Deutsche Bank Nat’l Trust Co. v. FDIC

Claims against a receiver are prudentially moot if there are insufficient assets to satisfy general unsecured liabilities; and, creditor's claims arising from post-receivership breach of pre-receivership agreements are subject to 12 USC § 1821(d)(11) priority distribution.

In an interlocutory appeal, Deutsche Bank National Trust Co. challenged the district court’s dismissal of its claims against the Federal Deposit Insurance Corporation (“FDIC”). Relying on Sharpe v. FDIC, Deutsche Bank asserted a superpriority claim, alleging that the FDIC exceeded its statutory authority when it failed to properly repudiate the pre-receivership agreements after FDIC’s receivership began. The FDIC, however, successfully argued that the bank’s claims were general unsecured claims under 12 USC § 1821(d)(11)(A)(iii), that were prudentially moot because the estate had insufficient funds to pay the unsecured claims. Although the bank had filed claims based on breach of contract, breach of fiduciary duty, takings, constructive trust, and due process, the Ninth Circuit first determined that the permissible scope of the interlocutory appeal extended to the sole issue of prudential mootness, as certified in the district court’s order. The panel then affirmed the district court’s dismissal, rejecting the bank’s argument that § 1821(d) categorically exempted general unsecured claims based on breaches of non-repudiated contracts. The panel observed that such an interpretation would be contrary to clear Congressional intent as reflected in the plain language of the statute. Narrowly distinguishing Sharpe to certain non-creditor claims, the court determined that even if a post-receivership breach of a pre-receivership agreement was exempt from § 1821(d) priority distribution, the bank was still a quintessential creditor. Thus, the panel held that, because the estate held insufficient funds to satisfy the bank’s general unsecured claims, the district court properly held that the claims against the FDIC were prudentially moot. AFFIRMED.