[00:00:02] Speaker 03:
We'll now take up third case this morning, 23-4091, America West Bank members versus Utah.

[00:00:39] Speaker 02:
Mr. Peck, whenever you're ready, we're ready for you.

[00:00:58] Speaker 04:
May it please the court, Robert Peck, on behalf of the plaintiff repellents.

[00:01:03] Speaker 04:
Due process places a constitutional condition on the exercise of a power that

[00:01:09] Speaker 04:
Utah law, and free of places in the hands of bank regulators.

[00:01:14] Speaker 04:
It means that subject to government deprivations, the person who is being deprived is entitled to a fair hearing at a meaningful time in a meaningful manner.

[00:01:28] Speaker 04:
This did not happen here.

[00:01:30] Speaker 04:
What due process does not tolerate is for the government to seize a property, including a bank said to be failing,

[00:01:39] Speaker 04:
deny a hearing before the seizure, accomplishing that seizure ex parte, then transfer the property to a federal agency so that no post-seizure hearing could occur, and then claiming that any due process rights now belong to the federal agency.

[00:01:58] Speaker 05:
As I understand it, your claim is against UDFI and your argument

[00:02:04] Speaker 05:
in response to the Rupert Feldman doctrine is with regard to UDGFI's activities, not with regard to the state court's lack of a hearing, either pre-deprivation or post-deprivation.

[00:02:21] Speaker 04:
That is correct.

[00:02:21] Speaker 04:
The court had no obligation to give a post-deprivation hearing.

[00:02:25] Speaker 04:
It heard the matter as it was entitled to ex parte.

[00:02:30] Speaker 05:
So you don't have any problem with what the court did.

[00:02:32] Speaker 04:
No, and they don't mention due process.

[00:02:34] Speaker 04:
They don't consider due process.

[00:02:36] Speaker 04:
The FDIC in their brief has asked you to assume sub salento that the court must have understood that they were denying due process.

[00:02:46] Speaker 04:
You can't read that out of the order of possession.

[00:02:50] Speaker 04:
The responsibility was entirely on Utah officials.

[00:02:54] Speaker 03:
And how could they have given you more due process?

[00:02:57] Speaker 03:
What did they do that deprived you of due process?

[00:03:00] Speaker 04:
Well, by transferring it to the FDIC, they foreclosed the right to have a hearing within 10 days, which we could have brought, and therefore challenged that process.

[00:03:15] Speaker 04:
And let's keep in mind, please, that when this action was filed, no one thought that there was a problem in raising the due process issue as it was in state court.

[00:03:27] Speaker 04:
It went up to the Utah Supreme Court.

[00:03:29] Speaker 04:
The Utah Supreme Court said it was still ripe to pursue the due process issue.

[00:03:33] Speaker 04:
So this case was refiled according to the instructions of the Utah Supreme Court in state court.

[00:03:39] Speaker 04:
And there was every right to seek a remedy based on the deprivation of due process.

[00:03:46] Speaker 05:
The problem with your argument, I think, let me ask you to tell me why I'm wrong about this, is that the immediate transfer to the FDIC deprived your client the stockholder of a post deprivation hearing, but you didn't allege in the complaint that there was a lack of a post deprivation hearing.

[00:04:10] Speaker 04:
We allege that there was a lack of procedural due process.

[00:04:13] Speaker 04:
Now that procedural due process requires a

[00:04:15] Speaker 04:
hearing before the deprivation.

[00:04:17] Speaker 04:
But it is a defense to that.

[00:04:20] Speaker 04:
You stated that you didn't.

[00:04:22] Speaker 04:
Right.

[00:04:23] Speaker 04:
And it is a defense to that that a post deprivation can be held instead.

[00:04:28] Speaker 04:
And the Supreme Court has authorized that as a sufficient meeting of the procedural due process.

[00:04:33] Speaker 04:
And so while this is only at the complaint stage, this is a motion to dismiss based on for real.

[00:04:40] Speaker 03:
You have to identify the process you were denied.

[00:04:43] Speaker 04:
And we identified it.

[00:04:45] Speaker 04:
In there, we did say that there was no post deprivation hearing.

[00:04:49] Speaker 04:
And indeed, as this continues.

[00:04:51] Speaker 05:
You're saying you alleged in the complaint that there was a denial of due process based on the lack of a post deprivation hearing?

[00:05:01] Speaker 04:
Yes, we do.

[00:05:02] Speaker 05:
Can you point me to that?

[00:05:03] Speaker 05:
It's not enough to just recite facts.

[00:05:05] Speaker 03:
You have to give your allegation of what was legally required.

[00:05:11] Speaker 03:
So if your statement of facts

[00:05:18] Speaker 05:
Well, I'm not trying to test you, but I sure didn't see it.

[00:05:23] Speaker 04:
I believe it was paragraph 175, if my memory is serving me right, because I'm not finding it immediately.

[00:05:28] Speaker 04:
But under PGRM, which we cite in our brief, even when you write your brief and you explain your response to the motion dismissed, the Supreme Court has said you can take what's in the brief and assume that that basically is now incorporated into the complaint.

[00:05:47] Speaker 04:
Between the two of them, we have this covered.

[00:05:50] Speaker 04:
Now, whether you consider this a matter of prudential standing, or call it third-party standing words, we really think it is Article 3 standing with respect to the injury in fact.

[00:06:02] Speaker 04:
The question is, what is the injury, and who does that injury occur to?

[00:06:06] Speaker 04:
And here, it's clear.

[00:06:09] Speaker 04:
The FDIC is not injured.

[00:06:11] Speaker 04:
The bank is not injured.

[00:06:13] Speaker 04:
Its assets are not injured.

[00:06:15] Speaker 04:
this deprivation of due process.

[00:06:18] Speaker 04:
Only my client is injured.

[00:06:21] Speaker 05:
Well, let's say the American West Bank members sold their stock in the bank to Bob Baccarat.

[00:06:29] Speaker 05:
And now I am the stockholder.

[00:06:32] Speaker 05:
Well, I am going to be injured because the asset has diminished in value.

[00:06:38] Speaker 05:
And so isn't that the prototypical example of a derivative injury?

[00:06:44] Speaker 04:
That is a derivative of injury if the asset is devalued, but the asset is not devalued by the lack of due process.

[00:06:51] Speaker 04:
The whole process of taking the bank is to preserve its assets and to increase its assets.

[00:06:58] Speaker 04:
So there's no injury to the bank or its assets.

[00:07:02] Speaker 05:
Okay, maybe I'm misunderstood, but I thought the whole injury was from the UDFI's liquidation of the bank.

[00:07:09] Speaker 05:
and then asking the court to approve the liquidation and then unilaterally transferring this diminished asset to the FDIC.

[00:07:21] Speaker 05:
So it all stems from the liquidation of the bank, which creates injury because it diminished the value of the asset that belonged to the American West Bank.

[00:07:33] Speaker 04:
I don't believe so, because the assets are unaffected by the due process claim.

[00:07:39] Speaker 04:
The assets are not, the fact is, this is very much like in Levin.

[00:07:47] Speaker 04:
There was a duty of loyalty that was considered to be outside of Freia's grasp.

[00:07:53] Speaker 04:
And the reason it was, putting aside the derivative versus direct issue,

[00:08:00] Speaker 04:
The reason it was is because this was an injury for which the FDIC could never sue, for which it would not suffer, and that did not go to the bank's assets.

[00:08:09] Speaker 04:
There was essentially a person reporting directly to the bank owner before it was seized who basically said, put more money in, put more money in, which was also occurring here, and doing so while knowing that the bank was going to be seized.

[00:08:27] Speaker 04:
The fact is, the seizure of preserved assets.

[00:08:29] Speaker 04:
I have a question.

[00:08:30] Speaker 04:
If I may interrupt you for a moment.

[00:08:33] Speaker 04:
I can't hear you.

[00:08:33] Speaker 04:
I'm sorry.

[00:08:34] Speaker 03:
I said I have a question.

[00:08:36] Speaker 03:
Yes.

[00:08:36] Speaker 03:
You kept talking.

[00:08:40] Speaker 03:
Normally, to have a claim of denial due process, don't you have to show that you were entitled to some procedure and you were prejudiced by the denial of that procedure?

[00:08:53] Speaker 03:
What was your prejudice?

[00:08:54] Speaker 03:
Did you agree with that proposition?

[00:08:56] Speaker 04:
I do agree with that proposition.

[00:08:58] Speaker 03:
So what was the loss from the denial of procedure?

[00:09:03] Speaker 04:
There is a value in the procedure that allows you to show that the bank was not failing, even if you do not prevail.

[00:09:11] Speaker 04:
And that opportunity was denied.

[00:09:13] Speaker 04:
So the investment-backed interests of the holding company, essentially, was the property.

[00:09:21] Speaker 03:
Okay, but then you're saying that you had the right to make some showing that you were denied, that the bank was not failing when it was put into receivership.

[00:09:36] Speaker 03:
The process that was denied was there was the next part of hearing to start with, and you say, well, that's okay if I have a hearing later on.

[00:09:46] Speaker 04:
We believe that's what Supreme Court President says.

[00:09:49] Speaker 03:
And why were you denied the opportunity?

[00:09:52] Speaker 03:
How were you denied the opportunity for a later hearing?

[00:09:56] Speaker 03:
Doesn't the Utah statute provide for review in 10 days?

[00:10:01] Speaker 04:
Within 10 days, and gives you the opportunity to enjoin the process by which the bank was seized.

[00:10:07] Speaker 04:
But you cannot enjoin the FDIC.

[00:10:09] Speaker 04:
So you can enjoin the UDFI.

[00:10:11] Speaker 04:
Did you pursue that?

[00:10:13] Speaker 03:
What?

[00:10:14] Speaker 03:
Did you pursue that?

[00:10:15] Speaker 04:
We didn't, because under Faria, you could not do so.

[00:10:19] Speaker 03:
It would be nice if you let me ask a question.

[00:10:22] Speaker 03:
I'm sorry, I speak slowly sometimes, so you might think I'm finished.

[00:10:28] Speaker 03:
Your clients did not seek review within that 10 days to see if perhaps in this circumstance the federal statute that says you can't enjoy in the FDIC would be overridden by constitutional concerns for due process.

[00:10:45] Speaker 03:
But don't you have to pursue the relief that's provided on its face by the statute rather than saying, well, we're going to lose if we try to pursue this?

[00:10:57] Speaker 04:
We believe it would have been futile.

[00:10:59] Speaker 04:
And under Patsy and cases like that in 1983 actions, you don't have to pursue futile actions.

[00:11:06] Speaker 03:
And it was futile because of your understanding of the statute saying you can't enjoin the FDIC.

[00:11:13] Speaker 04:
That's right.

[00:11:13] Speaker 03:
And we do not believe... Don't you think that would be overwritten by a constitutional claim that if you don't give us this right to review?

[00:11:21] Speaker 03:
That's what you're seeking here, saying there was a constitutional violation.

[00:11:25] Speaker 03:
Why could you not have argued that in the proceedings in state court?

[00:11:31] Speaker 04:
Because we think it's very clear the UDFI denied us due process.

[00:11:37] Speaker 04:
We don't think the FDIC did.

[00:11:41] Speaker 04:
We don't think that their actions at all were part of it.

[00:11:44] Speaker 03:
But the process you were denied, as I understand it, is the right to show that the receivership was improper because the bank was not failing.

[00:11:54] Speaker 03:
And you could have obtained that relief through review through the state processes.

[00:12:01] Speaker 03:
And you did not pursue those processes because you say, well, the FDIC statute would have barred an injunction.

[00:12:11] Speaker 03:
But you have a constitutional claim.

[00:12:13] Speaker 04:
I don't think the due process that we were denied was due from the FDIC.

[00:12:18] Speaker 04:
It was due from the UDFI.

[00:12:20] Speaker 03:
Well, it was due from the court.

[00:12:23] Speaker 03:
It was the court that had ordered the receivership, and that decision was without due process because you didn't have a chance to review it after the ex-partner proceeding.

[00:12:35] Speaker 04:
But if the UDFI had held onto the bank and allowed for a hearing after that, we could have brought that case and had that hearing, regardless of what the court that ordered possession did.

[00:12:53] Speaker 04:
There was nothing that the court did that denied us due process.

[00:12:57] Speaker 04:
It's what the UDFI did.

[00:12:59] Speaker 00:
Are you still advancing a 1983 claim against Commissioner Leary, fraud-based claim?

[00:13:06] Speaker 00:
Yes.

[00:13:06] Speaker 04:
We think that that's encompassed in our claim that none of this is covered by either Rucker Feldman or by Faria's advancement of the claim.

[00:13:19] Speaker 04:
Now, let's keep in mind that under Faria II,

[00:13:23] Speaker 04:
Whether you're looking at Levin, whether you're looking at Zucker, whether you're looking at Barnes or Hines, every one of these cases, the court acknowledges that there are exceptions to the claims that the FDIC may have.

[00:13:38] Speaker 04:
And whether you say it's derivative, derivative ones that you stand in the shoes of the corporation, you're seeking assets of the corporation logs, those are clearly covered by this provision.

[00:13:50] Speaker 04:
When you're talking about direct, there's different kinds of direct.

[00:13:53] Speaker 04:
And here, the FDIC cannot claim that it was denied due process, that it was injured by the denial of due process, that the bank was injured by the denial of due process, that its assets were injured by the denial of due process, or that they have claims to assets as a result of the denial of due process.

[00:14:12] Speaker 04:
None of that devolves onto the FDIC.

[00:14:15] Speaker 04:
And that is why Zucker says it's a limited decision.

[00:14:19] Speaker 04:
Heinz says don't over-read this decision.

[00:14:23] Speaker 04:
And that's why the duty of loyalty was considered not to be within the claim of furia.

[00:14:28] Speaker 05:
Can I ask you?

[00:14:29] Speaker 05:
You said, I didn't really follow it.

[00:14:33] Speaker 05:
Early in that answer, you said that, I think you were talking about Barnes, that if the claim was derivative, I think you said, quote, it would fall within this provision.

[00:14:42] Speaker 05:
But I didn't know what you meant.

[00:14:44] Speaker 05:
Did you mean that under Barnes, if it was derivative, you lose?

[00:14:48] Speaker 04:
No, Barnes, no.

[00:14:51] Speaker 04:
This claim is not derivative.

[00:14:54] Speaker 04:
Barnes, it was derivative.

[00:14:55] Speaker 05:
If it is derivative, do you agree that there's a lack of standing?

[00:15:00] Speaker 04:
Yes, because derivative means that we are seeking funds that go to the bank or to its assets.

[00:15:07] Speaker 05:
By virtue of the diminished value of the asset?

[00:15:12] Speaker 04:
No, by virtue of the fact that the funds that we're seeking really ought to go to the bank or claims of the bank or claims

[00:15:20] Speaker 04:
that are assets of a bank.

[00:15:22] Speaker 04:
And here we deny that.

[00:15:23] Speaker 04:
And the fact of the matter is, as all of these cases make clear, constitutional claims are not covered by the Fourier provision, and damage claims are not covered by the Fourier provision.

[00:15:34] Speaker 04:
That's why this purely damaged claim against UDFI should not be considered claims of the FDIC.

[00:15:41] Speaker 00:
May I ask another question?

[00:15:42] Speaker ?:
Yes.

[00:15:43] Speaker 00:
I'm still a little bit confused.

[00:15:44] Speaker 00:
It could just be me.

[00:15:45] Speaker 00:
So if you could walk me through.

[00:15:46] Speaker 00:
I am not clear on what your claims are that are before us with respect to procedural due process.

[00:15:55] Speaker 04:
May I finish?

[00:15:58] Speaker 00:
So I understand that you have the claim we've been discussing at length, the claim about the immediate appointment of the FDIC and the procedural due process claim attendant to that.

[00:16:09] Speaker 00:
and then you have a claim against Commissioner Leary for fraud, for alleged fraud during the hearing.

[00:16:15] Speaker 00:
Is that correct?

[00:16:16] Speaker 04:
That's correct.

[00:16:17] Speaker 00:
And are those distinct?

[00:16:18] Speaker 04:
Those are distinct.

[00:16:20] Speaker 00:
Okay, so the district court, as I understood it, said that you did not effectively pursue that FDIC immediate appointment claim.

[00:16:28] Speaker 00:
You waived any

[00:16:31] Speaker 00:
You didn't plead it, and you came up for the first time in the summary judgment process.

[00:16:37] Speaker 00:
So how are we to understand that procedural posture to consider your claim on the merits?

[00:16:43] Speaker 04:
Right.

[00:16:44] Speaker 04:
In our reply brief, we run through the claims in the complaint.

[00:16:48] Speaker 04:
And as I said, paragraph 175, if memory is serving me correctly, really does make the claim that we said.

[00:16:57] Speaker 04:
We argued the whole due process issue.

[00:17:01] Speaker 04:
in our brief opposing summary judgment, and even more so in our brief asking for summary judgment on due process grounds.

[00:17:09] Speaker 04:
All of that was clearly before the court, and there is no procedural waiver.

[00:17:14] Speaker 01:
Thank you.

[00:17:16] Speaker 01:
Good morning, Your Honors, and may it please the court.

[00:17:19] Speaker 01:
I am Joseph Brooks from the FDIC legal division.

[00:17:23] Speaker 01:
It was a little bit of a hodgepodge, but more of the court handling this

[00:17:27] Speaker 01:
Perhaps in the reverse order, one might have expected this case to be handled, because this is primarily a prudential standing case.

[00:17:35] Speaker 01:
What I would like to do, though, is quickly address the merits issues that the panel did.

[00:17:39] Speaker 01:
And hopefully, there'll be some time to talk about prudential standing at the end, although that might not be important.

[00:17:45] Speaker 01:
Judge Rossman, I think it's important when looking at the merits of this case to go directly to the question that you asked counsel.

[00:17:52] Speaker 01:
And whatever claims may have been raised in the complaint,

[00:17:55] Speaker 01:
Whatever claims may have been addressed in the appellant's opening brief, it is very clear what's left after the reply brief was filed.

[00:18:05] Speaker 01:
At pages 1 to 2 of the reply brief, quote, AWBM does not seek compensation for the property taken, unquote.

[00:18:13] Speaker 01:
At page 6, AWBM does not seek to reverse the transfer, nor does it seek compensation for the transfer.

[00:18:22] Speaker 01:
At 7,

[00:18:23] Speaker 01:
AWBM is entitled to redress, quote, regardless of the propriety of seizing the assets and transferring them to the FDIC.

[00:18:32] Speaker 01:
And finally, at five, the ultimate concession.

[00:18:35] Speaker 01:
The gravamen of AWBM's complaint was the process utilized by Utah that deprived AWBM of notice and hearing, unquote.

[00:18:44] Speaker 01:
In this court's Elliott decision, the court held as follows.

[00:18:48] Speaker 01:
An entitlement to nothing but procedure cannot be the basis for a liberty or property interest," close quote.

[00:18:56] Speaker 01:
And absent a separate, constitutionally protected liberty or property interest, there is no right to process.

[00:19:04] Speaker 01:
For that reason alone, the claims lack merit.

[00:19:07] Speaker 05:
Well, I'm not sure how that I agree that you get from A to Z. In paragraph 134 of the complaint,

[00:19:17] Speaker 05:
They predicate the lack of procedural due process on Commissioner Leary and UDF as false statements and material omissions to the state court.

[00:19:29] Speaker 05:
So I mean, that's their claim, right?

[00:19:35] Speaker 01:
Well, Your Honor, their claim, I believe, has three parts.

[00:19:38] Speaker 01:
They claim, one, they were denied a pre-deprivation hearing.

[00:19:41] Speaker 01:
They claim, secondly, they were denied a post-deprivation hearing, and they claim, third,

[00:19:47] Speaker 01:
that Commissioner Leary purportedly made fraudulent statements at the hearing that would have been corrected.

[00:19:53] Speaker 01:
Now, all of those problems would have gone away if AWBM had sought the hearing that was permitted within 10 days under Utah law 7-2-3.

[00:20:07] Speaker 01:
A post deprivation hearing is not necessary in urgent circumstances like this, excuse me, a pre deprivation hearing, if a post deprivation hearing is allowed.

[00:20:16] Speaker 05:
And presumably- How do you respond to their argument that they did not have an opportunity for a post deprivation hearing because of subsection J in Faria?

[00:20:27] Speaker 01:
That they are legally 100% wrong.

[00:20:31] Speaker 01:
And I rely on the primary case that they rely on in this appeal.

[00:20:35] Speaker 01:
In the Third Circuit's Hines case, and also in the DC Circuit's James Madison case described at length in Hines, both of those courts held that yes,

[00:20:46] Speaker 01:
1821J bars an action for equitable relief against acts of an FDIC receiver as a duly appointed receiver.

[00:20:56] Speaker 01:
However, both cases also held that if you are instead challenging the appointment of the receiver, 1821J does not bar that.

[00:21:07] Speaker 01:
And in fact, under FIREA, in the case of

[00:21:11] Speaker 05:
Well, they're not challenging the appointment of the FDIC as the receiver.

[00:21:15] Speaker 05:
They're arguing that the bank never should have been liquidated in the first place.

[00:21:19] Speaker 01:
Exactly, Your Honor.

[00:21:20] Speaker 01:
And that's exactly what they could argue in the Utah 7-2-3 hearing.

[00:21:25] Speaker 01:
And of course, of course, if the bank was improperly seized, the FDIC was improperly appointed by the very same party that seized that bank.

[00:21:37] Speaker 01:
And this is made clear in the Hines case.

[00:21:39] Speaker 01:
where the court said, even though the statute in Pennsylvania, which is virtually identical to the Utah statute, even though that statute talks in terms of the commissioner itself, or the state secretary there being the receiver, the Third Circuit held that it naturally applies when instead the secretary appoints someone else as a receiver, including the FDIC.

[00:22:02] Speaker 01:
Both Hines and James Madison foreclosed their argument that they were borrowed by 1821J.

[00:22:09] Speaker 01:
That's just not the case.

[00:22:10] Speaker 01:
And in any event, you would have to interpret FIRETA that way.

[00:22:14] Speaker 01:
Because as I said, it expressly provides for a challenge to the appointment of the FBICS receiver in instances where the appointment is by a federal official.

[00:22:25] Speaker 01:
It is silent as to what happens in instances like this where it's a state official.

[00:22:30] Speaker 01:
But in the absence of an opportunity for a post deprivation hearing,

[00:22:34] Speaker 01:
such as was clearly provided by 7-2-3, you would, of course, have a serious due process problem.

[00:22:41] Speaker 01:
There's none here.

[00:22:42] Speaker 01:
The only problem here is that AWBM made a decision on its own that it could not get an effective remedy by complying with the process created by Utah law.

[00:22:54] Speaker 01:
That is the only reason why we're here today.

[00:22:57] Speaker 01:
They themselves did not take advantage of that due process here.

[00:23:03] Speaker 01:
Do you think that forecloses all their claims?

[00:23:06] Speaker 01:
Yes, forecloses all their claims, because even the contention about fraud on the part of the commissioner, because he didn't present material information.

[00:23:15] Speaker 01:
Well, presumably, Your Honor, if they had the post-deprecation hearings afforded under Utah law, AWBM would present the information that they argue was withheld by Commissioner Leary.

[00:23:29] Speaker 01:
In fact, the record makes clear there was no information withheld.

[00:23:33] Speaker 01:
As the judge himself pointed out, in the language that's quoted in our briefs, the testimony was based on the FDIC report of examination of the information that was available.

[00:23:49] Speaker 00:
Is there anything to appellant's argument that the speed with which everything occurred with the appointment deprived them of the ability to pursue the Utah process?

[00:23:59] Speaker 01:
No, because the priest supposes that they had no opportunity to get that hearing because of the FDIC being appointed.

[00:24:06] Speaker 01:
He could have sought it.

[00:24:07] Speaker 01:
Now, would it be more difficult to unwind the transaction 10 days later?

[00:24:13] Speaker 01:
Perhaps.

[00:24:13] Speaker 01:
I don't know.

[00:24:14] Speaker 01:
The law provides that you get a remedy, not necessarily a perfect remedy.

[00:24:18] Speaker 01:
And the statutory language here under the Utah code provided that the state court judge there had

[00:24:26] Speaker 01:
All kinds of ability, it says, and I'm quoting from 7-2-3C.

[00:24:30] Speaker 01:
It says, if he finds that the seizure was arbitrary capricious otherwise contrary to law, he shall order the commissioner to surrender possession of the institution in a manner and on terms designated by the court in the public interest.

[00:24:46] Speaker 01:
So he would have had wide equitable discretion

[00:24:49] Speaker 01:
to put the pieces back together to the extent that they could and to provide such other relief.

[00:24:53] Speaker 01:
Again, the only reason my AWVM never had an opportunity to present the information to the state court judge that they say Commissioner Leary should have presented is because they, as they said, consulted with counsel, reached the conclusion that it wasn't worth their while to do so.

[00:25:11] Speaker 01:
But that procedure was there.

[00:25:13] Speaker 01:
That was an adequate post-demoration procedure.

[00:25:16] Speaker 01:
That is the holding of Hines.

[00:25:18] Speaker 01:
That is the principal case they rely upon.

[00:25:19] Speaker 03:
I don't see how that disposes of the fraud claim.

[00:25:23] Speaker 03:
Because if the fraud led to receivership and then it's difficult to unwind and there's some prejudice, which could happen because of the difficulty of unwinding, then the fraud caused damage that's still extant after the 10-day hearing.

[00:25:43] Speaker 01:
Two points.

[00:25:43] Speaker 01:
I know you're on the first one.

[00:25:45] Speaker 01:
Well, let me make the second point.

[00:25:47] Speaker 01:
That is why this case is ultimately about credential standing or alternatively about waiver.

[00:25:53] Speaker 03:
Your Honor, you can... I would think it's also about... I would also think there's a Rooker-Feldman issue there, but go ahead.

[00:25:59] Speaker 01:
But there's not a Rooker-Feldman issue on the fraud claim because we do not contest that the district court correctly concluded that only as to the fraud claim,

[00:26:09] Speaker 01:
because that was action of an individual not by the state court of charge.

[00:26:13] Speaker 03:
We won't go into it if you've waived the issue, but I'm not sure we don't have to go into it.

[00:26:18] Speaker 03:
I'm not sure you're right about that.

[00:26:20] Speaker 01:
It's a subject matter jurisdiction issue, Your Honor, and certainly as to the pre- and post-deploration hearings, that's correct.

[00:26:25] Speaker 01:
So first of all, there's the Rooker-Feldman issue.

[00:26:28] Speaker 01:
But let's take a further step back.

[00:26:30] Speaker 01:
They never raised the Rooker-Feldman issue.

[00:26:32] Speaker 01:
And they're not arguing that the court lacked jurisdiction.

[00:26:35] Speaker 01:
They're arguing that the court had jurisdiction.

[00:26:37] Speaker 01:
It is not raised but for a

[00:26:39] Speaker 01:
cursory reference, 28 pages into the brief, 12 lines deep in the foot.

[00:26:44] Speaker 01:
And under this court's precedent... When you say never raised, you mean they never challenged the ruling on Rooker-Feldman?

[00:26:49] Speaker 01:
They never sufficiently preserved a challenge to the Rooker-Feldman ruling of the court below.

[00:26:55] Speaker 03:
But the court below didn't bar the fraud claim under Rooker-Feldman, and I'm not sure why not.

[00:27:01] Speaker 01:
I'm not sure either, Your Honor.

[00:27:02] Speaker 01:
I believe there's certainly colorable arguments that they did.

[00:27:05] Speaker 03:
But if that's jurisdictional, we have to address it, whether you waive it or not.

[00:27:09] Speaker 01:
Yes, Your Honor.

[00:27:10] Speaker 01:
And I think it is jurisdictional for a couple of reasons.

[00:27:13] Speaker 01:
But the primary one is, as I said, it's wrapped up in their due process claim.

[00:27:19] Speaker 01:
What really happened here, what they're really complaining about is not so much that Commissioner Leary did what he was said to have done, but they weren't given the opportunity to go to a hearing and to turn that around.

[00:27:29] Speaker 01:
And even so, this happened in the course of the proceeding.

[00:27:33] Speaker 01:
The state court judge had the report of examination before him.

[00:27:37] Speaker 01:
He had all of the information.

[00:27:39] Speaker 01:
He had the ability to say that this procedure was not done properly.

[00:27:45] Speaker 01:
So it's sort of wrapped up in the three decisions that the state court judge made.

[00:27:50] Speaker 01:
And this is on the record very clearly.

[00:27:51] Speaker 01:
It was the state court judge.

[00:27:52] Speaker 01:
This is, in essence, Campbell versus City of Spencer all over again.

[00:27:57] Speaker 01:
It wasn't the UDFI who decided they don't get a pre- deprivation hearing.

[00:28:01] Speaker 01:
It was the state court judge.

[00:28:02] Speaker 01:
State court judge heard the evidence.

[00:28:04] Speaker 01:
He had the petition in front of him.

[00:28:06] Speaker 01:
He had the report of examination in front of him.

[00:28:08] Speaker 01:
He was able to determine whether sufficient information was in front of him to justify the seizure of the bank, and he made that determination.

[00:28:17] Speaker 05:
But under Utah law, it's the Commissioner Leary who had the unilateral statutory power to seize the bank.

[00:28:26] Speaker 01:
Well, he didn't exercise that power, Your Honor.

[00:28:28] Speaker 01:
He instead went to court.

[00:28:30] Speaker 01:
And if you look at the...

[00:28:33] Speaker 05:
I thought the allegation was that he did exercise his right under Utah law to seize the bank.

[00:28:40] Speaker 05:
Utah law then requires post-seizure to go and get approval from the Utah State Court.

[00:28:48] Speaker 05:
And I thought that's exactly what America West Bank members alleges.

[00:28:52] Speaker 05:
It was the initial step to seize the bank by Commissioner Leary that they're challenged.

[00:28:58] Speaker 01:
Well, if that's what they alleged, they're totally wrong.

[00:29:00] Speaker 01:
Am I wrong about that?

[00:29:01] Speaker 01:
Excuse me, Your Honor.

[00:29:02] Speaker 01:
I think you're incorrect.

[00:29:03] Speaker 01:
OK.

[00:29:04] Speaker 01:
Maybe because we're just presenting.

[00:29:05] Speaker 01:
What happened here was there was no seizure of the bank.

[00:29:09] Speaker 01:
There was a ex parte hearing.

[00:29:12] Speaker 01:
OK?

[00:29:12] Speaker 01:
On May 1, 2009, the UDFI went into the bank, excuse me, into the state court and filed a petition for an order of seizure.

[00:29:24] Speaker 01:
It then went to an ex parte hearing.

[00:29:26] Speaker 01:
Commissioner Leary testified before the state court.

[00:29:30] Speaker 01:
And also during that hearing, the FDIC stood up and said, in the event that Your Honor grants their petition and allows them to seize the bank, we, the FDIC, will accept the appointment as receiver.

[00:29:43] Speaker 01:
So the state court judge, first of all, the state court judge was informed at the beginning of the hearing.

[00:29:50] Speaker 01:
He was informed that the bank had requested to be at the hearing.

[00:29:54] Speaker 01:
And the state court judge said the bank has no right.

[00:29:57] Speaker 01:
The second thing he did was he heard the evidence.

[00:30:00] Speaker 01:
And after hearing the evidence and after hearing also that the FDIC would be immediately appointed, he said, I am granting the petition.

[00:30:08] Speaker 01:
The petition specifically authorizes Commissioner Leary to seize the bank.

[00:30:13] Speaker 01:
And it was pursuant to the petition granted by the court.

[00:30:18] Speaker 01:
Commissioner Leary, excuse me, the state court judge knew that Commissioner Leary would immediately appoint the FDIC.

[00:30:26] Speaker 01:
He also knew about 7-2-3, because that memorandum that was sent from the Utah attorney general's office to Judge Morris ahead of the hearing explained exactly how it worked.

[00:30:40] Speaker 01:
So if, and as I've explained, that meant that the marriage does not, but even if there were a problem here,

[00:30:47] Speaker 01:
with the FDIC being immediately appointed.

[00:30:50] Speaker 01:
That was done with a full knowledge of the state court judge because his order also expressly and explicitly authorizes the appointment by commissioner of a receiver with the judge's full knowledge that the receiver appointed would be the FDIC and that they would accept the appointment immediately.

[00:31:12] Speaker 01:
So any consequences that could have flowed from that are necessarily wrapped up in the judge's order.

[00:31:18] Speaker 01:
Back to Judge Hart's, it's 100% correct that Rooker-Filman bars this.

[00:31:23] Speaker 01:
And then in addition to that, as I've explained, if the court were to get through Prudential Standing, if the court were to get through waiver, if the court were to get through Rooker-Filman on the non-fraud based claims and get to the merits, it is an alternative basis, because this was brief, although, that they were not entitled to anything other than what they received

[00:31:42] Speaker 01:
And that 1827J did not bar them from seeking a hearing under Utah 7-3 in the state court.

[00:31:53] Speaker 01:
They had 10 days to seek the hearing, and they did not do it.

[00:31:56] Speaker 01:
And I see my time is up, and I'm happy to respond to any further questions.

[00:32:00] Speaker 01:
Thank you, counsel.

[00:32:01] Speaker 01:
Thank you.

[00:32:01] Speaker 01:
And we would ask that the district court's decision be affirmed.

[00:32:05] Speaker 03:
Case submitted.

[00:32:06] Speaker 03:
Counselor excused.

[00:32:06] Speaker 03:
Your time had expired, counsel.

[00:32:09] Speaker 04:
May I have a moment just to answer two questions?

[00:32:14] Speaker 03:
I thought you had plenty of time to present your case.

[00:32:17] Speaker 03:
I'll give you 30 seconds.

[00:32:19] Speaker 04:
First, it's paragraph 173 in the second amended complaint.

[00:32:23] Speaker 04:
Second, Hines says that the effect would be dramatic and fundamental, but still reach the same result where a third, basically they're saying that Faria does not cover

[00:32:37] Speaker 04:
And then the final thing is that we said throughout our brief, the opening brief, that this was an action against UDFI.

[00:32:51] Speaker 04:
It was not about the state court.

[00:32:53] Speaker 04:
If I had brought the state court action on appeal, they would say there's nothing about due process.

[00:32:59] Speaker 03:
Thank you, Your Honor.

[00:33:07] Speaker 03:
Cases submitted.

[00:33:09] Speaker 03:
Counselor excused.

[00:33:11] Speaker 03:
We'll take a brief break.