After exhaustion of streamlined administrative procedures, a claimant has a choice to either bring the claim de novo in the District Court . . . or have the claim determination reviewed by one or more administrative processes. The agency's determination whether to allow a claim must be made within 180 days. . . . Any suit (or motion to renew a suit filed prior to appointment of the receiver) must be brought by the claimant within 60 days after the denial of the claim. [Emphasis added].
That plaintiffs' pre-receivership claims against the RTC must be stayed for a maximum of 180 days from the date of the claim filing follows two district court decisions in this circuit recognizing § 1821(d)'s distinction between lawsuits against depository institution assets commenced prior to and after RTC receivership.
See Gumowitz v. First Federal Savings and Loan Association of Roanoke, 1991 WL 84630 (S.D.N.Y. 1991), International Fidelity Insurance Co. v. Yorkville Federal Savings and Loan Association, 1990 U.S. Dist. Lexis 14046 (S.D.N.Y. 1990). A majority of district courts in other circuits support this result. See Coston v. Gold Coast Graphics, Inc., 782 F. Supp. 1532 (S.D. Fla. 1991), Matter of Federal Deposit Ins. Corp., 762 F. Supp. 1002 (D.Mass. 1991), Rexam Ltd. v. Resolution Trust Corp., 754 F. Supp. 245 (D.Puerto Rico 1990), Tuxedo Beach Club Corp. v. City Federal Sav. Bank, 737 F. Supp. 18 (D.N.J. 1990). Judge Keeton's recent analysis in Matter of Federal Deposit Ins. Corp., 762 F. Supp. at 1005 provides a useful summary of the proper construction of § 1821(d):
It is clear that Congress manifested an intent to permit a claimant to continue an action on a claim instituted against an insolvent bank before appointment of the FDIC (or RTC) as receiver for that bank only after the claimant has exhausted the administrative claim review procedure. It thus necessarily follows that Congress manifested an intent to require a stay of all claims against an insolvent bank pending review of those claims by the FDIC as receiver.
The RTC can point to only one precedent where a pre-receivership lawsuit against a depository institution was dismissed without prejudice on the basis of § 1821(d)(13)(D) despite plaintiff's compliance with the RTC's claim process. New Maine Nat. Bank v. Reef, 765 F. Supp. 763 (D.Me. 1991).
This Court respectfully declines to follow New Maine because it appears to misclassify § 1821(d) as a "section" of FIRREA when, in fact, § 1821(d) is the "subsection" of § 1821 to which § 1821(d)(13)(D) refers. Id. at 765; 12 U.S.C. § 1821(d)(13)(D). The RTC alternatively points to several dismissals of pre-RTC intervention claims or counterclaims, but these cases are distinguishable because in each the party seeking RTC assets never filed a claim at all. See e.g., RTC v. Mustang Partners, 946 F.2d 103 (10th Cir. 1991), FDIC v. Shain, Schaffer & Rafanello, 944 F.2d 129 (3d Cir. 1991), Liquidation of First City National Bank & Trust Co., 759 F. Supp. 1048 (S.D.N.Y. 1991), RTC v. DuBois, 771 F. Supp. 154 (M.D.La. 1991), United Bank of Waco v. First Republic Bank Waco, 758 F. Supp. 1166 (W.D. Tex. 1991). This distinction is critical because § 1821(d)'s numerous references to continuing actions commenced against depository institutions prior to RTC receivership are contingent upon compliance with the RTC claims process. Dismissals of pre-receivership claims in which no filings occurred are inapplicable here because the plaintiffs have complied with the RTC claim process.
Finally, plaintiffs object to RTC's request to exercise subject matter jurisdiction over RTC's counterclaim for foreclosure on its mortgage on the Shelter Island property. Plaintiffs argue that the Court should exercise its discretionary power to stay the counterclaim because the original claims and counterclaims are intertwined and disposing of them separately would lead to piecemeal litigation. FIRREA only streamlines claims against RTC assets into an administrative claim process and does not affect related claims made by the RTC.
There is no doubt that the plaintiffs' claims against the depository institution and the foreclosure counterclaim are closely related. The plaintiffs affirmatively defend against RTC's counterclaim for foreclosure on the ground that Eastern Federal's allegedly fraudulent conduct renders the mortgage voidable. Under certain circumstances, which may or may not exist here, this defense is recognized in New York. See e.g., Lapis Enterprises, Inc. v. International Blimpie Corp., 84 A.D.2d 286, 445 N.Y.S. 2d 574, 578-79 (A.D. 2d Dept. 1981). The purposes behind the 180 day stay mandated under § 1821(d) would be thwarted if the plaintiff could not pursue its fraud claim directly against the RTC, but could indirectly do so as an affirmative defense against the foreclosure counterclaim brought by the RTC.
Moreover, the problem extends even further because of the nature of this lawsuit. Plaintiffs allege causes of action in their complaint which require proof that Eastern Federal, its Vice President, the sellers of the property and their brokers acted in concert to defraud the plaintiffs. Obviously, judicial resources would be wasted if the plaintiffs could press forward now in the litigation against every defendant except the depository institution. For these reasons, the Court orders that the entire case be stayed for a maximum of 180 days measured from December 24, 1991. See also Gumowitz, 1991 WL 84630, Connecticut Bank and Trust v. CT Partners. 136 F.R.D. 347, 351 (D.Conn. 1991), Matter of FDIC, 762 F.Supp. at 1005.
For the reasons stated above, this case is hereby stayed a maximum of 180 days from December 24, 1991. If, however, the RTC renders its claim decision in less than 180 days, the Court will entertain plaintiffs motion to continue the action within sixty days of the date of the RTC'S decision as required by 12 U.S.C. § 1821(d)(6).
Dated: January 23, 1992
Brooklyn, New York
John R. Bartels
UNITED STATES DISTRICT JUDGE