UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 93-2104
JAMES B. WHATLEY, ET AL.,
Plaintiffs-Appellants,
versus
RESOLUTION TRUST CORPORATION as
Receiver for Continental Savings,
a Federal Savings and Loan
Association,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Texas
( September 7, 1994 )
Before POLITZ, Chief Judge, GARWOOD and DUHÉ, Circuit Judges.
POLITZ, Chief Judge:
James Whatley, John Rowley, Philip Solomon, Myra Beth Whatley,
and Dan Bensimon appeal the district court's dismissal of their
claims against Resolution Trust Corporation and Continental
Savings, AFSLA, for lack of subject matter jurisdiction. For the
reasons assigned we vacate and remand for further proceedings.
BACKGROUND
On December 17, 1990 the plaintiffs filed suit in state court
in Travis County, Texas against Continental Savings, AFSLA for
breach of fiduciary duty, breach of contract, and tortious
interference with contractual relations. RTC, as conservator for
Continental, intervened on January 16, 1991 and removed to federal
court. The conservator was substituted as party defendant and
requested and received a stay of proceedings pursuant to 12 U.S.C.
§ 1821(d)(12)(A)(i).1 This stay expired in March of 1991.
Six months later, on August 16, 1991, the Office of Thrift
Supervision declared Continental insolvent and appointed RTC as
receiver. RTC filed pleadings to reflect its capacity as receiver
but did not request a stay of proceedings, although part (ii) of
subsection 1821(d)(12)(A) permits of such.2 RTC initiated the
administrative claims process by publishing notice in the Houston
Chronicle directing Continental's creditors to submit their claims
to RTC by November 18, 1991.3 RTC did not publish this notice in
Travis County where the plaintiffs lived and originally had filed
their suit. Nor did RTC provide the plaintiffs with personal
1
"After the appointment of a conservator . . . for an insured
depository institution, the conservator . . . may request a stay
for a period not to exceed -- (i) 45 days, in the case of any
conservator, . . . in any judicial action or proceeding to which
such institution is or becomes a party." 12 U.S.C.
§ 1821(d)(12)(A)(i).
2
"After the appointment of a . . . receiver of an insured
depository institution, the . . . receiver may request a stay for
a period not to exceed . . . (ii) 90 days, in the case of any
receiver, in any judicial action or proceeding to which such
institution is or becomes a party." 12 U.S.C.
§ 1821(d)(12)(A)(ii).
3
See 12 U.S.C. § 1821(d)(3)(B), requiring that such notice be
published.
2
notice of the filing procedures and deadline as required by
12 U.S.C. § 1821(d)(3)(C).4 Unaware of the procedure for filing an
administrative claim, on September 27, 1991 the plaintiffs sent RTC
a letter advising of the claims made in their pending lawsuit.
RTC, obviously fully cognizant of the pending lawsuit, made no
attempt whatsoever to communicate with plaintiffs or their counsel.
Instead, on January 15, 1992 -- after the time for filing
administrative claims had expired -- RTC filed a motion to dismiss
the plaintiffs' complaint for failure to exhaust administrative
remedies. In response the plaintiffs asserted that: (1) the
administrative claims process of the Financial Institutions Reform
and Recovery Enforcement Act of 1989 (FIRREA) does not apply to
lawsuits filed before the appointment of the receiver; (2) the
receiver's failure to give the plaintiffs proper notice of the
claims process exempted them from the exhaustion requirement; and
(3) the plaintiffs notified the receiver of their claim by the
September 1991 letter.
The district court initially denied RTC's motion to dismiss.
RTC then filed a motion for summary judgment contending that the
4
The receiver shall mail a notice similar
to the notice published under [subsection B]
at the time of such publication to any
creditor shown on the institution's books --
(i) at the creditor's last address
appearing in such books; or
(ii) upon the discovery of the name and
address of a claimant not appearing on the
institution's books within 30 days after the
discovery of such name and address.
12 U.S.C. § 1821(d)(3)(C) (emphasis added).
3
plaintiffs' unsecured claims were prudentially moot because the
value of the secured claims exceeded the value of the bank's
assets. Before ruling on the summary judgment motion, however, the
district court reversed its position on the motion to dismiss,
vacated its prior orders, and dismissed the plaintiffs' case for
lack of subject matter jurisdiction. The plaintiffs timely
appealed.
ANALYSIS
We review dismissals for lack of subject matter jurisdiction
de novo,5 applying the same standard as that applied by the
district court. The district court determined that the plaintiffs'
failure to file an administrative claim with RTC deprived the court
of jurisdiction. Concluding that FIRREA provides otherwise with
respect to lawsuits filed before the receivership, we vacate and
remand for further proceedings.
Pre- Versus Post-receivership Claims
We noted the differences between pre- and post-receivership
claims in Carney v. Resolution Trust Corporation.6 Because subject
matter jurisdiction is tested as of the time of the filing of the
complaint,7 district courts presiding over actions properly filed
prior to the appointment of a receiver continue to be vested with
5
Matter of Bradley, 989 F.2d 802 (5th Cir. 1993).
6
No. 93-1329, 1994 WL 126745 (5th Cir. April 14, 1994).
7
Carney.
4
jurisdiction.8 The situation differs when the receiver is
appointed before the filing of an action against a failed financial
institution. As explained in Meliezer v. Resolution Trust
Company,9 "FIRREA contains no provision granting federal
jurisdiction to claims filed after a receiver is appointed but
before administrative exhaustion."10
By contrast, several sections of FIRREA provide that federal
jurisdiction over pre-receivership claims continues after the
appointment of a receiver. Subsection 1821(d), which governs the
powers and duties of a receiver, states:
Except as otherwise provided in this subsection,11
no court shall have jurisdiction over --
(i) any claim or action for payment from, or any
action seeking a determination of rights with respect to,
the assets of any depository institution for which the
Corporation has been appointed receiver . . .; or
(ii) any claim relating to any act or omission of
such institution or the Corporation as receiver.12
Paragraph (5)(F)(ii) of the subsection provides otherwise, stating
that "[s]ubject to paragraph (12), the filing of a claim with the
receiver shall not prejudice any right of the claimant to continue
any action which was filed before the appointment of the
8
See Rosa v. Resolution Trust Corp., 938 F.2d 383 (3d Cir.),
cert. denied, 112 S.Ct. 582 (1991); see also Praxis Properties,
Inc. v. Colonial Sav. Bank, S.L.A., 947 F.2d 49 (3d Cir. 1991).
9
952 F.2d 879 (5th Cir. 1992).
10
Id. at 882.
11
"This subsection" refers to section 1821(d) as a whole.
Marquis v. F.D.I.C., 965 F.2d 1148 (1st Cir. 1992) (en banc).
12
12 U.S.C. § 1821(d)(13)(D).
5
receiver."13 Paragraph (12) explains that after its appointment,
a receiver "may request a stay for a period not to exceed . . .
(ii) 90 days, . . . in any judicial action or proceeding to which
such institution is or becomes a party."14
This circuit, and the others addressing the issue, have
interpreted these and other paragraphs15 of subsection 1821(d) to
mean that a separate scheme exists for the disposition of lawsuits
filed pre-receivership.16 Those claims, based on valid federal
jurisdiction when filed, may be affected only through the stay
provision detailed in paragraph (12)(A)(ii). This
legislatively-created framework strikes a fair balance between the
goals of efficiency and expediency underlying FIRREA and the
interests of creditors who, having invoked the proper procedures
for protecting their rights, have expended time, money, and energy
in properly asserting their claims.
Pre-receivership Claims and Exhaustion
There is an added odious dimension when the receiver, with
13
12 U.S.C. § 1821(d)(5)(F)(ii).
14
12 U.S.C. § 1821(d)(12)(A)(ii).
15
For example, paragraphs (6)(A) and (8)(C) permit a claimant
to continue a suit filed before the appointment of a receiver after
its administrative claim has been disallowed. 12 U.S.C.
§ 1821(d)(6)(A) and (8)(C).
16
See Brady Development Co. v. Resolution Trust Corp., 14 F.3d
998 (4th Cir. 1994); Carney; Marquis; Praxis; Rosa; see also
F.D.I.C. v. Glynn, 1993 WL 413958 (N.D.Ill. October 15, 1993);
Lanigan v. Resolution Trust Corp., 1992 EL 130075 (N.D.Ill. June 9,
1992); Guidry v. Resolution Trust Corp., 790 F.Supp. 651 (E.D.La.
1992); Coston v. Gold Coast Graphics, Inc., 782 F.Supp. 1532
(S.D.Fla. 1992).
6
full knowledge of the pending lawsuit, foregoes a request for a
stay and waits until the time for the administrative claims process
has expired to appear in court requesting dismissal because of the
plaintiffs' supposed failure to exhaust administrative remedies.
In the eyes of the claimant -- especially one who receives no
actual notice of the administrative process -- his lawsuit is
awaiting disposition: the receiver, having intervened and been
substituted as party defendant, ostensibly joins him in awaiting a
hearing on the merits. In reality, however, the receiver lies in
ambush, awaiting expiration of the administrative deadline so that
it may dispose of the claim without consideration of its merits.
We neither find nor assign any such intent to Congress in its
enactment of FIRREA.
Congress created a separate scheme for the handling of
pre-receivership actions, giving the receiver the privilege, but
not the duty, to request a stay of judicial proceedings so that it
might first consider the pending claim administratively. Neither
a request for a stay nor the failure to request a stay deprives the
district court of jurisdiction. Rather, if the receiver requests
a stay, the court will defer action temporarily. If the receiver
does not timely seek a stay, the judicial action will routinely
proceed. This does not mean that the judicial process runs
concurrently with the administrative remedy.17 Congress has given
the receiver the option to either request a stay, and proceed
17
See Carney (allowing simultaneous pursuit of administrative
and judicial remedies thwarts the congressional purpose for
enacting FIRREA); accord Brady.
7
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. Should
the receiver choose to proceed administratively, it must request
the stay within 90 days of its appointment;18 thereafter no stay may
be sought and the judicial action is to proceed.
As in any case of statutory interpretation, we look to the
plain language of the statute, reading it as a whole and mindful of
the linquistic choices made by Congress. The language of
subsection 1821(d) is clear: "The Corporation may, as receiver,
determine claims in accordance with the requirements of this
subsection."19 "After . . . appointment . . . [as] receiver for an
insured depository institution, . . . [it] may request a stay for
a period not to exceed . . . 90 days, . . . in any judicial action
or proceeding to which such institution is or becomes a party."20
The term "may" is permissive; it neither indicates nor requires an
exclusive means of action -- it is discretionary.21 Paragraph
18
See Praxis (analyzing the legislative history and the
language of 12 U.S.C. § 1821(d)(12)(A) and concluding that Congress
intended that the receiver request the stay within the first 90
days of its appointment). Otherwise, the receiver would have
"carte blanche to stay a judicial proceeding at any time it feels
it needs a 90-day break from the rigors of litigation." Id. 947
F.2d at 69. We agree with the analysis of our colleagues on the
Third Circuit that the privilege to request a stay must be
restricted to the first 90 days after appointment to prevent abuse.
19
12 U.S.C. § 1821(d)(3)(A) (entitled "Authority of receiver
to determine claims") (emphasis added).
20
12 U.S.C. § 1821(d)(12)(A)(ii) (emphasis added).
21
Rose v. Rose, 481 U.S. 619 (1987) (Congress' use of word
"may" does not imply exclusivity; it establishes only a
8
(3)(A) allows, but does not require, the receiver to determine
claims in accordance with FIRREA;22 paragraph (12)(A)(ii) grants the
receiver the privilege, should it choose to proceed
administratively, to request a stay of judicial proceedings.23
Neither provision is mandatory. The use of the term "shall" in
other paragraphs of subsection 1821(d) supports this analysis.24
The language of subsection 1821(d), and its legislative
history, lends support to our conclusion. Absent a request for a
stay pursuant to paragraph (12)(A)(ii), no provision of the
subsection exists by which the judicial proceeding may be stayed.
As congressional goals of efficiency and expediency would be
prejudiced if administrative and judicial processes were allowed to
proceed simultantously,25 Congress obviously intended to grant the
receiver the option to use initially either the administrative or
judicial mechanism. If Congress had intended the administrative
discretionary power); accord F.D.I.C. v. McSweeney, 976 F.2d 532
(9th Cir. 1992), cert. denied, 113 S.Ct. 2440 (1993); F.D.I.C. v.
Canfield, 967 F.2d 443 (10th Cir.), cert. dismissed, 113 S.Ct. 516
(1992); Resolution Trust Corp. v. Lightfoot, 938 F.2d 65 (7th Cir.
1991).
22
See also 12 U.S.C. § 1821(d)(6)(A)(i) (the receiver may opt
out of the administrative process after an administrative claim is
filed by refusing to act on the claim for 180 days at which point
the claimant is free to proceed in federal court).
23
See also Brady (concluding stay provision of paragraph
(12)(A)(ii) is optional and discretionary).
24
See e.g., 12 U.S.C. § 1821(d)(5)(A)(i) (establishing time
period in which receiver shall determine administrative claims);
(8)(A) (receiver shall establish an expedited claims process for
certain claimants); (15)(A) and (B) (receiver shall make an
accounting).
25
See Carney; see also Brady.
9
procedure to be exclusive for pre-receivership actions, it would
not have provided for the permissive stay. It would have been a
simple matter to provide for an automatic, mandatory stay of all
pending judicial actions.26 This Congress did not do; this we will
not do under the guise of statutory interpretation.27
Finally, the purposes of FIRREA and basic notions of fair play
militate against the procedure followed by the receiver -- awaiting
expiration of the time allowed for initiating claims and then
moving to dismiss the pending judicial actions. FIRREA seeks the
efficient and expedient handling of claims.28 Efficiency and
expediency, however, are not justifications for vitiating the
primary purpose of FIRREA. Congress intended to establish a scheme
for fairly adjudicating claims against failed financial
institutions. It did not structure a system for the sandbagging of
valid claims. The statute is not to be used as an easy means of
avoiding consideration of claims on their merits. As demonstrated
by the special provisions governing pre-receivership suits,
Congress had the rights of claimants in mind when it enacted
FIRREA. RTC may not distort the provisions designed to facilitate
the processing of claims into a tool for subverting the right of
claimants to present their claims on the merits.
26
See e.g., 11 U.S.C. § 362(a)(1) (imposing automatic stay in
the bankruptcy context).
27
Matter of Meyerland Co., 960 F.2d 512 (5th Cir. 1992), cert.
denied, 113 S.Ct. 967 (1993). See also Lightfoot; McSweeney;
Canfield.
28
See Brady; Carney; Marquis; Meliezer.
10
We therefore hold that with regard to actions filed before the
receivership, the receiver may opt either for the judicial route,
by allowing the action to continue, or it may choose the
administrative process, by moving for a stay within 90 days of its
appointment.29 In the instant case, RTC did not timely request a
stay of the plaintiffs' pre-receivership proceeding and it is
therefore deemed to have determined to proceed with the litigation
in federal court.
The decision of the district court is VACATED and the case is
REMANDED for further proceedings consistent herewith.
DUHÉ, Circuit Judge, concurring:
I agree that the receiver's failure to invoke the optional
stay simultaneously with the giving of notice to creditors means
that the pending action was not suspended under § 1821(d)(12) but
continued under § 1821(d)(5)(F)(ii). (Paragraph (5)(F)(ii)
recognizes that a claimant's right to continue a pre-appointment
law suit is not prejudiced unless the receiver requests a stay
under paragraph (12)). A plaintiff whose suit continues cannot
have his claim disallowed for failure to continue his suit.
I write separately to express my opinion that RTC's failure to
mail the notice required under § 1821(d)(3)(C) is also dispositive,
for two reasons.
First, the failure to mail notice left the receiver without
29
In so holding, we recognize that other circuits are not in
accord. See Brady Development Co. V. Resolution Trust Corp., 14
F.3d 998 (4th Cir. 1994); see also Bueford v. Resolution Trust
Corp., 991 F.2d 481 (8th Cir. 1993); Resolution Trust Corp. v.
Mustang Partners, 946 F.2d 103 (10th Cir. 1991).
11
the power to determine the plaintiffs' claim administratively and,
therefore, exempted plaintiffs from the exhaustion requirement
notwithstanding Meliezer. In Meliezer, a suit filed against the
receiver post-appointment, the receiver's failure to mail notice
upon learning the identity of the claimant (under subsection
(d)(3)(C)(ii)) did not relieve the claimant from the obligation to
exhaust administrative remedies, because subsection (d)(3)(C) does
not impose "a consequence for failure of compliance."30 The
Meliezer claimant was a debtor of the institution, not shown on the
institution's books as a creditor, and the claim became known to
the receiver only upon the filing of the suit after the bar date
for filing claims had passed. The plaintiff could have filed an
administrative claim belatedly at the time of its complaint which
the receiver would likely have disallowed.31 I would not extend the
30
Meliezer, 952 F.2d at 883. Unlike the Meliezer panel, I
find sound statutory basis for the argument that the receiver's
very authority to determine claims hinges on its compliance with
the notice requirements. See § 1821(d)(3)(A) (receiver may
determine claims in accordance with "requirements" of § 1821(d));
§ 1821(d)(3)(B) (receiver "shall" publish notice); § 1821(d)(3)(C)
(receiver "shall" mail a similar notice to creditors shown on the
institution's books and claimants who become known); see also
Meliezer, 952 F.2d at 881 (recognizing that under § 1821(d)(3) it
is the new claims procedure which "gives the Receiver . . .
authority to review claims"); id. at 880 (recognizing that by
publishing the notice and establishing a claims deadline the RTC
"implement[s] the administrative claims process"); Brady Dev. Co.
v. RTC, 14 F.3d 998, 1001 (4th Cir. 1994) (noting that RTC "began
its claims process" by publishing the required notice). Because
the notice provisions are mandatory under paragraph (3)(B) & (C),
I consider them a "requirement" of subsection (d). I also
interpret paragraph (3)(A) as conferring authority to determine
claims only if the receiver satisfies such "requirements."
Accordingly, the statutory scheme does provide a consequence for
the failure of compliance with the notice requirement.
31
See § 1821(d)(5)(C)(i) (providing for final disallowance
of claims filed after the date given in the published notice,
unless clause (ii) applies, i.e., claimant does not have notice of
holding of Meliezer to a creditor suit filed against the
institution before appointment of the receiver. In the case of a
claimant with a suit pending when the receiver is appointed, I
would hold that if the receiver fails to give notice of the claims-
filing deadline as required under § 1821(d)(3)(C), it lacks
authority to determine the claim under § 1821(d)(3)(A).
Chief Judge Politz's opinion recognizes, at least implicitly,
that the receiver's notice to a claimant with a suit pending
against the receiver is important. I consider his reference to the
receiver's "request [for a] substitute or supplemental filing" an
allusion to the receiver's duty to notify a plaintiff of any
administrative filing requirements. Thus if the receiver requests
a stay of a suit without requesting from the claimant a "substitute
or supplemental filing," the receiver must consider the claim
administratively based solely on the complaint. The mailing of
notice under § 1821(d)(3)(C) would constitute such a request for
substitute or supplemental presentation of the claim at the address
given in the notice.
Second, I would hold that the Due Process Clause requires
mailed notice to a claimant known to the receiver by virtue of his
having filed suit against the institution before the appointment of
the receiver. For such claimants, publication of notice (which is
sufficient for unknown claimants32) is constitutionally infirm. See
the appointment of the receiver in time to file a claim before the
bar date but files in time to permit payment).
32
Meliezer is again distinguishable. This Court never
considered the effect of the constitutional requirement of due
13
Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 317-20,
70 S. Ct. 652 (1950) (holding that notice by newspaper publication,
which is sufficient for unknown or missing claimants, is
unconstitutional with respect to known persons whose whereabouts
are also known); Mennonite Bd. of Missions v. Adams, 462 U.S. 791,
798-800, 103 S. Ct. 2706, 2711-12 (1983) (requiring under the Due
Process Clause that a proceeding affecting the property of a party
whose name and address are reasonably ascertainable be preceded by
personal service or mailed notice). These fundamental principles
of due process dictate that a claimant known because of a pending
law suit enjoys the protection of § 1821(d)(3)(C) (mailed notice to
creditors shown on the institution's books or to claimants who
become known) as a constitutional minimum.
I nevertheless concur. Regardless of the adequacy of the
notice given by the receiver under either the constitution or
FIRREA itself, the receiver must also request a stay to suspend
judicial action in a case filed pre-appointment. Otherwise, the
jurisdiction of the court continues.
process on the statutory notice provisions in that case. The
Meliezer plaintiff apparently received constitutionally adequate
notice via the newspaper publication. Meliezer at 883 n.7. Until
suit was filed after the receiver was appointed and indeed after
the bar date had passed, the Meliezer plaintiff was not a known
claimant and was known only as a debtor of the institution. Id. at
880.
14