Greater Slidell Auto Auction, Inc. v. American Bank & Trust Co. of Baton Rouge, La.

United States Court of Appeals,

Fifth Circuit.

No. 93-3443.

GREATER SLIDELL AUTO AUCTION, INC. and Rebecca Toblin Slocum,
Plaintiffs-Appellants,

v.

AMERICAN BANK & TRUST CO. OF BATON ROUGE, LA., et al.,
Defendants.

FEDERAL DEPOSIT INSURANCE CORPORATION, As Receiver for American
Bank & Trust Co., Defendant-Appellee,

v.

Joseph M. SLOCUM, Defendant-Appellant.

Sept. 23, 1994.

Appeal from the United States District Court for the Middle
District of Louisiana.

Before ALDISERT,1 REYNALDO G. GARZA and DUHÉ, Circuit Judges.

DUHÉ, Circuit Judge:

Greater Slidell Auto Auction appeals the summary dismissal of

its complaint for lack of subject matter jurisdiction based on its

failure to pursue its administrative remedies against the Federal

Deposit Insurance Corporation as receiver of a failed bank. We

hold that the district court has jurisdiction. We vacate the

dismissal and remand for further proceedings.

I.

Greater Slidell Auto Auction, Joseph Slocum, and Rebecca

Toblin Slocum filed suit in state court for breach of contract

1
Circuit Judge of the Third Circuit, sitting by designation.

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against the American Bank & Trust Company ("AmBank") in February

1988, after AmBank canceled Greater Slidell's line of credit. In

August 1990 the FDIC was appointed receiver for AmBank and, on

September 4, substituted itself for the failed bank and removed the

action to federal court. The FDIC then sought and obtained a 90-

day stay of the action pursuant to the Financial Institutions

Reform and Recovery Act of 1989 (FIRREA), 12 U.S.C. § 1821(d)(12).

In February 1993 the FDIC moved to dismiss based on

Plaintiffs' failure to exhaust their administrative remedies. See

id. § 1821(d)(13)(D) (limiting jurisdiction over claims against

depository institution); Meliezer v. RTC, 952 F.2d 879, 882 (5th

Cir.1992) (interpreting § 1821(d)(13)(D) as an exhaustion

requirement for claims filed after a receiver is appointed). It

argued that FIRREA required Plaintiffs to present their claim to

the FDIC by the deadline established on the FDIC's notice to

creditors of its appointment as receiver. See id. § 1821(d)(3)(B)

(requiring publication of a notice to creditors to present their

claims by a date specified in the notice) & (5)(B) (providing for

allowance of timely claims). The FDIC also contended that

Plaintiffs' failure to file a claim in a timely manner forever

barred that claim. See id. § 1821(d)(5)(C) (providing for final

disallowance of untimely claims).

The FDIC published notice of its appointment and of the claims

deadline in a local newspaper in accordance with FIRREA's notice

requirement under 12 U.S.C. § 1821(d)(3)(B). The FDIC never mailed

notice to Plaintiffs as required by § 1821(d)(3)(C), however.

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 The district court dismissed the action based on Plaintiffs'

failure to exhaust their administrative remedies, relying on

Meliezer. The court concluded that an administrative claim could

not be deemed filed by the initiation of a lawsuit. Final judgment

was entered, and this appeal followed.

Plaintiffs now present two issues for our consideration. They

contend that the FDIC's failure to mail notice of the bar date in

accordance with § 1821(d)(3)(C) (in addition to meeting the

notice-by-publication requirement of subsection (d)(3)(B))

constituted a violation of due process, even if such mailing is not

mandatory under the statute; and that the dismissal was improper

because Plaintiffs' pending state court action constituted a "claim

filed" with the FDIC such that the exhaustion requirements were

met.

II.

Plaintiffs argue that the court erred by failing to consider

their state court petition as satisfying the statutory requirement

that they "present" a claim to the receiver. If a claimant with a

suit pending against the failed institution when the receiver is

appointed receives no notice from the receiver of the

administrative process, the receiver has "the option to either

request a stay, and proceed administratively based on the

claimant's complaint or any substitute or supplemental filing it

may request, or forego the privilege of requesting a stay and thus

proceed judicially." Whatley v. RTC, No. 93-2104, slip op. at ----

, --- F.3d ----, (5th Cir. September 7, 1994) (emphasis added). In

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this case the receiver requested a stay but did not mail Plaintiffs

notice of the administrative claims procedure despite the

receiver's knowledge of the Plaintiffs' pending suit. We hold that

where the receiver fails to give notice of any other claims

procedure, it must consider any pending law suits in the

administrative process or forego the administrative process and

proceed with the law suit. The receiver was thus bound to proceed

administratively based on the claim as set forth in the petition

pending in the court action. Id.

Such a holding is not at odds with RTC v. Mustang Partners,

946 F.2d 103, 106 (10th Cir.1991), or Brady Development Co. v. RTC,

14 F.3d 998, 1005 (4th Cir.1994). Though Mustang and Brady refused

to consider a petition or counterclaim pending in court against the

receiver as satisfying the statutory requirement that the claimant

"present" a claim administratively, neither case considered the

situation here or in Whatley, i.e., that the receiver had not

notified the claimant that any additional presentation of the claim

was expected or required. See Mustang, 946 F.2d at 106 (noting

that RTC complied with the notice requirements with respect to the

claimant); Brady, 14 F.3d at 1005 (noting that RTC had followed

the requisite statutory provisions). A claimant with a law suit

pending against the bank when the receiver is appointed is entitled

to mailed notice of the administrative claims procedure before the

rule of Mustang or Brady could apply.

The consequence of the receiver's failure to act upon the

claim administratively is that the jurisdiction of the court

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continues over the Plaintiffs' action under § 1821(d)(6)(A)

("claimant may ... continue an action commenced before the

appointment of the receiver" within 60 days of the expiration of

the claims-determination period described in § 1821(d)(5)(A)(i)).

III.

We are also persuaded by Plaintiffs' argument that failure to

provide them notice by mail violates their right to due process.2

Mailing of notice to claimants known to the receiver is

constitutionally required; for such claimants, publication of

notice (which is sufficient for unknown claimants) is

constitutionally infirm. See Mullane v. Central Hanover Bank &

Trust Co., 339 U.S. 306, 317-20, 70 S.Ct. 652, 658-60, 94 L.Ed. 865

(1950); Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 798-800,

103 S.Ct. 2706, 2711-12, 77 L.Ed.2d 180 (1983); see also Whatley,

slip op. at ---- (Duhé, J., concurring). The statutory requirement

of mailed notice to claimants who become known applies as a

2
Even if our ruling regarding continuing jurisdiction under
§ 1821(d)(6)(A) is in error, we would nevertheless find federal
jurisdiction to determine Plaintiffs' claim because of the due
process challenge. Although Meliezer considers the restriction
on jurisdiction in § 1821(d)(13)(D) an exhaustion requirement, a
due process challenge to administrative procedures may be brought
in federal court despite any exhaustion requirement. See Bowen
v. City of New York, 476 U.S. 467, 483, 106 S.Ct. 2022, 2031-32,
90 L.Ed.2d 462 (1986) (recognizing exception to exhaustion
requirement if claimant asserts a constitutional challenge
collateral to his substantive claim); DCP Farms v. Yeutter, 957
F.2d 1183, 1189 (5th Cir.) (recognizing exception to exhaustion
requirement when plaintiff's contention is that the
administrative system is itself unlawful or unconstitutional),
cert. denied, --- U.S. ----, 113 S.Ct. 406, 121 L.Ed.2d 331
(1992); Information Resources, Inc. v. United States, 950 F.2d
1122, 1126 (5th Cir.1992) (recognizing exception to exhaustion
requirement where administrative remedies are inadequate).

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constitutional minimum to a claimant known by reason of a law suit

pending when the receiver is appointed.

IV.

The district court's jurisdiction continues over the merits of

the claim. The judgment of dismissal is

VACATED and the matter is REMANDED for further proceedings.

ALDISERT, Circuit Judge, dissents and will assign written
reasons.

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