Iberiabank v. Beneva 41-I, LLC

Citation:
Iberiabank v. Beneva, Case No. 11-11195 (11th Cir. Nov. 30, 2012)[Publish]
Tag(s):
Ruling:
Affirmed. Eleventh Circuit affirmed District Court holding the Termination Clause of sublease falls within the language of Section 1821(e)(13)(A) and therefore unenforceable against the FDIC as receiver of Orion. FDIC acted within its powers when it enforced the sublease notwithstanding the termination clause. [Bankruptcy discussion is limited to noting Section 1821 (e)(13)(A)’s prohibition on ipso facto clauses is analogous to the unenforceability of ipso facto clauses in the bankruptcy context. 11 U.S.C. § 365(b)(2).]
Procedural context:
Appeal of summary judgment granted in favor of Iberiabank holding termination clause was unenforceable against Iberiabank under 12 U.S.C. 1821(e)(13)(A).
Facts:
Beneva (Appellants) and Iberiabank (Appellee) became parties to the sublease at issue through a series of assignments. Florida Office of Financial Regulation closed Orion Bank (“Orion”) and appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. On that same day FDIC entered into a Purchase and Assumption Agreement with Iberiabank. Ultimately, Beneva notified Iberiabank of its intention to terminate the lease pursuant to the termination clause in the sublease amendment executed by Orion. Iberiabank brought a declaratory judgment action asking the court to rule the termination clause unenforceable under 12 U.S.C. § 1821 (e) (13) (A). The District Court for the Middle District of Florida entered judgment in favor of Iberiabank concluding the FDIC had “the absolute right to assume the sublease and transfer it to the Plaintiff," and characterised the termination clause as an ipso facto clause. In a footnote, this Court noted that Section 1821 (e)(13)(A)’s prohibition on ipso facto clauses is analogous to the unenforceability of ipso facto clauses in the bankruptcy context. 11 U.S.C. § 365(b)(2). Noting that ipso facto clauses are unenforceable against the trustee. In affirming the District Court, the 11th Circuit recast the issue. The relevant question was not whether Iberiabank sought to enforce the sublease, but whether the FDIC had enforced the contract. In reaching its decision, the 11th Circuit noted that interpretation of Section 1821(e)(13)(A)’s provision barring enforcement of ipso facto clauses against receivers and conservators is a matter of first impression in the circuit. Though the “termination clause did not incorporate the statutory language “exercise of the rights of the receiver,” the Court noted that exercise of the clause did exercise such rights. The Court also noted that under BAPCPA Congress amended the applicable statutory provision – effectively broadening the scope of contracts that are unenforceable against the FDIC. Beneva’s interpretation would permit parties to easily draft around Section 1821(e)(13)(A) thereby eviscerating the statutory intent. The Court also noted that the fact that the clause in enforceable in some context, does not mean that it is enforceable in all. The 11th Circuit held that the termination clause of the amended sublease is therefore unenforceable against the FDIC as receiver of Orion, and that it acted within its powers when it enforced the sublease notwithstanding the termination clause.
Judge(s):
Tjoflat, Martin, and Hill

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