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Glover v. Washington Mutual Bank

March 20, 2009



I. A. Procedural History

Presently before the court for disposition is a motion for a stay submitted by the FDIC, in its capacity as receiver for Washington Mutual Bank ("WMB").

On June 9, 2008, the plaintiff, Mary Glover ("Glover") filed a complaint against WMB and other defendants in the Court of Common Pleas of Allegheny County. As to WMB, the complaint alleged, inter alia, that the bank breached its contract with Glover by failing to properly service her mortgage loan. The action was removed to this court on July 14, 2008.

On September 25, 2008, the Office of Thrift Supervision ("OTS") appointed the FDIC as Receiver for WMB, and on October 24, 2008, the FDIC was substituted for WMB as a defendant in this action. On that same date, the court granted the FDIC's motion to stay the proceedings for ninety days under section 1821(d) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1821(d)(12)(A)(ii). This section provides that, after its appointment, a receiver may request a ninety-day stay in any judicial action to which it is or becomes a party. If an appointed receiver requests a stay, " the court shall grant such stay as to all parties." 12 U.S.C. §1821 (d)(12)(B). This provision is intended to give the agency an opportunity after its appointment to become oriented with pending legislation. Praxis Properties, Inc. v. Colonial Savings Bank, 947 F.2d 49, 63 n.14 (3d Cir. 1991).

On January 22, 2009, the FDIC filed the present motion for a stay of the proceedings pending exhaustion of the agency's administrative claims process under 12 U.S.C. § 1821(d)(3) through (13). The FDIC asserts that all claimants against a failed institution are required to exhaust an administrative claims process as a prerequisite to judicial review of their lawsuit. Glover opposes the stay on three bases: 1) she is not obligated to pursue her claim through the administrative procedure because the FDIC failed to satisfy its statutory notice requirements and because the claims process is inadequate; 2) FIRREA does not authorize the stay; and, 3) the FDIC does not have standing to request a stay on behalf of the other defendants.

B. Scope of FIRREA

FIRREA establishes a comprehensive scheme authorizing the FDIC to act as a receiver for failed institutions. In its capacity as a receiver, the FDIC "succeed[s] to all rights, titles, powers and privileges" of the institution. 12 U.S.C. §1821(d)(2)(A)(I). The statute also empowers the FDIC to " take over the assets . . . and conduct all business of the institution," and, "preserve and conserve the assets and property of such institution." 12 U.S.C. § 1821 (d)(2)(B)(i)-(iv). These statutory powers have been described as "quite broad, in keeping with the emergent objectives of the statute." Rosa v. Resolution Trust Corporation, 938 F.2d 383, 398 (3d Cir. 1991).

FIRREA also creates an administrative procedure for adjudicating claims asserted against an institution in receivership. 12 U.S.C. § 1821(d)(3)(B)(i) directs the receiver to provide prompt notice by publication to the failed institution's creditors informing them that they have ninety days from the date of published notice to present their claims against the institution. Subsection (d)(3)(C)(i) further requires the receiver to mail similar notice at the time of publication to any creditor listed on the institution's books or within thirty days upon discovery of a claimant not appearing on the institution's books. 12 U.S.C. § 1821 (d)(3)(C)(ii). Once a claim has been presented, the FDIC has 180 days to notify the creditor of the determination of the claim. 12 U.S.C. § 1821(d)(5)(A). If the claim is denied or not acted upon within the allotted time, a claimant has sixty days to do one of three things: (1) seek administrative review of the claim; (2) file suit on the claim in the district court where the financial institution has its principal place of business or the District Court for the District of Columbia; or (3) continue a judicial action commenced prior to the appointment of a receiver. 12 U.S.C. § 1821(d)(6)(A).

In the instant matter, on October 1, 2008, the FDIC published notice in The Seattle Times, the Las Vegas Review-Journal/Las Vegas Sun Newspapers, and The Wall Street Journal notifying creditors that any claims against WMB must be submitted to the FDIC's administrative claims process by December 30, 2008. Pursuant to subsection 1821 (d)(3)(B)(ii), the notices were republished in those newspapers on October 31, 2008 and December 1, 2008.

The FDIC alleges that it attempted to satisfy the obligatory notice by mail to creditors listed on WMB's books by November 30, 2008. The FDIC acknowledges, however, that some of those listed creditors may not have received mail notice until after November 30, 2008. In instances where the letter notice was not provided to a creditor thirty days before the claims bar date, the FDIC's policy is to afford creditors ninety days from the notice date of the letter to submit a claim through the administrative claims process. Decl. of David Swiss ¶ 5. (Document #27, Exhibit D). Notice was mailed to Glover on December 17, 2008, thus, the deadline for her to file an administrative claim is March 17, 2009.

C. Exhaustion of Administrative Claims Process

Congress has established an administrative claims process for resolving claims against failed financial institutions. 12 U.S.C. §§ 1821(d)(3) through (d)(13). Accordingly, FIRREA limits a claimant's access to judicial review as follows:

(D) Limitation on Judicial Review

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 ...

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