MBIA Insurance v. Federal Deposit Insurance

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 14, 2012 Decided March 8, 2013

No. 11-5317

MBIA INSURANCE CORPORATION,
APPELLANT

v.

FEDERAL DEPOSIT INSURANCE CORPORATION, IN ITS
CORPORATE CAPACITY AND AS CONSERVATOR AND RECEIVER
OF INDYMAC FEDERAL BANK, F.S.B.,
APPELLEE

Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cv-01011)

Howard R. Hawkins Jr. argued the cause for appellant.
With him on the briefs were Jason Jurgens, David F. Williams,
and Geoffrey Gettinger.

J. Scott Watson, Counsel, Federal Deposit Insurance
Corporation, argued the cause for appellee. With him on the
brief were Colleen J. Boles, Assistant General Counsel,
Lawrence H. Richmond, Senior Counsel, and William R. Stein
and Scott H. Christensen. Thomas L. Holzman and Daniel H.
Kurtenbach, Counsel, Federal Deposit Insurance Corporation,
entered appearances.
 2

Before: HENDERSON and ROGERS, Circuit Judges and
SENTELLE, Senior Circuit Judge.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge: The issue in this appeal is
whether payments made by the MBIA Insurance Corporation
(“MBIA”) to investors in mortgage securitizations of a failed
bank (IndyMac Bank, F.S.B.) constitute “administrative
expenses” entitled to priority under the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”),
Pub. L. No. 101-73, 103 Stat. 183 (Aug. 9, 1989), 12 U.S.C.
§ 1821(d)(11)(A). MBIA sued as the third party beneficiary of
the Pooling and Servicing Agreements (“PSAs”) of the failed
bank. It alleged that the Federal Deposit Insurance Corporation
(“FDIC”) as conservator of the successor bank had “approved,”
12 U.S.C. § 1821(d)(20), the PSAs and then breached its “Put
Back” obligations under those agreements, resulting in investor
claims on MBIA-issued insurance policies. The district court
rejected MBIA’s priority claim, and MBIA now contends that
the district court erred in relying on a narrow definition of
“approved” as requiring a written sanction when other broader
dictionary definitions exist under which the FDIC Conservator
arguably “approved” the PSAs when it executed the Purchase
and Assumption Agreement (“P&A”) and partially performed its
servicing obligations pursuant to the PSAs. For the following
reasons, we affirm.

I.

In the wake of IndyMac Bank’s financial collapse, a new
federally chartered bank, IndyMac Federal, assumed various
contractual agreements to which the failed bank had been a
party, including the three PSAs that are the basis for MBIA’s
claims. According to MBIA, the FDIC Conservator of IndyMac
 3

Federal breached its seller-and-servicer obligations under the
PSAs, causing damages to MBIA. To assess MBIA’s contention
that its damages constitute “administrative expenses” entitled to
priority under 12 U.S.C. § 1821(d)(11)(A) because the FDIC
had “approved” the PSAs within the meaning of § 1821(d)(20),
we set forth the relevant statutory framework before turning to
MBIA’s allegations, which, upon de novo review of the
dismissal of MBIA’s amended complaint, see Barr v. Clinton,
370 F.3d 1196, 1201 (D.C. Cir. 2004), we must accept as true,
Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C.
Cir. 2005).

A.
FIRREA was enacted in 1989 in the wake of the savings
and loan crisis “to enable the FDIC . . . to expeditiously wind
up the affairs of literally hundreds of failed financial institutions
throughout the country.” Freeman v. FDIC, 56 F.3d 1394, 1398
(D.C. Cir. 1995). Congress authorized the takeover of failing
federally regulated financial institutions, vesting authority in the
FDIC as receiver to liquidate the remaining assets of the failed
institution, see 12 U.S.C. § 1821(d)(2)(E), and as conservator to
“carry on the business of the institution and preserve and
conserve the assets and property,” see id. § 1821(d)(2)(D)(ii).
Upon appointment, the FDIC steps into the shoes of the failed
institution and succeeds to “title to the books, records, and
assets” of that entity, as well as to “all rights, titles, powers, and
privileges” of the institution. Id. § 1821(d)(2)(A). In so doing
it has “extraordinary powers,” Nat'l Union Fire Ins. Co. of
Pittsburgh, Pa. v. City Sav., F.S.B., 28 F.3d 376, 388 (3d Cir.
1994), including authority to “disaffirm or repudiate any
contract” of the failed institution that is “burdensome” and
whose repudiation “will promote the orderly administration of
the institution’s affairs,” subject to recovery of only “actual
direct compensatory damages.” See 12 U.S.C. § 1821(e)(1)-(3).
 4

In addition, in 1993 Congress adopted the National
Depositor Preference Amendment to the Federal Deposit
Insurance Act. Pub. L. 103–66, § 3001(a), 107 Stat. 312,
336–37. This required, as relevant, that in the distribution of the
assets of a failed institution depositors be paid before general
creditors could collect on their claims.1 As codified at 12 U.S.C.
§ 1821(d)(11), the depositor preference provision provides, in
relevant part:

amounts realized from the liquidation or other
resolution of any insured depository institution
by any receiver appointed for such institution
shall be distributed to pay claims (other than
secured claims to the extent of any such security)
in the following order of priority:

(i) Administrative expenses of the receiver.
(ii) Any deposit liability of the institution.
(iii) Any other general or senior liability of the
institution (which is not a liability described in
clause (iv) or (v)).
(iv) Any obligation subordinated to depositors or
general creditors . . . .
(v) Any obligation to shareholders . . . .

Id. § 1821(d)(11)(A). Of particular relevance here, Congress
also provided:

1
Previously, depositors and general creditors of a failed bank
had typically been treated to the same liquidation priority when claims
against such an institution were being resolved. See James A. Marino
& Rosalind L. Bennett, The Consequences of National Depositor
Preference, 12 FDIC BANKING REV. 19, 22 (1999).
 5

Notwithstanding any other provision of this
subsection, any final and unappealable judgment
for monetary damages entered against a receiver
or conservator for an insured depository
institution for the breach of an agreement
executed or approved by such receiver or
conservator after the date of its appointment
shall be paid as an administrative expense of the
receiver or conservator. Nothing in this
paragraph shall be construed to limit the power
of a receiver or conservator to exercise any rights
under contract or law, including to terminate,
breach, cancel, or otherwise discontinue such
agreement.

Id. § 1821(d)(20) (emphasis added). And if, pursuant to a
contract for services of the failed institution, the conservator or
receiver “accepts performance” before deciding to repudiate that
contract, the payment to the counterparty under the contract for
the services performed is “treated as an administrative expense
of the conservatorship or receivership.” Id. § 1821(e)(7)(B).

B.
According to MBIA’s amended complaint, IndyMac
Bank was heavily involved in the creation and promotion of
residential mortgage loan securitizations prior to its insolvency
in July 2008. Am. Compl. ¶¶ 23–25. Between 2002 and 2006,
it sponsored residential mortgage securitizations valued at
approximately $98.6 billion. Id. ¶ 24. To create a securitization,
IndyMac Bank sold portfolios of mortgage loans to trusts
managed by an outside banking institution, which, upon pooling
the loans, would divide the cash flows from the pools and issue
securities to investors. Id. ¶ 26. In order to increase
marketability, lower interest costs, and mitigate risk to investors,
many securitizations included the purchase of a financial
 6

guaranty policy from an insurer, such as MBIA. Id. ¶ 29.
Throughout 2006 and 2007, IndyMac Bank contracted with
MBIA to provide financial guaranty insurance policies for the
three IndyMac Bank securitization transactions at issue: INDS
2006-H4, INDS 2007-1, and INDS 2007-2. Id. ¶ 32. For each
securitization, MBIA and IndyMac Bank entered into an
Insurance and Indemnity Agreement, pursuant to which MBIA
issued insurance policies guaranteeing investors in the
securitized mortgages the promised cash flows in the event of
defaults and other losses in the mortgage loans underlying the
investors’ securities. Id. ¶¶ 32, 36, 38. In addition to
representations and warranties by IndyMac Bank regarding its
underwriting guidelines and practices for the loans in the
securitized mortgage pools, id. ¶ 39, the Insurance and
Indemnity Agreements incorporated by reference, for the benefit
of MBIA, the representations and warranties contained in the
PSAs for each securitization between IndyMac Bank and the
trusts managed by the outside banking institution, thereby
making MBIA a third-party beneficiary of the PSAs. Id. ¶¶
40–44. Among other obligations, the PSAs set forth “Seller”
and “Servicer” obligations of IndyMac Bank with respect to the
loans upon which the securitizations were based, including a
“Put Back” process.2

2
As Seller of the mortgage loans, IndyMac Bank made
representations and warranties about the quality and characteristics of
the loans in the pools of mortgages it transferred to the trusts for use
in securities. Am. Compl. ¶ 41; INDS 2007-1 PSA § 2.03, Schedule
III, Feb. 1, 2007. Also as Seller, IndyMac Bank obligated itself to
participate in a “Put Back” process, whereby the bank assumed
ongoing responsibility for curing any discovered breach of its
representations and warranties by replacing or repurchasing the
affected mortgage loans. Am. Comp. ¶¶ 58–59; INDS 2007-1 PSA
§ 2.03. As Servicer, IndyMac Bank collected principal and interest
payments from borrowers, Am. Compl. ¶¶ 27, 55; INDS 2007-1 PSA
§ 3.01-3.06, and provided other collection services in the event that
 7

On July 11, 2008, the Office of Thrift Supervision
(“OTS”) appointed the FDIC to act as receiver for IndyMac
Bank because it was “likely to be unable to pay its obligations
or meet its depositors’ demands in the normal course of
business,” “in an unsafe and unsound condition to transact
business due to its lack of capital and its illiquid condition,” and
had “no reasonable prospect of becoming adequately
capitalized.” OTS Order No. 2008-24, Pass-Through
Receivership Of A Federal Savings Association Into A De Novo
Federal Savings Association That is Placed Into
Conservatorship With the FDIC, July 11, 2008 at 2 (“OTS 2008
Order”); Am. Compl. ¶ 46. From the third quarter of 2007 to the
first quarter of 2008, IndyMac Bank had suffered losses
amounting to approximately $842 million and was projected to
report another $354 million loss for the second quarter of 2008.
OTS 2008 Order at 2. The OTS Director had determined that
“OTS must act immediately in order to prevent the probable
default of [IndyMac Bank].” Id. at 3. The OTS approved the
FDIC’s request for issuance of a new federal mutual savings
association charter pursuant to 12 U.S.C. § 1821(d)(2)(F)(i) and
authorized “the transfer of such assets and liabilities of
[IndyMac Bank] to its successor as the FDIC has determined to
be appropriate.” Id. at 3–4. Until a Board of Directors was
appointed or elected for the new institution, the OTS authorized
the FDIC to exercise those powers as well. See id. at 4.

borrowers were delinquent or defaulted on their mortgage obligations,
Am. Compl. ¶¶ 55–56; INDS 2007-1 PSA § 3.12. It also would remit
the proceeds from the mortgage loans to the trust and receive servicing
fees in consideration. Am. Compl. ¶ 57; INDS 2007-1 PSA § 3.15.
As Servicer, IndyMac Bank was not responsible for curing defects in
any representations and warranties made by IndyMac Bank as Seller.
Cf. INDS 2007-1 PSA § 2.09.
 8

To carry out its responsibilities, the FDIC, in its several
capacities, executed a Purchase and Assumption Agreement
(“P&A”) on the date of its appointment. Among the contracts
transferred to the successor institution organized by the FDIC,
IndyMac Federal, were the PSAs for the three IndyMac Bank
securitizations at issue. See P&A § 2.1(j)-(l). A “put” provision
allowed IndyMac Federal to require the IndyMac Bank Receiver
to reassume certain liabilities or assets upon request. See id.
§ 3.6. Any proceeds from a sale of IndyMac Federal’s assets
and liabilities that remained after satisfaction of all obligations
arising from IndyMac Federal’s operation were to be paid to the
IndyMac Bank Receiver to use in paying remaining claims. See
id. § 7.2. Section 13.5 of the P&A provided that “the
obligations and statements of responsibilities” in the P&A “are
for the sole and exclusive benefit of the Receiver, the
Corporation and the Assuming Bank and for the benefit of no
other Person.” Id. § 13.5 (emphasis added).

By March 2009, the FDIC Conservator had wound up
most of IndyMac Bank’s affairs. It sold a substantial portion of
IndyMac Federal’s assets and transferred all deposits to a newly
chartered federal savings bank — OneWest Bank; OneWest
agreed to “purchase all deposits and approximately $20.7 billion
[of IndyMac Federal’s $23.5 billion] in assets at a discount of
$4.7 billion.” FDIC Press Release, FDIC Closes Sale of
IndyMac Federal Bank, Pasadena, California, Mar. 19, 2009
(“FDIC 2009 Press Release”); Am. Compl. ¶ 70. As
conservator the FDIC had exercised authority under the “put”
provision to require the IndyMac Bank Receiver to reacquire
“any rights, obligations, or liabilities whatsoever” (enumerated
under the PSA) in connection with INDS 2007-1, as well as two
other securitizations not at issue here. See Agreement to
Evidence Put of Assets and Liabilities at 4–5 & Attachment A,
Mar. 2009. This FDIC Receiver repudiated the PSA contracts
as burdensome and not in the interests of the orderly
 9

administration of IndyMac Bank’s affairs. See FDIC Letter of
Mar. 19, 2008 to Deutsche Bank National Trust Co. With the
end of the FDIC conservatorship upon the sale to OneWest
Bank, IndyMac Federal was placed in a FDIC receivership,
which transferred IndyMac Federal’s remaining assets to FDIC
Corporate in satisfaction of certain obligations that arose in
connection with IndyMac Federal. Am. Compl. ¶ 85.

On May 29, 2009, MBIA filed suit against IndyMac
Bank and the FDIC as its receiver, alleging that MBIA had
incurred “significant losses in connection with its obligations
. . . to insure certain shortfalls in payments to investors in the
IndyMac [Securitization] Transactions, all as a result of
IndyMac’s misrepresentations and misleading conduct.” Compl.
¶ 49. MBIA also submitted in the FDIC administrative process
proofs of claims on June 16, 2009 and August 25, 2009, based
on alleged breaches of the representations and warranties in
IndyMac Bank’s PSAs and failure to honor the “Put Back”
obligation. See Am. Compl. ¶¶ 12, 130.

On November 12, 2009, the FDIC Board of Directors
made a “No Value Determination,” finding that the
receiverships for IndyMac Bank and IndyMac Federal had
insufficient assets to cover their respective liabilities. See FDIC
Resolution, Nov. 12, 2009 (“No Value Determination”). The
receiverships thus would make no “distribution on general
unsecured claims (and any lower priority claims).” Id. at 2.
“[T]herefore all such claims, asserted or unasserted, will recover
nothing and have no value.” Id. MBIA was advised by letter on
December 10, 2009 that no distribution would be made on its
submitted proofs of claims, which the FDIC classified as general
creditor claims.

On February 8, 2010, MBIA filed an amended complaint
alleging that its damages arising from the breach of three
 10

IndyMac Bank PSAs to which it was a third-party beneficiary
constituted “administrative expenses” under § 1821(d)(11)(A)
because the PSAs had been “approved” under § 1821(d)(20) by
the FDIC Conservator. Id. ¶ 4. Specifically, the FDIC
Conservator had “approved” the PSAs by entering into the P&A
on behalf of IndyMac Federal, collecting servicing fees under
the PSAs, partially performing its servicing obligations under
the PSAs, and selling two of the three PSAs to OneWest Bank.
Id. ¶¶ 60–62, 69. MBIA also asserted claims against FDIC
Corporate based on the No Value Determination deeming
MBIA’s claims worthless general creditor claims, and on FDIC
Corporate’s allegedly wrongful receipt of the proceeds of
IndyMac Federal’s sale of assets, liabilities, and deposits to
OneWest Bank.3 Id. ¶¶ 182–193. MBIA sought declaratory and
injunctive relief regarding the FDIC’s purported repudiation of
contracts related to INDS 2007-1, an IndyMac Bank
securitization. Id. ¶¶ 40, 194–202.

The district court, upon finding that MBIA had failed to
plead facts sufficient to demonstrate its monetary damages were
entitled to priority as administrative expenses of the FDIC
Conservator or Receiver, ruled that MBIA’s damages claims are
general creditor claims not entitled to administrative priority,
granted the FDIC’s motion to dismiss MBIA’s claims as
prudentially moot, and denied MBIA’s other requests for relief.
MBIA Ins. Corp. v. FDIC, 816 F. Supp. 2d 81 (D.D.C. 2011).
MBIA appeals.

3
In the district court MBIA counsel clarified that MBIA was
seeking “administrative expenses” priority under FIRREA’s
administrative claims process and “[did]n’t care what happened to the
$1.5 [billion]” in proceeds that the FDIC obtained from the sale to
OneWest Bank, and that its only alternative theory of recovery was
based on 12 U.S.C. § 1821(m). See Tr. Sept. 27, 2011 at 40, 85.
 11

II.

MBIA’s contention that its damages claims, arising from
payouts on insurance policies supporting three IndyMac Bank
mortgage securitizations, constitute “administrative expenses”
entitled to priority under 12 U.S.C. § 1821(d)(11)(A) presents a
question of statutory interpretation. Although that provision
does not define “administrative expenses,” MBIA relies on
§ 1821(d)(20), which it contends is “clear on its face,” MBIA Br.
at 55, in maintaining that the FDIC Conservator plainly
“approved” the underlying PSAs. Presumably because the FDIC
has not promulgated a regulation or other policy defining
“approved” for purposes of distribution under § 1821(d)(11)(A),
it does not seek deference under Chevron U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). See United
States v. Mead Corp., 533 U.S. 218, 226–27 (2001). With
Chevron inapplicable, the court “must decide for [itself] the best
reading.” Miller v. Clinton, 687 F.3d 1332, 1342 (D.C. Cir.
2012) (internal quotation and citation omitted). In so doing, we
will give the FDIC’s views “the weight derived from their
‘power to persuade.’” Id. at 1342 n.11 (quoting, inter alia,
Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)); see Wells
Fargo Bank v. FDIC, 310 F.3d 202, 208–09 (D.C. Cir. 2002).

We begin by examining whether the statutory text
resolves whether “approved” requires a formal, written
acknowledgment — as urged by the FDIC — or rather indicates
that approval by implication from other conduct is sufficient, as
MBIA urges. MBIA points to dictionary definitions that
“approved” means simply “to consent or agree to” or “to ratify.”
MBIA Br. at 38 (citing RANDOM HOUSE WEBSTER’S
UNABRIDGED DICTIONARY 103 (2d ed. 1998)). It also points out
that, unlike in other subsections calling for approval by the
 12

Corporation,4 Congress did not prescribe formal procedures for
a contract to be “approved” in § 1821(d)(20). Further, MBIA
views FIRREA to establish “a binary scheme whereby contracts
of a failed institution are either repudiated or not repudiated, and
those that are not repudiated may be enforced by the FDIC.” Id.
at 42. In other words, “approved” is the equivalent of “non-
repudiated” because, MBIA claims, invoking a statutory canon
against redundancy, otherwise § 1821(e)(1)-(3), which authorizes
the FDIC to repudiate contracts executed before appointment of
a receiver or conservator, is redundant. “‘Approved’ contracts
thus should include those that are assumed and not repudiated,
like the PSAs.” Id. at 42. After all, MBIA maintains, when
§ 1821(d)(20)’s use of “approved” is read in conjunction with
§ 1821(e)(7) on acceptance of services, it is clear that Congress
wanted counterparties to be protected when they satisfied their
contractual obligations.

4
Section 1821(d)(10) provides, in relevant part:

The receiver may, in the receiver's discretion and to the extent
funds are available, pay creditor claims which are allowed by
the receiver, approved by the Corporation pursuant to a final
determination pursuant to paragraph (7) or (8), or determined
by the final judgment of any court of competent jurisdiction
in such manner and amounts as are authorized under this
chapter.

12 U.S.C. § 1821(d)(10) (emphasis added). Section 1821(n) provides,
in relevant part:

The articles of association and organization certificate of a
bridge bank as approved by the Corporation shall be executed
by 3 representatives designated by the Corporation.

12 U.S.C § 1821(n)(1)(C) (emphasis added).
 13

In contrast to MBIA’s broad interpretation of
§ 1821(d)(20), the FDIC’s view is that in that provision:

Congress created a simple, bright-line rule. If
counterparties wish to ensure that they receive
administrative priority, they need to obtain
written documentation: a contract “executed or
approved” by FDIC after its appointment. This
simple rule protects the receivership estate,
depositors, contractual counterparties, and the
courts from precisely the kind of disputes
involved here.

FDIC Br. at 14. As to dictionary definitions, the FDIC responds
that in the context of contract approval the dictionaries all say the
same thing, namely that “approve” means to “confirm or
sanction formally” or to “confirm authoritatively.” See id. at 23
(citing RANDOM HOUSE WEBSTER’S UNABRIDGED DICTIONARY
103 (2d ed. 1998), WEBSTER’S THIRD NEW INTERNATIONAL
DICTIONARY 106 (2002), BLACK’S LAW DICTIONARY 118 (9th
ed. 2009), and A NEW ENGLISH DICTIONARY ON HISTORICAL
PRINCIPLES 416 (1st ed. 1888)). It emphasizes that its
interpretation gathers meaning from the words around
“approved.” See Jarecki v. G.D. Searle & Co., 367 U.S. 303,
307 (1961). Referencing the canon that words are known by
their companions, e.g., Gutierrez v. Ada, 528 U.S. 250, 255
(2000), the FDIC observes that the word “execute” is narrow and
does not include oral or other non-written actions, but requires
a writing; “to execute means ‘to complete and give validity to (a
legal instrument) by fulfilling the legal requirements, as by
signing or sealing.’” FDIC Br. at 24 (quoting RANDOM HOUSE
WEBSTER’S UNABRIDGED DICTIONARY at 676). It follows, the
FDIC suggests, that “approved” must be of similar limit, citing
Jarecki where the Supreme Court applied the canon noscitur a
sociis to limit the scope of the word “discovery,” which is broad
 14

viewed in isolation, to the common characteristic it shared with
the adjacent words “exploration” and “prospecting,” and
therefore “discovery” was limited to “only the discovery of
mineral resources.” 367 U.S. at 307. Moreover, the FDIC
observes, this court appears to have recognized that the lack of
identification by Congress of the relevant format — here, a
writing — may indicate latitude with regard to form but not with
respect to the recording requirement generally. Cf. Boulez v.
Comm’r, 810 F.2d 209, 216 n.51 (D.C. Cir. 1987).

MBIA replies that a list of two words is an inappropriate
occasion for application of noscitur a sociis, citing to Graham
County Soil & Water Conservation District v. United States ex
rel. Wilson, 130 S. Ct. 1396, 1403 (2010), and S.D. Warren
Company v. Maine Board of Environmental Protection, 547 U.S.
370, 378 (2006). Functionally, however, the FDIC points out
that there would have been no point for Congress to use a narrow
and precise term only to eliminate its usefulness and specificity
by intending that “approved” be read more broadly and in a way
that would make “executed” unnecessary or redundant. MBIA
has no response. Also, the FDIC explains that its narrow
interpretation does not read “executed” out of the statute as a
subset of “approved,” but gives each word its typical meaning:
“executed” refers to the FDIC giving legal validity by signing a
contract entered into by the receiver while “approved” refers to
the FDIC giving legal validity to a contract previously entered
into by the failed bank. MBIA agrees with this temporal
analysis, but maintains that “[t]his distinction . . . is entirely
consistent with MBIA’s allegation that the FDIC ‘approved’ the
PSAs” at issue. Reply Br. at 7.

The parties’ dictionary references and interpretation of
“executed or approved” suggest that MBIA’s “clear on its face”
claim fails, or at least does not resolve the precise question.
Considering § 1821(d)(20) in the context of other provisions of
 15

§ 1821 does, however, confirming that “approved” requires a
formal, written sanction and cannot take the broad meaning
urged by MBIA. In the only other instance where Congress
provided for “administrative expenses” status in § 1821 — in
§ 1821(e)(7) — it used a narrow and circumscribed provision.
Both parties cite Russello v. United States, 464 U.S. 16, 23
(1983), in support of their interpretations of “approved,” but the
FDIC points out that, in tying administrative priority to
“acceptance” in § 1821(e)(7)(B)(ii), Congress indicated it meant
something more specific by the word “approved” in
§ 1821(d)(20) than mere “acceptance” of a counterparty’s
performance. And having limited “acceptance” in § 1821(e)(7)
to the acceptance of services performed for the FDIC after its
appointment, Congress thereby demonstrated that it did not
intend administrative priority to extend to claims based on other
types of contractual obligations.

MBIA suggests that § 1821(e)(7) shows Congress
intended that “the FDIC should not accept benefits from
counterparties . . . without those counterparties being
compensated ahead of depositors during the resolution process.”
MBIA Br. at 46 (emphasis added). But the plain text of
§ 1821(e)(7) shows the opposite; Congress did not confer
administrative priority whenever the FDIC accepts “benefits”
from counterparties, but rather limited the priority status to
acceptance of “services performed” for the FDIC post-
appointment. MBIA does not deny it provided no such services
for the IndyMac Federal Conservator. So too, MBIA’s reference
to § 1821(n), supra note 4, regarding bridge banks and formal
approval by the Corporation, does not address administrative
expense priority much less demonstrate that § 1821(d)(20)’s
“approved” is “clear on its face” in MBIA’s favor; approval by
the Corporation is what the FDIC’s interpretation contemplates
when the Corporation acts as conservator or receiver.
 16

To the extent MBIA relies on the contract repudiation
provisions of § 1821(e), it does not advance its cause. MBIA
points to a comment in the legislative history of § 1821(e) that
it was “closely modeled on parallel provisions of section 365 of
the Bankruptcy Code” to support its argument that its reading of
“approved” in the FIRREA context is correct. MBIA Br. at 52
(citing S. REP. NO. 101-19 at 314 (1989)). But a reading of the
two sections shows they have little in common because
Congress omitted from § 1821(e) key language in 11 U.S.C.
§ 365, whereby the trustee may “assume or reject executory
contracts or [the] unexpired lease of the debtor,” instead
speaking only of the FDIC’s authority to repudiate. See RTC v.
Diamond, 18 F.3d 111, 122 (2d Cir. 1994), vacated on other
grounds, 513 U.S. 801. The FDIC suggests, moreover, that the
Bankruptcy Code does not have the need to “strengthen [the
FDIC’s] hand in remedying a national economic emergency,”
nor an overarching policy of protecting a class of depositors
above all others and a corresponding need to cabin
administrative expense. FDIC Br. at 41 (quoting Diamond, 18
F.3d at 123).

MBIA also maintains that the repudiation provisions
would be unnecessary and ineffective if damages arising from
the conservator’s breach of an un-repudiated contract left a
counterparty with only a general creditor claim. There is no
reason to view these provisions as unnecessary even it they do
not change the priority of damages, because the provisions serve
to limit the damages available to a counterparty (by eliminating
expectation and punitive damages). As the FDIC explains,
expectation damages in contract cases are of particular concern
to failed banks; for instance, repudiation protects the FDIC from
paying damages for lost profits resulting from repudiated
installment contracts. See ALLTEL Info. Servs. v. FDIC, 194
F.3d 1036, 1041 (9th Cir. 1999). Even assuming protections
from expectation and punitive damages were as insignificant as
MBIA suggests, which the FDIC emphasizes they are not, their
 17

elimination constitutes the only consequences Congress attached
to repudiation. See 12 U.S.C. § 1821(e)(3). Nothing in § 1821
provides that breaches of un-repudiated contracts have
administrative priority. Cf. Whitman v. Am. Trucking Ass’n, 531
U.S. 457, 468 (2001).

Furthermore, a broad reading of “approved” would
undermine Congress’s stated purpose to prefer depositors over
other creditors. Section 1821(d)(11) establishes an order of
priority among claimants of the failed bank, placing recovery of
“administrative expenses” first, followed by depositors’ claims,
and only thereafter general creditors’ claims. MBIA’s
interpretation would put general creditors before depositors
simply by virtue of the fact that the contracts to which they were
a party or beneficiary were liabilities transferred to the FDIC
Conservator by the commonly-used mechanism of a purchase
and assumption agreement, see FDIC, RESOLUTIONS HANDBOOK
19 (2003), and were not repudiated. Specifically, MBIA’s
broad interpretation of “approved” would “plac[e] general
creditor claims related to the failed bank’s pre-failure
misrepresentations above depositors,” which “are hardly the
types of claims that could ever be classified as administrative
expenses.” FDIC Br. at 35 (emphasis in original).5 The FDIC
regulation on “administrative expenses”6 tracks Congress’s

5
The FDIC characterizes MBIA’s lawsuit as an “attempt[] to
push off onto FDIC responsibility for the losses MBIA sustained when
the extreme risks it had knowingly assumed came home to roost and
MBIA had to pay out on its insurance commitments.” FDIC Br. at 1.
6
The FDIC regulation instructs that the receiver’s
“administrative expenses” are “necessary expenses,” 12 C.F.R.
§ 360.4 (2008), such as payment of the institution’s last payroll, guard
services, data processing services, utilities, and expenses related to
leased facilities, but generally do not include severance pay claims or
claims arising from contract repudiations, Receivership Rules, 60 Fed.
 18

purpose that “administrative expenses” be a narrowly drawn
category, limited to “ordinary and necessary expenses of the
[failed] institution . . . but only those that the receiver
determines are necessary to maintain services and facilities and
to effect an orderly resolution of the institution.” H.R. CONF.
REP. NO. 103-213, at 436–37 (1993). Conservator duties are
similarly circumscribed. See 12 U.S.C. § 1821(d)(2)(D). And
the FDIC notes, when Congress enacted the National Depositor
Preference Amendment it was part of a deficit reduction plan to
reduce FDIC losses from bank failures. See FDIC, HISTORY OF
THE EIGHTIES, LESSONS FOR THE FUTURE: AN EXAMINATION OF
THE BANKING CRISES OF THE 1980S AND EARLY 1990S 90
(1997); see also H.R. CONF. REP. NO. 103-111, at 87–88 (1993)
(stating amendment “would increase the amount of distribution
to depositors of failed institutions” and increase FDIC recovery,
thereby helping the Corporation to “realize a savings”). Even
under the FDIC’s narrow interpretation of “approved,” the
Federal Deposit Insurance Fund sustained a loss during IndyMac
Federal’s operation of about $10.7 billion. See FDIC 2009 Press
Release.7

In sum, by means of a pass-through receivership and
organization of a successor institution, continued banking
services could be provided to IndyMac Bank’s depositors while

Reg. 35,487-01, 35,487-1 (July 10, 1995). MBIA suggests the
regulations provide a nonexclusive list; still they reflect a limited
scope for “administrative expenses” that is consistent with the FDIC’s
narrow interpretation of § 1821(d)(20)’s “approved,” a related
provision. Cf. Babbitt v. Sweet Home Chapter of Cmty. for a Great
Oregon, 515 U.S. 687, 698–703 (1995).
7
During oral argument counsel for MBIA acknowledged that
its breach of contract claims, which it contends constitute
“administrative expenses” could amount to as much as five hundred
million dollars. See Oral Arg. Tr. Nov. 14, 2012 at 13, 27.
 19

a buyer was located for IndyMac Bank’s assets and other
property. Certain on-going contracts of the failed bank would
continue for these purposes. But Congress distinguished, by its
choice of words, between contracts merely “accepted” upon
transfer or thereafter “non-repudiated” and contracts that
qualified for “administrative expenses” priority under
§ 1821(d)(11)(A) because they had been “executed or approved”
under § 1821(d)(20) by the FDIC after appointment. The
context, where the FDIC steps into the shoes of a failed bank in
emergency circumstances, shows in light of other provisions of
§ 1821 that Congress intended “approved” to have a formality
consistent with “executed” and beyond “accept[ance],” and that
a narrow meaning is required under the depositor preference
scheme. A formal written sanction thus serves an important
statutory purpose by limiting the contracts that are given
priority. Cf. Doe v. United States, 372 F.3d 1347, 1359–61 (Fed.
Cir. 2004). The FDIC’s interpretation, unlike MBIA’s, gives
meaning to “approved” in the context of contract approval while
treating § 1821 as a “symmetrical and coherent regulatory
scheme,” FDA v. Brown & Williamson Tobacco Corp., 529 U.S.
120, 121 (2000). Viewed in context, “approved” cannot bear the
weight of MBIA’s broad meaning, see King v. St. Vincent’s
Hosp., 502 U.S. 215, 221 (1991), for Congress’s “will has been
expressed in reasonably plain terms,” Griffin v. Oceanic
Contractors, Inc., 458 U.S. 564, 570 (1982).

The FDIC has presented a careful contextual analysis of
§ 1821(d)(20) in light of the words Congress used in that
provision and elsewhere in § 1821 and the purpose of the
depositor preference distribution scheme, giving meaning to all
provisions of § 1821. Unlike MBIA’s approach, the FDIC’s
analysis neither renders “executed” and § 1821(e)(7)
meaningless, nor frustrates the depositor preference goal in
§ 1821(d)(11) but best advances it. In the § 1821 context, we
conclude that contract approval demands a formal determination
of necessity by the FDIC Conservator or Receiver, see 12 U.S.C.
 20

§ 1821(d)(2), and that a writing protects all interested parties,
distinguishing “approved” contracts from on-going agreements
assumed and non-repudiated. Under MBIA’s broad
interpretation of “approved,” mere assumption, oral agreement,
or partial performance would accord priority status to any
damages stemming from a non-repudiated contract encompassed
in the P&A as § 1821(d)(11)(A) “administrative expenses.”
Requiring a writing limits draws from the FDIC Insurance Fund
for payment of “administrative expenses” in a manner consistent
with the depositor preference distribution scheme. Section
1821(d)(20) is therefore best read as requiring formal, written
approval by the FDIC to qualify contract damages for priority as
“administrative expenses” under § 1821(d)(11)(A).

Our decision in Wells Fargo, 310 F.3d 202, reenforces
our conclusion. In that case, the court concluded that “[a]t the
very least” the FDIC was entitled to Skidmore deference for its
interpretation of a different FIRREA provision because it was
“charged with administering this highly detailed regulatory
scheme.” Id. at 208 (regarding 12 U.S.C. §§ 1815(d), 1817(l)).
In according Skidmore deference, the court examined the
purpose of the statutory scheme and concluded that the FDIC’s
interpretation was persuasive in part because contrary readings
of the text “would frustrate Congress’s . . . purpose” in enacting
the provision “and would render the statutory scheme largely
meaningless.” Id. Here, as in Wells Fargo, interpreting
§ 1821(d)(20) in light of Congress’s goals in enacting the
depositor preference scheme clearly favors the FDIC’s
interpretation.

The district court therefore properly rejected MBIA’s
broad interpretation of “approved” in § 1821(d)(20) and
dismissed MBIA’s damages claims in counts I-V and VIII as
prudentially moot in light of the FDIC’s No Value
Determination. See MBIA Ins. Corp., 816 F. Supp. 2d at
101–02. “Where it is so unlikely that the court’s grant of
 21

[remedy] will actually relieve the injury,” Penthouse Int’l, Ltd.
v. Meese, 939 F.2d 1011, 1019 (D.C. Cir. 1991), the doctrine of
prudential mootness permits the court in its discretion to “stay
its hand, and to withhold relief it has the power to grant” by
dismissing the claim for lack of subject matter jurisdiction,
Chamber of Commerce v. U.S. Dep’t of Energy, 627 F.2d 289,
291 (D.C. Cir. 1980). Absent a formal, written sanction by the
FDIC of the PSAs for the three mortgage securitizations at issue,
MBIA stands in the status of a general creditor under
§ 1821(d)(11). The No Value Determination forecloses the
possibility of a real measure of redress for general creditors
because the proceeds turned over to the FDIC receivers were
insufficient to pay claims below the depositor class, cf. FDIC v.
Kooyomjian, 220 F.3d 10, 15 (1st Cir. 2000); Boone v. IndyMac
Bank F.S.B., 2010 WL 7405439 (C.D. Cal. Dec. 14, 2010).
MBIA does not contend that it could recover on its damages
claims if it were treated as a general creditor, see Am. Compl.
¶ 12, and so a favorable judgment for MBIA on its contract
breach claims cannot “provide a real measure of redress,”
Foretich v. United States, 351 F.3d 1198, 1216 (D.C. Cir. 2003),
under § 1821(d)(11)’s despositor preference distribution scheme.

III.

MBIA also contends that the district court erred in
dismissing counts VI and VII for failure to state a claim. See
MBIA Ins. Corp., 816 F. Supp. 2d at 102–05. We affirm.

A.
MBIA sought an injunction ordering FDIC Corporate to
return any assets it received from the IndyMac Federal Receiver
as a result of the sale of IndyMac Federal’s assets to OneWest
Bank. Maintaining that “[w]hatever payments were made by
FDIC Receiver to FDIC Corporate . . . surely did not constitute
‘dividends’” within the meaning of this statute, MBIA Br. at 65,
MBIA alleged that the FDIC either “retained the $1.5 billion
 22

paid by OneWest . . . and has since liquidated other assets, the
proceeds from which it is holding in reserve to satisfy
administrative expense claims” and erroneously refused to
review MBIA’s claims, or “transferred or otherwise dissipated
the proceeds” from the sale without regard for these priority
claims, Am. Compl. ¶¶ 188–89. Under either theory, MBIA
insists, payment to FDIC Corporate was premature and therefore
exceeded statutory authority. Id.

Section 1821(d)(10)(B) provides:

The receiver may, in the receiver's sole
discretion, pay dividends on proved claims at any
time, and no liability shall attach to the
Corporation (in such Corporation's corporate
capacity or as receiver), by reason of any such
payment, for failure to pay dividends to a
claimant whose claim is not proved at the time of
any such payment.

12 U.S. C. § 1821(d)(10) (emphasis added). MBIA agrees with
the FDIC’s definition of “dividend” as a payment to creditors of
“any excess cash generated by the disposition of [a failed
bank’s] assets less disposition cost and reserves met,” to be paid
in accordance with the priority distribution scheme of
§ 1821(d)(11)(A). See MBIA Br. at 64 (quoting FDIC, FDIC
Dividends from Failed Banks, available at
http://www2.fdic.gov/divweb/index.asp). In urging that
payment by the FDIC Receiver of IndyMac Federal to FDIC
Corporate does not fall within this definition, MBIA relies
principally on information about IndyMac Bank’s dividend
payments that it accessed from the FDIC’s website. See MBIA
Br. at 64. That information, however, is not part of the record
properly before the court. See FED. R. APP. P. 10 (a) & (d).
MBIA has not alleged in its amended complaint sufficient facts
to determine that the IndyMac Federal Receiver paid FDIC
 23

Corporate on the basis of unproven claims, or that such payment
otherwise ought not to constitute a dividend payment. See, e.g.,
Am. Compl. ¶¶ 85–87, 188–89. Absent such allegations, there
was no basis for the district court to conclude that
§ 1821(d)(10)(B)’s preclusion of liability for the payment of
dividends is inapplicable to the IndyMac Federal Receiver’s
distribution of funds to FDIC Corporate.

B.
MBIA also sought an injunction reversing the FDIC’s
denial of MBIA’s claims against FDIC Corporate and the FDIC
Receivers, and a declaratory judgment that the FDIC failed to
repudiate the INDS 2007-1 PSA within a “reasonable period” as
required by 12 U.S.C. § 1821(e)(2). See Am. Compl. ¶¶
185–202. MBIA maintains that § 1821(j) poses no bar to this
relief because, “[b]y its terms, § 1821(j) shields only the
exercise of powers or functions Congress gave to the FDIC; the
provision does not bar injunctive relief when the FDIC has acted
or proposes to act beyond, or contrary to, its statutorily
prescribed, constitutionally permitted, powers or functions.”
Nat’l Trust for Hist. Pres. v. FDIC, 995 F.2d 238, 240 (D.C. Cir.
1993), aff’d on reh’g, 21 F.3d 469, 471 (1994) (internal
quotation omitted) (emphasis in original).

MBIA suggests that the FDIC acted beyond its statutory
powers when: (1) the “FDIC Receiver ignored section
1821(d)(20) by not treating MBIA’s claims as ‘administrative
expenses’ during the claims process”; (2) the “FDIC
Conservator did not properly dispose of the proceeds from the
sale of assets to OneWest”; and (3) the “FDIC Receiver did not
repudiate the INDS 2007-1 PSA in a reasonable time.” MBIA
Br. at 67. MBIA concedes, however, “[w]ith respect to the first
two of these claims, to the extent liability arising from MBIA’s
damages claims constitutes ‘administrative expenses,’ then the
FDIC’s actions were ultra vires, and declaratory relief is
appropriate.” Id. These two grounds for injunctive claims are
 24

therefore resolved on the merits by our holding that MBIA is not
entitled to “administrative expenses” distribution priority. See
Part II. MBIA’s request for injunctive and declaratory relief
based on untimely repudiation, in turn, is barred by 12 U.S.C.
§ 1821(j).

Section 1821(j) provides:

Except as provided in this section, no court may
take any action, except at the request of the
Board of Directors by regulation or order, to
restrain or affect the exercise of powers or
functions of the Corporation as a conservator or
a receiver.

12 U.S.C. § 1821(j). This court has acknowledged that Congress
placed “drastic” restrictions on a court’s ability to institute
equitable remedies of the sort requested by MBIA, see Freeman,
56 F.3d at 1398–99, and has held that § 1821(j) bars equitable
relief against the FDIC acting in its corporate capacity as well,
see Nat’l Trust, 995 F.2d at 240.

The FDIC as conservator or receiver is authorized to
“disaffirm or repudiate any contract or lease,” 12 U.S.C.
§ 1821(e)(1), and therefore repudiation is properly viewed as a
power of the Corporation operating in such capacities. Cf.
Nashville Lodging Co. v. RTC, 59 F.3d 236, 241 (D.C. Cir.
1995). A court declaring a repudiation invalid would necessarily
“restrain or affect the exercise” of this power by the FDIC and
thereby contravene § 1821(j). Even assuming that the
“reasonable time” clause in § 1821(e)(2) limits the repudiation
power, MBIA alleges no facts to show that the FDIC’s
repudiation of the INDS 2007-1 PSA eight months after
assuming the contract was not “within a reasonable period” in
light of the financial crisis and the other circumstances that led
to liquidation of IndyMac Bank’s assets and liabilities.
 25

IV.

Finally, as an alternative theory of recovery, MBIA
contends that FDIC Corporate was obligated under 12 U.S.C.
§ 1821(m)(13) to fund IndyMac Federal’s losses. Such losses,
it asserts, include any “liability to MBIA arising out of FDIC
Conservator’s breaches of the PSAs.”8 MBIA Br. at 59. “Had
FDIC Corporate satisfied its statutory obligation in section
1821(m)(13) to furnish funds to cover IndyMac Federal’s losses
during the period of the conservatorship,” MBIA continues,
“those additional funds would have been assets of the IndyMac
Federal receivership and available for distribution to claimants
like MBIA.” Id. at 62. In sum, “[t]he district court’s reliance on
prudential mootness to dismiss MBIA’s claims cannot be
reconciled with FDIC Corporate’s statutory obligation under
section 1821(m)(11)-(13) to fund IndyMac Federal’s losses,
including its liability to MBIA arising out of FDIC
Conservator’s breaches of the PSAs.” Id. at 59.

8
Neither party has waived its contention on this issue. The
district court analyzed MBIA’s alternative theory of recovery on its
merits. See MBIA Ins. Corp., 816 F. Supp. 2d at 105–06. Although
MBIA maintains that it “relied on FDIC’s admissions” in the district
court that § 1821(m) applied, see Reply Br. at 27, the district court
transcript shows that the FDIC immediately objected that § 1821(m)
had no relevance, see Tr. Sept. 27, 2011 at 73–74, and stated in
moving to dismiss that it may have relied on other statutory
mechanisms to establish IndyMac Federal, see Memorandum of Points
and Authorities in Support of FDIC Receiver’s Motion to Dismiss, at
7 (May 21, 2010). Moreover, the FDIC may “urge in support of a
decree any matter appearing in the record, although [its] argument
may involve an attack upon the reasoning of the lower court or an
insistence upon matter overlooked or ignored by it” so long as doing
so does not “modify the relief granted.” Freeman v. B&B Assoc., 790
F.2d 145, 150–51 (D.C. Cir. 1986) (citation omitted).
 26

Section 1821(m) addresses when the FDIC “organize[s]
a new national bank in the same community as the bank in
default.” 12 U.S.C. § 1821(m)(1). Under subpart (m) (11), the
FDIC “shall promptly make available” to the new bank “an
amount equal to the estimated insured deposits of such bank in
default plus the estimated amount of the expenses of operating
the new bank.” Id. § 1821(m)(11)(A). Subpart (m)(12), in turn,
requires “[e]arnings of the new bank” to be paid or credited to
the Corporation. Id. § 1821(m)(12). Subpart (m)(13) provides:

If any new bank, during the period it continues
its status as such, sustains any losses with respect
to which it is not effectively protected except by
reason of being an insured bank, the Corporation
shall furnish to it additional funds in the amount
of such losses.

Id. § 1821(m)(13).

Section 1821(m) is inapplicable here. The OTS 2008
Order approved a charter for a successor bank pursuant to 12
U.S.C. § 1821(d)(2)(F)(i). See OTS 2008 Order at 3. That
section states:

The Corporation may, as receiver –
(i) with respect to savings associations and by
application to the [OTS] organize a new Federal
savings association to take over such assets or
such liabilities as the Corporation may determine
to be appropriate.

12 U.S.C. § 1821(d)(2)(F)(i). The provision makes no reference
to the obligations in § 1821(m), and MBIA points to nothing to
suggest that “a new Federal savings association” organized
pursuant to § 1821(d)(2)(F)(i) triggers FDIC Corporate’s loss-
funding obligation under § 1821(m). Additionally, the version
 27

of the statute in effect when IndyMac Federal was created did
not allow for the creation of a “new bank” as a means to resolve
the affairs of a failed savings association like IndyMac Bank.
The amendment allowing such creation did not take effect until
July 30, 2008, weeks after the failure of IndyMac Bank.

Accordingly, we affirm the dismissal of MBIA’s
amended complaint.