Waldron v. Federal Deposit Insurance Corporation

Venture Bank (the bank) was a wholly owned subsidiary of Venture Financial Group, Inc. (VFG). VFG filed consolidated tax returns on behalf of the bank and VFG. In 2009, Washington State banking regulators closed the bank, and the Federal Deposit Insurance Corporation (FDIC) (defendant) was appointed as the bank’s receiver. In 2011, the FDIC submitted a request to the Internal Revenue Service (IRS) to allow the FDIC to serve as an alternative agent for VFG. The FDIC sought to file amended tax returns carrying back losses incurred by the bank and claiming refunds not previously pursued. VFG objected to the FDIC being its agent with the IRS, but the IRS nonetheless granted the FDIC’s request to act as an alternate agent. The FDIC filed a series of amended tax returns to recover funds owed to the bank. In 2017, VFG filed for chapter 7 bankruptcy. Mark Waldron (plaintiff) was selected as the chapter 7 trustee. In response, the FDIC filed a protective proof of claim and declared that the pending tax refunds were the property of the FDIC, not VFG or its bankruptcy estate. The IRS ultimately accepted the FDIC’s refund requests and paid the FDIC $8,471,982.36. Waldron brought suit in bankruptcy court and contended that the refunds should be considered part of the bankruptcy estate. The bankruptcy court agreed. The FDIC appealed, and the district court affirmed the judgment of the bankruptcy court. The FDIC appealed again, arguing that the bankruptcy court did not have subject-matter jurisdiction over the dispute because Waldron did not exhaust the administrative claims process as required by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).