     Case: 12-10080       Document: 00512093515         Page: 1     Date Filed: 12/21/2012




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                                            FILED
                                                                        December 21, 2012

                                       No. 12-10080                        Lyle W. Cayce
                                                                                Clerk

BUILDING FOUR SHADY OAKS MANAGEMENT L.P.,

                                                  Plaintiff-Appellant
v.

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for
Guaranty Bank, formerly a Texas Banking Company,

                                                  Defendant-Appellee



                   Appeal from the United States District Court
                for the Northern District of Texas, Dallas Division
                                  3:10-CV-970


Before DAVIS, JONES, and SMITH, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:*
       In its capacity as receiver for an insolvent bank, the Federal Deposit
Insurance Corporation (“FDIC”) repudiated a long-term commercial lease to
which the failed bank was a party. The other party to the lease brought suit,
alleging that the FDIC did not repudiate the lease within a reasonable period of
time. Following a bench trial, the district court dismissed the suit relying in part
on its finding that appellant was not prejudiced by the delayed lease


       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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                                  No. 12-10080

cancellation. We agree with the district court that prejudice was a relevant
consideration in determining the reasonableness of the FDIC’s actions and
whether it was timely.
                                        I.
      In 2007, Guaranty Bank (“Guaranty”) was a national bank whose deposits
were insured by the FDIC. On February 14, 2007, Guaranty entered into a
commercial lease agreement with Building Four Shady Oaks Management L.P.
(“Building Four”). Under the lease, Guaranty leased 3,740 square feet of
commercial space in Southlake, Texas from Building Four for a period of ten
years beginning May 15, 2008.
      On August 21, 2009, Guaranty was declared insolvent and the FDIC was
appointed as receiver, responsible for managing Guaranty’s assets and winding
up its affairs. Part of the FDIC’s role as receiver was to assume or repudiate
contracts to which Guaranty was a party. On January 25, 2010, the FDIC
notified Building Four that the FDIC was repudiating the Guaranty Lease,
effective March 31, 2010.
      Building Four brought suit against the FDIC, alleging that the FDIC
failed to repudiate the lease within a reasonable period of time. Building Four
sought damages for breach of contract in the amount of the rent and expenses
due under the lease. The FDIC argued that its delay in repudiating the lease
was reasonable under the circumstances and in light of Building Four’s inability
to show that it had been harmed. Specifically, because of the state of the rental
market at the time, Building Four was unable to show that it could have rented
the property to anyone else during the FDIC’s delay. On appeal, Building Four
has not challenged the district court’s factual finding that Building Four suffered
no prejudice as a result of the FDIC’s delay in repudiating the lease. Following
a bench trial, the district court dismissed Building Four’s claim, finding that
based on all the facts and circumstances, and balancing Building Four’s inability

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                                       No. 12-10080

to show that it was prejudiced, the FDIC repudiated the lease within a
reasonable period.
                                              II.
       We review a district court’s findings of fact for clear error and its legal
conclusions de novo. Klamath Strategic Inv. Fund v. United States, 568 F.3d 537,
543 (5th Cir. 2009).
                                             III.
                                              A.
       Building Four argues first that the district court erred by considering
prejudice as a factor in determining whether the FDIC repudiated a lease within
a reasonable period of time.
       With the passage of the Financial Institutions Reform, Recovery, and
Enforcement Act (“FIRREA”) in 1989, Congress empowered the FDIC to serve
as receiver for failed financial institutions. FDIC v. McFarland, 243 F.3d 876,
885 (5th Cir. 2001); 12 U.S.C. § 1821 (2006). Part of the authority the FDIC
exercises as receiver is the right to repudiate contracts of the failed institution.
12 U.S.C. § 1821(e).1 However, Congress put a limitation on this authority:



       1
           FIRREA provides:
       In addition to any other rights a conservator or receiver may have, the
       conservator or receiver for any insured depository institution may disaffirm or
       repudiate any contract or lease—

       (A) to which such institution is a party;

       (B) the performance of which the conservator or receiver, in the conservator’s
       or receiver’s discretion, determines to be burdensome; and

       (C) the disaffirmance or repudiation of which the conservator or receiver
       determines, in the conservator’s or receiver’s discretion, will promote the
       orderly administration of the institution’s affairs.

Id. § 1821(e)(1).

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                                  No. 12-10080

      The conservator or receiver appointed for any insured depository
      institution . . . shall determine whether or not to exercise the rights
      of repudiation under this subsection within a reasonable period
      following such appointment.

Id. § 1821(e)(2) (emphasis added).
      According to Building Four, the district court erred by considering
Building Four’s lack of prejudice in deciding whether the FDIC repudiated the
lease “within a reasonable period” under § 1821(e)(2). This is the primary
question presented by this appeal.
      “The starting point in statutory interpretation is the language of the
statute itself.” St. Tammany Parish, ex rel. Davis v. FEMA, 556 F.3d 307, 319
(5th Cir. 2009) (internal quotation marks omitted). Our primary duty is to give
effect to the clear intent of Congress by “apply[ing] the plain language of the
statute.” Id. at 320.
      Building Four contends that because the statute says nothing about
prejudice, the district court should not have considered it when determining
whether the FDIC repudiated its lease within a reasonable time. As Building
Four correctly asserts, “[a]bsent a clearly expressed legislative intention to the
contrary, the [statute’s] language must ordinarily be regarded as conclusive.”
Consumer Product Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102. 108
(1980). However, the language of § 1821(e)(2) is not nearly as conclusive as
Building Four would like it to be. If courts were only permitted to consider
factors explicitly mentioned in § 1821(e)(2)’s text, then they would not be able to
consider any surrounding circumstances in deciding what is a “reasonable”
period.
      It is apparent from § 1821(e)(2)’s short text that Congress did not speak
to the factors a court can consider in deciding what is a reasonable period of
time. However, “statutory construction is a holistic endeavor,” and we must give


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                                            No. 12-10080

proper consideration to a statute’s wording, context, and evident purpose. See In
re Amy Unknown, Nos. 09-41238, 09-41254, 09-31215, 2012 WL 5835827, slip
op. at *8 (5th Cir. Nov. 19, 2012) (en banc)(on petition for rehearing).
        While FIRREA does not define “reasonable,” the parties do not dispute
that whether a given period of time is reasonable necessarily depends on the
surrounding facts and circumstances. See, e.g., Alford v. United States, 709 F.2d
418, 424 n.9 (5th Cir. 1983).2 Building Four maintains that when assessing the
reasonableness of a period of time, the only relevant consideration is timing. We
disagree. The only way to determine whether an action’s timing is reasonable is
to consider it in light of surrounding circumstances. See id. at 424 n.9. We agree
with the district court that the prejudice caused to a lessor whose lease may be
cancelled should ordinarily be considered when deciding when to act. In other
words, all else being equal, it is less reasonable for the FDIC to delay its
repudiation of a contract with a party when that party will suffer great damage
as a result. Conversely, it is more reasonable for the FDIC to delay its
repudiation of a contract if the party to the contract will suffer no damages as
a result.
        The decision of one of our sister circuits support this conclusion. The
Eighth Circuit considered the reasonableness of the Resolution Trust Company’s
(“RTC”)3 repudiation of a failed savings and loan association’s sale-leaseback



        2
         See also Travelers Ins. Co. v. Liljeberg Enters., Inc., 38 F.3d 1404, 1410 (5th Cir. 1994)
(defining “reasonable time” as something “which depends upon the particular facts and
circumstances of the case.”); Resolution Trust Corp. v. CedarMinn Bldg. Ltd. P’ship, 956 F.2d
1446, 1455 (8th Cir. 1992) (“The amount of time that is reasonable must be determined
according to the circumstances of each case.”).
        3
            Under FIRREA, the RTC statutorily succeeded the Federal Savings and Loan
Insurance Corporation as conservator and receiver of certain failed financial institutions.
CedarMinn, 956 F.2d at 1449–50 & n.5. The distinction between the RTC and the FDIC is
irrelevant here, as “Congress gave the RTC all of the receivership and conservatorship powers it granted the
FDIC” and the two entity’s powers under § 1821(e)(2) are parallel. See id. at 1450 n.5.

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                                        No. 12-10080

agreement in Resolution Trust Corp. v. CedarMinn Building Ltd. Partnership.
956 F.2d 1446 (8th Cir. 1992). Interpreting the same provision of FIRREA at
issue here, the CedarMinn court found, “The amount of time that is reasonable
must be determined according to the circumstances of each case.” Id. at 1455. In
reaching its conclusion that the RTC’s repudiation was reasonable, the
CedarMinn court relied heavily upon the absence of prejudice to the affected
party. See id. at 1455–56 & n.14. (“CedarMinn clearly was not prejudiced by the
ongoing negotiations. There were no businesses eager to take on these leases.”).
At least two district courts have also explicitly integrated a consideration of
prejudice into their determination of what is a reasonable period of time under
§ 1821(e)(2).4
       The conclusion that prejudice may be considered in the determination of
what is reasonable is bolstered by § 1821(e)’s broad grant of discretion to the
FDIC. As the FDIC emphasizes, the statute permits it to repudiate “any contract
or lease” which in its own discretion the agency determines to be burdensome.
12 U.S.C. § 1821(e)(1) (emphasis added).
       Indeed, Building Four concedes in its brief that the “reasonable time”
limitation is “the only non-discretionary limitation on the FDIC’s repudiation
power.” According to Building Four, the broad discretion granted to the FDIC
mandates that the reasonable time requirement be interpreted strictly.
However, this assertion is at odds with both the broad discretion evident in
FIRREA and with the legislative history of the statute. When § 1821(e)(2) was




       4
          See N.H. Assoc. Ltd. P’ship v. FDIC, 978 F. Supp. 650, 654 (D. Md. 1997) (“Notably,
[the lessor] has not presented evidence that it was harmed in any way by the ninety-day
delay.”); Plymouth Mills, Inc. v. FDIC, 876 F. Supp. 439 (E.D.N.Y. 1995) (finding that under
§ 1821(e)(2), “the court must take into account the . . . the balance of hurt to the litigants”).

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                                     No. 12-10080

enacted, a strict 90-day limitation on the FDIC’s repudiation authority was
expressly rejected in favor of the open-ended “reasonable period” language.5
      In light of the statute’s language, context, and history, we therefore
conclude that prejudice to other parties to a contract may be considered in a
determination of what is a reasonable period of time under § 1821(e)(2) for
cancellation of a failed bank’s contract.
                                           B.
      Building Four next argues that if prejudice is a permissible consideration
under § 1821(e)(2), the district court nonetheless erred by considering the lack
of prejudice to Building Four after the FDIC’s repudiation. According to Building
Four, the district court erred by “look[ing] at the results of the FDIC’s actions to
determine whether they were reasonable at the time of repudiation.” As support
for its argument, Building Four points only to the district court’s statement that
the “inability of Building Four to generate any interest in the property despite
a stabilization of the commercial real estate market in the fourth quarter of 2010
shows a lack of prejudice to Building Four.” Building Four interprets this
statement as limiting the district court’s consideration to a lack of post-
repudiation prejudice.
      However, Building Four’s argument disregards the context of the district
court’s statement. The opinion’s analysis indicates that the court considered
prejudice following the repudiation only to shed light on the question of prejudice
at the time of the FDIC’s repudiation. To paraphrase the reasoning of the
district court, if Building Four was completely unable to rent its property for
eleven months after the FDIC’s repudiation, it is reasonable to infer that
Building Four could not have rented the property in the two months preceding


      5
       CedarMinn, 956 F.2d at 1455 n.13 (citing H.R. REP. No. 101-54(1) (1989), reprinted
in 1989 U.S.C.C.A.N. 86, 331; 1 G. PULLES, R. WHITLOCK AND J. HOGG, FIRREA, A
LEGISLATIVE HISTORY AND SECTION-BY-SECTION ANALYSIS, at 189–90 (1990)).

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                                       No. 12-10080

the FDIC’s repudiation.6 This is not an unreasonable inference, and the district
court did not err by considering such evidence in its prejudice analysis.
                                              C.
       Finally, Building Four argues that the district court erred by giving
dispositive weight to the factor of prejudice in its determination of whether the
FDIC repudiated a lease within a reasonable period under § 1821(e)(2).
According to Building Four, instead of merely considering prejudice as a factor,
the district court treated prejudice to the lessor as a prerequisite to finding that
a lease was not repudiated within a reasonable period. As support, Building
Four points to the district court’s statement that “[u]ltimately, the FDIC failed
to notify Building Four of its intent to repudiate within a reasonable time after
. . . the FDIC had made its decision to not accept the Guaranty Lease.” Building
Four also points to the district court’s statement that “the actions taken by the
FDIC in repudiating the Guaranty Lease caused delay to such an extent that the
FDIC’s actions cannot be characterized as reasonable given the circumstances.”
Reading these statements in isolation, Building Four argues that the district
court found that the FDIC did not act within a reasonable period of time, but
that Building Four could not complain without first establishing prejudice.
       The full context of the district court’s opinion shows that it correctly did
not make prejudice a prerequisite to a finding of unreasonableness under §
1821(e)(2). The district court made its reasoning clear when it stated, “proof of
prejudice is not a condition precedent to recovery under 12 U.S.C. § 1821(e).” In
multiple places, the district court was careful to predicate its analysis on



       6
          Contrary to Building Four’s assertions, the district court specifically concluded that
it was only evaluating the prejudice experienced by Building Four at the time of the FDIC’s
repudiation: “Building Four’s assertion of prejudice can rest only on the delay in the FDIC’s
repudiation of the Guaranty Lease from November 19, 2009 to January 25, 2010. Any
additional delay in placing the Guaranty Bank Space on the market caused by Building Four
or its agents does not factor into the Court’s analysis.”

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                                  No. 12-10080

multiple factors and “the particular facts and circumstances of the case.” The
district court’s opinion demonstrates that it considered a number of factors,
including the length of the delay, the necessary bureaucratic hurdles in the
FDIC, and the unprecedented state of the banking industry in 2008. Giving the
district court’s complete opinion a fair reading, we are satisfied that it did not
consider proof of prejudice to the lessor a prerequisite to establishing Building
Four’s § 1821(e)(2) claim.
                                       IV.
      For the reasons stated above, the judgment of the district court is
AFFIRMED.




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