Bruneau v. F.D.I.C.

• Court: Court of Appeals for the Fifth Circuit
• Decided: December 29, 1992
• Docket: 92-3256
• Status: Published

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________________

No. 92-3256 _____________________________

JAQUELINE B. BRUNEAU,

Plaintiff-Appellant, Cross-Appellees,

versus

FEDERAL DEPOSIT INSURANCE CORPORATION, As Receiver for Bankers Trust, N/A., ET AL.,

Defendant-Appellees.

ROB A. HARDESTY, ROBERT L. KAREM, RAYMOND A. LAPINO, SR., and MYRON E. MOOREHEAD,

Defendants-Appellees, Cross-Appellants.

_________________________________________________

Appeal from the United States District Court for the Eastern District of Louisiana _________________________________________________

(November 12, 1992)

Before KING, DAVIS, and WIENER, Circuit Judges.

PER CURIAM:

In this appeal from the district court's grant of summary

judgment in favor of Defendant-Appellee Federal Deposit Insurance

Corporation (FDIC), Plaintiff-Appellant Jacqueline B. Bruneau

asserts that the district court misapplied the law of constructive

trust, the holding in Downriver Community Federal Credit Union v. Penn Square Bank,1 and the D'Oench, Duhme doctrine.2 As we find the

district court's decision to be free of reversible error, we

affirm.

I

FACTS AND PROCEDURAL HISTORY

In early December 1988, Bruneau opened three accounts at

Bankers Trust of Louisiana (Bankers Trust) and made deposits into

all three totalling of $223,125.76. Bruneau asserts that an

employee of the bank represented that the three accounts would be

insured up to $100,000 each by the FDIC, and that Bruneau thus

believed that all of her money was insured.3 For purposes of this

review, we assume the truth of those representations by Bruneau.

In early March 1989, the Comptroller of Currency declared

Bankers Trust insolvent and terminated its existence as a national

banking association.4 The Comptroller appointed the FDIC as

receiver of Bankers Trust.

Bruneau filed a claim for recovery of her deposits with the

FDIC. The FDIC paid Bruneau $100,000 and issued her a Receivers

1 879 F.2d 754 (10th Cir. 1989), cert. denied, 493 U.S. 1070 (1990). 2 See D'Oench, Duhme & Co. v. Federal Deposit Ins. Co., 315 U.S. 447, 460 (1942). 3 This was clearly incorrect. 12 C.F.R. § 330.5 (1989) provides: "Funds owned by natural persons and deposited in one or more deposit accounts in his or her own name shall be added together and insured up to $100,000 in the aggregate." 4 See 12 U.S.C. § 191 (1988).

2 Certificate for the additional $123,473.53, entitling her to a

ratable distribution along with other uninsured depositors and

general creditors. Since obtaining the Receivers Certificate,

Bruneau has received a number of payments from the FDIC. When the

district court rendered its decision in the instant case, these

payments totaled $59,817.82. The FDIC asserts that four more

payments))totaling $12,936.26))were made after the court's last

calculation date and were thus not included in the $59,817.82

amount.

Unhappy with her share of the proceeds of the bank

distribution under the National Banking Act, Bruneau sued the FDIC

and several former officers and employees of the bank (Hardesty et

al.), who she alleged made the misrepresentations to her. Bruneau

claimed that the FDIC, by its predecessors, had breached its

fiduciary duty to her, had violated Louisiana statutory law, had

committed "concerted tort action" with some of the employees of the

bank, and had effectively created a constructive trust in her

favor.

The district court granted summary judgment in favor of the

FDIC. The court reasoned that the Bruneau's constructive trust

theory did not constitute a viable claim for a number of reasons.

One of those reasons was that the claims were barred by the

D'Oench, Duhme doctrine. The court held that Bruneau's other

claims were barred by the D'Oench, Duhme doctrine and § 1823(e) of

FIRREA.5 Bruneau timely appealed.

5 12 U.S.C. § 1823.

3 II

ANALYSIS

A. Bruneau's Claims

1. Effect of D'Oench, Duhme

The district court relied on several theories in rejecting all

of Bruneau's claims. One of the theories properly espoused by the

district court here is that Bruneau's claims are barred by the

D'Oench, Duhme doctrine. The district court found correctly that

all of the claims are based on bank personnel's misrepresentations

and fraudulent acts, all of which, for purposes of this appeal, we

assume to have occurred. Under D'Oench, Duhme and its statutory

counterpart, a claimant against the FDIC must produce evidence that

the agreement made with the bank meets all of the FIRREA

requirements.6 As the district court found, none of these

requirements were met by Bruneau. The agreement was not in

6 The relevant portion of FIRREA provides: No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 11 [12 U.S.C.S. § 1821], either as a security for a loan or by purchase or as a receiver of any insured depository institution, shall be valid against the Corporation unless such agreement)) (1) is in writing, (2) was executed by the depository institution and any person claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution, (3) was approved by the board of directors of the depository institution or its loan committee, . . . and (4) has been, continuously, from the time of its execution, an official record of the depository institution. 12 U.S.C.S. § 1823(e) (Supp. 1992).

4 writing; it was not executed by the depository institution

contemporaneously with the acquisition of the asset; it did not

have the required approval of bank executives; and it was not

continuously held as an official bank record.

Bruneau asserts in her brief to this court that "D'Oench,

Duhme is not apposite. Ms. Bruneau is not basing her claim for

recovery on the ground of a secret or side agreement, but rather on

the ground that this transaction never could occur because the bank

was prohibited from taking funds, thereby making this transaction

void from the beginning."7 Bruneau badly mischaracterizes her

position. Her entire case rests on the theory that the officers of

the bank committed a fraud by allowing her to deposit money when

they knew the bank was insolvent. The D'Oench, Duhme doctrine and

§ 1823(e) are directly implicated by a fraud accusation. Without

meeting the requirements of either, Bruneau's claims are barred.

2. Hopeless Insolvency

Bruneau's other argument involves the hopelessly outdated

"hopeless insolvency" doctrine, which was recently discussed in

dicta of the Tenth Circuit in the Downriver decision.8 The

district court's opinion ably explains the effect of the hopeless

insolvency doctrine, the dicta in the Downriver decision, and

7 We, like the district court before us, will ignore the gaping hole in Bruneau's logic that if there was no deposit ("th[e] transaction never could occur"), the FDIC would be responsible for nothing because its liability is triggered only by deposits. 8 879 F.2d at 761-63.

5 everything else relative to this essentially frivolous ground of

appeal. We refuse to expend any more judicial resources trying to

convince counsel that this turn-of-the-century doctrine has long

since ceased to have any contextual relevance in light of the

banking reforms that have occurred in this country during the past

sixty years.

B. The Cross-Appeal of Hardesty et al.

After the dismissing the FDIC with prejudice, the district

court turned to the state law claims that had been filed by Bruneau

against Hardesty et al. As to these claims, the court stated:

The remaining claims are for "intentional misrepresentation" (First Claim), "negligent misrepresentation" (Second Claim), "breach of fiduciary duty" (Fourth Claim), "violation of Louisiana Revised Statutes" (Fifth Claim), [and] "concerted tort action" (Sixth Claim). Each is based in Louisiana law, albeit as to the fifth claim, some of the defendants have filed a motion based on preemption of state law.

The court then held that it was without subject matter jurisdiction

and declined to exercise pendant jurisdiction over the remaining

parties. It then dismissed Bruneau's claims against Hardesty et

al. without prejudice.

Seeking to change the dismissal from one without prejudice to

one with prejudice, Hardesty et al. assert on appeal that the

district court erred in dismissing their claims for lack of subject

matter jurisdiction. They ground their appeal on the theory that

the Louisiana statute involved in Bruneau's charge of "violation of

6 Louisiana Revised Statutes"9 is preempted by federal banking law

and that the preemption in and of itself supports federal question

jurisdiction. Alternatively, they argue that the district court

should have addressed the state law claims under its pendant

jurisdiction. We dismiss out-of-hand the assertion that the

district court abused its discretion in not exercising pendant

jurisdiction over the state law claims.

It is clear from the opinion of the district court that it

dismissed Bruneau's claims against Hardesty et al. without

considering the claim of federal question jurisdiction arising from

the preemption of state law. This refusal to consider the claim

does not place the issue beyond our review, however, as the

preemption question is a matter of law that we would review de novo

if it had been fully considered by the district court.

Federal preemption most often appears as a defense to a

plaintiff's claim. Thus, the "federal issue does not appear on the

face of the plaintiff's complaint."10 Consequently, "a preemption

defense cannot be the basis of the original federal jurisdiction."11

As noted by the Seventh Circuit, the Supreme Court has

fashioned a narrow exception to this rule. The preemption defense

can "be the basis of the original federal jurisdiction" when

9 LA. REV. STAT. ANN. § 6:419 (West 1986 & Supp. 1992). 10 Lister v. Stark, 890 F.2d 941, 943 (7th Cir. 1989), cert. denied, 111 S. Ct. 579 (1990). 11 Id. (discussing jurisdiction sufficient to make removal proper)(citing Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987)); see Louisville & Nashville R.R. v. Mottley, 211 U.S. 149 (1908).

7 Congress has completely preempted a given area of state law. This "complete preemption" exception permits recharacterization of a plaintiff's state-law claim to a federal claim . . . .12

Hardesty et al. thus assert that § 6:419 of the Louisiana Revised

Statutes has been preempted by federal banking regulations to the

point that the asserted violation of that statute is no more than

a federal claim masquerading as a state claim. We disagree.

In Metropolitan Life Ins. Co. v. Taylor,13 the Supreme Court

found that "ERISA's preemption provision is . . . so strong that

every claim for benefits under a covered plan is regarded as

arising under the laws of the United States."14 Similarly, "[i]t

has long been recognized that section 301 of the Labor Management

Relations Act, 29 U.S.C. § 185, has such preemptive force."15 To

determine whether the statute has such preemptive force, there must

be evidence of "'the clearly manifested intent of Congress'" that

such preemption occur.16

In the instant case, no evidence of congressional intent to

preempt the area of law so pervasively has been presented to this

court. Instead, Hardesty et al. have thoroughly convinced us that

a defense of preemption exists in this context. They point to a

case from the Eastern District of Louisiana involving the same bank

12 Id. 13 481 U.S. at 63. 14 Trans World Airlines, Inc. v. Mattox, 897 F.2d 773, 787 (5th Cir.), cert. denied, 111 S. Ct. 308 (1990). 15 Id. 16 Id. (quoting Taylor, 481 U.S. at 67).

8 failure and the same defendants as the instant case, in which they

successfully used preemption as a defense to similar claims.17

Hardesty et al. now assert that "[t]he precise issue now before the

court has already been resolved in favor of defendants/cross

appellants" in the Mortgage Market case. Clearly, Hardesty et al.

misapprehends the distinction between that which was decided in

Mortgage Market and that which they presently urge to us.

In Mortgage Market, the district court held that "federal law

pre-empts [sic] application of La.Rev.Stat. § 6:419 or state

fiduciary law which would hold Hardesty, et al [sic] liable for the

uninsured portion of [the plaintiff]'s certificate of deposit."18

As irrefutable a proposition of law as that may be, it is entirely

different from the present assertion by Hardesty et al. that

federal law is so strongly preemptive in this area of the law that

plaintiff's claim "is regarded as arising under the laws of the

United States."19 Hardesty et al. cites nothing to this court (and

our research reveals nothing) to indicate that Congress intended to

"treat a complaint raising [these matters] as 'necessarily federal

in character'"20 Simply put, Hardesty et al.'s demonstration that

the defense of preemption applies does not create a basis for

subject matter jurisdiction in the same manner as does "super-

17 Mortgage Mkt., Inc. v. Federal Deposit Ins. Corp., 780 F. Supp. 406, 407-08 (E.D. La. 1991). 18 780 F. Supp. at 408. 19 Trans World Airlines, 897 F.2d at 787. 20 Id. (citing Taylor, 481 U.S. at 63-64).

9 preemption" of an ERISA provision or section 301 of the LMRA.

Hardesty et al. thus fail to convince us that such "super-

preemption" exists here.

Hardesty et al.'s claims may well have merit; they have merely

been asserted in the wrong place. The district court dismissed the

claims against Hardesty et al. without prejudice. Even though the

federal preemption cannot sustain federal subject matter

jurisdiction, it may be asserted in an effort to fend off any state

court claims against these defendants.

III

CONCLUSION

We are not impressed with Bruneau's assertions of error by the

district court. Unavoidably, the D'Oench, Duhme doctrine bars the

claims asserted by Bruneau against the FDIC. The district court's

analysis of the "hopeless insolvency" doctrine and the dicta found

in the Downriver decision to the instant case was correct. And the

district court did not abuse its discretion in refusing to exercise

pendant jurisdiction over the state law claims against Hardesty et

al. The district court's judgment is thus

AFFIRMED.