FDIC: Deposit Insurance Assessment Appeals: Guidelines & Decisions


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Deposit Insurance Assessment Appeals: Guidelines & Decisions

AAC-2002-04 (July 18, 2002)

Decision
[Bank] (“X Bank” or “Bank”) filed this administrative appeal challenging a January 28, 2002, determination by the Federal Deposit Insurance Corporation’s (“FDIC”) Division of Finance (“DOF”) that the Bank’s claim for a refund of assessment premiums was barred by the applicable five-year statute of limitations. The Bank sought recalculation of assessment premiums associated with its purchase of two branches of a savings bank in 1994. Deposit runoff from those branches, the Bank contended, should have reduced its insurance premiums by approximately $100,000, the refund amount it claimed.

In finding the Bank’s claim untimely, DOF did not address the underlying merits of the claim, nor does the Assessment Appeals Committee (“Committee”) consider them here. The sole issue to be determined in this appeal is whether the Bank brought its claim within the five-year limitations period for assessment matters prescribed by Congress in the Federal Deposit Insurance Act (“FDI Act”). Resolution of that issue requires an analysis of (1) when the Bank first brought its claim, and (2) when the claim “accrued,” that is, when the five-year statute of limitations began to run.

Background
The Bank submitted its claim to the FDIC by letter dated October 24, 2001, from its Chairman and Chief Executive Officer, ***, directed to the FDIC’s Office of the Ombudsman. According to the Bank, the FDIC violated the plain language of the Oakar Amendment (12 U.S.C. § 1815(d)(3)) when it failed to provide the Bank with an annual “Growth Worksheet” at the end of 1994. The Bank had made its initial Oakar Transaction – acquisition of the savings bank branches – in June of 1994. According to the Bank, it was entitled under the statute to a Growth Worksheet at the end of 1994 through which it could have adjusted its “Adjusted Attributable Deposit Amount” (“AADA”) to reflect deposit runoff from the acquired branches. The Bank asserted that it was not provided with a Growth Worksheet until the end of 1995, thereby losing the benefit of a negative annual growth rate in 1994. That negative growth rate, according to the Bank, would have lowered its AADA at the end of 1994 to a smaller figure than actually reported at the end of 1995. For this reason, the Bank maintained that it overpaid its assessments by $100,000, ¹and it sought a refund in that amount. In sum, X Bank made essentially the same AADA argument raised by Y Bank and rejected by this Committee in In the Matter of Y et al., AAC No. 99-04 (Sept. 27, 1999). ²

In its October 24, 2001, letter, the Bank referenced an effort to communicate its claim to Mr. Leslie R. Crawford, the FDIC’s Deputy Ombudsman, at the National Bankers Association’s 74th Annual Convention, which took place October 9 through 12, 2001.

By letter dated January 28, 2002, the Director of DOF responded to the Bank’s claim that the FDIC withheld a Growth Worksheet from the Bank in 1994. The Director informed X Bank that the five-year statute of limitations for assessments had run, that the Bank’s claim was untimely, and that the FDIC would not consider it. The DOF Director provided instructions for filing an appeal to this Committee.

By letter dated March 8, 2002, the Bank opted to appeal the Division Director’s determination to this Committee. In that letter, the Bank contended that it had “pursued the FDIC over a 5 year period seeking to recover adjustments due to overpayments for the actual purchases of branches and for relief or reductions in a loan that was extended by the RTC/now FDIC.” The FDIC, by letter dated April 5, 2002, requested from the Bank any documentation it had supporting the contention that it had pursued its claim with the FDIC over a five-year period.

The Bank responded on May 1, 2002, ³ with a package of ten documents. Nine of these documents related to an Interim Capital Assistance note restructuring that the Bank arranged with the FDIC. The tenth document, a September 22, 1995, letter from Mr. *** to then-FDIC Chairman Ricki Helfer, contained a reference to the deposit runoff from the 1994 savings bank acquisitions. In that letter, Mr. *** asserted, “As you can see, we feel that the assessment being debated is unfair, and will have a serious impact on our earnings.”

By letter dated May 24, 2002, the Bank was notified that the appeal record was complete and that the Committee would issue a decision.

Discussion
The question of whether the Bank brought its claim within the five-year statute of limitations of Section 7(g) may be resolved by analysis of when the Bank’s claim “accrued,” i.e., when the statute of limitations began to run, and when the claim was first brought. The Committee analyzes these issues below.

A. Accrual of X Bank’s Claim
Section 7(g) of the FDIC Act, 12 U.S.C. § 1817(g), provides the statute of limitations for the collection of unpaid or erroneously collected deposit insurance assessments. Under section 7(g), an action or proceeding for the recovery of any assessment due the FDIC, or for the recovery of any excess amount paid to the FDIC, must be brought within five years “after the right accrued for which the claim is made.” The standard legal rule is that accrual occurs when the plaintiff has a complete and present cause of action, i.e., when suit can be filed and relief obtained. Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Calif., 522 U.S. 192, 201 (1997): Reiter v. Cooper, 507 U.S. 258, 267 (1993); Rawlings v. Ray, 312 U.S. 96, 98 (1941).

The appropriate accrual date for AADA matters is established by identifying the alleged calculation error and then determining which semiannual assessment it first affected. On this basic point, X Bank directs us to the end of December 1994 when, the Bank asserts, the FDIC erred by not providing a Growth Worksheet. Because of that alleged error, the Bank contends that its AADA – its Bank Insurance Fund (“BIF”)/ Savings Association Insurance Fund (“SAIF”) ratio – was allegedly miscalculated. The calculations from any such 1994 worksheet would have been reflected on the Bank’s Certified Statement due January 31, 1995. At that time, however, the Bank attested that its assessment base for the second semiannual period in 1994 – the base on which its January 31, 1995, assessment amount was computed – was true, correct and complete, and the Bank paid that assessment. Now, over six years later, X Bank contends that its 1994 assessment base was wrong, resulting in an overpaid SAIF assessment. The Committee finds that the accrual date for this claim was January 31, 1995, when the Bank’s alleged SAIF overpayment was first due.

The Committee turns to an alternate, and we think incorrect, method of calculating AADA claim accrual dates applied recently in Norwest Bank Minnesota, N.A. v. FDIC. ⁴ The Norwest court ruled that no AADA claim accrues where an institution’s BIF/SAIF ratio is incorrect, so long as the two funds’ assessment rates remain the same. Instead, the court viewed an AADA claim as accruing only when the institution allegedly overpaid its combined BIF/SAIF assessment, which would result when the funds’ assessment rates diverged. Before divergence, the court apparently viewed the alleged SAIF overpayment as, in effect, an offset against the alleged BIF underpayment. In this way, the court tacitly and erroneously treated the BIF and SAIF as one fund. Thus, regardless of any error in BIF/SAIF apportionment, the Norwest court would not start the limitations clock running as long as the total combined BIF/SAIF assessment remained correct. Under this approach, had the BIF and SAIF rates never diverged, the statute of limitations for Bank’s claim would not yet have begun to run. We think the Norwest court was wrong.

Nevertheless, using the Norwest approach, the date of the first alleged overpayment by the Bank of its combined BIF/SAIF assessment can be precisely identified in FDIC records as September 29, 1995. On that date, the Bank paid its semiannual assessment, computed by applying BIF rates that were lower than SAIF rates. Accordingly, September 29, 1995, is the accrual date that would be found applying the Norwest approach.

B. When the Bank Brought Its Claim
To resolve this matter, the Committee must determine when the Bank first brought its assessment claim. The elements necessary to put an agency on notice of a claim may be gleaned by analogy from cases analyzing the notice provision of the Federal Tort Claims Act (“FTCA”). Under the FTCA, before bringing an action in court, a claimant “shall first have presented the claim to the appropriate Federal agency ….” 28 U.S.C. § 2675(a). Courts have interpreted this provision to require filing with the agency (1) a written statement sufficiently describing the inquiry to enable the agency to begin its own investigation, and (2) a sum-certain damages claim. GAF Corp. v. United States, 818 F.2d 901, 919 & n.106 (D.C. Cir. 1987) (U.S. Circuit Court cases cited).

Examination reveals that the Bank’s October 24, 2001, letter meets these requirements.⁵ In the letter, the Bank set out its AADA calculation theory and valued its claim at $100,000. The Bank, however, points to the September 22, 1995, letter from *** to former Chairman Helfer as evidence that its claim was first brought more than six years earlier. ⁶ The Committee finds nothing in the September 22, 1995, letter to suggest that the letter is anything more than a lobbying effort on the part of the Bank in opposition to legislation to impose a special SAIF assessment then being considered in Congress. Indeed, the letter on its face fails to meet the minimal requirements for submission of a claim: notice of a claim is not provided nor is any refund requested. Moreover, in September of 1995, as now, FDIC regulations set forth the explicit procedures for requesting revision of assessment payment computations. These rules provided what to submit, when to submit it, and the officer to whom it should be addressed. ⁷ The September 22, 1995 letter also meets none of the procedural requirements of the then-current rules. ⁸

The Committee finds that X Bank’s September 22, 1995 letter failed to bring a claim against the FDIC. The letter therefore can have no effect on the statute of limitations issue presented here. Rather, the evidence in this matter supports the conclusion that Bank X’s claim against the FDIC was first brought in its October 24, 2001 letter.

C. X Bank’s Claim Is Time Barred
The Committee resolves this matter by referring to two dates: the accrual date of X Bank’s claim for an assessment refund and the date the Bank first brought that claim to the FDIC. These dates must fall within five years of each other or, under the five-year limitation period contained in Section 7(g), the Bank’s claim is untimely.

X Bank’s claim accrued on January 31, 1995, when its first alleged SAIF overpayment was due. As of that date, if X Bank believed an error in its AADA calculation had occurred, it could have pursued that error with the FDIC. Instead, the Bank waited until October 24, 2001 – almost six years and nine months later – before doing so, well beyond the five-year statutory period. Nor is the claim timely even applying the Norwest approach. Under that calculation, the Bank’s claim would have accrued on September 29, 1995, when it first paid assessments based on divergent BIF and SAIF rates. Applying that accrual date, six years and twenty-five days elapsed ⁹ before the Bank brought this claim. ¹⁰

Accordingly, X Bank’s claim was not brought within five years of its accrual as required under Section 7(g), 12 U.S.C. § 1817(g), the statute of limitations for FDIC assessment matters. The Committee therefore finds that X Bank’s claim is time barred.

For the reasons discussed herein, under the authority delegated by the Board of Directors of the Federal Deposit Insurance Corporation, the Committee denies Bank’s appeal.

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¹ X’s AADA assessment payments have already been twice reduced notwithstanding the assessments challenged here. The Bank received the permanent 20 percent reduction in its AADA provided for in the Deposit Insurance Funds Act of 1996 (“DIFA”) (12 U.S.C. § 1815(d)(3)(K)), and also received the 20 percent DIFA reduction in its AADA for purposes of the 1996 SAIF Special Assessment (12 U.S.C. § 1817 Note).
2 Y argued that the FDIC incorrectly withheld a Growth Worksheet at the end of the year in which it conducted Oakar transactions. The Committee rejected this contention as incompatible with the structure and purpose of the Oakar Amendment, violative of the Amendment’s prohibition on inter-fund transfers without payment of entrance and exit fees, and, coupled with the concept of negative growth, unreasonable in result. Y’s claim of disparate treatment – i.e, other institutions had received Growth Worksheets that incorrectly instructed them to report transactions that occurred within the period of acquisition – was rejected: Y had no entitlement to inclusion in an error. The FDIC later refunded overpayments and chose not to pursue underpayments where errors had occurred.
³ The FDIC had allowed the Bank until April 19, 2002, to respond. When nothing was received by that date, the Chief of the FDIC’s Assessment Management Section telephoned *** to inquire whether the Bank intended to respond, and *** indicated that a response would be forthcoming.
⁴ C.A. No. 00-1250 (D.D.C. July 6, 2001) (presently on appeal to the U.S. Court of Appeals for the D.C. Circuit).
⁵ The oral communication, alleged to have occurred during the period from October 9 to October 12, 2001, obviously fails the requirement of a writing.
⁶ In fact, September 22, 1995, is one week prior to the claim’s accrual date calculated using the Norwest method.
⁷ See 12 C.F.R. § 327.3(h) (1995).
⁸ The other nine documents submitted with the September 22, 1995, letter lack any relevance whatever to the issue presented here, i.e. the timeliness of the Bank’s claim.
⁹ Even assuming that the Bank brought its claim by communicating it orally to the FDIC’s Deputy Ombudsman between October 9 and 12, 2001, the claim would still be untimely by more than a year.
¹⁰ The Norwest court considered a second statute of limitations, 28 U.S.C. § 2401(a), the six-year statute of limitations for civil actions brought against the United States. The Committee believes that only Section 7(g) governs FDIC assessment matters because: (1) the five-year period specified in Section 7(g) contradicts Section 2401(a)’s six-year period; (2) Section 7(g)’s five-year limitations period would be superfluous were Section 2401(a) to control; (3) Section 7(g)’s specific limitations period supercedes Section 2401(a)’s general limitations period; and (4) Section 7(g) is the more recent enactment of the two. In any case, the Committee notes that X Bank’s claim was not brought within six years, the limitations period of Section 2401(a), under either accrual method discussed in this decision.

Last Updated 06/30/2005

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