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ADAGIO INVESTMENT HOLDING v. FEDERAL DEPOSIT INSURANCE CORP.

ADAGIO INVESTMENT HOLDING LTD., et al., Plaintiffs,
v.
FEDERAL DEPOSIT INSURANCE CORP. in its Corporate Capacity and as Receiver for the Connecticut Bank of Commerce, Defendants.



The opinion of the court was delivered by: ELLEN S. HUVELLE, District Judge

MEMORANDUM OPINION

Plaintiff Elver Capital Ltd. ("Elver") alleges that FDIC improperly classified Elver's certificate of deposit ("CD") held at the Connecticut Bank of Commerce ("CBC") when it failed in June 2002. FDIC determined that Elver's CD was not a conventional CD, but rather was an "IBF CD," which categorization deprived plaintiff of both deposit insurance and a viable claim against the FDIC-administered receivership estate. Presently before the Court is plaintiff's partial motion for summary judgment. Having reviewed the pleadings and undisputed evidence, the Court concludes that plaintiff's motion should be granted because FDIC, contrary to its regulations, failed to rely on the bank's records, which, along with the testimony of CBC officials, establish that Elver's CD was a garden-variety CD, and not an IBF CD.

BACKGROUND

  On July 5, 2001, Elver, a British Virgin Islands corporation, completed CBC's International Account Opening Documentation ("IAOD"), checking three boxes: "checking" (also known as a demand deposit account or "DDA"), "International Banking Facility Deposit — Non-Bank Customer" (also known as an "IBF"),*fn1 and "Certificate of Deposit." (Elver's Motion for Partial Summary Judgment ["Elver's Mot."], Ex. B at 2.) The bank established three different account numbers corresponding to each type of account that Elver had opened. (See, e.g., id., Ex. C.) Elver's checking account statements reflect funds flowing daily between the checking and IBF accounts, and they also indicate the quarterly maturing and contemporaneous issuance of a replacement ninety-day $250,000 CD in Elver's name.

  After CBC was closed by order of the Connecticut Superior Court on June 26, 2002, FDIC accepted appointment as the bank's receiver and began the process of determining which accountholders' funds qualified for deposit insurance and how claims against CBC's receivership estate were to be prioritized. FDIC ultimately concluded that Elver's CD was an IBF CD, rather than an ordinary CD. Had the latter been the case, FDIC, in its corporate capacity, would have paid Elver $100,000 in deposit insurance, and pursuant to the National Depositor Preference Act ("NDPA"), 12 U.S.C. § 1821(d)(11), FDIC, in its capacity as receiver for CBC, would have issued a Class 2 receivership certificate for the CD's remaining $150,000.*fn2 However, having been classified as an owner of an IBF CD, Elver received no deposit insurance and was issued a Class 3 receivership certificate, which as a practical matter has no monetary value.

  Thus, the issue presented is whether FDIC violated the Federal Deposit Insurance Act, 12 U.S.C. §§ 1811 et seq. ("FDI Act"), and related regulations when it designated Elver's CD as an IBF CD account, as opposed to an insured and NDPA-preferred ordinary certificate of deposit account.

  LEGAL ANALYSIS

  Under Fed.R. Civ. P. 56, a motion for summary judgment shall be granted if the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In considering a motion for summary judgment, the "evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255; see also Wash. Post Co. v. United States Dep't of Health and Human Servs., 865 F.2d 320, 325 (D.C. Cir. 1989).

  The non-moving party's opposition, however, must consist of more than mere unsupported allegations or denials and must be supported by affidavits or other competent evidence setting forth specific facts showing that there is a genuine issue for trial. Fed.R. Civ. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The non-moving party must provide evidence that would permit a reasonable jury to find in the non-moving party's favor. Laningham v. United States Navy, 813 F.2d 1236, 1242 (D.C. Cir. 1987). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby, 477 U.S. at 249-50 (internal citations omitted).

  In addressing plaintiff's motion, FDIC correctly notes that, "[i]n making the [CD] insurance determinations, FDIC is entitled to rely exclusively on the deposit account records of a failed institution." (FDIC's Mem. in Opp'n to Elver's Mot. for Summ. J. ["FDIC's Opp'n"] at 3.) Indeed, FDIC is required to rely on them, unless it finds them ambiguous. 12 C.F.R. § 330.5(a)(1). See also FDIC v. Fedders Air Conditioning, USA, Inc., 35 F.3d 18, 22-23 (1st Cir. 1994) (relying on bank records as evidence to support a claim of a deposit denied by FDIC). This principle, which FDIC purportedly followed in classifying Elver's CD as an IBF CD, guides this Court's analysis. However, because the Court cannot agree Elver's money was deposited in an IBF CD in light of CBC's unambiguous records, it grants partial summary judgment in favor of Elver.

  First, plaintiff's IAOD clearly reflected Elver's choice to open three separate types of account, including a "certificate of deposit" that made no reference to an international banking facility. (Elver's Mot., Ex. B at 2.) Moreover, as explained in the Court's September 28 Memorandum Opinion, an international customer's decision to open an IBF in addition to a checking account did not transform all facets of the customer's banking relationship with CBC into an IBF.*fn3 (See Mem. Op. at 12.) Rather, Elver — like twenty-four other similarly-situated plaintiffs — had separate DDA and IBF accounts. This same reasoning applies to Elver's decision to open a CD in addition to a DDA and an IBF — the IAOD clearly reflects Elver's intent to open a CD, but in no way supports the notion that the CD was an IBF CD. (See, e.g., id. at 9 (discussing effect of each plaintiff's IAOD designation of which account types to open), 19 (discussing irrelevance of IAOD ¶ 7 in determining whether each plaintiff's funds must be "swept" into an IBF in order to effectuate the IAOD's terms).) Therefore, since the IAOD filled out by Elver indicates its intent to open an ordinary CD, there is no basis to argue that the IAOD established an IBF CD, which is itself such an obscure financial instrument that the FDIC claims agent in charge of CBC's closure had only encountered it once before. (See Elver's Mot., Ex. F at 120 (Gilliard deposition).)

  Second, Elver's account statements confirm that CBC in fact established the three account types requested on the IAOD. Elver's DDA statement shows numerous wire transfers, the IBF overnight sweeps, and the quarterly maturing of a $250,000 CD, with corresponding interest, and the contemporaneous issuance of a replacement ninety-day CD for $250,000, with an interest rate of 2.6% as of May 7, 2002. (See, e.g., id., Ex. C.) Nothing in the statement would signal to Elver, FDIC, or this Court that Elver's CD was anything other than a regular CD. Rather, the statement simply reflects a "Deposit from closed CD," giving the certificate number and amount, and later that day shows a "Transfer to CD Acct.," giving a new certificate number, the date of maturity, and the interest rate. There is no reference to an IBF in the CD line items. By contrast, the IBF sweep is clearly listed as "Transfer into IBF/Transfer Cdt. [credit]" and "Transfer From IBF/Transfer Dr. [debit]." Therefore, Elver's account statement does not support, and indeed refutes, FDIC's attempt to merge Elver's CD with its IBF.

  Third, there is no evidence to support the contention that Elver's CD was somehow linked to its IBF, thereby rendering the CD an IBF CD. Elver's CD had a different account number from its IBF (see id., Exs. C, D), and it received a higher rate of interest on the funds in the CD, as compared to the IBF. (See Elver's Mot., Ex. H at 86 (Gomez deposition).) And, although funds from Elver's CD and its IBF accounts were deposited in Elver's DDA checking account on the day each quarter when the CD matured, a new CD was always purchased contemporaneously in precisely the same amount as the CD that had just matured. (See, e.g., id., Ex. C.)

  In addition to these bank records, the testimony of CBC officials also refutes FDIC's theory that an IBF CD was offered to the bank's customers. Carmen Gomez, an international account officer at CBC, stated emphatically that the bank did not offer IBF CDs. (Id., Ex. H at 84 (Gomez deposition).) So did CBC's Senior Vice President, Benjamin Canto. (Id., Ex. I at 167 (Canto deposition).) Moreover, Joseph Bush, Jr., FDIC's Senior Financial Management Analyst in charge of numerous FDIC functions with respect to the closing of CBC (FDIC's Opp'n, Ex. 18 at 1), conceded that, despite his assertion that CBC offered IBF ...


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