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Hindes v. F.D.I.C.

February 19, 1998


On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 94-02355) Argued December 12, 1997

Before: Greenberg, Roth, and Seitz, Circuit Judges

The opinion of the court was delivered by: Greenberg, Circuit Judge.

(Filed: February 19, 1998)



Gary E. Hindes, and other shareholders of Meritor Savings Bank ("Meritor"), appeal from various district court

orders dismissing their claims against the Federal Deposit Insurance Corporation ("FDIC") and the Pennsylvania Secretary of Banking ("Secretary"). Appellants contend that the appellees wrongfully seized Meritor, thereby depriving them of their substantive due process rights. More particularly, appellants allege that the FDIC reneged on an agreement with Meritor with respect to the computation of its capital base, ignored Meritor's actual financial condition when seizing Meritor, and engaged in a conspiracy with state officials to close the bank. Appellants also assert that the FDIC violated certain of its statutory duties as receiver.

The district court had jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1367 and 12 U.S.C. §§ 1819(b)(2)(A) and 1821(d)(6)(A). We have jurisdiction to review thefinal orders of the district court pursuant to 28 U.S.C. § 1291. We exercise plenary review over the issues on this appeal, as they all require review of the district court's interpretation and application of legal precepts. See Turner v. Schering- Plough, Corp., 901 F.2d 335, 340 (3d Cir. 1990).


The Secretary*fn1 closed Meritor, the largest savings bank in Pennsylvania, on December 11, 1992, and appointed the FDIC as its receiver. The majority of appellants' allegations concern the events leading up to that closing, as they primarily object to the propriety of the seizure of Meritor. Because the district court disposed of all of appellants' claims on either motions to dismiss or for summary judgment, we accept as true their allegations, and therefore base our recitation of the facts on the allegations in the complaint.

In 1982, at the FDIC's request, Meritor assumed the deposit liabilities of Western Savings Fund Society of Philadelphia ("Western"). To induce Meritor to assume these liabilities, the FDIC granted Meritor the right to amortize, over a 15-year period, $796 million of "goodwill" resulting from the Western transaction ("grand-fathered goodwill"), thereby increasing Meritor's regulatory capital base. This transaction saved the FDIC and its Bank Insurance Fund $400 million. The FDIC and Meritor evidenced this regulatory goodwill inducement in a written agreement dated April 3, 1982. For over ten years, the FDIC and Meritor abided by that agreement.

In an agreement dated April 5, 1991, the FDIC reaffirmed the 1982 agreement and further agreed to renegotiate Meritor's capital requirements if at any time Congress prohibited Meritor from considering this goodwill as a capital component. This 1991 agreement was prompted when Meritor proposed that its 12% Subordinated Capital Noteholders ("Noteholders") exchange their notes for stock and cash in order to infuse Meritor with more that $100 million of additional capital. Because the Noteholders would become shareholders, the continuation of the goodwill as a regulatory asset of Meritor was crucial to them. Therefore, before agreeing to the proposal, representatives of the Noteholders met with senior management of the FDIC, who assured them that the FDIC had no plans to disallow the grand-fathered goodwill. In fact, the FDIC encouraged the Noteholders to participate in the exchange. The exchange was completed in 1991, resulting in a $108 million increase in Meritor's capital.

On December 19, 1991, Congress adopted the FDIC Improvements Act of 1991, requiring the FDIC to adopt new rules regulating bank capital. The FDIC published draft regulations in the summer of 1991 which clearly permitted Meritor's grand-fathered goodwill to continue to be included in its capital. When the FDIC adopted final regulations in September 1991, however, the regulations differed from the proposals so as to create doubt as to whether Meritor's grand-fathered goodwill would remain as capital. The FDIC refused Meritor's request to clarify the uncertainty. The confusion created by the regulations resulted in a withdrawal of over $300 million in deposits from Meritor.

The appellants allege that, by mid-September, the FDIC and the Secretary had begun to devise a plan to seize Meritor in mid-December 1992, which was approximately

the time the new regulations would take effect, and to sell its assets to one of Meritor's most aggressive competitors.

On December 11, 1992, the FDIC hand-delivered a letter to Meritor reneging on its 1982 agreement and formally notifying Meritor that, under the new regulations, the grand-fathered goodwill no longer would be included in its capital base. On the same day, the FDIC also hand- delivered Meritor a "Notification to Primary Regulator" ("Notification") which stated that the FDIC Board of Directors had found that Meritor was in violation of its 1991 agreement regarding capital maintenance, was in an unsound condition, and had inadequate capital. In the Notification, the FDIC asserted that it immediately would institute proceedings to cancel Meritor's insurance if Meritor did not promptly satisfy certain capitalization requirements. Because insurance was a prerequisite to Meritor's continued operation, the demand created a crisis. The Secretary, who the FDIC notified of these matters prior to notifying Meritor, used the crisis to justify the immediate closing of the bank on the same afternoon. At that time, he appointed the FDIC as receiver of Meritor. Neither Meritor nor the appellants challenged the appointment under the state procedure available for that purpose. See Pa. Stat. Ann., tit. 71, § 733-605 (West 1990).

The appellants also allege that the FDIC and the Secretary disregarded circumstances which rendered the closing of Meritor inappropriate. In particular, eight days before the closing of the bank, Meritor sold a subsidiary bringing in capital which put it in compliance with the capital maintenance agreement. In addition, on December 9, 1992, two days prior to the closing of the bank, the FDIC received a bid of $181.3 million for Meritor's remaining operations and deposits.

In August 1994, appellants filed this action against the FDIC, both in its corporate capacity ("FDIC-Corporate") and as receiver of Meritor ("FDIC-Receiver"), various unidentified agents and employees of the FDIC ("the Doe defendants"), and the Secretary. In general, the complaint alleges that these appellees deprived the appellants of their substantive due process rights*fn2 and asserts claims under 42 U.S.C. § 1983, Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 91 S.Ct. 1999 (1971), and the Administrative Procedure Act ("APA"). The complaint also alleges that the FDIC violated various statutory duties.

By order entered March 1, 1995, the district court dismissed the due process claims, embodied in Count I, against the FDIC and the Secretary as well as appellants' APA claim in Count IV against FDIC-Corporate on the grounds that 12 U.S.C. § 1821(j) deprived it of jurisdiction to adjudicate those claims. The district court also dismissed the section 1983 claim against the FDIC, finding that the FDIC was not a "person" under that statute.

By order entered September 6, 1995, the district court dismissed the claims against the FDIC for the enforcement of its statutory duties. On November 8, 1996, the district court approved a Stipulation of Dismissal of the remaining claims against the Secretary in his individual capacity, which the court entered on November 27, 1996. Thus, following the district court's order of November 27, 1996, appellants' only remaining claims were against the Doe defendants.

On November 15, 1996, appellants moved the district court to certify its March 1, 1995 order for an interlocutory appeal. They argued that the claims involving the Doe defendants were substantially the same as those against the FDIC and an immediate appeal would avoid the waste that would occur if this court eventually overturned the district court's order. FDIC-Receiver and FDIC-Corporate objected to the certification of the March 1, 1995 order, in part because the appellants' request did not include a request to certify the September 6, 1995 order as well, which they argued would result in "piecemeal" appellate review. Thereafter, appellants agreed to an expansion of the proposed certification to include the district court's order of September 6, 1995.

On April 27, 1997, the district court denied the appellants' motion to certify its orders. The district court dismissed the claims against the Doe defendants because there were no named parties remaining in the action and because appellants failed to identify the fictitious parties by the close of discovery. Having dismissed the claims against the Doe defendants, the court concluded that its orders were final so that it therefore denied the appellants' motion to certify as moot. On May 6, 1997, they filed a notice of appeal.



An untimely appeal does not vest an appellate court with jurisdiction. See Browder v. Director, Dep't of Corrections, 434 U.S. 257, 264, 98 S.Ct. 556, 561 (1978); Marcangelo v. Boardwalk Regency, 47 F.3d 88, 91 (3d Cir. 1995). To be timely, the notice of appeal must have been filed within 60 days from the date of the district court's entry of a final judgment. See 28 U.S.C. § 1291; Fed. R. App. P. 4(a)(1) (establishing a 60-day period for appeal where a federal agency or officer is a party). In general, a judgment is not final for purposes of appeal until the district court has disposed of all claims against all parties. See Buzzard v. Roadrunner Trucking, Inc., 966 F.2d 777, 779 (3d Cir. 1992); Jackson v. Hart, 435 F.2d 1293, 1294 (3d Cir. 1970) (per curiam).

Appellees have filed a motion to dismiss this appeal as untimely. They argue that the district court's orders were final, thereby starting the running of the time to appeal, on November 27, 1996, upon the district court's dismissal of all claims except those against the Doe defendants. Thus, appellees aver that this appeal is untimely because the appellants did not file a notice of appeal until May 6, 1997, 179 days after the district court's entry of a final judgment. We reject appellees' argument and hold that appellants timely filed this appeal so that we have jurisdiction to consider the appeal on its merits.

Doe defendants "are routinely used as stand-ins for real parties until discovery permits the intended defendants to be installed." Scheetz v. Morning Call, Inc., 130 F.R.D. 34,

36 (E.D. Pa. 1990) (citations omitted). The case law is clear that "ictitious parties must eventually be dismissed, if discovery yields no identities," id. at 37, and that an action cannot be maintained solely against Doe defendants. See Scheetz v. Morning Call, Inc., 747 F. Supp. 1515, 1534-35 (E.D. Pa. 1990) (noting that Federal Rules do not contemplate a plaintiff proceeding without a tangible defendant except in extraordinary circumstances), aff'd on other grounds, 946 F.2d 202 (3d Cir. 1991); Breslin v. City and County of Philadelphia, 92 F.R.D. 764 (E.D. Pa. 1981) (dismissing complaint against identified defendants warrants dismissing unnamed defendants).

Appellees conclude from these cases that Doe defendants are deemed dismissed, without a formal order by the district court, if they remain unnamed at the close of discovery or upon the district court's dismissal of all named defendants. We, however, need not reach the issue of whether the district court's order became final on November 27, 1996, by virtue of such a deemed dismissal of the Doe defendants.*fn3 Even if a final order was entered on that date, this appeal was timely because the "Motion to Certify for Immediate Appeal" which appellants filed on November 15, 1996, was the functional equivalent of a notice of appeal and therefore satisfies the requirements of Fed. R. App. P. 3.

Fed. R. App. P. 3(c) requires that a notice of appeal specify the parties taking the appeal and the orders from which the parties appeal. Despite these requirements, an "appeal will not be dismissed for informality of form or title of the notice of appeal, or for failure to name a party whose intent to appeal is otherwise clear from the notice." Id. Courts liberally construe the requirements for a notice of appeal. See Smith v. Barry, 502 U.S. 244, 248, 112 S.Ct. 678, 681-82 (1992); Torres v. Oakland Scavenger Co., 487 U.S. 312, 316-17, 108 S.Ct. 2405, 2408-09 (1988). Thus, courts can find that a litigant has satisfied the requirements of Rule 3(c) even if the litigant files a document that is "technically at variance with the letter of [Rule 3] . . . if the litigant's action is the functional equivalent of what the rule requires." Torres, 487 U.S. at 316-17, 108 S.Ct. at 2408-09. Therefore, if a litigant files a document, regardless of its title, within the time for appeal under Fed. R. App. P. 4, it is effective as a notice of appeal provided that it gives sufficient notice of the party's intent to appeal. See Smith, 502 U.S. at 248-49, 112 S.Ct. at 682.

We have held that a "Petition for Permission to Appeal" filed under the mistaken belief that the district court's order was interlocutory, but which notified the parties and the court of the intention to appeal, functioned as a notice of appeal. See Landano v. Rafferty, 970 F.2d 1230, 1237 (3d Cir. 1992); see also San Diego Comm. Against Registration and the Draft v. Governing Bd. of Grossmont Union High Sch. Dist., 790 F.2d 1471, 1473-74 (9th Cir. 1986) (construing a Fed. R. App. P. 5(a) motion as a notice of appeal).

In this case, appellants filed documents which were the "functional equivalent" of a notice of appeal. On November 15, 1996, appellants filed a "Motion to Certify for Immediate Appeal" in which they sought leave to file an interlocutory appeal of the district court's March 1, 1995 order. Thus, even if the March 1 order became final on November 27, 1996, we will treat the motion, which specifically indicated an intention to appeal, and which was filed in the belief that the order remained interlocutory, as a notice of appeal. See Landano, 970 F.2d at 1237. Subsequently, appellants also filed a reply to appellees' objection to the certification, which requested to expand the proposed certified appeal to include the district court's September 6, 1995 order. Taken together, these documents notify the parties and the court as to appellants' specific intention to seek appellate review of both orders. Therefore, the documents were the functional equivalent of a de jure notice of appeal.

Furthermore, appellants filed these documents within the period for a timely appeal under Rule 4. The "Motion to Certify for Immediate Appeal" was filed after the district court approved the stipulation of dismissal but before the order actually was entered. Rule 4(a)(2) specifically addresses this scenario as it provides that " notice of appeal filed after the court announces a decision or order but before the entry of the judgment or order is treated as filed on the date of and after the entry" of that order. Pursuant to this rule, we treat the motion as filed on November 27, 1996, after the entry of the dismissal order. Accordingly, this appeal is timely.*fn4


On March 1, 1995, the district court held that 12 U.S.C. § 1821(j) deprived it of jurisdiction over appellants' due process and APA claims, Counts I and IV respectively, and therefore dismissed those counts against all appellees. By the same order, the district court also dismissed Count III, a 42 U.S.C. § 1983 claim, as against the FDIC for failure to state a claim because the FDIC is not a "person" within that statute.*fn5

We begin our merits analysis with a Discussion of the appellants' First Amended Complaint. The district court analyzed the complaint as though Count I asserted an independent cause of action for a due process violation against all appellees. We do not adopt this construction of the complaint.

Count I seeks the following remedies based upon an alleged due process violation: (1) a declaration that the FDIC, Doe defendants and the Secretary violated appellants' substantive due process rights; (2) a declaration that the FDIC's notification is void and a rescission thereof; (3) a declaration of the invalidity of the Secretary's orders closing Meritor and appointing FDIC as receiver and rescissions thereof; and (4) the imposition of a constructive trust for Meritor's benefit nunc pro tunc. This count, however, does not identify the source of the substantive cause of action for the alleged constitutional violation as against each appellee.

Accordingly, FDIC-Corporate urges us to dismiss Count I as improperly seeking declaratory relief without asserting a substantive cause of action. We decline to view the complaint so narrowly. Rather, we are required to construe the pleadings "as to do substantial Justice," Fed R. Civ. P. 8(f), and in favor of the appellants. See Budinsky v. Commonwealth of Pa. Dep't of Envtl. Resources, 819 F.2d 418, 421 (3d Cir. 1987); see also West v. Keve, 571 F.2d 158, 163 (3d Cir. 1978) (liberally construing a complaint, which literally only sued defendants in their official capacities, so as also to state a claim against the defendants in their individual capacities because the complaint stated facts sufficient to constitute such a claim).

The due process violations alleged in Count I against the FDIC and the Doe defendants properly are viewed as constitutional claims asserted under section 1983 and Bivens, as alleged in Counts III and II respectively. Therefore, Count I does not assert a separate cause of action against these defendants, but seeks declaratory and injunctive relief in addition to the relief requested in Counts II and III.

The due process claim alleged against the Secretary in his official capacity is a different matter, however, because the complaint does not elsewhere identify a substantive cause of action against the Secretary in his official capacity for a due process violation. While Count III asserts a claim against the Secretary, it does so only in his individual capacity. Accordingly, although the complaint does not explicitly identify this claim as such, we construe it as asserting a section 1983 claim against the Secretary in his official capacity.

Thus, we proceed with our analysis as though the relief sought in Count I against the FDIC and the Doe defendants was sought in the counts alleging a right to relief pursuant to section 1983 and Bivens. Although our analysis of these counts takes a different course than that of the district court, we ultimately affirm its dismissal of these claims. We, like the district court, will not discuss the merits of the Bivens claim because the Doe defendants properly were dismissed on other grounds.

1. Section 1983 Claim

We begin our analysis with a Discussion of the section 1983 claim asserted against the FDIC. The district court dismissed this claim, holding that the FDIC was not a "person" within the meaning of section 1983 and therefore was not subject to section 1983 liability. The complaint alleges that the FDIC, under color of state law, acted in concert with the Secretary and deprived appellants of their substantive due process rights. The district court held that the FDIC could not be held liable under section 1983 because it was not a "person" within the meaning of the statute. We agree.

Section 1983 creates a cause of action against "very person who, under color of any [state law] . .. subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution." 42 U.S.C. § 1983. Because section 1983 provides a remedy for violations of federal law by persons acting pursuant to state law, federal agencies and officers are facially exempt from section 1983 liability inasmuch as in the normal course of events they act pursuant to federal law. See District of Columbia v. Carter, 409 U.S. 418, 425, 93 S.Ct. 602, 606 (1973); see also Daly- Murphy v. Winston, 837 F.2d 348, 355 (9th Cir. 1988) (no section 1983 claim against federal officials acting pursuant to federal law); Zernial v. United States, 714 F.2d 431, 435 (5th Cir. 1983) ...

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