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Baldev Raj Bhutani v. Barrington Bank and Trust

December 10, 2012


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


Baldev Bhutani filed suit in Illinois state court against the Federal Deposit Insurance Corporation (FDIC), in its capacity as receiver for the failed Charter National Bank and Trust (Charter Bank), and against Barrington Bank and Trust Company (Barrington Bank), which acquired the assets and liabilities of Charter Bank. Bhutani sought to recover funds he had deposited into a money market account at Charter Bank. The FDIC removed the case to this Court pursuant to 28 U.S.C. § 1442 and then moved to dismiss for lack of subject matter jurisdiction. Barrington Bank has also moved to dismiss for lack of subject matter jurisdiction, and for failure to state a claim. For the reasons stated below, the Court grants defendants' motions.


The Court takes the following facts from the allegations in Bhutani's complaint and the parties' submissions on the motions to dismiss.

In August 2007, Bhutani -- as manager of Avtar LLC --obtained a loan from Charter Bank in the amount of $1,650,000, secured by a mortgage on real estate in Gurnee, Illinois. The terms of the loan required Bhutani to sign as guarantor and to open a money market account in his name. The loan further provided for a right to setoff from accounts held by Avtar LLC and required Bhutani's guaranty to remain in place until all mortgage obligations were satisfied. Pursuant to the agreement, Bhutani deposited a total of $325,505.12 into his money market account from August 2007 through October 2009.

On May 17, 2011, Charter Bank served Bhutani with a state court complaint for foreclosure alleging that Avtar LLC was behind in its interest payments on the loan. On November 23, 2011, the court in foreclosure action entered a default judgment against Avtar LLC. Approximately one month later, Charter Bank stated in court that the funds in Bhutani's money market account had been applied toward payments on the loan to Avtar LLC. The Sheriff of Lake County conducted a foreclosure sale of the Gurnee property, and Charter Bank purchased the property.

On February 10, 2012, the Office of the Comptroller of the Currency (OCC) closed Charter Bank and appointed the FDIC as receiver.*fn1 Bhutani alleges that on the same day, the FDIC transferred Charter Bank's assets and liabilities to Barrington Bank.

Bhutani filed a timely administrative claim with the FDIC as receiver in which he asserted that Charter Bank had wrongfully set off funds in his money market account against the Avtar LLC loan. He attached to his claim documents he had filed in the state court foreclosure case in January 2012 in which he alleged that Charter Bank had denied his requests to withdraw funds in 2010 and 2011 claiming that the "funds were all used up." FDIC's Opening Br., Ex. B. By letter dated April 11, 2012, the FDIC as receiver informed Bhutani that his claim was disallowed. The FDIC's notice further stated:

Pursuant to 12 U.S.C. Section 1821(d)(6), if you do not agree with this disallowance, you have the right to file a lawsuit on your claim . . . in the United States District (or Territorial) Court for the District within which the failed institution's principal place of business was located or the United States District Court for the District of Columbia within 60 days from the date of this notice.

Id.., Ex. C. The letter explained that any failure to file a lawsuit pursuant to the statute would make the disallowance final and would forever bar Bhutani's claim.

Despite what the notice stated, Bhutani did not file suit in federal district court. Rather, on or about May 4, 2012, he filed suit in Illinois state court seeking to obtain the funds from the money market account. As indicated earlier, the FDIC then removed the case to federal court. In his complaint, Bhutani alleges that defendants have refused him access to his funds; they (more specifically Charter Bank) were not permitted to a right of set-off from his money market account; and they have improperly refused to account for how his funds were used.


On a motion to dismiss for lack of subject matter jurisdiction, the Court accepts the factual allegations in the complaint as true and draws reasonable inferences in favor of the plaintiff. 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 on that issue. United Phosphorus Ltd. v. Angus ...

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