Case: 20-30173 Document: 00515961544 Page: 1 Date Filed: 08/02/2021
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
August 2, 2021
No. 20-30173 Lyle W. Cayce
Clerk
Lexon Insurance Company, Incorporated,
Plaintiff—Appellant,
versus
Federal Deposit Insurance Corporation, as receiver for First
NBC Bank, New Orleans, LA; United States of America,
Defendants—Appellees.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:18-CV-4245
Before Elrod, Duncan, and Wilson, Circuit Judges.
Jennifer Walker Elrod, Circuit Judge:
Lexon Insurance Company appeals the district court’s grant of
summary judgment to the Federal Deposit Insurance Corporation in its
Receiver capacity (the FDIC-R) and argues that the FDIC-R improperly
repudiated two letters of credit. Lexon also appeals the district court’s Rule
12(b)(1) dismissal of its Federal Tort Claims Act claim against the FDIC in
its corporate capacity (FDIC-C). We AFFIRM.
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I.
In 2016, appellant Lexon executed performance bonds totaling
approximately $11 million to the Bureau of Ocean Energy Management 1 on
behalf and as certified surety of non-party Linder Oil Company. Lexon, in
turn, required the oil company to post collateral that Lexon would hold until
the Bureau released Lexon from liability under the bonds. To acquire the
collateral, the oil company applied to First NBC, a then-functioning
Louisiana bank, which issued two letters of credit amounting to $9,985,500,
with Lexon as the beneficiary. Functionally, this reduced Lexon’s liability on
the bonds from about $11 million to less than $2 million.
Lexon had a right to draw on the letters of credit if Lexon determined
in its “sole judgment” that the funds were required for Lexon’s
“protection” against “claims that had been or may be made” against the
bonds. Initially, the letters of credit were valid through March 2017, but they
were set to automatically renew for successive one-year terms unless and
until the bank gave Lexon advance notice of non-renewal.
Not all was well at the bank. The FDIC and state regulators became
concerned about the bank’s viability and, in November 2016, entered a
consent order that granted the FDIC-C control of the bank. The order
prohibited the bank from subsequently extending “additional credit
1 The Bureau of Ocean Energy Management, part of the United States Department
of the Interior, leases oil and gas rights on the outer Continental Shelf to private developers.
See 43 U.S.C. §§ 1332, 1334. At the end of a lease, the lessee must permanently plug all
wells, remove all platforms, and clear the seafloor of all obstructions. See
30 C.F.R.
§§ 250.1702, 250.1703 (2019). To guarantee compliance with these and other lease
obligations, a lessee must provide the Bureau with non-cancellable bonds, issued by a
certified surety, which are payable on demand to the Bureau’s regional director. See
id.
§§ 556.900(a), 556.902(a), (b), (d) (2016). The surety will remain liable on the bonds until
the Bureau determines that all lease obligations are satisfied. See id. §§ 556.902(d),
556.906.
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to . . . any borrower whose existing credit ha[d] been classified Loss by the
FDIC.”
On April 28, 2017, Louisiana regulators closed the bank and appointed
the FDIC-R as receiver. Over the next few months, the FDIC-R indicated to
Lexon on at least two occasions that the letters of credit might be repudiated.
In June and August of 2017, the FDIC-R sent Lexon letters “strongly
suggest[ing]” that Lexon “immediately take any action necessary to protect
[its] interests . . . . [including] arrang[ing] for the issuance of any new standby
letter of credit from another financial institution.” Lexon did not submit any
draws on the letters of credit, nor did it arrange for any substitute letters of
credit from other financial institutions.
As it turned out, not all was well with the oil company either. It was
behind on over $100 million of loans from the bank and subsequently filed for
bankruptcy. From when the FDIC-R took over the bank to when it sold the
oil company’s loan portfolio (about four months), it worked to resolve the oil
company’s loan portfolio. On September 28, 2017, the FDIC-R sold the oil
company’s loan portfolio to a third party, repudiated the letters of credit, and
mailed Lexon notices of repudiation. Lexon attempted to draw on the letters
of credit in December 2017, but the FDIC-R never responded.
Lexon filed this lawsuit against the FDIC-R, alleging violations of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA). Under FIRREA and relevant here, the receiver of a failed
financial institution may repudiate “any contract or lease”: (1) to which the
financial institution (here, the bank) is a party; (2) that the FDIC-R
“determines to be burdensome;” and (3) the repudiation of which would, in
the FDIC-R’s “discretion . . . promote the orderly administration of the
institution’s affairs.” 12 U.S.C. § 1821(e)(1). In addition, the receiver must
repudiate the contract or lease within a “reasonable period following [its]
appointment [as receiver].” § 1821(e)(2). Where the receiver repudiates a
contract, the repudiation is treated as a breach of contract, but damages are
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“limited to actual direct compensatory damages . . . determined as of . . . the
date of the appointment of the . . . receiver.” § 1821(e)(3)(A)(i)–(ii).
The district court granted the FDIC-R’s motion to dismiss. It held
that the letters of credit were “contract[s]” under § 1821(e)(1) and that the
FDIC-R had repudiated the letters of credit within a “reasonable period”
under § 1821(e)(2). The district court allowed Lexon leave to replead and
conduct discovery. Lexon later filed an amended complaint reasserting its
initial claims against the FDIC-R and adding a claim against the FDIC-C for
negligence under the Federal Tort Claims Act. Lexon attached to its
amended complaint over one hundred pages of depositions, evidence, and
other materials that it had gathered in discovery. The crux of Lexon’s
complaint was that a letter of credit is not a “contract or lease” under
§ 1821(e)(1) and therefore cannot be repudiated by the FDIC-R. And even if
a letter of credit were a contract, Lexon argued that the FDIC-R violated
§ 1821(e) by failing to repudiate in a “reasonable period.” See § 1821(e)(2).
Lexon also argued that it had suffered “actual direct compensatory
damages” by virtue of its “lost collateral” of $9,985,500. See
§ 1821(e)(3)(A)(i).
The FDIC-R moved to dismiss Lexon’s amended complaint under
Federal Rule of Civil Procedure 12(b)(6). The district court sua sponte
converted the FDIC-R’s motion to dismiss into a motion for summary
judgment. In its order on the converted motion for summary judgment, the
district court reaffirmed its prior holding that a letter of credit is a contract,
that the FDIC-R had repudiated the letters of credit within a reasonable
period, and that Lexon had no recoverable damages. The district court
dismissed the claims against the FDIC-R.
The FDIC-C moved to dismiss under Federal Rule of Civil Procedure
12(b)(1) for lack of subject-matter jurisdiction. A few months later, the
district court dismissed Lexon’s claims against the FDIC-C, holding that
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Lexon failed to identify a viable claim under the Federal Tort Claims Act.
Lexon timely appealed.
II.
We “review a district court’s grant of summary judgment de novo,
applying the same standards as the district court.” Spring St. Partners-IV,
L.P. v. Lam, 730 F.3d 427, 435 (5th Cir. 2013). A “court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). If a district court improperly entered “summary judgment
sua sponte without notice,” we review that decision for harmless error. Atkins
v. Salazar,
677 F.3d 667, 678 (5th Cir. 2011).
III.
Lexon raises several arguments on appeal. First, Lexon argues that
the district court erred by granting summary judgment sua sponte. Second,
Lexon argues that the district court should have ruled in its favor on the
merits on its claims against the FDIC-R. Third, Lexon argues that the district
court erred in dismissing its Federal Tort Claims Act claim against the FDICC. We address each argument in turn.
A.
Lexon argues that the district court erred in sua sponte converting the
FDIC-R’s motion to dismiss into a motion for summary judgment. Although
district courts may grant summary judgment sua sponte, they must first give
the parties “notice and a reasonable time to respond.” Fed. R. Civ. P. 56(f).
See also Leatherman v. Tarrant Cnty. Narcotics Intel. & Coordination Unit, 28
F.3d 1388, 1397–38 (5th Cir. 1994); D’Onofrio v. Vacation Publ’ns, Inc.,
888
F.3d 197, 210 (5th Cir. 2018). We “strictly enforce[]” the notice
requirement. D’Onofrio,
888 F.3d at 210. If a district court erred by failing
to give the parties notice, we review for harmless error.
Id. Under that
standard, a sua sponte grant of summary judgment can be affirmed “‘if the
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nonmoving party admits that he has no additional evidence anyway’ or if ‘the
appellate court evaluates all of the nonmoving party’s additional evidence
and finds no genuine issue of material fact.’” Id. (quoting Leatherman,
28
F.3d at 1398).
Here, the district court erred by failing to give notice to the parties. 2
We ask, then, whether that error was harmless. Lexon argues that, had it
received notice, it would have submitted different evidence of the value of its
“lost collateral”—less than the full amount of the letters of credit. Lexon
argues that the lost collateral, while perhaps not being worth the full value of
the letters of credit, “had at least some economic value.” However, Lexon
never pleaded nor argued in the district court that its damages could be
anything less than the full value of the letters of credit—$9,985,500. If the
district court did not have an opportunity to rule on an argument, we will not
address it on appeal. FDIC v. Mijalis, 15 F.3d 1314, 1327 (5th Cir. 1994). We
therefore reject this argument.
Lexon also argues that the district court should not have granted
summary judgment because the allegations in its amended complaint and the
attached exhibits created a genuine issue of material fact as to whether the
FDIC-R repudiated the letters of credit within a “reasonable period” under
§ 1821(e)(2). “An issue is material if its resolution could affect the outcome
of the action.” Spring St. Partners-IV, 730 F.3d at 435 (quoting Daniels v.
City of Arlington,
246 F.3d 500, 502 (5th Cir. 2001)). “We resolve factual
controversies in favor of the nonmoving party, but only where there is an
2
Here, Lexon arguably should have known that the district court would consider
converting any dispositive motion from the FDIC into a motion for summary judgment
because Lexon had conducted five months of discovery, attached to its amended complaint
over one hundred pages of discovery documents, and relied on those documents in its
amended complaint.
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actual controversy, that is, when both parties have submitted evidence of
contradictory facts.” Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th
Cir. 2005).
Lexon directs us to several pieces of evidence and argues that each
presented a genuine issue of material fact. For example, Lexon cites a letter
that was sent from the FDIC-R to the oil company four days after the FDIC’s
appointment as receiver. The letter explained that, “absent extraordinary
circumstances,” the FDIC-R would repudiate the letters of credit and invited
the oil company to notify the FDIC-R within thirty days of any extraordinary
circumstances that would warrant non-repudiation. In Lexon’s view, this
letter shows that it was unreasonable for the FDIC-R to “delay” repudiation
of the letters of credit until 153 days after its appointment as receiver.
We disagree with Lexon and “find[] no genuine issue of material
fact.” Leatherman, 28 F.3d at 1398. Lexon’s argument is based on cherrypicking language from some evidence and ignoring other evidence altogether.
The above-described letter simply does not establish that the FDIC-R had
decided to repudiate the letters of credit within four days of its
appointment—much less that any delay greater than four days was
“unreasonable” under § 1821(e)(2). Indeed, the letter indicated that a
repudiation decision had not been made. Plus, not only did the oil company
respond to the letter and negotiate with the FDIC-R over the next four
months, the letters of credit were integral to the $100 million oil company
loan portfolio—which the evidence unequivocally shows that the FDIC-R
was trying to resolve.
Summary judgment is not foreclosed by “some metaphysical doubt as
to the material facts, by conclusory allegations, by unsubstantiated assertions,
or by only a scintilla of evidence.” McCarty v. Hillstone Restaurant Grp., Inc.,
864 F.3d 354, 357 (5th Cir. 2017) (quoting Boudreaux,
402 F.3d at 540).
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Moreover, this case is different from D’Onofrio, where we held that “the lack
of notice deprived the non-moving party of the opportunity to collect and
submit summary judgment evidence.” D’Onofrio, 888 F.3d at 211. In
contrast, Lexon was given five months to conduct discovery and depose
witnesses. It attached to its amended complaint sixteen exhibits—including
deposition transcript excerpts, written correspondence, e-mails, and an asset
report.
We hold that the district court did not err in sua sponte granting
summary judgment. 3 Although it erred in failing to notify the parties, that
error was harmless.
B.
Lexon also argues that the district court should have ruled in its favor
on the merits of its claims against the FDIC-R. Specifically, Lexon contends
that a letter of credit is not a “contract or lease” that can be repudiated under
§ 1821(e)(1), that the FDIC-R did not repudiate in a “reasonable period”
under § 1821(e)(2), and that it has “actual direct compensatory damages” to
which it is entitled under § 1821(e)(3)(A)(i).
1.
Whether a letter of credit is a contract under § 1821(e)(1) is a question
of first impression in our court. Title 12 U.S.C. § 1821(e) is part of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA). FIRREA was “[p]assed in the wake of a national crisis in the
banking and savings-and-loan industries, [and] was intended to promote
stability, economic recovery, and increased public confidence.” FDIC v.
3
One of our sister circuits affirmed a grant of summary judgment to the FDIC
where it had delayed repudiating a lease 206 days after appointment as receiver. See
BKWSpokane, LLC v. FDIC, 663 F. App’x 524, 526–27 (9th Cir. 2016).
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McFarland, 243 F.3d 876, 885 (5th Cir. 2001). Under FIRREA, the FDIC
has the power to serve as a receiver for failed financial institutions. This
includes FDIC-R’s power to “repudiate contracts.”
12 U.S.C. § 1821(e)(1).
This power is granted in § 1821(e), which is titled: “Provisions relating to
contracts entered into before appointment of conservator or receiver.”
Subsection (e)(1) states: “In addition to any other rights a conservator or
receiver may have, the conservator or receiver for any insured depository
institution may disaffirm or repudiate any contract or lease” that the FDIC-R
determines to be burdensome and the repudiation of which would, in the
FDIC-R’s “discretion . . . promote the orderly administration of the
institution’s affairs.” § 1821(e)(1)(B), (C) (emphasis added).
“[A]bsent contrary indications, Congress intends to adopt the
common law definition of statutory terms.” United States v. Shabani, 513
U.S. 10, 13 (1994). Moreover, “we look to the ordinary meaning of the
term . . . at the time Congress enacted the statute.” Perrin v. United States,
444 U.S. 37, 42 (1979). We see no contrary indications, so we interpret
“contract” in § 1821(e) according to its common law and ordinary meaning
when FIRREA was passed in 1989.
In 1989, Black’s Law Dictionary defined “contract” as “[a]n
agreement between two or more persons which creates an obligation to do or
not to do a particular thing.” Contract, Black’s Law Dictionary (5th ed. 1979).
The Restatement’s definition was in accord: “A contract is a promise or a
set of promises for the breach of which the law gives a remedy, or the
performance of which the law in some way recognizes as a duty.”
Restatement (Second) of Contracts § 1 (Am. L. Inst. 1981). A comment to
the version of the Uniform Commercial Code in place in 1989 stated that a
“letter of credit is essentially a contract between the issuer and the
beneficiary.” U.C.C. § 5-114 cmt. 1 (1977). “Letters of credit are another
type of commercial specialty properly includable within the definition of a
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formal contract.” 1 Richard A. Lord, Williston on Contracts § 1:11 (4th ed.
2007). If the “skeletal . . . formalities” of letters of credit “are complied
with, a binding agreement exists notwithstanding the absence of
consideration.” Id.
The district court concluded that letters of credit are contracts in the
context of 12 U.S.C. § 1821. So do we. A letter of credit creates an
“obligation” between the issuer (here, the bank) and the beneficiary (here,
Lexon). Contract, Black’s Law Dictionary (5th ed. 1979). It is a “promise”
that the issuer will fulfill its obligation under the letter of credit. Restatement
(Second) of Contracts § 1 (Am. L. Inst. 1981). Here, that meant that the bank
promised to pay Lexon $9,985,500 upon a proper draw by Lexon on the
letters. And UCC Article 5 provides a remedy for a breach of that promise—
recovery of the amount of the letter of credit.
Although Lexon is correct that letters of credit lack some of the
traditional elements of contracts (like mutual assent and consideration), we
must give weight to Congress’s inclusion of “any” before “contract or
lease.” “‘[A]ny’ has an expansive meaning, that is, ‘one or some
indiscriminately of whatever kind.’” Ali v. Fed. Bureau of Prisons, 552 U.S.
214, 219 (2008) (quoting United States v. Gonzales,
520 U.S. 1, 5 (1997)).
Lexon also argues that including letters of credit within the ambit of
“contract” would swallow up “lease” in § 1821(e)(1). Not so. In our view,
Congress likely said “contract or lease” in § 1821(e)(1) to preview FIRREA’s
different remedies for contracts as compared to leases. For contracts,
damages are determined as of the date of the appointment of the receiver.
§ 1821(e)(3)(A)(ii)(I). For leases, damages are determined as of the date of
repudiation. § 1821(e)(4)(B)(i). Thus, in this context, “lease” is a
subspecies of “contract” and its inclusion in § 1821(e)(1) highlights its
different treatment in certain respects. Therefore, our expansive
interpretation of “any contract or lease” does not nullify “lease.”
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In Granite Re, Inc. v. National Credit Union Administration Board, the
Eighth Circuit held that a “letter of credit . . . is a contract for purposes of”
12 U.S.C. § 1787(c) of the Federal Credit Union Act. Granite Re, Inc. v. Nat’l
Credit Union Admin. Bd.,
956 F.3d 1041, 1045 (8th Cir. 2020). FIRREA
amended the Federal Credit Union Act to include the provisions of
§ 1787(c), which are “materially identical” to the provisions of
12 U.S.C.
§ 1821(e) that are applicable to the FDIC. See
id. at 1045 n.2, 1047 n.4. See
also Nat’l Credit Union Admin. Bd. v. Goldman, Sachs & Co.,
775 F.3d 145,
148 n.3 (2d Cir. 2014). Thus, the “basic canon of statutory construction that
identical terms within an Act bear the same meaning” applies here and we
decline to split with the Eighth Circuit on the issue. Est. of Cowart v. Nicklos
Drilling Co.,
505 U.S. 469, 479 (1992).
Letters of credit are repudiable contracts for the purposes of
§ 1821(e)(1). 4
2.
Having held that a letter of credit is a contract under § 1821(e)(1), we
now turn to Lexon’s argument that the district court erred by holding that
the FDIC-R repudiated the letters of credit in a “reasonable period” under
4
We have previously described letters of credit as contracts on at least two
occasions and as undertakings on at least one occasion. See FDIC v. Plato, 981 F.2d 852,
854 n.3 (5th Cir. 1993) (“A letter of credit transaction actually consists of three distinct
contracts . . . [including] the letter of credit itself, [which is] a contract between the bank
and seller . . . .”); In re Coral Petroleum, Inc.,
878 F.2d 830, 832 (5th Cir. 1989) (“[A] letter
of credit transaction ordinarily involves three separate contracts . . . [including] the letter
of credit itself, [which is] a contract between the issuing bank and the beneficiary.”);
LaBarge Pipe & Steel Co. v. First Bank,
550 F.3d 442, 450 (5th Cir. 2008) (A “letter of credit
is an ‘undertaking’ (as opposed to a contract).”). None of these prior cases interpreted
“contract” under § 1821. We are not bound by them. See Granite Re,
956 F.3d at 1046
(“[W]e have never held that a letter of credit is not a contract generally, let alone for
purposes of § 1787(c).”).
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§ 1821(e)(2). The FDIC-R repudiated the letters of credit 153 days after its
appointment as receiver for the bank.
Whether a delay is reasonable depends on the facts and circumstances
of the individual case. Bldg. Four Shady Oaks Mgmt. L.P. v. FDIC, 504
F. App’x 292, 295 (5th Cir. 2012) (citing Travelers Ins. Co v. Liljeberg Enters.,
Inc.,
38 F.3d 1404, 1410 (5th Cir. 1994)). The length of the delay is one, but
not the only, factor.
Id. We also consider whether the holder of the contract
or lease suffered any prejudice from the delay and whether the FDIC-R acted
in bad faith. Id.; see also Resol. Tr. Corp. v. CedarMinn Bldg. Ltd. P’ship,
956
F.2d 1446, 1455 (8th Cir. 1992) (considering prejudice a central factor in the
reasonableness analysis); BKWSpokane LLC v. FDIC,
12 F. Supp. 3d 1331,
1340 (E.D. Wash. 2014) (“Courts have looked to various
factors . . . including evidence of the receiver’s bad faith, prejudice to the
nonrepudiating party caused by the delay, and whether delay was needless or
stemmed from legitimate reasons.”), aff’d, 663 F. App’x at 526–27.
Under the facts and circumstances of this case, we hold that the
FDIC-R repudiated the letters of credit within a “reasonable period” under
§ 1821(e)(2). During the 153 days between the FDIC-R’s appointment and
its repudiation of the letters of credit, the FDIC-R was engaged in extensive
negotiations with the oil company about its problematic $100 million loan
portfolio—part of which was the $9,985,500 letters of credit. 5 There were
ongoing e-mails and meetings on a daily basis about a potential settlement
with the oil company. This process involved costly valuation reports and a
5
We have previously held in a non-precedential opinion that a 157-day delay
between appointment and repudiation was a “reasonable period.” Bldg. Four Shady Oaks
Mgmt. L.P., 504 F. App’x at 293, 297, aff’g No. 3:10-CV-970,
2011 WL 13185720, at *5
(N.D. Tex. Dec. 23, 2011).
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multi-tiered approval process within the FDIC-R for any proposals. Those
negotiations broke down and the FDIC-R sold the oil company’s loan
portfolio to a third party. The very same day that the sale was executed, the
FDIC-R repudiated the letters of credit and gave Lexon written notice that it
had done so.
The FDIC-R did not act in bad faith. Indeed, Lexon was on notice
throughout the entire delay that the letters of credit “might be repudiated”
as explained by the FDIC-R’s two letters to Lexon. In addition to warning
that the letters of credit might be repudiated, the letters also “strongly
suggested” that Lexon protect itself and acquire letters of credit from
another financial institution. Lexon also suffered no prejudice as a result of
the delay. There was no call for payment on the bonds during the delay. The
delay granted Lexon more time to draw on the letters of credit (which it did
not do) and gave Lexon more time to get letters of credit from another
institution (which it also did not do).
The FDIC-R repudiated the letters of credit within a “reasonable
period” under § 1821(e)(2).
3.
On its claims against the FDIC-R, Lexon’s final argument is that the
district court erred in holding that it does not have “actual direct
compensatory damages.” § 1821(e)(3)(A)(i). Any actual direct
compensatory damages to which Lexon may be entitled are determined “as
of . . . the date of the appointment of the . . . receiver.”
§ 1821(e)(3)(A)(ii)(I). “‘[A]ctual direct compensatory damages’ does not
include . . . (i) punitive or exemplary damages; (ii) damages for lost profits or
opportunity; or (iii) damages for pain and suffering.” § 1821(e)(3)(B)(i)–
(iii).
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Here, the FDIC-R was appointed receiver of the bank on April 28,
2017. Lexon argues that its damages on that date were the value of its “lost
collateral”—the $9,985,500 value of the letters of credit. In other words,
Lexon argues that it is entitled to the same amount of damages from proper
repudiation by the FDIC-R as it would be entitled to if the FDIC-R had
improperly repudiated the letters of credit.
We reject Lexon’s argument and hold that it lacks “actual direct
compensatory damages” under FIRREA. The value of “lost collateral” is
not actual, direct, compensatory damages under FIRREA. Lexon does not
allege any actual damages on the bonds by or before the FDIC-R’s
appointment. 6 We do not require “letter-of-credit beneficiaries to be
prescient of an impending conservatorship in order to recover damages” nor
do we require that a letter of credit be drawn on before the FDIC-R’s
appointment. Granite Re, 956 F.3d at 1046. In accordance with the statute,
what we do require, however, is that actual direct compensatory damages be
realized on or before the appointment date.
Id. at 1047; § 1821(e)(3)(A)–(B).
Lexon has neither alleged nor brought forth evidence of any such damages
here.
C.
Lexon also brought a claim against the FDIC in its corporate capacity
(the FDIC-C) under the Federal Tort Claims Act. The Act allows claims
against the United States for damages caused by negligence of government
employees “under circumstances where the United States, if a private
person, would be liable to the claimant in accordance with the law of the place
where the act . . . occurred.” 28 U.S.C. § 1346(b)(1). Lexon alleges that the
6
Indeed, the Bureau of Ocean Management did not call for payment on the bonds
until much later, in between the filing of Lexon’s opening and reply briefs in this court.
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FDIC-C negligently controlled the bank by allowing the letters of credit to
renew in early 2017. The district court dismissed Lexon’s claim for lack of
subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1).
Specifically, the district court held that Louisiana law does not impose a tort
duty on an analogous private person acting in like circumstances to the FDICC.
Lexon argues that Article 2315 of the Louisiana Civil Code is the
underlying state law that provides it a claim. That statute provides that
“[e]very act whatever of man that causes damage to another obliges him by
whose fault it happened to repair it.” La. Civ. Code art. 2315(A) (2004).
Louisiana courts analyze Article 2315 according to general principles of
negligence law, including duty-risk analysis. Bursztajn v. United States, 367
F.3d 485, 489 (5th Cir. 2004). A plaintiff must show: (1) duty, (2) breach of
the duty, (3) causation in fact, (4) legal causation, and (5) actual damages.
Id.
The closest analogy to the FDIC-C in the private sphere is the
regulatory function of the Louisiana Office of Financial Institutions. But the
Supreme Court has rejected imposing tort duties on federal entities based on
state-law liabilities for state entities. See United States v. Olson, 546 U.S. 43,
46 (2005). Thus, Lexon must resort to the only remaining, conceivable
avenue of relief—the “Good Samaritan” theory.
Id. at 45–47. In Good
Samaritan cases, the Louisiana Supreme Court has adopted the standard
found in the Restatement (Second) of Torts, § 324A.
Lexon’s Good Samaritan claim fails on at least two fronts. First,
§ 324A requires “physical harm.” Restatement (Second) of Torts § 324A
(Am. L. Inst. 1965). Lexon has alleged only financial harms, not physical
harms. Second, § 324A imposes liability only where the allegedly at-fault
party “undertake[s] to perform a duty owed by the other to the third
[party].” Here, the “undertake[r]” would be the FDIC-C; the “other”
15
Case: 20-30173 Document: 00515961544 Page: 16 Date Filed: 08/02/2021
No. 20-30173
would be the bank; and the “third [party]” would be Lexon. The FDIC-C
did not have a duty to Lexon as a third party, much less a duty to prevent the
letters of credit from renewing. 7 See, e.g., First State Bank of Hudson Cnty. v.
United States, 599 F.2d 558, 563 (3d Cir. 1979) (“When the FDIC carried out
its responsibilities . . . its purpose was to safeguard this system of
insurance . . . not . . . to fulfill an obligation to notify the insured bank of any
unlawful banking practice.”); Fed. Savs. & Loan Ins. Corp. v. Shelton,
789 F.
Supp. 1367, 1369 (M.D. La. 1992) (“It is clear that the FDIC[-C] owes no
duty to manage a bank.”); FDIC v. Raffa,
935 F. Supp. 119, 124 (D. Conn.
1995) (“The [FDIC-C’s] ‘No Duty Rule’ paints a bright line that maintains
the court’s focus on the persons whose alleged wrongdoing brought about the
insolvency in the first instance.”); Fed. Savs. & Loan Ins. Corp. v. Roy, No.
CIV JFM-87-1227,
1988 WL 96570, at *1 (D. Md. June 28, 1988)
(“[N]othing could be more paradoxical or contrary to sound policy than to
hold that it is the public which must bear the risk of errors of judgment made
by its officials in attempting to save a failing institution—a risk which would
never have been created but for defendants’ wrongdoing in the first
instance.”).
Lexon failed to establish an analogous private liability and the district
court correctly dismissed Lexon’s Federal Tort Claims Act claim for lack of
subject-matter jurisdiction.
…
The judgment of the district court is AFFIRMED.
7
The consent order did not prohibit the FDIC-C from maintaining then-current
lines of credit or allowing then-current credit to renew. Rather, it prohibited only the
“exten[sion of] . . . any additional credit.” (emphasis added).
16
