Banks & Banking – Receivership – FDIC – Civil Practice – Borrowers’ Defenses – Subject Matter Jurisdiction

Palmetto State Bank v. Riley (Lawyers Weekly No. 002-146-17, 9 pp.) (J. Michelle Childs, J.) 1:16-cv-03842; D.S.C.

Holding: Even though defendants have amended their answer so that, instead of asserting counterclaims, they are now asserting defenses based on the actions of a now-defunct bank, the Federal Deposit Insurance Corp., as receiver, is nevertheless a necessary party. As such, this court has jurisdiction over this case.

The court adopts the magistrate judge’s opinion and denies defendants’ motion to dismiss the FDIC and remand to state court.

After Allendale County Bank (ACB) was declared insolvent, the FDIC was appointed as receiver, and plaintiff purchased certain assets of ACB, including defendants’ loan. Plaintiff filed this action to enforce defendants’ promissory notes, and defendants asserted counterclaims (now defenses) based on the actions of ACB.

This action does not involve only pre-closing rights against a state-insured depository institution or obligations owing to depositors, creditors, or stockholders by the state-insured depository institution. The action also involves the indemnification of plaintiff by the FDIC required by the Purchase and Assumption Agreement between the two entities. According to that agreement, the FDIC must indemnify plaintiff against any liabilities incurred prior to its appointment as receiver for ACB.

Defendant’s amended answer contains multiple defenses to plaintiff’s claims that are based on actions by ACB. If defendants were successful in raising those defenses, it could lessen the amount of debt owed to plaintiff based on the actions of ACB, for which the FDIC has agreed to indemnify plaintiff.

Accordingly, the FDIC remains a real party in interest in this matter, regardless of whether defendants’ allegations are styled as defenses or counterclaims.

Motion denied.