Damiano v. Federal Deposit Insurance

United States Court of Appeals,

Eleventh Circuit.

No. 94-4947.

Irene J. DAMIANO, Plaintiff-Appellant,

v.

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Amerifirst

Bank, A Federal Savings Bank, successor in interest to Amerifirst

Federal Savings and Loan Association, Defendant-Appellee.

Jan. 29, 1997.

Appeal from the United States District Court for the Southern

District of Florida. (No. 90-8415 CIV-DLG) Donald L. Graham, Judge.

Before EDMONDSON and BIRCH, Circuit Judges, and FOREMAN*, Senior

District Judge.

BIRCH, Circuit Judge:

This appeal presents the first impression issue in our circuit

of whether the plaintiff in a pre-receivership lawsuit must file an

administrative claim with the federal receiver of a failed

financial institution pursuant to the Financial Institutions

Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L.

No. 101-73, 103 Stat. 183 (codified as amended in scattered

sections of 12 U.S.C.) when the receiver did not timely require

exhaustion of administrative remedies. The district court held

that it lacked subject matter jurisdiction over this

pre-receivership lawsuit and dismissed the case. Because we hold

that the receiver did not stay the action within ninety days of its

appointment as receiver and, thus, did not timely require

exhaustion of administrative remedies, we VACATE the district

*

Honorable James L. Foreman, Senior U.S. District Judge for

the Southern District of Illinois, sitting by designation.

court's dismissal and REMAND for further proceedings.

I. BACKGROUND

On September 27, 1990, plaintiff-appellant Irene J. Damiano

brought this action against her former employer, Amerifirst Federal

Savings and Loan Association ("Amerifirst"), for age discrimination

under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C.

§§ 621-634. After the district court denied Amerifirst's motion to

dismiss for failure to state a claim, Amerifirst filed an answer on

February 27, 1991. Less than three weeks later, on March 15, 1991,

Amerifirst was declared insolvent and the Resolution Trust

Corporation ("RTC") was appointed its receiver.1 On April 10,

1991, the RTC filed a motion to be substituted as the party

defendant in this case.

On March 24, 1991, the RTC published a notice to claimants in

local newspapers setting out an administrative claim procedure for

the winding down of Amerifirst pursuant to FIRREA, 12 U.S.C. §

1821(d)(3)(B).2 The notice advised Amerifirst's creditors that

1

On December 31 1985, the RTC dissolved and the Federal

Deposit Insurance Corporation ("FDIC") succeeded to the RTC as

receiver. 12 U.S.C. § 1441a(m). To avoid confusion, however, we

will consistently refer to the receiver as the RTC in this

opinion.

2

Section 1821(d)(3)(B) provides:

(B) Notice Requirements

The receiver, in any case involving the

liquidation or winding up of the affairs of a closed

depository institution shall—

(i) promptly publish a notice to the depository

institution's creditors to present their claims,

together with proof, to the receiver by a date

specified in the notice which shall not be less than 90

days after the publication of such notice; and

they should file their claims with the RTC at its claims department

in Tampa, Florida, within ninety days of the notice publication

(i.e., before June 22, 1996). The RTC, however, did not mail the

notice to Damiano or her lawyer as required by § 1821(d)(3)(C).3

(ii) republish such notice approximately 1 month

and 2 months, respectively, after the publication under

clause (i).

12 U.S.C. § 1821(d)(3)(B). The RTC complied with the

republication requirements of clause (ii).

3

Section 1821(d)(3)(C) provides:

(C) Mailing Required

The receiver shall mail a notice similar to the

notice published under subparagraph (B)(i) 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 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.

21 U.S.C. § 1821(d)(3)(C). Damiano was a known creditor to

the RTC by virtue of her pending suit and as evidenced by

the fact that the RTC substituted itself as party defendant

in April 1991.

Although Damiano mentioned in her brief that she did

not receive a mailed notice of the RTC's claims process, she

did not argue that the RTC's failure excused her from

exhausting her administrative remedies. See Greater Slidell

Auto Auction v. American Bank & Trust Co., 32 F.3d 939, 942

(5th Cir.1994) (holding "that failure to provide [the

plaintiffs] notice by mail violates their right to due

process")(citing Mullane v. Central Hanover Bank & Trust

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

865 (1950)); Whatley v. RTC, 32 F.3d 905, 910 n. 1 (5th

Cir.1994) (Duhé, J., concurring) (suggesting "that the

receiver's very authority to determine claims

[administratively] hinges on its compliance with the notice

requirements"). Therefore, we do not address these

arguments. We find it necessary, nonetheless, to correct

the RTC's apparent ignorance of its statutory duties in this

Damiano did not comply with the administrative claim procedure

described in the RTC's notice. She did, however, contact opposing

counsel on several occasions in an effort to resolve her lawsuit

out of court. Damiano first sent a settlement proposal to

Amerifirst's counsel, David Rogero, on January 18, 1991. On March

28, 1991, Damiano sent a second letter to Rogero to confirm a

telephone conversation which took place on March 20, 1991, and

offered to provide any additional information that Rogero's

"client" (the RTC at that time, arguably) might require to review

the settlement proposal adequately. Rogero responded on April 11,

1991, and informed Damiano that the RTC had taken over Amerifirst

and that he could not predict when the RTC would review and respond

to her settlement proposal. Rogero later withdrew as defense

counsel in November 1991.

After the claims bar date of June 22, 1991 passed, Damiano was

informed that the RTC retained Jesse McCrary as its new counsel in

connection with her lawsuit. Damiano sent a letter to McCrary on

August 6, 1991, in which she reiterated her settlement proposal.

She sent another letter to McCrary on October 9, 1991, to discuss

case. The RTC boldly stated in its motion to dismiss filed

with the district court that

[n]otwithstanding any suggestion to the contrary ...,

it is not the RTC's burden to assure itself that

potential claimants find and follow the correct

administrative procedures. Rather, it is incumbent

upon would-be claimants and their legal counsel to

ascertain and comply with the necessary filing

requirements, as the first step in "exhausting

administrative remedies."

R1-45-7 (emphasis added). This statement is flatly

contradicted by the mandatory language of § 1821(d)(3)(C).

the trial schedule.

On November 21, 1991, the RTC filed a motion to dismiss or,

alternatively, for a stay pending exhaustion of administrative

remedies. Damiano failed to respond to this motion and, on

November 19, 1992, the district court dismissed the case without

prejudice because it did not know whether Damiano had attempted to

comply with the administrative process. Damiano filed a motion for

reconsideration and for reinstatement of the action on December 28,

1992. The district court granted Damiano's motion and reinstated

the action on April 8, 1993.4 On February 25, 1994, the court

placed the case on the trial calendar for June 27, 1994. The RTC

filed a new motion to dismiss for lack of subject matter

jurisdiction on June 16, 1994.

The district court dismissed the case. Citing Brady

Development v. RTC, 14 F.3d 998, 1006 (4th Cir.1994) and RTC v.

Mustang Partners, 946 F.2d 103, 106 (10th Cir.1991), the court held

4

The RTC argues on appeal that the district court lacked

subject matter jurisdiction to consider Damiano's motion because

it should be deemed a motion to alter or amend judgment which was

untimely under Fed.R.Civ.P. 59(e). See Hertz Corp. v. Alamo

Rent-A-Car, Inc., 16 F.3d 1126, 1129 (11th Cir.1994) (holding

that the district court lacked subject matter jurisdiction over a

motion to alter or amend judgment filed more than ten days after

entry of the final judgment in violation of the time limitation

of Rule 59(e)). We reject the RTC's argument because we conclude

that the district court could have treated Damiano's motion as a

motion for relief from judgment under Rule 60(b)(6), for which

there is no strict time limitation of a jurisdictional nature.

See Nisson v. Lundy, 975 F.2d 802, 806 (11th Cir.1992). Unlike

the motion at issue in Hertz, which asked the court to amend a

judgment of dismissal without prejudice to a dismissal with

prejudice, Damiano's motion squarely asked the court to relieve

it from the judgment in the interest of justice. The district

court accepted Damiano's explanation for failing to respond to

RTC's motion and reinstated the action. The district court did

not abuse its discretion in doing so.

that FIRREA created a mandatory administrative exhaustion

requirement for all claims, including those asserted in a

pre-receivership lawsuit. The court then found that Damiano's

correspondence with opposing counsel did not constitute compliance

with the administrative claims procedures set out in the RTC's

published notices5 and, thus, concluded that Damiano forfeited her

claim by failing to exhaust her administrative remedies. This

appeal followed.

II. DISCUSSION

We review de novo the district court's dismissal of the

action for lack of subject matter jurisdiction and its

interpretation of the statute. Sims v. Trus Joist MacMillan, 22

F.3d 1059, 1060 (11th Cir.1994). Damiano argues on appeal that the

RTC has elected to proceed with her claim judicially, rather than

administratively, by failing to timely request a stay of her

lawsuit pending exhaustion of the administrative process.6 See

5

The court ruled that: (1) Damiano's letter dated January

18, 1991, was sent before the RTC became receiver and therefore

could not qualify as an administrative claim; (2) Damiano's

letters dated August 6, 1991 and October 9, 1991 were both sent

after the claims bar date of June 22, 1991 and thus were

untimely; and (3) Damiano's March 28, 1991 letter, which

happened to have been sent within the administrative claims

period, "was merely a letter from Damiano's counsel to

Amerifirst's counsel discussing prior settlement offer

[and,therefore,] ... was not a claim sent to the address

specified in the published notices." R1-62-5.

6

The RTC urges us not to consider Damiano's statutory

argument because she raises it for the first time on appeal. The

principle, however, that an appellate court generally does not

consider arguments that were not presented to the trial court,

RTC v. Dunmar Corp., 43 F.3d 587, 598 (11th Cir.), cert. denied,

--- U.S. ----, 116 S.Ct. 74, 133 L.Ed.2d 33 (1995), is a rule of

practice, not a jurisdictional limitation. Dean Witter Reynolds,

Inc. v. Fernandez, 741 F.2d 355, 360 (11th Cir.1984). "[T]he

decision whether to consider an argument first made on appeal ...

Whatley v. RTC, 32 F.3d 905 (5th Cir.1994). We agree.

FIRREA is a complex statute.7 Understanding the process that

§ 1821(d) established for the liquidation of failed financial

institutions requires careful parsing through its myriad subparts.

Our previous review of the statutory scheme led us to conclude that

FIRREA created a statutory exhaustion requirement that generally

applies to postreceivership as well as pre-receivership claims.

Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A., 39 F.3d

is left primarily to the discretion of the courts of appeals, to

be exercised on the facts of individual cases." Id. (internal

quotations and citations omitted) (omission in original). We

have identified certain exceptional circumstances under which we

will consider arguments first raised on appeal. See id. at 360-

61. Among them, we "will "consider an issue not raised in the

district court if it involves a pure question of law, and if

refusal to consider it would result in a miscarriage of justice.'

" id. (quoting Roofing & Sheet Metal Serv. v. La Quinta Motor

Inns, 689 F.2d 982, 989 (11th Cir.1982)). Damiano's argument

involves statutory interpretation, a pure question of law.

Moreover, we consider the dismissal of her potentially

meritorious complaint because she did not comply with an

administrative procedure of which she was not aware due to the

RTC's failure to notify her as required by statute to be a

miscarriage of justice. Therefore, we will exercise our

discretion and consider the argument.

7

The First Circuit described FIRREA as follows:

FIRREA's text comprises an almost impenetrable

thicket, overgrown with sections, subsections,

paragraphs, subparagraphs, clauses, and subclauses—a

veritable jungle of linguistic fronds and brambles. In

light of its proxility and lack of coherence, confusion

over its proper interpretation is not only

unsurprising—it is inevitable.

.... Section 1821(d) ... is a relatively small

piece of the statutory puzzle—but one which exemplifies

the larger interpretive problem: section 1821(d) is

comprised of nineteen separately numbered fascicles,

most with myriad subparts, occupying seven pages of the

United States Code. It is, in short, an avalanche of

words.

Marquis v. F.D.I.C., 965 F.2d 1148, 1151 (1st Cir.1992).

292, 296 & n. 4 (11th Cir.1994) (collecting cases), vacated for

reh'g en banc, 58 F.3d 589 (1995), reinstated in part, 83 F.3d

1317, 1323 n. 3 (1996) (en banc) (reinstating the relevant part of

the first opinion in which the panel construed the administrative

exhaustion requirement of FIRREA); see also Aguilar v. F.D.I.C.,

63 F.3d 1059, 1061 (11th Cir.1995) (per curiam) (recognizing that

FIRREA's administrative exhaustion requirement applies generally to

all claims against an institution in federal receivership). The

statute deals, however, with pre-receivership lawsuits differently

from post-receivership claims as it established "a separate scheme

... for the disposition of lawsuits filed pre-receivership."

Whatley, 32 F.3d at 908 (5th Cir.1994) (footnote and citations

omitted); see also Aguilar, 63 F.3d at 1061-62 (explaining the

applicability of the exhaustion requirement to pre-receivership

lawsuits) (citing Whatley, 32 F.3d at 907-08).

For post-receivership claims, the court has no subject matter

jurisdiction unless the claimant has exhausted the administrative

remedies. See 12 U.S.C. § 1821(d)(13)(D)8; McMillian v. F.D.I.C.,

81 F.3d 1041, 1045 (11th Cir.1996) (involving a post-receivership

8

Section 1821(d)(13)(D) provides:

Except as otherwise provided in this subsection

[1821(d) ], 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 [RTC] has been appointed receiver ...; or

(ii) any claim relating to any act or omission of

such institution or the [RTC] as receiver.

12 U.S.C. § 1821(d)(1)(D).

employee claim). The statutory scheme is more complex for claims

asserted in pre-receivership lawsuits. Subject matter jurisdiction

is ordinarily tested as of the time of filing the complaint. Lujan

v. Defenders of Wildlife, 504 U.S. 555, 569 n. 4, 112 S.Ct. 2130,

2141 n. 4, 119 L.Ed.2d 351 (1992); Rosa v. RTC, 938 F.2d 383, 392

n. 12 (3d Cir.), cert. denied, 502 U.S. 981, 112 S.Ct. 582, 116

L.Ed.2d 608 (1991). Therefore, courts in which lawsuits were

pending when the RTC is appointed receiver remain vested with

jurisdiction. Whatley, 32 F.3d at 907. This is confirmed by the

statute's reference to the continuation, as opposed to the

reinstatement, of pre-receivership lawsuits after the appointment

of the receiver. See 12 U.S.C. § 1821(d)(5)(F)(ii). 9 Moreover,

the statute does not provide for an automatic stay of all

pre-receivership actions, pending exhaustion of the administrative

process. Cf. 11 U.S.C. § 362(a)(1) (automatic stay for all pending

lawsuits against debtor who files for bankruptcy). It specifically

gives the receiver the right, but not the duty, to stay a pending

action within the first ninety days of being appointed as a

receiver. 12 U.S.C. § 1821(d)(12); see Praxis Properties, Inc. v.

Colonial Sav. Bank, 947 F.2d 49, 71 (3d Cir.1991).

There are two possible explanations for the absence of an

9

12 U.S.C. § 1821(d)(5)(F)(ii) provides:

Subject 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 receiver.

12 U.S.C. § 1821(d)(5)(F)(ii) (emphasis added). Paragraph

(12) allows the RTC to request a ninety-day stay in the

litigation after its appointment as a receiver and requires

the court to grant such stay. 12 U.S.C. § 1821(d)(12).

automatic stay provision in FIRREA: either Congress intended for

the judicial and administrative processes to run concurrently; or

it intended to give the receiver the discretion of deciding whether

to require the claimant to exhaust its administrative remedies or

to allow the suit to proceed judicially. The first explanation is

inconsistent with FIRREA's aim of the "expeditious[ ] and fair[ ]"

resolution of claims against failed financial institutions in

federal receivership and its concern for conserving judicial

resources. See H.R.Rep. No. 54(I), 101st Cong., 1st Sess. 419

10

(1989) U.S.Code Cong. Admin.News pp. 86, 215. The second

explanation is supported both by the legislative history and the

language of the statute. The drafters of FIRREA explained that the

purpose of "the stay [is to] give[ ] the [receiver] a chance to

analyze pending matters and [to] decide how best to proceed."

H.R.Rep. No. 54(I), at 331, 1989 U.S.Code Cong. & Admin.News pp.

86, 127 (emphasis added). Section 1821(d)(3)(A), which sets out

the receiver's authority to determine claims administratively, does

not require the receiver to subject all claimants to the

administrative process. Instead, it is permissive, providing that

10

The House report explains the purpose of FIRREA's

administrative procedure as follows:

The claims determination procedure ... enables the FDIC

[or RTC] to dispose of the bulk of claims against

failed financial institutions expeditiously and

fairly.... Thus, the claim resolution process

established in this section should allow the FDIC [or

RTC] to quickly resolve many of the claims against

failed financial institutions without unduly burdening

the District Courts.

H.R.Rep. No. 54(I), at 419, U.S.Code Cong. & Admin. News

1989, p. 215.

the RTC "may, as receiver, determine claims in accordance with the

requirements of this subsection [1821(d) ]." 12 U.S.C. §

1821(d)(3)(A) (emphasis added).11 We conclude that Congress

intended for the receiver to decide whether to "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, 32 F.3d at 908.

The procedure that we have described above is consistent with

the two cases involving pre-receivership lawsuits previously

decided by this circuit.12 Both in Motorcity and Aguilar, the

receiver requested a stay pending the submission by the plaintiff

of an administrative claim. See Aguilar, 63 F.3d at 1061;

Motorcity, 39 F.3d at 295. In Aguilar, we stated: "Where a

11

The use of the permissive "may" both in sections

1821(d)(3)(A) and 1821(d)(12) stands in stark contrast to the

many other instances in section 1821(d) where a mandatory "shall"

is used. See, e.g., 12 U.S.C. §§ 1821(d)(3)(B), (C).

12

The RTC contends that Whatley 's result, which we adopt

here, is contrary to the cases relied upon by this court in

Motorcity, 39 F.3d at 296 n. 4. None of these cases, however,

considered the specific question of statutory interpretation that

we have considered here. Only the Ninth Circuit has considered

Whatley 's result. Without evaluating Whatley 's reasoning in

detail, the Ninth Circuit rejected its result because it

conflicts with that court's interpretation of the claims bar date

set out in the receiver's published notices as a jurisdictional

requirement. See Intercontinental Travel Mktg. v. F.D.I.C., 45

F.3d 1278, 1284 (9th Cir.1994). This interpretation stems from §

1821(d)(5)(C)(i), which provides that, except in certain narrow

circumstances (not applicable here), "claims filed after the date

specified in the notice published under paragraph (3)(B)(i) shall

be disallowed and such disallowance shall be final." 12 U.S.C. §

1821(d)(5)(C)(i). Our holding, however, is that Damiano is not

required to file an administrative claim at all, not that the RTC

must consider an untimely claim. Therefore, our holding is not

inconsistent with § 1821(d)(5)(C)(i).

lawsuit against a financial institution is pending when the [RTC]

is appointed receiver and the [RTC] timely insists on the use of

its administrative processes, the court action will be suspended,

but only suspended[,] ... while the plaintiff exhausts the

administrative remedies." 63 F.3d at 1061 (emphasis added). Thus,

the RTC must satisfy two conditions to require the plaintiff in a

prereceivership lawsuit to exhaust its administrative remedies

before continuing the action: (1) The RTC must "insist on the use

of its administrative processes," by staying the action and

informing the plaintiff that it is doing so pending exhaustion of

the administrative remedies,13 and (2) it must do so in a timely

fashion, that is within the ninety-day period specified in §

1821(d)(12).

13

The RTC also should fulfill its statutory duty of mailing

a copy of the published notice setting out the administrative

claims process and the claims bar date to the plaintiff. See 12

U.S.C. § 1821(d)(3)(C). Failure to do so raises serious

constitutional concerns regarding the sufficiency of notice under

the Due Process Clause, see Freeman v. F.D.I.C., 56 F.3d 1394,

1403 (D.C.Cir.1995), even if the plaintiff knew that the failed

financial institution it previously sued is now in federal

receivership. Cf. Mennonite Bd. of Missions v. Adams, 462 U.S.

791, 800, 103 S.Ct. 2706, 2712, 77 L.Ed.2d 180 (1983) (holding

that "a mortgagee's knowledge of [a mortgagor's] delinquency in

the payment of taxes is not equivalent to notice that a tax sale

is pending" and thus does not relieve the government from the

requirement of mailing such notice to the mortgagee); City of

New York v. New York, N.H. & H.R. Co., 344 U.S. 293, 297, 73

S.Ct. 299, 301, 97 L.Ed. 333 (1953) (holding that, under the old

bankruptcy code, a creditor who knew that the debtor commenced

bankruptcy proceedings was not under a duty to inquire about the

claims bar date established by the bankruptcy court and was,

thus, entitled "to assume that the statutory "reasonable notice'

will be given them before their claims are forever barred");

Spring Valley Farms, Inc. v. Crow (In re Spring Valley Farms,

Inc.), 863 F.2d 832, 835 (11th Cir.1989) ("The language in City

of New York clearly is not grounded in goals unique to the former

bankruptcy act. The Court's emphasis on notice and opportunity

to be heard underlines a due process concern.").

Although the RTC filed a motion to be substituted as the party

defendant in Damiano's suit less than one month after its

appointment as Amerifirst's receiver, it did not request a stay

pending the exhaustion of administrative remedies until November

21, 1991, more than eight months, or about 240 days, after its

appointment as a receiver. Therefore, it has elected to proceed

with this lawsuit judicially by failing to timely insist on the use

of its administrative processes.14 To hold otherwise would be to

allow the RTC to ignore a lawsuit of which it clearly was aware and

in which it had intervened, thus luring the claimant to assume that

the RTC is ready to deal with it as a litigant, while "[i]n

reality, ... the receiver lies in ambush, awaiting expiration of

the administrative deadline so that it may dispose of the claim

without consideration of its merits." Whatley, 32 F.3d at 908.

Like the Fifth Circuit, "[w]e neither find nor assign any such

intent to Congress in its enactment of FIRREA." Id.

III. CONCLUSION

Damiano appeals the district court's dismissal of her lawsuit

for lack of subject matter jurisdiction. The district court held

that Damiano forfeited her pre-receivership claim against a failed

financial institution in federal receivership by failing to exhaust

her administrative remedies. Because the RTC did not timely

request a stay of the action within ninety days of its appointment

as receiver, it has elected to allow Damiano's suit to proceed

14

Because we conclude that the RTC elected to proceed with

Damiano's suit judicially, we need not review the district

court's ruling that Damiano's correspondence with opposing

counsel during the claims period did not constitute compliance

with FIRREA's administrative process, see supra note 5.

judicially. We therefore VACATE the district court's judgment and

REMAND for further proceedings consistent with this opinion.