DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for certain residential mortgage-backed securitization trusts sponsored by IndyMac Bank, F.S.B., Plaintiff-Appellant,
FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of IndyMac Bank, F.S.B.; Federal Deposit Insurance Corporation, as Conservator and Receiver of IndyMac Federal Bank F.S.B.; Federal Deposit Insurance Corporation, in its corporate capacity; and Federal Deposit Insurance Corporation; FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR INDYMAC BANK, FSB; DEFENDANT FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR INDYMAC BANK FSB, Defendants-Appellees
Argued and Submitted, Pasadena, California: April 9,
Appeal from the United States District Court for the Central District of California. D.C. No. 2:09-cv-03852-GAF-FFM. Gary A. Feess, District Judge, Presiding.
Thomas M. Peterson (argued) and Jami Wintz McKeon, Morgan, Lewis & Bockius LLP, San Francisco, California; Allyson N. Ho and William S.W. Chang, Morgan, Lewis & Bockius LLP, Houston, Texas; and Gregory T. Parks and Maire E. Donovan, Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, for Appellant.
Colleen J. Boles, Assistant General Counsel, Lawrence H. Richmond, Senior Counsel, J. Scott Watson (argued), Minodora D. Vancea, Counsel, Federal Deposit Insurance Corporation, Arlington, Virginia, for Appellee.
Before: Ferdinand F. Fernandez, Johnnie B. Rawlinson, and Jay S. Bybee, Circuit Judges. Opinion by Judge Rawlinson.
RAWLINSON, Circuit Judge:
In this interlocutory appeal, Appellant Deutsche Bank National Trust Co. (Deutsche Bank) challenges the district court's dismissal of its claims against the Federal Deposit Insurance Corporation (FDIC).
The dispositive issue is whether Deutsche Bank's claims are general unsecured claims under 12 U.S.C. § 1821(d)(11) and thereby prudentially mooted by the lack of sufficient funds in the estate to pay unsecured claims. Deutsche Bank maintains that it possesses superpriority claims and that 12 U.S.C. § 1821(d)(11) is inapplicable because the FDIC exceeded its statutory authority by splitting the agreements governing and transferring the servicing rights without Deutsche Bank's consent. Assuming that the FDIC breached the agreements governing, we nevertheless affirm the district court's dismissal of Deutsche Bank's claims because the purported breach did not transform Deutsche Bank's general unsecured claims into superpriority claims.
A. Deutsche Bank's Lawsuit Against The FDIC
According to its Complaint, Deutsche Bank served in the capacity as trustee for more than 240 mortgage securitization trusts created by IndyMac. Prior to its failure in July, 2008, IndyMac functioned as a mortgage securitizer, acquiring mortgage loans that it sold to the Trusts. According to Deutsche Bank, the Trusts subsequently sold residential mortgage-backed securities " supported by the cash flows on the underlying mortgage loans."
IndyMac's success in attracting investors to purchase the mortgage-backed securities depended on IndyMac's representations and promises that a single entity (IndyMac) would perform the interrelated services necessary to protect, preserve, and service the Trust assets. The mortgage-backed securities transactions were governed by agreements that established and regulated the Trusts and the related relationships among the parties with interests in the Trusts. Among the Governing Agreements were Pooling and Servicing Agreements (PSAs), Sale and Servicing Agreements, Indentures, and Trust Agreements. Pursuant to the Governing Agreements,
IndyMac was required, inter alia, to: enforce the loan obligations; collect payments from the borrowers; administer the documents related to the mortgage loans; provide notification concerning missing or defective loan documentation; provide notification of mortgages that did not comply with IndyMac's representations; cure breaches of representations or warranties adversely affecting the Trust's beneficiaries; and modify seriously delinquent loans. In return, IndyMac received the loans' purchase prices and " monthly fees and income from the Trusts based on the aggregate outstanding principal balance of the mortgage loans in each Trust...."
On July 11, 2008, the Office of Thrift Supervision closed IndyMac, appointed the FDIC as receiver, created a new savings bank, IndyMac Federal, and appointed the FDIC as conservator (FDIC-C) of IndyMac Federal. Another federal savings bank, OneWest Bank, was formed as a thrift holding company to purchase IndyMac Federal's assets and liabilities. As receiver and conservator, the FDIC " succeeded to all rights, titles, powers, and privileges of IndyMac Federal, including those arising under the Governing Agreements or otherwise related to the Trusts." As IndyMac Federal's conservator, the FDIC administered the Trusts and serviced the mortgages based on servicing rights established by the Governing Agreements. In that capacity, the FDIC sold certain assets and rights of IndyMac Federal to OneWest for approximately $13.9 billion.
Deutsche Bank alleged that
[t]he sale to OneWest included many valuable rights that IndyMac held under the Governing Agreements or that were otherwise related to the Trusts, but improperly excluded certain of IndyMac's obligations to the Trusts and the Trustee under those same Governing Agreements without making alternate arrangements to assure the performance of those excluded obligations. Specifically, the sale to OneWest included what the FDIC characterized as the " servicing rights" under the Governing Agreements, including IndyMac's right to service the mortgage loans in the Trusts and the corresponding right to receive the servicing fees and income provided in the Governing Agreements. The sale, however, excluded certain obligations imposed on IndyMac under the same Governing Agreements, including... " any repurchase obligations for breaches of loan level representations, any indemnities relating to origination activities or securities laws or any seller indemnity."
According to Deutsche Bank, the FDIC exceeded its statutory authority " [i]n attempting to sell, and thereby reap the benefits of, the Governing Agreements without assuming and assigning (or otherwise performing) the related obligations..." Deutsche Bank averred that " [i]n the sale to OneWest, the FDIC purported to split unitary contracts and divide rights and obligations that [were] not severable."
Deutsche Bank also alleged that the FDIC, as receiver, breached several representations and warranties and failed to comply with the Governing Agreements, particularly in servicing the mortgage loans. Deutsche Bank averred that the FDIC's conduct resulted in approximately $6 billion to $8 billion in damages to the Trusts and Trustee.
Deutsche Bank asserted causes of action against the FDIC for pre-failure breach of contract as IndyMac Federal's receiver and conservator, (Count One); post-failure breach of contract as conservator, (Count Two); breach of contract for sale to OneWest as conservator, receiver, and in its corporate capacity, (Count Three); repudiation
of certain trusts as receiver, (Count Four); breach of the duty of good faith and fair dealing as receiver and conservator, (Count Five); breach of fiduciary duty as receiver and conservator, (Count Six); unconstitutional taking via the sale to OneWest and the splitting of obligations, (Count Seven); unconstitutional taking of right to appoint a successor servicer, (Count Eight); due process violations premised on the sale to OneWest, the splitting of obligations and the right to appoint a successor servicer, (Counts Nine and Ten); and constructive trust (Count Eleven).
B. Legal and Statutory Framework
Because Deutsche Bank's claims depend on whether it is a general unsecured creditor under the distribution priorities set forth in 12 U.S.C. § 1821(d)(11), discussion of the applicable statutory framework, as interpreted in our precedent, sets the stage for our resolution of this case.
" Congress passed FIRREA in 1989 in response to the crisis in the nation's banking and savings and loan industries. The statute allows the FDIC to act as receiver or conservator of a failed institution for the protection of depositors and creditors." Sharpe v. FDIC, 126 F.3d 1147, 1154 (9th Cir. 1997) (citation omitted). " Congress granted the FDIC broad powers in conserving and disposing of the assets of the failed institution. To enable the FDIC to move quickly and without undue interruption to preserve and consolidate the assets of the failed institution, Congress enacted a broad limit on the power of courts to interfere with the FDIC's efforts...." Id. (citation and internal quotation marks omitted).
Pursuant to 12 U.S.C. § 1821(d)(2)(H), " [t]he [FDIC], as conservator or receiver, shall pay all valid obligations of the insured depository institution in accordance with the prescriptions and limitations of this chapter." The FDIC has the additional task under 12 U.S.C. § 1821(d)(13)(E) of " maximiz[ing] the net present value return from the sale or disposition of such assets" and " minimiz[ing] the amount of any loss realized in the resolution of cases[.]" However, under 12 U.S.C. § 1821(e), the FDIC also has the authority to repudiate " any contract or lease... the performance of which the conservator or receiver, in the conservator's or receiver's discretion, determines to be burdensome..." 12 U.S.C. § 1821(e)(1)(B). If the FDIC decides to repudiate a contract under this provision, " the liability of the conservator or receiver for the disaffirmance or repudiation... shall be -- (i) limited to actual direct compensatory damages..." Id. § 1821(e)(3)(A)(i).
As a corollary to FIRREA, in 1993 Congress adopted the National Depositor Preference Amendment to the Federal Deposit Insurance Act. This legislation provided " that in the distribution of the assets of a failed institution depositors be paid before general creditors could collect on their claims." MBIA Ins. Corp. v. FDIC, 708 F.3d 234, 236, 404 U.S. App. D.C. 156 (D.C. Cir. 2013) (footnote reference omitted). This preference amendment establishing the distribution priority framework for failed institutions was codified in 12 ...