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Feldman v. Federal Deposit Insurance Corp.

United States District Court, District of Columbia

December 21, 2016

LYNN FELDMAN, as Trustee of the Estate of Image Masters, Inc., et al., Plaintiffs,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Washington Mutual Bank, Defendant.

          MEMORANDUM OPINION

          ELLEN SEGAL HUVELLE United States District Judge.

         This matter concerns mortgage payments that six bankrupt businesses made to a failed bank in connection with a Ponzi scheme. Plaintiff Lynn Feldman, Chapter 7 Trustee of the estates of the businesses, filed this lawsuit against the Federal Deposit Insurance Corporation (“FDIC”), as receiver for the bank, to avoid and recover approximately $11, 894, 719.17 in transfers Feldman alleges the bank knew or should have known were fraudulent. (Am. Compl. ¶¶ 49-53, ECF No. 18.)

         The FDIC moves the Court to dismiss the amended complaint on multiple grounds: lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), failure to state a claim upon which relief can be granted under Rule 12(b)(6), failure to plead facts with sufficient particularity under Rule 9(b), and failure to join required parties under Rule 12(b)(7). (Def.'s Mot., Sept. 1, 2016, at 2-3, ECF No. 19). The FDIC further requests that the Court strike Feldman's demand for a jury trial. (Id. at 28.)

         Upon consideration of the pleadings and for the reasons that follow, the FDIC's motion to dismiss will be granted. Because the Court finds that it does not have jurisdiction, it need not address the FDIC's other arguments in favor of dismissal or its argument that the jury demand should be stricken.

         BACKGROUND

         The FDIC challenges this Court's jurisdiction on administrative-exhaustion grounds, and for similar reasons, it argues that Feldman's claim is time-barred. The sequence of events leading up to the lawsuit is therefore relevant to the disposition of the motion.

         Wesley Snyder was the sole owner and operator of Image Masters, Inc., and five other businesses through which Snyder perpetuated a multi-million dollar Ponzi scheme from 1988 to 2007. (Am. Compl. ¶¶ 5, 10, 44.) As part of the illegal scheme, Snyder convinced homeowners with existing mortgages to take out new, larger mortgages and give the proceeds of the refinancing to Snyder. (Id. ¶ 20.)[1] Snyder did not use the proceeds of refinancing to make investments or to immediately pay down the principal on the new mortgages, as the homeowners believed he would. (Id. ¶ 21.) Instead, Snyder used the money to perpetuate his scheme, ultimately stealing tens of millions of dollars from more than 800 homeowners. (Id. ¶¶ 23-24, 44.) Washington Mutual Bank was one of the banks that extended new mortgages to the victims of Snyder's scheme. (Id. ¶ 12.)

         On September 18, 2007, after the Ponzi scheme collapsed, Snyder's business entities each filed a voluntary petition for Chapter 7 bankruptcy. (Id. ¶ 2.)[2] Feldman was appointed as interim Chapter 7 Trustee of the estates of Snyder's businesses on September 19, 2007, the day after they filed for bankruptcy. (Id. ¶ 3.)[3]

         On September 25, 2008, over a year after Feldman became the Chapter 7 Trustee, the Office of Thrift Supervision closed Washington Mutual and appointed the FDIC as receiver pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”), Pub. L. No. 101-83, 103 Stat. 183 (1989) (codified in various sections of Title 12 of the U.S. Code). (Def.'s Mot. at 10; see Am. Compl. ¶ 7.) The FDIC set December 30, 2008, as the deadline for filing administrative claims in the receivership and published notices of the receivership and claims deadline in the Wall Street Journal on October 1, 2008, and October 31, 2008. (See Def.'s Mot., Ex. A.).

         On October 8, 2008, less than two weeks after Washington Mutual closed, Feldman sent a letter addressed to Mr. David Schneider, President of Washington Mutual Home Loan, Inc., to “advise[] Washington Mutual of her . . . claims.” (Am. Compl. ¶ 54.) Feldman did not receive a response to her letter from the former bank or from the FDIC. (See Id. ¶¶ 54-55.)

         Just under ten months after sending the letter to Schneider, Feldman filed a proof of claim with the FDIC, as receiver for Washington Mutual, on August 3, 2009. (Id. ¶ 55.) On or about September 18, 2009, the FDIC sent a letter to Feldman, which she received on September 24, 2009, disallowing the claim as untimely. (See Id. ¶ 56.) Finally, on November 16, 2009, Feldman brought this action against the FDIC, seeking review of the FDIC's decision to disallow her claims. (Id. ¶¶ 49-53.)[4]

         STANDARD OF REVIEW

         The FDIC has moved, inter alia, to dismiss for lack of subject-matter jurisdiction. When presented with a motion to dismiss on jurisdictional and other grounds, courts should first consider the Rule 12(b)(1) jurisdictional challenge. See Loughlin v. United States, 393 F.3d 155, 170 (D.C. Cir. 2004) (“The federal courts are courts of limited jurisdiction, and they lack the power to presume the existence of jurisdiction in order to dispose of a case on any other grounds.” (quoting Tuck v. Pan American Health Organization, 668 F.2d 547, 549 (D.C. Cir. 1981))); United States ex rel. Settlemire v. Dist. of Columbia, 198 F.3d 913, 920-21 (D.C. Cir. 1999) (citation omitted) (declining to issue a ruling on the merits after holding the court lacked jurisdiction).

         A jurisdictional challenge under Rule 12(b)(1) may be either facial or factual. “If a defendant mounts a ‘facial' challenge to the legal sufficiency of the plaintiff's jurisdictional allegations, the court must accept as true the allegations in the complaint and consider the factual allegations of the complaint in the light most favorable to the non-moving party.” Erby v. United States, 424 F.Supp.2d 180, 182 (D.D.C. 2006) (citing I.T. Consultants, Inc. v. Pakistan, 351 F.3d 1184, 1188 (D.C. Cir. 2003)). In a factual challenge, “the court may not deny the motion to dismiss merely by assuming the truth of the facts alleged by the plaintiff and disputed by the defendant.” Phoenix Consulting Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000). It must “go beyond the pleadings and resolve any disputed issues of fact the resolution of which is necessary to a ruling upon the motion to dismiss.” Id.

         Where, as here, the moving party has raised a factual challenge, “the plaintiff bears the burden of establishing the factual predicates of jurisdiction by a preponderance of the evidence.” See Erby, 424 F.Supp.2d at 182 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). “While the district court may consider materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction, the court must still accept all of the factual allegations in [the] complaint as true.” Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005) (citations and quotation marks omitted) (alteration in original).

         ANALYSIS

         Feldman invokes FIRREA as the basis of federal jurisdiction in this case. (See Am. Compl. ¶ 1 (citing 12 U.S.C. § 1821(d)(6)).) The FDIC argues that this Court is deprived of jurisdiction because, by not filing a timely claim with the FDIC, Feldman failed to exhaust the administrative remedies available to her.[5] Feldman contends that her failure to file a claim by the FDIC's deadline is excused by the late-filed claims exception, 12 U.S.C. § 1821(d)(5)(C)(ii), and that she therefore fully complied with FIRREA's administrative-claims process. The Court disagrees.

         I. THE FIRREA CLAIMS PROCESS ...


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