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FDIC v. MILLER

November 15, 1991

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff,
v.
LAURENCE MILLER, BARBARA MILLER, EDWIN CAREY, GILBERT DEMANGE, WILLIAM LANCASTER, CHARLES MARSHALL, KENNETH PHILLIPS, JOHN ZAK and MARY STANLEY, Defendants. EDWIN CAREY, CHARLES MARSHALL, KENNETH PHILLIPS, LAURENCE MILLER and BARBARA MILLER, Defendants/Counterplaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff/Counterdefendant. EDWIN CAREY, CHARLES MARSHALL and KENNETH PHILLIPS, Defendants/Third-Party Plaintiffs, v. OFFICE OF THRIFT SUPERVISION, Third-Party Defendants. EDWARD CAREY and CHARLES MARSHALL, Defendants/Third-Party Plaintiffs, v. OFFICE OF COMMISSIONER OF SAVINGS AND RESIDENTIAL FINANCE, Third-Party Defendants.


HOLDERMAN


The opinion of the court was delivered by: JAMES F. HOLDERMAN

JAMES F. HOLDERMAN, District Judge:

 Plaintiff, Federal Deposit Insurance Corporation ("FDIC") brought this action against defendants, Laurence Miller, Barbara Miller, Edwin Carey, Gilbert Demange, William Lancaster, Charles Marshall, Kenneth Phillips, John Zak, and Mary Stanley, former directors and officers of Lyons Federal Trust and Savings ("Lyons") and its subsidiary service corporations. The FDIC claims breach of fiduciary duties, fraud, negligence and breach of contract.

 Defendants Carey, Marshall and Phillips (herein referred to as "Director claimants") have counterclaimed against the FDIC for recoupment and have asserted a third-party claim against the Office of Thrift Supervision ("OTS"). *fn1" Additionally, defendants Carey and Marshall have brought a third-party action against the Illinois Office of Commissioner of Savings and Residential Finance ("the Commissioner"). *fn2" Defendants Laurence Miller and Barbara Miller (herein referred to as "the Millers") have counterclaimed against the FDIC for interference with contractual rights and damage to professional reputation.

 The FDIC and OTS have moved to dismiss the counterclaims and third-party claims against them, pursuant to Fed. R. Civ. P. 12(b)(1), claiming that the court lacks jurisdiction because the Millers and Director claimants have failed to comply with the requirements of the Federal Tort Claims Act ("FTCA"). 28 U.S.C. §§ 1346(c), 2675(a), 2679(a), 2680(h). The Commissioner has moved to dismiss under Rule 12(b)(1), claiming that jurisdiction over the third-party complaint against it is barred by the Eleventh Amendment. For the reasons stated in this opinion, FDIC's motion to dismiss the Director claimants' counterclaims is DENIED, while FDIC's motion to dismiss the Millers' counterclaims is GRANTED. Third-party defendants OTS and the Commissioner's motions to dismiss the third-party claims against them are GRANTED.

 FACTUAL BACKGROUND

 This case concerns a troubled savings and loan institution, Lyons Federal Trust and Savings ("Lyons"). The Federal Savings and Loan Corporation ("FSLIC") became receiver for Lyons in 1987. In its initial action, the FDIC, which has succeeded to claims of Lyons and the FSLIC, alleged that the defendants' breaches of fiduciary and contractual duties, negligence, and, in the case of the Millers, fraud, caused Lyons to lose over $ 20 million. The losses are specifically attributed to a number of transactions allegedly engaged in by the Millers defendants, as officers of Lyons, and either assented to or not prevented by the other defendants as members of the Lyons board of directors.

 The Director claimants base their counterclaims and third-party claims on the involvement of the counter-defendant, FDIC, and third-party defendant government agencies, OTS and the Commissioner, and their predecessors *fn3" (to which the counter/third-party complaints refer collectively as "the Regulators") in the affairs of Lyons during the years prior to receivership. According to their allegations, the Regulators, pursuant to a number of supervisory and agreements and directives, assumed "operational duties" at Lyons. (Carey and Marshall Counterclaim and Third-Party Complaint, para. 16, Phillips', para. 15) This assumption of operational duties allegedly caused Carey, Marshall and Phillips to rely on the Regulators to prevent fraud and improprieties at Lyons during the time period when a "substantial portion" of the allegedly improper activities enumerated in the FDIC's original complaint took place. (Carey and Marshall, para. 17, Phillips' para. 16). According to the Director claimants, the government regulators therefore bear some portion of the responsibility for losses which are the subject of the FDIC's main action.

 The Millers' counterclaims are similar to each other. They assert circumstances which the Millers allege evidence the government's unjustified regulatory interference at Lyons. The Millers claim that the Regulators' actions, which included the leaking of confidential information and ultimately the removal of the Millers as directors and officers of Lyons, damaged their professional reputations and interfered with their contractual rights with Lyons.

 DISCUSSION

 I. COUNTERCLAIMS OF DIRECTOR CLAIMANTS

 The FDIC argues that the Director claimants' counterclaims against it should be dismissed because of the Director claimants' failure to comply with procedural requirements imposed by the Federal Tort Claims Act ("FTCA") on parties pursuing claims against federal agencies. The Director claimants respond by arguing that they need not comply with the FTCA's procedural requirements because their claim against the FDIC is one of recoupment.

 The Director claimants do not contest that their allegations against the FDIC sound in tort. Normally, a tort claim against a federal agency like the FDIC must be brought in conformity with the requirements of the FTCA, even if the claim is asserted as a counterclaim. Federal Deposit Insurance Corporation v. Citizens Bank & Trust Co., 592 F.2d 364, 373 (7th Cir. 1979). Under the FTCA, a claim against a federal agency like the FDIC must be presented to and denied by the agency before an action can be brought in federal court. 28 U.S.C. § 2675(a). Also, suits against federal agencies under the FTCA must name the United States as a party. See e.g., Federal Deposit Ins. Corp v. Hartford Ins. Co. of Illinois, 877 F.2d 590 (7th Cir. 1989); Hughes v. United States, 701 F.2d 56, 58 (7th Cir. 1982). The Director claimants have never presented a claim to the FDIC and have named only the FDIC, not the United States, as counterdefendant.

 An exception to the general rules of sovereign immunity exists in the case of counterclaims asserted "with respect to matters in recoupment arising out of the same transaction or occurrence which is the subject matter of the same suit." Federal Deposit Insurance Corporation v. Citizens Bank & Trust Co., 592 F.2d at 373. The government's waiver of immunity in the recoupment text relieves claimants of the burden of conforming with the FTCA's procedural requirements. Parties counterclaiming in recoupment need not name the United States as a party or exhaust administrative remedies before suit. Federal Deposit Insurance Corp. v. Carter, 701 F. Supp. 730, 733 (C.D. Cal. 1987). Therefore, if the Director claimants' counterclaims have been properly classified as recoupment claims, they should not be dismissed on the grounds asserted by the FDIC. *fn4"

 To enjoy exemption from the procedural requirements of the FTCA, a recoupment counterclaim must, in addition to addressing the same transactions or occurrences as the main claim, aim only at "defeating the government's claim." Federal Savings and Loan Insurance Corporation v. Quinn, 419 F.2d 1014, 1017 (7th Cir. 1969). The recoupment exception does not extend to any claims ...


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