Litigating Failed Financial Institution Cases: Firrea's Administrative Review Requirement
| Publication year | 1992 |
| Pages | 37 |
1992, January, Pg. 37. Litigating Failed Financial Institution Cases: FIRREA's Administrative Review Requirement
Litigating against the government as receiver in failed financial institution cases raises issues quite different from those involved in litigation between private entities. This is true regarding both the substantive(fn1) and procedural aspects of the litigation.(fn2) This article focuses on the procedural requirements unique to such litigation.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA")(fn3) amended many of the statutory provisions relating to financial institutions. These amendments include the requirement that claimants exhaust their administrative remedies against a failed financial institution over which government regulatory agencies have been appointed receiver.(fn4) If the claim involves the assets or acts or omissions of the failed institution, the claim must be submitted to the receiver---the Resolution Trust Corporation ("RTC") or the Federal Deposit Insurance Corporation ("FDIC")---for initial review.
The claimant may file suit in federal district court only after disallowance of the claim or the passage of a required 180-day period (whichever is earlier). If the claimant does not submit the claims to the RTC or FDIC as required, the claimant's action may be dismissed for lack of subject matter jurisdiction or stayed pending completion of the initial administrative review.
The following section is an overview of the statutory provisions and legislative history concerning the administrative review requirement. It is followed by a discussion of the case law interpreting the requirement.
FIRREA was enacted by Congress as a response to the "crisis in the savings and loan industry that has commanded so much public attention in recent years." FIRREA's many complex provisions seek to "remedy the problems Congress perceived to result from the existing regulatory scheme."(fn5)
FIRREA's administrative review requirements for claims asserted against the RTC or FDIC as receiver of a failed financial institution are codified at 12 U.S.C. § 1821(d). They can be summarized as follows:
1. If a financial institution fails and the RTC or FDIC is appointed receiver, the receiver must "promptly publish a notice" to the creditors of the failed financial institution. The notice must give creditors not less than ninety days from the date of the notice in which to present their claims to the receiver.(fn6)
2. Within 180 days after a claim is filed, the RTC or FDIC must determine whether to allow or disallow the claim. Then, it must notify the claimant of any determination with respect to the claim.(fn7) If the receiver does not act within the 180-day period, the claim is treated as though it were disallowed.(fn8)
3. If the claim is disallowed, the claimant has the following options: (1) to request further administrative review of the claim before the RTC or FDIC;(fn9) (2) to file suit in federal district court, where the claim will be subject to de novo review;(fn10) or (3) if the suit was filed against the financial institution before appointment of the receiver, the claimant may "continue [the] action" in federal district court.(fn11)
4. If the claimant fails to pursue one of the preceding options within sixty days after the earlier of (1) notice of disallowance of the claim provided by the receiver or (2) 180 days after filing the claim with the receiver,
the claim shall be deemed to be disallowed.... [A]s of the end of such period
such disallowance shall be final, and the claimant shall have no further rights or remedies with respect to such claim.(fn12)
5. Federal court jurisdiction over claims involving a failed financial institution is limited by a provision concerning judicial review. The provision states that
[e]xcept as otherwise provided in this subsection, no court shall have jurisdiction over---
(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets...
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