Tam v. Fed. Deposit Ins. Corp.

830 F.Supp.2d 850

Philemon TAM, Kathy T–M Tam, Titus Tambunan, Christine Tam, and Victor Tam, Plaintiff,

v.FEDERAL DEPOSIT INSURANCE CORPORATION, in its own name and as Receiver for IndyMac Bank, F.S.B.; Does 1 through 10, Defendants.

Case No. CV 08–06458 MMM (AJWx).

United States District Court, C.D. California.

Nov. 14, 2011.

Philemon Tam, Pasadena, CA, pro se.

Kathy T-M Tam, Pasadena, CA, pro se.

Titus Tambunan, Pasadena, CA, pro se.Christine Tam, Pasadena, CA, pro se.Victor Tam Pasadena, CA, pro se.Rita Maria Haeusler, Hughes Hubbard & Reed LLP, Los Angeles, CA, Scott H. Christensen, Hughes Hubbard & Reed LLP, Washington, DC, Byron Z. Moldo, Ervin Cohen & Jessup LLP, Beverly Hills, CA, for Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

MARGARET M. MORROW, District Judge.

On July 11, 2008, the Office of Thrift Supervision (“OTS”) closed IndyMac Bank, F.S.B. (“IndyMac”) and appointed the Federal Deposit Insurance Corporation (“FDIC”) as the bank's receiver pursuant to 12 U.S.C. § 1821(c)(2)(A). That same day, the FDIC formed IndyMac Federal Bank, a newly chartered depository institution, and transferred IndyMac's insured deposits to it. The FDIC made deposit insurance determinations for accounts held at IndyMac and notified depositors of the determinations via letter. Some depositors, including plaintiffs, later filed actions challenging the FDIC's deposit insurance determinations and/or alleging wrongful acts by IndyMac or its former employees prior to commencement of the receivership.

The parties filed opening briefs on September 14, 2009; ¹ the FDIC filed a responsive brief on September 28, 2009.² On July 31, 2009, the court granted plaintiffs' request for oral argument and set a hearing for October 19, 2009.

I. FINDINGS OF FACT

A. The Accounts

1. Plaintiffs Philemon Tam, Kathy T–M Tam, Titus Tambunan, Christine Tam, and Victor Tam opened nine accounts with IndyMac prior to July 11, 2008.³

2. Prior to July 11, 2008, account XXXXXX7443 had a balance of $8.243.43 and was held in the name of Kathy T–M Tam. Account XXXXXX1808 had a balance of $14,088.64 and was also held in the name of Kathy T–M Tam. Account XXXXXX7442 had a balance of $18,313.30 and in the name Philemon Tam. Account XXXXXX8867 had a balance of $4,039.54 and was held in the name of Victor C. Tam, while account XXXXXX7347 had a balance of $561,762.46 and was held by Kathy T–M Tam in trust for (“ITF”) Christine Tam, Philemon Tam, Victor Tam, and Daphne Malatesta. Account XXXXXX0218 had a balance of $742,638.17 and was held by Philemon Tam and Kathy T–M Tam ITF Christine Tam, Victor Tam, and Daphne Malatesta. Account XXXXXX1399 had a balance of $10,063.23 and was held by Titus Tambunan ITF Christine and Victor Tam. Account XXXXXX8317 had a balance of $202,468.12 and was held by Titus Tambunan ITF Christine and Victor Tam, while account XXXXXX2173 had a balance of $540,729.07 and was held by Titus Tambunan ITF Christine and Victor Tam.⁴ The funds deposited in the nine accounts belonging to plaintiffs totaled $2,102,345.96.⁵

3. Accounts XXXXXX7347, XXXXXX0218, XXXXXX1399, XXXXXX8317, and XXXXXX2173 were informal revocable trust accounts.⁶ Accounts XXXXXX7443, XXXXXX1808, XXXXXX7442, and XXXXXX7442 were single ownership accounts.⁷

4. Account XXXXXX7347 was held by Kathy T–M Tam. The beneficiaries for this account were Philemon Tam, her husband, Christine and Victor Tam, her children, and Daphne Malatesta, her granddaughter. Account XXXXXX0218 was held by Philemon Tam and Kathy T–M Tam. The beneficiaries for this account were Christine and Victor Tam, the depositors' children, and Daphne Malatesta, their granddaughter. Accounts XXXXXX1399, XXXXXX8317, and XXXXXX2173 were held by Titus Tambunan. The beneficiaries for these accounts were Christine and Victor Tam, his niece and nephew respectively.⁸

B. The FDIC's Insurance Determination

5. The FDIC as receiver for IndyMac assigned Michael Norton to review deposit insurance coverage and claims arising out of IndyMac's failure. Norton reviewed the nine accounts at issue in this case.⁹

6. On July 12, 2008, Norton interviewed Philemon Tam and explained his preliminary determination regarding the amount of insured and uninsured funds in the accounts. Tam indicated that he would fill out and fax to Norton “Declarations of Testamentary Deposit” for each informal trust account. Tam requested that Norton provide a preliminary determination of insurance coverage, and Norton informed him that approximately $1,250,000.00 of the funds appeared to be uninsured.¹⁰ The declarations that Tam subsequently provided listed owners and beneficiaries for each of the revocable trust accounts that were not reflected in IndyMac's records at the time it closed on July 11, 2008.¹¹ As a result, the FDIC relied on the bank's records in making its deposit insurance determination.¹²

7. Norton concluded that accounts XXXXXX7443, XXXXXX1808, XXXXXX7442, and XXXXXX7442 were single ownership accounts. Single ownership accounts owned by Kathy T–M Tam (XXXXXX7443 and XXXXXX1808) had a balance of $22,332.07. The single ownership account owned by Philemon Tam (XXXXXX7442) had a balance of $18,313.30. The single ownership account owned by Victor Tam (XXXXXX8867) had a balance of $4,039.54. Each of these single ownership accounts was fully insured, as each had a balance less than $100,000.¹³

8. Norton concluded that account XXXXXX7347 was held by Kathy T–M Tam. Norton concluded that XXXXXX0218 was held by Philemon and Kathy T–M Tam. The beneficiaries for both accounts were Christine and Victor Tam, the depositors' children, and Daphne Malatesta, their granddaughter. In addition, Philemon Tam was a beneficiary on account XXXXXX7347. Norton concluded that under the deposit insurance rules then in effect, the two accounts had seven “beneficial relationships,” defined as a relationship between one trustee and one beneficiary.¹⁴ He found that all seven beneficial relationships involved qualifying beneficiaries (spouse, children, and grandchild).¹⁵

9. Norton determined that because account XXXXXX7347 had four beneficial relationships, each beneficial relationship was entitled to a one-quarter share of $140,440.62.¹⁶ Because account XXXXXX0218 had six beneficial relationships, he found that each beneficial relationship was entitled to a one-sixth share equal to $123,773.03.¹⁷ Three beneficial relationships—Kathy T–M Tam ITF Christine Tam, Kathy T–M Tam ITF Victor Tam, and Kathy T–M Tam ITF Daphne Malatesta—had an interest in both accounts; consequently, Norton aggregated the shares for a total of $264,213.64. ¹⁸

10. Norton concluded that Philemon Tam ITF Christine Tam; Philemon Tam ITF Victor Tam; and Philemon Tam ITF Daphne Malatesta each held $123,773.03 in the two accounts. He concluded that Kathy T–M Tam ITF Christine Tam, Kathy T–M Tam ITF Victor Tam, and Kathy T–M Tam ITF Daphne Malatesta each held $264,213.64 in the two accounts. Finally, he concluded that Kathy T–M Tam ITF Philemon Tam held a $140,440.62 interest in the accounts.¹⁹

11. Because each trust relationship was insured for $100,000, each of Philemon Tam ITF Christine Tam; Philemon Tam ITF Victor Tam; and Philemon Tam ITF Daphne Malatesta was $23,733.03 over the deposit insurance limit. Kathy T–M Tam ITF Christine Tam; Kathy T–M Tam ITF Victor Tam; and Kathy T–M Tam ITF Daphne Malatesta were each $164,213.64 over the deposit insurance limit, while Kathy T–M Tam ITF Philemon Tam was $40,440.62 over the deposit insurance limit. ²⁰

12. Norton concluded that the Titus Tambunan's two accounts were held in trust for his niece and nephew. Because neither a niece nor a nephew is a qualifying beneficiary, Norton treated these funds as if they had reverted to the single ownership of Tambunan. As a single owner, Tambunan was insured for $100,000. Consequently, Tambunan's accounts were $653,260.42 over the deposit insurance limit.²¹

13. Howard calculated the total combined account balance for the five revocable trust accounts as $2,057,661.05. As the accounts were insured only to $800,000, they were $1,257,661.05 over the deposit insurance limits. ²²

14. On August 5, 2009, the FDIC sent plaintiffs a Notice of Allowance of Claim (“Notice”) and a Receivership Certificate in the amount of $1,257,661.05. ²³

15. Based on the FDIC's calculation that the ultimate resolution of IndyMac's assets would result in a recovery of approximately 50% of the uninsured deposits of IndyMac, FDIC sent the Tams a 50% advance dividend in the amount of $628,830.53.²⁴

16. On September 23, 2009, the FDIC notified the court that it had reviewed the accounts held by Tambunan and determined that Tambunan was entitled to an additional $100,000 in insurance, bringing the total insurance for all of plaintiffs' accounts to $900,000. The supplemental briefing does not indicate the reasoning for this revision.²⁵

II. CONCLUSIONS OF LAW

A. Standard of Review

17. The FDIC's determination of insurance coverage is governed by the Federal Deposit Insurance Act (“FDIA”), as amended, 12 U.S.C. §§ 1811 et seq.

18. The FDIC's final determination “regarding any claim for insurance coverage [is] a final agency action reviewable in accordance with” the Administrative Procedure Act (“APA”). 12 U.S.C. § 1821(f)(4). Under the APA, the court examines whether the FDIC's decision was “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). Accordingly, the parties agree that the relevant question the court must answer is whether the FDIC's action was arbitrary or capricious.²⁶

19. Final agency decision is arbitrary and capricious if the agency “ ‘has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency...