FDIC Statute of Limitations Extension Example #2
In the last bank insolvency post I gave you the first of two examples of how the Federal Deposit Insurance Corporation's (the "FDIC") can use Section 11(d)(14) of the Federal Deposit Insurance Act (the "FDI Act") to extend the limitations period on claims against a prime contractor for defects in a building's curtain wall. Today I'll give you the second example. This time it's the FDIC extending the limitations period on claims against a surety under a performance bond.
Example #2 - FDIC vs Surety
First, assume all of the facts from yesterday's example. Now add that the prime contractor provides a performance bond to the
original owner. Under the bond the surety guarantees the prime
contractor's performance under the prime contract. The bank is a
co-obligee under the bond (meaning that the bank can enforce the bond
too). The bond is on the American Institute of Architects Form A312 - 1984 Performance Bond.
After taking over as receiver for the failed bank (nearly 3 years after the prime contractor last provided any work on the project), the FDIC also sues the surety because the curtain wall gaps breach an express warranty in the prime contract.
Like the prime contractor, the surety asks the judge to dismiss the FDIC's lawsuit because the FDIC filed it too late. The surety says that Section 9 of the bond shortens the the time to submit claims under the bond to 2 years after the earlier of:
But the FDIC urges the judge to not dismiss the lawsuit. They cite the opening language in Section 11(d)(14) of the FDI Act that says re-setting of the LP Start Date and extension of limitations period apply "notwithstanding any provision of any contract." According to the FDIC, Section 11(d)(14) of the FDI Act preempts the shorter time limit in Section 9 of the bond. And the limitations periods under Section 11(d)(14) haven't expired yet.
The issue has some doubt. Section 14(d)(14) of the FDI Act resets when statutes of limitation begin to run and how long they run for. But Section 9 of the bond doesn't refer to any "statute of limitations". It merely says that legal or equitable proceedings shall be instituted within 2 years after....."
So the surety argues that the deadline in Section 9 of the bond isn't a modification of the statutes of limitation on the FDIC's claims. Instead it's a private deadline for instituting those claims. Consequently, Section 11(d)(14) of the FDI Act - which by its own language applies to statutes of limitation - shouldn't apply to lengthen the deadlines set under Section 9 of the bond.
But judges often give the the FDIC the benefit of the doubt. This judge does and:
Upcoming Posts
In the next bank failure post we'll talk about how the FDIC can revive claims even after the statute of limitations has expired.
Example #2 - FDIC vs Surety
First, assume all of the facts from yesterday's example. Now add that the prime contractor provides a performance bond to the
original owner. Under the bond the surety guarantees the prime
contractor's performance under the prime contract. The bank is a
co-obligee under the bond (meaning that the bank can enforce the bond
too). The bond is on the American Institute of Architects Form A312 - 1984 Performance Bond.After taking over as receiver for the failed bank (nearly 3 years after the prime contractor last provided any work on the project), the FDIC also sues the surety because the curtain wall gaps breach an express warranty in the prime contract.
Like the prime contractor, the surety asks the judge to dismiss the FDIC's lawsuit because the FDIC filed it too late. The surety says that Section 9 of the bond shortens the the time to submit claims under the bond to 2 years after the earlier of:
- Prime contractor default under the prime contract, and
- When the prime contractor stopped work on the project
But the FDIC urges the judge to not dismiss the lawsuit. They cite the opening language in Section 11(d)(14) of the FDI Act that says re-setting of the LP Start Date and extension of limitations period apply "notwithstanding any provision of any contract." According to the FDIC, Section 11(d)(14) of the FDI Act preempts the shorter time limit in Section 9 of the bond. And the limitations periods under Section 11(d)(14) haven't expired yet.
The issue has some doubt. Section 14(d)(14) of the FDI Act resets when statutes of limitation begin to run and how long they run for. But Section 9 of the bond doesn't refer to any "statute of limitations". It merely says that legal or equitable proceedings shall be instituted within 2 years after....."
So the surety argues that the deadline in Section 9 of the bond isn't a modification of the statutes of limitation on the FDIC's claims. Instead it's a private deadline for instituting those claims. Consequently, Section 11(d)(14) of the FDI Act - which by its own language applies to statutes of limitation - shouldn't apply to lengthen the deadlines set under Section 9 of the bond.
But judges often give the the FDIC the benefit of the doubt. This judge does and:
- Rules that Section 11(d)(14) of the FDI Act preempts the shorter deadlines set under Section 9 of the bond
- Denies the surety's request to dismiss the FDIC's lawsuit
- Tells the surety that they can appeal the decision later if they want.
Upcoming Posts
In the next bank failure post we'll talk about how the FDIC can revive claims even after the statute of limitations has expired.
Construction Law Today is a legal blog about construction contracts, disputes, finance, and the people whose job it is to deal with them.
when a national bank fails and gets the fdic as the receiver and an additional other national bank buys the failed bank under fdic approval, what is the statute that you can bring a claim of mortgage fraud against the failed bank/buying bank? 90 days from the date the receiver took over the failed Bank? This is an important question for some of us to understand so your comments are very important.
Thanks, Robert.