurisdiction over such action, suit, or proceeding.

9
 No. 08-60674

private third party and was dismissed from the case.42 Analogizing § 1441a(l)(1)
to § 1819(b)(2), and citing to Griffin's analysis, the Third Circuit held that
§ 1441a(l)(1) "precludes continuing jurisdiction over an action where the RTC is
no longer a party" because "the policy reasons for federal jurisdiction [under
FIRREA] end when the FDIC or RTC leaves the case."43 The court further held
that the time-of-filing doctrine was insufficient to retain jurisdiction under
FIRREA because the doctrine was more closely associated with diversity cases
than federal-question cases.44 Moreover, the court noted that other courts had
inconsistently applied the time-of-filing doctrine in federal-question cases.45
Ultimately, however, the New Rock court concluded that while original
jurisdiction was lacking, a district court could retain supplemental jurisdiction
over state claims pursuant to 28 U.S.C. § 1367(c).46
All three of these cases make it clear that a court following Griffin will
recognize continued federal jurisdiction when the FDIC removes a case but is
later dismissed, and that this jurisdiction is pursuant to 12 U.S.C. § 1819 and
not any other statute.47 As Griffin is Fifth Circuit precedent, we are bound by
its holding.

42
Id.
43
Id. at 1501-02 (citing Mill Invs., Inc. v. Brooks Woolen Co., 797 F. Supp. 49 (D. Me.
1992)).
44
Id. at 1503-04.
45
Id.
46
Id. at 1504.
47
See Griffin, 935 F.2d at 696 ("In sum, federal jurisdiction is proper in this case
because according to . . . § 1819, the case arises under federal law.") (emphasis added); Four
Star Holding, 178 F.3d at 101 (following Griffin to hold that FDIC's dismissal "does not divest
the court of subject matter jurisdiction under Section 1819") (emphasis added); New Rock Asset
Partners, L.P., 101 F.3d at 1502, 1504 (disagreeing with Griffin and holding that supplemental
jurisdiction, not original jurisdiction, existed after RTC's dismissal).

10
 No. 08-60674

Because federal jurisdiction continues in this case pursuant to
§ 1819(b)(2), that jurisdiction extends to all claims in the "suit," regardless of
their state or federal origin.48 As the district court retained original jurisdiction
over all claims in this case, remand for any claim was inappropriate.49
We recognize that the party in Griffin arguing for federal jurisdiction was
a successor in interest to the FDIC, and no successor in interest remains in the
instant case.50 In addition, the Griffin court expressly cited the existence of a
successor in interest as part of its rationale for continued jurisdiction.51
However, the Griffin court clearly relied on the time-of-filing rationale for
recognizing federal jurisdiction under its interpretation of § 1819(b)(2), with the
federal policy concerns it cited as "[f]urther" justifications.52 Moreover, Fifth
Circuit cases following Griffin exclusively cite the time-of-filing rationale as their
reason for recognizing original jurisdiction, and they make no mention of the
policy concerns the Griffin court also relied on.53 In at least one case, a prior

48
See § 1819(b)(2)(A) ("suit" shall "arise under the laws of the United States");
Meyerland, 960 F.2d at 518-19; Buchner, 981 F.2d at 819; see also Mackie, 962 F.2d at 1150
(holding that the term "suit" in § 1730(k)(1) covers the "entirety of the civil proceeding");
Brockman v. Merabank, 40 F.3d 1013, 1015-16 (9th Cir. 1994) (holding that the term "suit" in
§ 1441a(l)(1) includes all claims in a case, and that the addition of RTC to the action
"transformed the 'entire suit' into one that arose under federal law.") (citation omitted); Spring
Garden Assoc. v. RTC, 26 F.3d 412, 415-16 (3d Cir. 1994) (same). Indeed, as even courts that
disagree with the Fifth Circuit recognize, the disputed issue in the circuits regarding
§ 1819(b)(2) is ultimately one of jurisdictional "duration" rather than of jurisdictional
"breadth." See New Rock Asset Partners, L.P., 101 F.3d at 1499 n.4 (distinguishing the
question before it from the holding in Spring Garden).
49
See Buchner, 981 F.2d at 821.
50
See Griffin, 935 F.2d at 696.
51
See id.; see also Four Star Holding, 178 F.3d at 100.
52
See Griffin, 935 F.2d at 696.
53
See, e.g., Bank One Tex. Nat'l Ass'n v. Morrison, 26 F.3d 544, 547 (5th Cir. 1994)
(citing the time-of-filing rationale in Griffin as the sole basis for continued jurisdiction despite
D'Oench Duhme being at issue in guarantor's defense); Walker v. FDIC, 970 F.2d 114, 120 (5th

11
 No. 08-60674

Fifth Circuit panel has recognized original jurisdiction based on § 1819(b)(2)
when no successor in interest to the FDIC remained. 54 Accordingly, a successor
in interest to the FDIC is not necessary for original jurisdiction to continue
pursuant to § 1819(b)(2).
IV.
We follow the rule that "a district court exceeds its authority if it remands
a case on grounds not expressly permitted by controlling statute." 55 Despite the
FDIC's dismissal, all claims in the instant case continue to "arise under the laws
of the United States," pursuant to § 1819(b)(2). Therefore, original jurisdiction
remains, and the exercise of that jurisdiction was mandatory for the district
court.56 Accordingly, the district court had no discretion to remand the case and
erred in doing so.57
The Judgment of Remand is Reversed. The cause is reinstated in the
federal court.

Cir. 1992); First Gibraltar Bank, FSB v. Bradley, 98 F.3d 1338, No. 95-20500, 1996 WL
556852, at *5 (5th Cir. Sep. 10, 1996) (unpub.) (citing Morrison, 26 F.3d at 547-48).
54
See Walker, 970 F.2d at 120.
55
Buchner, 981 F.2d at 820 (citing Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S.
336, 345, 96 S. Ct. 584, 590 (1976), abrogated on other grounds by Quackenbush, 517 U.S. at
714-15, 116 S. Ct. at 1720).
56
See Buchner, 981 F.2d at 821.
57
Because we find original federal jurisdiction over all claims in the instant case
pursuant to § 1819(b)(2), we do not address whether Appellees' federally preempted usury
claims also provide continuing federal jurisdiction, or whether the state fraud and negligence
claims are "separate and independent" so as to otherwise be subject to remand under 28 U.S.C.
§ 1441(c).

12
 No. 08-60674

E. GRADY JOLLY, Circuit Judge, concurring in the judgment:
I fully appreciate the efficient and judicially economical approach of the
majority. I am unable, however, to agree that our precedent or the text of § 1819
requires that state claims cannot be remanded when no party to the case is a
successor-in-interest to the FDIC and no federal interests remain in the case.
Although the court clearly has jurisdiction over the case, including all state
claims, that fact does not in itself mean that the court lacks discretion to remand
state claims. Whether to remand is a discretionary matter subject to the abuse
of discretion standard. Regan v. Starcraft, 524 F.3d 627, 631 (5th Cir. 2008).
Once the FDIC and its interests have been dismissed, there is no federal
character in the state claims. See FSLIC v. Griffin, 935 F.2d 691, 696 (5th Cir.
1991) (justifying continued federal-question jurisdiction based on presence of
successor-in-interest to FSLIC). The statute gives original jurisdiction to cases
in which the FDIC “is a party.” 12 U.S.C. § 1819(b)(2)(A). The statute does not,
through some feat of alchemy, make the case’s state-law claims federal-law
claims. Nor does the text “is a party” mean that all state-law claims in any case
to which the FDIC ever was a party continue to arise under federal law after
dismissal of all federal interests.
Here, I concur in the result reached by the majority because there remain
federal usury claims and related state-law claims, which cannot be remanded.
Laurents v. Arcadian Corp., No. 94-41183, 1995 WL 625394, at *2, 69 F.3d 535
(5th Cir. Oct. 4, 1995) (setting forth rule that properly removed questions of
federal law cannot be remanded under 28 U.S.C. § 1441(c)).

13