Rundgren v. Washington Mutual

Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, a party must exhaust all remedies under the statute before addressing the matter in court.

In 2005 the Rundgrens secured a mortgage for their property in Kilauea, Hawaii. Three years later, the Rundgrens refinanced their mortgage with Washington Mutual (“WaMu”). The Rundgrens later claimed that WaMu tainted the loan with fraudulent acts. The fraudulent acts that WaMu allegedly committed eventually led the loan to be seized by the Office of Thrift Supervision and placed into a receivership at the Federal Deposit Insurance Corporation (“FDIC”). The assets were eventually transferred from the FDIC to JPMorgan Chase under a Purchase and Assumption Agreement. Chase then determined that the Rundgrens were in default of their loan and that their property would be foreclosed on. The Rundgrens subsequently sued WaMu and Chase in Hawaii State Court. In their complaint, the Rundgrens alleged that Chase and WaMu breached their fiduciary duties during the refinancing period. The Rundgrens removed the action to federal court but the complaint was dismissed for lack of jurisdiction under “Rule 12(b)(1) of the Federal Rules of Civil Procedure because the Rundgrens had failed to exhaust their claims with the FDIC prior to bringing suit, as required by 12 U.S.C. § 1821(d)(13)(D).” The Ninth Circuit first determined whether or not the district court had merit to dismiss the Rundgren’s claims. The panel determined that since the Rundgrens did not exhaust their remedies under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), there was no jurisdiction. The Rundgrens challenged this argument because the language of the statute did not specifically address the Rundgrens relationship with WaMu and Chase. However, the panel reasoned that the FIRREA was designed so that individuals could exhaust other remedies before pursuing court action. The panel determined that the Rundgrens did not exhaust all of their remedies. AFFIRMED.