RESPONDENT:Federal Deposit Insurance Corporation, As Receiver For American Diversified Savings Bank, et al.
LOCATION:Kiryas Joel Village School District
DOCKET NO.: 93-489
DECIDED BY: Rehnquist Court (1993-1994)
LOWER COURT: United States Court of Appeals for the Ninth Circuit
CITATION: 512 US 79 (1994)
ARGUED: Mar 21, 1994
DECIDED: Jun 13, 1994
Paul Bender – on behalf of the Respondents
Rex E. Lee – on behalf of the Petitioner
Media for O’Melveny & Myers v. Federal Deposit Insurance Corporation
Audio Transcription for Opinion Announcement – June 13, 1994 in O’Melveny & Myers v. Federal Deposit Insurance Corporation
William H. Rehnquist:
The opinion of the Court in No. 93-489, O’Melveny & Myers versus FDIC will be announced by Justice Scalia.
This case is here on writ of certiorari to the United States Court of Appeals for the Ninth Circuit.
The petitioner, law firm, represented a California Savings and Loan Association in certain real estate syndications which turned out to be fraudulent on the part of the S&L.
The S&L later became insolvent and the respondent in this case, the Federal Deposit Insurance Corporation, became the receiver of the S&L.
The FDIC caused the S&L to make refunds to the investors in the fraudulent real estate syndications and then filed suit against the petitioner in Federal District Court alleging state causes of action for professional negligence and breach of fiduciary duty.
The petitioner moved for summary judgment alleging that the S&L officers knew of the fraudulent conduct that knowledge must be imputed under California law to the SNL and also to the FDIC which as receiver stood in the S&L’s shoes, and that because of the imputed knowledge the FDIC was estooped from pursuing the tort claims.
The District Court granted summary judgment but the Court of Appeals reversed stating that a federal common law rule of decision control.
In the unanimous decision announced today, we reverse the judgment of the Ninth Circuit.
The California rule of decision rather than any federal rule governs petitioner’s tort liability.
State law governs the imputation of corporate officer’s knowledge to a corporation that is asserting state law causes of action.
There is no federal general common law and the remote possibility that a corporation may go into federal receivership is no basis for adapting a special federal common law rule that would divest states of authority over the entire law of imputation.
Likewise, California law governs the narrower question whether corporate officer’s knowledge can be imputed to the FDIC when it sues as receiver.
This Court will not adapt a judge-made federal rule to supplement comprehensive federal regulation.
Matters that are left unaddressed in such a comprehensive scheme are presumably left to sate law.
Section 821(d)(2)(A)(i) of Title 12 places the FDIC in the insolvent S&L’s shoes to pursue its claims under state law except where some provision in the extensive framework of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, more commonly known as FIRREA, specifically creates a federal rule of decision.
FIRREA created no federal rule of decision that governs in this case.
Finally, judicial creation of a special federal rule of decision would not be justified even if FIRREA is inapplicable to the instant receivership which began in 1986 three years before FIRREA was passed.
Instances where a special federal rule is warranted are few and restricted limited to situations where there is a significant conflict between some federal policy or interest and the application of state law.
The FDIC has identified no such conflict here.
The parties to the case are in agreement that if state law does govern, it is California law but they disagree to what that law provides.
We leave it to the Ninth Circuit to resolve that point.
Accordingly, the judgment of the Court of Appeals is reversed and the case is remanded for further proceedings.
Justice Stevens has filed a concurring opinion in which Justices Blackmun, O’Connor, and Souter join.