Commonwealth of Mass v. FDIC

• Court: Court of Appeals for the First Circuit
• Decided: February 8, 1995
• Docket: 94-1649
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 94-1649

                            COMMONWEALTH OF MASSACHUSETTS,

                                     Petitioner,

                                          v.

                        FEDERAL DEPOSIT INSURANCE CORPORATION,

                                     Respondent.

                                 ____________________

                        ON PETITION FOR REVIEW OF AN ORDER OF

                      THE FEDERAL DEPOSIT INSURANCE CORPORATION
                                 ____________________

                                        Before

                            Cyr and Boudin, Circuit Judges,
                                            ______________

                             and Keeton,* District Judge.
                                          ______________

                                 ____________________

            Thomas  O.  Bean, Assistant  Attorney  General,  with  whom  Scott
            ________________                                             _____
        Harshbarger, Attorney General, was on brief for petitioner.
        ___________
            Edward J.  O'Meara, Counsel,  with whom  Ann S.  Duross, Assistant
            __________________                       ______________
        General Counsel, and Richard J. Osterman, Jr., Senior Counsel, were on
                             ________________________
        brief for respondent.

____________________

                                   February 8, 1995
                                 ____________________

__________

        *Of the District of Massachusetts, sitting by designation.



BOUDIN, Circuit Judge.  In the  years 1990 through 1992,
                         _____________

            the  Federal  Deposit  Insurance  Corporation  was  appointed

            receiver  for  over 30  banks  principally  located or  doing

            business  in Massachusetts.   Massachusetts has  an abandoned

            property statute, Mass. Gen. L.  ch. 200A, that arguably gave

            Massachusetts title under state law to certain of the insured

            deposits  in these banks, based  on the failure  of the named

            depositors to  communicate with their banks  over an extended

            period.   Some of these potential claims had matured prior to

            the banks' failure; others occurred during the receivership.

                 In March  1994, Massachusetts  wrote to the  FDIC naming

            the  banks  and asserting  that  the  Commonwealth owned  the

            abandoned  deposits and  that the FDIC  was obligated  to pay

            deposit    insurance   benefits   on    those   accounts   to

            Massachusetts.  An FDIC attorney responded in April 1994 with

            a   two-paragraph   letter  to   the   Commonwealth's  lawyer

            reiterating  the  FDIC's  position  that  the  "Massachusetts

            abandoned property law is preempted by federal law provisions

            which  dictate  the   disposition  of  unclaimed   deposits."

            Treating   this  letter   as  a   dispositive  determination,

            Massachusetts in  June 1994  filed a  petition in  this court

            seeking review of the FDIC's action.

                 The  underlying  dispute   raises  important   questions

            including interpretation of  a federal statute--the Unclaimed

            Deposits  Amendments Act  of 1993--which  became law  in June

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1993.  107  Stat. 220.   The FDIC position  on the merits  is

            that   federal  law  preempts   the  Massachusetts  abandoned

            property statute as to abandoned deposits held by the FDIC as

            receiver.  But the FDIC urges us not to reach  the merits and

            instead to dismiss for lack of subject matter jurisdiction.

                 We do not  reach the  merits because we  agree with  the

            FDIC's  threshold defense  that direct  review of  the FDIC's

            action  in this court is  not authorized by  statute and that

            the  matter must  be resolved  in the  first instance  in the

            district court.   The jurisdictional issue  turns, by general

            agreement, on  12 U.S.C.    1821(f), whose  third and  fourth

            paragraphs read as follows:

                 (3) Resolution of disputes
                 (A)  Resolution in accordance to corporation regulations
                           In the case of  any disputed claim relating to
                      any  insured  deposit   or  any  determination   of
                      insurance coverage with respect to any deposit, the
                      Corporation  [the FDIC]  may resolve  such disputed
                      claim  in accordance with regulations prescribed by
                      the   Corporation   establishing   procedures   for
                      resolving such claims.

                 (B)  Adjudication of claims
                           If   the   Corporation   has  not   prescribed
                      regulations  establishing procedures  for resolving
                      disputed  claims, the  Corporation may  require the
                      final   determination  of  a   court  of  competent
                      jurisdiction before paying any such claim.

                 (4) Review of Corporation's determination
                           Final  determination  made by  the Corporation
                      shall be reviewable in accordance with chapter 7 of
                      Title 5 by  the United States Court  of Appeals for
                      the District  of Columbia  or the court  of appeals
                      for   the  Federal   judicial  circuit   where  the
                      principal  place  of  business  of  the  depository
                      institution is located.

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It  is common  ground that  the FDIC  has chosen  not to

            adopt   "regulations  .  .   .  establishing  procedures  for

            resolving  such  claims"  to  insured  deposits  or insurance

            coverage.  In these circumstances, the D.C. Circuit held that

            direct court  of appeals  review under section  1821(f)(4) is

            not  available and that such a dispute must first be resolved

            in  a court  of  general jurisdiction,  normally the  federal

            district court.  See  Callejo v. RTC, 17 F.3d 1497 (D.C. Cir.
                             ___  _______    ___

            1994).  Massachusetts, in  response, relies upon decisions of

            the Second and Fifth Circuits that read section 1821(f)(4) to

            permit immediate court of appeals review.1

                 Our  issue  is thus  one on  which  very able  judges in

            different   circuits   have  reached   opposite   results  in

            construing a rather brief set of statutory provisions.  There

            is  certainly  some  looseness  in the  language  of  section

            1821(f); but in the end we  agree with the D.C. Circuit  that

            language and policy alike favor  the FDIC's position.   Since

            two other circuits disagree,  we think it fitting to  explain

            our  reasoning  briefly  instead   of  relying  solely  on  a

            reference to the excellent discussion in Callejo.
                                                     _______

____________________

                 1Kershaw v. RTC, 987 F.2d 1206 (5th Cir. 1993); Nimon v.
                  _______    ___                                 _____
            RTC, 975 F.2d  240 (5th Cir. 1992); Abrams v.  FDIC, 938 F.2d
            ___                                 ______     ____
            22 (2d Cir. 1991).   The FDIC cites us to unpublished  orders
            of the Third and Fourth Circuits that appear to coincide with
            Callejo's approach  so Callejo may  represent the  "majority"
            _______                _______
            view. 

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In  enacting section  1821(f), Congress  explicitly gave

            the  FDIC two ways to resolve disputes about insured deposits

            and  insurance coverage  of deposits.   First,  the FDIC  can

            resolve the  disputes  itself  by  adopting  regulations  for

            resolving such  claims.  Section  1821(f)(3)(A).  If  it does

            so, then  under section 1821(f)(4) the  dissatisfied claimant

            can  obtain  direct court  of  appeals review  of  the FDIC's

            "final   determination"   pursuant   to  the   Administrative

            Procedure  Act,   5  U.S.C.      701-06.    Second,  if  "the

            Corporation  has  not prescribed  regulations"  for resolving

            such claims, the FDIC "may require the final determination of

            a  court of  competent  jurisdiction  before  resolving  such

            claims."  Section 1821(f)(3)(B).

                 The  phrase "court of  competent jurisdiction" assuredly

            refers to a federal district court or, absent  exclusivity or

            removal, a state  trial court.  The  phrase is often  used in

            this manner, e.g., Watkins v. Green, 548 F.2d 1142, 1143 (4th
                         ____  _______    _____

            Cir. 1977) (construing  5 U.S.C.    703), and  this usage  is

            plainly what is  intended here.   The reference  occurs in  a

            section  juxtaposed with one calling for direct review in the

            court of appeals;  and in context the  provision assumes that

            the court of  competent jurisdiction will adjudicate  factual

            disputes  when the  FDIC has  not established  procedures for

            doing so.

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Against  this  background,  we  think  that  in  section

            1821(f)  Congress  deliberately  set  forth  two  alternative

            methods of  resolving deposit and insurance  claims, and made

            the  course to  be followed  depend on  whether the  FDIC has

            established regulations  for the adjudication of such claims.

            If  it has, the agency decides the factual disputes and there

            is direct court of  appeals review; if  it has not, then  the

            agency's less formal resolution is subject to  scrutiny in an

            action brought  in a  trial court of  competent jurisdiction,

            which will normally be the federal district court.2

                 True,  the  statute's language  is  not  airtight.   The

            direct route to  the court  of appeals is  available, as  the

            statute  phrases  the  matter,   when  there  is  a  "[f]inal

            determination"  by the  FDIC.   In the  abstract, the  quoted

            phrase could refer either to a determination made  under FDIC

            regulations as  provided  in section  1821(f)(3)(A) or  could

            include  far less formal  resolutions, such as  the letter at

            issue in this case.  But,  in context, the latter is surely a

            less plausible reading of the words; and it becomes even less

            plausible when history and function are considered.  

____________________

                 2The  district courts have original jurisdiction of such
            actions without reference to amount in controversy, 12 U.S.C.
              1819(b)(2)(A),  and the FDIC would  almost certainly remove
            any   such  action  brought  in   a  state  court.     Id.   
                                                                   ___
            1819(b)(2)(B).  Strictly speaking, section 1819(b)(2)(A) does
            not confer jurisdiction; it  simply recognizes that there are
            courts of general jurisdiction able to entertain such claims.

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The tradition  of judicial review of  official action is

            complex enough  that  few statements  about  it can  be  made

            without   qualification.     Still,  broadly   speaking,  two

            different  avenues for  judicial review  have existed  in the

            federal  courts:   one  involves an  original  action in  the

            district court to enjoin unlawful official action, especially

            where no  other  means  is provided;  the  other,  used  with

            increasing frequency where an agency has authority to resolve

            factual  disputes in  the first  instance, is to  empower the

            court  of  appeals  to  review  the  agency  directly.    See
                                                                      ___

            generally Note, Jurisdiction to Review Federal Administrative
            _________       _____________________________________________

            Action:  District Court or Court of Appeals, 88 Harv. L. Rev.
            ___________________________________________

            980 (1975).

                 Because of  the crisis out  of which its  present powers

            have  emerged, the  FDIC  and its  companion, the  Resolution

            Trust Corporation,  have  enjoyed a  succession of  statutory

            favors relating  to their powers,  procedures and limitations

            on judicial intervention.   As a part  of this mosaic, it  is

            not at all surprising that Congress would empower the FDIC to

            make the  initial choice whether to  adjudicate claims itself

            or insist that this task be  performed by the courts.  In the

            former  case  the  FDIC   would  have  to  expend  additional

            resources but  in return it  would be more likely  to enjoy a

            greater degree of deference  in its resolution of issues.   5

            U.S.C.    706(2)(A), (E).

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Thus,  in  constructing  section  1821(f)  Congress  has

            simply borrowed  from  two different  traditions of  judicial

            review,  indeed,  the  two   dominant  traditions.    It  has

            authorized  one to be used  if the agency  configures its own

            procedures  to   conform  to  the  model   of  formal  agency

            adjudication; it has provided for the other to be used if the

            agency chooses not  to do so but, by  some less formal means,

            makes  clear  its  unwillingness  to pay.    The  puzzle fits

            together quite  neatly.  Nor is it unprecedented for Congress

            to deploy both methods for a single agency.  See Note, supra,
                                                         ___       _____

            88 Harv. L. Rev. at 981 & n.11.

                 The final  reason for resolving  any doubts in  favor of

            the D.C.  Circuit's approach  is functional.   Under Callejo,
                                                                 _______

            the court of appeals is the court of first instance where the

            agency  has in  place  a procedure  to  resolve any  disputed

            facts.   Alternatively,  the district  court--which  has  the

            capacity for making fact findings  as a matter of  course--is

            the  court of first instance where the agency has declined to

            establish  an  adjudicatory procedure.   This  is not  only a

            rational  plan,  but  one  that corresponds  exactly  to  the

            bifurcation in the statutory language.

                 Of course,  one could make the choice  of judicial forum

            turn  on whether  in  a particular  case  there were  factual

            disputes still to  be resolved.  But this is  a call that can

            often be  made only  during the  process of judicial  review.
                                 ______

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Rules to determine which  court has jurisdiction ought  to be

            clear  and easily  applied  at the  outset.   In  any  event,

            everything  in the  statutory language  leans against  ad hoc
                                                                   ______

            choices:   what matters under the statute is whether the FDIC

            has adopted (and presumablyused) regulations foradjudication.

                 In our own case  it would probably be more  efficient to

            resolve  the merits in this court at once, because the merits

            issues appear to be  entirely legal.  But we are dealing with

            a jurisdictional statute adopted  by Congress and intended to

            be observed uniformly.  On a more practical level, experience

            teaches  that in  the  end, a  clear  and simple  schema  for

            judicial  review saves time for  everyone.  If  this case had

            begun  in the  district court,  we might  now be  deciding an

            appeal by one side or the  other from summary judgment on the

            merits.

                 In sum, the statutory language of  section 1821(f)--read

            in context--amply supports the D.C. Circuit's interpretation.

            If reading the  statute in  this fashion produced  an odd  or

            impractical   outcome,   one    might   search   for    other

            interpretations; but the bifurcation squares with the history

            of  judicial review  proceedings in  federal courts,  and the

            framework  is  eminently workable.    The only  quirk  is the

            initial  choice provided  to  the agency;  but  it is  easily

            explained,  by  the  banking  crisis,  and  in  any case  was

            explicitly conferred by Congress.

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The  FDIC has  tendered  an  alternative  jurisdictional

            defense, namely, that section 1821(f) is entirely irrelevant-

            -and therefore  cannot confer  jurisdiction on the  courts of

            appeals--because  Massachusetts' claims  raise a  broad legal

            issue  and are thus not  claims for insurance  benefits.  The

            Commonwealth's claims,  however, were explicitly  for deposit

            insurance benefits.  A claim for such insurance benefits does

            not cease to be so because of the substantive issue raised by

            the specific claim or the number of claims made.  

                 Given  that two  circuits have  read section  1821(f) to

            favor direct court of appeals review, no criticism can attach

            to  the   Commonwealth's  choice   in  this  case   to  begin

            proceedings  in this  court.   To  avoid  any risk  that  the

            Commonwealth might be prejudiced by having to start a new law

            suit, we exercise our authority "in the interest  of justice"

            to transfer  this  case  to the  district  court  instead  of

            dismissing.  See 28 U.S.C.   1631;  Callejo, 17 F.3d at 1501.
                         ___                    _______

            The district  court, of course, may require that the petition

            be  reframed as  a complaint  and follow  whatever procedural

            course it deems appropriate.

                 Similarly,  all issues  are open  to the  district court

            except the two specifically decided in this opinion.  We have

            decided here  only that the Commonwealth's  claims are claims

            for  insurance benefits  and that  federal-court jurisdiction

            over the  FDIC's  disposition  of such  claims  lies  in  the

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district court rather than in the court of appeals.   We have

            not considered  whether  the FDIC's  determinations here  are

            "final" to  the extent required for  judicial intervention or

            any other  such question.  Our purpose  in saying this is not

            to inject new issues, but simply  to make plain that we  have

            decided only the two matters actually briefed and argued.

                 This case  is transferred to the  United States District
                               ___________

            Court for the District of Massachusetts.

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