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Finkielstain v. Seidel

decided: September 8, 1988.


Appeal from an order of the United States District Court for the Southern District of New York (Leval, J.) dismissing the action against Maryland Deposit Insurance Fund Corp., and denying motions for abstention, dismissal for forum non conveniens, or for transfer pursuant to 28 U.S.C. § 1404(a).. Affirmed in part and reversed and remanded in part.

Van Graafeiland and Mahoney, Circuit Judges, and Metzner, Senior District Judge.*fn*

Author: Metzner

METZNER, Senior District Judge:

Jacobo Finkielstain instituted this action to rescind two loan agreements between himself and First Maryland Savings & Loan, Inc. (First Maryland). After entry into these transactions, First Maryland was placed in receivership under Maryland law which provided that the Maryland Deposit Insurance Fund Corp. (MDIF) shall be appointed receiver of any savings and loan association being operated in an unsafe and unsound manner.

Finkielstain's complaint alleges violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, and Rule 10(b)(5) promulgated thereunder. There are also allegations of common law fraud. Finkielstain has named both First Maryland and MDIF, as receiver for First Maryland, parties defendant.

These defendants moved to dismiss the complaint on the ground that the Eleventh Amendment bars any suit against MDIF which they claim is the real party in interest.

The movants further argued that, in the interest of federalism and comity, the district court should abstain from adjudicating the matter. In the alternative, they urge that the action should be dismissed under the doctrine of forum non conveniens, or transferred to the District of Maryland, pursuant to 28 U.S.C. § 1404(a).

The court below dismissed the action against MDIF on the ground of Eleventh Amendment immunity. Further, it found that First Maryland was the real party in interest and did not have immunity even though MDIF was its receiver. Finally, the court refused to abstain, dismiss or transfer the action as to First Maryland.

The defendants, on appeal, argue that the claim against First Maryland must be dismissed because MDIF is the real party in interest, and that it is immune from suit pursuant to the Eleventh Amendment. They further urge that First Maryland is entitled to this immunity, but its claim rests on the claimed immunity of MDIF.

This court has jurisdiction of the appeal under the collateral order doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949). We have applied the doctrine to a case in which Eleventh Amendment immunity was the issue. Minotti v. Lensink, 798 F.2d 607, 608 (2d Cir. 1986).

It should be noted that plaintiff-appellee Finkielstain did not cross-appeal from the dismissal as to MDIF. This is unusual because an affirmance of the order below would result in the sole defendant being a party which has neither the right nor the means to defend itself. The normal rule is that a judgment or order will not be set aside or altered in favor of a person who has not filed a timely notice of appeal or cross-appeal. 9 Moore's Federal Practice (para.) 204.11[5] (2d ed. 1987). However, it has been held that the requirement of a cross-appeal is a rule of practice which is not jurisdictional and in appropriate circumstances may be disregarded. See In re Union Carbide Corp. Gas Plant Disaster, 809 F.2d 195, 203 (2d Cir. 1987); United Optical Workers Union Local 408 v. Sterling Optical Co., Inc., 500 F.2d 220, 224 (2d Cir. 1974); 15 C. Wright, A. Miller & E. Cooper, FEDERAL PRACTICE AND PROCEDURE § 3904 at 416-19 (1976 and Supp. 1987). In our view this case presents the circumstances which justify the application of the exception to the general rule.

The first issue to be addressed on this appeal is who is the real party in interest in the litigation.

The Maryland state court order appointing MDIF as receiver of First Maryland states that "it is impossible and unwise to return the management of First Maryland to its former board of directors or to a new board, to be managed as a continuing institution . . . ." The order stated that MDIF as receiver was possessed of "powers and duties traditionally inherent in a receivership under principles of equity and of common law " . . . MDIF is then directed to liquidate First Maryland in an orderly manner, and to act with regard to its assets in order to "achieve the ultimate goal of restoring to the depositors of First Maryland access to their deposit accounts in as short a time as may be possible . . . ."

It is clear that under the Maryland statute pursuant to which the court issued the above order, First Maryland exists in name only, and that its assets and liabilities are now the responsibility of MDIF. Any judgment entered in favor or plaintiff in this lawsuit will be responded to by MDIF as receiver of ...

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