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United States District Court, Central District of Illinois, Springfield Division

November 25, 1991


The opinion of the court was delivered by: Richard Mills, District Judge:


Sadly, we face here the failure of another Savings & Loan.

The issue: whether a complaint against the Resolution Trust Corporation, as receiver of a failed financial institution, must be dismissed when the plaintiff filed its claim in United States District Court prior to pursuing federally mandated administrative remedies.

Before the Court is Defendant's motion to dismiss Plaintiff's complaint for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) because Plaintiff failed to exhaust its administrative remedies as required by 12 U.S.C. § 1821(d) before bringing its claim in federal court.

I. Facts

This is not the first time that we have visited this matter. See Orchard Hills Cooperative Apartments, Inc. v. Germania Federal Savings and Loan Association, 720 F. Supp. 127 (C.D.Ill. 1989).*fn1 We will not repeat the lengthy facts detailed in its prior decision, however some supplementation is necessary. Orchard Hills Cooperative Apartments, at 128-29. After this Court dismissed Plaintiff's suit, Plaintiff filed a complaint against Germania Federal Savings & Loan (Germania) in the Circuit Court of Sangamon County on June 26, 1990. The complaint contained three counts: Count I alleged common law fraud; Count II alleged that Germania breached its fiduciary duty to Plaintiff; and a breach of contract claim was brought in Count III.

Four days prior to the filing of Plaintiff's complaint, the Resolution Trust Corporation (RTC) was appointed conservator of Germania. Pursuant to 12 U.S.C. § 1441a(b)(1)(B) (1989), RTC filed a motion to remove this action to the United States District Court for the Southern District of Illinois where it was also substituted as the defendant. Subsequently, Plaintiff filed a motion for change of venue to the Central District of Illinois because this Court was well acquainted with the facts of this case. Plaintiff's motion was granted and this case was transferred to this Court on December 27, 1990.

On July 26, 1991, Defendant was appointed receiver of Germania and this Court granted its motion to substitute RTC as receiver as the defendant in this case. Defendant now seeks to have this case dismissed for lack of subject matter jurisdiction on the ground that Plaintiff failed to exhaust the administrative procedures for bringing claims against the RTC as established in the Financial Institution Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1821(d) (1989).

II. Motion to Dismiss

  When ruling on a motion to dismiss pursuant to 12(b)(1), the
court must take all of the plaintiff's allegations as true and
must view them, along with all reasonable inferences
therefrom, in the light most favorable to the plaintiff.
Brown v. Keystone Consolidated Industries, Inc., 680 F. Supp. 1212
 (N.D.Ill. 1988). A district court may properly look beyond
the jurisdictional allegations of the complaint and view
whatever evidence has been submitted relevant to the
determination of jurisdiction. Grafon Corp. v. Hausermann,
602 F.2d 781 (7th Cir. 1979). Dismissal is proper when the
complaint fails to sufficiently allege the existence of subject
matter jurisdiction. Brown, at 1215.

III. Analysis

In response to the savings and loan crisis, Congress enacted FIRREA in order to provide a regulatory framework in which claims against failed financial institutions could be handled "expeditiously and fairly." Hermitage Associates v. Resolution Trust Corp., No. 91-2027, 1991 WL 281737, 1991 U.S. Dist. LEXIS 15507 (E.D.N.Y. Oct. 3, 1991) (quoting H.R.Rep. No. 54(I), 101st Cong. 1st Sess. 419 (1989, U.S.Code Cong. & Admin.News 1989, p. 86)). To help attain this goal, FIRREA created the RTC to manage, contain and resolve all cases involving failed savings institutions. 12 U.S.C. § 1441a(b)(3)(A) (1989). Under 12 U.S.C. § 1441a(b)(4) (1989), RTC has the same powers and rights to perform its duties as the Federal Deposit Insurance Corporation (FDIC) has according to 12 U.S.C. § 1821, 1822, and 1823 (1989). Decrosta v. Red Carpet Inns Int'l Inc., 767 F. Supp. 694 (E.D.Pa. 1991).

The resolution procedure for claims filed against a financial institution in RTC receivership are set forth in 12 U.S.C. § 1821(d). First, a claimant may file its claim with the RTC which has 180 days to allow or disallow it. 12 U.S.C. § 1821(d)(5)(A)(i) (1989). Afterwards, if a claimant is dissatisfied with the results, it has 60 days to obtain de novo judicial review of the RTC's determination pursuant to § 1821(d)(6)(A) which provides in pertinent part:

  the claimant may request administrative review of
  the claim in accordance with subparagraph (A) or
  (B) of paragraph (7) or file suit on such claim
  (or continue an action commenced before the
  appointment of the receiver) in the district or
  territorial court of the United States for the
  district within which the depository
  institution's principal place of business is
  located or the United States District Court for
  the District of Columbia (and such court shall
  have jurisdiction to hear such claim).

This is the only path that a claimant can follow to the federal courts. United States v. Altman, 762 F. Supp. 139 (S.D.Miss. 1991). Section 1821(d)(13)(D) limits the jurisdiction of district courts to de novo review of claims first presented to the RTC:

Except as otherwise provided in this subsection, no court shall have jurisdiction over —

    (i) any claim or action for payment from, or
  any action seeking a determination of rights with
  respect to, the assets of any depository
  institution for which the Corporation has been
  assigned receiver, including assets which the
  Corporation may acquire from itself as such
  receiver; or

    (ii) any claim relating to any act or omission
  of such institution or the Corporation as

Thus, FIRREA divests Article III courts of subject matter jurisdiction over claims presented to the RTC until the claimant has exhausted administrative remedies. Circle Industries, Division of Nastasi-White, Inc. v. City Federal Savings Bank, 749 F. Supp. 447 (E.D.N.Y. 1990), aff'd per curiam, 931 F.2d 7 (2d Cir. 1991).

Neither Defendant's motion to dismiss nor Plaintiff's memorandum in opposition states that Plaintiff first sought an administrative remedy before pursuing this action in district court.*fn2 Although the RTC was conservator of Germania at the time this claim was filed, that did not relieve Plaintiff of the responsibility of following the administrative procedures set forth in § 1821(d) once the RTC became the receiver of Germania Bank. Circle Industries, 749 F. Supp. at 454-55. Therefore, this Court must dismiss Plaintiff's claim for lack of subject matter jurisdiction since it did not first pursue mandated administrative remedies before seeking a judicial determination of its claim. Any other conclusion would defeat Congress' intent to have the RTC develop administrative procedures to settle claims brought against failed financial institutions.

Ergo, Defendant's motion to dismiss is ALLOWED. All pending motions are hereby DENIED as moot. Hopefully, this matter, which has dragged on for a great length of time in one form or another through both the state and federal systems, can be settled by the parties through the administrative process.


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