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MATTER OF FIRST CITY NAT. BANK AND TR.

March 26, 1991

IN THE MATTER OF THE LIQUIDATION OF FIRST CITY NATIONAL BANK AND TRUST COMPANY.


The opinion of the court was delivered by: Haight, District Judge:

MEMORANDUM OPINION AND ORDER

This case requires the Court to consider the impact of the administrative claims procedures contained in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1821(d), upon the retaining and charging liens of attorneys who rendered services to an insolvent national banking association.

Background

On December 20, 1989 the United States Comptroller of the currency declared the First City National Bank and Trust Company (the "Bank"), a national banking association, to be insolvent. The Comptroller appointed the Federal Deposit Insurance Corporation ("FDIC") receiver of the Bank.

The Bank had been represented in various legal matters by the firm of Ross & Hardies (the "Firm").

On February 7, 1990 the FDIC made written demand on the Firm for files in two litigated matters in which the Firm had represented the Bank prior to its insolvency. The FDIC also called upon the Firm to prepare necessary substitution of counsel forms for those matters. The Firm failed to comply with those demands.

On March 29, 1990 the Firm filed a claim as an unsecured creditor in the amount of $92,358 with the FDIC as receiver of the Bank. The FDIC allowed that claim, and has paid a dividend of 31% to the Firm.

On April 25, 1990 the FDIC made written demand on the Firm for the files relating to eight additional litigated matters in which the Firm had represented the Bank, and asked that the Firm prepare substitution of counsel forms for those matters as well. A spokesperson for the Firm, Peter Livingston, Esq., advised in a telephone discussion with a staff attorney for the FDIC that the Firm would not comply with the agency's request and claimed an attorney's lien on the files.

The FDIC could not persuade the Firm to retreat from that position in subsequent conversations and mailings. The FDIC therefore brought a motion before Part I of this Court for an order directing the Firm to turn over to the FDIC all files in its possession relating to the ten litigated matters; to deliver to the FDIC executed substitutions of counsel in those cases; and to refrain from taking any action on behalf of the Bank or FDIC without specific written authorization from FDIC.

The FDIC opposes the firm's motion for interpleader relief, and presses its own original motion. Both motions have been briefed and argued. This Opinion resolves them both.

Discussion

Congress enacted FIRREA, effective as of August 9, 1989, to supplement earlier federal statutes regulating banks, and to provide a detailed regulatory framework to deal with the major difficulties confronting the thrift and banking industries. See Circle Industries v. City Federal Savings Bank, 749 F. Supp. 447, 451 (E.D.N.Y. 1990).

Under the statutory scheme, the FDIC becomes the receiver of a failed bank. The power of the Comptroller of the Currency to appoint receivers derives from the Act of May 15, 1916, 12 U.S.C. § 192. The FDIC, created by the Act of September 21, 1950, 12 U.S.C. § 1811 et seq., acts as receiver pursuant to § 1821(c). FIRREA's more recent contributions to the statutory scheme are twofold. First, it establishes administrative procedures for adjudicating claims in the first instance asserted against the FDIC as receiver of a failed bank. See 12 U.S.C. § 1821(d)(5)-(14). Second, FIRREA contains provisions specifically delineating the scope and form of judicial review of the agency's disallowance of claims asserted against it in its capacity as receiver. § 1821(d)(6), (13)(D).

FIRREA gives the FDIC authority to determine claims against failed banks, ¶ 1821(d)(3)(A), in accordance with the requirements of the statute and regulations promulgated by the agency under rulemaking authority conferred by § 1821(d)(4). § 1821(d)(5)(A)(i) provides:

  Before the end of the 180-day period beginning on
  the date any claim against a depository
  institution is filed with the Corporation as
  receiver, the Corporation shall determine whether
  to allow or disallow the claim and shall notify
  the claimant of any determination with respect to
  such claim.

FIRREA's provisions for judicial review appear in subsections 1821(d)(6) and (13)(D). Subsection ...


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