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Regas, Frezados & Dallas Llp v. Federal Deposit Insurance Corporation

January 28, 2011

REGAS, FREZADOS & DALLAS LLP, PLAINTIFF,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR MUTUAL BANK, AND
UNITED CENTRAL BANK, SUCCESSOR IN INTEREST TO MUTUAL BANK, DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:

MEMORANDUM OPINION AND ORDER

Regas, Frezados & Dallas LLP (Regas) has sued the Federal Deposit Insurance Corporation (FDIC), in its capacity as receiver for Mutual Bank, and United Central Bank, successor in interest to Mutual Bank, to recover unpaid legal fees and expenses allegedly owed to Regas by Mutual Bank. Defendants have moved to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim. For the reasons stated below, the Court denies the motion.

Background

The Court takes the following facts from the allegations in Regas's complaint and the parties' submissions on the motion to dismiss. Regas is a law firm that previously served as outside general counsel to Mutual Bank. In early 2009, Regas represented Mutual Bank in connection with the sale of a hotel property. The hotel operator had incurred liens against the property in the approximate amount of $600,000. At closing, Chicago Title Insurance Company (Chicago Title) required $620,989.50 to be held in escrow to clear title due to the outstanding liens. To enable the sale, Regas devised a legal strategy to secure waivers and releases of the outstanding liens. Through this strategy, Regas ultimately obtained the release by Chicago Title of $575,578.83 from the amount held in escrow.

Beginning in February 2009, Mutual Bank stopped paying Regas's legal fees and expenses. In March 2009, Regas began to assert Illinois statutory and common law attorney's liens on proceeds stemming from its representation of Mutual Bank.

Because Regas had served a notice of attorney's lien on Chicago Title, Chicago Title issued the checks totaling $575,578.83 from the escrow account to both Mutual Bank and Regas. Regas deposited the funds in its client trust account. Regas then "came into possession of further sums in connection with its representation of Mutual Bank totaling $37,012.33." Compl. ¶ 27. Together with the funds from the escrow account, Regas holds a total of $612,591.16. Pursuant to an agreement between Regas and Mutual Bank, the funds remain in Regas's client trust account subject to further agreement of the parties or court order.

On July 31, 2009, the Illinois Department of Financial and Professional Regulation closed Mutual Bank and appointed the FDIC as receiver. By that date, Mutual Bank owed Regas $832,259.62 in fees and expenses. On November 2, 2009, Regas filed a proof of claim for $832,259.62 with the FDIC. Regas also sought a determination that it was entitled to apply the $612,591.16 in its client trust account towards the debt. The FDIC did not respond to the claim within 180 days, as it was required to do under 12 U.S.C. § 1821(d)(5)(A)(I).

On June 4, 2010, Regas filed suit in this Court. Regas seeks an order affirming its claim of $832,259.62 in its entirety, permitting Regas to retain the $612,591.16 in lien funds in partial satisfaction of its claim, and stating that Regas's interest in the lien funds is superior to that of United Central Bank.

On July 2, 2010, about four weeks after Regas filed this suit, the FDIC issued a ruling on Regas's proof of claim. It granted Regas a receiver's certificate for $831,134.37 and denied the remaining $1,125.25 of Regas's claim.

Discussion

Defendants have moved to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).

A. Subject matter jurisdiction

On a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the Court accepts the factual allegations in the complaint as true and construes reasonable inferences in favor of the non-movant. Rueth v. EPA, 13 F.3d 227, 229 (7th Cir. 1993). The Court is not restricted to the jurisdictional contentions asserted in the complaint, however; it may use other submitted evidence to determine whether it has subject matter jurisdiction. Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995). The party asserting jurisdiction bears the burden of persuasion. United Phosphorus Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003).

Regas contends that the Court has subject matter jurisdiction over the action pursuant to a provision of the Financial Institutions Recovery, Reform and Enforcement Act of 1989 (FIRREA), specifically, 12 U.S.C. § 1821. FIRREA sets forth procedures by which a creditor may file a proof of claim with the FDIC. E.g., 12 U.S.C. §§ 1821(d)(3), 1821(d)(5). Once a creditor submits a claim, the agency has 180 days to rule on it. 12 U.S.C. § 1821(d)(5)(A)(I). If the agency disallows the claim or fails to rule within 180 days, the claimant is entitled to de novo examination of the claim by the federal courts. 12 U.S.C. § 1821(d)(6)(A). To obtain judicial review, "[the] creditor must take action on the claim either within 60 days of receiving any notice of disallowance, or within 60 days after expiration of the 180-day period for consideration of the claim." Capitol Leasing Co. v. FDIC, 999 F.2d 188, 192 (7th ...


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