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Jette v. Orange County Financial

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA


December 14, 2009

SUSAN JETTE AND BARBARA ANN JETTE, INDIVIDUALS, PLAINTIFFS,
v.
ORANGE COUNTY FINANCIAL, INC., A CORPORATION; MORTGAGEIT, INC., A CORPORATION; INDYMAC FEDERAL BANK, F.S.B.; TIEMPO ESCROW, INC., A CORPORATION; JERRY INDES, AN INDIVIDUAL; MR. MINUS, AN INDIVIDUAL; AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANTS.

The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER GRANTING THE FDIC'S MOTION TO DISMISS*fn1

On October 29, 2009, Defendant Federal Deposit Insurance Corporation (the "FDIC"), Receiver for IndyMac Bank, F.S.B. and IndyMac Federal Bank, FSB, filed a motion under Federal Rule of Civil Procedure 12(b)(1) in which it seeks to dismiss Plaintiffs' claim under the Truth in Lending Act ("TILA") for lack of subject matter jurisdiction, or alternatively, for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (Docket No. 145.) For the reasons stated below, the motion is GRANTED.

I. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(1), a defendant may move to dismiss a complaint for lack of subject matter jurisdiction. Plaintiff has the burden of demonstrating that federal subject matter jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994).

A "[r]ule 12(b)(1) jurisdictional attack[] can be either facial or factual." White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). "In a facial attack, the challenger asserts that the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction. By contrast, in a factual attack, the challenger disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).

Here, the FDIC's jurisdictional attack is factual since the FDIC relies on extrinsic evidence outside of the pleadings in support of its argument that Plaintiffs' TILA claim is time barred. See id. "In resolving a factual attack on jurisdiction, the district court may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment.... Once the moving party has converted the motion to dismiss into a factual motion by presenting affidavits or other evidence properly before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction." Id. (citation omitted.)

II. Background

On April 3, 2008, Plaintiffs' filed a complaint in the district court for the Southern District of California, alleging federal and state claims against Defendants, including a claim under TILA against Defendant IndyMac Bancorp., Inc. ("IndyMac Bancorp"). The case was transferred from the Southern District of California to this federal district court in the Eastern District of California on July 30, 2008. IndyMac Bancorp, however, filed a Chapter 7 bankruptcy petition in United States' Bankruptcy Court in the Central District of California on July 31, 2008. (Not. of Filing for Bankruptcy.) As a result of IndyMac Bancorp's bankruptcy filing, on September 19, 2008, the parties stipulated to voluntarily dismiss IndyMac Bancorp from this action under Federal Rule of Civil Procedure 41(a)(1).

On July 11, 2008, the Office of Thrift Supervision ("OTS"), an agency of the Treasury Department that regulates savings banks, issued an order closing IndyMac Bank, F.S.B., and appointing the FDIC as that bank's receiver. (Stipulation to Substitute Real Parties in Interest, Ex. A.) That same day, the OTS chartered a new institution, IndyMac Federal Bank, FSB, and appointed the FDIC as the conservator to operate the new financial institution. (Id.)

On an unknown date, Plaintiffs filed a proof of claim with the FDIC, as the receiver for IndyMac Bank, F.S.B., seeking to rescind their loan under TILA. (Golden Decl., Ex. A).*fn2 In a letter dated November 5, 2008, and received by Plaintiffs' Counsel on November 10, 2008, the FDIC notified Plaintiffs that their claim had been disallowed. (Mallory Decl., Exs. A, C.) The FDIC's letter further stated:

Pursuant to 12 U.S.C. Section 1821(d)(6), if you do not agree with this disallowance, you have the right to file a lawsuit on your claim (or continue any lawsuit commenced before the appointment of the Receiver), in the United States District (or Territorial) Court for the District within which the failed institution's principal place of business was located or the United States District Court for the District of Columbia within 60 days from the date of this notice. (Id.)

On March 5, 2009, Plaintiffs filed a first amended complaint in this action, in which they allege a TILA claim against IndyMac Federal Bank FSB. On March 19, 2009, the OTS issued an order appointing the FDIC as the receiver, instead of conservator, of IndyMac Federal Bank, FSB. (Stipulation to Substitute Real Parties in Interest, Ex. B.) Subsequently, the parties filed a stipulation and order in this case, which was entered on May 22, 2009, substituting "the FDIC, as Receiver for IndyMac Federal Bank, FSB and as Receiver for IndyMac Bank, F.S.B." On October 29, 2009, the FDIC filed a motion to dismiss Plaintiffs' TILA claim under Rules 12(b)(1) and 12(b)(6).

III. Discussion

The FDIC argues Plaintiffs' TILA claim is time barred under 12 U.S.C. § 1821(d)(6), and therefore the court lacks jurisdiction over the claim. Plaintiffs counter their TIlA claim is not time barred because the applicable statute authorizes them to continue litigating their claim in this lawsuit since this case was filed before the FDIC was appointed receiver. (Opp'n. 1.)

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. ("FIRREA"), 12 U.S.C. § 1821(d)(3)-(13), establishes "a comprehensive statutory scheme granting [the] FDIC authority to act as Receiver for failed financial institutions, [and] create[s] a statutory procedure for the processing of claims against the FDIC." Ramos v. NDEX West, LLC, No. 1:09-CV-00190 OWW GSA, 2009 WL 1675911, at *2 (E.D. Cal. June 1, 2009)(citing 12 U.S.C. §§ 1821(d)(3)-(13)). The statutory process requires all claims against a failed financial institution to be submitted to the FDIC within 90 days of the FDIC's mailing of a claims form. 12 U.S.C. § 1821(d)(3)(B). Upon receipt of a claim, the FDIC has 180 days to review the claim and decide whether to allow or disallow the claim.

12 U.S.C. § 1821(d)(5)(A)(I).

If the FDIC disallows a claim, the claimant has sixty days from the "date of any notice of disallowance" to either "request administrative review of the claim... or file suit on such claim (or continue an action commenced before the appointment of the receiver) in the district... court of the United States for the district within which the depository institution's principal place of business is located or the United States District Court for the District of Columbia...." 12 U.S.C. § 1821(d)(6)(A)(ii). However, if the claimant fails to file suit on such claim, or continue an action commenced before the appointment of the receiver, "before the end of the 60-day period" "the claimant shall have no further rights or remedies with respect to such claim." 12 U.S.C. § 1821(d)(6)(B)(ii). Specifically, Section 1821(d)(6)(B)(ii) provides: "[i]f any claimant fails to... file suit on such claim (or continue an action commenced before the appointment of the receiver), before the end of the 60-day period described in [Section 1821(d)(A)], the claim shall be deemed to be disallowed... as of the end of such period, such disallowance shall be final, and the claimant shall have no further rights or remedies with respect to such claim." 12 U.S.C. § 1821(d)(6)(B)(ii).

The FDIC argues it disallowed Plaintiffs' claim on November 5, 2008, and Plaintiffs' failed to request a second administrative review, file a new lawsuit or continue previously commenced litigation within the sixty day statutory period as required. (Mot. to Dismiss 7:19-22.) The FDIC asserts Plaintiffs' TILA claim is therefore barred under Section 1821(d)(6)(B)(ii). Plaintiffs rejoin citing 12 U.S.C. § 1821(d)(5)(F)(ii), which states "[t]he 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 a receiver." (Opp'n. 3:15-23.)

This section, however, does not support Plaintiffs' argument, and Plaintiffs have not demonstrated that the time limitations in Section 1821(d)(6) are inapplicable. Plaintiffs also rely on FDIC v. Grillo for support. 788 F. Supp. 641 (D.N.H. 1992). The Grillo court interpreted FIRREA as providing a "duality of remedies when a lawsuit is filed prior to appointment of the FDIC receiver," including "pursu[ing] [the] court action simultaneously with the administrative claims resolution process," but Grillo does not suggest that once the statutory claims process is invoked and a claim is disallowed, the time limitations in Section 1821(d)(6) are inapplicable. In fact, Grillo suggests just the opposite where it states: "[if] the administrative claims procedure is followed and the claim is disallowed, Congress has provided the claimant with ample review procedures...." Id. at 647. Since the statute prescribes that upon the disallowance of a claim, any litigation commenced before the appointment of the receiver must be continued within the sixty day period, Plaintiffs' argument is unsupported and unpersuasive. See 12 U.S.C. § 1821(d)(6)(A)(ii).

The FDIC disallowed Plaintiffs' claim on November 5, 2008. (Mallory Decl., Ex. A.) Therefore, under Section 1821(d)(6), Plaintiffs had until January 4, 2009, to the continue pre-receivership litigation in this action. See Yumukoglu v. Resolution Trust Corp., No. 91-4520, 1992 WL 236939, at *1 (E.D. La. Sept. 1, 1992)(stating that "[t]he date of the notice of disallowance, not the date that notice is mailed or received commences the 60 day period...."). At the time Plaintiffs' proof of claim was disallowed, IndyMac Federal Bank, FSB and the FDIC were not parties in this case, and IndyMac Bancorp had been dismissed. Plaintiffs' argue that by alleging a claim against IndyMac Federal Bank, FSB in their first amended complaint, which was filed on March 5, 2009, they properly continued a lawsuit commenced before the appointment of the FDIC as receiver. However, Plaintiffs' first amended complaint was filed well outside of the sixty day time period.

Plaintiffs' failure to act within the sixty day statutory time period is fatal to their TILA claim against the FDIC. See Freeman v. Resolution Trust Corp., No. C-93-4215-VRW, 1994 WL 398515, at *3 (N.D. Cal. July 20, 1994)(dismissing claims filed outside of sixty day statutory period). Since the court "has no jurisdiction over claims filed outside of the [sixty]-day statute of limitations mandated by § 1821(d)(6)(B)," Plaintiffs' TILA claim against the FDIC is dismissed. Freeman, 1994 WL 398515, at *3.

IV. Conclusion

For the stated reasons, the FDIC's motion to dismiss is GRANTED and Plaintiffs' TILA claim against the FDIC is dismissed with prejudice. The FDIC is dismissed as a party in this action.


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