Court: District Court, D. Montana; January 3, 2013; Federal District Court
Rathbun entered into a 2005 agreement with IndyMac Bank for a home equity line of credit based on his property in Ravalli County. He alleges that IndyMac wrongfully encumbered two lots (Lots 20 and 21) instead of just Lot 20, which has caused him to incur damages due to his inability to secure other loans against Lot 21 during favorable lending conditions. IndyMac was closed by the Office of Thrift Supervision and placed into FDIC receivership on July 11, 2008. OneWest was created to acquire certain assets of IndyMac from the FDIC and is being sued by Rathbun as IndyMac’s successor. OneWest seeks judgment on the pleadings, arguing that the court lacks jurisdiction over claims related to a failed bank and that such claims must be resolved through the FDIC’s administrative process, as mandated by FIRREA. OneWest points out that agreements with the FDIC explicitly state that it is not liable for claims like Rathbun's and that he must exhaust administrative remedies. OneWest's motion relies on judicial notice of facts from Office of Thrift Supervision Orders and agreements with the FDIC, which Rathbun appears to concede. The agreements indicate that OneWest only assumed designated liabilities, with the FDIC retaining all liabilities subject to the administrative claims process.
Rathbun filed his original complaint on May 29, 2009, in Ravalli County, naming IndyMac Financial Service, Inc. as the sole defendant and alleging damages for Fraud, Constructive Fraud, Negligent Misrepresentation, and Slander of Title, all based on the wrongful encumbrance of Lot 21. His Amended Complaint introduced OneWest as a defendant and included a claim for Setoff. The Second Amended Complaint further added claims for Violation of the Truth in Lending Act and violations of the Montana Consumer Protection Act, with OneWest being implicated only in the Setoff and Truth in Lending Act claims. Rathbun contends that any debt owed to OneWest should be offset by damages caused by IndyMac's actions. He alleges IndyMac failed to properly identify the encumbered property, framing this as a defense against OneWest's purported non-judicial foreclosure, although no non-judicial foreclosure is mentioned in his Statement of Facts. OneWest denies seeking foreclosure, and Rathbun's response does not clarify this point but expresses an intent to prevent it.
The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) is applicable to OneWest as it acquired a failed bank and prevents district courts from asserting jurisdiction over claims related to the failed institution's actions unless administrative remedies have been exhausted. Since Rathbun's claims, including Setoff, pertain to IndyMac's alleged misconduct, they must follow the FDIC's administrative claims process, thereby depriving the court of jurisdiction. Dismissal of Rathbun’s claims does not infringe on due process, as the Ninth Circuit has upheld that a lack of notice from the FDIC does not violate rights, given that 12 U.S.C. § 1821(d)(5)(C)(ii)(I) allows for extensions in filing claims without notice. A judgment on the pleadings may be granted when the moving party is entitled to it as a matter of law, as established in case law.
OneWest contends that Rathbun's claims are barred due to lack of subject matter jurisdiction under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Specifically, Section 1821(d)(13)(D) states that no court has jurisdiction over claims concerning the assets of a depository institution for which the FDIC is receiver, or claims related to the institution's acts or omissions. The provision allows for jurisdiction only after the completion of the administrative claims process. The Ninth Circuit, in Benson v. JPMorgan Chase Bank, has established that this jurisdictional bar applies to claims against an assuming bank when they are based on the conduct of a failed institution, a position supported by other circuit courts.
The Court affirms that FIRREA's jurisdictional provisions apply to OneWest as the successor of the failed IndyMac. It clarifies that the inquiry focuses on whether Rathbun’s claims relate to any acts or omissions of IndyMac. Rathbun's claims—including Fraud, Constructive Fraud, Slander of Title, Negligent Misrepresentation, and violations of the Truth in Lending Act and Montana Consumer Protection Act—are all linked to IndyMac's actions and therefore fall under the jurisdictional bar established by 12 U.S.C. 1821(d)(13)(D). Furthermore, Rathbun's assertion that his Truth in Lending Act claim serves as an affirmative defense against OneWest’s foreclosure is also grounded in IndyMac’s alleged misidentification of encumbered property, rendering it similarly barred.
Lastly, Rathbun's claims of fraudulent inducement and setoff are interpreted as referring to Fraud and Constructive Fraud, which again relate exclusively to acts of IndyMac, thus confirming their dismissal under the jurisdictional limitations of FIRREA.
Rathbun's claim for Setoff is presented as an affirmative defense against OneWest's alleged non-judicial foreclosure. He cites Bolduc v. Beal Bank and RTC v. Midwest Federal Savings Bank to argue that affirmative defenses are not subject to FIRREA’s administrative claims process. In Bolduc, the court treated plaintiffs' claims as affirmative defenses in foreclosure actions, distinguishing it from National Union Fire Insurance Co., where plaintiffs sought a preemptive ruling on an insurance contract's validity. Rathbun contends that the facts of Bolduc closely mirror his situation. Similarly, in RTC v. Midwest Federal Savings Bank, a mutual mistake claim was recognized as an affirmative defense in response to foreclosure proceedings initiated by RTC. The court held that jurisdiction over affirmative defenses is not divested by FIRREA. However, Rathbun's Setoff claim differs because it is not in response to any proceedings by OneWest; he only briefly mentions foreclosure in relation to a Truth in Lending Act violation, without asserting any actual foreclosure process has occurred. Furthermore, Rathbun's Setoff claim seeks a preemptive ruling against OneWest, akin to the claims in National Union Fire Insurance Co., and is contingent upon his monetary claims against IndyMac, which cannot be pursued in district court under 12 U.S.C. § 1821(d)(13)(D).
Rathbun's claim for Setoff is contingent upon his claim for monetary damages, seeking a ruling that any debt owed to OneWest under a home equity line of credit should be offset by damages from IndyMac's wrongful encumbrance of his property. The claim does not allege any foreclosure proceedings by OneWest and pertains to actions of IndyMac, over which the Court lacks jurisdiction under 12 U.S.C. § 1821(d)(13)(D). Consequently, all of Rathbun's claims must be dismissed due to lack of jurisdiction.
Rathbun argues he is not subject to the exhaustion requirement of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) because he did not receive notice of his right to file a claim with the FDIC, claiming that due process violations arise from dismissal without such notice. However, the Court clarifies that lack of notice does not invalidate the administrative claims process and cites precedent indicating that FIRREA provides exceptions for claimants who did not receive notice. Furthermore, if Rathbun has a due process claim, it should be directed against the FDIC, which is responsible for providing notice, not OneWest. Rathbun's assertion that the sale of his loan to OneWest negates the applicability of the relevant legal rationale is rejected, as similar arguments have been dismissed in prior cases. The Court emphasizes that judicial review is available only after the exhaustion of administrative procedures under FIRREA, negating Rathbun's claims of due process violations.
OneWest asserts that it is shielded from liability for Rathbun’s claims under the Master Purchasing Agreement and the Servicing Business Asset Purchase Agreement, regardless of whether the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) jurisdictional bar applies. The key arguments are: (1) the FDIC retained liability for all such claims, or (2) the Agreements explicitly exempt OneWest from liability.
Section 4.02 of the Master Purchase Agreement states that the Seller (FDIC) will not assign, and the Purchaser (OneWest) will not assume any liabilities not expressly assumed, with specific reference to the undefined "Group I Liabilities." Similarly, Section 2.04 of the Servicing Purchase Agreement outlines that the Seller shall not assign, and the Purchaser shall not assume or be liable for "Excluded Liabilities," which also remains undefined. The absence of records regarding these liabilities prevents the provisions from effectively shielding OneWest from liability in the current motion.
However, both Agreements contain clauses releasing OneWest from any liabilities related to claims governed by FIRREA’s claims administration process, which applies to all of Rathbun’s claims under 12 U.S.C. 1821(d)(13)(D)(ii). As a result, the Court concludes that it lacks jurisdiction, necessitating the dismissal of the case.
All claims made by Rathbun relate to actions or omissions of IndyMac, a defunct banking institution. Under 12 U.S.C. 1821(d)(13)(D), the Court lacks jurisdiction to adjudicate these claims until administrative remedies have been exhausted, necessitating their dismissal. Rathbun's Renewed Motion to Strike OneWest's Affirmative Defenses argues that the defense of failure to exhaust administrative remedies should be dismissed due to a lack of timely notice regarding his right to pursue such remedies from the FDIC. However, it is clarified that the absence of notice does not exempt Rathbun from the administrative claims process nor does it grant the Court jurisdiction. Consequently, this motion is deemed without merit.
As OneWest's Motion for Judgment on the Pleadings resolves all of Rathbun's claims, it is unnecessary to consider Rathbun’s additional argument regarding OneWest’s defense of not being the real party in interest. The Motion for Judgment on the Pleadings is granted, and the Renewed Motion to Strike is denied. The Clerk is instructed to notify the parties of this order and to close the file, with all other motions rendered moot. OneWest's response addressed Rathbun's First Amended Complaint, while Rathbun subsequently submitted a Second Amended Complaint due to the untimeliness of his Motion to Strike. OneWest maintains that its arguments apply equally to the Second Amended Complaint, which is acknowledged for judicial efficiency, leading to the recommendation for dismissal of all claims, including those in the Second Amended Complaint. Furthermore, there is no evidence of any foreclosure proceedings linked to Rathbun's claims, particularly his claim for Setoff, which risks inviting an advisory opinion from the Court. OneWest also contends that Rathbun's Renewed Motion to Strike constitutes a “thinly disguised surreply” that contravenes local rules, a viewpoint that is supported.
