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Lexon Insurance Co., Inc. v. Federal Deposit Insurance Corp.

United States District Court, E.D. Louisiana

September 25, 2019


         SECTION “B” (1)

          ORDER & REASONS

         Before the Court are defendant Federal Deposit Insurance Corporation as receiver for First NBC Bank’s (“FDIC-R”) “Motion to Dismiss for Failure to State a Claim for Relief” (Rec. Doc. 55), plaintiff Lexon Insurance Company Incorporated’s (“Lexon”) “Amended Complaint” (Rec. Doc. 43) and plaintiff’s “Memorandum in Opposition to Defendant’s Memorandum in Support of Its Motion to Dismiss for Failure to State a Claim” (Rec. Doc. 63). For the reasons discussed below, IT IS ORDERED that defendant’s construed motion for summary judgment (Rec. Doc. 55)[1] is GRANTED with respect to count two of plaintiff’s claim relative to repudiation of the Standby Letters of Credit (“SLOCs”) (Emphasis added); count three of plaintiff’s claim for breach of contract; count four of plaintiff’s claim relative to actual and compensatory damages; and count five of plaintiff’s claim that SLOCs are not contracts. The amended complaint against FDIC-R is dismissed.


         The facts giving rise to defendant FDIC-R’s current motion are detailed in this Court’s Order and Reasons regarding defendant’s first motion to dismiss for failure to state a claim. See Rec. Doc. 34; see also Rec Doc. 21.

         In March of 2016, plaintiff Lexon, as surety, executed eight bonds on behalf of non-party Linder Oil that secured offshore mineral leases with the United States Department of Interior, Bureau of Ocean Energy Management (“BOEM”). Rec. Doc. 43 at ¶ 10. On March 24, 2016, First NBC Bank issued two standby letters of credit relating to the bonds issued by plaintiff. Id. at ¶ 11-12. After the SLOCs were issued, First NBC Bank’s financial stability deteriorated and was subsequently closed by the State of Louisiana. Id. at ¶ 32. Defendant was appointed receiver for First NBC Bank on April 28, 2017. Id. On September 28, 2017, 153 days after the appointment of defendant as receiver, defendant repudiated the SLOCs. Id. at ¶ 52. On December 1, 2017, 64 days after the SLOCs were repudiated, plaintiff requested to draw down the entire amount secured by the SLOCs. Id. at ¶ 53. At the time of the requested draw, plaintiff had made no requests to draw on the SLOCs, and no claims had been made on the bonds by BOEM. See generally Rec. Doc. 43; see also Rec. Doc. 55-1 at 4-5.

         On April 25, 2018, Plaintiff filed a four-count complaint against FDIC, seeking “damages of $9, 985, 500.00 resulting from the FDIC’s failure to honor, and improper repudiation of, [the] two [letters of credit] issued by [First NBC Bank].” Rec. Doc. 1. Defendant moved to dismiss all claims for failure to state a claim on July 2, 2018. See Rec. Doc. 21 at 1. That motion was subsequently granted by this court, in favor of defendant. See Rec. Doc. 34. An order was issued on September 7, 2018, dismissing Lexon’s claim without prejudice to Lexon’s right to bring an amended complaint within forty (40) days from the order. Id. at 6-7.[2]

         Thereafter, on January 18, 2019, Lexon filed an amended five-count complaint against FDIC, again seeking damages of $9, 985, 500.00. See Rec. Doc. 43. The amended complaint alleges causes of action: (1) under the Federal Tort Claims Act (“FTCA”) against the United States as a defendant on behalf of the FDIC in their pre-receivership corporate capacity (“FDIC-C”)[3]; (2) for failure to timely repudiate the SLOCs in violation of 12 U.S.C. § 1821(e); (3) for breach of contract under 12 U.S.C. § 1821(d)(20) by defendant FDIC-R, in approving the SLOCs in writing; (4) that plaintiff is entitled to actual and compensatory damages under 12 U.S.C. § 1821(e); and (5) defendant’s lack of authority to repudiate the SLOCs because the SLOCs are not considered contracts. See id. Defendant FDIC-R moves to dismiss a majority of plaintiff Lexon’s claims for failure to state a claim. See Rec. Doc. 55.


         Motion for Summary Judgment Standard

         Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56(c)). See also TIG Ins. Co. v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002). “As to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue of material fact exists if the evidence would allow a reasonable jury to return a verdict for the non-moving party. Anderson, 477 U.S. at 248. The court should view all facts and evidence in the light most favorable to the non-moving party. United Fire & Cas. Co. v. Hixson Bros. Inc., 453 F.3d 283, 285 (5th Cir. 2006). Mere conclusory allegations are insufficient to defeat summary judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996).

         The movant must point to “portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, ’ which it believes demonstrate the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323. If and when the movant carries this burden, the non-movant must then go beyond the pleadings and present other evidence to establish a genuine issue. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). However, “where the non-movant bears the burden of proof at trial, the movant may merely point to an absence of evidence, thus shifting to the non-movant the burden of demonstrating by competent summary judgment proof that there is an issue of material fact warranting trial.” Lindsey v. Sears Roebuck & Co., 16 F.3d 616, 618 (5th Cir. 1994). “This court will not assume in the absence of any proof that the nonmoving party could or would prove the necessary facts and will grant summary judgment in any case where critical evidence is so weak or tenuous on an essential fact that it could not support a judgment in favor of the [non-movant].” McCarty v. Hillstone Rest. Grp., 864 F.3d 354, 357 (5th Cir. 2017).

         Claim for Contractual Damages and FDIC-R’s Alleged Failure to Timely Repudiate the SLOCs

         Defendant argues that plaintiff has failed to state a claim for relief in their amended complaint because the damages asserted by plaintiff are not representative of amounts “[d]ue [a]nd [o]wing.” Rec. Doc. 55-1, at 7. In support, defendant asserts: (1) the standby letters of credit are contracts for the purposes of 12 U.S.C. § 1821(e); (2) the FDIC-R properly repudiated the SLOCs; (3) plaintiff failed to show actual and compensatory damages; (4) and that even in the event that plaintiff obtained funds, plaintiff would be required to return any funds “to the extent the BOEM does not make a claim against the bonds.” See id. at 7-9, 11. Plaintiff argues that damages need not be due and owing because defendant’s failure to properly repudiate the SLOCs entitles them to “normal contract law damages.” See Rec. Doc. 63 at 13.

         When the FDIC is appointed receiver over a failed financial institution, Congress has expressly authorized the FDIC to repudiate: (1) contracts to which the institution is a party; (2) that the receiver determines to be burdensome; and (3) that in the receiver’s discretion “promote the orderly administration of the institution’s affairs.” See 12 U.S.C. § 1821(e)(1). The receiver must determine whether to repudiate a contract within a reasonable time following their appointment as receiver. Id. Generally, the FDIC has “‘broad authority’ to repudiate contracts that were entered into before its appointment as a receiver.” NCB ...

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