Mark D. Waldron, Chapter 7 Trustee for Venture Financial Group, Inc., Plaintiff-Appellee,
Federal Deposit Insurance Corporation, in its capacity as Receiver of Venture Bank, Defendant-Appellant.
and Submitted June 10, 2019 Anchorage, Alaska
from the United States District Court for the Western
District of Washington D.C. No. 3:16-cv-05907-RBL Ronald B.
Leighton, District Judge, Presiding
Brooks (argued), Counsel; Katheryn R. Norcross, Senior
Counsel; Colleen J. Boles, Assistant General Counsel; Federal
Deposit Insurance Corporation, Arlington, Virginia; for
H. Morton (argued) and Dillon E. Jackson, Foster Pepper PLLC,
Seattle, Washington, for Plaintiff-Appellee.
Before: A. Wallace Tashima, William A. Fletcher, and Marsha
S. Berzon, Circuit Judges.
panel reversed the district court's judgment affirming
the bankruptcy court's decision after a bench trial in
favor of the chapter 7 trustee for the bankruptcy estate of a
failed bank's parent company, on a claim for recovery as
a preferential transfer of tax refunds obtained by the FDIC,
receiver of the failed bank.
with other circuits, the panel held that the FDIC's
appeal was timely filed within 60 days of entry of the
district court's judgment because, even though acting
solely as a receiver, the FDIC was a United States agency
under Federal Rule of Appellate Procedure 4(a)(1)(B)(ii).
and remanding, the panel held that the Financial Institutions
Reform, Recovery, and Enforcement Act divested the bankruptcy
court of jurisdiction because the bankruptcy trustee did not
exhaust required administrative remedies before filing the
preference action. The panel held that the Parker
exhaustion exception did not apply because the preference
action did not arise incident to the FDIC's collection
efforts against the debtor. Declining to expand the
Parker exception, the panel held that, because the
trustee failed to exhaust, the bankruptcy court lacked
subject matter jurisdiction over his claims.
Federal Deposit Insurance Corporation ("FDIC")
obtained approximately $8.4 million in tax refunds as part of
its receivership over a failed bank. The bank's parent
company declared bankruptcy. Mark Waldron, the bankruptcy
estate's trustee, contended that the tax refunds should
be considered part of the bankruptcy estate, and the
bankruptcy court agreed. But Waldron did not exhaust the
administrative claims process as required by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA"). We hold that because of the failure to
exhaust, the bankruptcy court did not have subject-matter
jurisdiction over this dispute.
Bank ("the Bank") is a wholly owned subsidiary of
Venture Financial Group, Inc. ("VFG"). For each tax
year before 2009, VFG filed consolidated federal tax returns
on behalf of both entities, in accordance with a 1993 tax
allocation agreement ("TAA") between VFG and the
Bank. The TAA set forth guidelines for how the consolidated
tax returns would be handled, specifying that, "[f]or
each taxable period, each subsidiary of the Affiliated Group
shall compute its separate tax liability as if it had filed a
separate tax return and shall pay such amount to the
Parent." It further provides that "in the case of a
refund, the Parent shall make payment to each member for its
share of the refund." The TAA has remained in place and
unchanged since its execution.
September 2009, Washington State banking regulators closed
the Bank and placed it into federal receivership; the FDIC
was appointed as the Bank's receiver. In July 2011, the
FDIC submitted a request to the IRS to allow the FDIC to
serve as an alternative agent for the Bank's affiliated
group, per Treasury Regulation § 301.6402-7(c). The FDIC
sought to file amended tax returns carrying back losses
incurred by the Bank and claiming refunds not previously
pursued. The FDIC notified VFG of this request. Although VFG
objected to "the FDIC being [its] agent with the IRS,
" the IRS granted the FDIC's request to
act as an alternative agent. Between August 2011 and
September 2013, the FDIC filed a series of amended tax
returns to recover refunds owed to the Bank.
October 2013, VFG filed for chapter 7 bankruptcy. Mark
Waldron was selected as the chapter 7 trustee. In response to
the bankruptcy petition, the FDIC filed a protective proof of
claim, declaring that the pending tax refunds were property
of the FDIC, not VFG or its bankruptcy estate, but stating a
claim for payments from the estate should the VFG or the
bankruptcy estate be determined to be owner of the refunds.
The FDIC did not file a claim for any amount beyond the tax
the IRS accepted the FDIC's refund requests and paid the
refunds with interest. The IRS paid some of the refunds
before VFG filed for bankruptcy, and some after. In total,
the FDIC received $8, 471, 982.36 in tax refunds from the
August 2014, Waldron filed this preference action in
bankruptcy court against the FDIC, seeking to recover the tax
refunds obtained by the FDIC as a preferential transfer. The
FDIC moved to dismiss the complaint, arguing, among other
things, that the bankruptcy court lacked jurisdiction over
Waldron's claims because he had failed to exhaust the
administrative claims process as required by FIRREA, Pub. L.
No. 101-73, 103 Stat. 183. The bankruptcy court denied the
bench trial, the bankruptcy court issued a decision. The
court first reiterated its conclusion that it had
subject-matter jurisdiction despite Waldron's failure to
exhaust administrative remedies, then interpreted the 1993
TAA to "establish a creditor-debtor relationship
between VFG and the Bank." According to the bankruptcy
court, "[a]ny tax refunds received were the property of
VFG, and the Bank merely held a claim for payment against VFG
for its share of the funds." In so ruling, the
bankruptcy court rejected the FDIC's argument that the
"Bob Richards rule" applies in this case.
See In re Bob Richards Chrysler-Plymouth Corp.,
Inc., 473 F.2d 262, 265 (9th Cir. 1973)(establishing the
default rule that, absent an agreement to the contrary, tax
refunds belong to the entity whose losses formed the basis
for the refunds). Thus, the court held, the bankruptcy estate
was entitled to the refunds as a voidable preference.
FDIC appealed the bankruptcy court's decision to the U.S.
District Court for the Western District of Washington. The
district court affirmed the bankruptcy court's decision
and entered final judgment on March 20, 2018. ...