The opinion of the court was delivered by: Lechner, District Judge.
Facts and Procedural History
The plaintiff, Mountain Ridge State Bank ("Mountain Ridge"), is
a New Jersey banking corporation. FDIC Brief at 1. Mountain
Ridge had entered into a two participation agreements with
defendant Investor Funding Corporation ("IFC") whereby IFC
transferred all of its rights and obligations with respect to
numerous promissory notes (the "Notes") to Mountain Ridge.
The Notes were executed by, among others, the Moving
Defendants. Id; Defendants' Brief at 1. The Moving Defendants
claim the proceeds of the Notes were paid not to them directly,
but to partnerships in which they had invested. Defendants'
Brief at 1. The Moving Defendants claim they ceased to make
payments due and owing under the Notes when they discovered
that the partnerships were in fact part of "ponzi scheme"
involving IFC and defendant John Kimble. Id.
Subsequently, Mountain Ridge commenced an action on 22 August
1989 in the Superior Court to recover for the Moving
Defendants' default under the Notes. Id. at 2; FDIC Brief at
1. The Moving Defendants answered Mountain Ridge's complaint
and asserted, among other things, the affirmative defenses of
fraud and failure of consideration. Defendants' Brief at 2. On
4 October 1990, after a series of motions in the Superior
Court, the defendants, represented by the law firm of Kudman &
Trachten ("Kudman"), were granted leave to amend their answer
to assert counterclaims against Mountain Ridge for rescission
and restitution. Id. at 2-3.
On 5 October 1990, the Commissioner of Banking of the State of
New Jersey declared Mountain Ridge insolvent and appointed and
confirmed the FDIC as receiver pursuant to N.J.S.A.
17:9A-272(D).*fn2 Defendants' Brief at 3; FDIC Brief at 3-4.
On the same day, the FDIC filed an ex parte application in
the Superior Court pursuant to 12 U.S.C. § 1821(d)(12)*fn3
for a ninety-day stay of all proceedings in the Superior Court
to which Mountain Ridge was a party. FDIC Brief at 4;
Defendants' Brief at 3. The FDIC's ex parte application was
apparently made in a proceeding separate from the action to
enforce the Notes. Defendants' Brief at 3; FDIC Brief at 3. The
application for the stay, however, was heard by Hon. Paul B.
Thompson, who was the Judge in the Superior Court before whom
the action to enforce the Notes was pending. FDIC Brief at 3.
Judge Thompson, by an Order, dated 9 October 1990, stayed until
3 January 1991 all cases or matters in the Superior Court in
which Mountain Ridge was a party. FDIC Brief at 3; Defendants'
Brief at 3. The Moving Defendants did not learn of the stay
until 20 November 1990, when they received from the law firm of
Wiley, Malehorn & Sirota ("Wiley") a copy of the Order granting
a stay. FDIC Brief at Exhibit L.
It is apparent from various orders of the Superior Court that
Wiley represented Mountain Ridge in this case in state court
prior to the appointment of the FDIC. See FDIC Brief at
Exhibits C, D, E & F. For example, in a letter-opinion, dated 4
October 1990, Judge Thompson declined to grant Mountain Ridge's
motion for summary judgment. FDIC Brief at Exhibit G. The
letter-opinion was addressed to Wiley. Id.
It does not appear Wiley had been formally retained by the
FDIC to handle any Mountain Ridge litigation at the time Wiley
sent a copy of the Order granting the stay to the Moving
Defendants. By a letter sent to Wiley, dated 13 November 1990,
the FDIC stated it was attempting to ascertain whether Wiley
was qualified to represent the FDIC in the Mountain Ridge cases
pending in the Superior Court. FDIC Brief at Exhibit K.
Although that letter did not specifically refer to this case,
the letter did state that Wiley should "continue to handle" the
unspecified Mountain Ridge cases discussed in a meeting between
Wiley and the FDIC on 7 November. Id.
On 24 December 1990, the FDIC directed Wiley to commence
proceedings to remove this case from state to federal court.
FDIC Brief at Exhibit M. The FDIC desired removal because it
anticipated the defendants represented by Kudman would assert a
counterclaim. Id. It is assumed that sometime in December
1990, Wiley was formally retained to continue as counsel for
the FDIC on this matter. See Geppert Affidavit at ¶ 10.
On 3 January 1991, the FDIC filed its Notice of Removal with
this court. On 15 January 1991, the parties appeared for a
status conference at which time the parties discussed whether
the removal from state to federal court was appropriate.*fn4
The Moving Defendants oppose removal of this case to federal
court and seek remand to the Superior Court. The Moving
Defendants contend removal is improper for several reasons.
First, the Moving Defendants contend removal is precluded
because this is a "state action" involving purely state law.
Defendants' Brief at 6. Second, the Moving Defendants contend
the notice of removal was untimely. Id. at 7. Third, they
contend the stay was improperly obtained. Id. at 13. Last,
the Moving Defendants contend this court should decline or
defer exercise of jurisdiction because the Superior Court has
retained jurisdiction to determine whether appointment of the
FDIC as receiver was appropriate. Id. at 15. The FDIC
disputes all of these contentions.
A. Removal Under 12 U.S.C. § 1819
The FDIC may seek the removal from state to federal court of a
case in which the FDIC is a party.*fn5
12 U.S.C. § 1819(b)(2)(B) (as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, Pub.L. No. 101-73, § 209,
103 Stat. 183 (1989) ("FIRREA"), codified, as amended, at
12 U.S.C. § 1819(b)(2)(B)). Any case in which the FDIC is a party
has been deemed by Congress to arise, except in certain
circumstances, under the laws of the United States.*fn6
Id. at § 1819(b)(2)(A). An action does not arise under the
laws of the United States when it is an action:
(i) to which the [FDIC], in the [FDIC]'s capacity as
receiver of a State insured depository institution by the
exclusive appointment by State authorities, is a party other
than as a plaintiff;
(ii) which involves only the preclosing rights against the
State insured depository institution, or obligations owing
to, depositors, creditors, or stockholders by the State
insured depository institution; and
(iii) in which only the interpretation of the law of such
State is necessary.
Id. at § 1819(b)(2)(D). Section 1819(b)(2)(D) is not to be
construed, however, to limit a federal court's jurisdiction
when the State insured depository institution could have
invoked the jurisdiction of ...