Federal Deposit Insurance v. Meyerland Co.

910 F.2d 1257, 1990 WL 120704

Opinions

DUHÉ, Circuit Judge:

Proceedings Below and Appellate Jurisdiction

Meyerland Co. and William M. Adkinson sued Continental Savings Association (“Continental”) for, among other things, usury and fraud in state court. Continental counterclaimed for fraud and breach of contract. The trial court awarded Continental $30,031,089.99 and Adkinson $1,124,-109.59 in damages. Meyerland and Adkin-son appealed.

After the appeal was filed, the Federal Home Loan Bank Board declared Continental insolvent and appointed the Federal Savings and Loan Insurance Corporation (FSLIC) as receiver. The FSLIC removed to federal district court which remanded on April 21, 1989.

On August 9, 1989, the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), Pub.L. 101-73, 103 Stat. 183 was enacted. The Federal Deposit Insurance Corporation (FDIC) succeeded the FSLIC as the receiver of Continental and the FDIC then removed this case on September 7, 1989 under § 209[4] of the FIRREA (12 U.S.C. § 1819(b)(2)(B)).¹ The district court again remanded and awarded the appellees $2,500 in sanctions.

The FDIC appeals. Although re-, mand orders are generally not appealable, 12 U.S.C. § 1819(b)(2)(C) authorizes an appeal in this case. This appeal presents two issues: (1) Whether 12 U.S.C. § 1819(b)(2) authorizes the FDIC to remove a state court appellate proceeding; and (2) Whether the district court erred in awarding sanctions.

(1) Whether Congress meant what it said.

12 U.S.C. § 1819(b)(2) states:

(A) In general

Except as provided in subparagraph (D), all suits of a civil nature at common law or in equity to which the Corporation, in any capacity, is a party shall be deemed to arise under the laws of the United States.

(B) Removal

Except as provided in subparagraph (D), the Corporation may ... remove any such action, suit, or proceeding from a state court to the appropriate United States district court, (emphasis supplied).

The exception in subparagraph (D) does not apply to the instant case and the sole issue to be decided, therefore, is whether Congress meant to authorize the FDIC to remove a state court appellate proceeding. To decide this issue, we must first determine (A) whether Article Three authorizes jurisdiction over this type of removal and, (B) if so, whether Congress meant to authorize appellate removal when it enacted § 1819(b)(2).²

(A) Article Three

It is black letter law that “Congress may not expand the jurisdiction of the federal courts beyond the bounds established by the Constitution.” Verlinden B. V. v. Central Bank of Nigeria, 461 U.S. 480, 491, 103 S.Ct. 1962, 1970, 76 L.Ed.2d 81 (1983). The power of Congress to authorize removal of cases on appeal has been repeatedly affirmed. See Martin v. Hunter’s Lessee, 14 U.S. (1 Wheat.) 304, 349, 4 L.Ed. 97 (1816) (“Congress ... may authorize removal either before or after judgment.”); Gaines v. Fuentes, 92 U.S. 10, 18, 23 L.Ed. 524 (1876); and Tennessee v. Davis, 100 U.S. 257, 269, 25 L.Ed. 648 (1880). Congress, however, has seldom chosen to exercise this power and we must decide whether it has done so by enacting the FDIC removal statute.³

(B) The FDIC Removal Statute

The FDIC argues that 12 U.S.C. § 1819(b)(2) means exactly what it says and since it does not exclude appellate removal, then it authorizes appellate removal. We would agree with the FDIC that the plain meaning of the statute controls its interpretation. See Mills v. Director, 877 F.2d 356, 362 (5th Cir.1989) (en banc) (Duhé, J., dissenting). Jurisdictional statutes, however, must also be interpreted with an eye towards history. Justice Frankfurter in Romero v. International Terminal Operating Co., 358 U.S. 354, 360-379, 79 S.Ct. 468, 473-484, 3 L.Ed.2d 368 (1959) explained:

[abstractly stated, the problem is the ordinary task of a court to apply the words of a statute according to their proper construction. But ‘proper construction’ is not satisfied by taking the words as if they were self-contained phrases. So considered, the words do not yield the meaning of the statute. The words we have to construe are not only words with a history. They express an enactment that is part of a serial, and a serial that must be related to Article III of the Constitution, the watershed of all judiciary legislation, and to the enactments which have derived from that Article.

If the history of the interpretation of judiciary legislation teaches anything, it teaches the duty to reject treating such statutes as a wooden set of self-sufficient words.... [We must not forget that it] is a statute, not a Constitution, we are expounding.

History tells us clearly what Congress meant when it enacted 12 U.S.C. § 1819(b)(2). In Osborn v. Bank of the United States, 22 U.S. (9 Wheat) 738, 822, 6 L.Ed. 204 (1824) Justice Marshall expounded on the outer limits of Article Three jurisdiction: “when a question to which the judicial power of the Union is extended by the constitution forms an ingredient of the original cause, it is in the power of Congress to give the circuit courts jurisdiction of that cause.” Osborn “reflects a broad conception of ‘arising under’ jurisdiction, according to which Congress may confer on the federal courts jurisdiction over any case or controversy that may call for the application of federal law.” Verlinden, 461 U.S. at 492, 103 S.Ct. at 1970. Even though the only issues to be decided are ones of state law, Article Three permits the exercise of jurisdiction if one of the parties is a federal corporation. See, e.g., The Bank of the United States v. The Planters’ Bank of Georgia, 22 U.S. (9 Wheat) 904, 6 L.Ed. 244 (1824). Congress however, did not actually grant the lower federal courts removal jurisdiction over federal question cases until 1875.⁴ This statute, the predecessor to 28 U.S.C. § 1441, was given an expansive interpretation in the Pacific Railroad Removal Cases, 115 U.S. 1, 5 S.Ct. 1113, 29 L.Ed. 319 (1885). The Pacific Railroad Court relied on Osborn to hold that “every case, irrespective of its nature, brought by or against a federally charted corporation is a suit arising under the ‘laws of the United States.’ ” Frankfurter, Distribution of Judicial Power Between United States and State Courts, 13 Cornell L.Q. 499, 509 (1928). The expansive reading given by the Pacific Railroad Court to “arising under” was soon curtailed. Id. See also Romero, 358 U.S. at 379 n. 50, 79 S.Ct. at 484 n. 50. 28 U.S.C. § 1331, for example, is interpreted more narrowly than the Constitution permits. Verlinden, 461 U.S. at 494-95, 103 S.Ct. at 1971-72. The general removal statute, 28 U.S.C. § 1441, is also not interpreted as broadly as it could be. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941) (the “policy of the successive acts of Congress regulating the jurisdiction of the federal courts is one calling for the strict construction of [removal]”) and Willy v. Coastal Corp., 855 F.2d 1160 (5th Cir.1988). See also Collins, The Unhappy History of Federal Question Removal, 71 Iowa L.Rev. 717 (1986). It is clear that no federal jurisdiction exists over the present dispute under either 28 U.S.C. § 1331 or § 1441 because the issues are governed by state law and federal law is a small ingredient of the dispute. See Gully v. First National Bank at Meridian, 299 U.S. 109, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936) (for a suit to “arise under” federal law, a “right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiffs cause of action”) and Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). It is equally clear that Congress enacted 12 U.S.C. § 1819 precisely so that the FDIC could enjoy federal question jurisdiction similar to that articulated in Osborn and the Pacific Railroad Removal Cases. See Pernie Bailey Drilling Co. v. FDIC, 905 F.2d 78, 79-80 (5th Cir.1990); Franklin National Securities Litigation v. Andersen, 532 F.2d 842 (2nd Cir.1976); and FDIC v. George-Howard, 153 F.2d 591 (8th Cir.), cert. denied, 329 U.S. 719, 67 S.Ct. 53, 91 L.Ed. 623 (1946). Thus, § 1819 authorizes the exercise of jurisdiction over a dispute which involves only issues of state law and to which the FDIC is a party.

History does not tell us, however, whether 12 U.S.C. § 1819 supports the exercise of removal jurisdiction over an appellate proceeding. The appellants rely on Barrow v. Hunton, 99 U.S. 80, 25 L.Ed. 407 (1879) to argue that the removal of a post-judgment proceeding is improper. In Barrow, Hunton won a state court judgment. The judgment debtor moved to have the judgment nullified and Hunton removed. The Supreme Court reasoned that if the removed proceeding was an appeal or similar to an appeal of a state court judgment, then removal would be improper because “[ojtherwise, the [lower federal courts] would become invested with power to control the proceedings in the state courts, or would have appellate jurisdiction over them.... Such a result would be totally inadmissible. Id. 99 U.S. at 83.

The appellants’ reliance on Barrow, however, is misplaced. First, the limits which Barrow placed on removal jurisdiction are statutory.⁵ Thus, even if we were to concede that Barrow is still good law for the purposes of 28 U.S.C. § 1441,⁶ it is not conclusive for our purposes. Congress clearly intended that the FDIC removal statute be given a different interpretation than the general removal statute. Second, Barrow relied on an interpretation of removal which may well be no longer valid. Barrow rests on the notion that removal is like an appeal because the proceeding did not commence in federal court. The modern view of removal, however, is that it is more closely akin to original than to appellate jurisdiction because once the ease is removed, it is treated as if it had commenced in federal court. See Freeman v. Bee Machine Co., 319 U.S. 448, 452, 63 S.Ct. 1146, 87 L.Ed. 1509, rehearing denied, 320 U.S. 809, 64 S.Ct. 27, 88 L.Ed. 489 (1943), and Savell v. Southern Ry., 93 F.2d 377, 379 (5th Cir.1937). See generally J. Dillon, The Removal of Causes from State Courts to Federal Courts with Forms 4 (5th ed. 1889).

Although Barrow does not stand in the way of exercising jurisdiction over the instant dispute, the bare language of 12 U.S.C. § 1819 does not clearly support the exercise of jurisdiction either. That the FDIC has the authority to remove suits which “arise under” the laws of the United States to the “appropriate United States district court” does not establish the right of the FDIC to remove appellate proceedings. The FDIC contends that this right is established by 12 U.S.C. § 1821(d)(13)(B) which states “In the event of any appeal-able judgment, the Corporation as conservator or receiver shall have all the rights and remedies available to the insured depository ... and the Corporation in its corporate capacity, including removal to Federal court and all appellate rights.” This language makes it clear that the FDIC may remove a suit after judgment. It does not, however, clearly establish that the FDIC may remove a case which is on appeal. One reading of 12 U.S.C. § 1821(d)(13)(B) when it is read in pari materia with the FDIC removal statute, 12 U.S.C. § 1819(b)(2)(B), suggests that a suit may not be removed once it is on appeal because a case may be removed only to a federal district court. The majority of the cases involving post-judgment removal were removed from a state district court, not the state court of appeals, to the federal district court and then an appeal was filed or an attack was made on the judgment via Fed.R.Civ.P. 60. See, e.g., Beighley v. FDIC, 868 F.2d 776, 779 (5th Cir.1989); Northshore Development, Inc. v. Lee, 835 F.2d 580, 582 (5th Cir.1988); and In re Savers Federal Savings and Loan Ass’n, 872 F.2d 963, 964 (11th Cir.1989).⁷

In In re Savers a debtor sued a financial institution in state court claiming as here, breach of contract and fraud and the institution counter claimed to recover on the debtor’s note. After judgment and after denial of post-trial motions for hearing, new trial, and remittitur, the FSLIC was appointed conservator of the institution. It then filed notice of removal. The district court remanded concluding that the case was completed in state court and that defendant was, in effect, seeking appeal. The Eleventh Circuit granted mandamus and vacated the remand on the basis of § 1819(b)(2)(B).

The Eleventh Circuit framed the question as “whether after there has been a final judgment by the state trial court, but when the period for appeal has not yet lapsed, a case ceased to be an ‘action from a state court.’ ” 872 F.2d at 965-66. The court concluded that “[w]e can discern no reason to confine the interpretation of ‘action’ to actions that have not rendered judgment. ... Had Congress intended to limit the removal power of FSLIC to suits pending before a state trial court, it could have explicitly stated as much, as it did in ... 12 U.S.C. § 632....” Id. at 966.

In the instant case, it is true, removal is sought from the state appellate court whereas in Savers no appeal had yet been filed. The significant factor, however, is that state appellate proceedings had not yet been exhausted when removal was effected. Accord Murray v. Ford Motor Company, 770 F.2d 461, 463 (5th Cir.1985) (per curiam); Butner v. Neustadter, 324 F.2d 783 (9th Cir.1963); Munsey v. Testworth Laboratories, Inc., 227 F.2d 902, 903 (6th Cir.1955) (per curiam). In FDIC v. Yancey Camp Development, 889 F.2d 647, 648 (5th Cir.1989), a case which was on appeal, we allowed removal and the district court set aside a default judgment. We conclude that the FDIC is entitled to remove the instant dispute as well.

C. Procedure

Our decisions here and in Yancey Camp, however, entail certain procedural difficulties which we must now face. In Yancey Camp, the case was removed from the state court of appeals and the federal district court then entertained an attack on the removed judgment under Fed.R.Civ.P. 60. Once a case is removed, however, the federal court takes the case as it finds it on removal. Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers, 415 U.S. 423, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974); In re Savers Federal Savings and Loan Ass’n, 872 F.2d 963, 966 (11th Cir.1989); and Butner v. Neustadter, 324 F.2d 783, 785 (9th Cir.1963). Federal courts must “treat everything that occurred in the state court as if it had taken place” in federal court. In re Savers, 872 F.2d at 966. Thus, since the instant case was on appeal in the state court when it was removed, it will be on appeal once the merits of this dispute are reached. We are certain that Congress did not intend to deprive the parties to this dispute of their right to appeal and to relegate them to relief under Fed.R.Civ.P. 60 when it authorized appellate removal by enacting the FDIC removal statute. Thus, the role of the district court must be simply to treat the removed proceeding as if it had originated in the district court and adopt the state court judgment as its own. See Yancey Camp,

Since the instant appeal only deals with the district court’s decision to remand, we do not reach the merits of the case. One further procedural point, however, must be addressed. When this appeal was first filed, a motion panel of this court decided not to enjoin the ongoing state appeal. Its decision is not the law of the case. See Northshore Development, Inc. v. Lee, 835 F.2d 580, 583 (5th Cir.1988) and Browning v. Navarro, 887 F.2d 553, 557 (5th Cir.1989), reh’g denied, 894 F.2d 99 (5th Cir.1990). An injunction is proper because once a case is removed, the state court no longer has jurisdiction over the dispute. The anti-injunction act, moreover, does not bar our injunction. Federal courts are generally barred from enjoining state court proceedings so as to preserve our system of concurrent jurisdiction. See Atlantic Coast Line R. Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 286, 90 S.Ct. 1739, 1743, 26 L.Ed.2d 234 (1970). However, once a case is removed, the state court no longer enjoys concurrent jurisdiction over the dispute. The anti-injunction act, therefore, does not bar an injunction of a state court proceeding which purports to exercise jurisdiction over a removed case. See French v. Hay, 89 U.S. (22 Wall) 250, 253, 22 L.Ed. 857 (1875).⁸

(2) Sanctions.

Since we reverse the district court’s decision to remand the instant appeal, it is clear that its award of sanctions for improper removal must also be reversed.

Conclusions

The decision of the district court remanding this matter and assessing sanctions is REVERSED and REMANDED. Further state court proceedings are hereby ENJOINED.

Footnotes

1

. Although the FIRREA was enacted after the current proceeding was initiated, it is clear that the FDIC may utilize it. See Turboff v. Merrill Lynch, Pierce, Fenner, & Smith, 867 F.2d 1518, 1521 (5th Cir.1989) (Jones, J.) (“When Congress adopts statutory changes while a suit is pending, the effect of which is not to eliminate a substantive right but rather to change the tribunal which will hear the case, those changes — barring specifically expressed intent to the contrary — which have immediate effect.”) (citations omitted); and In re Resolution Trust Co., 888 F.2d 57, 58 (8th Cir.1989).

2

. We do not decide whether this type of removal would be proper under 28 U.S.C. § 1441. First, it is clear that the FDIC could not remove the instant case under § 1441. The dispute hinges on state law and thus, there is no federal question jurisdiction. Second, it is unclear whether the FDIC may utilize § 1441 to effectuate removal in any case, not just the present one. In FDIC v. Sumner Financial Corp., 602 F.2d 670 (5th Cir.1979) we held that the predecessor statute to 12 U.S.C. § 1819(b)(2) was a complete jurisdictional scheme and that both original and removal jurisdiction over the FDIC was proper only if the case fell within the ambit of § 1819. Id. at 677-80. See also FDIC v. Elefant, 790 F.2d 661 (7th Cir.1986). It is not entirely clear, however, that Sumner is still good law. In FSLIC v. Ticktin, 490 U.S. 82, 109 S.Ct. 1626, 104 L.Ed.2d 73 (1989) the Supreme Court held that the statute granting jurisdiction over the FSLIC, 12 U.S.C. 1730(k)(l), was not exclusive and did not preclude the exercise of jurisdiction under other grants of jurisdiction. The FSLIC jurisdictional statute was very similar to the statutory predecessor to the FDIC jurisdictional statute and Ticktin, therefore, calls into question the result we reached in Sumner.

3

. Congress enacted at least one statute authorizing post-judgment removal during the Reconstruction era. See the Habeas Corpus Act of 1863, ch. 81, § 5, 12 Stat. 755, 757 ("And it shall be lawful in any such action or prosecution ... after final judgment, for either party to remove and transfer, by appeal, such case.”)

4

. Act of March 3, 1875, ch. 137, § 2, 18 Stat. 470.

5

. Although Congress generally forbids the lower federal courts from entertaining appeals from state courts — see, e.g., District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476, 482, 103 S.Ct. 1303, 1311, 1314, 75 L.Ed.2d 206 (1983) and Rooker v. Fidelity Trust Co., 263 U.S. 413, 415-16, 44 S.Ct. 149, 68 L.Ed. 362 (1923), there is no constitutional prohibition against it doing so. See The Federalist No. 82, at 494-95. (A.' Hamilton) (Rossiter ed. 1961) (“I perceive ... no impediment to the establishment of an ,• appeal from the State courts to the subordinate national tribunals....”)

6

. See Beighley v. FDIC, 868 F.2d 776, 781 (5th Cir.1989) (suggesting that Barrow’s reach has been curtailed by modern case law).

7

. See also Azzopardi v. Ocean Drilling & Exploration Co., 742 F.2d 890 (5th Cir.1984) and Butner v. Neustadter, 324 F.2d 783, 785 (9th Cir.1963).

8

. 28 U.S.C. § 1446(d) recognizes -this fact by stating that after removal, the "State court shall proceed no further unless and until the case is remanded.” 28 U.S.C. § 1446(d), therefore, provides support for our decision to enjoin the state court appellate proceeding. We do not rely on this statute, however, because it is not clear whether § 1446 may be utilized when removal is premised on 12 U.S.C. § 1819(b)(2). The predecessor to the current statute stated that the FDIC could "remove any such action ... by following any procedure for removal now or hereafter in effect.” The Financial Institutions Supervisory Act of 1966, Pub.L. No. 89-695, § 205, 80 Stat. 1028, 1055. In In re Savers Federal Savings & Loan Assoc., 872 F.2d 963, 965 (11th Cir.1989), for example, the court held that the procedural strictures of § 1446 governed removal under 12 U.S.C. § 1730(k)(l) (repealed by FIRREA, Pub.L. 101-73, Title IV, § 407, 103 Stat. 363 (1989)) which employed language similar to the now repealed FDIC removal statute. The current FDIC removal statute says nothing about the procedure which is to be followed on removal and it is possible, therefore, that § 1446 no longer governs FDIC removal. See Resolution Trust Corp. for Sandia Federal Sav. Assn. v. Key, 733 F.Supp. 1086, 1089 (N.D.Tex.1990) (holding that 28 U.S.C. § 1446 does not govern removal by the Resolution Trust Corporation). Since we do not rely directly on § 1446, we need not to decide this issue.