Wednesday, April 28, 2010

Eleventh Circuit Reverses Injunction Against FDIC Relating To Colonial Loans

In Bank of America v. Colonial Bank (09-14739), the Eleventh Circuit reversed a temporary injunction (discussed HERE) because the district court lacked "jurisdiction to enjoin the FDIC as receiver and that Bank of America must first exhaust the administrative claims process prior to seeking a judicial remedy."  Writing for a panel that included Justice O'Connor, Judge Anderson stated:
This case arises from the collapse of Colonial Bank (“Colonial”), the fifth largest bank failure in the near 77-year history of the Federal Deposit Insurance Corporation (“FDIC”). Bank of America, N.A. (“Bank of America”), brought this action against Colonial, alleging it wrongfully refused to return thousands of mortgage loans and their proceeds, valued in excess of $1 billion, to which Bank of America had legal title. On August 13, 2009, the district court entered a temporary restraining order (“TRO”) against Colonial, prohibiting the bank from taking any action with respect to the disputed assets. The next day, the FDIC was appointed as receiver for Colonial, and was promptly substituted as defendant in this case. Thereafter, the district court converted the TRO into a preliminary injunction against the FDIC, rejecting the FDIC’s arguments that the district court lacked jurisdiction to enjoin the FDIC as receiver and that Bank of America must first exhaust the administrative claims process prior to seeking a judicial remedy. The FDIC filed both a timely appeal of the district court’s preliminary injunction order and a petition for a writ of mandamus to dissolve the district court’s preliminary injunction. We consolidated the two actions and expedited this appeal.
Our inquiry in this case is limited to the threshold question of subject matter jurisdiction. The FDIC argues that the anti-injunction provision of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), 12 U.S.C. §1821(j), deprived the district court of jurisdiction to enjoin the FDIC because the preliminary injunction unlawfully restrained the FDIC’s exercise of its receivership powers and functions. Because we conclude that the FDIC’s proposed actions with respect to the loans and loan proceeds at issue fall squarely within its statutory receivership powers and functions, we hold that 12 U.S.C. § 1821(j) stripped the district court of its jurisdiction to enter the preliminary injunction. Accordingly, we vacate the district court’s order and remand with instructions to dismiss Bank of America’s motion for a preliminary injunction for lack of jurisdiction.

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