On Appeal from the United States District Court for the District of New Jersey. (Civ. No. 92-cv-03408).
Before: Greenberg, Cowen and Nygaard Circuit Judges.
National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") and Gulf Insurance Company ("Gulf") filed a declaratory judgment action against City Savings, F.S.B., in Receivership ("City Savings") and the Resolution Trust Corporation, as Receiver ("RTC"). In the declaratory judgment action, National Union and Gulf sought to rescind insurance policies which they had issued and under which City Savings and the RTC were seeking coverage. The RTC filed a motion to dismiss the declaratory judgment action and also filed a counterclaim. The district court held that under the Financial Institution Reform, Recovery and Enforcement Act of 1989 ("FIRREA"),*fn1 12 U.S.C. § 1821(d)(3), (d)(13)(D), it lacked subject matter jurisdiction over National Union and Gulf's declaratory judgment action. The district court also held that under FIRREA, National Union and Gulf were jurisdictionally barred from raising certain affirmative defenses to the RTC's counterclaim. For the reasons stated below, we will affirm the district court's holding that under FIRREA the district court lacks subject matter jurisdiction over National Union and Gulf's declaratory judgment action. However, we will reverse the district court's holding that under FIRREA National Union and Gulf are barred from raising affirmative defenses to the counterclaim.
Effective March 22, 1989, National Union and Gulf issued policies of insurance*fn2 to CityFed Financial Corp. ("CityFed") and its subsidiaries. The insurance policies provide coverage for losses sustained from, among other things, the dishonest or fraudulent acts of employees of CityFed and its subsidiaries. On October 27, 1989, City Federal Savings Bank ("City Federal"), a subsidiary of CityFed, sent a letter to National Union and Gulf providing notice that City Federal might have suffered a loss covered by the insurance policies as a result of dishonest or fraudulent acts of City Federal employees. On December 7, 1989, City Federal put National Union and Gulf on notice of another potential claim involving the alleged dishonest and/or fraudulent acts of George E. Mikula, an Executive Vice President of City Federal. On January 4, 1990, City Federal placed National Union and Gulf on notice of a third potential claim arising from the alleged dishonest and/or fraudulent acts of Frank W. Allaben, a former Vice President of City Federal and City Federal Mortgage Corporation.
In the interim, by Order dated December 7, 1989, City Federal was declared insolvent by the Director of the Office of Thrift Supervision ("OTS") and ordered closed. By the same Order, the RTC was appointed Receiver of City Federal, succeeding to all rights, titles, powers, and interests of City Federal. Also on December 7, 1989, the Director of the OTS created City Savings Bank--a federally chartered mutual savings association--to take over certain assets and liabilities of City Federal. The RTC was then appointed as Conservator for and took possession of City Savings Bank.
In accordance with FIRREA, 12 U.S.C. § 1821(d)(3)(B), the RTC then caused to be published notice to all creditors of City Federal that they had until March 17, 1990 to bring any claims against the assets of City Federal. In addition, the RTC sent known creditors, i.e., those then appearing on City Federal's books, individual letters in December of 1989 informing them of the bar date. National Union was among those who were sent a letter notifying it of the RTC's appointment as Receiver and the bar date for the submission of claims. The RTC thereafter published the bar date in the newspaper on December 17, 1989, January 21, 1990, and February 18, 1990. Gulf apparently received from the RTC information concerning the appointment of the RTC as Receiver, but never was sent information concerning the March 17, 1990 bar date.
On December 14, 1989 and February 22, 1990, respectively, Gulf and National Union informed the RTC that effective December 8, 1989--the takeover date of City Federal--the insurance policies would be treated as canceled pursuant to the terms of these policies that they would automatically terminate upon the takeover of the insured by receiver, other liquidators, or other state or federal officials. Although both National Union and Gulf notified the RTC that they considered the policies canceled effective the date the RTC took over the operations of the bank, neither raised or asserted to the RTC a right to rescind the policies before the March 17, 1990 bar date. That is, prior to the March 17, 1990 bar date, neither National Union nor Gulf informed the RTC that it denied coverage under the polices for events occurring prior to the RTC's appointment as Receiver.
By an Order dated September 21, 1990, the Director of OTS closed City Savings Bank and appointed the RTC as its Receiver. City Savings--a federally chartered mutual savings association--was then organized to take over the assets and liabilities of City Savings Bank. The RTC was appointed Conservator of City Savings and, accordingly, took possession and charge of this newly created entity. Thereafter, by Order dated January 11, 1991, the Director of the OTS closed City Savings and appointed the RTC as its Receiver.
On or about February 27, 1991, the RTC as Receiver for City Savings filed three proofs of loss totaling approximately $152 million with National Union and Gulf, claiming that the losses were covered by the insurance policies. The three claims were attributed to the alleged dishonest and/or fraudulent acts of City Federal employees. After investigating the RTC's claims, National Union and Gulf tendered the entire premiums paid for the insurance policies, plus interest, to the RTC on June 12th and 26th, 1992, respectively, in an effort to rescind the insurance contracts. The RTC rejected the premium refunds.
On August 7, 1992, National Union and Gulf commenced the declaratory judgment action against the RTC, as Receiver of City Savings, asserting that National Union and Gulf had the right to rescind the insurance policies issued to CityFed. The RTC made a motion to dismiss the declaratory judgment action for lack of subject matter jurisdiction, and also filed a counterclaim.
The district court granted the RTC's motion to dismiss the declaratory judgment action. The district court held that under § 1821(d)(3) and (d)(13)(D) of FIRREA, it lacked subject matter jurisdiction over the declaratory judgment action seeking rescission. The district court also held that under FIRREA, National Union and Gulf were jurisdictionally barred from raising their rescission theory as an affirmative defense to the counterclaim brought by the RTC against them.
A. APPELLATE JURISDICTION
We first address whether we have appellate jurisdiction over the order of the district court dismissing appellant's complaint for lack of subject matter jurisdiction. Because the RTC brought a counterclaim which has not been finally adjudicated, the district court's dismissal of National Union and Gulf's Complaint for Declaratory Judgment would not ordinarily be considered a "final judgment," and we would not ordinarily have appellate jurisdiction under 28 U.S.C. § 1291. However, pursuant to Fed. R. Civ. P. 54(b), the district court entered a final judgment dismissing National Union and Gulf's Complaint for Declaratory Judgment.*fn3 We therefore have appellate jurisdiction over the district court's dismissal of the declaratory judgment complaint. 28 U.S.C. § 1291.
The parties did not raise the question of whether we have appellate jurisdiction to review that portion of the district court's Order entered May 27, 1993 which barred National Union and Gulf from raising affirmative defenses to any counterclaims brought by the RTC. Since appellate jurisdiction cannot be waived or consented to by the parties, Carpenters Health & Welfare Fund of Phila. & Vicinity v. Kenneth R. Ambrose, Inc., 665 F.2d 466, 468 (3d Cir. 1981), we must determine whether we have jurisdiction to review the district court's holding concerning the bar against affirmative defenses by National Union and Gulf.
The district court certified the entire Order dated May 27, 1993 as final under Fed. R. Civ. P. 54(b), including its holding that National Union and Gulf could not raise their rescission theory as an affirmative defense to the counterclaim brought by the RTC. However, simply because a district court certifies a matter under Rule 54(b) does not automatically result in proper appellate jurisdiction. We first review a Rule 54(b) certification to determine whether the matter being certified was actually "final," and in this determination we exercise plenary review. Gerardi v. Pelullo, 16 F.3d 1363, 1368 (3d Cir. 1994). "Then, if we conclude that the judgment [was] final, we . . . consider whether the district court abused its discretion in determining that [it was] ready for appeal taking into account judicial administrative interests as well as the equities involved." Id. (internal quotations, modifications and citation omitted).
As to the first inquiry, the reason for us inquiring into whether a matter certified under Rule 54(b) is actually "final" is because Rule 54(b) allows certification of finality in situations where a claim or a party's interest is adjudicated to finality, but the claim or party happens to be a part of a continuing litigation presenting multiple claims or multiple parties. Rule 54(b) does not allow a claim which when viewed separately is not final to be considered final. In other words, Rule 54(b) only parses out final claims or parties whose claims are final from a multiclaim or multiparty litigation--it does not operate to magically deem a non-final claim "final." See id.
We need only address the first inquiry, whether the Order barring National Union and Gulf from raising the affirmative defense of rescission was final. Clearly, it was not. The affirmative defense of rescission would have been a defense to the counterclaim brought by the RTC against National Union and Gulf. That counterclaim has not been finally adjudicated, and therefore any orders concerning the counterclaim, including the district court's order that the affirmative defense of rescission could not be raised as an affirmative defense to the counterclaim, are not final orders. Thus, the portion of the Order barring National Union and Gulf from raising rescission as an affirmative defense, not being a final order, was not properly certified by the district court under Rule 54(b).
We nevertheless conclude that under the doctrine of pendent appellate jurisdiction, we have appellate jurisdiction to review the district court's Order which held that National Union and Gulf are barred from raising the affirmative defense of rescission in the counterclaim brought by the RTC. We have stated that "pendent appellate jurisdiction over an otherwise unappealable order is available only to the extent necessary to ensure meaningful review of an appealable order." Hoxworth v. Blinder, Robinson & Co., 903 F.2d 186, 209 (3d Cir. 1990).*fn4 In this case, in order for us to meaningfully determine whether National Union and Gulf may, consistent with due process, be barred from bringing their declaratory judgment action, it is necessary for us to address whether they would be able to raise rescission as a defense or affirmative defense in a proceeding against them. See infra typescript at pp. 26-34. Therefore, we properly have appellate jurisdiction over the order barring National Union and Gulf from raising rescission as an affirmative defense.
B. ANALYSIS OF § 1821(d)(13)(D)
The issue presented is whether the district court properly determined that under FIRREA, 12 U.S.C. § 1821(d)(3) and (d)(13)(D), the district court lacked subject matter jurisdiction over National Union and Gulf's declaratory judgment action seeking rescission of the insurance policies in question. Furthermore, we must determine whether the district court correctly determined that under FIRREA, National Union and Gulf are barred from raising rescission as an affirmative defense to the RTC's counterclaim. The issue of whether the district court correctly interpreted § 1821(d)(3) and (d)(13)(D) of FIRREA concerning subject matter jurisdiction is a legal question over which we exercise plenary review. Cf. Federal Ins. Co. v. Richard I. Rubin & Co., 12 F.3d 1270, 1282 (3d Cir. 1993), cert. denied, ___ U.S. ___, ___ S. Ct. ___ (U.S. May 23, 1994).
Section 1821(d)(13)(D) of FIRREA contains a jurisdictional bar which is central to this appeal. That section provides:
Except as otherwise provided in this subsection, 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 Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or
(ii) any claim relating to any act or omission of such institution or the Corporation as receiver.
12 U.S.C. § 1821(d)(13)(D). The "except as otherwise provided in this subsection" language quoted above refers to subsection (d) of § 1821. E.g., Marquis v. FDIC, 965 F.2d 1148, 1153 & n.5 (1st Cir. 1992). "Subsection (d) . . . provides for de novo district court jurisdiction only after the filing of a claim with, and the initial processing of that claim by, RTC pursuant to § 1821(d)(5) and (6)(A)." Rosa v. RTC, 938 F.2d 383, 391-92 (3d Cir.), cert. denied, ___ U.S. ___, 112 S. Ct. 582 (1991).*fn5 Thus, we have characterized the jurisdictional restriction contained in § 1821(d)(13)(D) as a statutory exhaustion requirement: in order to obtain jurisdiction to bring a claim in federal court, one must exhaust ...