Borrowers’ Claims Against FDIC Were Subject to FIRREA.
On January 31st, the D.C. Circuit addressed whether a borrower’s claim against the FDIC as receiver for a failed bank was subject to the administrative exhaustion requirements of the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"). The Westbergs obtained a loan from Silver State Bank to build a house. After funds had been disbursed but before construction was completed, the FDIC was appointed the bank’s receiver. As receiver, the FDIC repudiated the loan while requiring the Westbergs to repay disbursed funds. The Westbergs submitted an administrative claim for costs resulting from construction delays caused by the FDIC’s repudiation of the loan, but did not seek relief from their repayment obligation. After the FDIC denied the claim the Westbergs filed suit. The D.C. Circuit, affirming dismissal, held that the Westbergs’ repayment claim was subject to FIRREA’s administrative exhaustion requirements because the claim stemmed from the FDIC-as-receiver’s act of repudiating the loan. It further found that plaintiffs failed to meet that requirement. Westberg v. FDIC.