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Shaw v. Bank of America Corp.

United States Court of Appeals, Ninth Circuit

December 27, 2019

Norman Shaw, Plaintiff-Appellant,
v.
Bank of America Corporation; U.S. Bank, Defendants-Appellees.

          Argued and Submitted October 24, 2019 Pasadena, California

          Appeal from the United States District Court for the Southern District of California Dana M. Sabraw, District Judge, Presiding No. 3:12-cv-01207-DMS-BLM.

          Norman Shaw (argued), Solana Beach, California, pro se; Chris Ford, Ford Law AZ, Phoenix, Arizona; for Plaintiff-Appellant.

          Alan E. Schoenfeld (argued), Wilmer Cutler Pickering Hale and Dorr LLP, New York, New York; Albinas J. Prizgintas and Arpit K. Garg, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C.; Bryant S. Delgadillo and Mariel Gerlt-Ferraro, Parker Ibrahim & Berg LLP, Costa Mesa, California; for Defendants-Appellees.

          Before: Andrew J. Kleinfeld, Consuelo M. Callahan, and Ryan D. Nelson, Circuit Judges.

         SUMMARY [*]

         Truth in Lending Act

         The panel affirmed the district court's dismissal of a Truth in Lending Act claim for lack of subject matter jurisdiction based on the jurisdiction-stripping provisions of the Financial Institutions Reform, Recovery, and Enforcement Act.

         Plaintiff sought rescission of a mortgage loan on the ground that the lender violated TILA by providing him with defective notice of the right to cancel when the loan was signed. The panel held that FIRREA's administrative exhaustion requirement applied because there was (1) a "claim" that (2) related to "any act or omission" of (3) an institution for which the Federal Deposit Insurance Corp. had been appointed receiver. First, the panel held that plaintiff had a "claim" because his cause of action gave right to the equitable remedy of rescission and was susceptible of resolution via FIRREA's claims process. Agreeing with the Fourth Circuit, the panel concluded that there was no requirement that the loan have passed through an FDIC receivership. Second, the panel held that plaintiff's claim related to an act or omission, that is, the lender's alleged failure to comply with TILA's disclosure requirements. Finally, the third element was met because the lender had failed and the FDIC had been appointed as receiver. The panel further held that FIRREA's statutory exhaustion requirement does not contain a futility exception, allowing a claim to proceed when filing with the FDIC would be futile.

         The panel held that plaintiff did not exhaust his remedies with the FDIC before filing suit, and his later communications with the FDIC did not prevent dismissal of his TILA claim for lack of subject matter jurisdiction. In addition, the district court did not abuse its discretion in denying plaintiff's request for further discovery.

          OPINION

          R. Nelson, Circuit Judge.

         Plaintiff Norman Shaw appeals from the district court's dismissal of his Truth in Lending Act ("TILA") claim for lack of subject matter jurisdiction based on the jurisdiction-stripping provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"). Because we agree that the district court lacked subject matter jurisdiction, we affirm the district court's dismissal.

         I

         Plaintiff Norman Shaw owns a home in Solana Beach, California. In 2006, he refinanced his home loan, borrowing $1.26 million from Washington Mutual Bank ("WaMu"). One month later, LaSalle Bank, N.A. allegedly became the trustee of his loan, although WaMu continued to service it. WaMu was later closed and placed into the receivership of the Federal Deposit Insurance Corporation ("FDIC"). At that time, JPMorgan Chase Bank acquired WaMu's assets via a Purchase and Assumption Agreement with the FDIC.

         In 2009, Mr. Shaw defaulted on his home loan and a foreclosure date was set. A month before foreclosure, Mr. Shaw sent notices of loan rescission to WaMu, JP Morgan Chase, and Bank of America pursuant to instructions in his loan documents. Mr. Shaw sought rescission, claiming that WaMu violated TILA by providing him with defective notice of the right to cancel when the loan was signed. None of the institutions contacted by Mr. Shaw rescinded the loan.

         Being "short on options to save [his] home," Mr. Shaw declared bankruptcy, which halted foreclosure proceedings. He then filed a TILA lawsuit as an adversary proceeding in bankruptcy court. By that point, the trustee of the loan was U.S. Bank, a successor in interest to Bank of America. U.S. Bank moved to dismiss Mr. Shaw's adversarial action for lack of jurisdiction. The bankruptcy court agreed.

         Mr. Shaw then brought this action in May 2012, seeking rescission of the loan under TILA. After several years of litigation, including an appeal to this court, U.S. Bank moved to dismiss Mr. Shaw's claim for lack of jurisdiction, arguing he failed to exhaust administrative remedies through the FDIC as required by FIRREA. Mr. Shaw responded that FIRREA did not apply and further discovery was needed to make that showing. The district court rejected these arguments, granted U.S. Bank's motion, and entered judgment. This appeal followed.

         While this appeal was pending, Mr. Shaw sent the FDIC a letter explaining the alleged TILA violations and requesting assistance in rescinding the loan. Mr. Shaw told the FDIC that his loan was owned by "either LaSalle Bank, Bank of America, or both."[1] The FDIC responded a week later, explaining it was "unable to process" his request because "[t]he financial ...


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