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Bank of America, N.A. v. Federal Deposit Insurance Corporation

United States District Court, District Circuit

August 26, 2013

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.




Plaintiff and Counterclaim Defendant Bank of America, N.A. ("BOA"), acting as the indenture trustee, collateral agent, custodian, and "in other capacities" with respect to short term and subordinated notes issued by Ocala Funding, LLC (the "Ocala Notes"), filed claims against the Colonial Bank ("Colonial") receivership on behalf of itself and two investors in the Ocala Notes. Dkt. No. 20 (First Amended Complaint ("FAC") at Introduction and ΒΆ 4). Defendant and Counterclaimant Federal Deposit Insurance Corporation ("FDIC"), in its capacity as the Receiver for Colonial, moves to dismiss the claims pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Dkt. No. 73 ("Mot."). The FDIC argues that in light of its recent formal determination that the assets of the Colonial receivership are insufficient to make any distribution on the claims of general unsecured creditors (the "No-Value Determination"), BOA's claims have "no value" and must therefore be dismissed because no case or controversy exists under Article III of the United States Constitution. Mot. at 2. Alternatively, the FDIC moves to dismiss BOA's claims as prudentially moot. Id.

BOA opposes the motion, arguing that it should be denied on "five separate and independent grounds." Dkt. No. 90 ("Opp.") at 2. First, BOA argues that the No-Value Determination only implicates general unsecured claims, and not the other "priority claims" that BOA filed against the Colonial receivership. Second, BOA argues that the No-Value Determination is fundamentally flawed and should not be accepted at face value. Third, BOA claims that even if its claims are moot, they can still be used as a setoff against the FDIC's counterclaims. Fourth, BOA contends that the FDIC has identified no "conventional legal basis for the Court to give dispositive weight to the no-value' determination.'" Lastly, BOA argues that-even if this Court rules against BOA on the four above grounds-it should refrain from dismissing BOA's claims until BOA has had an opportunity to challenge the No-Value Determination through the Administrative Procedures Act ("APA") process.

Having reviewed the briefing by the parties, together with all other relevant materials, the Court finds that the FDIC's No-Value Determination is a final agency action, and is therefore subject to challenge only pursuant to the APA. The No-Value Determination is binding on this Court and is preclusive as to whether there are now or ever will be assets sufficient to satisfy general unsecured claims against the Colonial receivership. The Court further finds that BOA has only asserted general unsecured claims. Because the Colonial receivership will never have the assets necessary to satisfy a judgment in BOA's favor, this Court lacks subject matter jurisdiction over BOA's claims. What is more, the claims against the receivership are prudentially moot. Thus, the Court will GRANT the FDIC's motion to dismiss BOA's affirmative claims. The Court's reasoning is set forth below.


This Court has described the financial transactions underpinning this case in great detail on multiple occasions. See, e.g., Dkt. No. 50. It will refrain from doing so again here. Instead, the Court will briefly outline the background of this dispute, and elaborate, as necessary, in the discussion below.

On August 3, 2009, federal agents raided the Florida offices of Taylor, Bean & Whitaker Mortgage Corp. ("TBW") and Colonial. Eventually, agents uncovered a multi-billion dollar fraudulent scheme that resulted in a tremendous financial loss to a number of financial entities. The discovery has spawned multiple lawsuits between these entities. In this lawsuit, BOA, acting in its capacity as the indenture trustee, custodian, and collateral agent for the Ocala Notes (Ocala was one of TBW's subsidiaries) as well as two investors in Ocala Notes, seeks to recover approximately $1.7 billion from the FDIC as the receiver for the now defunct Colonial and Platinum Community Bank ("Platinum"), another bank involved in the TBW scheme.[1] The FDIC, in turn, countersued, seeking to recover $900 million from BOA for allegedly breaching its duties as the custodian and bailee for Colonial.

On December 10, 2012, this Court issued a Memorandum Decision dismissing all of BOA's claims on behalf of Ocala, but did not dismiss certain claims to the extent that they were brought by BOA on behalf of the two investors and in BOA's individual capacity. Dkt. No. 50. Discovery commenced on the remaining issues.

On April 15, 2013, the FDIC issued the No-Value Determination regarding Colonial. See 78 Fed. Reg. 76, 23565 (April 15, 2013). The No-Value Determination announced that "insufficient assets exist in the receivership of Colonial [], to make any distribution on general unsecured claims, and therefore such claims will recover nothing and have no value." Id. It states that as of March 31, 2013, "the maximum value of assets that could be available for distribution by the Receiver, together with maximum possible recoveries on professional liability claims against directors, officers, and other professionals, as well as potential tax refunds, was $3, 282, 813, 040." Id. The No-Value Determination further states that as of that same date, the "administrative expenses and depositor liabilities equal $4, 981, 236, 544, exceeding available assets and potential recoveries by $1, 698, 423, 504." Id.


Federal courts are courts of limited jurisdiction. Harris v. Sebelius, ___ F.Supp.2d ___, 2013 WL 1209945, *1 (D.D.C. 2013). When a party files a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), "the plaintiff[] bear[s] the burden of proving by a preponderance of the evidence that the Court has subject matter jurisdiction." Id. (quoting Carney Hosp. Transitional Care Unit v. Leavitt, 549 F.Supp.2d 93, 95 (D.D.C. 2008)) (other citation and internal quotation marks omitted) (alterations in original). A court considering a motion to dismiss for lack of jurisdiction must accept the factual allegations in the complaint as true. Id. (citing Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005)). However, a court need not accept as true legal conclusions couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When assessing a motion to dismiss under Rule 12(b)(1), a court may consider any undisputed facts in the record, or "the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Harris, 2013 WL 1209945, *1 (quoting Herbert v. Nat'l Acad. of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1992)).

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint, or in this case, an amended complaint. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). To satisfy this test, a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint, " Atherton v. District of Columbia, 567 F.3d 672, 681 (D.C. Cir. 2009), and grant a plaintiff "the benefit of all inferences that can be derived from the facts alleged." Kowal v. MCI ...

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