Summary
The Second Circuit held that the Federal Deposit Insurance Corporation could remove a derivative action to federal court under 12 U.S.C. § 1819(4) even though it was aligned as, or sought realignment as, a party plaintiff rather than a defendant. The court interpreted the statute's authorization to remove any action to which the FDIC is a party as controlling over the general removal provisions requiring removal by defendants.
Topics
Practice areas
Questions Presented
- Whether 12 U.S.C. § 1819(4) authorizes the FDIC to remove a state-court action when the FDIC is a party plaintiff, or is subject to realignment as a plaintiff, rather than a defendant.
- Whether the reference in § 1819(4) to following the procedure for removal in 28 U.S.C. § 1446 limits the FDIC's removal authority to the defendant-only removal procedure in § 1446(a).
- Whether the general rule requiring consent of all defendants to removal applies to an FDIC removal under the special removal authority in § 1819(4).
Holdings
- Under 12 U.S.C. § 1819(4), the FDIC may remove any state-court action to which it is a party, including a derivative or double-derivative action in which its interest is that of a plaintiff or subrogated and realigned plaintiff.
- The phrase in § 1819(4) requiring the FDIC to follow the procedure for removal refers to the mechanical requirements of 28 U.S.C. § 1446, including where, when, and how to file, and does not incorporate § 1446(a)'s limitation of removal to defendants.
- The general all-defendants-consent rule does not limit an FDIC removal authorized by the special removal statute in 12 U.S.C. § 1819(4).
Key quotations
“We hold in a case of first impression that the Federal Deposit Insurance Corporation (FDIC) may by virtue of its statutory authority, 12 U.S.C. § 1819(4),1 and its status as a receiver of a national bank,2 remove a derivative suit to federal court despite the fact that its interest in the litigation is as a party plaintiff and only a “defendant or defendants” may remove generally under 28 U.S.C. §§ 1441(a), 1446.3” (532 F.2d at 842)
“We think that was, in the plain words of the statute, to permit removal of any suit “to which the Corporation shall be a party,” whether as a defendant or a subrogated or a realigned derivative suit plaintiff.” (532 F.2d at 845)
“In light of what we have said above, however, we believe that the reference in § 1819(4) to “procedure for removal” is solely to the mechanical portions of 28 U.S.C. § 1446 which determine the “where,” “when,” and “how” of petitioning for removal.” (532 F.2d at 846)
Factual background
A stockholder of Franklin New York Corporation brought a derivative action against directors and officers of the Parent and Franklin National Bank, alleging that Michele Sindona and FASCO obtained control of the Bank and caused it to engage in improvident loans, underwritings, and foreign-exchange transactions. Loews Corporation was sued for selling 22 percent of the Parent's stock to Sindona and FASCO without adequately investigating their alleged intent to strip the Parent and Bank. The action was both derivative on behalf of the Parent and double derivative on behalf of the Bank. After the Bank became insolvent and the FDIC was appointed receiver, the FDIC was substituted and removed the action to federal court.
Procedural history
A Parent stockholder filed a state-court derivative and double-derivative action against directors, officers, and other defendants arising from the alleged misuse of Franklin National Bank and its parent. After the FDIC was appointed receiver for the Bank, it was substituted as a defendant and removed the action under 12 U.S.C. § 1819(4); it also sought realignment as a plaintiff. The United States District Court for the Eastern District of New York held that § 1819(4) authorized removal of any action to which the FDIC was a party, regardless of its plaintiff or defendant alignment, and certified the issue for interlocutory appeal.
Remand instructions
The case was remanded to the district court for further proceedings after affirmance of the determination that the federal court had subject matter jurisdiction over the removed action.