The opinion of the court was delivered by: Roslynn R. Mauskopf, United States District Judge.
The Federal Deposit Insurance Corporation ("FDIC"), in its capacity as
receiver for Washington Mutual Bank, F.A. ("WaMu"), moves to intervene
in this foreclosure action as a counterclaim defendant pursuant to
Federal Rules of Civil Procedure 24(a)(2) and 24(b). The FDIC seeks to
defend certain counterclaims by defendant mortgagor James Nell
asserted against WaMu's successor-in-interest JPMorgan Chase Bank,
N.A. ("Chase"): counterclaims two (violation of the Truth in Lending
Act), four (recoupment), five (unjust enrichment), six (conspiracy to
commit fraud), and seven (deceptive trade practices) (together, the
"Borrower Claims"). If intervention is granted, the FDIC also asks the
Court to dismiss Chase's third-party complaint against it as moot,
since Chase only seeks indemnification from the FDIC for the Borrower
The FDIC also moves under Rule 12(b)(1) to dismiss the Borrower Claims without prejudice pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989, codified as amended in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(d) (2011) ("FIRREA"). The FDIC alleges that Nell failed to exhaust his Borrower Claims through the FDIC's administrative review process, barring him from raising those claims in this Court.
For the reasons that follow, the Court grants the FDIC's motion to intervene (Doc. No. 19), dismisses Chase's third-party complaint against the FDIC, and dismisses the Borrower Claims for lack of jurisdiction. Further, since the FDIC's party status was the only basis for federal jurisdiction here. The Court remands the remaining claims to New York Supreme Court, Richmond County.
On or about July 30, 2004, Nell acquired residential property at 16 Turf Road, Staten Island, New York by virtue of a $386,250 mortgage (the "Mortgage") issued by WaMu.
On September 25, 2008, the Office of Thrift Supervision declared WaMu insolvent and appointed the FDIC to act as receiver pursuant to 12 U.S.C. §§ 1464(d)(2)(A) and 1821(c)(5). The FDIC became successor-in-interest to WaMu, assuming all of its rights, titles, powers, privileges and operations. On that same date, the FDIC sold WaMu's assets to Chase, pursuant to a Purchase and Assumption Agreement ("P & A Agreement").*fn2 Notably, P & A Agreement Section 2.5 excluded the transfer of any liability for claims seeking monetary relief arising out of WaMu's pre-failure lending activities; the FDIC retained exclusive liability for these claims.
On July 20, 2009, Chase, as successor-in-interest to WaMu's mortgage assets, commenced a foreclosure action against Nell in New York Supreme Court, Richmond County. In opposition, Nell brought foreclosure misconduct counterclaims directly against Chase, but also alleged WaMu's misconduct in the underlying mortgage-lending process. Despite relying in part on WaMu's conduct in asserting his Borrower Claims, Nell directed those claims solely against Chase on a successor-in-interest theory.
Chase notified the FDIC of Nell's Borrower Claims on or about October 26, 2009. On December 2, 2009, the FDIC moved to intervene in the state court foreclosure action by Order to Show Cause. In an opinion dated February 18, 2010, the state court denied the FDIC's motion to intervene.
Chase then sued the FDIC in a third-party state court action filed on March 30, 2010, seeking indemnification for any pre-acquisition lender liability attributable to WaMu's conduct in issuing the Mortgage. On April 14, 2010, third-party defendant FDIC removed both the third-party and foreclosure actions to this Court pursuant to 28 U.S.C. § 1331, 28 U.S.C. § 1441, 12 U.S.C. § 1819(b)(2)(B), and 12 U.S.C. § 1821(d)(6)(A). On June 14, 2010, Nell moved under 28 U.S.C. § 1447(c) to remand the actions to state court, arguing that the FDIC's removal was untimely. In an order dated November 9, 2010 (Doc. No. 16), this Court denied Nell's motion
On February 28, 2011, the FDIC moved under Rule 24(a)(2), or alternatively Rule 24(b), to intervene as a counterclaim defendant as to the Borrower Claims. (Mot. to Dismiss and Intervene (Doc. No. 19).) The FDIC also moved under FIRREA and Rule 12(b)(1) to dismiss Nell's counterclaims and Chase's third-party complaint without prejudice, arguing that 12 U.S.C. §§ 1821(d)(3)--(13) denies this Court jurisdiction over creditor claims against the FDIC as receiver until they have been exhausted in the FDIC's administrative claims review process. (Id.)
On March 11, 2011, Nell opposed the FDIC's motion to intervene. (Opp.
Mem. (Doc. No. 20).) Nell contends that the motion is untimely, and
that the FDIC and Chase have not established that his Mortgage was
among those assets transferred from WaMu under the P & A Agreement.
(Id. at 6.) In response, on April 4, 2011, the FDIC provided executed
copies of the P & A Agreement and Mortgage, along with a declaration
by a Chase Mortgage Officer
confirming Chase's purchase of the Mortgage. (See Attachments to
Reply Mem. (Doc. No. 21).) Chase submitted no opposition to the FDIC's