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Bank of America, N.A. v. F.D.I.C.

United States District Court, District of Columbia

December 10, 2012

BANK OF AMERICA, N. A., As Indenture Trustee, Custodian, and Collateral Agent for Ocala Funding, LLC, Plaintiff and Counterclaim Defendant,
FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as the Receiver for Colonial Bank, and in its capacity as the Receiver for Platinum Community Bank, Defendant and Counterclaim Plaintiff.

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Frank E. Emory, Jr., Patrick L. Robson, Hunton & Williams LLP, Charlotte, NC, Alissa Branham, Gregory D. Phillips, Marc T.G. Dworsky, Michael J. O'Sullivan, Richard C. St. John, Munger, Tolles & Olson, LLP, Los Angeles, CA, Bonnie K. Arthur, Hunton & Williams LLP, Washington, DC, Joseph J. Saltarelli, Michael B. Kruse, Hunton & Williams LLP, New York, NY, Kristin Linsley Myles, Sarala V. Nagala, Munger, Tolles & Olson LLP, San Francisco, CA, for Plaintiff and Counterclaim Defendant.

Athanasios Basdekis, Michael L. Murphy, Benjamin L. Bailey, Christopher S. Morris, Bailey & Glasser, LLP, Charleston, WV, for Defendant and Counterclaim Plaintiff.





A. Overview of TBW's Operation 69

B. Factual Background Common to All Claims 70

D. Factual Allegations Specific to BOA's Claims Against the FDIC 72

E. Factual Allegations Specific to the FDIC's Counterclaims Against BOA 74



A. Standards of Review 76

B. The FDIC's Motion to Dismiss the Amended Complaint 77

1. Whether This Court Has Subject Matter Jurisdiction over BOA's Claims 78

a. Whether BOA Exhausted the Administrative Remedies under FIRREA on behalf of Ocala 78

b. Whether BOA Has Standing to Bring Claims on Behalf of DB and BNP 83

i. Whether DB and BNP Have Article III Standing 83

ii. Whether BOA Can Pursue the Claims on Behalf of DB and BNP 85

c. Whether Counts IX, X, and XI Have Been Administratively Exhausted under FIRREA 86

2. Whether the Amended Complaint States a Claim for Fraudulent Transfer 86

3. Whether the Amended Complaint Pleads Fraud with the Requisite Specificity 90

C. BOA's Motion to Dismiss the FDIC's Counterclaims 91

1. Whether the Counterclaims are Barred by the Exculpatory Clauses 93

2. Whether the Counterclaims State a Claim for Breach of the Custodial Agreement 96

a. Counterclaim 1 96

b. Counterclaim 2 97

c. Counterclaim 3 98

d. Counterclaim 4 98

e. Counterclaim 5 99

3. Whether the Breach of Bailment Counterclaims Fail as a Matter of Law 100

a. Whether the Bailee Letters Are Enforceable Contracts between Colonial and BOA 101

b. Whether the Breach of Bailment Counterclaims State a Claim for Relief 106

4. Whether the Tort Counterclaims Fail As a Matter of Law 107

a. Whether the Economic Loss Doctrine Bars the Tort Claims 107

b. Whether the Custodial Agreement Limits BOA's Tort Liability 108


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Before the Court are two motions to dismiss. First, Defendant and Counterclaimant Federal Deposit Insurance Corporation (the " FDIC" ), in its capacity as the Receiver for both Colonial Bank (" Colonial" ) and Platinum Community Bank (" Platinum" ), moves to dismiss the First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6). (Dkt. No. 26.). Second, Plaintiff and Counterclaim-Defendant Bank of America,

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N.A., (" BOA" ) moves to dismiss the FDIC's Counterclaims pursuant to Rule 12(b)(6). (Dkt. No. 36.). Having considered the parties' arguments, pleadings, and the relevant case law, the court is fully advised. For the reasons set forth below:

IT IS HEREBY ORDERED that each motion is GRANTED in part and DENIED in part.


This dispute is the result of a multi-billion dollar fraudulent scheme that left the financial sector reeling. The scheme was orchestrated by Lee Farkas, the former chairman of Taylor, Bean & Whitaker Mortgage Corp. (" TBW" ), with the aid of several bank employees from Colonial and Platinum.[1] It stemmed from TBW's loan origination business, which started with humble roots in 1982, but grew at a frenetic pace as the United States' housing bubble grew. When the housing market began to crumble, so did TBW's finances. In 2002, Farkas and his coconspirators hid TBW's financial decline through a complex scheme that evolved over several stages. Initially, they disguised overdrafts on TBW's bank accounts held at Colonial by " sweeping" funds from other accounts into the overdrawn accounts. As TBW's deficit grew to well over $100 million, Farkas and his co-conspirators initiated more sophisticated measures, including selling sham mortgage loans, multi-pledging collateral, and overstating the actual value of TBW's and its subsidiaries' assets. In the final stage of the scheme, Farkas and his coconspirators attempted to fraudulently obtain $553 million from the Troubled Asset Relief Program. The scheme was eventually uncovered in August 2009. Farkas is now serving a 30-year sentence after being convicted in April 2011 of 14 counts of conspiracy and bank, wire, and securities fraud. A handful of other executives from TBW and Colonial have also been sentenced to prison for their roles in the fraud.

TBW's loan origination business operated through a complex web of financial agreements between multiple financial institutions. When TBW collapsed, these institutions were left behind in the wreckage. Many of these institutions turned to the courts to determine liability for the multi-billion dollar losses caused by the fraud. This is one such case. In this case, BOA, acting in its capacity as the Indenture Trustee, Custodian, and Collateral Agent for one of TBW's subsidiaries, Ocala Funding, LLC (" Ocala" ), seeks to recover approximately $1.7 billion from the FDIC as the Receiver for the now defunct Colonial and Platinum banks. The FDIC, in turn, has countersued. It seeks to recover $900 million from BOA for allegedly breaching its duties as the Custodian and Bailee for Colonial.

A. Overview of TBW's Operation

As previously stated, TBW operated through a complex web of financial arrangements with a number of financial institutions who operated in a number of different capacities. Before delving into the minutiae of these financing arrangements, it is helpful to understand the interplay between the various entities implicated in this lawsuit.

The process started with TBW originating a mortgage loan for an individual homebuyer. TBW funded the loan through a series of funding agreements it had with Colonial. Under these agreements, Colonial advanced funds to TBW in exchange for a 99% ownership interest in the loan; TBW retained a 1% ownership interest.

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At this point, Colonial and/or TBW sent the loan to BOA to be held for the benefit of Colonial and TBW (in their respective ownership interests). In this way, BOA acted as custodian and bailee of the loan for both Colonial and TBW.

Next, TBW's subsidiary, Ocala, purchased Colonial's 99% ownership interest in the loan, thereby effectively paying Colonial back the amounts Colonial had extended to fund the loan. Ocala raised the money needed to purchase Colonial's 99% ownership interest by selling short-term notes to outside investors, to wit, Deutsche Bank (" DB" ) and BNP Paribas (" BNP" ). TBW then notified BOA of Ocala's purchase of the loans and BOA would send the sale proceeds to Colonial from an account that Ocala maintained at BOA. At this point, BOA's relationship to the loan changed. BOA still held the loan, but now it retained the loan as the indenture trustee, custodian, and collateral agent for Ocala and Ocala's outside investors ( i.e., DB and BNP). BOA held the loan in a collateral account that Ocala maintained at BOA.

Next, TBW arranged for Ocala to sell the loan to Freddie Mac. The proceeds from that sale were placed in Ocala's collateral account at BOA and were either used to pay back DB and BNP or to purchase more loans from Colonial. Finally, BOA would send the loan to a Freddie Mac custodial account at Colonial. The transaction was then complete.

The fractures in TBW's operation were not discovered until TBW collapsed in August 2009. At that point, the participants realized that TBW had been manipulating the system. BOA alleges that Farkas and employees at Colonial and Platinum fraudulently diverted virtually all of Ocala's assets, the result of which was that Ocala was unable to make payments to its outside investors, and DB and BNP ultimately lost approximately $1.7 billion. BOA seeks to recover this loss from the FDIC as the Receiver for both Colonial and Platinum. The FDIC, in turn, alleges that at some point in 2008, TBW began to manipulate its operation such that thousands of loans were pledged as collateral to Ocala, Colonial, and Freddie Mac at the same time. The FDIC alleges that Colonial was unaware of this " multi-pledging scheme" and ultimately lost a total of $900 million. The FDIC claims that BOA was complicit in the " multi-pledging" and seeks to recover the $900 million loss from BOA.

With this background in mind, the Court now turns to the detailed factual allegations asserted by both BOA and the FDIC.

B. Factual Background Common to All Claims[2]

TBW was the largest independent ( i.e., non-depository owned) mortgage originator [3] and servicer [4] in the United States when it filed for Chapter 11 bankruptcy protection on August 24, 2009. (Dkt. No. 25 Answer to First Amended Complaint, Affirmative Defenses, and Counterclaims, at ¶ 9; Dkt. No. 20 First Amended Complaint at ¶ 27; Final Reconciliation Report of Debtor Taylor, Bean & Whitaker Mortgage

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Corp. (the " FRR" ) [5] at p. 9, ¶ 1, In re Taylor, Bean & Whitaker Mortg. Corp, No. 3:09-bk-07047-JAF (Bankr.M.D.Fla. filed Aug. 24, 2009), ECF No. 1644.). TBW provided mortgage financing to individual borrowers through a network of independent mortgage brokers and community banks. (FRR at p. 13, ¶ 18.). Its ultimate objective was to sell these mortgages to investors in the secondary market, typically Freddie Mac, and retain the right to service the mortgages for the investors. (Id.; Dkt. No. 20 at ¶ 31-32.).

In 2002 through 2009, TBW experienced tremendous growth in the number of loans it originated. For example, in 2004, TBW originated a total of 59,129 loans representing a dollar value in excess of $9.5 billion. (FRR at p. 14, ¶ 20.). By early 2009, TBW originated approximately 14,500 new loans representing a dollar value in excess of $2.7 billion every month. ( Id.; Dkt. No. 20 at ¶¶ 29-30.).

TBW required significant financing in order to fund its loans at the time of closing and then hold onto them until they could be sold to Freddie Mac. (FRR at p. 14, ¶ 22.). This is where Colonial came in. Colonial was key to TBW's financing needs, serving as TBW's primary source of funding through a number of different funding arrangements. (Dkt. No. 20 at ¶¶ 18 and 44.) In particular, Colonial provided funding through various mortgage participation [6] agreements that the parties refer to as the " COLB Facilities." ( Id. at ¶ 43.). Under the terms of the COLB Facilities, Colonial purchased from TBW a 99% participation interest in each loan that TBW originated; TBW retained a 1% participation interest in the loan. ( See Dkt. No. 25 at ¶ 11; FRR at p. 15, ¶ 24; Dkt. No. 20 at ¶ 43.). The parties refer to these loans as the " Participated Mortgage Loans." (Dkt. No. 25 at ¶ 11.).

As the United States' housing market began to show signs of weakness and TBW's sources of credit dried up, TBW sought additional sources of funding with which to originate and fund mortgages. ( Id. at ¶ 13.). To that end, TBW created Ocala in 2005. ( Id. at ¶ 14; FRR at pp. 53-54, ¶¶ 103-104.). TBW controlled Ocala and, as a practical matter, was fully responsible for all of Ocala's business activities. (Dkt. No. 20 at ¶ 53; FRR at p. 53, ¶ 103.).

TBW created Ocala to function as a conduit through which TBW could obtain funding from outside investors. (Dkt. No. 25 at ¶ 15; FRR at pp. 53-54, ¶ 104; Dkt. No. 20 at ¶ 49.). Ocala funded its operations by issuing short-term liquidity notes (the " Ocala Notes" ) that were supposed to be secured at all times by Participated Mortgage Loans that Ocala owned and/or the cash proceeds of the sale of these Loans to Freddie Mac. (Dkt. No. 25 at ¶¶ 15-19; Dkt. No. 20 at ¶¶ 50-51; FRR at p. 53-54, ¶ 104.). At the time of TBW's collapse, DB and BNP were the only holders of Ocala Notes. DB owned $1.2 billion of the Notes; BNP owned $480.7 million. (Dkt. No. 20 at ¶ 52; Dkt. No. 25 at ¶ 19.).

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TBW arranged for Ocala to purchase Colonial's 99% participation interest in each Participated Mortgage Loan that TBW funded through the Colonial COLB Facilities. (Dkt. No. 20 at ¶ 60; Dkt. No. 25 at ¶ 16.). By arranging for Ocala to purchase Colonial's 99% interest, TBW effectively paid back Colonial, which, in turn, freed up more funding for TBW to use from the COLB Facilities. (Dkt. No. 25 at ¶ 16.). Once Ocala owned the Loans, TBW arranged for the Loans to be sold to Freddie Mac. ( Id. at ¶ 17.). TBW would cause the proceeds from the Freddie Mac sale to either be applied to the balance outstanding on the Ocala Notes or to cause Ocala to buy more Participated Mortgage Loans from Colonial. Id.

BOA had several distinct but related roles in the above-described arrangement. First, TBW and Colonial needed a custodian to hold the Participated Mortgage Loans pending Ocala's purchase of Colonial's interest in the Loans. To that end, in July 2008, Colonial, TBW, and BOA entered into a contract entitled " Custodial Agreement." (Dkt. No. 25 at ¶ 22.). The provisions of the Custodial Agreement are set forth in greater detail herein at Section IV.D., but generally under this Agreement, BOA agreed to accept the Participated Mortgage Loans, hold them for the benefit of Colonial and TBW (to the extent of each entities' participation interest in the Loans), and either return the Loans to Colonial or remit payment to Colonial once the Loans were sold to Ocala. ( Id. at ¶¶ 22-23.). BOA was paid a fee for these services. ( Id. at ¶ 34.).

BOA asserts that the Custodial Agreement is the only agreement that governed this transfer of Loans. (Dkt. No. 36, BOA's Reply in support of its Motion to Dismiss, at 22.). The FDIC asserts that Colonial transmitted the Loans to BOA via bailee letters (the " Bailee Letter(s)" ) and that the Bailee Letters either modified the Custodial Agreement or constituted new, independent agreements between Colonial and BOA. (Dkt. No. 41, the FDIC's Opp. to BOA's Motion to Dismiss, at 10.). It is pursuant to these agreements that the FDIC brings its Counterclaims.

BOA also agreed to act as the Indenture Trustee, Custodian and Collateral Agent for the Ocala Facility. (Dkt. No. 20 at ¶ 10.). This agreement is reflected in a set of agreements that the parties refer to as the " Ocala Facility Documents." ( Id. at ¶¶ 53-54.). Three of these agreements are particularly relevant to this dispute, each dated June 30, 2008: (1) the Security Agreement, (2) the Purchase Agreement, and (3) the Base Indenture. The provisions of these agreements are discussed in detail herein at Section IV.C., but generally under these agreements, BOA agreed to administer and regulate the flow of mortgages and cash in and out of Ocala, certify the solvency of Ocala prior to its issuance of Ocala Notes, and, upon certain events of default, shut down Ocala and take other specific actions. BOA was paid a fee for these services.[7]

D. Factual Allegations Specific to BOA's Claims Against the FDIC

When TBW collapsed in August 2009, the parties discovered that the value of the collateral backing the Ocala Notes was grossly overstated. (Dkt. No. 20 at ¶ 1.). When the dust finally settled, Ocala owed DB and BNP approximately $1.7 billion, but the value of the mortgage loans backing

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the Ocala Notes coupled with Ocala's cash on deposit was less than $200 million. ( Id.; FRR at p. 63, ¶ 119.). BOA, in its capacity as Indenture Trustee, Custodian, and Collateral Agent under the Ocala Facility Documents, seeks to recover the amounts owed on the Ocala Notes from the FDIC as the Receiver for Colonial and Platinum. (Dkt. No. 20 at ¶ 1.). The substance of BOA's claims is that Colonial and Platinum were parties to TBW's fraudulent scheme that resulted in the loss of billions of dollars belonging to Ocala. (Dkt. No. 35, BOA's Opp. to the FDIC's Motion to Dismiss, at 1; Dkt. No. 20 at ¶¶ 1, 64-68, 106.).

Specifically, BOA alleges that when TBW began to experience significant liquidity problems in 2002, TBW and Colonial conspired to cover the cash shortfalls in TBW's master bank account (the " Master Account" ) by " sweeping" money from other TBW accounts at Colonial into the Master Account. (Dkt. No. 20 at ¶ 65a.). This gave the false appearance that the Master Account was not overdrawn. ( Id. ). The day after the funds were swept into the Master Account, TBW and Colonial swept the same funds back out of the Account. ( Id. ). BOA asserts that TBW and Colonial continued to disguise the Master Account's growing deficit by creating false mortgage loan data to give the impression that Colonial had purchased ownership interest in certain of TBW's loans. ( Id. at ¶ 65b.). BOA claims that Colonial knew that this data included loans that either did not exist or that TBW had already committed or sold to outside investors ( i.e., Freddie Mac). ( Id. ). BOA alleges that during this same time, " billions of dollars" were transferred from Ocala accounts to a TBW account at Colonial for the purpose of purchasing mortgages. ( Id. at ¶ 68.). However, BOA alleges, some of the funds were not actually used to purchase mortgages, or were used to purchase " sham" mortgages, and therefore, the transfers, were in fact, a theft of Ocala's assets. ( Id. ). Finally, BOA claims that TBW, Colonial, and Platinum diverted $50 million from Ocala to an escrow account at Platinum as part of their effort to fraudulently obtain TARP funds. ( Id. at ¶ 74.).

BOA maintains that TBW and the banks concealed the above-described fraudulent diversions from BOA and Ocala's investors by, among other things, providing BOA with falsified collateral lists that misrepresented the status of loans in which Ocala allegedly held a security interest. ( Id. at ¶ 65i.). According to BOA, these falsified collateral lists misrepresented the ownership status of loans allegedly held by Ocala by more than $1 billion. ( Id. ).

BOA asserts that the combined effect of the above-described fraudulent activities was that TBW, Colonial and Platinum fraudulently diverted virtually all of Ocala's assets, leaving it unable to pay its obligations when the fraud was uncovered. (Dkt. No. 20 at ¶ 1.). In bringing this action, BOA seeks to recover Ocala's losses from Colonial and Platinum for the benefit of Ocala, Ocala's investors ( i.e., DB and BNP), and BOA itself. BOA maintains that it is entitled to bring such claims and, indeed, is obligated to bring the claims as Indenture Trustee, Custodian, and Collateral Agent under the Ocala Facility Documents. (Dkt. No. 20 at ¶¶ 8-10; Dkt. No. 35 at 8.).

According to BOA, it is pursuant to these obligations that BOA commenced suit in the United States District Court for the Southern District of Florida against Colonial to recover mortgages and other assets allegedly belonging to Ocala. ( Id. at ¶¶ 102, 104.). The Eleventh Circuit dismissed the case, stating that BOA had to proceed through the statutory administrative claims process created by Congress

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for distressed financial institutions. ( See Dkt. No. 35 at 9 (citing Bank of Am. N.A. v. Colonial Bank, 604 F.3d 1239, 1241 (2010)).). Therefore, on November 19, 2009 and December 9, 2009, BOA filed proofs of claim with the FDIC (as the Receiver for Colonial and Platinum), seeking allowance of general unsecured claims against Colonial and Platinum, respectively, for the losses suffered by Ocala and its investors ( i.e., DB and BNP). ( Id. at ¶¶ 123-124 and 137-138.).

The parties dispute on whose behalf BOA filed the proofs of claim. BOA asserts that it filed the claims on behalf of Ocala, Ocala's investors ( i.e., DB and BNP) and itself. ( See Dkt. No. 35 at 16.). The FDIC counters that the claims were only filed on behalf of DB and BNP. ( See Dkt. No. 26, the FDIC's Motion to Dismiss, at 9.). On August 4, 2010, the FDIC disallowed the claim against Colonial. (Dkt. No. 20 at ¶ 130.). Similarly, on August 5, 2010, the FDIC disallowed the claim against Platinum. ( Id. at 144.). BOA filed the present action seeking a de novo review of the FDIC's denial of the receivership claims (Counts I through IV). ( Id. at ¶ 10.). BOA also alleges claims for fraud (Count V), civil conspiracy (Count VI), unjust enrichment (Count VII), conversion (Count VIII), and actual and constructive fraudulent transfer (Counts IX and X). ( Id. at ¶¶ 169-234.).

E. Factual Allegations Specific to the FDIC's Counterclaims Against BOA

The FDIC concedes that Colonial employees were involved in aspects of TBW's fraudulent scheme. (Dkt. No. 41 at 4.). However, it claims that these employees were not involved in any wrongful actions with respect to Ocala. ( Id. ). Instead, the FDIC maintains that Ocala's inability to pay back the Ocala Notes was due to a facet of TBW's scheme of which Colonial was unaware, and that TBW was only able to pull off because BOA breached its obligations to Colonial. (Dkt. No. 25 at ¶¶ 1-8.).

The FDIC alleges that in July 2008, Colonial, TBW, and BOA entered into the Custodial Agreement. ( Id. at ¶ 22.). The stated purpose of the Custodial Agreement was to govern the transfer of the Participated Mortgage Loans from TBW to Colonial pursuant to the mortgage participation agreement under the Colonial COLB Facilities. ( See Custodial Agreement at Recitals attached as Ex. A to Dkt. No. 36-1, Declaration of Kristin Linsley Myles (the " Myles Decl." )). Under the Agreement, BOA " agreed to act on behalf of [Colonial] and [TBW] ... as [Colonial's] and [TBW's] agent and bailee (to the extent of their respective ownership interests in Participated Mortgage Loans) for purposes of holding the [documents] related to the Participated Mortgage Loans ..." . ( Id. ). The FDIC also asserts that Colonial routinely transferred the Participated Mortgage Loans and associated documents to BOA under cover of a standard bailee letter (the " Bailee Letters" ), utilizing the letter as a Loan Transmittal Sheet. (Dkt. No. 25 at ¶ 31; see also a copy of a Bailee Letter attached as Ex. B to Dkt. No. 36-1, Myles Dec.).

The FDIC claims that the Custodial Agreement and Bailee Letters, together and separately, establish that BOA was Colonial's agent and bailee, placing certain obligations on BOA. (Dkt. No. 25 at ¶¶ 24-25.). Among other things, BOA was obliged to hold the Participated Mortgage Loans for Colonial's exclusive use and benefit and for the purpose of perfecting Colonial's ownership in the Loans until Colonial was paid for their sale. ( Id. ). The FDIC alleges that BOA breached these obligations in the following manner.

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The FDIC claims that at some point beginning around June 2008, TBW started notifying BOA that Ocala had " purchased" certain Participated Mortgage Loans from the Colonial COLB Facilities, but would never instruct BOA to pay Colonial for the Loans that Ocala allegedly purchased. ( Id. at ¶ 43.). [8] Instead, BOA would receive the Loans from TBW and enter them into its collateral management system as collateral for DB and BNP without first paying Colonial. ( Id. ). Next, BOA would assist Ocala in selling the Loans to Freddie Mac. ( Id. ). The FDIC asserts that BOA would accomplish this by falsifying Freddie Mac Form 996E forms entitled " Warehouse Lender Release of Security Interest," on which BOA would state that it was the " Warehouse Lender," that TBW was the " Seller," and that there were no other encumbrances on the Loans. ( Id. at ¶ 44.).

The FDIC claims that after Freddie Mac paid Ocala for the Loans, TBW would instruct BOA to forward the sales proceeds to Colonial. ( Id. at ¶ 45.). However, the sales proceeds were not used to pay Colonial for the Loans that were just sold to Freddie Mac; instead, the FDIC alleges, TBW directed BOA to pay Colonial for Loans that had been shipped to BOA earlier and that had already been sold by Ocala to Freddie Mac in the intervening time. ( Id. ). In effect, the new sales proceeds were used to pay Colonial for its prior sales to Ocala. Thus, Ocala was never current on the amount that it owed Colonial. The FDIC asserts that a substantial number of these Loans were listed as collateral under the Colonial COLB Facilities even though Colonial was not paid for the Loans at the time of Ocala's " purchase" of the Loans. ( Id. ). The FDIC asserts that the net effect of this course of conduct was that thousands of Participated Mortgage Loans were sold to Freddie Mac but remained listed in BOA's system as collateral for the Ocala Notes. ( Id. at ¶¶ 45-49).

The FDIC asserts that the above-described process was unknown to Colonial at the time because Colonial still typically received payment for the Loans within the appropriate amount of time under the Bailee Letters. ( Id. at 46.). However, when TBW collapsed in August 2009, the process described above came to an abrupt halt. ( Id. ). At that time, Colonial, DB/BNP, and Freddie Mac each believed that they owned the same 4,205 Participated Mortgage Loans, and Colonial and Freddie Mac believed that they owned an additional 603 Loans. (Dkt. No. 25 at ¶ 48.). In other words, according to the FDIC, in August 2009, BOA was obligated to Colonial for 4,808 Participated Mortgage Loans with a total value of $900 million. ( Id. at ¶ 49.). The FDIC filed sixteen Counterclaims alleging breach of contract, bailment, fiduciary duties, and common law bailment with respect to these 4,808 Participated Mortgage Loans. ( Id. at ¶¶ 67-154.).


BOA commenced this action on October 1, 2010. (Dkt. No. 1.). The FDIC moved to dismiss the Complaint on March 14, 2011. (Dkt. No. 16.). In response, BOA moved to amend the Complaint pursuant to 12 U.S.C. § 1821(d)(6)(A)(ii), which the Court granted on April 11, 2011. (Dkt. Nos. 19-20; Minute Entry dated April 11, 2011.). The FDIC filed the present motion to dismiss, and also filed an Answer and Counterclaims. (Dkt. Nos. 25 and 36.).

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On October 24, 2011, BOA moved to dismiss the FDIC's Counterclaims pursuant to Rule 12(b)(6), claiming that each Counterclaim fails as a matter of law. (Dkt. No. 37.). The case was reassigned to this District Court Judge on January 27, 2012. (Dkt. No. 42.). Thereafter, BOA filed a motion before the Judicial Panel on Multidistrict Litigation to transfer this case to the Southern District of New York. In re Ocala Funding, LLC, 867 F.Supp.2d 1332 (U.S.Jud.Pan.Mult.Lit.2012). On March 20, 2012, this Court stayed the case pending the Panel's resolution of the motion. (Minute Entry dated March 20, 2012.). On June 18, 2012, the parties notified the Court that the Panel denied BOA's motion to transfer the case, and the Court lifted the stay. (Minute Entry dated June 18, 2012.).

The Court heard oral arguments on the cross motions to dismiss on October 2, 2012. (Minute Entry dated October 2, 2012.). The motions are now ripe for review.


A. Standards of Review

1. The Standard of Review for 12(b)(1) Motions

The FDIC moves to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1). When a party files a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), " the plaintiff[ ] bear[s] the burden of proving by a preponderance of the evidence that the Court has subject matter jurisdiction." Biton v. Palestinian Interim Self-Gov't Auth., 310 F.Supp.2d 172, 176 (D.D.C.2004). Because subject matter jurisdiction focuses on a court's power to hear the plaintiff's claim, a Rule 12(b)(1) motion imposes on the court an affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority. Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C.2001). For this reason, BOA's " ‘ factual allegations in the complaint ... will bear closer scrutiny in resolving [the] 12(b)(1) motion’ than in resolving [the] 12(b)(6) motion for failure to state a claim." Id. at 13-14 (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed.1987) (alternation in original)).

In deciding the Rule 12(b)(1) motion, this Court need not limit itself to the allegations of the Amended Complaint. See Hohri v. United States, 782 F.2d 227, 241 (D.C.Cir.1986), vacated on other grounds, 482 U.S. 64, 107 S.Ct. 2246, 96 L.Ed.2d 51 (1987). Rather, this Court may " consider such materials outside the pleadings as it deems appropriate to resolve the question whether it has jurisdiction in the case." Scolaro v. D.C. Board of Elections and Ethics, 104 F.Supp.2d 18, 22 (D.D.C.2000) (citing Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C.Cir.1992)); see also Venetian Casino Resort, L.L.C. v. E.E.O.C., 409 F.3d 359, 366 (D.C.Cir.2005) (" given the present posture of this case— a dismissal under Rule 12(b)(1) on ripeness grounds— the court may consider materials outside the pleadings" ).

2. The Standard of Review for 12(b)(6) Motions

The FDIC and BOA both move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), " a complaint must contain sufficient factual matter, accepted as true, to ‘ state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007))

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(internal quotes omitted). This Court must construe the operative pleading in the light most favorable to the pleader and must accept as true all reasonable factual inferences drawn from well-pleaded factual allegations. Aktieselskabet AF 21 November 2001 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C.Cir.2008). This Court need not, however, " accept inferences drawn by [pleaders] if such inferences are unsupported by the facts set out in the [operative pleading]. Nor must the [C]ourt accept legal conclusions cast in the form of factual allegations." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994).

If the well-pleaded facts do not permit the Court, drawing on its judicial experience and common sense, to infer more than the " mere possibility of misconduct," then the operative pleading has not shown that the pleader is entitled to relief. Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citing Fed.R.Civ.P. 8(a)(2)). " The plausibility standard is not akin to a ‘ probability requirement,’ but it asks for more than a sheer possibility that [the movant] has acted unlawfully." Id. at 678, 129 S.Ct. 1937 (citation omitted). " Where a complaint pleads facts that are merely consistent with [the movant's] liability, it stops short of the line between possibility and plausibility of entitlement to relief." Ashcroft, 556 U.S. at 678, 129 S.Ct. 1937 (internal citation and quotation marks omitted).

In addition, because this Court's review of the Rule 12(b)(6) motions is based upon consideration of the allegations contained in the operative pleadings, the Court will not consider extraneous documents, except under limited circumstances. See generally Hinton v. Corr. Corp. of Am., 624 F.Supp.2d 45, 46 (D.D.C.2009). For instance, this Court may consider documents attached to the Amended Complaint and/or Counterclaims, Stewart v. Nat'l Educ. Ass'n, 471 F.3d 169, 173 (D.C.Cir.2006), or referred to in the Amended Complaint and/or Counterclaims if the documents are central to the claims and the parties do not dispute the documents' authenticity, Kaempe v. Myers, 367 F.3d 958, 965 (D.C.Cir.2004). Here BOA and the FDIC refer the Court to a number of documents that are central to their respective claims, the authenticity of which is not contested. Accordingly, the Court has considered these documents in resolving these motions.

B. The FDIC's Motion to Dismiss the Amended Complaint

The FDIC and BOA each move to dismiss their counterparts' claims in their entirety. The Court will address the FDIC's motion first. The FDIC moves to dismiss the Amended Complaint pursuant to Federal Rule 12(b)(1) for failure to exhaust administrative remedies under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (" FIRREA" ) and for lack of standing. ( See Dkt. No. 26, at 2-3.). The FDIC also asserts, again pursuant to FIRREA, that this Court lacks subject matter jurisdiction over the three equitable claims (Counts II, IV, and VII). ( Id. at 4.).

In the alternative, the FDIC seeks to dismiss Counts V (Fraud), IX (Actual Fraudulent Transfer), and X (Constructive Fraudulent Transfer) for failure to state a claim upon which relief can be granted. ( Id. ). The FDIC contends that the Amended Complaint does not allege several of the material elements necessary to state a claim for actual and/or constructive fraudulent transfer, and does not assert factual allegations sufficient to establish entitlement to relief. ( Id. ) The FDIC also alleges that the fraud claim does not meet the heightened pleading requirements of

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Federal Rule 9(b). ( Id. ). The Court addresses each argument in turn.

1. Whether This Court Has Subject Matter Jurisdiction over BOA's Claims

Federal courts are courts of limited jurisdiction and have subject matter jurisdiction only to the extent that it is conferred by statute or the Constitution. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C.Cir.2004) (noting that " [a]s a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction" ). The claimant bears the burden of establishing by a preponderance of the evidence that a court has jurisdiction; failure to do so is fatal to the claim. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Kokkonen, 511 U.S. at 377, 114 S.Ct. 1673. A court must dismiss a complaint for lack of subject matter jurisdiction where " it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Bobreski v. U.S. E.P.A., 284 F.Supp.2d 67, 72 (D.D.C.2003) (quoting Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 315 F.3d 338, 343 (D.C.Cir.2003)). A court may consider relevant materials outside the pleadings to determine whether it has jurisdiction. Wilson v. District of Columbia, 269 F.R.D. 8, 11 (D.D.C.2010).

The FDIC contends that this Court does not have subject matter jurisdiction over the claims asserted in the Amended Complaint for the following three reasons. First, to the extent that BOA seeks to recover damages allegedly incurred by Ocala, this Court is without jurisdiction because Ocala has not exhausted its administrative remedies under FIRREA. Second, to the extent that BOA seeks to recover damages allegedly incurred by DB and BNP, this Court is without jurisdiction because DB's and BNP's injuries are derivative of Ocala's injuries and, as such, cannot confer Article III standing. Third, the FDIC argues that Counts VI (Civil Conspiracy), IX (Actual Fraudulent Transfer) and X (Constructive Fraudulent Transfer) have not been exhausted under FIRREA. [9]

a. Whether BOA Exhausted the Administrative Remedies under FIRREA on behalf of Ocala

In enacting FIRREA, Congress created a comprehensive statutory scheme under which it granted the FDIC the authority to act as the Receiver for a failed financial institution. The " core purpose" of FIRREA is to " ensure that the assets of a failed institution are distributed fairly and promptly among those with valid claims against the institution." Freeman v. FDIC, 56 F.3d 1394, 1401 (D.C.Cir.1995). Congress intended to grant the FDIC the " power to take all actions necessary to resolve problems posed by financial institutions in default" in an " expeditious manner." H.R.Rep. No. 101-54(I) at 322, 330, as reprinted in 1989 U.S.C.C.A.N. 86, 118, 126. To that end, Congress created a statutory procedure for the orderly and

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efficient processing of claims against failed financial institutions. This administrative claims process, set forth in 12 U.S.C. §§ 1821(d)(3) through (13), centralizes the initial consideration and resolution of claims by requiring that all claims be submitted to the Receiver by the " claims bar date," a date certain established by the Receiver. Once a timely administrative claim is submitted, the Receiver has 180 days to determine whether to approve or disallow the claim. Id. § 1821(d)(5)(A)(i). The Receiver may disallow any portion of a timely claim that is not proven to the Receiver's satisfaction. Id. §§ 1821(d)(5)(C), 1821(d)(5)(D). Section 1821(d)(6)(A) also establishes that a claimant can file a new suit, or continue a pre-existing suit, on a claim within 60 days after the earlier of (i) the Receiver's initial determination of a claim, or (ii) termination of the 180-day period in which the Receiver may determine the claim. In such a suit, the court performs a de novo judicial determination of the claim. Id. § 1821(d)(5)(A)7(E).

The administrative claims process is mandatory. Thus, in Section 1821(d)(13)(D), Congress withdrew jurisdiction from all courts to hear claims against the FDIC as Receiver, except as granted elsewhere in Section 1821(d). See Freeman, 56 F.3d at 1399-1400. The jurisdictional bar provision and the claims procedures work together to impose a " statutory exhaustion requirement" that is " explicitly jurisdictional." Rosa v. RTC, 938 F.2d 383, 395 (3d Cir.1991), cert. denied, 502 U.S. 981, 112 S.Ct. 582, 116 L.Ed.2d 608 (1991); see Freeman, 56 F.3d at 1400 (" Section 1821(d)(13)(D) thus acts as a jurisdictional bar to claims or actions by parties who have not exhausted their § 1821(d) administrative remedies." ). This Circuit recognizes that " [j]urisdictional provisions in federal statutes are [ ] strictly construed." Hardin v. City Title & Escrow Co., 797 F.2d 1037, 1040 (D.C.Cir.1986); Freeman, 56 F.3d at 1400 (strictly applying Sections 1821(d)(6) and (13)(D) to dismiss claims for lack of jurisdiction); see Office & Prof'l Emps. Int'l Union, Local 2 v. FDIC, 962 F.2d 63, 66 (D.C.Cir.1992) (" FIRREA ... preclude[s] suit on a claim that was not first presented to the Receiver." ); see also, Brady Dev. Co. v. RTC, 14 F.3d 998, 1007 (4th Cir.1994) (" The administrative prerequisite to suit set forth [FIRREA] has been strictly construed and is considered an absolute and unwaivable jurisdictional requirement ...." ) (internal quotation marks and brackets omitted).

In the suit at hand, BOA purports to assert claims on behalf of Ocala. The FDIC moves to dismiss these claims, arguing that neither Ocala, nor BOA on Ocala's behalf, filed an administrative claim with the FDIC, as is required to confer jurisdiction upon this Court. The FDIC asserts that while BOA contends that it filed administrative claims on behalf of Ocala ( i.e., the November 19 and December 19, 2009 proofs of claim referenced above in Section II.D.), the claims themselves reveal that they were actually filed on behalf of DB, BNP, and BOA. In support of its argument, the FDIC points to the cover page for each proof of claim on which " claimant" is identified as " BOA as Trustee (as defined in Exhibit A hereto)." (Dkt. No. 20 at Exs. A and C.). Exhibit A, in turn, states that the claim is submitted " on behalf of the Secured Parties, as defined in the [Ocala Facility Documents]." ( Id. ). The FDIC asserts that Ocala is not included in ...

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