KENDALL J. NEWMAN

ORDER AND

FINDINGS AND RECOMMENDATIONS

By these findings and recommendations, the court recommends that plaintiff's claims against defendant Federal Deposit Insurance Corporation as Receiver for and on behalf of Amtrust Bank ("FDIC") be dismissed with prejudice and that plaintiff's remaining claims be remanded to state court. BACKGROUND

On March 13, 2009, plaintiff, presently a resident of Sacramento, California, commenced this action concerning foreclosure of his real property in Acampo, California, against defendants Amtrust Bank, Linda K. Weeks, Re/Max Gold Real Estate, Williams & Williams Worldwide Real Estate Auctions, and Quality Loan Service Corporation in the San Joaquin County Superior Court. Plaintiff alleged that although representatives from Amtrust Bank had orally agreed to postpone a January 21, 2009 foreclosure sale if plaintiff submitted documentation required for a loan modification review, which plaintiff provided, Amtrust Bank nonetheless foreclosed on the property, with the assistance of Quality Loan Service Corporation as trustee. Plaintiff further alleged that Amtrust Bank, defendant Linda Weeks (affiliated with defendant Re/Max Gold Real Estate), and/or others had wrongfully entered the real property and taken his personal belongings. Plaintiff asserted state law claims for (1) setting aside the trustee's sale; (2) cancellation of deed; (3) injunctive relief; (4) breach of contract; (5) fraud; (6) trespass to real property; (7) trespass to personal property; and (8) conversion. (See ECF No. 1-1 at 8-22.)

Amtrust Bank filed an answer to plaintiff's complaint in state court on June 16, 2009. (ECF No. 1-1 at 23-32.) During the pendency of the action in state court, the other defendants were not served with process. (ECF No. 9.) On December 4, 2009, Amtrust Bank was closed by the United States Department of the Treasury's Office of Thrift Supervision, and the FDIC was appointed as Receiver. (See FDIC's Request for Judicial Notice, ECF No. 16-2 ["RJN"] Ex. H.) Thereafter, on April 30, 2011, the FDIC determined that "insufficient assets exist in the receivership of AmTrust Bank, Cleveland, Ohio, to make any distribution to general unsecured claims, and therefore such claims will recover nothing and have no value." (RJN Ex. I.) The FDIC's notice in the Federal Register setting forth the no-value determination explained:

On December 4, 2009, AmTrust Bank, Cleveland, Ohio, (FIN #10155) was closed by the Office of Thrift Supervision ("OTS"), and the Federal Deposit Insurance Corporation ("FDIC") was appointed as its receiver ("Receiver"). In complying with its statutory duty to resolve the institution in the method that is least costly to the deposit insurance fund, see 12 U.S.C. 1823(c)(4), the FDIC facilitated a transaction with New York Community Bank, Westbury, New York, to acquire the deposits and most of the assets of the failed institution.
Section 11(d)(11)(A) of the Federal Deposit Insurance Act, 12
U.S.C. 1821(d)(11)(A) , sets forth the order of priority for distribution of amounts realized from the liquidation or other resolution of an insured depository institution to pay claims. Under the statutory order of priority, administrative expenses and deposit liabilities must be paid in full before any distribution may be made to general unsecured creditors or any lower priority claims.
As of December 31, 2010, the value of assets available for distribution by the Receiver, together with anticipated recovery sources, including recoveries on claims against directors, officers, and other professionals, claims in bankruptcy, and refunds of Federal and state taxes, was $3,102,153,098. As of the same date, administrative expenses and depositor liabilities equaled $4,555,852,340, exceeding available assets by $1,453,699,242. Accordingly, the FDIC has determined that insufficient assets exist to make any distribution on general unsecured creditor claims (and any lower priority claims) and therefore all such claims, asserted or unasserted, will recover nothing and have no value.

Subsequently, on March 14, 2013, the San Joaquin County Superior Court granted the substitution of FDIC for Amtrust Bank for purposes of this action. (ECF No. 1-2 at 106-07.) On April 4, 2013, FDIC then removed the action to this court pursuant to 12 U.S.C. § 1819, which provides that generally, "all suits of a civil nature at common law or in equity to which the [FDIC], in any capacity, is a party shall be deemed to arise under the laws of the United States" for purposes of federal court jurisdiction. 12 U.S.C. § 1819(b)(2)(A). Plaintiff did not file a motion for remand or otherwise oppose the removal of the action to federal court.

Presently pending before the court are several motions filed by various parties. On August 5, 2013, plaintiff filed a motion for an extension of time until September 5, 2013, to serve the remaining defendants with process. (ECF No. 9.) On September 23, 2013, defendant Quality Loan Service Corporation appeared and filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 14.) Thereafter, on September 30, 2013, defendant FDIC filed a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). (ECF No. 16.) Then, on October 15, 2013, defendants Linda K. Weeks and NorCal Gold, Inc. (erroneously sued as Re/Max Gold Real Estate) appeared and joined in the motion to dismiss filed by defendant Quality Loan Service Corporation and the motion for judgment on the pleadings filed by defendant FDIC. (ECF No. 17.) These motions are addressed separately below.

DISCUSSION

Plaintiff's Motion for Extension of Time to Serve Defendants With Process

On August 5, 2013, plaintiff filed a motion for an extension of time until September 5, 2013, to serve any remaining defendants with process. (ECF No. 9.) In that motion, plaintiff explained that he had not previously served the defendants other than Amtrust Bank with process, because he had relied on his former attorney to accomplish service of process. However, according to plaintiff, that attorney has since been suspended from the practice of law and no longer represents plaintiff.

Since the filing of plaintiff's motion, it appears that all of the defendants, except for defendant Williams & Williams Worldwide Real Estate Auctions, have now appeared through counsel. Nevertheless, in the interests of clarity, the court retroactively grants plaintiff an extension of time until September 5, 2013, to complete service of process.

FDIC's Motion for Judgment on the Pleadings

As noted above, FDIC filed a motion for judgment on the pleadings, which was noticed for hearing on November 7, 2013. (ECF No. 16.) Plaintiff failed to file an opposition or statement of non-opposition to that motion in accordance with Local Rule 230(c). After reviewing the papers in support of the motion, the court found the motion to be suitable for resolution without oral argument and submitted the motion on the record pursuant to Local Rule 230(g). (ECF No. 19.)

Request for Judicial Notice

Before proceeding to the substance of the FDIC's motion, the court addresses the FDIC's request for judicial notice filed in conjunction with that motion.

"The court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). A court may take judicial notice of "matters of public record." Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).

The court grants the FDIC's request for judicial notice, because the 11 exhibits of which judicial notice is requested (Exhibits A-K) are publicly recorded documents, public court records, documents from government agency websites, and/or contents from the Federal Register. As such, these documents constitute sources whose accuracy cannot reasonably be questioned.

Substantive Analysis of the FDIC's Motion for Judgment on the Pleadings

"After the pleadings are closed--but early enough not to delay trial--a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). "Because the motions are functionally identical, the same standard of review applicable to a Rule 12(b) motion applies to its Rule 12(c) analog." Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). Dismissal may generally be granted where there is no cognizable legal theory or lack of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). In considering a motion for judgment on the pleadings, the Court accepts all factual allegations in the complaint as true and must construe them in the light most favorable to the non-moving party. Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). "[A] judgment on the pleadings is appropriate when, even if all allegations in the complaint are true, the moving party is entitled to judgment as a matter of law." Westlands Water Dist. v. Firebaugh Canal, 10 F.3d 667, 670 (9th Cir. 1993).

In its motion, the FDIC argues that plaintiff's claims against the FDIC should be dismissed for lack of subject matter jurisdiction, because no effective relief can be granted as to such claims, which are moot and/or entirely precluded. That argument has merit.

Article III of the United States Constitution grants federal courts jurisdiction to decide only actual cases or controversies. U.S. Const. art. III, § 2, cl. 1; see also Gator.com Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1128 (9th Cir. 2005) ("It is an inexorable command of the United States Constitution that the federal courts confine themselves to deciding actual cases and controversies."). Thus, a federal court has a duty "to decide actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it." Mills v. Green, 159 U.S. 651, 653 (1895); see also Iron Arrow Honor Society v. Heckler, 464 U.S. 67, 70 (1983) ("Federal courts lack jurisdiction to decide moot cases because their constitutional authority extends only to actual cases or controversies."); U.S. v. Geophysical Corp. of Alaska, 732 F.2d 693, 698 (9th Cir. 1984) (holding that federal courts "cannot take jurisdiction over a claim as to which no effective relief can be granted.")

Based on the above-mentioned principles, courts have dismissed claims against the FDIC as receiver for mootness and lack of jurisdiction where the receivership estate has insufficient assets to satisfy the plaintiff's claim. See Henrichs v. Valley View Development, 474 F.3d 609, 615 (9th Cir. 2007) (affirming dismissal of moot claim against FDIC as receiver when no assets remained in the receivership to satisfy plaintiff's claim, stating that federal courts "have no jurisdiction over moot claims."); Rodrigues v. Fed. Deposit Ins. Corp., 2012 WL 1945497, at **3-4 (N.D. Cal. May 30, 2012) (unpublished).

"Congress unequivocally expressed its intent to limit the maximum liability of the FDIC to the amount the claimant would have received in a liquidation under federal priority regulations." First Ind. Fed. Sav. Bank v. F.D.I.C., 964 F.2d 503, 507 (5th Cir. 1992); Henrichs v. Valley View Dev., 474 F.3d 609, 615 (9th Cir. 2007) (citing First Ind. Fed. Sav. Bank, 964 F.2d at 507); see also 12 U.S.C. § 1821(i)(2). Under the established priority scheme for distribution of receivership assets, general unsecured creditors, such as plaintiff here, are paid only after the administrative expenses incurred by the FDIC and depositor liabilities have first been paid in full. 12 U.S.C. § 1821(d)(11)(A); see also Fed. Deposit Ins. Corp. v. RPM Mortg., 2010 WL 9502044, at *3 (C.D. Cal. Aug. 13, 2010) (unpublished).

In this case, the FDIC on April 30, 2011, formally determined, and on May 11, 2011, published a notice in the Federal Register, that the administrative expenses and depositor liabilities of the Amtrust Bank receivership exceeded available assets, and that "insufficient assets exist in the receivership of AmTrust Bank, Cleveland, Ohio, to make any distribution to general unsecured claims, and therefore such claims will recover nothing and have no value." (RJN Ex. I.) Thus, the FDIC correctly points out that, even if all plaintiff's allegations were accepted as true and plaintiff were to prevail on his claims against the FDIC, there would be no assets in the receivership estate from which plaintiff could recover any damages. As such, plaintiff's damages claims against the FDIC are moot, there is no actual case or controversy with regards to such claims, and they should be dismissed for lack of subject matter jurisdiction.

Furthermore, plaintiff's claims for equitable relief, such as plaintiff's claims for setting aside the trustee's sale, cancellation of deed, and injunctive relief are barred by 12 U.S.C. § 1821(j). The Ninth Circuit has explained that provision, and its role in the statutory framework, as follows:

Congress has granted the FDIC as receiver express statutory authority to dispose of receivership assets, thereby reducing the losses borne by federal taxpayers when federally insured financial institutions...fail. As receiver, the FDIC has broad authority to "take over the assets ... and conduct all business of the institution," "collect all obligations and money due to the institution," and "preserve and conserve the assets and property of such institution." 12 U.S.C. § 1821(d)(2)(B)(i), (ii), (iv). Moreover, the FDIC may "place the insured depository institution in liquidation and proceed to realize upon the assets of the institution...." 12 U.S.C. § 1821(d)(2)(E). The FDIC as receiver may also "transfer any asset or liability of the institution in default ... without any approval,
assignment, or consent...." 12 U.S.C. § 1821(d)(2)(G)(i)(II). Finally, the FDIC may "exercise ... such incidental powers as shall be necessary to carry out such powers," and "take any action authorized by this Chapter, which the [FDIC] determines is in the best interests of the depository institution, its depositors, or the [FDIC]." 12 U.S.C. § 1821(d)(2)(J)(i), (ii).
...
Essential to these enumerated powers is the FDIC's ability to carry out its basic functions as a receiver free from judicial restraint, pursuant to 12 U.S.C. § 1821(j). Section 1821(j), entitled "Limitation on court action," states that "[e]xcept as provided in this section, no court may take any action, except at the request of the Board of Directors by regulation or order, to restrain or affect the exercise of powers or functions of the [FDIC] as a conservator or a receiver."
It is well-established that § 1821(j) bars restraint by the courts on the statutory powers of the FDIC when it acts as receiver. See In re Landmark Land Co., 973 F.2d 283, 290 (4th Cir. 1992) (stating that the comprehensive scheme of [the Financial Institutions Reform, Recovery, and Enforcement Act], which includes 12 U.S.C. § 1821(j), indicates Congress' intent to allow the RTC [the former entity charged with the FDIC's present functions] full reign in exercising its statutory authority without injunctive restraints imposed by the courts); Ward v. Resolution Trust Corp., 996 F.2d 99, 102-04 (5th Cir. 1993) (stating that the RTC is free to liquidate receivership assets without being encumbered by the possibility of injunctive actions, and further explaining that rescission is even more problematic than an injunction); Telematics Int'l, Inc. v. NEMLC Leasing Corp., 967 F.2d 703, 705 (1st Cir. 1992).

[C]ourts have applied § 1821(j) to insulate the actions of the FDIC as receiver from restraint, even where the receiver is alleged to have violated state law and equitable remedies are available. See Volges v. Resolution Trust Corp., 32 F.3d 50, 52 (2d Cir. 1994) (refusing to enjoin a receiver's sale of mortgages even though the sale might violate state contract law because receivers have broad powers to dispose of the assets of a failed institution as they see fit), cert. denied, 515 U.S. 1162, 115 S.Ct. 2618, 132 L.Ed.2d 860 (1995); Gross v. Bell Sav. Bank, 974 F.2d 403, 407-08 (3d Cir. 1992) (holding that when the RTC performs functions assigned to it by statute, injunctive relief will be denied even when the RTC is acting in violation of other statutory schemes).

Here, plaintiff's property was foreclosed on and sold at a public auction on January 21, 2009, at which Amtrust Bank itself purchased the property. (See Trustee's Deed Upon Sale, RJN Ex. F.) As noted above, the FDIC was subsequently appointed as Amtrust Bank's receiver on December 4, 2009. (RJN Ex. H.) Thereafter, on December 16, 2010, plaintiff's former property was conveyed by the FDIC to third parties via a special warranty deed recorded on December 21, 2010. (RJN, Ex. G.) Plainly, the granting of plaintiff's requests for equitable relief in this action would constitute an improper judicial restraint on, and interference with, the FDIC's activities as receiver for Amtrust Bank in violation of section 1821(j), because such relief would essentially involve setting aside the prior conveyances and cancelling the associated deeds. Sahni, 83 F.3d at 1059. Accordingly, plaintiff's equitable claims against the FDIC are precluded by section 1821(j) and are likewise subject to dismissal.

Therefore, for the reasons outlined above, the court concludes that the FDIC's motion for judgment on the pleadings should be granted. Because plaintiff's claims against the FDIC are not capable of being cured by further amendment, the claims should be dismissed with prejudice.

Remaining Claims/Motions

As noted above, plaintiff's complaint contains only state law claims and does not assert any federal claims. Furthermore, the parties are not completely diverse, because plaintiff and at least one or more defendants (including defendant Linda K. Weeks) are alleged to be citizens of California. Indeed, the action was only removed to federal court in light of the FDIC's status as receiver of Amtrust Bank pursuant to 12 U.S.C. § 1819.

Therefore, in light of the recommendation that plaintiff's claims against the FDIC be dismissed with prejudice, the court also finds it appropriate to decline to exercise supplemental jurisdiction over the remaining claims. See 28 U.S.C. § 1367(c)(3) ("The district courts may decline to exercise supplemental jurisdiction over a claim...if - the district court has dismissed all claims over which it has original jurisdiction"); see also Acri v. Varian Associates, Inc., 114 F.3d 999, 1000-01 (9th Cir. 1997) (" 'in the usual case in which all federal-law claims are eliminated before trial, the balance of factors . . . will point toward declining to exercise jurisdiction over the remaining state-law claims' "), quoting Carnegie-Mellon University v. Cohill, 484 U.S. 343, 350 n.7 (1988). Here, given that a trial date in this court has not yet been set, the court recommends that plaintiff's remaining claims be remanded to state court and that the pending motion to dismiss filed by defendant Quality Loan Service Corporation, and joined in by defendants Linda K. Weeks and NorCal Gold, Inc., be denied without prejudice. Importantly, the court expresses no opinion as to the merits of that motion, which may be renewed in state court pursuant to its procedures.

One issue raised by the motion to dismiss filed by defendant Quality Loan Service Corporation, and joined in by defendants Linda K. Weeks and NorCal Gold, Inc., requires some brief discussion. In that motion, these defendants contended, in addition to making other substantive arguments concerning the merits of plaintiff's claims, that plaintiff lacked standing to assert his claims, because plaintiff had filed a Chapter 13 bankruptcy petition in bankruptcy court, which was converted to a Chapter 7 case in September 2013. (ECF Nos. 14-1, 17.) It is well-established that "the bankruptcy code endows the bankruptcy trustee with the exclusive rights to sue on behalf of the estate." Estate of Spirtos v. One San Bernardino County Superior Court Case Numbered SPR 02211, 443 F.3d 1172, 1176 (9th Cir. 2006). The court further notes that, on October 24, 2013, plaintiff's Chapter 7 Trustee, Geoffrey Richards, filed a request for a continuance for at least 60 days to allow the Trustee, who had only recently been appointed, to make decisions on how to handle the case; for example, whether to pursue the claims, abandon the claims to plaintiff, etc. (ECF No. 18.)

Ordinarily, the court would be inclined to grant the Trustee such a continuance. Obviously, the issue of plaintiff's standing also applies to plaintiff's claims against the FDIC, and indeed, the FDIC also raised the standing issue in its motion for judgment on the pleadings. (ECF No. 16-1.) However, in light of the unique circumstances of this case, the court finds it appropriate to presently resolve the FDIC's motion for judgment on the pleadings. Regardless of whether the claims against the FDIC are ultimately pursued by the bankruptcy trustee or plaintiff (after any abandonment by the bankruptcy trustee), such claims are precluded for the reasons discussed above and must be dismissed. Because the involvement of the FDIC as a party is the only real basis for federal court jurisdiction, it makes little sense to grant the requested continuance at this juncture, only in a few months to then recommend dismissal of the claims against the FDIC, with the action to be remanded to state court at that point. Judicial efficiency and economy are better served by addressing the incurable claims against the FDIC now, and allowing the case to be remanded to state court and to proceed without any unnecessary delays.

Notably, no prejudice to the Trustee would result. Due to the inherent time that passes between the issuance of these findings and recommendations and their adoption by the district judge (assuming that they are adopted), the Trustee should have sufficient time to investigate plaintiff's remaining claims and decide how he would like to proceed. Furthermore, upon any remand, the Trustee may also seek an appropriate extension of time in state court, if necessary.

CONCLUSION

For the reasons discussed above, IT IS HEREBY ORDERED that:

1. Plaintiff's motion for an extension of time until September 5, 2013, to complete service of process (ECF No. 9) is GRANTED.
2. All further motion practice, except for any motions seeking relief of an emergency nature, is stayed pending resolution of the findings and recommendations by the district judge.

IT IS ALSO HEREBY RECOMMENDED that:

1. The FDIC's motion for judgment on the pleadings (ECF No. 16) be GRANTED.
2. Any asserted claims against the FDIC be DISMISSED WITH PREJUDICE.
3. The remaining claims in this action be REMANDED to the San Joaquin County Superior Court.
4. The motion to dismiss filed by defendant Quality Loan Service Corporation, and joined in by defendants Linda K. Weeks and NorCal Gold, Inc. (ECF No. 14), be DENIED WITHOUT PREJUDICE.
5. The Clerk of Court be directed to serve a certified copy of the order on the Clerk of the San Joaquin County Superior Court, and reference the state case number (39-2009-00206103-CU-OR-STK) in the proof of service.
6. The Clerk of Court be directed to close this case and vacate all dates.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen (14) days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any reply to the objections shall be served on all parties and filed with the court within fourteen (14) days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1156-57 (9th Cir. 1991).

IT IS SO ORDERED AND RECOMMENDED.

___________

KENDALL J. NEWMAN

UNITED STATES MAGISTRATE JUDGE