No. 00-46 

IN THE 

Supreme Court of the United States 

Supreme Court of the United States 

Supreme Court of the United States 

Supreme Court of the United States 

BRUCE G. MURPHY, 

Petitioner, 

v. 

JEFFREY H. BECK, 
as Successor Agent for Southeast Bank, N.A., 

Respondent. 

On Writ of Certiorari 
to the United States Court of Appeals for the Eleventh Circuit 

BRIEF FOR PETITIONER 

JOHN F. BLOSS 
CLARK BLOSS & 

MCIVER, PLLC 
Post Office Box 1349 
Greensboro, NC 27402 
(336) 275-7275 
ERIK S. JAFFE 

Counsel of Record 
ERIK S. JAFFE, P.C. 
5101 34 

th Street, N.W. 
Washington, DC 20008 
(202) 237-8165 

THOMAS C. GOLDSTEIN 
AMY HOWE 
THOMAS C. GOLDSTEIN, P.C. 
4607 Asbury Place, N.W. 
Washington, DC 20016 
(202) 237-7543 

Counsel for Petitioner 

QUESTION PRESENTED 

The federal common-law D’Oench doctrine, as expanded 
by the progeny of D’Oench, Duhme & Co., Inc. v. FDIC, 315 
U.S. 447 (1942), generally provides federal banking insurers, 
receivers of failed financial institutions, and their successors- 
in-interest sweeping protection against unrecorded agree- 
ments that might form the basis of a claim or defense. There 
is a broad and well-recognized circuit split over whether this 
federal common-law doctrine is viable in light of this Court’s 
decisions in O’Melveny & Myers v. FDIC, 512 U.S. 79 
(1994), and Atherton v. FDIC, 519 U.S. 213 (1997). 

The question presented in this case is: 

Whether the federal common-law D’Oench doctrine 
constitutes a valid bar to petitioner’s claims? 

ii 

PARTIES TO THE PROCEEDINGS BELOW 

The plaintiff-appellant below, and petitioner in this court, 
is Bruce G. Murphy. 

The defendant-appellee in the Southern District of Florida 
and in the Eleventh Circuit, and respondent in this Court, is 
Jeffrey H. Beck, as Successor Agent for Southeast Bank, N.A. 

In the District Court for the District of Columbia, the D.C. 
Circuit, and the Southern District of Florida prior to the sub- 
stitution of Beck, the defendant-appellee was the Federal De- 
posit Insurance Corporation, as receiver for Southeast Bank, 
N.A. (FDIC-Receiver). The FDIC-Receiver is no longer a 
party to this case and is not a respondent in this Court. 

iii 

TABLE OF CONTENTS 

Pages 

QUESTION PRESENTED...................................................... i 

PARTIES TO THE PROCEEDINGS BELOW..................... ii 

TABLE OF CONTENTS....................................................... iii 

TABLE OF AUTHORITIES .................................................. v 

OPINIONS BELOW............................................................... 1 

JURISDICTION ..................................................................... 2 

STATUTORY PROVISIONS INVOLVED .......................... 2 

STATEMENT......................................................................... 3 

SUMMARY OF ARGUMENT.............................................. 9 

ARGUMENT........................................................................ 11 

I. There Is No Valid Federal Common Law 
Governing The Rights of the FDIC-Receiver or Its 
Private Successors....................................................... 11 

A. O’Melveny and Atherton Govern 

Invocations of Federal Common Law by 
the FDIC-Receiver or Its Private 
Successors. ........................................................11 

B. The D’Oench Doctrine Is Invalid As 

Applied To the FDIC-Receiver or Its 
Private Successors. ............................................14 

II. There Is No Basis for Avoiding the Rule of 
O’Melveny and Atherton............................................. 21 

A. Invalid Federal Common Law Is Not 

Presumed Retained, Regardless of Its Age. ......21 

B. O’Melveny and Atherton Both Apply To 

Pre-Existing Federal Common Law. .................22 

C. The Common-Law Rules Asserted in This 

Case Are Neither Longstanding Nor Well 
Established.........................................................26 

iv 

D. Any Requirement That a Statute Speak 

Directly To the Issue In Order To Preempt 
the Evolved D’Oench Doctrine Is Amply 
Satisfied. ............................................................29 

CONCLUSION..................................................................... 31 

v 

TABLE OF AUTHORITIES 

Pages 

Cases 

Astoria Fed. Sav. & Loan Ass’n. v. Solimino, 501 U.S. 
104 (1991)................................................................... 28, 30 

Atherton v. FDIC, 519 U.S. 213 (1997) ........................ passim 

Beighley v. FDIC, 676 F. Supp. 130 (N.D. Tex. 1987), on 
reh’g, 679 F. Supp. 625 (N.D. Tex. 1988), aff’d, 868 
F.2d 776 (CA5 1989)........................................................ 28 

Bryce v. Bull, 143 So. 409 (Fla. 1932) ................................. 25 

D’Oench, Duhme & Co., Inc. v. FDIC, 315 U.S. 447 
(1942)......................................................................... passim 

Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) ............ 11 

FDIC v. British-Am. Corp., 744 F. Supp. 1169 (E.D.N.C. 
1990) ................................................................................. 26 

FDIC v. First Nat’l Fin. Co., 587 F.2d 1009 (CA9 1978) ... 26 

FDIC v. Mason, 115 F.2d 548 (CA3 1940).......................... 23 

FDIC v. Meo, 505 F.2d 790 (CA9 1974).............................. 26 

FDIC v. Newhart, 892 F.2d 47 (CA8 1989) ......................... 27 

Florida Tomato Packers, Inc. v. Wilson, 296 So. 2d 536 
(Fla. Dist. Ct. App. 1974), cert. denied, 327 So.2d 32 
(Fla. 1976)......................................................................... 25 

Franklin v. Gwinnett County Pub. Sch., 503 U.S. 60 
(1992)................................................................................ 18 

FSLIC v. Two Rivers Assocs., Inc., 880 F.2d 1267 (CA11 
1989) ................................................................................. 27 

Gilman v. FDIC, 660 F.2d 688 (CA6 1981)........................... 3 

In re Anjopa Paper & Bd. Mfg. Co., 269 F. Supp. 241 
(S.D.N.Y. 1967)................................................................ 27 

vi 

In re Jeter, 48 B.R. 404 (Bankr. N.D. Tex. 1985) ................ 26 

Isbrandtsen Co. v. Johnson, 343 U.S. 779 (1952)................ 30 

Langley v. FDIC, 484 U.S. 86 (1987) ........................... passim 

Milwaukee v. Illinois, 451 U.S. 304 (1981)........ 22, 24, 25, 29 

Mistretta v. United States, 488 U.S. 361 (1989)................... 18 

Mobil Oil Corp. v. Higginbotham, 436 U.S. 618 (1978)...... 24 

Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A., 
(“Motorcity I”), 83 F.3d 1317 (CA11 1996) (en banc), 
vacated and remanded sub nom. Hess v. FDIC, 519 
U.S. 1087 (1997), reinstated, 120 F.3d 1140 (CA11 
1997) (en banc), cert. denied sub nom. Hess v. FDIC, 
523 U.S. 1093 (1998).................................................... 9, 16 

Motorcity of Jacksonville, Ltd. v. Southeast Bank N.A., 
(“Motorcity II”), 120 F.3d 1140 (CA11 1997) (en 
banc), cert. denied sub nom. Hess v. FDIC, 523 U.S. 
1093 (1998)....................................................... 9, 15, 16, 29 

Murphy v. FDIC, 208 F.3d 959 (CA11 2000) 
(“Murphy II”)...................................................................... 2 

Murphy v. FDIC, 61 F.3d 34 (CADC 1995) (“Murphy I”) .... 2 

Murphy v. FDIC, 829 F. Supp. 3 (D.D.C. 1993), rev’d, 
61 F.3d 34 (CADC 1995) ................................................... 1 

Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 
77 (1981)..................................................................... 22, 24 

O’Melveny & Myers v. FDIC, 512 U.S. 79 (1994) ....... passim 

Texas Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 
630 (1981)......................................................................... 18 

Trigo v. FDIC, 847 F.2d 1499 (CA11 1988)........................ 27 

United States v. Kimbell Foods, Inc., 440 U.S. 715 
(1979)................................................................................ 12 

United States v. Texas, 507 U.S. 529 (1993)................. passim 

Wallis v. Pan Am. Petroleum Corp., 384 U.S. 63 (1966)12, 24 

vii 

Wheeldin v. Wheeler, 373 U.S. 647 (1963) .......................... 12 

Statutes 

12 U.S.C. § 1441a(b)(4).................................................... 5, 19 

12 U.S.C. § 1821(d)(2) ......................................................... 13 

12 U.S.C. § 1821(d)(9) .................................................. passim 

12 U.S.C. § 1821(n)(4)(I) ................................................. 5, 19 

12 U.S.C. § 1823(e) ....................................................... passim 

12 U.S.C. § 197..................................................................... 15 

28 U.S.C. § 1254..................................................................... 2 

Federal Deposit Insurance Act of 1950, c. 967, 64 Stat. 
873 (Sept. 21, 1950)............................................................ 4 

Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 (“FIRREA”), Pub. L. No. 
101-73, 103 Stat. 183 (Aug. 9, 1989) ............................. 2, 4 

Other Authorities 

Brief for the FDIC in Opposition, Hess v. FDIC, No. 97- 
1025 (cert. denied, 523 U.S. 1093 (1998)) ....................... 20 

Brief for the FDIC in Opposition, Noel v. FDIC, No. 99- 
655 (cert. denied, -- U.S. --, 120 S. Ct. 935 (2000))......... 20 

Policy Statement Regarding Federal Common Law and 

Statutory Provisions Protecting FDIC, as Receiver or 
Corporate Liquidator, Against Unrecorded Agreements 
or Arrangements of a Depository Institution Prior to 
Receivership, 62 Fed. Reg. 5984 (1997) .......................... 20 

R. Stevens & B. Nielson, The Standard of Care for 
Directors and Officers of Federally Chartered 
Depository Institutions: It’s Gross Negligence 
Regardless of Whether Section 1821(k) Preempts 
Federal Common Law, 13 Ann. Rev. Banking L. 169 
(1994).................................................................................23 

IN THE 

Supreme Court of the United States 

Supreme Court of the United States 

Supreme Court of the United States 

Supreme Court of the United States 

BRUCE G. MURPHY, 

Petitioner, 

v. 

JEFFREY H. BECK, 
as Successor Agent for Southeast Bank, N.A., 

Respondent. 

On Writ of Certiorari 
to the United States Court of Appeals for the Eleventh Circuit 

BRIEF FOR PETITIONER 

OPINIONS BELOW 

This case began in the District Court for the District of 
Columbia. It was appealed to the D.C. Circuit, remanded to 
the district court, transferred to the Southern District of Flor- 
ida, and eventually appealed to the Eleventh Circuit. This 
Court granted certiorari to review the decision of the Eleventh 
Circuit. 

The District Court for the District of Columbia’s opinion 
and order granting summary judgment to then-defendant 
FDIC-Receiver is published as Murphy v. FDIC, 829 F. Supp. 
3 (D.D.C. 1993), and is reproduced as Appendix B to the Pe- 
tition (pages B1-B11). The D.C. Circuit’s decision reversing 
the district court is published as Murphy v. FDIC, 61 F.3d 34 

2 

(CADC 1995) (“Murphy I”), and is reproduced as Appendix 
C to the Petition (pages C1-C14). On remand, the D.C. Dis- 
trict Court transferred the case to the Southern District of 
Florida. The transfer order is unpublished and is reproduced 
as Appendix D to the Petition (pages D1-D2). In May 1998, 
respondent Jeffrey H. Beck, as Successor Agent for Southeast 
Bank, N.A., was substituted as party defendant for the FDIC- 
Receiver. The substitution order is unpublished and is repro- 
duced as Appendix E to the Petition (page E1). The District 
Court for the Southern District of Florida’s opinion and order 
dismissing the complaint is unpublished and is reproduced as 
Appendix F to the Petition (pages F1-F6). The Eleventh Cir- 
cuit’s decision affirming the district court is published as 
Murphy v. FDIC, 208 F.3d 959 (CA11 2000) (“Murphy II”), 
and is reproduced as Appendix A to the Petition (pages A1- 
A18).1 

JURISDICTION 

The Eleventh Circuit entered its judgment on April 7, 
2000. The petition for a writ of certiorari was filed on July 5, 
2000, and granted on September 26, 2000. This Court has 
jurisdiction under 28 U.S.C. § 1254(1). 

STATUTORY PROVISIONS INVOLVED 

The federal common-law D’Oench doctrine has been par- 
tially codified by 12 U.S.C. § 1823(e), as amended, and 12 
U.S.C. § 1821(d)(9).2 These provisions are reproduced as 

1 At respondent’s insistence, the opinions of the Eleventh Circuit and the 
District Courts for the Southern District of Florida and the District of Co- 
lumbia were again reproduced in the Joint Appendix. Citations in this 
brief will continue to refer to the Appendices to the Petition (Pet. App.). 

2 Section 1823(e) was amended by the Financial Institutions Reform, Re- 
covery, and Enforcement Act of 1989 (“FIRREA”), Pub. L. No. 101-73, 
103 Stat. 183 (Aug. 9, 1989). 

3 

Appendix G to the Petition (pages G1-G2) and Appendix H to 
the Petition (page H1), respectively. 

STATEMENT 

1. The federal common-law rule at issue in this case is a 
mongrel descendant of the rule of equitable estoppel set out 
by this Court in D’Oench, Duhme & Co., Inc. v. FDIC, 315 
U.S. 447 (1942). In D’Oench, the Federal Deposit Insurance 
Corporation acting in its corporate capacity (FDIC-Corporate) 
sued to recover on a note it had acquired in connection with 
payments it made from the insurance fund to facilitate the 
transfer of deposit liabilities from a failed bank to a healthy 
bank.3 The maker of the note defended on the ground that the 
bank had agreed not to call the note, although no such agree- 
ment appeared in the bank’s records. 

Looking to a then-existing provision of the Federal Re- 
serve Act criminalizing the false overvaluation of a security 
to influence any action by the FDIC-Corporate, this Court 
discerned a “federal policy to protect respondent, and the 
public funds which it administers, against misrepresentations 
as to the securities or other assets in the portfolios of the 
banks which respondent insures or to which it makes loans.” 
315 U.S. at 457. In light of that policy, this Court held: 

Plainly one who gives such a note to a bank with a se- 
cret agreement that it will not be enforced must be pre- 
sumed to know that it will conceal the truth from the 

3 There is a well-defined dichotomy between the FDIC acting in its corpo- 
rate capacity and pursuing its own rights as a bank insurer (FDIC- 
Corporate) and the FDIC acting as a receiver of a failed bank asserting 
derivative rights on behalf of a bank’s creditors and shareholders (FDIC- 
Receiver). See O’Melveny & Myers v. FDIC, 512 U.S. 79, 85 (1994); 
Atherton v. FDIC, 519 U.S. 213, 225 (1997); Gilman v. FDIC, 660 F.2d 
688, 690 (CA6 1981). The difference in these separate capacities is quite 
significant to this case, where respondent is asserting rights that, at best, 
are derivative from the FDIC-Receiver. See infra at 12-15, 26-27. 

4 

vigilant eyes of the bank examiners. * * * 
The test is 

whether the note was designed to deceive the creditors 
or the public authority, or would tend to have that effect. 
It would be sufficient in this type of case that the maker 
lent himself to a scheme or arrangement whereby the 
banking authority on which respondent relied in insuring 
the bank was or was likely to be misled. 

Id. at 460. Because the maker of the note “was responsible 
for the creation of the false status of the note in the hands of 
the bank,” the Court concluded that he was not allowed to 
plead the “secret agreement” leading to that false status as a 
defense. Id. at 461. Otherwise he “would be enabled to de- 
feat the purpose of the statute by taking advantage of an un- 
disclosed and fraudulent arrangement which the statute con- 
demns and which the maker of the note made possible.” Id. 

In 1950, Congress substantially enacted the holding of 
D’Oench as part of a provision relating to purchase and as- 
sumption transactions by the FDIC-Corporate. See Federal 
Deposit Insurance Act of 1950, c. 967, 64 Stat. 873, 889 
(Sept. 21, 1950), codified at 12 U.S.C. § 1823(e). That provi- 
sion originally provided that “[n]o agreement which tends to 
diminish or defeat the right, title or interest of the Corporation 
[the FDIC] in any asset acquired by it under this section, ei- 
ther as security for a loan or by purchase, shall be valid 
against the Corporation unless such agreement” satisfied four 
detailed conditions relating to writing, execution, approval, 
and recordation. 

In 1989, as part of the comprehensive reforms adopted in 
the Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (“FIRREA”), Pub. L. No. 101-73, 103 Stat. 183 
(Aug. 9, 1989), Congress amended 12 U.S.C. § 1823(e) both 
to expand and to make more precise the federal defense 
against certain unwritten agreements. FIRREA extended 
§ 1823(e) to agreements tending to diminish or defeat the in- 
terest of the FDIC in any asset acquired by it “as receiver”; 
extended that section to the newly formed Resolution Trust 

5 

Corporation (RTC), 12 U.S.C. § 1441a(b)(4); and added 
comparable protection for “bridge banks,” which are transi- 
tional entities created to facilitate purchase and assumption 
transactions, id. § 1821(n)(4)(I). FIRREA also added a new 
provision at 12 U.S.C. § 1821(d)(9)(A), which made 
§ 1823(e) applicable to affirmative claims against the banking 
authority. 

From 1950 to the present, this Court has never explicitly 
addressed whether the D’Oench case has continuing force as 
a common-law rule of decision separate from § 1823(e). And 
this Court has only once interpreted § 1823(e), in Langley v. 
FDIC, 484 U.S. 86 (1987), providing some indirect insight 
into the relationship between D’Oench and § 1823(e). See 
infra at 18-19. The lower federal courts, however, have taken 
the limited holding of the D’Oench case and run with it in a 
variety of occasionally conflicting directions. This case pres- 
ents the question whether several aspects of the mutated 
D’Oench “doctrine” have any federal common-law existence 
independent of the terms of § 1823(e). 

2. On August 18, 1989, petitioner Murphy invested over 
$500,000 in Orchid Island Associates Limited Partnership 
(“Orchid”) as part of a development project for a golf and 
beach club in Florida.4 Over a period of several years ex- 
tending before and after this investment, Southeast Bank lent 
Orchid approximately $50 million for the project. Through- 
out this period Southeast Bank exercised extensive control 
and direction over the project making Southeast Bank a de 
facto joint venturer with Orchid. As a result of various 
wrongful activities by Southeast Bank and Orchid, Orchid 
eventually defaulted on its loans and Southeast Bank fore- 

4 Unless otherwise noted, the facts are taken from the Eleventh Circuit’s 
opinion, Pet. App. A, which are in turn taken from the allegations of peti- 
tioner’s amended complaint, which must be accepted as true given the 
procedural posture of the case. Pet. App. A4. 

6 

closed on the property. In 1991, Southeast Bank was declared 
insolvent and placed into FDIC receivership. 

In 1992, Murphy filed suit in the District Court for the 
District of Columbia against the FDIC as receiver for South- 
east Bank. The complaint alleged that Southeast Bank’s 
wrongful actions in concert with Orchid caused the loss of 
Murphy’s investment. The complaint set forth claims for 
breach of fiduciary duty, breach of contract, accounting defi- 
ciencies, fraud, negligent misrepresentation, and securities 
violations. 

The FDIC-Receiver moved to dismiss the complaint, ar- 
guing that Murphy’s claims were barred by § 1823(e) and, 
independently, by the federal common-law D’Oench doctrine. 
In particular, the FDIC-Receiver asserted that the D’Oench 
doctrine barred Murphy’s claims because liability depended 
upon the joint misdeeds of Southeast Bank and Orchid, but 
there was no written agreement memorializing their collusive 
wrongdoing as a formal “joint venture.” 

On August 10, 1993, the district court, treating the FDIC’s 
motion as one for summary judgment, granted summary 
judgment on all counts. Pet. App. B1. The district court 
ruled that Murphy “cannot recover against Southeast on any 
theory of an alleged unwritten joint venture agreement pursu- 
ant to D’Oench * * * and 12 U.S.C. § 1823(e).” Pet. App. 
B4. Murphy appealed. 

On August 1, 1995, the D.C. Circuit, per Judge Ginsburg 
for himself, Chief Judge Edwards, and then-Judge Wald, re- 
versed. Pet. App. C1. The court held that § 1823(e) did not 
bar Murphy’s claims because those claims did not relate to a 
specific “asset” acquired by the FDIC, Pet. App. C5, and that 
this Court’s decision in O’Melveny & Myers v. FDIC, 512 
U.S. 79 (1994), “removes the federal common law D’Oench 
doctrine as a separate bar to such claims.” Pet. App. C2. As 
part of a detailed analysis of this Court’s O’Melveny decision, 
the D.C. Circuit quoted O’Melveny’s statement regarding the 

7 

“‘extensive framework of FIRREA’” that “‘[t]o create addi- 
tional “federal common-law” exceptions is not to “supple- 
ment” this scheme, but to alter it.’” 
Pet. App. C10. 

The D.C. Circuit then applied the reasoning of O’Melveny 
to the federal common-law D’Oench doctrine thus: 

[A]lthough the opinion for the Court does not specifi- 
cally mention D’Oench, it does expressly include one of 
the D’Oench-like statutory provisions (§ 1821(d)(9)) in 
the list of special federal statutory rules of decision from 
which it infers that “[i]nclusio unius, exclusio alterius.” 
O’Melveny & Myers, 512 U.S. at --, 114 S. Ct. at 2054. 
In so doing the Supreme Court, we think, necessarily 
decided the D’Oench question. To translate: the inclu- 
sion of § 1821(d)(9) in the FIRREA implies the exclu- 
sion of overlapping federal common law defenses not 
specifically mentioned in the statute – of which the 
D’Oench doctrine is one. 

Pet. App. C10-C11. The D.C. Circuit concluded that “the 
need for a body of federal common law under the rubric of 
D’Oench has now ‘disappeared’ and that the district court 
erred in holding that Murphy’s claims are barred under 
D’Oench.” Pet. App. C13. 

On remand to the district court, the FDIC-Receiver again 
moved to dismiss petitioner’s (amended) complaint on state- 
law grounds. Motion to Dismiss, June 14, 1996. 

On August 21, 1996, the district court, without ruling on 
the pending motion to dismiss, transferred the case, sua 
sponte and over Murphy’s objections, to the Southern District 
of Florida. Pet. App. D1. 

On May 7, 1998, the FDIC-Receiver moved to substitute 
respondent Jeffrey H. Beck, as Successor Agent for Southeast 
Bank, as the party defendant in the Southern District of Flor- 
ida. Motion to Substitute Party Defendant, May 7, 1998. 
Beck had become the Successor Agent of Southeast Bank 
when, pursuant to 12 U.S.C. § 197, the FDIC-Receiver had 

8 

completed its receivership duties and called a meeting of the 
shareholders of Southeast Bank to elect an agent to wind up 
the Bank’s affairs. After a series of intervening appoint- 
ments, Beck – who was also the Chapter 7 trustee for South- 
east Banking Corporation and sole shareholder of the Bank – 
elected himself as the Successor Agent. Motion to Substitute 
Party Defendant ¶¶ 3-5, at 1-2. 

On May 11, 1998, respondent Beck, as Successor Agent 
for Southeast Bank, was substituted for the FDIC-Receiver as 
the party defendant. Pet. App. E1. 

On July 27, 1998, the District Court for the Southern Dis- 
trict of Florida granted the motion to dismiss pending from 
the District of Columbia. Pet. App. F1. The district court 
held, inter alia, that Murphy’s claims were barred by the 
common-law D’Oench doctrine notwithstanding the D.C. 
Circuit’s contrary prior decision in the case. Pet. App. F5-F6. 
Murphy again appealed. 

On April 7, 2000, the Eleventh Circuit, relying exclu- 
sively on the common-law D’Oench doctrine, affirmed the 
district court’s decision. Pet. App. A1.5 The court initially 
rejected Murphy’s arguments that the D.C. Circuit’s prior de- 
cision should control based on either choice-of-law or law-of- 
the-case principles. Pet. App. A11-A12. 

The Eleventh Circuit then held, in reliance on its prior cir- 
cuit precedent, that the federal common-law D’Oench doc- 
trine was good law notwithstanding related statutory provi- 
sions amended and added by FIRREA and notwithstanding 
this Court’s decisions in O’Melveny and Atherton: 

In Motorcity I and Motorcity II [Motorcity of Jack- 
sonville, Ltd. v. Southeast Bank N.A., (“Motorcity I”), 83 
F.3d 1317 (CA11 1996) (en banc), vacated and re- 

5 The court expressly declined to reach two other grounds given by the 
district court for the dismissal. Pet. App. A18 n.8. Those other grounds, 
while in petitioner’s view frivolous, would remain open on remand. 

9 

manded sub nom. Hess v. FDIC, 519 U.S. 1087 (1997), 
reinstated, Motorcity of Jacksonville, Ltd. v. Southeast 
Bank N.A., (“Motorcity II”), 120 F.3d 1140 (CA11 
1997) (en banc), cert. denied sub nom. Hess v. FDIC, 
523 U.S. 1093 (1998)] we * * * * explained that both 
O’Melveny and Atherton dealt with the question of 
whether to create new federal common law in particular 
areas rather than with the question of whether Congress 
intended the FIRREA to supplant “the previously estab- 
lished and long-standing federal common law D’Oench 
doctrine.” Motorcity II, 120 F.3d at 1143; see also 
Motorcity I, 83 F.3d at 1330. 

Pet. App. A16-A17. The Eleventh Circuit also rejected Mur- 
phy’s argument that the D’Oench doctrine was inapplicable 
where a receivership has generated a substantial profit ($150 
million) and hence the only persons (inequitably) benefiting 
from application of the doctrine – and from Murphy’s loss – 
were the Bank’s shareholders rather than the FDIC. Pet. App. 
A13-A14. The court accordingly held that the D’Oench doc- 
trine “remains good law” in the Eleventh Circuit and was ap- 
plicable to this case. Id. A18. 

Murphy timely petitioned for a writ of certiorari, which 
this Court granted on September 26, 2000. 

SUMMARY OF ARGUMENT 

1. Federal common law is a disfavored creature, limited 
to exceptional circumstances demanding a federal rule of de- 
cision but lacking a federal statute to provide one. This 
Court’s decisions in O’Melveny & Myers v. FDIC, 512 U.S. 
79 (1994), and Atherton v. FDIC, 519 U.S. 213 (1997), es- 
tablish the standards governing the availability off federal 
common law rules for the benefit off the FDIC acting in its 
capacity as a receiver of a failed financial institution. Those 
cases confirmed that the interests pursued by the FDIC- 
Receiver are not those of the United States, and thus do not 
create one of those “‘few and restricted instances’” where 

10 

federal common law might be justified. O’Melveny, 512 U.S. 
at 87 (citation omitted); Atherton, 519 U.S. at 225. Those 
cases also established that FIRREA, by comprehensively ad- 
dressing the rights of the FDIC-Receiver, left no room or jus- 
tification for federal common law, but rather left unaddressed 
matters “subject to the disposition provided by state law.” 
O’Melveny, 512 U.S. at 85. 

Under the approach and holdings of O’Melveny and Ath- 
erton, there is no valid federal common-law D’Oench doc- 
trine applicable to this case. Any supposed federal interests 
of the FDIC-Receiver or its private successor in this case are 
no stronger than, and are in fact much weaker than, the inter- 
ests rejected in O’Melveny and Atherton. The only interests 
at stake are the purely private interests of the Bank’s share- 
holders. Even apart from FIRREA, therefore, the evolved 
federal common-law D’Oench doctrine invoked in this case is 
invalid. That conclusion is only confirmed by the 1989 en- 
actment of FIRREA. The detailed provisions governing 
which parties and what claims are subject to the statute’s 
D’Oench-like protections leave no room for federal common 
law. Inclusio unius, exclusio alterius. 

2. There is no basis for avoiding the limitations of 
O’Melveny and Atherton in the supposed fact that they dealt 
with the creation of new federal rules rather than the dis- 
placement of old ones. Any supposed presumption that stat- 
utes do not intend to displace existing federal common law 
does not apply to federal common law that is invalid even 
aside from inferences drawn from subsequent congressional 
action. Furthermore, such a presumption does not displace 
the O’Melveny and Atherton analyses. Both of those cases 
relied upon earlier cases from this Court that had displaced 
pre-existing federal common law, and Atherton itself dealt 
with a common-law rule that had been applied by federal 
courts for over one hundred years. And as applied in this 
case, the evolved common-law rule invoked by respondent 
was neither longstanding nor well established when FIRREA 

11 

was adopted, hence no saving presumption would even apply. 
Finally, even applying a presumption of retention, that pre- 
sumption is more than overcome given that FIRREA spoke 
directly to the issues addressed by the D’Oench doctrine. 

ARGUMENT 

I. THERE IS NO VALID FEDERAL COMMON LAW 
GOVERNING THE RIGHTS OF THE FDIC-RECEIVER OR 

ITS PRIVATE SUCCESSORS. 

The decision below depends entirely upon the proposition 
that federal common law protects the FDIC-Receiver and, 
derivatively, its private successors, from claims related to un- 
recorded agreements. But such federal common law has 
never validly existed and, even if it had, it would not have 
survived the enactment of FIRREA in 1989. 

A. O’Melveny and Atherton Govern Invocations of 

Federal Common Law by the FDIC-Receiver or Its 
Private Successors. 

The basic principles controlling this case were set out by 
this Court in its unanimous decision in O’Melveny & Myers v. 
FDIC, 512 U.S. 79 (1994). In prosecuting a state-law mal- 
practice action, the FDIC-Receiver sought to rely on a federal 
common-law rule to bar a state-law estoppel defense based 
upon imputed knowledge of the alleged wrongdoing. Under 
alternative analyses, this Court rejected the FDIC-Receiver’s 
invocation of federal common law. 

Starting with the fundamental proposition – established in 
Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78 (1938), but 
apparently lost on the FDIC – that “‘[t]here is no federal gen- 
eral common law,’” 512 U.S. at 83, this Court held that state 
law, “not federal law, governs the imputation of knowledge to 
corporate victims of alleged negligence.” Id. at 84-85. Re- 
garding the further question whether such imputed knowledge 
could be charged to the FDIC-Receiver, this Court again re- 
jected the application of federal common law. 

12 

Noting the FDIC-Receiver’s reliance on United States v. 
Kimbell Foods, Inc., 440 U.S. 715, 726 (1979), for the propo- 
sition that “federal law governs questions involving the rights 
of the United States arising under nationwide federal pro- 
grams,” the Court observed that the “FDIC is not the United 
States,” and that, even if it were, the Court could not assume 
that the FDIC “was asserting its own rights rather than, as re- 
ceiver, the rights of” the bank in receivership. 512 U.S. at 85. 
Nor did the case involve one of those “‘few and restricted’” 
instances “where there is a ‘significant conflict between some 
federal policy or interest and the use of state law.’” 512 U.S. 
at 87 (quoting Wheeldin v. Wheeler, 373 U.S. 647, 651 
(1963); Wallis v. Pan Am. Petroleum Corp., 384 U.S. 63, 68 
(1966)). “Not only the permissibility but also the scope of 
judicial displacement of state rules turns upon such a con- 
flict.” 512 U.S. at 87-88. 

The rules at issue did “not govern the primary conduct of 
the United States or any of its agents or contractors, but affect 
only the FDIC’s rights and liabilities, as receiver, with respect 
to primary conduct on the part of private actors that has al- 
ready occurred,” and there was not even “that most generic 
(and lightly invoked) of alleged federal interests, the interest 
in uniformity.” Id. at 88. There was likewise no federal in- 
terest in avoiding the supposed depletion of the deposit insur- 
ance fund because “there is no federal policy that the fund 
should always win,” and this Court had previously rejected 
similar “‘more money’ arguments.” Id. This Court also dis- 
posed of the FDIC-Receiver’s theory that application of state 
law would “‘disserve the federal program,’” finding it a “fac- 
ile approach to federal-common-law-making” that “demon- 
strates the runaway tendencies of ‘federal common law’ un- 
tethered to a genuinely identifiable (as opposed to judicially 
constructed) federal policy.” Id. at 89. 

In addition to the generic assertion of federal interests, the 
FDIC-Receiver had claimed that FIRREA “positively 
authorized federal common law.” Id. at 87. Not only did the 

13 

Court reject this contention, it held that FIRREA actually con- 
firmed the absence of federal common law. Noting that 12 
U.S.C. § 1821(d)(2)(A)(i) places the FDIC-Receiver into the 
shoes of the insured depository institution, the Court then held 
that those further “provisions of FIRREA which specifically 
create special federal rules of decision regarding claims by, 
and defenses against, the FDIC as receiver” – notably in- 
cluding § 1821(d)(9) – “demolished” the argument that 
FIRREA demonstrated a “high federal interest” sufficient to 
justify use of federal common law. 512 U.S. at 86. The 
added rights expressly granted to the FDIC-Receiver, this 
Court ruled, can be neither “supplemented [nor] modified by 
federal common law. * * * Inclusio unius, exclusio alterius.” 
Id. Referring to the “extensive framework of FIRREA,” this 
Court stated that “[t]o create additional ‘federal common-law’ 
exceptions is not to ‘supplement’ this scheme, but to alter it.” 
Id. at 87. Instead of inviting federal common law, “matters 
left unaddressed in such a scheme are presumably left subject 
to the disposition provided by state law.” Id. at 85. 

Whether judged on the law either before or after FIRREA, 
the conclusion was the same: The FDIC-Receiver may not 
invoke federal common law to defeat claims or defenses in- 
volving the rights of a bank in receivership. Id. at 87. 

Three years after O’Melveny, this Court again rejected the 
FDIC-Receiver’s invocation of federal common law in Ath- 
erton v. FDIC, 519 U.S. 213 (1997). Regarding the applica- 
ble standard of care for officers and directors of a federally 
chartered savings association being sued by the FDIC- 
Receiver, this Court held that FIRREA set the minimum stan- 
dard and rejected “a pre-existing judge-made federal com- 
mon-law standard” invoked by the FDIC-Receiver to fill the 
space above that minimum standard. 519 U.S. at 225. Ana- 
lyzing the validity of the asserted federal common-law stan- 
dard – which had been created by this Court and applied by 
the lower courts for over 100 years – this Court held that Erie 
had eliminated the general basis for the rule and that the rule 

14 

did not fall within the otherwise exceedingly narrow category 
of valid federal common law. See generally 519 U.S. at 218- 
19 (reviewing O’Melveny and the cases considered therein, 
and concluding that application of state law did not create a 
sufficient conflict with or threat to federal interests such as 
might justify federal common law). In rejecting various al- 
leged federal interests, the Court noted significantly that, as in 
O’Melveny, “the FDIC is acting only as receiver of a failed 
institution; it is not pursuing the interest of the Federal Gov- 
ernment as a bank insurer.” Id. at 225. Given that prior cases 
had declined to recognize federal common law where the as- 
serted interests were “at least as strong as, if not stronger 
than, those present[ed]” by the FDIC-Receiver, the Court 
concluded that there “is no federal common law that would 
create a general standard of care applicable to this case.” 519 
U.S. at 226. 

O’Melveny and Atherton set the standard for analyzing ef- 
forts by the FDIC-Receiver to invoke federal common law. 
Applying those standards to this case, there still “is no federal 
common law” that applies for the benefit of either the FDIC- 
Receiver or respondent as its private successor. 

B. The D’Oench Doctrine Is Invalid As Applied To 
the FDIC-Receiver or Its Private Successors. 

As in O’Melveny and Atherton, the first question to con- 
sider here is whether, aside from FIRREA, there even validly 
exists a federal common-law rule of decision applicable to 
respondent as the private successor to the FDIC-Receiver. 
Thereafter, this Court would consider whether FIRREA had 
any further implications concerning the existence or validity 
of any federal common-law rule that might govern this case. 

No Federal Interest Justifying Federal Common Law. 

There is nothing exceptional about claims against the estate of 
a bank in receivership or thereafter that implicates a federal 
interest sufficient to draw the federal courts into the task of 
lawmaking. Even when the FDIC-Receiver was still a party 

15 

to this case, there was no question that it was “acting only as a 
receiver of a failed institution” and was “not pursuing the in- 
terest of the Federal Government as a bank insurer.” Ather- 
ton, 519 U.S. at 225; see O’Melveny, 512 U.S. at 85. And as 
the case came to the Southern District of Florida and the 
Eleventh Circuit, even the FDIC-Receiver had left the scene, 
having completed its duties and, pursuant to 12 U.S.C. § 197, 
returned the substantial remaining estate of Southeast Bank to 
respondent as the Successor Agent elected by and acting for 
the benefit of the shareholders. While even the direct in- 
volvement of the FDIC-Receiver is insufficient to support a 
federal common-law rule, the current dispute affects only the 
shareholders of the Bank and petitioner Murphy, and does not 
even remotely implicate significant federal interests. Neither 
a need for uniformity, nor the deposit insurance fund, nor the 
proper operation of a federal program is in any way affected 
by the competing private claims in this case. And assertions 
of such effects would be inadequate in any event, as both Ath- 
erton and O’Melveny have established in contexts far more 
compelling than this case. Atherton, 519 U.S. at 219-20; 
O’Melveny, 512 U.S. at 88. 

The Eleventh Circuit made no effort to identify federal 
interests or to analyze the validity of the D’Oench doctrine as 
applied in this case. Instead it merely cited to its prior deci- 
sions in Motorcity I and Motorcity II for the overly broad 
claim that the D’Oench doctrine constituted “‘previously es- 
tablished and long-standing federal common law.’” Pet. App. 
A16 (quoting Motorcity II, 120 F.3d at 1143). But the age of 
the initial D’Oench case – the holding of which is limited to 
defenses against collection on assets held by the FDIC- 
Corporate and hence does not apply here – is beside the point 
and establishes neither the age nor the legitimacy of its over- 
reaching offspring, the D’Oench doctrine as applied by the 
courts below. And even in the Motorcity opinions, the Elev- 
enth Circuit offered nothing remotely resembling a significant 
federal interest that would be applicable to this case. Rather, 

16 

it asserted that the D’Oench case itself involved a “‘uniquely 
federal interest[],’” expanded its assertion to claim that “the 
previously-established federal common-law D’Oench doc- 
trine * * * operates in an area of special federal concern as 
recognized by Congress, the Supreme Court, and the lower 
federal courts,” and thus concluded that the “O’Melveny 
analysis does not apply.” Motorcity I, 83 F.3d at 1328, 1330. 
Despite these bold assertions, the nature of any significant 
federal interest beyond the confines of the original D’Oench 
case, much less beyond the scope of the specific statutory 
provisions, remains a mystery. Having thus blinked the issue 
of the validity apart from FIRREA of the evolved D’Oench 
doctrine, the Eleventh Circuit then dismissed the impact of 
FIRREA by applying a presumption favoring the retention of 
such common law. Id. 

After Motorcity I was vacated and remanded by this Court 
for reconsideration in light of Atherton, the Eleventh Circuit 
again misconceived the issue of whether the D’Oench doc- 
trine was a valid application of federal common law, focusing 
instead on the fact that the initial D’Oench case post-dated 
this Court’s decision in Erie. Motorcity II, 120 F.3d at 1143. 
But once again, the court’s approach to federal common law 
was too “facile.” O’Melveny, 512 U.S. at 89. Petitioner seri- 
ously doubts whether even the narrow D’Oench case raised 
interests sufficient to justify federal common law under cur- 
rent standards, much less survived as federal common law in 
light of its 1950 codification. But even if it did, that does not 
answer whether its wayward extensions, never endorsed by 
this Court, are valid. No interest identified by the Eleventh 
Circuit justifies those extensions and the displacement of state 
law beyond the scope of the 1950 statute and the original 
D’Oench case.6 

6 Petitioner believes that the D’Oench case itself was preempted by the 
1950 statute, which spoke directly and comprehensively to the issue origi- 
nally addressed by this Court. While D’Oench is certainly relevant to 

17 

Furthermore, even the basic interests underlying D’Oench 
itself do not support the rule asserted in this case. There is no 
credible suggestion that petitioner “lent himself” to the secret 
agreement between Southeast Bank and Orchid, D’Oench, 
315 U.S. at 460, or that he was in any position to have in- 
sisted that such agreement be put in writing. Petitioner was 
the victim of, not a participant in, the collusive behavior in 
this case. Conspirators generally do not reduce their conspir- 
acy to writing, and their victims can hardly demand other- 
wise. The interest in D’Oench of encouraging written agree- 
ments and deterring secret ones thus has no application here. 
If anything, disallowing the type of claim in this case has the 
exact opposite effect, encouraging such collusion by reducing 
the consequences. Whatever the merits of the alleged inter- 
ests in D’Oench itself, they are not implicated here, and con- 
sequently “the scope of judicial displacement of state rules” 
falls well short of this case. O’Melveny, 512 U.S. at 87 (em- 
phasis added). 

The extremely limited circumstances justifying the appli- 
cation of federal common law simply do not exist, and have 
never existed, under the circumstances presented by this case. 
As this Court has noted, “absent some congressional authori- 
zation to formulate substantive rules of decision, federal 
common law exists only in such narrow areas as those con- 
cerned with the rights and obligations of the United States, 
interstate and international disputes implicating the conflict- 
ing rights of States or our relations with foreign nations, and 

inform courts as to the meaning of the statutory terms adopted in 1950, see 
Langley v. FDIC, 484 U.S. 86, 92-93 (1987), there is no indication that it 
carries further force beyond the language of the statute. This Court need 
not reach the viability of the D’Oench case itself, which does not apply to 
the facts here. But if it elects to reach that logically prior issue, the 1950 
demise of the narrower D’Oench case a fortiori would invalidate the sub- 
sequent expansion of the doctrine by the lower federal courts in precisely 
the same manner as in Atherton the invalidity, after Erie, of the earlier 
Briggs case eliminated all subsequent applications of that line of federal 
common law in the lower federal courts. 

18 

admiralty cases.” Texas Indus., Inc. v. Radcliff Materials, 
Inc., 451 U.S. 630, 641 (1981).7 This case involves none of 
those limited areas and hence there is no federal common law 
to be applied. 

FIRREA Negates Any Possible Federal Common Law. 

The detailed provisions of FIRREA both confirm the absence 
of federal common law to begin with and would in any event 
negate any existing federal common law. While not address- 

7 Petitioners believe that the quoted statement from Texas Industries 
should be the outer limits of federal common law. Both O’Melveny and 
Atherton, however, use language suggesting a further, though extremely 
narrow, policy-based justification for federal common law. O’Melveny, 
512 U.S. at 88 (discussing absence of any “significant conflict with an 
identifiable federal policy or interest”); Atherton, 519 U.S. at 218 (dis- 
cussing conflict with federal policy as narrow potential basis for common 
law). Such independent judicial promotion of supposed federal policy 
goals (at the expense of state law) is troubling at a minimum, O’Melveny, 
512 U.S. at 89, and raises difficult separation-of-powers and federalism 
problems. Indeed, even where directed by Congress, the exercise by the 
judiciary of such derivative authority, other than in certain traditionally 
judicial realms such as sentencing or remedies, could raise concern under 
the nondelegation doctrine. Cf. Mistretta v. United States, 488 U.S. 361, 
390-91 (1989) (discussing the “role that the Judiciary always has played, 
and continues to play, in sentencing”); Franklin v. Gwinnett County Pub. 
Sch., 503 U.S. 60, 66 (1992) (“[f]rom the earliest years of the Republic, 
the Court has recognized the power of the Judiciary to award appropriate 
remedies to redress injuries actionable in federal court”). The doctrine of 
constitutional doubt thus should weigh against construing a federal statute 
as authorizing judicial lawmaking without an express affirmative indica- 
tion of such authorization, and should preclude the finding of such 
authorization based upon mere inference. Where the operative provisions 
of a statute do not go as far as some aspirational policy statement or leg- 
islative history might otherwise have suggested they go, that merely dem- 
onstrates the presence of competing, though perhaps unspoken, policy 
concerns that constrain the more flowery aspirations. Legislative com- 
promise and other checks often temper the full implementation of sweep- 
ing principles or policies. Federal courts have no constitutional authority 
to tinker with the legislative results merely because, among the competing 
interests at stake, some supposedly preferred interest might be better 
served by doing so. 

19 

ing D’Oench by name, the use of § 1821(d)(9) as the basis for 
its application of the “inclusio unius, exclusio alterius” prin- 
ciple more than covers that ground.8 Furthermore, FIRREA 
was quite detailed regarding to whom and how far its 
D’Oench-like protections would extend. For example, 
FIRREA extended the previous statutory protections to the 
FDIC-Receiver, the RTC, and bridge banks, and extended the 
coverage, at least for the FDIC, to certain affirmative claims. 
See 12 U.S.C. §§ 1823(e), 1441a(b)(4), 1821(n)(4)(I), 
1821(d)(9). This detailed legislative treatment of the effec- 
tiveness of unwritten agreements suggests that Congress ex- 
tended protection to such parties and such claims as it thought 
proper, and declined to go further. Allowing federal common 
law to proceed where Congress has chosen to stop “is not to 
‘supplement’ this scheme, but to alter it.” O’Melveny, 512 
U.S. at 87. 

The preemptive inferences from FIRREA are further sup- 
ported by this Court’s pre-FIRREA decision in Langley v. 
FDIC. Interpreting the word “agreement” in the 1950 version 
of § 1823(e), this Court looked to the D’Oench case, but only 
as “the leading case in this area prior to enactment of 
§ 1823(e) in 1950.” 484 U.S. at 92. D’Oench was used ex- 
clusively as support for and confirmation of the otherwise 
permissible meaning of the word “agreement,” and there was 
no suggestion that either D’Oench or its progeny could extend 
any protection beyond the statutory terms themselves. That 
the Court viewed the statute as the final word in the area, to 
the seeming exclusion of federal common law, can be seen 
toward the end of the opinion, where it stated: 

The short of the matter is that Congress opted for the 
certainty of the requirements set forth in § 1823(e). An 
agreement that meets them prevails even if the FDIC did 

8 And, as the D.C. Circuit noted in Murphy I, this “Court was specifically 
advised by both sides on brief and at oral argument that resolution of the 
issue before it could also affect the D’Oench doctrine.” Pet. App. C10. 

20 

not know of it; and an agreement that does not meet 
them fails even if the FDIC knew. It would be rewriting 
the statute to hold otherwise. 

Id. at 95 (emphasis added). This passage, anticipating virtu- 
ally identical sentiments in O’Melveny, suggests that the fed- 
eral common-law D’Oench doctrine did not separately sur- 
vive even its 1950 codification. With this case fresh in its 
memory, Congress made detailed revisions and additions to 
that codification, thus more certainly defining its choices, and 
leaving still less room for any supposed federal common law. 

Further (though perhaps unintentional) corroboration that 
FIRREA shut the door on any putative federal common law 
comes from the behavior of the FDIC-Receiver itself, which 
suggests that in the wake of FIRREA there is not even a col- 
orable federal interest in a continued common-law supple- 
ment. As the FDIC-Receiver has argued to this Court in op- 
position to petitions for certiorari, it has adopted a policy un- 
der which it claims it will not invoke the common-law 
D’Oench doctrine as to any transaction arising after 
FIRREA’s enactment. See Br. for the FDIC in Opp. at 6-7, 
Noel v. FDIC, No. 99-655 (cert. denied, -- U.S. --, 120 S. Ct. 
935 (2000)) (claiming that the FDIC will assert D’Oench only 
as to transactions preceding the August 9, 1989, enactment of 
FIRREA); Br. for the FDIC in Opp. at 10, Hess v. FDIC, No. 
97-1025 (cert. denied, 523 U.S. 1093 (1998)) (same).9 It is 
hardly credible for private parties such as respondent here to 
claim an overriding federal interest when its predecessor, the 
FDIC-Receiver, feels no such interest in or need for federal 
common law. 

Under the controlling principles of O’Melveny and Ath- 
erton, there simply does not exist any valid federal common 

9 Policy Statement Regarding Federal Common Law and Statutory Provi- 
sions Protecting FDIC, as Receiver or Corporate Liquidator, Against Un- 
recorded Agreements or Arrangements of a Depository Institution Prior to 
Receivership, 62 Fed. Reg. 5984 (1997). 

21 

law that applies in this case. The progeny of the D’Oench 
case were not, and certainly are not now, good law. 

II. THERE IS NO BASIS FOR AVOIDING THE RULE OF 

O’MELVENY AND ATHERTON. 

The Eleventh Circuit disregarded O’Melveny and Atherton 
by claiming that those cases dealt only with the creation of 
new federal common law, but did not apply to pre-existing 
federal common law. It then argued that FIRREA did not 
displace the common-law D’Oench doctrine because statutes 
that invade the common law are presumed to leave long- 
established principles intact absent an evident purpose to the 
contrary, citing United States v. Texas, 507 U.S. 529, 534 
(1993). But the general policy favoring preservation of the 
common law does not alter the application of O’Melveny or 
Atherton in this case. 

First, invalid federal common law is not presumed to be 
preserved by congressional action. Second, O’Melveny, Ath- 
erton, and their precursors apply to pre-existing as well as 
newly minted federal common law. And any favorable pre- 
sumption applicable to federal common law is far weaker for 
policy-based applications of federal common law than it is for 
core federal common law involving the rights of the United 
States, disputes between states, or admiralty. Third, the mu- 
tations of the D’Oench doctrine invoked in this case were 
neither longstanding nor well established in 1989, hence they 
do not trigger any presumption of retention. Fourth, even as- 
suming that Congress must have spoken directly to the issues 
in order to overcome any applicable presumption, it has. 
Congress in FIRREA directly addressed the effectiveness of 
parole agreements, and consequently displaced any federal 
common law, whether old or new. 

A. Invalid Federal Common Law Is Not Presumed 

Retained, Regardless of Its Age. 

In holding that FIRREA did not displace the supposed 
common law asserted in this case, the Eleventh Circuit merely 

22 

assumed the validity of the mutated D’Oench doctrine based 
on the age of the D’Oench case, and then cited to its prior de- 
cisions in Motorcity I and Motorcity II. Pet App. A16-A17. 
But as both O’Melveny and Atherton teach, the valid scope of 
any federal common law is not to be assumed. And as the 
previous section illustrated, any extension of the D’Oench 
doctrine to this case – involving an affirmative claim, unre- 
lated to any asset of the Bank, defended first by the FDIC- 
Receiver and now by a private successor agent – is not valid 
regardless of the age or validity of the more limited D’Oench 
case itself. As in Atherton, invalid federal common law, even 
if old, is not available to fill any space left open by FIRREA. 
Such space is to be filled by state law. Atherton, 519 U.S. at 
218. 

B. O’Melveny and Atherton Both Apply To Pre- 
Existing Federal Common Law. 

The analyses in O’Melveny and Atherton were not limited 
to whether federal common law should be newly created as 
opposed to retained from some prior existence. While 
O’Melveny arguably involved a request for a “new” rule, it 
nonetheless relied upon cases finding displacement of pre- 
existing federal common law. See O’Melveny, 512 U.S. at 85 
(citing Northwest Airlines, Inc. v. Transport Workers, 451 
U.S. 77 (1981); Milwaukee v. Illinois, 451 U.S. 304 (1981)). 

Thus, in Milwaukee v. Illinois, this Court stated that 
“when Congress addresses a question previously governed by 
a decision rested on federal common law the need for such an 
unusual exercise of lawmaking by federal courts disappears. 

* * * [The Court’s] commitment to the separation of powers 
is too fundamental to continue to rely on federal common law 

* * * when Congress has addressed the problem.” 451 U.S. at 
314-15 (emphasis added and internal quotations omitted); see 
also Northwest Airlines, 451 U.S. at 84 nn.10 & 11 (discuss- 
ing weight of authority in the lower federal courts supporting 
the federal common-law right of a contribution ultimately re- 

23 

jected by the Court). There is simply no basis for asserting 
that Texas somehow represents a departure from this long line 
of cases and thereby renders O’Melveny inapplicable. 

In Atherton, the federal common-law rule being pressed 
by the FDIC-Receiver was over 100 years old, and even 
though it was created by this Court before Erie, the lower 
courts had continued to apply it throughout the remainder of 
the century. 519 U.S. at 220 (citing subsequent cases apply- 
ing Briggs); FDIC v. Mason, 115 F.2d 548, 551-52 (CA3 
1940); see also R. Stevens & B. Nielson, The Standard of 
Care for Directors and Officers of Federally Chartered De- 
pository Institutions: It’s Gross Negligence Regardless of 
Whether Section 1821(k) Preempts Federal Common Law, 13 
Ann. Rev. Banking L. 169, 173-74 (1994) (“Before the adop- 
tion of FIRREA, a consensus existed among federal courts 
that * * * federal law alone governed * * * the issue of offi- 
cers’ and directors’ liability” for federally chartered S&Ls). 
Again, there was no suggestion that such post-Erie applica- 
tion of federal common law in the lower courts somehow 
raised the bar for displacement or otherwise voided the 
O’Melveny analysis. 

10 

Furthermore, it is highly doubtful that Texas established a 
standard in any way different from its predecessors, many of 
which were cited in both O’Melveny and Atherton. Thus, the 
“speaks[s] directly” test set forth in Texas, 507 U.S. at 534, is 
the virtually identical verbal formulation set out in numerous 

10 It is no answer to Atherton to say that the original Briggs decision at 
issue was itself invalid after Erie whereas the D’Oench decision came 
after Erie and remains good law. The original D’Oench decision does not 
apply to this case, and probably did not independently survive its codifi- 
cation in 1950, when that case was still a pup. See supra at 4, 16-17 n.6. 
As for any subsequent evolution of the D’Oench doctrine in the lower 
courts since 1950, this Court has never endorsed such developments, they 
are no different than the post-Erie applications of the Briggs rule at issue 
in Atherton, and they are not entitled to any presumption of validity or 
preservation without much more. 

24 

prior cases. See Milwaukee v. Illinois, 451 U.S. at 315 (“the 
question [in Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 
625 (1978)] was whether the legislative scheme ‘spoke di- 
rectly to a question’ – in that case the question of damages – 
not whether Congress had affirmatively proscribed the use of 
federal common law”); Northwest Airlines, 451 U.S. at 95 

n.34 (“once Congress addresses a subject, even a subject pre- 
viously governed by federal common law * * * the task of the 
federal courts is to interpret and apply statutory law, not to 
create common law”); Mobil Oil, 436 U.S. at 625 (courts may 
not supplement a statute when an Act “does speak directly to 
a question”). This Court in O’Melveny cited those cases us- 
ing the same language, and hence it is simply wrong to sug- 
gest that a different standard should now apply merely be- 
cause it did not also cite the Texas case. Compare 
O’Melveny, 512 U.S. at 85 (citing Northwest Airlines and 
Milwaukee) with Texas, 507 U.S. at 534 (citing Mobil Oil and 
Milwaukee for the “speak directly” formula). 

11 

Finally, any presumption as applied to federal common 
law is of limited utility in cases such as this one, where there 
is considerable existing state law to consider as well, and 
hence presumptions regarding displacement or preservation 
will tend to cut both ways. As this Court has noted, “Con- 
gress acts * * * against the background of the total corpus ju- 
ris of the states.” Wallis, 384 U.S. at 68 (citation and quota- 
tion marks omitted). Outside of the core areas of federal 

11 Insofar as there may be a perceived difference in the rigor of the analy- 
sis in Texas as opposed to some other cases, such a difference can be ex- 
plained by the fact that the common-law rule at stake in Texas went to the 
very heart of federal common law, involving the rights of the United 
States itself as against the several States. Furthermore, the preemptive 
inference would have led to extremely unusual results in Texas that were 
not to be lightly reached. Neither circumstance is present here, and hence 
there is no basis for applying any supposedly greater vigor in an effort to 
preserve a federal common-law rule regarding private rights where Con- 
gress has legislated on the issue at length. 

25 

common law where one would be hard pressed to find prop- 
erly applicable state law, policy-based federal common law 
typically acts precisely to displace otherwise applicable state 
law. To read a statute as preserving federal common law thus 
necessarily reads it as allowing the displacement of state 
law. 

12 Such a reading should be disfavored because the pre- 
sumption in favor of preserving state law from federal dis- 
placement is considerably stronger than any presumption ap- 
plicable to federal common law. 

[T]he appropriate analysis in determining if federal 
statutory law governs a question previously the subject 
of federal common law is not the same as that employed 
in deciding if federal law pre-empts state law. In con- 
sidering the latter question “‘we start with the assump- 
tion that the historic police powers of the States were not 
to be superseded by the Federal Act unless that was the 
clear and manifest purpose of Congress.’” * * * [I]n 
cases such as the present “we start with the assumption” 
that it is for Congress, not federal courts, to articulate 
the appropriate standards to be applied as a matter of 
federal law. 

Milwaukee, 451 U.S. at 316-17 (citation omitted); see also 
Texas, 507 U.S. at 534 (“a different standard applies when 
analyzing the effect of federal legislation on state law” than in 
the case of federal common law). Indeed, “the very concerns 
about displacing state law which counsel against finding 
pre-emption of state law in the absence of clear intent actually 
suggest a willingness to find congressional displacement of 
federal common law.” Milwaukee, 451 U.S. at 317 n.9. 

12 In this case, for example, applying a federal common-law rule would 
displace state law rules regarding what establishes a de facto joint venture 
(or conspiracy), vicarious liability between such venturers, and the use of 
parole evidence to demonstrate concerted action and liability to third par- 
ties injured thereby. Bryce v. Bull, 143 So. 409, 411-12 (Fla. 1932); 
Florida Tomato Packers, Inc. v. Wilson, 296 So. 2d 536, 539-40 (Fla. 
Dist. Ct. App. 1974), cert. denied, 327 So.2d 32 (Fla. 1976). 

26 

Whatever the presumption concerning federal common law in 
areas where state law has nothing to say, that presumption is 
either weakened or non-existent where federal common law 
would displace state law. This is just such a case. 

C. The Common-Law Rules Asserted in This Case 
Are Neither Longstanding Nor Well Established. 

Even assuming, arguendo, that the difference between 
Texas and O’Melveny turns on the age and familiarity of the 
common-law rule in question, the rule being asserted in this 
case was neither aged nor familiar in 1989 when FIRREA 
was enacted. While the original D’Oench decision – applica- 
ble to the FDIC-Corporate and limited in a variety of ways – 
is indeed long in the tooth, the many new extensions of the 
D’Oench doctrine applied in this case lack the common-law 
credentials of the original decision. 

13 

For example, the first time a court of appeals seems to 
have squarely confronted and ruled upon whether the 
D’Oench doctrine should be extended to the FDIC-Receiver 
was not until 1978; over thirty-five years after the original 
D’Oench case. See FDIC v. First Nat’l Fin. Co., 587 F.2d 
1009, 1012 (CA9 1978) (rejecting the argument that the 
D’Oench doctrine does not apply to the FDIC-Receiver). 
Compare FDIC v. Meo, 505 F.2d 790, 793 (CA9 1974) (sug- 
gesting that D’Oench does not apply to the FDIC-Receiver). 
And the issue remained quite unsettled prior to and even after 
FIRREA, with various courts finding that the FDIC-Receiver 
remained subject to state law. See FDIC v. British-Am. 
Corp., 744 F. Supp. 116, 119 (E.D.N.C. 1990) (noting that 
prior to 1989 amendment, protection of D’Oench doctrine 
“not available when the FDIC appears as receiver for the 
failed bank”); In re Jeter, 48 B.R. 404, 410 (Bankr. N.D. Tex. 
1985) (“FDIC, as receiver of a national bank, is simply a suc- 

13 And even the D’Oench case itself could claim no great age in 1950 
when § 1823(e) was first enacted, and hence any presumption against dis- 
placement of that narrower common-law rule would not have applied. 

27 

cessor in interest of the bank and takes title to the bank’s 
claims against its debtors subject to all defenses which are 
good against the bank.”); see also In re Anjopa Paper & Bd. 
Mfg. Co., 269 F. Supp. 241, 253 (S.D.N.Y. 1967) (“Gener- 
ally, the receiver of a national bank takes title to the bank's 
claims against its debtors subject to all the existing rights and 
equities.”); Trigo v. FDIC, 847 F.2d 1499, 1503 n.4 (CA11 
1988) (“While federal law controls the rights and liabilities of 
the FDIC-Corp., state law controls the FDIC when the agency 
is acting as receiver of a failed bank.”). Though later cases 
also went the other way, see FSLIC v. Two Rivers Assocs., 
Inc., 880 F.2d 1267, 1277 & n.15 (CA11 1989) (holding, 
shortly after FIRREA, that D’Oench doctrine protects the 
FDIC-Receiver, and rejecting Trigo as dicta), there was no 
uniform view and this Court had never resolved the issue. 

In similar fashion, the further extension of the D’Oench 
doctrine to private successors of the FDIC does not seem to 
have been decided in the courts of appeal until December 
1989 – after the enactment of FIRREA in August of that year. 
See FDIC v. Newhart, 892 F.2d 47, 49 (CA8 1989) (applying 
D’Oench to purchaser of notes from FDIC-Corporate, though 
seemingly based upon state law grounds). And the Eighth 
Circuit in that case described the unpublished district court 
cases that had previously reached the same result as “essen- 
tially assertions without detailed reasoning, so as to have no 
persuasive force.” Id. at 50 n.3. Such a ringing non- 
endorsement of the pre-FIRREA state of the federal common- 
law rule being invoked in this case shows that such law was 
neither longstanding nor well established. 

The extension of the D’Oench doctrine to affirmative 
claims, as opposed to defenses against asset collection, also 
was a more recent development. See Beighley v. FDIC, 676 
F. Supp. 130, 132 (N.D. Tex. 1987) (in a § 1823(e) case, 
holding that to “allow a claim against the FDIC asserting the 
very grounds that could not be used as a defense to a claim by 
the FDIC is to let technicality stand in the way of principle.”), 

28 

on reh’g, 679 F. Supp. 625 (N.D. Tex. 1988), aff’d, 868 F.2d 
776 (CA5 1989). And even so, the extension seems primarily 
to have been a means to prevent circumvention of the rule as 
applied to asset collection: Allowing a defendant in a collec- 
tion suit merely to rename a contractual defense as a counter- 
claim for breach of contract would indeed have been trou- 
bling. But that “asset”-based approach does not establish the 
acceptance or longevity of a common-law rule barring no- 
asset affirmative claims such as those raised by petitioner. 

14 

The uncertain legal terrain in 1989 rebuts any notion that 
the common-law rules invoked here could escape displace- 
ment by FIRREA. “Before we can apply this reluctance to 
infer legislative abrogations of the common law, however, we 
must determine what that terrain was – or at least how it 
might have been perceived – when Congress acted; Congress 
cannot think it necessary, and we should not expect it, to state 
clearly an intent to abrogate a common-law rule that does not 
exist.” Texas, 507 U.S. at 541 (Stevens, J., dissenting). 

But even apart from any uncertainty, the most salient 
feature of the evolved common-law rules applied in this case 
is the absence of any support from this Court for those multi- 
farious extensions of the original D’Oench case. Petitioner 
submits that the proper measure of whether a federal com- 
mon-law principle is sufficiently well established to receive 
any favorable presumption should turn not on the occasional 
rulings of the lower federal courts, but rather upon the con- 
sistent rulings of this Court. Cf. Astoria Fed. Sav. & Loan 
Ass’n. v. Solimino, 501 U.S. 104, 108 (1991) (supporting the 
notion that preclusion rules are “well established” by citing 
Supreme Court cases spanning a period of almost forty 
years); Texas, 507 U.S. at 533 (citing three Supreme Court 

14 There is a tremendous difference between blocking the collection of an 
asset of the receivership, thus reducing the estate, and pursuing a success- 
ful no-asset claim, which simply puts the claimant in line with the other 
creditors awaiting a share of whatever assets will remain after higher pri- 
ority recipients are paid. 

29 

cases dating back as many as fifty years as the basis for the 
longstanding common-law rule that was preserved). In the 
present case, there is not a single ruling of this Court that 
would support the extension of D’Oench to the facts of peti- 
tioner’s claim. Absent such a ruling, the common law in- 
voked by respondent cannot be viewed as well established 
and cannot qualify for an inference that would overcome the 
authority of O’Melveny and Atherton. 

D. Any Requirement That a Statute Speak Directly 

To the Issue In Order To Preempt the Evolved 
D’Oench Doctrine Is Amply Satisfied. 

As a final matter, even under the “speaks directly” test in- 
voked by respondent and the Eleventh Circuit, both the 1950 
Act and FIRREA satisfy that test. The issue to which a stat- 
ute must directly speak is the general one regarding the effec- 
tiveness of oral agreements, not the presence or absence of 
federal common-law authority. Milwaukee, 451 U.S. at 315. 

Here, there is no serious question that the 1950 Act spoke 
directly to the subject covered by the D’Oench case, and ef- 
fectively codified the rule of that case. See Langley, 484 U.S. 
at 92. FIRREA likewise spoke quite specifically to the issue 
of which parties were entitled to the bar against reliance on 
unrecorded agreements and what claims or defenses would be 
subject to that bar. See supra at 19. 

15 

Furthermore, there is no doubt that Congress may “speak 
directly” to an issue via the inclusio unius, exclusio alterius 

15 The Eleventh Circuit’s search for something more to demonstrate a spe- 
cific congressional intent to abrogate federal common law, see Motorcity 
II, 120 F.3d at 1144 n.6, simply ignores this Court’s opinion in Milwau- 
kee, which rejected any such requirement and noted that federal law was 
preempted where Congress addressed the general issue. 451 U.S. at 315 
(discussing Mobil Oil). Requiring further specificity in the “issue” re- 
quired to be addressed by Congress in order to displace federal common 
law would do violence to the separation-of-powers principles that restrain 
the creation of federal common law to begin with. 

30 

principle, as evidenced by this Court’s decision in Is- 
brandtsen Co. v. Johnson, 343 U.S. 779, 783 (1952), a case 
squarely relied upon in the later Texas case. Texas, 507 U.S. 
at 534. In Isbrandtsen, this Court held that despite “several 
early lower court decisions which allowed a set-off against a 
seaman’s suit for wages,” subsequent “legislation passed by 
Congress for the protection of seamen, beginning in 1872, has 
now covered this field.” 343 U.S. at 781. It reached this con- 
clusion because, while not mentioning set-offs in the statute, 

Congress has gone so far in expressly listing such de- 
ductions and set-offs that it is a fair inference that those 
not listed may not be made. It thus remains for the 
courts to determine only what are the deductions or 
set-offs for derelictions of duty that are listed by Con- 
gress, rather than to determine which of the deductions 
or set-offs once known to the general maritime law 
Congress has failed to exclude. Congress, in effect, has 
excluded all of them except those which it has listed af- 
firmatively. 

Id. at 789; see also Astoria Fed., 501 U.S. at 110 (statute “car- 
ries an implication that the federal courts should recognize no 
preclusion,” previously recognized in federal common law). 
Of course, O’Melveny engaged in precisely such inclusio 
unius, exclusio alterius analysis, and cited the statutory codi- 
fication of the D’Oench doctrine as an example of why a 
largely separate defense was excluded. O’Melveny, 512 U.S. 
at 86-87. Where the alleged common-law defense at issue is 
substantially the same as the statutory defense, the inference 
of exclusion is orders of magnitude stronger and more than 
sufficient to satisfy the “speaks directly” test. The O’Melveny 
analysis is thus fully consistent with Texas and its predeces- 
sors and dispositive of the present case. 

31 

CONCLUSION 

For the foregoing reasons, this Court should reverse the 
judgment of the Eleventh Circuit and remand for further pro- 
ceedings. 

JOHN F. BLOSS 
CLARK BLOSS & 

MCIVER, PLLC 
Post Office Box 1349 
Greensboro, NC 27402 
(336) 275-7275 

Respectfully submitted, 

ERIK S. JAFFE 

Counsel of record 

ERIK S. JAFFE, P.C. 
5101 34 

th Street, N.W. 
Washington, DC 20008 
(202) 237-8165 

THOMAS C. GOLDSTEIN 
AMY HOWE 
THOMAS C. GOLDSTEIN, P.C. 
4607 Asbury Place, N.W. 
Washington, DC 20016 
(202) 237-7543 

Counsel for Petitioner 

Dated: November 13, 2000. 

APPENDICES 

APPENDIX A