Federal Deposit Insurance v. Dosland

50 F. Supp. 3d 1070, 2014 WL 4978550
CourtDistrict Court, N.D. Iowa
DecidedOctober 7, 2014
DocketNo. C 13-4046-MWB
StatusPublished
Cited by6 cases

This text of 50 F. Supp. 3d 1070 (Federal Deposit Insurance v. Dosland) is published on Counsel Stack Legal Research, covering District Court, N.D. Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Federal Deposit Insurance v. Dosland, 50 F. Supp. 3d 1070, 2014 WL 4978550 (N.D. Iowa 2014).

Opinion

MEMORANDUM OPINION AND ORDER REGARDING THIRD-PARTY PLAINTIFFS’ MOTION FOR JURISDICTIONAL DISCOVERY

MARK W. BENNETT, District Judge.

[1072]*1072TABLE OF. CONTENTS

I. INTRODUCTION.1072

A. Background.1072

B. Arguments Of The Parties.1073

II.LEGAL ANALYSIS.1076

A. The “Discretionarg Function Exception ”.1076
B. Standards For Jurisdictional Discoverg.1077
1. Discretion and factors.1077

2. Jurisdictional discoverg in FTCA “discretionarg function” cases.... 1078

C. Application Of The Standards .1081

III.CONCLUSION 1084

I. INTRODUCTION
A. Background

The Federal Deposit Insurance Corporation, as Receiver for Vantus Bank, (FDICR) filed this action, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 1811 et seq., against the former officers and directors of Vantus Bank in Sioux City, Iowa, asserting claims of gross negligence, negligence, and breach of fiduciary duty. The FDIC-R’s claims are based primarily on its allegations that the defendants caused Vantus Bank to use $65 million — 120 percent of its core capital — to purchase fifteen high risk collater-ized debt obligations backed by Trust Preferred Securities (CDO-TruPS) without due diligence and in disregard and ignorance of regulatory guidance about the risks of and limits on purchases of such securities.

On May 27, 2014, the officers and directors filed their Third-Party Complaint and Jury Demand (docket no. 54), asserting a claim pursuant to the Federal Tort Claims Act (FTCA), 28 U.S.C. § 2671 et seq. In their Third-Party Complaint, the officers and directors (hereafter, the third-party plaintiffs) allege that the United States acting as the Office of Thrift Supervision (OTS) owed duties to Vantus Bank, its stockholders, members, account-holders, depositors, officers, directors, the FDIC, and the Deposit Insurance Fund. They allege, further, that the OTS negligently violated that duty by failing to analyze accurately Vantus Bank’s investments and to take more timely action to remedy Vantus Bank’s alleged investment violations. The third-party plaintiffs allege that, because of the OTS’s negligence, the OTS should be apportioned a share of fault and be liable for contribution, pursuant to IOWA CODE CH. 668, for any damages sought by the FDIC-R.

In response, on July 15, 2014, the OTS filed a Motion To Dismiss (docket no. 63), seeking dismissal of the Third-Party Complaint for at least two independent reasons: (1) this court lacks jurisdiction, because the “discretionary function exception” to the FTCA applies in this case; and (2) even if this court has jurisdiction, the Third-Party Complaint fails to state a claim upon which relief can be granted, because the regulators and examiners owed no duty to the failed bank. Litigation of that motion was put on hiatus, when I entered an Order (docket no. 70), on August 1, 2014. In that Order, I granted the third-party plaintiffs to and including August 8, 2014, to file any motion for jurisdictional discovery and stated that the deadline for their response to the OTS’s Motion To Dismiss would be reset either upon denial of their anticipated mo[1073]*1073tion for jurisdictional discovery or upon the completion of any jurisdictional discovery allowed by the court.

The third-party plaintiffs’ Motion For Jurisdictional Discovery (docket no. 71), followed in due course, on August 8, 2014. On August 19, 2014, the OTS filed its Response To The Third-Party Plaintiffs’ Motion For Jurisdictional Discovery (docket no. 77), opposing any such discovery. On August 22, 2014, the FDIC-R filed its separate Resistance To Defendants’ Motion For Jurisdictional Discovery (docket no. 78), likewise opposing any such discovery. On September 8, 2014, the third-party plaintiffs filed their Reply In Support Of Motion For Jurisdictional Discovery (docket no. 85), responding to both the OTS’s and the FDIC-R’s resistances. In an Order (docket no. 87), filed September 9, 2014,1 took the unusual step of allowing the OTS to file a surreply to address what it argued were new legal arguments and new facts in the third-party plaintiffs’ Reply, primarily because the OTS’s request to file a surreply was unopposed. Thus, the OTS’s Surreply (docket no. 88) was filed September 9, 2014. With that filing, the briefing of the question of jurisdictional discovery was complete.

The third-party plaintiffs requested oral arguments on their Motion For Jurisdictional Discovery. The OTS stated in its Response that it neither resisted nor joined in that request, but it did opine that the nature of the issues presented makes oral arguments unnecessary in this instance. I agree with the OTS and note, further, that my crowded schedule has not permitted the timely scheduling of oral arguments. Therefore, I deny the third-party plaintiffs’ request for oral arguments, and I will consider their Motion For Jurisdictional Discovery fully submitted on the written submissions.

B. Arguments Of The Parties

In their Motion For Jurisdictional Discovery, the third-party plaintiffs seek discovery to determine the existence of a statute, regulation, or policy specifically prescribing a course of action or a mandatory timeline for the OTS to act with respect to Vantus Bank. They point out that the record shows that the OTS first raised concerns regarding certain of Vantus Bank’s investments in a letter dated June 26, 2007, but never “ordered” divestment of those assets; indeed, they argue, the OTS initially did nothing. It was not until February 13, 2008, they contend, that the OTS requested a “plan to obtain compliance” by March 15, 2008. They contend that the OTS’s delay had a significant effect on the damages claimed by the FDIC-R, because of the loss of liquidity in the securities at issue during the seven months that the OTS did nothing.

The third-party plaintiffs recognize that • this court lacks jurisdiction under the FTCA over claims arising from regulatory actions that fall within the “discretionary function exception.” The third-part plaintiffs argue that they have taken substantial steps to try to obtain discovery demonstrating that the OTS’s actions do not fall within this exception, despite attempts by the FDIC-R to block such discovery and the FDIC-R’s delays in producing such discovery once it was ordered to do so. They argue that, because of the FDIC-R’s tactics and delays, they were forced to file their Third-Party Complaint by an existing deadline to add parties, based on allegations of their beliefs concerning OTS’s failure to comply with mandatory requirements, rather than file a request for a further extension of the deadline to add parties until after the FDIC-R had fully complied with their discovery requests. They now assert that the FDIC-R and the OTS are attempting to place them in a [1074]

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Bluebook (online)
50 F. Supp. 3d 1070, 2014 WL 4978550, Counsel Stack Legal Research, https://law.counselstack.com/opinion/federal-deposit-insurance-v-dosland-iand-2014.