Commonwealth Of Massachusetts v. Federal Deposit Insurance Corporation

102 F.3d 615, 1996 U.S. App. LEXIS 33131
CourtCourt of Appeals for the First Circuit
DecidedDecember 19, 1996
Docket96-1548
StatusPublished
Cited by35 cases

This text of 102 F.3d 615 (Commonwealth Of Massachusetts v. Federal Deposit Insurance Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Commonwealth Of Massachusetts v. Federal Deposit Insurance Corporation, 102 F.3d 615, 1996 U.S. App. LEXIS 33131 (1st Cir. 1996).

Opinion

102 F.3d 615

65 USLW 2420

COMMONWEALTH OF MASSACHUSETTS, Plaintiff, Appellant,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION and Federal Deposit
Insurance Corporation, as Receiver for Bank Five
for Savings, et al., Defendants, Appellees.

No. 96-1548.

United States Court of Appeals,
First Circuit.

Heard Nov. 4, 1996.
Decided Dec. 19, 1996.

Thomas O. Bean, Assistant Attorney General, Boston, MA, with whom Scott Harshbarger, Attorney General of Massachusetts, was on brief, for plaintiff-appellant.

Mitchell E.F. Plave, Counsel, Washington, DC, with whom Ann S. DuRoss, Assistant General Counsel, and Colleen B. Bombardier, Senior Counsel, were on brief for defendant-appellee FDIC, in its corporate capacity.

Leslie Randolph, Counsel, Washington, DC. with whom Ann S. DuRoss, Assistant General Counsel, and Robert D. McGillicuddy, Senior Counsel, were on brief for defendant-appellee FDIC, as Receiver for Bank Five for Savings, et al.

Before SELYA, CYR and LYNCH, Circuit Judges.

LYNCH, Circuit Judge.

Against the backdrop of a general economic decline and tightened federal bank regulations, Massachusetts suffered forty-eight bank failures between 1987 and 1994. This case is part of the aftermath of that financial crisis. At issue is whether the Commonwealth of Massachusetts, acting under its abandoned property statute, may obtain either the federal deposit insurance proceeds or the pro rata distributions from abandoned accounts in failed Massachusetts banks. Considerable sums are at stake.

I.

The Federal Deposit Insurance Corporation was created by the Banking Act of 1933, Pub.L. No. 73-66, § 8, 48 Stat. 162, to alleviate hardships caused by bank failures. See S.Rep. No. 584, 72d Cong., 1st Sess. 10 (1932).1 The agency in its corporate capacity ("FDIC-Corporate") offers insurance on depositors' accounts for up to $100,000. 12 U.S.C. § 1821(a)(1)(B). Participating banks and thrifts pay premiums to the FDIC. Those premiums are used to maintain two insurance funds, the Bank Insurance Fund and the Savings Association Insurance Fund. Id. § 1821(a)(5), (6). When a bank fails, FDIC-Corporate draws money from one of these funds and either pays the insurance proceeds directly to depositors as an insured deposit or transfers the money to a new bank as a transferred deposit, using whichever method is more cost effective. Id. § 1821(f). Upon payment to the depositors, FDIC-Corporate becomes subrogated to the depositors' rights against the failed banks. Id. § 1821(g)(1).

The FDIC acting as a receiver ("FDIC-Receiver") winds up the affairs of failed banks and distributes any remaining assets pro rata to the bank's creditors. Id. §§ 1821(c)(2)(A)(ii); 1821(d)(11)(A). FDIC-Corporate may bring a claim against FDIC-Receiver for the insured depositors' pro rata shares of any distributed liquidated assets. See id. § 1821(g)(1).

Before 1988, FDIC-Corporate had generally honored claims by states, pursuant to their abandoned property acts, for the insured value of abandoned deposits at failed banks.2 Treatment of Abandoned Deposits and Property in Failed Depository Institutions: Hearing Before the Subcomm. on Financial Institutions Supervision, Regulation and Insurance of the House Comm. on Banking, Finance and Urban Affairs, 102d Cong., 2d Sess. 149 (1992) (Letter of Alice C. Goodman, Acting Director, Office of Legislative Affairs, FDIC). FDIC-Receiver continues to permit states that file timely claims pursuant to the provisions governing general creditors of the receivership estate to act on behalf of absent depositors and to claim those depositors' pro rata shares of any distributed liquidated assets. Id. at 95 (Testimony of Alfred J.T. Byrne, General Counsel, FDIC). However, after 1988, FDIC-Corporate began declining to pay states the insured value of abandoned accounts. Id. at 97-98. FDIC-Corporate asserted that its original policy was inconsistent with the plain language of the pre-1993 version of 12 U.S.C. § 1822(e), which provided that insurance funds not claimed by a depositor within eighteen months of the appointment of a receiver reverted back to the FDIC. Id; see also 12 U.S.C. § 1822(e) (1989) (current version enacted 1993).

The states, with Massachusetts in the vanguard, fought back. They lobbied Congress, leading to the enactment of compromise legislation, the Unclaimed Deposits Amendments Act of 1993 ("UDAA"), Pub.L. No. 103-44, 107 Stat. 220 (1993), under which the states receive the insured value of abandoned deposits for a 10-year period. If a depositor fails to make a claim during this time, the insurance proceeds on the abandoned account must be returned to the FDIC and all rights of the depositor are extinguished. 12 U.S.C. § 1822(e)(5); see infra note 7.

However, the UDAA expressly made the former version of § 1822(e) applicable to banks placed in receivership between January 1, 1989 and June 28, 1993, with one additional proviso. Claims by insured depositors at such banks made prior to the termination of the receivership estate are not time-barred. Pub.L. No. 103-44, § 2(b) (1993). Thus, depositors at banks placed in receivership between January 1, 1989 and June 28, 1993 have the longer of eighteen months or until the termination of the receivership estate to file claims with FDIC-Corporate for the insured value of their accounts. Id.

Massachusetts also turned to the federal judicial system for redress, claiming it is entitled to the insurance proceeds and the pro rata distributions from abandoned deposits in thirty-three failed Massachusetts banks for which the FDIC was appointed receiver between May 1990 and December 1992.3

II.

The Commonwealth has its own comprehensive legal framework, the Massachusetts Abandoned Property Act ("MAPA"), Mass. Gen. L. ch. 200A, for dealing with abandoned property. The federal government has a similarly intricate statutory and regulatory scheme relating to bank failures. The dispute between the Commonwealth and the FDIC involves the intersection of these two bodies of law.

The MAPA was enacted both to protect the rights of true owners when and if they appear and to bring additional revenues to the Commonwealth's treasury. Treasurer & Receiver Gen. v. John Hancock Mut. Life Ins. Co., 388 Mass. 410, 446 N.E.2d 1376, 1383 (1983). It creates a presumption that deposits are abandoned unless the owner has, during the past three years, either communicated with the deposit holder or engaged in certain other activities. Mass. Gen. L. ch. 200A, § 3. Deposit holders, including banks, are required to submit annual reports to the State Treasurer listing the names and addresses of depositors deemed to have abandoned accounts valued at more than $100. Id. § 7. The banks must send letters to the owners of such accounts at least sixty days before filing the report, giving notice that the deposits are about to be surrendered to the custody of the Commonwealth. Id. § 7A.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

NH Hospital Assoc., et al. v Burwell, et al.
2017 DNH 040 (D. New Hampshire, 2017)
Bernardo Ex Rel. M & K Engineering, Inc. v. Johnson
814 F.3d 481 (First Circuit, 2016)
Federal Deposit Insurance v. Estrada-Colon
848 F. Supp. 2d 206 (D. Puerto Rico, 2012)
Federal Deposit Insurance v. Estrada-Rivera
813 F. Supp. 2d 265 (D. Puerto Rico, 2011)
Miguelachuli v. Federal Deposit Insurance
799 F. Supp. 2d 141 (D. Puerto Rico, 2011)
Trompler, Inc. v. NLRB
Seventh Circuit, 2003
Trompler, Inc. v. National Labor Relations Board
338 F.3d 747 (Seventh Circuit, 2003)
United States v. Deaton
332 F.3d 698 (Fourth Circuit, 2003)
Mark Duckworth v. Pratt & Whitney, Inc.
152 F.3d 1 (First Circuit, 1998)
Duckworth v. Pratt & Whitney
First Circuit, 1998

Cite This Page — Counsel Stack

Bluebook (online)
102 F.3d 615, 1996 U.S. App. LEXIS 33131, Counsel Stack Legal Research, https://law.counselstack.com/opinion/commonwealth-of-massachusetts-v-federal-deposit-insurance-corporation-ca1-1996.