Federated Bank v. Federal Deposit Insurance Corporation

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 15-11946
Non-Argument Calendar
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D.C. Docket No. 1:12-cv-03445-SCJ
FEDERATED BANK,
Plaintiff - Appellant,
versus
FEDERAL DEPOSIT INSURANCE CORPORATION,
as receiver for Silverton Bank, N.A.,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(March 9, 2016)
Before MARCUS, WILSON and ROSENBAUM, Circuit Judges.
PER CURIAM:
Federated Bank (“Federated”) appeals from the district court’s final
judgment in this action that arises out of a loan participation agreement (the
“Agreement”) it had entered into with Silverton Bank, N.A. (“Silverton”), under
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which Silverton had sold to Federated a roughly one-third interest in a $3 million-
plus loan for the purchase price of $1 million. When the loan matured and the
entire principal amount became due, the underlying borrower J. Michael Womble
(“Womble”) defaulted. Five months later, Silverton failed and the FDIC was
appointed as its receiver. After unsuccessful efforts to collect on or otherwise
address the Womble default, the FDIC sued Womble and others to recover the
amount due under Womble’s note and another Silverton loan. The court entered
judgment in that action in favor of the FDIC in the total principal amount of
$4,941,297 plus accrued interest and attorney’s fees; the FDIC thereafter settled
with Womble and others for $1.9 million. At that point, Federated submitted an
administrative claim to the FDIC pursuant to the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (“FIRREA”), demanding a cash payment
of $1 million, and asserting a “claim for money damages against [the] FDIC for
post-receivership breach of contract.” The FDIC denied Federated’s claim.
Federated then filed this action in federal district court under FIRREA,
alleging that the FDIC failed to attempt to recover on the underlying $3 million
defaulted loan, and failed to provide information to Federated about the loan. The
complaint contained four counts: Count I (judicial review of Federated’s
administrative claim); Count II (breach of contract); Count III (equitable
subordination); and Count IV (attorneys’ fees and litigation expenses). The district
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court dismissed Counts I, III, and IV and part of Count II, and ultimately granted
summary judgment in favor of the FDIC on the rest of Count II. On appeal,
Federated argues that the district court erred: (1) to the extent it dismissed
Federated’s claims because the claims qualify as administrative expenses of the
FDIC, they qualify as post-receivership claims that must be paid in cash, and the
district court had subject matter jurisdiction over the claims; and (2) to the extent it
granted summary judgment because Federated put forth evidence that its damages
resulted from its cost of performance, from charge-offs and from the FDIC’s
failure to liquidate collateral and sue on the note. After careful review, we affirm.
We review de novo the legal conclusions underlying a district court’s
dismissal of claims for lack of subject matter jurisdiction, and its findings of
jurisdictional facts for clear error. Houston v. Marod Supermarkets, Inc., 733 F.3d
1323, 1328 (11th Cir. 2013). We review de novo a district court’s dismissal of
claims for failure to state a claim. SFM Holdings, Ltd. v. Banc of Am. Sec., LLC,
600 F.3d 1334, 1336 (11th Cir. 2010). We also review a district court’s order
granting summary judgment de novo, applying the same standard as the district
court, and drawing all factual inferences in the light most favorable to the non-
movant. Nat’l Parks Conservation Ass’n v. Norton, 324 F.3d 1229, 1236 (11th
Cir. 2003). Summary judgment is proper where “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
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matter of law.” Fed. R. Civ. P. 56(a). “When the nonmoving party has the burden
of proof at trial, to prevail at summary judgment the moving party has the burden
of either negating an essential element of the nonmoving party’s case or showing
that there is no evidence to prove a fact necessary to the nonmoving party’s case.”
McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1236, 1242 (11th Cir. 2013).
Finally, we review a district court’s grant of a motion for reconsideration for abuse
of discretion. Region 8 Forest Serv. Timber Purchasers Council v. Alcock, 993
F.2d 800, 806 (11th Cir. 1993).
First, we are unpersuaded by Federated’s claim that the district court erred in
dismissing three of its claims for lack of subject matter jurisdiction. Except as
otherwise provided in FIRREA, “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 [FDIC] has
been appointed receiver . . . or (ii) any claim relating to any act or omission of such
institution or the [FDIC] as receiver.” 12 U.S.C. § 1821(d)(13)(D). FIRREA
permits suit to be filed on such claims only if the FDIC denies the claim or fails to
resolve it within a specified time period. 12 U.S.C. § 1821(d)(6)(A). In Interface
Kanner, LLC v. JPMorgan Chase Bank, N.A., we recognized that, “for post-
receivership claims -- such as [Federated’s] potential claim[s] against the FDIC --
the court has no subject matter jurisdiction unless the claimant has exhausted the
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administrative remedies.” 704 F.3d 927, 934 (11th Cir. 2013) (quotation omitted).
We also cited with approval the Third Circuit’s conclusion that “the plain meaning
of § 1821(d)(13)(D)(i) includes declaratory judgment actions.” Id. (citing Nat’l
Union Fire Ins. Co. of Pittsburgh, Pa. v. City Sav., F.S.B., 28 F.3d 376, 385 (3d
Cir. 1994)). Thus, the D.C. Circuit has held that a plaintiff must exhaust the exact
same claim in the administrative process as the one it brings in federal court:
Although [the plaintiffs] filed a timely proof of claim with the FDIC, their
claim requested only damages for construction delays. Their claim made no
mention of the declaratory relief the [plaintiffs] now seek nor could anything
in the claim fairly be construed to put the FDIC on notice that the [plaintiffs]
challenged its conclusion that repudiation of the loan agreement did not
erase the [plaintiffs’] duty to repay the previously disbursed amount.
Because the [plaintiffs] failed to route their claim for declaratory relief
through the administrative review process, section 1821(d)(13)(D)(ii)
withholds judicial review of that claim.
Westberg v. FDIC, 741 F.3d 1301, 1308 (D.C. Cir. 2014) (persuasive authority).
Here, the district court lacked subject matter jurisdiction over three of the
claims Federated raised in its complaint. Although it had submitted to the FDIC a
single claim for money damages, Federated included in its complaint claims for
declaratory relief (part of Count II), equitable subordination of the FDIC’s interest
in settlement funds received from Womble and others due to the alleged failure of
the FDIC to segregate those settlement funds (Count III), and attorneys’ fees and
litigation expenses (Count IV). Indeed, Federated has admitted that it never
submitted to the FDIC its claims for equitable subordination and attorneys’ fees
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and legal expenses found in Counts III and IV.1 Nor are we persuaded by
Federated’s argument that these Counts are not distinct claims but only
“remedies.” As the D.C. Circuit said in Westberg, Federated’s administrative
claim to the FDIC “made no mention of the [equitable] relief [it] now seek[s] nor
could anything in the claim fairly be construed to put the FDIC on notice that
[Federated] challenged [the manner in which the FDIC handled the settlement
funds].” 741 F.3d at 1308. Federated even admits that it would have been
impossible for the FDIC to do anything with the Womble settlement funds until
after Federated had already submitted its administrative claim. Because Federated
did not submit these claims to the FDIC before bringing suit, it failed to exhaust its
administrative remedies for these claims, and the district court could not consider
them. See Interface, 704 F.3d at 934 (“for post-receivership claims -- such as
[Federated’s] potential claim[s] against the FDIC -- the court has ‘no subject
matter jurisdiction unless the claimant has exhausted the administrative
remedies’”). The district court properly dismissed all of Federated’s claims other
than its breach-of-contract claim demanding money damages.
1 As for the part of Count II that seeks a declaration that “Federated is . . . reliev[ed] . . . of any
obligation to reimburse [the] FDIC for costs and expenses purportedly arising out of the
Agreement,” Federated did not challenge the district court’s dismissal of this claim in its opening
brief. It has thus abandoned any argument that it administratively exhausted this part of Count
II. See Solutia, Inc. v. McWane, Inc., 672 F.3d 1230, 1237 (11th Cir. 2012) (holding that an
argument not included in a party’s opening brief is deemed abandoned).
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We also reject Federated’s argument that the district court erred in
dismissing for failure to state a claim Count I, which seeks a declaration that
Federated would be entitled to receive -- as a first-priority creditor -- payment in
cash for a judgment in its favor on its breach-of-contract claim. The National
Depositor Preference Amendment to the Federal Deposit Insurance Act (“FDIA”),
mandates that, when paying claims from receivership assets, the FDIC must follow
a specified payment-priority scheme: (i) administrative expenses; (ii) deposit
liabilities; (iii) other general or senior liabilities; (iv) obligations subordinated to
depositors or general creditors; and (v) obligations to shareholders. 12 U.S.C. §
1821(d)(11). “[A]dministrative expenses” are defined as “those necessary
expenses incurred by the receiver in liquidating or otherwise resolving the affairs
of a failed insured depository institution. Such expenses shall include pre-failure
and post-failure obligations that the receiver determines are necessary and
appropriate to facilitate the smooth and orderly liquidation or other resolution of
the institution.” 12 C.F.R. § 360.4.
Here, Federated does not argue that its breach-of-contract claim under the
participation agreement constitutes an administrative expense within the meaning
of 12 C.F.R. § 360.4. Rather, it says that because its claim is one for breach of a
contract executed or approved by the FDIC after it was appointed as receiver for
Silverton, the claim qualifies as an administrative expense under § 1821(d)(20).
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Section 1821(d)(20) regulates the treatment of claims arising from a post-
receivership breach of contract by FDIC as receiver, and provides that:
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 . . . .
12 U.S.C. § 1821(d)(20) (emphases added).
However, Federated does not argue that the FDIC executed the Agreement
for purposes of § 1821(d)(20). Federated argues only that the FDIC approved the
Agreement because it “assumed the role as lead lender on the loan, made business
decisions relating to its servicing . . ., approved legal action against the borrower
by filing a lawsuit in Federal Court and has collected and retained proceeds under
the loan.” But none of the FDIC’s activities alleged by Federated constitutes
approval of the Agreement. Rather, they are all collection activities related to the
underlying loan. Indeed, the FDIC’s activities could not constitute approval for
purposes of § 1821(d)(20). As the D.C. Circuit held in MBIA Ins. Co. v. FDIC,
“Section 1821(d)(20) . . . requir[es] formal, written approval by the FDIC to
qualify contract damages for priority as ‘administrative expenses’ under
§1821(d)(11)(A).” 708 F.3d 234, 245 (D.C. Cir. 2013). “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
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formality consistent with ‘executed’ and beyond ‘accep[tance],’ and that a narrow
meaning is required under the depositor preference scheme.” Id. at 244.
Accordingly, “[a] formal written sanction thus serves an important statutory
purpose by limiting the contracts that are given priority.” Id.
Federated attempts to distinguish MBIA, arguing that it involved an
agreement that had been repudiated and this case does not. But that is not a basis
for distinguishing this case. In MBIA, the court explained the need for a formal
writing even when a non-repudiated contract continues in force post-receivership:
[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 . . . .’
MBIA, 708 F.3d at 245. We agree with the MBIA Court and reject the argument
Federated makes here.
Federated also argues -- for the first time on appeal -- that written approval
of the Agreement “may very well exist,” but that “the trial court erred in ruling on
the Motion to Dismiss without allowing Federated to seek complete discovery on
these issues.” However, this argument was waived because Federated did not raise
it before the district court. Millennium Partners, L.P. v. Colmar Storage, LLC, 494
F.3d 1293, 1304 (11th Cir. 2007) (“Arguments raised for the first time on appeal
are not properly before this Court.”) (quotation omitted). Further, nowhere in its
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complaint does Federated allege that the FDIC approved the Agreement in writing,
and notably, Federated has not put forth any evidence suggesting that the FDIC
approved the Agreement in writing, even though discovery is now completed.
Federated next points to an internal FDIC claims manual for the proposition
that it has the right to be paid in cash on its claim for post-receivership breach of
the Agreement by the FDIC as receiver. However, it is undisputed that the claims
manual it relies upon had been rescinded and replaced by the FDIC nearly a year
before Federated filed its administrative claim and that the claims manual that
superseded it includes no provision like the one Federated relies upon from the
rescinded claims manual. In any event, internal agency manuals like the FDIC’s
claims manual do not provide an independent basis for liability. Rather, as the
Supreme Court and this Court have held, such manuals are solely for the use of
agency employees, do not have the force of law, and do not provide any
substantive rights to persons or entities who interact with federal agencies. See
Schweiker v. Hansen, 450 U.S. 785, 789 (1981) (Social Security Administration
(“SSA”) Claims Manual is a “handbook for internal use by thousands of SSA
employees” that “has no legal force, and . . . does not bind the SSA.”); United
States v. Harvey, 659 F.2d 62, 63, 66 (5th Cir. Unit B 1981) (observing that a
Veterans Administration loan servicing manual was “internal agency publication
issued to employees engaged in loan servicing operations to provide procedural
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information and policy guidelines” and holding “the manual does not create
substantive rights in the mortgagor enforceable in federal court”).2
We also find no merit to Federated’s argument that the district court erred in
granting summary judgment to dispose of its breach-of-contract claim. “The
elements for a breach of contract claim in Georgia are the (1) breach and the (2)
resultant damages (3) to the party who has the right to complain about the contract
being broken.” Norton v. Budget Rent A Car Sys., Inc., 705 S.E.2d 305, 306 (Ga.
App. 2010) (quotation omitted). When suing for damages in Georgia, a plaintiff
“has the burden of proof of showing the amount of loss in a manner in which the
jury . . . can calculate the amount of the loss with a reasonable degree of certainty.
An allowance for damages cannot be based on guess work.” Big Builder, Inc. v.
Evans, 191 S.E.2d 290, 291 (Ga. App. 1972). Thus, a party’s “fail[ure] to perform
. . . standing alone does not furnish a basis upon which the amount of the loss can
be calculated.” Id. In other words, “damages awarded for breach of contract
cannot be vague, speculative, or uncertain . . . and must be traced solely to the
breach of contract.” Turner Broadcasting Sys., Inc. v. McDavid, 693 S.E.2d 873,
886 (Ga. App. 2010). While proximate cause is usually a jury question in Georgia,
it may be determined by the courts “in plain and undisputed cases.” Sanders v.
Lull Int’l, Inc., 411 F.3d 1266, 1271 (11th Cir. 2005) (quotation omitted).
2 See Stein v. Reynolds Sec., Inc., 667 F.2d 33, 34 (11th Cir. 1982) (adopting as binding all
decisions issued by a Unit B panel of the former Fifth Circuit).
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Here, Federated claims that the FDIC breached the Agreement in two ways:
(1) it failed to provide Federated with sufficient information about the Womble
note, the potential for default, and the FDIC’s collection efforts; and (2) it failed to
liquidate the collateral securing the note -- approximately 44,000 shares of stock in
FMCB Holdings, Inc. -- or to act quickly enough to initiate a collection action
against the borrower. Federated also describes the damages it suffered: (1) the
price it paid for its participation interest in the Womble note; and (2) the amounts
of the Womble loan it was forced to “charge off” (i.e., report as a lost asset of the
bank). Federated has failed, however, to put forth evidence of how the FDIC’s
alleged breaches caused the harm Federated suffered.
As for the first breach, the district court concluded that “Federated has
offered no evidence at all on how the FDIC’s alleged failure to provide required
information caused any damage suffered by Federated.” For example, Federated
offered no evidence that it would have taken different action had it been aware of
the information the FDIC allegedly failed to provide it. See Sun American Bank v.
Fairfield Fin. Servs., Inc., 690 F. Supp. 2d 1342, 1368 (M.D. Ga. 2010) (“Precise
legal damages [from a breach of contract similar to the one alleged here] would be
impossible to calculate because such calculation would require speculation into
what Sun American would have done with the information Fairfield was obligated
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to disclose. . . . It might have made good decisions, or it might have made bad
decisions. . . . It is impossible to say.”).
As for the second breach, the only evidence suggesting that there was a
market for the FMCB shares was a December 4, 2009 letter from FMCB Holdings.
But as the district court concluded, that letter is “an insufficient basis upon which
the jury could determine what damages might have been suffered by Federated due
to the FDIC’s allegedly commercially unreasonable delay in initiating collection
activities.” In fact, the letter itself provides that there is no “public market” for
FMCB Holdings, Inc.’s shares. Furthermore, the only share sale referenced in the
letter was for 3,200 shares. Without an available public market, Federated cannot
point to one sale as the basis for determining that $35 per share was a realistically
possible price point. The collateral here was over 44,000 shares, a significantly
higher number, particularly when discussing a stock for which there is already no
public market. Federated provided no evidence from which a reasonable jury
could conclude that a sale of such magnitude was even possible at any price.
Because it is plain that there is no evidence from which a reasonable jury
could conclude without speculation that the alleged actions or inactions of the
FDIC caused Federated to suffer any damages under the Agreement, the district
court did not err in granting summary judgment in favor of the FDIC on
Federated’s breach-of-contract claim. Nor, moreover, did the district court abuse
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its discretion by granting the FDIC’s motion for reconsideration of the initial
denial of the FDIC’s summary judgment motion. “[B]ecause the order [denying
summary judgment] was interlocutory, ‘the court at any time before final decree
[could] modify or rescind it.’” Bon Air Hotel, Inc. v. Time, Inc., 426 F.2d 858,
862 (5th Cir. 1970) (quoting John Simmons Co. v. Grier Bros. Co., 258 U.S. 82, 88
(1922)),3 abrogated on other grounds by Little v. Liquid Air Corp., 37 F.3d 1069
(5th Cir. 1994); see also Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1315
(11th Cir. 2000) (noting that “the district court has plenary power over
[interlocutory orders] and this power to reconsider, revise, alter or amend the
interlocutory order is not subject to the limitations of Rule 59”) (quotation
omitted).
AFFIRMED.
3 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), we adopted as
binding precedent all Fifth Circuit decisions issued before October 1, 1981.
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