Fayez and Amal Shamieh v. First Nbc Bank Holding Company

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

15-1182

FAYEZ AND AMAL SHAMIEH

VERSUS

FIRST NBC BANK HOLDING COMPANY, ET AL.

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APPEAL FROM THE
FOURTEENTH JUDICIAL DISTRICT COURT
PARISH OF CALCASIEU, NO. 12-4961
HONORABLE DAVID A. RITCHIE, DISTRICT JUDGE

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SHANNON J. GREMILLION
JUDGE

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Court composed of Elizabeth A. Pickett, Shannon J. Gremillion, and Phyllis M.
Keaty, Judges.

REVERSED.

Hunter W. Lundy
T. Houston Middleton, IV
Lundy, Lundy, Soileau & Soth, L.L.P.
501 Broad Street
P.O. Box 3010
Lake Charles, LA 70602-3010
(337) 439-0707
COUNSEL FOR RESPONDENTS/APPELLEES:
Fayez and Amal Shamieh

Robin B. Cheatham
Jeffrey E. Richardson
Scott R. Cheatham
Adams & Reese, LLP
4500 One Shell Square
New Orleans, LA 70139
(504) 581-3234
COUNSEL FOR APPLICANTS/APPELLANTS:
HCB Financial Corporation
First NBC Bank Holding Company

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GREMILLION, Judge.

The appellants, HCB Financial Corporation (HCB) and First NBC Bank

Holding Company (First NBC), applied for writs to the Louisiana Supreme Court

following our affirmation of the trial court‘s ruling denying their exception of lack

of subject matter jurisdiction. See Shamieh v. First NBC Bank Holding Co., 15-

1182 (La.App. 3 Cir. 1/20/16), an unpublished writ. The supreme court granted

the writ and remanded to this court for briefing, argument, and full opinion. Upon

further consideration, we reverse the trial court‘s denial of appellant‘s declinatory

exception of lack of subject matter jurisdiction.

FACTUAL AND PROCEDURAL BACKGROUND

In April 2006, the Shamiehs, Louisiana residents, executed a mortgage and

promissory note in favor of Central Progressive Bank (CPB) in the amount of

$832,000 jointly with Florida resident Estephan Daher for the purpose of

purchasing and developing real property in Florida. The loan was renewed and

modified several times between 2007 and 2011, and the Shamiehs made the

payments with little contribution from Daher. On November 18, 2011, CPB failed,

and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver

of CPB. On that same day, First NBC acquired the loan at issue from the FDIC.1

On November 30, 2012, the Shamiehs filed suit in the Fourteenth Judicial

District against Daher, Daher Contracting, Inc., three employees of CPB (Mark

Juneau, Ralph Menetre, III, and Donna Erminger), and First NBC. The Shamiehs

sought rescission of the mortgage and promissory note, alleging fraud on part of

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There is some discrepancy regarding the date that First NBC acquired the loan from the FDIC. The briefs
submitted by the Shamiehs and HCB/First NBC indicate that the loan was transferred on the same day the FDIC
assumed the assets and liabilities of CPB, i.e., November 18, 2011. The federal opinions discussed hereafter state
that the loan was transferred by the FDIC to First NBC on December 14, 2011. The Shamiehs petition states, ―On
or about December 14, 2011, First NBC Bank approved the loan renewal and/or modification, and Daher and
Petitioners executed a Change in Terms Agreement and Modification of Mortgage.‖ In either case, the actual date of
transfer is irrelevant to our findings.

the bank employees because they knew or should have known that Daher was

insolvent.

On November 30, 2013, HCB acquired the loan at issue from First NBC.

On January 8, 2014, the Shamiehs filed a First Supplemental and Amending

Petition adding HCB and three other individuals involved in financial dealings

with Daher (Olin Marler, Kevin Tingle, and Rufus Tingle) as defendants.

HCB removed the lawsuit to the United States District Court for the

Western District of Louisiana, Lake Charles Division, based on provisions of the

Financial Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA),

Pub.L. No. 101-73, 103 Stat. 183 (1989). The Shamiehs filed a motion seeking to

have the case remanded to state court. The federal court found that HCB did not

have authority under FIRREA to remove the case, and the federal magistrate judge

recommended that the Shamiehs motion for remand be granted. Shamieh v. HCB

Fin. Corp., No. 2:14-cv-02215, 2014 WL 5365452 (W.D.La. Oct. 21, 2014). The

federal district court affirmed the magistrate judge‘s recommendation and granted

the motion to remand. Shamieh v. HCB Fin. Corp., No. 2:14-cv-2215, 2015 WL

432604 (W.D.La. Jan. 29, 2015).

Once back in state court, HCB and First NBC filed a Declinatory Exception

of Lack of Subject Matter Jurisdiction arguing that no court had jurisdiction

because FIRREA mandated that administrative remedies be exhausted before filing

suit. Following a hearing on November 20, 2015, the trial court denied HCB and

First NBC‘s exception.

HCB and First NBC thereafter filed a writ application with this court, which

was denied on January 20, 2016. HCB and First NBC filed a writ application with

the Louisiana Supreme Court on February 17, 2016. The supreme court granted

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the application on April 8, 2016, and remanded to this court for briefing, argument,

and full opinion.

ASSIGNMENT OF ERROR

HCB and First NBC‘s sole assignment of error is that the trial court erred in

denying their exception of lack of subject matter jurisdiction because the Shamiehs

had not exhausted the administrative remedies required under FIRREA before

filing suit.

DISCUSSION

At the outset, we note that Congress‘s legislation in FIRREA, which aimed

to enable the smooth and timely processing of claims against failed banks, is not a

simple and easy-to-understand piece of legislation. As noted by the court in

Marquis v. FDIC, 965 F.2d 1148 (1st Cir. 1992):

FIRREA‘s text comprises an almost impenetrable thicket,
overgrown with sections, subsections, paragraphs, subparagraphs,
clauses, and subclauses-a veritable jungle of linguistic fronds and
brambles. In light of its prolixity and lack of coherence, confusion
over its proper interpretation is not only unsurprising-it is inevitable.

Id. at 1151.

The section of FIRREA pertaining to an administrative remedy is found in

12 USC § 1821(d)(13)(D)(i) & (ii) which states:

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 appointed 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 receiver.

―Although FIRREA does not explicitly mandate exhaustion of

administrative remedies before judicial intervention, the language of the statute and

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indicated congressional intent make clear that such is required.‖ Meliezer v.

Resolution Trust Co., 952 F.2d 879, 882 (5th Cir. 1992). Numerous cases support

this application of FIRREA. ―‗When exhaustion is statutorily mandated, the

requirement is jurisdictional.‘‖ Id. (quoting Townsend v. United States Dep’t of

Justice Immigration & Naturalization Serv., 799 F.2d 179, 181 (5th Cir. 1986)).

Further, there is no doubt that the Shamiehs‘ claims relate to acts of the

failed institution, CPB, which is plain on the face of their petition and requires no

review.

The Shamiehs argue that the federal rulings remanding their case to state

court held that FIRREA does not apply at all to the facts of this case. Based on the

wording of the federal opinions, we could see how the Shamiehs could advance

this argument. The magistrate judge‘s slip opinion granted the Shamiehs‘ request

for remand to state court. But, this proceeding involved an involuntary bankruptcy

petition filed against Daher and HCB‘s request that the case be transferred to

Florida. The magistrate court stated in part:

Due to the substantial federal interest in ensuring its
sustainability, [FIRREA] of 1989 gives the FDIC significant removal
power in state court actions in which it is a party. In addition to
extending the time-limit for removal the Act also allows the FDIC to
unilaterally remove even if it is realigned as a plaintiff. While we
acknowledge that this power has been held to extend even to third
party institutions who later acquire assets from the FDIC, we cannot
conclude that it does so in this case.

Here, as the plaintiffs aptly point out, the FDIC was never a
party to this case. In fact the FDIC could never have been a party
since the suit was not filed until after it transferred the mortgage to
NBC. In addition the defendant did not acquire the mortgage directly
from the FDIC but instead obtained it from NBC nearly two years
after the initial transfer. In each of the cases cited above and notably
in those cited by the defendant the FDIC had either been a party to the
initial suit or had transferred it rights directly to the party asserting
removal while litigation was still pending.

. . . Here, we deal with § 1819 and we find that extending its
broad removal powers to every successor who might happen to

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acquire an asset once held by the FDIC would dilute the removal
restrictions of § 1446, and would expand federal jurisdiction to an
overwhelming degree.

....

Applying these factors to this case, we find remand proper.
First and since FIRREA does not apply there is no independent basis
for federal jurisdiction absent the bankruptcy petition because the
parties are non-diverse and these are all state law claims.

Shamieh v. HCB Fin. Corp., No. 2:14-cv-02215, 2014 WL 5365452 (W.D.La. Oct.

21, 2014) (Citations omitted).

In the memorandum opinion issued by the district judge affirming the

magistrate judge‘s recommendation, the court stated:

When determining which provisions of FIRREA apply to the
FDIC‘s assignees, the Fifth Circuit has relied on federal common law
because the statutes are silent as to their effect on assignees. . . . [A]
jurisdictional bar–the FIRREA requirement that a plaintiff must
exhaust administrative remedies before bringing suit against the
FDIC-also applies to assignees.

....

However, it cannot be said that the Magistrate Judge‘s decision
is ―clearly erroneous.‖ There is no conflicting law directly on this
issue. While the Magistrate Judge took a narrow interpretation of the
subject statute, it cannot be said that the statute was applied
incorrectly.

Shamieh v. HCB Fin. Corp., No. 2:14-cv-2215, 2015 WL 432604 (W.D.La. Jan.

29, 2015).

Reading this language in the context of the overall opinion pertaining to the

involuntary bankruptcy filing, we do not think the federal court meant to suggest

that FIRREA does not apply at all to any of the facts of this case. The only issue

before the federal court was whether the removal to its court was proper—which it

deemed not to be pursuant to 12 U.S.C. § 1819(b)(2)(B), because FIRREA only

authorizes removal by the FDIC. As noted by the appellants, removal and subject

matter jurisdiction are two separate matters: The former is a procedural device to

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transfer a case from state court to federal court, and the latter pertains to any

court‘s ability to hear the case before it. See 28 U.S.C. § 1446; Boudreaux v. State,

Dep’t of Transp. & Dev., 01-1329 (La. 2/26/02), 815 So.2d 7. We need not

address the issue of whether the FDIC‘s power to remove to federal court extends

to subsequent assignees that purchase assets of the failed bank from the FDIC, as it

is not relevant to the determination of subject matter jurisdiction.

The plain language of 12 U.S.C. § 1821(d)(13)(D)(i) & (ii) makes clear that

Congress intended that a party making any claims arising from the initial failed

bank must exhaust administrative remedies before proceeding to court.

Further, the fact that the FDIC was not named as a defendant is immaterial.

Otherwise any plaintiff could avoid the administrative exhaustion requirement by

omitting the FDIC as a defendant. This would circumvent the purpose of FIRREA,

to orderly dispose of claims against the failed bank. Any claim arising out of the

act or omission of the failed bank must exhaust administrative remedies regardless

of whether the FDIC is named as a defendant. See Acosta-Ramirez v. Banco

Popular de Puerto Rico, 712 F.3d 14 (1st Cir. 2013) and Sunsouth Bank v. First

NBC Bank, No. 1:13-CV-379-WKW, 2015 WL 9581418 (M.D.Al. Dec. 29, 2015),

which involved the same defendants in this case, and the FDIC was not named as a

defendant. The court in Sunsouth, p. 4, stated, ―Application of the administrative

exhaustion requirement is not based on the entity named as the defendant in the

complaint. Instead, it is based upon ‗the actor responsible for the alleged

wrongdoing[.][‘]‖

Finally, the Shamiehs argue that even if FIRREA applies, the state court still

has jurisdiction because there is no evidence ―that the FDIC complied with the

notice requirements of the administrative remedy provision that HCB and FNBC

now seek to invoke.‖ The Shamiehs further state:

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It is far from certain to whom the Shamiehs might have presented
their claims had they been aware of their claims when the paper was
transferred, let alone to whom the claims might be presented at this
stage of the proceedings.

We agree that this situation—one in which a party does not become aware of

a claim they have against the failed bank until after it has already been assigned to

another bank by the FDIC—presents difficult questions whose answers are hard to

decipher from FIRREA. Nevertheless, the federal courts have addressed this issue:

FIRREA only requires that the FDIC mail notice to known creditors
or claimants, see 12 U.S.C. § 1821(d)(3)(C), and the plaintiffs‘ claims
were not advanced until well after Downey Savings failed. Thus, they
could not have been known to the FDIC at the time of receivership.
Notice was given by publication, and notice by publication is
sufficient for inchoate claims. See, e.g. Freeman v. FDIC, 56 F.3d
1394, 1402 (D.C.Cir.1995); Meliezer v. Resolution Trust Co., 952
F.2d 879, 882-83 (5th Cir.1992); cf. Tellado, 707 F.3d at 281 (holding
that ―[t]he fact that the deadline for bringing a claim through the
administrative process may have passed‖ does not preclude the
application of FIRREA‘s jurisdictional bar).

We add, moreover, that once an inchoate claim materializes,
FIRREA creates a pathway for the holder of such a claim to introduce
it into the claims-processing regime. See 12 U.S.C.
§1821(d)(5)(A)(ii), (C)(ii). The plaintiffs have not tried to invoke this
remedy.

Demelo v. U.S. Bank Nat’l Ass’n, 727 F.3d 117, 124 (1st Cir. 2013). Still, ―the

remedy‖ referred to by the Demelo court is an extension of time granted by the

FDIC via written agreement with the complainant. Nevertheless, we must apply

the laws created by Congress as written, which can only lead to the conclusion that

barring the exhaustion of administrative procedures, no court has jurisdiction over

this claim.

CONCLUSION

The judgment of the trial court denying the defendant-appellant‘s exception

of subject matter jurisdiction is reversed. All costs of this appeal are assessed

against the plaintiffs-appellees, Fayez and Amal Shamieh.

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REVERSED.

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