Builders Bank, LLC v. Federal Deposit Insurance Corp., No. 18-2804 (7th Cir. 2019)

Annotate this Case
Justia Opinion Summary

After a 2015 examination, the FDIC assigned Builders Bank a CAMELS (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk) rating of 4, which exposed the bank to extra oversight. After the Seventh Circuit concluded that some components of a CAMELS rating are open to judicial review, Builders merged into a non-bank enterprise and left the banking business. The district court dismissed the remanded suit as moot. The Seventh Circuit affirmed, rejecting a claim for damages based on paying too much for deposit insurance. The Administrative Procedures Act, 5 U.S.C. 702, waives the government’s sovereign immunity but establishes a right of review only when “there is no other adequate remedy in a court.” There is a potential remedy under 12 U.S.C. 1817(e)(1), which says: In the case of any payment of an assessment by an insured depository institution in excess of the amount due, the Corporation may refund the amount of the excess payment to the insured institution or credit such excess amount toward the payment of subsequent assessments. The Tucker Act, 28 U.S.C. 1491, waives immunity for such a suit but limits venue to the Claims Court. Builders did not cite the FDIC’s sue-and-be-sued clause, 12 U.S.C. 1819(a), as an alternative waiver. Apart from those that affect subject-matter jurisdiction, legal contentions must be presented in the district court. This suit was litigated on remand under the APA, so it fails.

Download PDF
In the United States Court of Appeals For the Seventh Circuit ____________________ Nos. 18-2799 & 18-2804 BUILDERS NAB LLC, Plaintiff-Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant-Appellee. ____________________ Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 15 C 6033 & 16 C 9940 — Sharon Johnson Coleman, Judge. ____________________ ARGUED APRIL 12, 2019 — DECIDED APRIL 25, 2019 ____________________ Before FLAUM, EASTERBROOK, and SYKES, Circuit Judges. EASTERBROOK, Circuit Judge. After an examination in 2015, the Federal Deposit Insurance Corporation assigned Builders Bank a CAMELS rating of 4, near the boZom of the scale. The acronym, which stands for capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk, re ects a bank’s ability to withstand nancial challenges, and a rating of 4 exposes a bank to extra oversight. Builders Bank sued, and we concluded that some compo- 2 Nos. 18-2799 & 18-2804 nents of a CAMELS rating are open to judicial review. Builders Bank v. FDIC, 846 F.3d 272 (7th Cir. 2017). Before the case could be resolved on remand, however, Builders Bank merged into a non-bank enterprise, Builders NAB LLC, and left the banking business. This led the district court to dismiss the suit as moot. 2018 U.S. Dist. LEXIS 53678 (N.D. Ill. Mar. 30, 2018). The request for a beZer CAMELS rating in the future is moot, as the district judge found, because Builders is no longer a bank. But it also wants damages, contending that the rating required it to pay too much for deposit insurance. It submits that it is entitled to compensation if the court concludes that the rating should have been 3 rather than 4. The district court rejected that argument on the ground that Builders Bank is not the real party in interest. Fed. R. Civ. P. 17(a). Indeed it no longer exists. But a corporate merger replaces the old rms with the designated survivor. Builders Bank’s assets became part of Builders NAB, the surviving rm, and we have recaptioned this case accordingly. Builders NAB owns any claim that Builders Bank possessed. That includes the claim against the FDIC for a refund. But what is the source of that claim? In the district court Builders relied on the Administrative Procedure Act, contending that 5 U.S.C. §702 waives the national government’s sovereign immunity and entitles it to a remedy. There are two potential problems. First, §702 waives sovereign immunity only with respect to relief “other than money damages”. Although money is not necessarily damages, see Bowen v. Massachuse@s, 487 U.S. 879 (1988), compensation for a completed injury is usually understood to be a form of damages. Builders does not want Nos. 18-2799 & 18-2804 3 a prospective adjustment of the rate it must pay for insurance, with overpayments credited against future premiums; it seeks a nancial award to recompense it for past injury. Whether that counts as “damages” for the purpose of §702— in other words, whether it is “substitute relief” rather than “speci c relief” (on which see Department of the Army v. Blue Fox, Inc., 525 U.S. 255, 262 (1999)) is not something we need to decide, in light of the second problem. The APA establishes a right of review only when “there is no other adequate remedy in a court”. 5 U.S.C. §704. Builders itself points to one potential remedy: 12 U.S.C. §1817(e)(1), which says: In the case of any payment of an assessment by an insured depository institution in excess of the amount due to the Corporation, the Corporation may— (A) refund the amount of the excess payment to the insured depository institution; or (B) credit such excess amount toward the payment of subsequent assessments until such credit is exhausted. This knocks out Builders’ claim under the APA, but without necessarily entitling it to any relief. To use §1817(e)(1) as a source of a nancial payout, Builders needs a statute waiving sovereign immunity. The Tucker Act, 28 U.S.C. §1491, ts that bill but limits venue to the Court of Federal Claims. The FDIC’s sue-and-be-sued clause, 12 U.S.C. §1819(a) Fourth, may provide an alternative waiver, but Builders did not bring it to the district court’s aZention. In that court it relied entirely on the APA. Indeed, Builders did not alert the district court to §1817(e)(1) as a potential source of relief until a motion led after judgment. The FDIC contends that Builders’ claim is now foreclosed for that reason alone. 4 Nos. 18-2799 & 18-2804 To this Builders replies that it has not waived reliance on §1817(e)(1) and §1819(a) Fourth but just overlooked them, and a court of appeals may relieve a party from a forfeiture. That’s true, see Teumer v. General Motors Corp., 34 F.3d 542, 546 (7th Cir. 1994), but to say that an appellate court may address an issue that was forfeited in the district court is not to say that it must. Teumer itself declined to entertain a new theory. This is not the rst time that Builders has recast its argument following defeat in the district court. It did so when the case was here earlier and we indulged it, because the question then concerned subject-maZer jurisdiction. In nding jurisdiction, we suggested (as Builders had not) that there might be a possibility of damages for overpayment of deposit-insurance premiums. 846 F.3d at 275. That experience may have led Builders to think that it could litigate haphazardly in the district court and be bailed out on appeal again. If we conveyed that impression, we regret it. Apart from those that a ect subject-maZer jurisdiction, legal contentions must be presented in the district court— must be presented before the district judge acts, rather than as afterthoughts—and Builders has already received its share (perhaps more than its share) of appellate indulgence. Litigants that do not do their legal research until after losing in the district court have wasted a judge’s valuable time. By refusing to entertain arguments rst advanced after the district judge’s decision, we give litigants appropriate incentives to present their cases properly so that they may be decided correctly without appeals. This suit was litigated on remand as a nancial claim under the APA. So cast, it fails. We hold Builders to its litigation Nos. 18-2799 & 18-2804 5 strategy and do not permit it to change on appeal both its substantive theory and its asserted waiver of sovereign immunity. We modify the district court’s judgment to be one on the merits rather than a dismissal for mootness. As so modi ed, the judgment is AFFIRMED.

Primary Holding

Seventh Circuit affirms the dismissal, as moot, of a suit against the FDIC, alleging overpayment of deposit insurance.

Disclaimer: Justia Annotations is a forum for attorneys to summarize, comment on, and analyze case law published on our site. Justia makes no guarantees or warranties that the annotations are accurate or reflect the current state of law, and no annotation is intended to be, nor should it be construed as, legal advice. Contacting Justia or any attorney through this site, via web form, email, or otherwise, does not create an attorney-client relationship.