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Leonard K. Holwell v. Jp Morgan Chase Bank

March 30, 2011


The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge


Plaintiff moves for leave to file a second amended complaint to add the Federal Deposit Insurance Corporation ("FDIC") in its corporate capacity as a Defendant in this case. For the reasons that follow, this motion is GRANTED.


On June 16, 2008, Plaintiff filed a complaint against Washington Mutual Bank ("Washington Mutual") alleging conversion of depositor's funds and aiding and abetting wire fraud. On or about September 25, 2008, the Office of Thrift Supervision appointed the FDIC as the receiver of Washington Mutual. Approximately three weeks later, on October 14, 2008, Plaintiff filed an amended complaint naming JP Morgan Chase Bank, N.A., as the successor to Washington Mutual, as the sole Defendant. On March 2, 2009, Judge Houston*fn1 granted the parties' joint motion to substitute FDIC in place of Washington Mutual "as the party . . . in this action." [Dock. # 16] Plaintiff now moves forleave to amend his complaint to add the FDIC in its corporate capacity as a Defendant.


Under Fed. R. Civ. P. 20(a)(2), persons may be joined as a defendant in an action if: "(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action." This rule "is to be construed liberally in order to promote trial convenience and to expedite the final determination of disputes, thereby preventing multiple lawsuits." League to Save Lake Tahoe v. Tahoe Regional Planning Agency, 558 F.2d 914, 917 (9th Cir. 1977).

Plaintiff asserts that "a portion of Plaintiff's claim . . . is for the recovery of insured bank deposits" maintained by Washington Mutual before it failed and that he is entitled to recovery under 12 U.S.C. § 1821(f). (Mem. at 2-3) Although Plaintiff's proposed second amended complaint does not set forth a claim under this theory, the Court finds that a claim against FDIC in its corporate capacity for recovery of insured bank deposits would satisfy the requirements of Fed. R. Civ. P. 20(a)(2). The Court GRANTS Plaintiff's motion for leave to amend with the understanding that the Second Amended Complaint will set forth a basis for recovery against FDIC in its corporate capacity. However, if the second amended complaint that Plaintiff files does not address this deficiency, Defendants may seek dismissal.

Defendants raise several arguments as to why even if the requirements of Rule 20(a)(2) are met, leave to amend would still be improper. None are persuasive at this time.

Most prominently, Defendants assert that leave to amend would be futile because the statute of limitations on any claim regarding payment of insured deposits under 12 U.S.C. § 1821(f) has expired. Under the statute of limitations set forth in § 1821(f)(5), "Any request for review of a final determination by the Corporation [FDIC] regarding any claim for insurance coverage shall be filed with the appropriate United States district court not later than 60 days after the date on which such determination is issued." On July 27, 2009, the FDIC sent Plaintiff a Notice of Disallowance of Claim, see FDIC's Status Report of November 23, 2009, and it appears that Plaintiff has not sought review of this agency determination.

Nevertheless, such facts do not direct a conclusion that Plaintiff's claims under § 1821(f) are time-barred. Although the record does not appear to contain a copy of Plaintiff's claim or the FDIC's Notice of Disallowance of Claim, it is likely that any administrative determination was limited to a claim against FDIC as a receiver pursuant to 12 U.S.C. § 1821(d). On March 13, 2009 -- approximately two months before Plaintiff filed an administrative claim -- , Plaintiff received a letter from the FDIC discussing the procedure for bringing claims under 12 U.S.C. § 1821(d)(5)(C). This letter concludes:

If a portion of your claim is for an insured deposit, your claim is not against the Receiver but rather is against the FDIC in its 'corporate' capacity as deposit insurer. An insured depositor's rights are prescribed in 12 U.S.C. Section 1821(f) and differ from the rights described in the preceding paragraphs.

(Pl. Ex. B) Thus, the record does not indicate that the Plaintiff has made a claim for an insured deposit and if so, that the FDIC has made a final determination on this claim, which would trigger the statute of limitations under § 1821(f).*fn2 Moreover, to the extent that the FDIC argues that claims filed pre-receivership cannot be brought under this section (see FDIC Resp. at 6), the Court finds this position to be unsupported by case law and not persuasive. For these reasons, the Court finds that the statute of limitations in section 1821(f) does not render leave to amend futile.

Defendants remaining arguments as to why leave to amend should be denied are similarly not persuasive. Defendant FDIC asserts that the parties' stipulation that FDIC is the receiver of Washington Mutual and that "FDIC is now the real party in interest" [dock. # 15] precludes Plaintiff from seeking amendment to add FDIC as a Defendant in its corporate capacity. (FDIC Resp. at 4-5) However, this stipulation contains no language limiting Plaintiff's right to add parties at a later date, and Defendant asserts no authority for the proposition that a plaintiff cannot bring suit against the FDIC both in its capacity as a receiver and as a corporation. Leave to amend will not be denied on this basis.

Finally, FDIC complains of Plaintiff's "inordinate" one year and 11 month delay in moving for leave to amend and asserts that granting leave to amend would prejudice it because "the substitution of the FDIC in its corporate capacity will radically shift the nature of the complaint and require the FDIC to undertake an entirely new course of defense." (FDIC Opp. at 6) Neither position has merit. Plaintiff's suit was filed approximately three months before FDIC was appointed as receiver, and this case was stayed pursuant to 12 U.S.C. ยง 1821(d) from May 18, 2009 until December 8, 2009. Thus, the amount of time Plaintiff could have sought leave to amend the complaint is substantially less than one year and eleven months. Moreover, FDIC cannot credibly claim that it surprised by Plaintiff's position. As noted above, the FDIC's letter to Plaintiff contemplated the possibility that Plaintiff had a claim against the FDIC in its corporate capacity, and in an April 2, 2009 filing, Plaintiff stated his intent to amend the ...

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