Argued and Submitted: August 28, 2014.
Appeal fro the United States District Court for the Central District of California. D.C. No. 2:10-cv-04614-GAF-AGR. Gary A. Feess, District Judge, Presiding.
The panel affirmed the district court's summary judgment in favor of the Bank of Manhattan, N.A. on its breach of contract claim, and held that the Federal Deposit Insurance Corporation, in its role of receiver of a closed bank, may not breach underlying asset contractual obligations without consequence.
The panel held that the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 U.S.C. § 1821(d)(2)(G)(i)(II), did not immunize the FDIC from breach of pre-receivership contract claims. The panel concluded that the district court did not err in rejecting the FDIC's claimed statutory defense and entering judgment against the FDIC for its breach of a participation agreement.
Dissenting, Judge Rawlinson would reverse the district court's ruling that FIRREA did not preempt Bank of Manhattan's claim based on this court's prior opinion in Sahni v. American Diversified Partners, 83 F.3d 1054 (9th Cir. 1996).
J. Scott Watson, Federal Deposit Insurance Corporation, Arlington, Virginia, argued the cause on behalf of Defendant-Appellant. Minodora D. Vancea, Federal Deposit Insurance Corporation, Arlington, Virginia, filed the opening and reply briefs. With her on the opening brief were Watson, Colleen J. Boles, and Lawrence H. Richmond, Federal Deposit Insurance Corporation, Arlington, Virginia. With her on the reply brief were Boles, Watson, and Kathryn R. Norcross, Federal Deposit Insurance Corporation, Arlington, Virginia.
Richard W. Esterkin, Morgan, Lewis & Bockius LLP, Los Angeles, California, argued the cause and filed the brief on behalf of Plaintiff-Appellee.
Before: Diarmuid F. O'Scannlain, Johnnie B. Rawlinson, and Jay S. Bybee, Circuit Judges. Opinion by Judge O'Scannlain; Dissent by Judge Rawlinson.
O'SCANNLAIN, Circuit Judge:
We must decide whether the Federal Deposit Insurance Corporation, in its role
of receiver of a closed bank, may breach underlying asset contractual obligations without consequence.
In December 2007, Professional Business Bank (" PBB" ) sold to First Heritage Bank, N.A. (" Heritage" ) a fifty percent participation interest in a commercial loan PBB had made to Al's Garden Art, Inc. The terms of the PBB-Heritage Participation Agreement (" Agreement" ) imposed two contractual limitations on Heritage's interest in the loan. First, Heritage could not transfer its interest in the loan without PBB's prior written consent. Second, the Agreement granted PBB a right of first refusal, such that it could elect to repurchase Heritage's loan interest upon the latter's receipt of any bona fide third-party offer.
Within one year of executing its agreement with PBB, the Office of the Comptroller of the Currency closed Heritage and appointed the Federal Deposit Insurance Corporation (" FDIC" ) to act as receiver for Heritage's assets. By operation of 12 U.S.C. § 1821(d)(2)(A), the FDIC became successor in interest to all of Heritage's assets and liabilities. Six months later, and without first seeking PBB's consent or providing PBB with an opportunity to repurchase Heritage's interest in the Al's Garden ...