Veluchamy v. Federal Deposit Insurance

In the

United States Court of Appeals

For the Seventh Circuit

No. 10-3879

P ETHINAIDU V ELUCHAMY, et al.,

Plaintiffs-Appellants,

v.

F EDERAL D EPOSIT INSURANCE C ORP., in its capacity

as receiver for Mutual Bank, Harvey, Illinois, and

in its corporate capacity,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 10 C 648— William J. Hibbler, Judge.

A RGUED N OVEMBER 2, 2012—D ECIDED F EBRUARY 4, 2013

Before M ANION, W ILLIAMS, and H AMILTON, Circuit Judges.

W ILLIAMS, Circuit Judge. Plaintiffs, members of the

Veluchamy family and the Veluchamy Family Founda-

tion, controlled Mutual Bank. In an effort to save the

bank from insolvency and at the request of FDIC-Corpo-

rate, they raised about $30 million mostly in the form

of note purchases. But after that money was raised in

2 No. 10-3879

2008, FDIC-Corporate requested another $70 million to

keep the bank open, and Plaintiffs were not able to get

that funding. In May and June 2009, regulators issued

warnings that the bank would soon go under without

more capital. On July 1, 2009, the board of Mutual Bank

voted to redeem the $30 million in notes and convert

the proceeds into personal deposit accounts belonging to

two of the Veluchamys, essentially returning their

money, but this transaction could not occur without

the approval of FDIC-Corporate. See 12 U.S.C. § 1821(i).

Thirty days later, without a response from FDIC-Corpo-

rate, the bank was declared insolvent, and the FDIC was

appointed as the receiver of the bank. FDIC-Receiver

moved quickly to arrange with United Central Bank

to assume the bank’s deposits, and Mutual Bank’s

branches opened as branches of United Central Bank the

next day. Plaintiffs then filed proofs of claim with FDIC-

Receiver seeking to redeem the notes and convert the

proceeds into personal deposit accounts so that

they could obtain depositor-level (i.e., high) priority

in the post-insolvency distribution scheme, but FDIC-

Receiver did not allow the claims.

Plaintiffs brought an Administrative Procedure Act

(“APA”) claim against FDIC-Corporate, alleging that

they had been (1) misled into investing $30 million into

the bank and (2) prevented from getting their money

back on the eve of insolvency. The district court dis-

missed this claim as moot, but we dismiss on different

jurisdictional grounds. This claim asserts that FDIC-Corpo-

rate’s failure to approve the note redemption caused

Plaintiffs injury, and that FDIC-Corporate should com-

No. 10-3879 3

pensate them for that injury in the form of cash and the

use of the FDIC’s own funds to create personal deposit

accounts for them. But this request for substitute mon-

etary relief constitutes a request for “money damages,”

which the APA does not authorize. See 5 U.S.C. § 702.

In addition, Plaintiffs asserted APA and Financial

Institutions Reform, Recovery and Enforcement Act

(“FIRREA”) claims against FDIC-Receiver for rejecting

their proofs of claim. The district court’s dismissal of

these claims was proper. We lack jurisdiction to con-

sider Plaintiffs’ APA claim against FDIC-Receiver

because 12 U.S.C. § 1821(d)(7)(A) only permits such a

claim if Plaintiffs first seek administrative review of

the disallowance, which they did not. And Plaintiffs’

FIRREA claim essentially challenges the FDIC’s regula-

tory decision not to act on the bank’s redemption

approval request, when FIRREA’s administrative claims

process only contemplates claims premised on the acts

of the bank, not the FDIC as regulator. Therefore we affirm.

I. BACKGROUND

Because this case is considered on a motion to dismiss

for failure to state a claim, we assume the facts alleged

in the complaint to be true. No evidence outside the

pleadings was submitted with respect to the jurisdic-

tional arguments, so the jurisdictional analysis also as-

sumes those facts to be true. See Alicea-Hernandez v.

Catholic Bishop of Chi., 320 F.3d 698, 701 (7th Cir. 2003).

The Federal Deposit Insurance Corporation (“FDIC”) is

most typically known as the federal agency that insures

4 No. 10-3879

the accounts of a bank’s depositors, but it also serves as

a bank overseer and regulator. See FDIC v. Ernst & Young

LLP, 374 F.3d 579, 581 (7th Cir. 2004). And when an

insured bank fails, the FDIC acts in a receiver capacity,

stepping into the shoes of the failed bank much like

a trustee in bankruptcy. Id. As receiver, the FDIC

attempts to preserve or enhance the value of the

bank’s assets and to dispose of them as quickly as

possible, protecting depositors and maintaining

confidence in the banking system. The parties

refer to the FDIC acting in its regulatory capacity as

“FDIC-Corporate,” and in its receiver capacity as “FDIC-

Receiver,” and so do we.

Plaintiffs Pethinaidu Veluchamy, Parameswari

Veluchamy, Arun K. Veluchamy, Anu Veluchamy, and

the Veluchamy Family Foundation, a family foundation

established by the individual plaintiffs, collectively

own 93.2% of First Mutual Bancorp of Illinois, Inc., a

holding company that was the sole owner of Mutual

Bank at Harvey, Illinois, a state-chartered bank (the

“Bank”). In 2007 and prior to June 2008, the Bank’s

capital category was “well capitalized,” the highest and

best level of capitalization that an FDIC-insured bank

may have. See 12 U.S.C. § 1831o(b)(1).

However, after the Bank’s June 2008 call report (a

report on the financial conditions of a bank submitted

quarterly to the FDIC, see 12 U.S.C. § 1817), FDIC-Corpo-

rate notified the Bank that its capital category was down-

graded to “adequately capitalized,” and that it would

need an additional $30 million of capital in order to be

No. 10-3879 5

restored to “well capitalized” status. Plaintiffs met

this requirement before the next call report was due in

September 2008, arranging for the purchase of millions

of dollars of notes from the Bank and additional shares

of First Mutual, among other actions. Most of the

$30 million infusion through note purchases came from

Plaintiffs themselves. After FDIC-Corporate reviewed

these transactions in September 2008, the Bank’s “well

capitalized” status was restored.

According to Plaintiffs’ depiction of events, the rug

was soon pulled out from under them through a series of

tag-team regulatory actions by FDIC-Corporate and

the Illinois Department of Financial and Professional

Regulation (the “IDFPR”), which regulates state-chartered

banks, over the next several months. On December 30,

2008, without any further examination of the Bank, the

IDFPR and FDIC-Corporate ordered the Bank to develop

an acceptable “Capital Plan” within 60 days (the reasons

for this are not alleged in the complaint). On February 10,

2009, the Bank filed a “Preliminary Response” out-

lining how it would maintain “well capitalized” status,

but FDIC-Corporate revoked that status the following

day because it did not believe that approximately

$6 million of the notes sold by the Bank in 2008 should

be considered capital, and because of an additional

$40 million in capital losses that FDIC-Corporate had

discovered. In March 2009, IDFPR issued a “Section

51 Order,” see 205 ILCS § 5/51, stating that it intended

to take control of the Bank if it did not satisfy certain

capital ratio benchmarks within 60 days (May 2009).

Soon thereafter, Plaintiffs arranged for the infusion of

6 No. 10-3879

another $6 million or so in capital, keeping the Bank

“adequately capitalized” and staving off the threatened

IDPFR takeover. But on April 28, 2009, a company

(whose independence Plaintiffs question) hired by FDIC-

Corporate to investigate the Bank reported that the

Bank needed another $70 million in capital to stay sol-

vent. On May 12, 2009, the IDFPR issued another Section 51

Order stating that it would take control of the bank if the

Bank did not satisfy certain capital ratio benchmarks

within 60 days (July 2009). On June 3, 2009, FDIC-Corpo-

rate notified the Bank that it was “critically undercapital-

ized,” the worst level of capitalization that may be desig-

nated. See 12 U.S.C. § 1831o(b)(1). (There is no allega-

tion that suggests that any of the regulators’ capital assess-

ments were inaccurate, nor is there any allegation that

Plaintiffs as owners were not aware of these problems.)

At a special meeting on July 1, 2009, the Bank’s board

of directors resolved to seek FDIC-Corporate’s approval

to redeem approximately $30 million in notes. See 12

U.S.C. § 1828(i)(1) (FDIC-Corporate approval required

for bank to redeem notes). In doing so, the board noted

that Pethinaidu and Parameswari Veluchamy would

agree to keep the proceeds of the redeemed notes on

deposit at the Bank in an interest-free demand deposit

account. This would give them the same highly-protected

status as ordinary depositors in the case of bank failure,

which was imminent. Otherwise, Plaintiffs—like other

investors who may not have the privilege of such an

arrangement—would drop to lowly creditor or equity

holder status near the end of the post-insolvency dis-

tribution pecking order. The complaint alleges that this

No. 10-3879 7

transaction was approved for the legitimate business

interests of the Bank, by providing liquidity (in the form

of the personal deposit accounts) among other pur-

ported benefits. This seems like nothing more than rear-

ranging deck chairs on the Titanic, or perhaps more like

the captain rushing to secure a lifeboat for himself, espe-

cially since Plaintiffs confirmed at oral argument that

this transaction would not have infused the Bank with

more capital which would have saved the sinking ship.

Nonetheless, given the motion to dismiss posture, we

assume the transaction was done for legitimate reasons.

The Bank submitted its request for FDIC-Corporate’s

approval the following day. With no response, the

Bank again asked FDIC-Corporate to act on July 24, 2009.

On July 31, 2009, the IDFPR declared the Bank insolvent

and appointed the FDIC as receiver. See 12 U.S.C.

§ 1821(c)(3)(A) (state supervisory entities have power to

request that FDIC accept receivership of failed bank).

FDIC-Receiver acted quickly, entering into a purchase

and assumption agreement with United Central Bank

to assume all the deposits of the Bank among other

actions, and the Bank’s branches opened as branches

of United Central Bank the next day.

On November 3, 2009, Plaintiffs filed administrative

proofs of claim with FDIC-Receiver. The complaint does

not specify precisely what Plaintiffs asked for, nor did

Plaintiffs include them in the record, even though this

is the very basis for one of Plaintiffs’ claims. The FDIC’s

appellate brief (and the district court, in part) frames the

FIRREA claim as seeking the redemption of notes and

8 No. 10-3879

treating the proceeds as deposits, and Plaintiffs do not

dispute this characterization, so we assume that to be

the case. The administrative proofs of claim essentially

sought to accomplish the same goal that the July 1,

2009 board resolution sought to achieve. On December 3,

2009, FDIC-Receiver “disallowed” (that is, rejected) their

claims. Within 60 days, Plaintiffs filed a complaint

in federal district court. See 12 U.S.C. § 1821(d)(6).

The complaint asserted an APA claim against FDIC-

Corporate, alleging that it arbitrarily and capriciously

misled Plaintiffs into believing that $30 million would

be enough to save the Bank, and the claim also chal-

lenged FDIC-Corporate’s failure to respond within

30 days to the Bank’s request to redeem the notes. The

complaint also raised APA and FIRREA claims against

FDIC-Receiver for disallowing the claims. It sought

declaratory relief and an order requiring the FDIC to “treat

Plaintiffs Pethinaidu Veluchamy’s and Parameswari

Veluchamy’s $23.6 million in subordinated debt as a

deposit of the Bank” and to pay Plaintiffs a total of

$9.3 million in damages.

The FDIC moved to dismiss on both jurisdictional

grounds and the merits, and the district court granted

the motions. Tackling the claims against FDIC-Receiver

first, the district court dismissed the APA claim because

it found that de novo challenges to the FDIC-Receiver’s

disallowance can only be made under FIRREA and not

the APA. The district court then dismissed the FIRREA

claim because FDIC-Receiver had no authority, absent

FDIC-Corporate’s approval, to redeem the notes, and

No. 10-3879 9

the court found it was statutorily barred from ordering

the FDIC-Receiver to act otherwise. See 12 U.S.C. § 1821(j).

The court then dismissed the APA claim against FDIC-

Corporate on mootness grounds: because the court

could not order FDIC-Receiver to redeem the notes, it

reasoned, the injuries allegedly caused by FDIC-Corporate

were not redressable by a favorable decision. Plaintiffs

(hereinafter the “Appellants”) timely appealed.

II. ANALYSIS

We start by addressing Appellants’ APA claim against

FDIC-Corporate, whose alleged acts leading up to

the Bank’s insolvency are at the core of Appellants’ com-

plaint.

A. Appellants’ APA Claim Against FDIC-Corporate

Is Barred Because It Seeks Money Damages

The district court dismissed the APA claim against

FDIC-Corporate as moot, but as discussed above, Appel-

lants’ complaint specifically seeks damages in the form

of cash payments and an order directing the FDIC to treat

two of the Appellants’ $23.6 million in subordinated

debt as bank deposits. As the FDIC notes, granting this

latter request would require the “FDIC to provide

money to repurchase the notes and utilize the proceeds to

establish a deposit account for the Veluchamys” (Appel-

lee’s Br. at 26), but they do not suggest that this is some-

how impossible to accomplish even at this late stage, and

the FDIC obviously has not acquiesced to Appellants’

10 No. 10-3879

demand for millions of dollars in cash payments. There-

fore, Appellants’ APA claim against FDIC-Corporate

is not moot, and the FDIC does not seriously argue other-

wise.

The APA claim is, however, jurisdictionally barred

for another reason: it seeks money damages. The relevant

portion of the APA, 5 U.S.C. § 702, provides:

A person suffering legal wrong because of agency

action, or adversely affected or aggrieved by

agency action within the meaning of a relevant

statute, is entitled to judicial review thereof. An

action in a court of the United States seeking

relief other than money damages and stating a

claim that an agency or an officer or employee

thereof acted or failed to act in an official capacity

or under color of legal authority shall not be dis-

missed nor relief therein be denied on the ground

that it is against the United States or that the

United States is an indispensable party.

(Emphasis added). As the Supreme Court has explained,

the United States has not waived its sovereign immunity

when it comes to APA claims seeking money damages.

See Dep’t of Army v. Blue Fox, Inc., 525 U.S. 255, 260 (1999).

A party seeks “money damages” if he or she is seeking

“substitute” relief, rather than “specific” relief. Id. at 262.

In other words, “[money] [d]amages are given to the

plaintiff to substitute for a suffered loss, whereas

specific remedies ‘are not substitute remedies at all, but

attempt to give the plaintiff the very thing to which he

was entitled.’ ” Id. (quoting Bowen v. Massachusetts, 487

U.S. 879, 895 (1988)).

No. 10-3879 11

Whether the relief sought is “substitute” or “specific” is

the touchstone of this inquiry. Therefore, the fact that “a

judicial remedy may require one party to pay money

to another is not a sufficient reason to characterize the

relief as ‘money damages,’ ” Bowen, 487 U.S. at 893, if that

sum of money constitutes “the very thing” to which the

plaintiff claims he is entitled. For example, in Bowen,

Massachusetts claimed that it was statutorily entitled to

about $6.5 million in Medicaid reimbursement which

the Secretary of Health and Human Services had de-

nied. Though a successful suit would obviously result

in an award of money, the Supreme Court found that

Massachusetts’s claim was for “specific relief ([which]

undo the Secretary’s refusal to reimburse the State)

rather than for money damages” because it did not seek

“relief that substitutes for that which ought to have

been done . . . .” Id. at 910. On the other hand, even if a

plaintiff does not specifically ask for a direct cash pay-

ment, the plaintiff may still be seeking “money dam-

ages” if the relief sought is “merely a means to the end of

satisfying a claim for the recovery of money.” Blue Fox,

525 U.S. at 262. In Blue Fox, the plaintiff subcontractor

was owed money by a contractor with the federal gov-

ernment. Because the contractor became insolvent, the

subcontractor filed an APA claim seeking an equitable

lien on any funds that the government had not yet paid

to the contractor under the contract. Though the

equitable lien was not itself cash, the Supreme Court

unanimously found this to be a request for money

damages because the lien’s “goal [was] to seize or attach

money in the hands of the Government as compensation

12 No. 10-3879

for the loss resulting from the default of the prime con-

tractor.” Id. at 263 (emphasis added). In other words, the

equitable lien was a substitute for the payment that

the contractor owed to the subcontractor; the sub-

contractor never asserted a specific entitlement to

the equitable lien itself.

Under these principles, Appellants’ request for an

order requiring the FDIC to “pay Plaintiffs Pethinaidu

Veluchamy and Parameswari Veluchamy $5.0 million in

damages,” “pay Plaintiff Anu Veluchamy $1.7 million

in damages,” “pay Arun K. Veluchamy $600,000 in dam-

ages,” and “pay Veluchamy Family Foundation $2.0

million in damages,” constitutes a request for money

damages. Appellants claim that FDIC-Corporate’s al-

legedly misleading behavior caused them to pour their

money into the Bank, and the millions of dollars they

seek are meant to compensate them for their loss, which

is classic substitute relief.

Appellants’ request for an order directing the FDIC

to treat $23.6 million in subordinated debt as a deposit

of the Bank also constitutes a request for money dam-

ages. As noted above, the FDIC explains that satisfying

this request would require it to provide money from

its own coffers (or should we say, taxpayer coffers) to

effectuate the notes repurchase and create personal

deposit accounts for Pethinaidu and Parameswari

Veluchamy, and Appellants do not dispute in their reply

that this is what their APA claim, if successful, would

require. Though what is essentially a transfer of money

from the FDIC’s coffers into Appellants’ pockets does

No. 10-3879 13

not itself make that relief “money damages” under the

APA, see Bowen, 487 U.S. at 893, Appellants’ additional

failure to demonstrate (or even to assert) a legal entitle-

ment to that specific money transfer does make such

relief “money damages.” The core of Appellants’ claims

is that FDIC-Corporate should have simply given per-

mission for the Bank to redeem the notes in July 2009,

which would have resulted in the creation of these per-

sonal accounts. But giving permission pre-insolvency is

different from directly handing over money post-insol-

vency, and Appellants’ demand for an order requiring

the FDIC—potentially in a capacity far different from

its role in July 2009—to spend government money to

repurchase the notes and/or to create deposit accounts

post-insolvency is clearly a substitute for that pre-insol-

vency permission. Like the equitable lien in Blue Fox, the

relief Appellants request is “merely a means to the end

of satisfying a claim for the recovery of money.”

Blue Fox, 525 U.S. at 262. Appellants’ APA claim against

FDIC-Corporate is therefore jurisdictionally barred.

At oral argument, Appellants argued for the first time

that this APA claim was not for “money damages”

because all they seek is the FDIC-Corporate’s (belated)

approval of the note redemption so that FDIC-Receiver

may effectuate it now, or something to that effect. Such a

request might conceivably overcome the “money dam-

ages” jurisdictional bar. But this request is not contained

in the complaint, and arguments raised for the first

time at oral argument are waived. See Quality Oil, Inc. v.

Kelley Partners, Inc., 657 F.3d 609, 614-15 (7th Cir. 2011). The

FDIC prominently raised the “money damages” argument

14 No. 10-3879

in its appellate brief, clearly asserting what Appellants’

request for relief would entail, yet Appellants’ reply

brief did not dispute the FDIC’s characterization or argue

that they were really just seeking FDIC-Corporate’s

permission for the note redemption. See also United Phos-

phorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir.

2003), overruled on other grounds by Minn-Chem, Inc. v.

Agrium, Inc., 683 F.3d 845 (7th Cir. 2012) (en banc)

(“burden of proof on a 12(b)(1) issue is on the party

asserting jurisdiction”). So we do not consider this argu-

ment.

B. Appellants’ APA Claim Against FDIC-Receiver Is

Barred Because Appellants Did Not Seek Adminis-

trative Review

We need not dwell long on Appellants’ APA claim

against FDIC-Receiver challenging its disallowance of the

claims. As we explained in Helm v. Resolution Trust Corp.,

43 F.3d 1163 (7th Cir. 1995), FIRREA provides federal

jurisdiction to review claims that are “disallowed” by

FDIC-Receiver in only two circumstances. See 12 U.S.C.

§ 1821(d)(13)(D) (“Except as otherwise provided in this

subsection, no court shall have jurisdiction over . . . any

claim relating to any act or omission of . . . the [FDIC] as

receiver.” (emphasis added)). First, the disallowance may

be challenged via an APA claim only after the relevant

administrative agency has reviewed the disallowance.

See 12 U.S.C. § 1821(d)(7)(A). Second, a party may seek

de novo review of the disallowance pursuant to 12 U.S.C.

§ 1821(d) (this is known as the “FIRREA claim”). See

No. 10-3879 15

Helm, 43 F.3d at 1165-66. Appellants here did file a

FIRREA claim, which is addressed next, but they also

filed an APA claim challenging the disallowance.

Because the disallowance was never administratively

reviewed, we lack jurisdiction to consider the APA

claim against FDIC-Receiver.

C. Appellants’ FIRREA Claim Fails Because It Essen-

tially Challenges the FDIC’s Action or Inaction as

a Regulator, Which Is Not Cognizable Under

Section 1821(d)

The FDIC appears to concede that there is no barrier

to our consideration of the FIRREA claim against FDIC-

Receiver on the merits (see Appellee’s Br. at 18), though

the heading of the brief’s next section argues that we

are barred from considering Appellants’ claims against

“either defendant” because of 12 U.S.C. § 1821(j), which

provides that “no court may take any action . . . to restrain

or affect the exercise of the powers or functions of the

[FDIC] as a conservator or receiver.” The district court

found that Section 1821(j) barred the FIRREA claim.

Furthermore, some circuits frame Section 1821(j) as a

jurisdictional inquiry (as does the FDIC). See, e.g., Hanson

v. FDIC, 113 F.3d 866, 870 (8th Cir. 1997). Therefore

we address Section 1821(j)’s applicability here.

As the text suggests, Section 1821(j) “ ‘effect[s] a sweep-

ing ouster of courts’ power to grant equitable rem-

edies . . . .’ ” Courtney v. Halleran, 485 F.3d 942, 948 (7th Cir.

2007) (quoting Freeman v. FDIC, 56 F.3d 1394, 1399 (D.C.

Cir. 1995)). “Although this limitation on courts’ power

16 No. 10-3879

to grant equitable relief may appear drastic, it fully

accords with the intent of Congress at the time it enacted

FIRREA in the midst of the savings and loan insolvency

crisis to enable the FDIC . . . to expeditiously wind up

the affairs of literally hundreds of failed financial institu-

tions throughout the country.” Freeman, 56 F.3d at 1398.

One of the “powers or functions” of the FDIC as receiver

is to take the “amounts realized from the liquidation or

other resolution of the failed bank” and to dis-

tribute them to those with claims against the assets of

the failed back, pursuant to the priority order set forth

by 12 U.S.C. § 1821(d)(11). As the FDIC explains and

Appellants do not dispute, Appellants are currently

subordinate creditors who have fourth priority in the

distribution scheme, but the redemption and deposit-via-

redemption relief sought by the FIRREA claim would

make them depositors, bumping them up to second

priority along with all the other ordinary depositors

whose savings were threatened by the Bank’s failure.

The question is whether this priority upgrade would

“restrain or affect” FDIC-Receiver’s function of dis-

tributing proceeds to claimsholders pursuant to the

statutory priority scheme. Neither party cites any case

on point, nor do we find any.

In the absence of further guidance, we conclude that

the specific relief requested by Appellants’ FIRREA

claim would not be barred by Section 1821(j). In Freeman,

the D.C. Circuit unequivocally affirmed the “sweeping”

nature of Section 1821(j) and the importance of

shielding FDIC-Receiver’s important and time-sensitive

stabilizing functions from court injunctions, but it went

No. 10-3879 17

on to say that “parties aggrieved by the FDIC’s actions as

receiver were [not] left entirely without remedies. In many

cases, . . . aggrieved parties will have opportunities to

seek money damages or other relief through the adminis-

trative claims process provided in 12 U.S.C. § 1821(d), and

their claims are ultimately subject to judicial review.”

Freeman, 56 F.3d at 1399. Therefore, where the FDIC as

receiver has disallowed a claim pursuant to the admin-

istrative process outlined in Section 1821(d) (as hap-

pened here), the judicial resolution of that claim

expressly permitted by that subsection should not

typically run afoul of Section 1821(j), another subsection

of the same statute. See Bank of Amer. Nat’l Ass’n v.

Colonial Bank, 604 F.3d 1239, 1246 (11th Cir. 2010) (“The

operation of § 1821(j) does not leave Bank of America

without a remedy. Its claim is one that can and should be

pursued through the [§ 1821(d)] administrative claims

process. . . . [O]ur sister circuits have held that all

manner of claims are appropriate for resolution through

the administrative claims process.” (citing cases)); cf.

Courtney, 485 F.3d at 949 (subsections of Section 1821

should be read in tandem with one another).

In this case, Appellants filed a Section 1821(d) adminis-

trative claim seeking second-level priority equal to that

of ordinary depositors, and the statute expressly contem-

plates these kinds of administrative claims. See 12 U.S.C.

§ 1821(d)(5)(D)(i) (“The receiver may disallow any

portion of any claim by a creditor or claim of security,

preference, or priority which is not proved to the satisfac-

tion of the receiver.” (emphasis added)); see, e.g., MBIA

Ins. Corp. v. FDIC, 816 F. Supp. 2d 81 (D.D.C. 2011) (ad-

18 No. 10-3879

dressing on the merits the plaintiff’s claim of first-level

priority status, while discussing applicability of Section

1821(j) separately for other claims). FDIC-Receiver’s

overall function of distributing amounts pursuant to the

statutory priority scheme does not seem to be impacted

simply because one claimant’s priority assignment gets

changed, at least in this case. The FDIC does not argue, for

instance, that bumping up Appellants’ priority treat-

ment even at this late stage would force lower-priority

claimants who already obtained their proceeds to

disgorge them, or cause some other practical con-

sequence that would prevent FDIC-Receiver from per-

forming its essential, time-sensitive functions (and

recall that at least one part of the FDIC’s brief concedes

that this claim may be considered on the merits). Section

1821(j) therefore does not bar Appellants’ FIRREA claim

against FDIC-Receiver. Indeed, given that the central

purpose of the statute is to protect depositors in the

wake of a bank failure, it would seem that someone

with a meritorious claim that he is a depositor should

be able to obtain that protection through the judicial

process established by Section 1821(d)(6)(A)(ii).

Appellants, however, do not have a meritorious

claim, for the simple reason that their alleged entitlement

to depositor status is not actually a claim against the

Bank. In other words, it is not premised on any action or

inaction by the Bank. They do not argue, for instance,

that they at one time had deposit accounts with the

Bank which suddenly disappeared, that the Bank had

legitimately agreed to create such accounts for them and

then failed to do so, or that the Bank did anything

No. 10-3879 19

wrong. In fact, the Bank, under the allegedly well-inten-

tioned leadership of Appellants, did everything within its

lawful power to bestow such coveted depositor status

upon Appellants. It was the FDIC in its regulatory capacity

that prevented that from happening, and thus the real

target of Appellants’ claim, dressed in FIRREA clothing, is

the FDIC-as-regulator, not the Bank. And Section 1821(d)

does not contemplate claims challenging the FDIC’s

regulatory actions or inactions, only claims premised on

the “depository institution’s” actions or inactions. See,

e.g., 12 U.S.C. §§ 1821(d)(3)(B)(i) (referring to claims of

“the depository institution’s creditors”); 1821(d)(5)(A)(i)

(referring to “any claim against a depository institution”).

That is why the FIRREA claim is properly framed as

being brought against the FDIC as receiver, i.e., in its

capacity as the Bank. Without an actual claim against

the Bank, the FIRREA claim fails.

But even if we were to consider under FIRREA the

propriety of the FDIC’s acts as a regulator, that is, its non-

response to the Bank’s last-minute note redemption

request, Appellants’ claim would still fail. The regulation

governing such note redemption requests, 12 C.F.R.

§ 303.241, provides for an expedited process for review

of requests to reduce or retire capital stock, notes, or

debentures under Section 1828(i). Under the expedited

processing provision, requests are deemed approved if

no decision is made within 20 days. But that expedited

processing is available only for well-capitalized institu-

tions. Appellants’ bank was not eligible for it. As of June 3,

2009, the Bank was “critically undercapitalized,” and the

request was made on July 2, 2009. If 20 days is the time

20 No. 10-3879

for expedited processing for such requests by stable

banks, it is not unreasonable for the FDIC to take more

than 28 days when the request comes from a finan-

cially troubled institution. When reviewing proposals

by undercapitalized banks to restore capital (not retire

capital), moreover, the FDIC is required to act “expedi-

tiously, and generally not later than 60 days after”

a capital restoration plan is submitted. 12 U.S.C.

§ 1831o(e)(2)(D)(ii). Again, if Congress deems 60 days

“expeditious” for action on a capital restoration plan,

28 days could not constitute unreasonably delayed

agency action when considering a critically undercapital-

ized bank’s request to reduce capital. And remember

that those are the provisions written for normal times,

not for the worst banking and financial crisis in the last

three generations, when Appellants’ bank went under.

Even apart from the issue of expeditiousness, it is also

hard to see how responsible bank regulators could

approve the retirement of capital by a critically under-

capitalized bank on the brink of collapse so that the

FDIC, taxpayers, and those with legitimate claims

against the Bank would be left picking up the extra tab.

See 12 U.S.C. § 1828(i)(4) (factors for approving reduction

of capital include financial condition of bank, adequacy

of capital structure, and future earnings prospects).

We lastly reject Appellants’ request for leave to amend

their complaint. Appellants never moved for leave to

amend the complaint before the district court, no Rule 59(e)

or 60(b) motion was ever filed, and Appellants do not

argue that they lacked any opportunity to ask for such

leave. See Sharp Elecs. Corp. v. Metro. Life Ins. Co., 578 F.3d

No. 10-3879 21

505, 513 (7th Cir. 2009). It is clear in any event that

granting such leave would be futile.

III. CONCLUSION

For the above-stated reasons, we A FFIRM the judgment

of the district court.

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