in all Winstar-Related Cases at the Court v. United States

44 Fed. Cl. 3, 1999 WL 345653
CourtUnited States Court of Federal Claims
DecidedMay 20, 1999
DocketNo. 90-8 C
StatusPublished
Cited by22 cases

This text of 44 Fed. Cl. 3 (in all Winstar-Related Cases at the Court v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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in all Winstar-Related Cases at the Court v. United States, 44 Fed. Cl. 3, 1999 WL 345653 (uscfc 1999).

Opinion

OPINION ON ISSUES RELATED TO FDIC INTERVENTION

TURNER, Judge.1

The Federal Deposit Insurance Corporation (FDIC), by motion filed on November 12, 1996, sought to intervene as party-plaintiff and substitute itself as sole party-plaintiff in 43 ‘Winstar-related” cases2 which involved failed thrift institutions. The motion was vigorously opposed by existing plaintiffs [5]*5in the affected eases. Issues raised by the motion were extensively briefed and were argued on January 28 and 30, 1997.

At the conclusion of'oral argument on January 30,1997, “tentative” rulings were made, subject to refinement after consultation with the parties. A definitive order dated March 14, 1997 granted the motion to the extent that FDIC sought intervention as a party-plaintiff in the 43 cases involving failed thrifts, but denied the motion to the extent that FDIC sought to be substituted for (and to the exclusion of) all shareholder plaintiffs in those 43 cases. A copy of the March 14, 1997 order is attached.

This opinion is to more fully state the rationale for the rulings in said order.

I

FDIC sought leave to intervene in .each case in either of two capacities, to wit, as duly appointed receiver of a failed thrift or as the statutory manager of the FSLIC Resolution Fund3 (and consequently the holder of legal title to all undistributed assets, including claims, of a failed thrift).

The critical, pivotal fact with respect to the intervention issue is that FDIC, as receiver or fund manager, is the holder of legal title to the claims formerly held by the thrifts.4

The powers and duties of FDIC as receiver of an insured institution are set forth in 12 U.S.C. § 1821(d)(2). That statute clearly provides that FDIC as receiver, by operation of law, succeeds to “all rights, titles, powers, and privileges of the [thrift] ... and of any stockholder ... of such institution with respect to the institution and the assets of the institution ...” and may “collect all obligations and money due the institution.” 12 U.S.C. § 1821(d)(2)(A)(i) & (B)(ii).

The powers and duties of FDIC as manager of the FSLIC Resolution Fund are identical to those of a receiver as the result of incorporation of those powers in 12 U.S.C. § 1823(d)(3). That statute provides that assets of a receivership acquired by FDIC in its capacity as an insurance corporation remain impressed with their character as receivership assets and that, consequently, FDIC has the same rights, powers and obligations with respect to such assets as it had (or would have) as a receiver.

To illustrate, 12 U.S.C. § 1823(d)(3)(A) states that “with respect to any asset acquired” from a receivership, FDIC “shall have all of the rights, powers, privileges, and authorities of ... [FDIC] as receiver under [12 U.S.C. § 1821].” Title 12 U.S.C. § 1823(d)(3)(C) provides: “In exercising any [such] right, power, privilege, or authority ..., [FDIC] ... shall continue to be subject to the fiduciary duties and obligations of the ... [FDIC] as receiver to claimants against the insured ... institution in receivership.”

Among the obligations imposed upon receivers is the requirement to distribute assets in a set order of priorities. Title 12 U.S.C. § 1821(d)(ll)(A), dealing with the priority for distribution of “amounts realized from the liquidation or other resolution of any insured depository institution” by any receiver, expressly states that except for “secured claims to the extent of any such security,” the first priority consists of expenses of administration, the second priority is the deposit liability, third and forth priorities consist of claims of creditors other than depositors, and the fifth and last priority is for shareholders.

In combination, these statutory provisions establish that FDIC, as receiver or FSLIC [6]*6Resolution Fund manager, holds legal title to the assets (including claims) formerly owned by the failed thrifts and that any recovery based on the assertion of a claim of any such thrift must be distributed pursuant to the statutory order of priorities.

II

RCFC 24, which is essentially identical to Rule 24 of the Federal Rules of Civil Procedure, provides:

(a) Intervention of Right. Upon timely application anyone shall be permitted to intervene in an action ... when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.
(b) Permissive Intervention. Upon timely application anyone may be permitted to intervene in an action ... when an applicant’s claim or defense and the main action have a question of law or fact in common. In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.

FDIC’s status as holder of legal title to the claims of the failed thrifts and its obligations concerning distribution of the proceeds of such claims certainly qualify for intervention of right unless it could be demonstrated that its “interest is adequately protected by existing parties.” RCFC 24(a).

Even if FDIC’s interests were “adequately protected by existing parties,” its claims and the “main aetion[s]” plainly have “a question of law or fact in common,” RCFC 24(b), qualifying FDIC for permissive intervention. Actually, the claims asserted by FDIC are the identical claims asserted by the shareholder plaintiffs to the extent they are asserting derivatively the claims of the failed thrifts. A court’s discretion to grant permissive intervention should be exercised only after considering whether intervention would “unduly delay or prejudice the adjudication of the rights of the original parties.”

With respect to intervention of right, we concluded that the FDIC’s interests were not adequately protected by the existing parties. The voluminous briefing and lengthy argument concerning FDIC’s motion revealed that many shareholder plaintiffs assumed that without FDIC’s presence in the case, they will be entitled to payment from liquidation of the thrift’s claims ahead of creditors.

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44 Fed. Cl. 3, 1999 WL 345653, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-all-winstar-related-cases-at-the-court-v-united-states-uscfc-1999.