UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA

124 Pages·2012·0.42 MB·English

USCA Case #11-5317 Document #1377012 Filed: 06/04/2012 Page 1 of 124

ORAL ARGUMENT NOT YET SCHEDULED
Case No. 11-5317
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
MBIA INSURANCE CORPORATION,
Plaintiff-Appellant,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
Defendant-Appellee.
On Appeal From the United States District Court
For The District of Columbia
09-CV-01011-ABJ
BRIEF FOR APPELLANT
David F. Williams Howard R. Hawkins, Jr.
Geoffrey Gettinger Jason Jurgens*
CADWALADER, WICKERSHAM & TAFT, CADWALADER, WICKERSHAM & TAFT,
LLP LLP
700 Sixth Street, N.W. One World Financial Center
Washington, D.C. 20001 New York, New York 10281
Tel: [phone] Tel: [phone]
Fax: [phone] Fax: [phone]

* Admission Pending
Attorneys for Plaintiff-Appellant MBIA Insurance Corporation
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CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES
Pursuant to Circuit Rule 28(a)(1), appellant MBIA Insurance
Corporation (“MBIA”) hereby certifies the following:
Parties and Amici
1. Parties Appearing Before District Court: MBIA appeared as
plaintiff before the district court. The Federal Deposit Insurance Corporation
(“FDIC”) appeared as defendant in its corporate capacity, and as conservator and
receiver for IndyMac Federal Bank, F.S.B. (“IndyMac Federal”). No amici or
intervenors appeared before the district court.
2. Parties Appearing Before This Court: MBIA appears as
appellant before this Court. The FDIC has appeared as appellee in its corporate
capacity, and as conservator and receiver for IndyMac Federal. To date, no amici
or intervenors have appeared before this Court in connection with this appeal.
Rulings Under Review
MBIA appeals from the Order issued by District Court Judge Amy
Berman Jackson, dated October 6, 2011 (the “Order”), and the accompanying
Memorandum Opinion, dated October 6, 2011, which granted the FDIC’s motions
to dismiss MBIA’s Amended Complaint (the “Ruling”). A copy of the Order can
be found in the Joint Appendix at __, and a copy of the Ruling can be found in the
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Joint Appendix at ___. The Ruling is reported at 816 F. Supp. 2d 81 (D.D.C.
2011).
Related Cases
This case was not previously before this Court or any court other than
the district court. A related case, Deutsche Bank Nat’l Trust Co. v. FDIC, 784 F.
Supp. 2d 1142 (C.D. Cal. 2011), appeal pending, No. 11-56339 (9th Cir.), involves
certain of the same transactions and parties.
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CORPORATE DISCLOSURE STATEMENT
Pursuant to Fed. R. App. P. 28(a)(1) and Circuit Rule 26.1, MBIA
hereby discloses that it is a wholly owned subsidiary of MBIA Inc., which is a
publicly held corporation listed on the New York Stock Exchange. MBIA is
incorporated and headquartered in New York. MBIA provides financial guarantee
insurance in connection with, among other things, residential mortgage-backed
securitizations.
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TABLE OF CONTENTS
PAGE
CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES .............. i
CORPORATE DISCLOSURE STATEMENT ....................................................... iii
TABLE OF CONTENTS .......................................................................................... iv
TABLE OF AUTHORITIES ................................................................................. viii
GLOSSARY OF ABBREVIATIONS ....................................................................... 1
JURISDICTIONAL STATEMENT .......................................................................... 3
STATEMENT OF ISSUES PRESENTED FOR REVIEW ...................................... 4
STATEMENT OF THE CASE .................................................................................. 5
A. MBIA’s Amended Complaint ..................................................... 5
B. The District Court’s October 6 Opinion ..................................... 7
STATUTES AND REGULATIONS ......................................................................... 9
STATEMENT OF FACTS ...................................................................................... 10
A. The FDIC And Relevant Statutory Framework ........................ 10
1. FDIC As Conservator ..................................................... 12
2. FDIC As Receiver .......................................................... 13
3. FDIC Corporate .............................................................. 14
B. MBIA, IndyMac And The IndyMac Transactions ................... 15
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PAGE
C. IndyMac’s Post-Closing Contractual Obligations As
Servicer And Seller Under The PSAs ....................................... 16
D. IndyMac’s Failure And The Creation Of IndyMac
Federal ....................................................................................... 18
E. IndyMac Federal Assumes IndyMac’s Contractual Rights
And Obligations Under The PSAs ............................................ 19
F. FDIC Conservator Breached Post-Closing Servicing
Obligations ................................................................................ 20
G. FDIC Conservator Breached Post-Closing Seller
Obligations ................................................................................ 21
H. FDIC Conservator Continued To Partially Perform And
Collect Millions In Servicing Fees ........................................... 22
I. The Sale Of IndyMac Federal’s Assets .................................... 23
J. MBIA’s Proofs Of Claim .......................................................... 25
K. The FDIC’s No Value Determination ....................................... 25
SUMMARY OF ARGUMENT ............................................................................... 26
STANDARD OF REVIEW ..................................................................................... 31
ARGUMENT ........................................................................................................... 31
POINT I MBIA’S CLAIMS ARE NOT PRUDENTIALLY MOOT ................ 32
A. MBIA’s Claims Constitute “Administrative Expenses”
Entitled To Priority ................................................................... 33
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PAGE
B. The District Court Erred In Concluding That FDIC
Conservator Did Not “Approve” The PSAs ............................. 37
1. “Approved” As Used In 12 U.S.C. § 1821(d)(20)
Means To Have Consented, Agreed Or Ratified ............ 37
2. The Formal Approval Process Envisioned By The
District Court Is Not Found In Either The Statute
Or The FDIC’s Regulations ............................................ 40
3. The District Court Ignored MBIA’s Allegations
That FDIC Conservator “Approved” The PSAs ............ 42
C. Treating Liability Arising From FDIC Conservator’s
Breach Of Contracts As Administrative Expenses Is
Consistent With Section 1821(e)(7)(B) .................................... 45
D. Congress’s Inclusion Of A Repudiation Process In
FIRREA Confirms That MBIA’s Interpretation Of
Section 1821(d)(20) Is Correct ................................................. 46
E. Public Policy Requires Liability Arising From FDIC
Conservator’s Breaches To Be Treated As
Administrative Expenses .......................................................... 50
F. Treating Liability Arising From FDIC Conservator’s
Breaches As Administrative Expenses Is Consistent With
The Bankruptcy Code ............................................................... 52
G. MBIA’s Interpretation Of Section 1821(d)(20) Is
Consistent With Legislative History ......................................... 55
H. MBIA’s Interpretation Of Section 1821(d)(20) Is
Consistent With The FDIC’s Regulations ................................ 56
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PAGE
POINT II THE RESOLUTION OF A NEW BANK, LIKE INDYMAC
FEDERAL, SHOULD NOT RESULT IN A NO VALUE
DETERMINATION THAT AVOIDS BREACH OF
CONTRACT CLAIMS ON PRUDENTIAL MOOTNESS
GROUNDS .......................................................................................... 59
POINT III MBIA’S CLAIMS AGAINST FDIC CORPORATE ARE NOT
BARRED BY SECTION 1821(d)(10)(B) .......................................... 63
POINT IV MBIA’S CLAIMS FOR DECLARATORY AND
INJUNCTIVE RELIEF ARE NOT BARRED BY SECTION
1821(j) ................................................................................................. 65
CONCLUSION ........................................................................................................ 69
CERTIFICATE OF COMPLIANCE ....................................................................... 71
CERTIFICATE OF SERVICE ................................................................................ 72

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TABLE OF AUTHORITIES
PAGE(S)
CASES:
Adams v. Resolution Trust Corp.,
927 F.2d 348 (8th Cir. 1991) .............................................................................. 64
Adelphia Bus. Solutions, Inc. v. Abnos,
482 F.3d 602 (2d Cir. 2007) ............................................................................... 53
Ashcroft v. Iqbal,
556 U.S. 662 (2009) ............................................................................................ 31
Bank of New York v. FDIC,
508 F.3d 1 (D.C. Cir. 2007) ................................................................................ 38
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) ............................................................................................ 31
Cabell v. Markham,
148 F.2d 737 (2d Cir.), aff’d,
326 U.S. 404 (1945) ........................................................................................... 38
Chamber of Commerce v. United States Dep’t of Energy,
627 F.2d 289 (D.C. Cir. 1980) ............................................................................ 32
City of Covington v. Covington Landing L.P.,
71 F.3d 1221 (6th Cir. 1995) .............................................................................. 53
Deutsche Bank Nat’l Trust Co. v. FDIC,
784 F. Supp. 2d 1142 (C.D. Cal. 2011) ........................................................ 19, 68

 Authorities upon which we chiefly rely are marked with asterisks.
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PAGE(S)
Doe v. Metropolitan Police Dep’t,
445 F.3d 460 (D.C. Cir. 2006) ............................................................................ 31
Doe v. United States,
372 F.3d 1347 (Fed. Cir. 2004) .......................................................................... 38
FDIC v. Phoenix Casa Del Sol, LLC,
No. CV 09–2556–PHX–MHM, 2011 WL 814858
(D. Ariz. Mar. 3, 2011) ....................................................................................... 56
First Hartford Partners II v. FDIC,
No. 93 Civ. 0933, 1993 U.S. Dist. LEXIS 14651
(S.D.N.Y. Oct. 15, 1993) .................................................................................... 67
Foretich v. United States,
351 F.3d 1198 (D.C. Cir. 2003) .......................................................................... 32
Franklin Fin. v. Resolution Trust Corp.,
53 F.3d 268 (9th Cir. 1995) ................................................................................ 52
In re GM Corp.,
407 B.R. 463 (Bankr. S.D.N.Y. 2009), aff’d sub nom.
In re Motors Liquidation Co., 428 B.R. 43 (S.D.N.Y. 2010) ....................... 54-55
Henry v. FDIC,
695 F. Supp. 2d 1063 (C.D. Cal. 2010) .............................................................. 64
Janowsky v. United States,
133 F.3d 888 (Fed. Cir. 1998) ............................................................................ 36
Johnson v. Jamaica Hosp.,
467 N.E.2d 502 (N.Y. 1984) ............................................................................... 49
Kenford Co., Inc. v. Erie Cty.,
493 N.E.2d 234 (N.Y. 1986) ............................................................................... 49
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