Former employees of the failed Westernbank, taken into receivership by the FDIC, filed suit against Banco Popular de Puerto Rico (BPPR), which acquired Westernbank's deposits and certain assets. The employees claimed severance pay under Puerto Rican Law 80. The FDIC intervened, asserting that the court lacked jurisdiction because the plaintiffs did not file necessary administrative claims with the FDIC, nor did they contest the FDIC’s disallowance of those claims in federal court. The plaintiffs' counsel conceded this point during oral arguments.
The court emphasized that the plaintiffs’ failure to follow the FDIC's administrative claims process invoked a statutory bar under 12 U.S.C. 1821(d)(13)(D) and confirmed that jurisdiction could not be circumvented by not naming the FDIC as a defendant. Consequently, the court vacated the summary judgment for the defendants and remanded the case for dismissal due to lack of subject-matter jurisdiction. The factual background revealed that the FDIC had closed Westernbank on April 30, 2010, terminating all employees and informing them of their right to file claims under FIRREA's mandatory administrative claims process. The plaintiffs, who had worked for Westernbank from 1978 to 2005, did not provide evidence of having filed such claims. BPPR, under the Purchase and Assumption Agreement, acquired Westernbank's deposits and assets but did not assume any severance pay liabilities for former employees, with the FDIC agreeing to indemnify BPPR for any such liabilities.
Claims under Law 80 for severance or enhanced severance pay by former employees were anticipated in the P&A Agreement, with the FDIC agreeing to indemnify BPPR for such claims based on successor liability. Plaintiffs, who became BPPR employees after signing temporary employment agreements between April 30 and June 17, 2010, acknowledged the termination of their employment with Westernbank and that their new employment with BPPR did not continue their previous relationship. All plaintiffs eventually left BPPR.
On October 18, 2010, they initiated a lawsuit against BPPR in Puerto Rico for unjust termination under Law 80, seeking severance payments for their employment at both BPPR and Westernbank. They argued BPPR was liable as a successor employer due to its acquisition of Westernbank's assets and the continuation of similar business operations. BPPR removed the case to federal court on November 19, 2010, and the FDIC moved to intervene in February 2011, asserting it retained certain liabilities related to the claims in the P&A Agreement.
The district court allowed the FDIC's intervention on April 15, 2011. BPPR sought summary judgment on August 26, 2011, claiming it was not liable for severance based on the plaintiffs' prior employment with Westernbank. The FDIC also moved for dismissal, arguing the court lacked subject-matter jurisdiction over the severance claims, as the plaintiffs had been notified of their right to file claims against the FDIC but had not done so properly.
The district court granted BPPR's summary judgment on March 30, 2012, without addressing the jurisdictional issue. The plaintiffs appealed, abandoning claims not related to their tenure at Westernbank. Federal courts must resolve jurisdictional questions before addressing case merits, as established in precedent cases, underscoring the necessity of determining subject-matter jurisdiction, which can lead to complete dismissal if lacking.
Cruz was classified as a regular employee rather than a temporary one, but his termination was deemed justified by the district court. Appeals courts conduct plenary reviews to determine subject-matter jurisdiction, considering any submitted evidence. The Federal Deposit Insurance Corporation (FDIC) assumed severance liabilities related to former employees of Westernbank during its tenure, as authorized by the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). FIRREA grants the FDIC the role of receiver for failed financial institutions, enabling it to assume the rights and obligations of the failed bank, including merging with healthier institutions and transferring assets or liabilities. However, under the Purchase and Assumption (P&A) Agreement, the FDIC did not take on liabilities associated with Law 80 and indemnified BPPR against unassumed liabilities, indicating that any claims for severance pay should be directed at the FDIC.
Furthermore, the plaintiffs’ failure to adhere to FIRREA's administrative claims process presents a jurisdictional barrier. FIRREA mandates the FDIC to publish a notice requiring creditors of a failed institution to file claims within a specified timeframe, which must be at least ninety days after the notice. After a claim is filed, the FDIC has 180 days to make a decision, and claimants have an additional sixty days to seek judicial review if their claims are disallowed or if the FDIC fails to act within the specified period.
Notice must be sent to all known creditors of the institution, as mandated by 12 U.S.C. 1821(d)(3)(C). If a claimant fails to seek administrative or judicial review within sixty days, any part of the claim not allowed is deemed disallowed and final, with no further rights or remedies available (12 U.S.C. 1821(d)(6)(B)). FIRREA limits court jurisdiction over claims if the plaintiff has not adhered to the statutory claims process. Specifically, 12 U.S.C. 1821(d)(13)(D) denies jurisdiction for claims related to the assets of a depository institution under FDIC receivership and for any acts or omissions by the institution or the FDIC as receiver. Courts have held that non-compliance with the statutory claims process results in a lack of subject matter jurisdiction (Simon v. FDIC, 48 F.3d 53).
Plaintiffs must demonstrate federal jurisdiction, which requires filing administrative claims; failure to do so bars their claims (Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375). Additionally, many plaintiffs who filed claims with the FDIC for severance pay after the Westernbank receivership did not pursue timely judicial review after their claims were denied. The FDIC contends that not filing suit within the sixty-day requirement deprives courts of jurisdiction, a position supported by several court decisions (e.g., Home Capital Collateral, Inc. v. FDIC, 96 F.3d 760). Thus, failure to comply with the sixty-day limit for seeking judicial review further deprives courts of jurisdiction, as established by FIRREA's provisions.
The provision's language indicates Congress intended for it to be "jurisdictional," as established in Henderson ex rel. Henderson v. Shinseki. The sixty-day limit is integral to a structured process aimed at efficiency, supporting the view that noncompliance triggers FIRREA's jurisdictional constraints, similar to failing to file an administrative claim. The plaintiffs cannot circumvent this jurisdictional bar by naming BPPR as the sole defendant; had the case been filed against the FDIC, it would have been jurisdictionally barred. The jurisdictional limitation applies to attempts to sidestep FIRREA's claims process by suing the purchasing bank, focusing on the substance of the claim rather than its form. Other circuit courts, including the Sixth and Ninth Circuits, have reinforced this interpretation, emphasizing that claims related to the FDIC as receiver are subject to jurisdictional limitations despite the entity named. The Third Circuit also concluded that claims against the assuming bank were not independent but stemmed from the FDIC's actions. The plaintiffs' claims involve decisions made by the FDIC regarding employment and severance pay, with no independent claims against BPPR post-receivership. Acknowledging this, the conclusion is that the claims are jurisdictionally barred. The court vacates the district court's summary judgment, remanding with instructions to dismiss for lack of subject-matter jurisdiction, with no costs awarded.
