Lexon Insurance Company, Inc. v. Federal Deposit Insurance Corporation

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

LEXON INSURANCE COMPANY, INC., CIVIL ACTION

VERSUS NO. 18-4245

FEDERAL DEPOSIT INSURANCE CORP., SECTION “B”(1)

AS RECEIVER FOR FIRST NBC BANK

ORDER & REASONS

Before the Court are, defendant United States of America’s

(“FDIC-C”) “Motion to Dismiss for Lack of Subject Matter

Jurisdiction” (Rec. Doc. 70), plaintiff Lexon Insurance Company,

Inc.’s (“Lexon”) “Plaintiff’s Memorandum in Opposition to Motion

to Dismiss for Lack of Subject-Matter Jurisdiction” (Rec. Doc.

73), and defendant FDIC-C’s “Reply Memorandum in Support of

Motion to Dismiss for Lack of Subject-Matter Jurisdiction” (Rec.

Doc. 78). Accordingly,

IT IS ORDERED that defendant FDIC-C’s Motion to dismiss for

lack of subject matter jurisdiction (Rec. Doc. 70) is GRANTED.

FACTS AND PROCEDURAL HISTORY

The facts giving rise to defendant FDIC-C’s1 current motion

are further detailed in this Court’s Order and Reasons regarding

1 “The roles of the FDIC-C and FDIC-R are distinct. See Credit Life Ins. Co.

v. F.D.I.C., 870 F. Supp. 417, 421 (D. N.H. Oct. 18, 1993) (“FDIC-Corporate

and FDIC-Receiver are distinct entities.”) In Hartford Casualty Ins. Co. v.

F.D.I.C., the 5th Circuit held “under the dual capacities doctrine, the FDIC-

defendant’s first motion to dismiss for failure to state a claim.

See Rec. Doc. 34; see also Rec Doc. 21.

In March of 2016, plaintiff Lexon, as surety, executed eight

Bonds (“the Bonds”) on behalf of non-party Linder Oil that

secured offshore mineral leases with the United States

Department of Interior, Bureau of Ocean Energy Management

(“BOEM”). Rec. Doc. 43 at ¶ 10. As a condition of executing the

Bonds, Lexon required Linder to post collateral to secure Lexon’s

financial interest in the event that a claim was made under the

Bonds. Id. at ¶ 11. On March 24, 2016, First NBC Bank (“First

NBC”) issued two standby letters of credit (“SLOCs”) relating to

the Bonds issued by plaintiff Lexon. Id. at ¶ 11-12. The SLOCs,

by their own terms, expired on March 24, 2017, but would

automatically renew for a one-year period unless First NBC gave

plaintiff Lexon 60-days written notice of nonrenewal. Id. at ¶

14.

In late 2015, early 2016, prior to First NBC’s closing and

receivership, the FDIC-C and the Louisiana Office of Financial

Institutions (“LOFI”) began an examination of First NBC, which

uncovered “First NBC’s declining financial health.” Id. at ¶ 16.

On November 10, 2016, as a result of the examination, the FDIC,

C may not be held liable for acts committed by the FDIC-R, i.e., the FDIC

acting in one capacity is not subject to defenses or claims based on its acts

in other capacities.” Hartford Cas. Ins. Co. v. F.D.I.C., 21 F.3d 696, 706

(5th Cir. 1994). The current motion concerns actions allegedly taken by the

FDIC in their Corporate, pre-receivership capacity.

LOFI, and First NBC entered into a Consent Order (“the Consent

Order”). Id. at ¶ 18.2

As pertains to the instant issue before the court, the

Consent Order states in pertinent part:

(a) While this ORDER is in effect, the Bank [First NBC]

shall not extend, directly or indirectly, any additional

credit to or for the benefit of any borrower whose

existing credit has been classified Loss by the FDIC or

the State as the result of its examination of the Bank,

either in whole or in part, and is uncollected, or to

any borrower who is already obligated in any manner to

the Bank on any extension of credit, including any

portion thereof, that has been charged off the books of

the Bank and remains uncollected.

(b) While this ORDER is in effect, the Bank [First NBC]

shall not extend, directly or indirectly, any additional

credit to or for the benefit of any borrower whose

extension of credit is classified Doubtful and/or

Substandard by the FDIC or the State as the result of

its examination of the Bank, either in whole or in part,

and is uncollected, unless the Bank's Board has signed

a detailed written statement giving reasons why failure

to extend such credit would be detrimental to the best

interests of the Bank.

Id. Exhibit C, Consent Order, at p. 8, ¶ 4(a),(b). During the

effectiveness of the Consent Order, FDIC personnel were present

on-site at First NBC “from early 2016 until First NBC’s failure.”

Id. at ¶ 21. It is alleged in the complaint that the FDIC

personnel “would have actively participated in such meetings and

controlled, directly or indirectly, decisions about the day-to-

day management and affairs of First NBC.” Id.

2 The Consent Order is attached in its entirety to plaintiff’s amended

complaint (Rec. Doc. 43) as exhibit C.

After the Consent Order came into effect, First NBC failed

to send the required notice of nonrenewal regarding the SLOCs

before 60-day deadline, resulting in an extension of the SLOCs

through March of 2018. Id. at ¶ 26. Plaintiff Lexon alleges that

renewal of the SLOCs “caused Lexon to lose its right to the

collateral for the Bonds and its opportunity to mitigate any

losses, costs, and expenses incurred under the Bonds.” Id. at ¶

28. Plaintiff asserts that once defendant FDIC entered into the

Consent Order, “[1] the FDIC ha[d] a duty to mandate First NBC’s

observance and compliance with all of its terms and conditions,

including a duty to prohibit First NBC from extending additional

credit to Linder” and “negligently allowed First NBC to extend

the term of the SLOCs.” Id. at ¶ 25.

On April 25, 2018, Plaintiff filed a four-count complaint

against defendant the FDIC-R, seeking “damages of $9,985,500.00

resulting from the FDIC’s failure to honor, and improper

repudiation of, [the] two [SLOCs] issued by [First NBC].” Rec.

Doc. 1. Defendant moved to dismiss all claims for failure to

state a claim on July 2, 2018. See Rec. Doc. 21 at 1. That

motion was subsequently granted by this court, in favor of

defendant. See Rec. Doc. 34. An order was issued on September 7,

2018, dismissing Lexon’s claim without prejudice to Lexon’s

right to bring an amended complaint within forty (40) days from

the order. Id. at 6-7.

Thereafter, on January 18, 2019, Lexon filed an amended

five-count complaint against the FDIC-C and FDIC-R, again

seeking damages of $9,985,500.00. See Rec. Doc. 43. Defendant

FDIC then filed a motion to dismiss under FRCP 12(b)(6), which

was subsequently granted by this Court as to all claims against

defendant FDIC-R. See Rec. Doc. 79.

The current matter pertains only to the single remaining

cause of action asserted by plaintiff Lexon against defendant

United States of America, based on pre-receivership oversight

activity by the FDIC-C, pursuant to the Federal Tort Claims Act

(“FTCA”). Plaintiff brings their claim against the United States

as a defendant on behalf of the FDIC in their pre-receivership

corporate capacity (“FDIC-C”). Defendant moves to dismiss

plaintiff’s claim against the FDIC-C arising under the FTCA, for

lack of subject matter jurisdiction. Rec. Doc. 70 at 1.

LAW AND ANALYSIS

Rules 12(b)(1) and 12(h)(3) of the Federal Rules of Civil

Procedure govern dismissals for lack of subject matter

jurisdiction. “A case is properly dismissed for lack of subject

matter jurisdiction when the court lacks the statutory or

constitutional power to adjudicate the case. Home Builders Ass'n

of Miss., Inc. v. City of Madison, 143 F.3d 1006 (5th Cir.1998).

A motion to dismiss under Rule 12(b)(1) requires that the Court

only examine whether it has jurisdiction to hear the case; it does

not call for intrusion into the merits of the claim. Bell v. Hood,

327 U.S. 678, 682 (1946). Once the court determines that there is

a lack of subject matter jurisdiction, dismissal is appropriate.

A. Federal tort Claims Act (“FTCA”)

The United States is immune from suit except where expressly

provided by Congress. Under the Federal Tort Claims Act (“FTCA”),

suits against the United States are authorized “for injury or loss

of property, or personal injury or death caused by negligent or

wrongful act or omission of any employee of the Government while

acting within the scope of his office or employment, under

circumstances where the United States, if a private person, would

be liable to the claimant in accordance with the law of the place

where the act or omission occurred.” 28 U.S.C. § 2672. Johnson v.

Sawyer, 4 F.3d 369 (5th Cir. 1993) (“To recover under the FTCA,

[plaintiff] must have been able to succeed against the [federal]

government in a state law tort cause of action.” (emphasis in

original)). The FTCA also provides that the United States will be

liable in tort “in the same manner and to the same extent as a

private individual under like circumstances.” 28 U.S.C. § 2674.

Id. (citing Artez v. United States, 604 F.2d 417, 427 (5th

Cir.1979)). “[L]aw of the place,” as the phrase is used in 28

U.S.C. § 1346(b), “refers exclusively to state law.” Brown v.

United States, 653 F.2d 196, 201 (5th Cir. 1981).

B. Louisiana Civil Code Article 2315

The place of the act or omission in this case is Louisiana

and its law should apply. Plaintiff brings its claim pursuant to

Louisiana Civil Code Article 2315 (“Article 2315”), which states

in pertinent part: “Every act whatever of man that causes damage

to another obliges him by whose fault it happened to repair it.”

LA. CIV. CODE art. 2315. Article 2315 requires courts to undergo

a “duty-risk analysis” to determine tort liability for general

negligence. Alford v. Anadarko E&P Onshore LLC, No. 13-5457,

2015 WL 471596, at *11 (E.D. La. Feb. 4, 2015).

In Louisiana, under the duty-risk analysis, a plaintiff

must show five elements:

(1) the defendant had a duty to conform his conduct to

a specific standard of care . . . ; (2) the defendant's

conduct failed to conform to the appropriate standard

of care . . . ; (3) the defendant's substandard conduct

was a cause-in-fact of the plaintiff's injuries . .

.(4) the defendant's substandard conduct was a legal

cause of the plaintiff's injuries . . . and (5) actual

damages . . .

Id.

The threshold issue for determining liability in a

negligence action is “whether the defendant owed the plaintiff

a duty, and whether a duty is owed is a question of law.” Hanks

v. Entergy Corp., 2006-477, p. 21 (La. 12/18/2006); 944 So. 2d

564, 579; See also Carroll v. Am. Empire Surplus Lines Ins. Co.,

289 F. Supp. 3d 767 (E.D. La. Dec. 21, 2017) (“whether the

defendant owed the plaintiff a duty is a threshold issue in any

negligence action.”). The Eastern District has held, “[u]nder a

duty-risk analysis, absent a defendant owing a duty to the

plaintiff, there can be no actionable negligence and therefore

no liability.” Alford, No. 13-5457, 2015 WL 471596, at *11

(citing Lemann v. Essen Lane Daquiries, Inc., 2005-1095, at p.

7 (La. 3/10/06); 923 So. 2d 627, 633).

Defendant contends this Court lacks subject matter

jurisdiction over plaintiff’s claim against them pursuant to the

FTCA because there is “no tort duty that applies to an analogous

private person acting as the FDIC-C in like circumstances under

Louisiana Law.” Rec. Doc. 70-2 at 4. Plaintiff counters that the

FDIC-C owed a duty of care to plaintiff Lexon once it entered

into the Consent Order and “took control” of First NBC, to

exercise ordinary care in complying with the mandatory terms and

conditions of the Consent Order to “prevent forseeable injury to

stakeholders like Lexon. Rec. Doc. 73 at 6.

Initially, defendant notes a long-standing history of a

“no-duty” rule in the federal precedent surrounding this issue.

Courts in the Fifth Circuit, applying federal law, have regularly

held that the FDIC, and similar federal banking regulators, owe

no duty to a bank that is currently under their supervision, nor

do they assume a duty by undertaking said banking institution’s

supervision.3 However, the “no-duty rule” is mere lagniappe when

determining the central issue in this matter; namely, whether

the State law of Louisiana would impose a duty on the FDIC-C to

uphold the terms of the Consent Order.

Louisiana recognizes no private tort duty that is analogous

to the regulatory functions performed by the FDIC. Defendant

contends that there is no analogous private tort duty that would

be applicable to the FDIC-C because, “no private party provides

the exact sort of banking oversight the FDIC-C performs.” Rec.

Doc. 70-2 at 7. Defendant further avers that “the Supreme Court

has instructed lower courts to consider Good Samaritan liability

that could arise if a private party did undertake an analogous

function under state law.” Id. (citing United States v. Olson,

546 U.S. 43, 45-47 (2005). Plaintiff counters that Louisiana

“has adopted a broader and more flexible view of assumed duties

of ordinary care than described in Section 324A [stating the

test for Good Samaritan liability]” and “while ‘Good Samaritan’

liability is a species of assumed duty recognized under Louisiana

3 Fed. Sav. & Loan Ins. Corp. v. Shelton, 789 F. Supp. 1367, 1369 (M.D. La.

1992) (“It is clear that the FDIC owes no duty to manage a bank or to bring

to the attention of its officers and directors any wrongdoing during its

regulatory activities.”)(emphasis added); see also FSLIC v. Derbes, No. 86-

2764, 1986 WL 432, at *2, n.1 (E.D. La. Nov. 13, 1986)(citing First State

Bank of Hudson County v. United States, 599 F.2d 558, 562-63 (3rd Cir. 1979);

Harmsen v. Smith, 586 F.2d 156, 158 (9th Cir. 1978))(holding that a federal

regulatory institution, similar to the FDIC “does not, by merely undertaking

regulation and supervision of financial institutions, assume a duty to one

who is injured by the unlawful practices of a regulated institution.”).

law, it does not limit the general rule . . .” Rec. Doc. 73 at

9. This Court disagrees with plaintiff’s contentions.

In Olson, the Supreme Court of the United States noted that

the FTCA makes the United States liable “‘in the same manner and

to the same extent as a private individual under like

circumstances.’” Olson, 546 U.S. at 46 (emphasis in

original)(quoting 28 U.S.C. § 2674). The Supreme Court held that

the term “like circumstances” does not constrict a court’s

analysis to the “same circumstances, but requires it to look

further afield.” Id. at 46. The decision then instructs lower

courts to apply Good Samaritan analogies when deciphering the

FTCA. Id. As an example, the Court opined: “Private individuals,

who do not operate lighthouses, nonetheless may create a

relationship with third parties that is similar to the

relationship between a lighthouse operator and a ship dependent

on the lighthouse’s beacon. Id. (citing Indian Towing Co. v.

United States, 350 U.S. 61, 64-65 (1955).

Louisiana has adopted the standard for Good Samaritan

liability from the RESTATEMENT (SECOND) OF TORTS § 324A (1965). Bujol

v. Entergy Servs., Inc., 2003-0492, pp. 14-15 (La. 5/25/04); 922

So. 2d 1113, 1128-29; see also Hebert v. Rapides Par. Police

Jury, 2006-2001, pp. 9-10 (La. 4/11/07); 974 So. 2d 635, 643-

44; Section 324A states:

One who undertakes, gratuitously or for consideration,

to render services to another which he should

recognize as necessary for the protection of a third

person or his things, is subject to liability to the

third person for physical harm resulting from his

failure to exercise reasonable care to protect his

undertaking, if (a) his failure to exercise reasonable

care increases the risk of such harm, or (b) he has

undertaken to perform a duty owed by the other to the

third person, or (c) the harm is suffered because of

reliance of the other or the third person upon the

undertaking.

RESTATEMENT (SECOND) OF TORTS § 324A (1965)(emphasis added).

Defendant contends that plaintiff Lexon cannot establish

liability under the Good Samaritan doctrine because: (1) Lexon’s

amended complaint does not allege physical harm; (2) Lexon does

not allege that their risk was increased by executing the Consent

Order; and (3) the terms of the Consent Order do not impose a

duty on the FDIC-C to approve or deny additional credit. Rec.

Doc. 70-2 at 7, 8, 9.

In opposition, plaintiff cites two cases that purportedly

stand for the proposition that defendant FDIC-C assumed a duty

to abide by the terms of the Consent Order to plaintiff Lexon by

entering into the Consent Order. Id. at 8. This Court declines

plaintiff’s invitation to find that defendant FDIC-C assumed or

owed a duty of care to plaintiff Lexon, the surety for a borrower

of a banking institution under regulation by the FDIC-C.

First, Plaintiff cites Holthaus v. Cameron Brown Co., where

a plaintiff borrower sued a defendant lender for failing to

“lock-in” the interest rate on a loan after giving assurances

that it would. See Holthaus v. Cameron Brown Co., 491 So. 2d 443

(La. Ct. App. 1st. Cir. 1986). In Holthaus, Louisiana’s First

Circuit Court of Appeal held that the defendant had breached the

duty owed to the plaintiff by failing to “lock-in” an interest

rate for a loan at a 12.5% interest rate. Id. at 444. The court

stated that although the defendant had no general duty to provide

an interest rate of 12.5% to plaintiff, defendant’s assurance

that it would “lock-in” the interest rate caused defendant to

“assume[] a duty . . . to plaintiff, to use due care to do so.”

Id. (citing W. PROSSER, HANDBOOK OF THE LAW OF TORTS, at 345 (4th ed.

1971).

Holthaus is factually distinct from the current case.

Defendant FDIC-C and plaintiff Lexon, unlike the plaintiff and

defendant in Holthaus, did not have a lending or business

relationship. The lending relationship was between First NBC and

Linder Oil Company (“Linder”), while Lexon was merely a surety

for Linder, as agreed between those parties. The FDIC-C never

had an agreement with plaintiff Lexon and therefore could not

have assumed a duty, nor did it give assurances or promises to

Lexon in any way. Further, the crux of the Holthaus decision was

that plaintiff acted in reliance on the “locked-in” language

presented by the defendant. The court held that “the risk that

resulted was encompassed within the scope of protection of the

duty, for it was specifically to plaintiff that defendant

extended the assurance, and it was reasonably foreseeable that

plaintiff would rely on the strong, ‘locked-in’ language.” See

Holthaus, 491 So. 2d at 444 (citing Sibley v. Gifford Hill and

Co., Inc. 475 So. 2d 315, 319 (La. 1985). As stated above, there

were no assurances made by the FDIC-C to Lexon, rather there was

an agreement and lending relationship between First NBC and

Linder, which Lexon was not privy to. Lexon merely acted as

surety for Linder, who obtained SLOCs from First NBC to satisfy

the collateral requirement for their separate suretyship

agreement.

Plaintiff’s second case, Slaid v. Evergreen Indem., Ltd.,

is similarly misplaced. In Slaid, the purchaser of a mobile home

brought an action in negligence against the bank that sold and

inspected the mobile home for injuries sustained as the result

of a Christmas tree fire. Slaid v. Evergreen Indem., Ltd., 32,363

(La. Ct. App. 2d Cir. 1999); 745 So. 2d 793. The court noted

that the bank had “no legal duty to inspect the home for inherent

vices or defects prior to the sale, [but] once it undertook this

task through [the bank’s] inspection, it assumed a duty to

perform the inspection in a non-negligent manner.” Id. at p. 10;

799.

Defendant further notes that the court applied Good

Samaritan liability to the facts of the case, without naming it

as such, when it cited the Second Restatement of Torts Section

324A. Id. at P. 7; 798. Further, Slaid analyzed the assumed duty

with respect to physical injuries sustained as a result of the

negligent inspection, namely the death and “disfiguring third

degree burns” of two persons trapped within the mobile home

resulting from a Christmas tree fire. Id. at p. 2; 795. The case

does not stand for the proposition that a regulatory body, such

as the FDIC-C, is in any way liable to a third-party surety, for

potential economic losses resulting from the renewal of a

standard letter of credit in defiance of a Consent Order.

Plaintiff has failed to show that defendant FDIC-C owes a

duty of care to plaintiff Lexon, and further fails to offer

support that there is an analogous tort duty applicable to the

FDIC-C under Good Samaritan liability, as instructed by the

Supreme Court of the United States. As it is clear that plaintiff

has failed to show that this Court has subject matter

jurisdiction over this state court claim, pursuant to the FTCA,

this court finds no need to delve further into the merits of

this matter and discuss the discretionary function exception to

the FTCA.

New Orleans, Louisiana this 28th day of February, 2020.

___________________________________

SENIOR UNITED STATES DISTRICT JUDGE