Opinion
20-cv-301 (GRB) (AYS)
2022-09-09
SPA 79 D L.P., Plaintiff, v. NATIONAL CREDIT UNION ADMINISTRATION, National Credit Union Administration Board, as Conservator for Municipal Credit Union, Municipal Credit Union, and Michael G. Ryan, in his capacity as Agent for the National Credit Union Administration Board, Defendants.
GLEICH FARKAS & EMOUNA, LLP, Attorneys for Plaintiff, 36 South Station Plaza, Great Neck, NY 11021, By: Lara P. Emouna, Esq., Stephan B. Gleich, Esq. BREON PEACE UNITED STATES ATTORNEY FOR THE EASTERN DISTRICT OF NEW YORK, 610 Federal Plaza, Central Islip, NY 11722, By: Robert W. Schumacher, Esq.
GLEICH FARKAS & EMOUNA, LLP, Attorneys for Plaintiff, 36 South Station Plaza, Great Neck, NY 11021, By: Lara P. Emouna, Esq., Stephan B. Gleich, Esq. BREON PEACE UNITED STATES ATTORNEY FOR THE EASTERN DISTRICT OF NEW YORK, 610 Federal Plaza, Central Islip, NY 11722, By: Robert W. Schumacher, Esq. MEMORANDUM AND ORDER GARY R. BROWN, District Judge:
INTRODUCTION
Presently before the Court is plaintiff SPA 79 D L.P.'s motion for partial summary judgment and defendants' cross-motion for summary judgment, both brought pursuant to Federal Rule of Civil Procedure 56. For the reasons stated below, plaintiff's motion is denied and defendants' motion is granted in its entirety.
BACKGROUND
The following facts, taken from the parties' Local Rule 56.1 statements, are undisputed unless otherwise noted. See DEs 52, 56, 61.
Defendant National Credit Union Administration ("NCUA") is an independent federal agency that charters and regulates federal credit unions. DE 56, ¶ 2. Defendant National Credit Union Administration Board ("NCUAB") is the entity that runs the NCUA. DE 61, ¶ 3. The Federal Credit Union Act, 12 U.S.C. § 1751 et seq., empowers NCUAB to step in as a conservator of federally-insured credit unions in danger of failing. As conservator, the NCUAB has the power to, among other abilities, repudiate any of the failed credit union's contracts that it "determines to be burdensome" or whose repudiation "will promote the orderly administration of the credit union's affairs." DE 61, ¶ 5; 12 U.S.C. § 1787(c)(1)(B)-(C).
Defendant Municipal Credit Union ("MCU") is the federally-insured, state-chartered credit union for which the New York Department of Financial Services appointed NCUAB as conservator in May 2019. DE 56, ¶¶ 1, 12. Soon after appointment, NCUAB formed an "MCU consultant management team," tasked to assess operations and make recommendations and decisions that would reduce costs and redesign MCU's organizational structure. DE 61, ¶ 12.
When NCUAB was appointed, MCU was a lessee of a property owned by Plaintiff SPA 79 D L.P ("SPA"). DE 56, ¶ 5. The lease contained a termination provision which automatically activated upon the exercise of eminent domain authority upon the whole or any part of the leasehold. DE 56, ¶ 18. The New York Department of Transportation obtained a small permanent easement comprising 184 square feet on the property, DE 61, ¶ 28, technically activating the termination provision, but the parties decided to maintain the status quo. To formalize that arrangement, MCU sent the following letter to SPA on July 3, 2019:
[T]he lease between [SPA] and MCU states, "If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain . . . then and in that event, the term of this lease shall cease and terminate . . ." MCU does not wish to terminate the lease[ ] and believes that [SPA] also wishes to continue our tenancy. In order to formalize this understanding, please sign below to indicate your agreement with the following:SPA signed the letter on July 8, 2019. DE 56, ¶¶ 22-23; DE 53-3.
The lease between [MCU] and [SPA] . . . will continue in effect under its present terms . . . . [T]he Lease is not terminated despite the New York Department of Transportation taking a permanent easement . . . .
In the meantime, MCU remained under NCUAB's conservatorship. In August 2019, defendants engaged a firm called Bancography to evaluate whether MCU's "branches were optimally positioned and profitably performing." DE 56, ¶ 14. Bancography published its report on September 26, 2019. DE 61, ¶¶ 14-15. With those findings in hand, defendants "formulated a November 19, 2019 branch closure plan," which proposed ceasing operations at the location leased from SPA, among other properties. DE 61, ¶ 16. The New York Department of Financial Services approved the plan on December 2, 2019, which MCU officially confirmed on December 9, 2019. DE 61, ¶¶ 17-18. At the next monthly conservator meeting, held December 17, 2019, NCUAB granted MCU permission to close the subject branches and requested copies of the leases for the relevant properties. DE 61, ¶¶ 19-20. On December 27, 2019, NCUAB—in its conservator capacity and through its agent defendant Michael G. Ryan—repudiated the leases, including the lease with SPA, having "determined that continuation of [the leases], if valid, would be burdensome and would hinder the orderly administration of the affairs of MCU." DE 56, ¶ 26.
SPA rejected the repudiation on January 9, 2020 and brought this case on January 17, 2020. DE 61, ¶ 22. MCU vacated the premises on February 5, 2020. DE 61, ¶ 23.
SPA brings nine causes of action—eight seeking declaratory judgment and one seeking attorney's fees—against all defendants. As relevant to here, SPA seeks declarations that: (1) defendants failed to comply with the lease's notice provisions; (2) defendants had no authority to repudiate the lease after affirming it on July 3, 2019, abused their discretion in doing so and/or did not do so in a reasonable period of time; (3) defendants are equitably estopped from repudiating the lease; (4) defendants' repudiation was not made within a reasonable period of time of NCUAB's appointment as conservator; (5) defendants abused their discretion in determining that the Lease would be burdensome "after [allegedly] concluding on or about July 3, 2019, that the Lease was desirable"; (6) defendants did not determine the Lease would be burdensome within a reasonable period of time after NCUAB was appointed conservator; and (7) defendants did not determine the Lease would hinder the orderly administration of MCU's affairs within a reasonable period of time after NCUAB was appointed conservator.
Neither party moved for summary judgment on the ninth cause of action seeking a declaration that 12 U.S.C. § 1787(c)(4) reflects an unconstitutional deprivation of due process and taking without just compensation to the extent it limits "damages . . . for the disaffirmance or repudiation" of leases. The ninth cause of action is referenced only in defendants' reply, DE 63 at 15, an argument which plaintiff urges this Court to ignore in a motion to strike. See DE 64. However, the reason that both sides treat the ninth cause of action as an afterthought is because there is no substance to that claim. See Resolution Trust Corp. v. Ford Motor Credit Corp, 30 F.3d 1384, 1388-89 (11th Cir. 1994) (although FIRREA has economic effects, "the impact is not of the type that normally rises to the level of unconstitutionality"); Plymouth Mills Inc. v. FDIC, 876 F. Supp. 439, 445 (E.D.N.Y. 1995) (granting defendant summary judgment on purported Fifth Amendment "takings claim"); LB Credit Corp. v. RTC, 796 F. Supp. 358, 362 (N.D. Ill. 1992) (FIRREA repudiation of lease not violative of takings clause). In any event, plaintiff is not entitled to independent declaratory relief because plaintiff's underlying substantive claims are dismissed. See Limtung v. Thomas, No. 19-CV-3646(RPK)(MMH), 2021 WL 4443710, at *9 (E.D.N.Y. Sept. 28, 2021) ("A plaintiff cannot maintain a claim for declaratory judgment where the underlying substantive claim has been dismissed since the Declaratory Judgment Act only created a procedural mechanism and not an independent cause of action.") (citation omitted). As such, the Court hereby, sua sponte, dismisses the ninth cause of action as without basis in law.
SPA seeks summary judgment in its favor on the above claims and its claim for attorney's fees. In response, defendants cross-moved for summary judgment in their favor on these same claims, seeking dismissal.
LEGAL STANDARD
Summary judgment, pursuant to Rule 56, is appropriate only where the movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The relevant governing law in each case determines which facts are material; "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When making this determination, a court must view all facts "in the light most favorable" to the non-movant, Tolan v. Cotton, 572 U.S. 650, 656-57, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014), and "resolve all ambiguities and draw all permissible factual inferences in favor of the [non-movant]," Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012) (quoting Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir. 2003)). Thus, "[s]ummary judgment is appropriate [only] where the record taken as a whole could not lead a rational trier of fact to find for the [non-movant]." Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)) (internal quotation marks omitted).
To defeat a summary judgment motion properly supported by affidavits, depositions, or other documentation, the non-movant must offer similar materials setting forth specific facts demonstrating that there is a genuine dispute of material fact to be tried. Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). The non-movant must present more than a "scintilla of evidence," Fabrikant v. French, 691 F.3d 193, 205 (2d Cir. 2012) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505), or "some metaphysical doubt as to the material facts," Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (quoting Matsushita, 475 U.S. at 586-87, 106 S.Ct. 1348), and "may not rely on conclusory allegations or unsubstantiated speculation," id. (quoting FDIC v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir. 2010)).
The district court considering a summary judgment motion must also be "mindful . . . of the underlying standards and burdens of proof," Pickett v. RTS Helicopter, 128 F.3d 925, 928 (5th Cir. 1997) (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505), because the "evidentiary burdens that the respective parties will bear at trial guide district courts in their determination[s] of summary judgment motions," Brady v. Town of Colchester, 863 F.2d 205, 211 (2d Cir. 1988). "[W]here the [non-movant] will bear the burden of proof on an issue at trial, the moving party may satisfy its burden by pointing to an absence of evidence to support an essential element of the [non-movant's] case." Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 486 (2d Cir. 2014) (quoting Brady, 863 F.2d at 210-11) (internal quotation marks omitted). Where a movant without the underlying burden of proof offers evidence that the non-movant has failed to establish his claim, the burden shifts to the non-movant to offer "persuasive evidence that his claim is not 'implausible.' " Brady, 863 F.2d at 211 (citing Matsushita, 475 U.S. at 587, 106 S.Ct. 1348). "[A] complete failure of proof concerning an essential element of the [non-movant's] case necessarily renders all other facts immaterial." Crawford, 758 F.3d at 486 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
DISCUSSION
I. Section 1787
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183 (1989), enumerates "NCUA's powers and responsibilities as conservator or liquidating agent for a failed credit union." Nat'l Credit Union Admin. Bd. v. Goldman, Sachs & Co. ("Goldman Sachs"), 775 F.3d 145, 148 (2d Cir. 2014) (citing FIRREA § 1217, 103 Stat. at 530), aff'g 2014 WL 297518 (S.D.N.Y. Jan. 28, 2014). Relevant here is NCUA's power to repudiate a failed credit union's contracts. 12 U.S.C. § 1787(c). Section 1787(c) reads:
(c) Provisions relating to contracts entered into before appointment of conservator or liquidating agent
(1) Authority to repudiate contracts
In addition to any other rights a conservator or liquidating agent may have, the conservator or liquidating agent for any insured credit union may disaffirm or repudiate any contract or lease—
(A) to which such credit union is a party;
(B) the performance of which the conservator or liquidating agent, in the conservator's or liquidating agent's discretion, determines to be burdensome; and
(C) the disaffirmance or repudiation of which the conservator or liquidating agent determines, in the conservator's or liquidating agent's discretion, will promote the orderly administration of the credit union's affairs.
(2) Timing of repudiation
Id. § 1787(c)(1)-(2). "Under these provisions, NCUA, as liquidating agent, is empowered to repudiate 'any' contract of the failed entity upon NCUA's determination, in its discretion, that the contract is burdensome or that repudiation will promote the orderly administration of the credit union's affairs." Goldman Sachs, 775 F.3d at 148.The conservator or liquidating agent appointed for any insured credit union shall determine whether or not to exercise the rights of repudiation under this subsection within a reasonable period following such appointment.
Section 1787(g), known as the "anti-injunction provision," limits a court's ability to interfere with a conservator's exercise of its statutory power:
Except as provided in this section, no court may take any action, except at the request of [NCUAB] by regulation or order, to restrain or affect the exercise of powers or functions of [NCUAB] as a conservator or a liquidating agent.12 U.S.C. § 1787(g).
Subsections 1787(c)(1)-(2), (g)'s statutory text is "materially identical" to that in 12 U.S.C. § 1821(e)(1)-(2), (j) and 12 U.S.C. § 4617(d)(1)-(2), (f). See Goldman Sachs, 2014 WL 297518, at *5. The Court may therefore rely on precedent interpreting the corresponding § 1821 and § 4617 subsections in addressing § 1787 here. E.g., Goldman Sachs, 775 F.3d at 148 (interpreting § 1787(c) the same as 12 U.S.C. § 1821(e) because they are "materially identical"); Kirkindoll v. Nat'l Credit Union Admin. Bd., 2014 WL 7178005, at *6 (N.D. Tex. Dec. 17, 2014); see United States v. Robinson, 702 F.3d 22, 33-34 (2d Cir. 2012) ("Having used identical language, Congress obviously intended the same principle to apply . . ." in two statutes); see generally Maloney v. Soc. Sec. Admin., 517 F.3d 70, 75 (2d Cir. 2008) ("Where two provisions in different statutes share similar text and legislative histories, it is reasonable to interpret one in a manner consistent with the other.").
II. Statutory Authority to Repudiate
SPA contends that the July 3, 2019 letter to reaffirm the lease strips defendants of their repudiation power. According to SPA, there is "no statutory authority" permitting a conservator "to change its mind" and subsequently disaffirm or repudiate a lease after the conservator has made "a decision that [a lease] should be affirmed and should not be repudiated." DE 51 at 11. But there is clearly a factual distinction between declining to repudiate a lease and what happened here: a determination to waive an automatic contractual termination provision that had been triggered by third-party events. Thus, consistent with this Court's obligation to draw all inferences in favor of the non-movant, SPA's argument fails. Even if viewed as a forbearance of the exercise of defendants' repudiation powers, nothing in the statute prevents a conservator from "chang[ing] its mind" or "making a second determination" about repudiation, so long as the repudiation occurs within a reasonable time. "[T]he statute does not impose any restrictions on the authority to disaffirm, other than that of a reasonable time limitation." Monument Square Assocs., Inc. v. RTC., 792 F. Supp. 874, 878 (D. Mass. 1991) (interpreting § 1821(e)(2)). In reaching this determination, the Court is mindful of § 1787(g), encompassing the "direct manifestation of Congress's intent to prevent courts from interfering with [NCUAB] in the exercise of its statutory powers." See Volges v. RTC, 32 F.3d 50, 52 (2d Cir. 1994) (interpreting § 1821(j)). SPA cites no cases suggesting otherwise.
The Court notes that the § 1787(g) anti-injunction provision deprives the Court of the power to grant SPA any declaratory judgment that would effectively 'restrain' NCUAB from exercising its repudiation authority, see Courtney v. Halleran, 485 F.3d 942, 948 (7th Cir. 2007) (quoting Freeman v. FDIC, 56 F.3d 1394, 1399 (D.C. Cir. 1995)), notwithstanding SPA's attempt to characterize the remedies sought as something other than injunctive relief. DE 60 at 10-11 n.12.
To the extent plaintiff relies on "principles of contract law," § 1787 overrides those principles. The Second Circuit has called § 1821(e)'s identical text "an express grant of federal power exercisable in derogation of all contrary state law" which "supersedes—or preempts—volumes of state law." RTC v. Diamond, 45 F.3d 665, 670-71 (2d Cir. 1995); see also Winkal Mgmt., LLC v. FDIC, 288 F. Supp. 3d 33, 39 (D.D.C. 2017) ("Under FIRREA, courts determine a party's available damages not by applying 'ordinary contract principles,' but instead by looking to FIRREA's detailed regime governing the FDIC's repudiation liability."). Indeed, "[t]he fact that the [exercise of such statutory powers] might violate [a plaintiff's] state law contract rights does not alter the calculus." Volges, 32 F.3d at 52. SPA's invocation of contract law proves unavailing.
Much the same can be said as to plaintiff's reliance on principles of equitable estoppel: equitable remedies are not available to contest a conservator's exercise of its repudiation powers under § 1787. Such relief is precluded by the anti-injunction provision of § 1787(g). The Second Circuit has noted that the identical text in § 1821(j) "precludes equitable remedies," depriving courts of "equitable jurisdiction over the [conservator or receiver] in the exercise of its statutory functions." Volges, 32 F.3d at 53. At least six other Circuits have interpreted § 1821(j)'s anti-injunction provision in the same way. Courtney v. Halleran, 485 F.3d 942, 948 (7th Cir. 2007); Hindes v. FDIC, 137 F.3d 148, 160 n.9 (3d Cir. 1998); Sharpe v. FDIC, 126 F.3d 1147, 1154 (9th Cir. 1997); Tri-State Hotels, Inc. v. FDIC, 79 F.3d 707, 715 (8th Cir. 1996); Freeman v. Federal Deposit Insurance Corp., 56 F.3d 1394, 1399 (D.C. Cir. 1995); In re Landmark Land Co. of Oklahoma, Inc., 973 F.2d 283, 290 (4th Cir. 1992) ("[T]he anti-injunction provision [of § 1821(j)] specifically precludes equitable interference . . . .").
For these reasons, defendants' cross-motion is granted. Thus, SPA's second and third causes of action are dismissed.
The basis for the Court's grant of summary judgment to defendants on this cause of action moots the issue raised in SPA's letter motion to strike regarding the authority of MCU's attorney and executive vice-president to act on behalf of the conservator. See DE 64. Hence, the letter motion to strike is denied as moot.
Similarly, SPA's suggestion that the July 3, 2019 letter contains an implied, "binding admission concerning the desirability, benefit and value of the Lease," DE 51 at 20, effectively barring defendants from making a subsequent burdensomeness determination suffers from the same defects mentioned above. SPA further asks the Court to find NCUAB's burdensomeness determination "irrational, arbitrary and capricious, and an abuse of discretion." DE 51 at 10. It remains unclear whether this Court is empowered to conduct such a review. Goldman Sachs, 775 F.3d at 151-52 ("Section 1787(c) is ambiguous as to whether the liquidating agent's determination of burdensomeness is subject to judicial review."); Jenkins-Petre P'ship One v. RTC, 1991 WL 160317, at *5 (D. Colo. Aug. 13, 1991) ("[Section 1821(e)] does not provide that the RTC explain its actions or that a court may review the basis for that decision."). At most, some courts have engaged in a "narrowly circumscribed" review. See e.g., McCarron v. FDIC, 111 F.3d 1089, 1093 (3d Cir. 1997); Emps.' Ret. Sys. of Alabama v. RTC, 840 F. Supp. 972, 983 (S.D.N.Y. 1993) (finding no abuse of discretion in deciding that a contract was "burdensome and that the contract's repudiation would promote the orderly administration of [a bank's] affairs"). With respect to such "narrowly circumscribed" review,
[t]he relevant issue is not whether [NCUAB] considered everything possible in making these determinations or even whether [NCUAB] reached the 'right' decision; the question is whether he made the determinations required. Even if the determinations were based on incorrect perceptions of fact or incorrect assumptions about the governing law, [NCUAB] has broad discretion to make the determinations and to effectuate repudiation.See Emps.' Ret. Sys. of Alabama, 840 F. Supp. at 983 (discussing § 1821(e)).
Plainly, NCUAB did not abuse its discretion here. The burdensomeness determination followed its review of Bancography's findings, whose engagement concerned the performance of MCU's branch network. Bancography spent six weeks reviewing "demographic, competitive analysis, economic and financial data" and prepared a sixty-nine page report. DE 61, ¶¶ 14-15; DE 57-8. The report noted that the Lease property "face[d] similar challenges" to MCU branches "rank[ing] at or near the bottom . . . in new-account and transaction volumes." DE 57-8 at 57. It also sat "well removed from other MCU branches, leaving [it] with a lack of network-effect synergy." DE 57-8 at 57. The Court is mindful that "there is no requirement that the conservator . . . make a formal finding that a lease or contract is burdensome" because the matter is left to its discretion. See 1185 Ave. of Americas Assocs. v. RTC, 22 F.3d 494, 498 (2d Cir. 1994) (interpreting § 1821(e)); Hennessy v. FDIC, 58 F.3d 908, 919 (3d Cir. 1995) ("Section 1821(e) does not set forth a specific procedure for a receiver to follow in repudiating a contract."). Yet here, defendants engaged in a reasoned process that would withstand a far more searching review. Plainly, there was no abuse of discretion. See Goldman Sachs, 775 F.3d at 152.
The doctrine of waiver offers SPA no recourse. "Waiver 'is an equitable doctrine,' " U.S. D.I.D. Corp. v. Windstream Commc'ns, Inc., 775 F.3d 128, 136-37 (2d Cir. 2014) (quoting 31 C.J.S. Estoppel and Waiver § 86), which has no application here by virtue of § 1787(g)'s "sweeping ouster of courts' power to grant equitable remedies," Courtney v. Halleran, 485 F.3d 942, 948 (7th Cir. 2007) (quoting Freeman, 56 F.3d at 1399) (interpreting § 1821(j)); see also FDIC v. Jacobs, 2014 WL 7176756, at *3 (D. Nev. Dec. 16, 2014) ("The Court has been unable to locate any case employing the doctrines of waiver or estoppel against the FDIC's decision whether to invoke the [power to repudiate].").
SPA's motion for summary judgment is denied and Defendants' cross-motion is granted. Thus, SPA's fifth, sixth, and seventh causes of action are dismissed.
III. Reasonable Time Period
Plaintiff contends that, in repudiating the lease in December 2019, defendants did not act within a reasonable time, when measured from NCUAB's appointment as conservator in May 2019, the agreement to forestall the automatic termination in July 2019, or the alleged ancillary (and largely irrelevant) delay in hiring Bancography to make the determination in August 2019. However, no matter how thinly one slices the issue, the period of time at issue is limited to seven months.
The hiring of a consultant is only relevant insofar as it purportedly delayed the repudiation decision, which is the only determination subject to the statute's unreasonable delay limitation.
"The amount of time that is reasonable must be determined according to the circumstances of each case." RTC v. CedarMinn Bldg. Ltd. P'ship, 956 F.2d 1446, 1455 (8th Cir. 1992), cited with approval in 1185 Ave. of Americas Assocs., 22 F.3d 494. "Congress specifically intended to give [the agency] flexibility in determining what constitutes a reasonable period for repudiation." Nat'l Credit Union Admin. Bd. v. Goldman, Sachs & Co., No. 13 CIV. 6721 DLC, 2014 WL 297518, at *4 (S.D.N.Y. Jan. 28, 2014), aff'd, 775 F.3d 145 (2d Cir. 2014) (citation omitted). The parties identify three factors relevant to reasonableness: (1) whether NCUAB was "dilatory or acted in bad faith," Goldman Sachs, 775 F.3d at 153; (2) the prejudice to the contractual counterparty caused by the repudiation, CedarMinn Bldg. Ltd. P'ship, 956 F.2d at 1455-56 & n.14; Bldg. Four Shady Oaks Mgmt. L.P. v. FDIC, 504 F. App'x 292, 295 (5th Cir. 2012); and (3) the complexity of the case, see Plymouth Mills, Inc. v. FDIC, 876 F. Supp. 439, 443-44 (E.D.N.Y. 1995).
A reasonable jury, even viewing the evidence in the light most favorable to plaintiff, would find that NCUAB's repudiation was timely. As to the first factor, SPA does not directly accuse NCUAB of bad faith; instead, it argues that "the Government's 'bad faith' is irrelevant." DE 60 at 28 ("[). Of course, SPA's argument is spurious, as the issue of whether defendants acted in good faith represents a critical factor on the issue of reasonableness. Goldman Sachs, 775 F.3d at 153 (upholding repudiation of an arbitration agreement despite a three-year delay because, in part, "[t]he evidence in no way suggests that NCUA was dilatory or in bad faith."). The record contains evidence that defendants were not dilatory: after appointment, NCUAB formed an "MCU consultant management team," hired Bancography, reviewed the findings, and dutifully elevated the proposed repudiation to the appropriate decision-makers for approval. See DE 63 at 10-11 (reciting the timeline of events). In BKWSpokane LLC v. F.D.I.C., 12 F. Supp.3d 1331, 1340-41 (E.D. Wash. 2014), aff'd, 663 F. App'x 524 (9th Cir. 2016), the court found that repudiation of a lease in an almost identical time frame, i.e., approximately seven months, did not represent an unreasonable delay, due to the complexities attendant to the repudiation of a multi-million dollar long-term lease that required thorough review and approval from higher authorities. Hence, the lack of bad faith factor weighs in defendants' favor.
As to the second factor, SPA conclusorily claims to have suffered prejudice because the delay (coupled with the representations in the July 3, 2013 letter) led SPA to forgo the opportunity to pursue remedies in an eminent domain proceeding, namely, indirect damages for termination of the lease and direct damages for the property taken. DE 53, Aff. of Cary F. Staller ¶¶ 17-19. It is not, however, clear how SPA was prejudiced at that juncture; plainly, as a sophisticated business participant, SPA entered the agreement aware that repudiation remained a possibility. More significantly, plaintiff presents "no evidence that [it] marketed the property, rejected other lease offers, incurred expenses, or in any other manner suffered prejudice attributable to the delayed repudiation." BKWSpokane, 12 F. Supp. 3d at 1340. Defendants correctly note that any claimed prejudice is mitigated by SPA's continued receipt of rent payments from July 2019 through December 2019. See DE 55 at 23; BKWSpokane, 12 F. Supp. 3d at 1340-41 (lessor "actually benefited" because it received contractual lease payments that "it would not have received had" repudiation occurred earlier). As a result, any prejudice arising out of plaintiff's inability to obtain damages in an eminent domain proceeding for a mere 184 square-feet easement is slight when compared with the additional six months of rent payments received by plaintiff. Hence, the prejudice factor weighs in defendants' favor as well.
The last factor is that of the complexity of the situation faced by defendants. MCU's former CEO embezzled over $10 million from MCU, a $4.2 billion credit union. See DE 25, Am. Compl. ¶ 15 (citing NYS Department of Financial Services May 17, 2019 press release); "About MCU," Mar. 3, 2022 Press Release, available at https://www.nymcu.org/aboutmcu/mcu-announces-new% 20executive-leadership-and-board-of-directors.aspx (last accessed Sept. 6, 2022). NCUAB points to its need to hire Bancography as an outside consultant as evidence of the complexity of the situation and the difficult decisions to be made. Yet one need not reach that far. It is beyond peradventure that an outside entity assuming control of a $4.2 billion enterprise that has run into significant trouble faces enormous complexities. There are countless decisions to be made in order to safeguard the institution. Under such circumstances, no rational trier of fact could find that a single decision relating to a particular branch location lease which is resolved within seven months could constitute an unreasonable delay. See Goldman Sachs, 775 F.3d at 152-53 (repudiation of contract by liquidating agent three years after appointment was reasonable where agent had reviewed a list of credit union's over 1,900 contracts, was unaware of a certain contract's existence until plaintiff disclosed it in a demand for arbitration, and agent repudiated the contract nine days later); BKWSpokane, 12 F. Supp. 3d at 1340 ("The [receiver] has satisfactorily explained that a repudiation of this size (a $22 million lease extending into the year 2032) required a much higher level of authority for approval, full documentation and vetting"). The case cited by plaintiff, Central Buffalo Project Corp. v. F.D.I.C., 29 F. Supp. 2d 164, 169-70 (W.D.N.Y. 1998), is distinguishable because there the receiver's attorney had testified it was a "no-brainer" that the leases would be repudiated since the assuming banks had no use for them.
For the foregoing reasons, no reasonable jury under these circumstances could find that the timing of NCUAB's repudiation was unreasonable. BKWSpokane, 12 F. Supp. 3d at 1341 ("The question is not whether the FDIC's decision could have been more reasonable or more timely, but rather, whether its timing was "unreasonable." That it was not.) Thus, defendants are granted summary judgment on SPA's fourth cause of action.
IV. Service Under the Lease Terms
SPA contends NCUAB's repudiation is "invalid, null and void because it was not delivered to SPA pursuant to the terms of the Lease," which called for service by "registered or certified mail." DE 51 at 35. NCUAB delivered the repudiation letter "by regular mail." Id. at 37.
SPA's argument—that in order to repudiate a lease, NCUAB must follow the terms of that lease—is foreclosed by the Second Circuit's decision in Goldman Sachs, which held that Section 1787(c) foreclosed such common law contractual arguments, noting that the statute "explicitly establishes NCUA's right to repudiate so as to avoid having to perform burdensome contractual obligations of the failed institution," including "purely procedural provisions." Id. at 151. That is to say, the repudiation dispenses with all contractual obligations.
The Eighth Circuit reached a similar conclusion in RTC v. Mgmt., Inc., 25 F.3d 627 (8th Cir. 1994) (interpreting § 1821(e)). There, a federal savings bank was a party to a renewable contract with a provision charging fees in the event that the bank gave a "notice of intent not to renew." Id. at 629-30. After the RTC was appointed receiver and repudiated the contract, the contractual counterparty "argue[d] that it [was] entitled to the [fees] under the terms of the [contract] because the RTC's repudiation was the functional and legal equivalent of a 'notice of intent not to renew.' " Id. at 631. The Eighth Circuit rejected this argument, holding that "[t]he authority and the decision to repudiate were separate from and in no way dependent on the" terms of the contract and thus "written notice" of repudiation "did not constitute a notice of non-renewal" thereunder. Id.
Here, SPA cannot require NCUAB to repudiate a contract in accordance with the terms of that contract. A contrary holding undermines § 1787(c), whose authority is invoked to avoid contractual obligations altogether. Goldman Sachs, 775 F.3d at 151. Repudiation is a statutory power "separate from and in no way dependent" on the Lease terms, leaving no basis to equate NCUAB's repudiation letter with a "notice" contemplated in the Lease. Mgmt., Inc., 25 F.3d at 631.
Further, and as observed by the Third Circuit, "a valid repudiation" need only be made "in a manner which is 'clear, unambiguous and reasonable under the circumstances.' " McCarron, 111 F.3d at 1094 (applying § 1821(e)); O'Neill v. FDIC, 2013 WL 12237728, at *4 (D.P.R. Sept. 30, 2013) ("Notice of the repudiation may be informal, as long as it is unambiguous."). There is no dispute that SPA received the repudiation letter and understood its effect - SPA replied to the letter two weeks after its receipt. See New Hampshire Assocs. Ltd. P'ship v. FDIC, 978 F. Supp. 650, 656 (D. Md. 1997).
For these reasons, SPA is denied summary judgment and defendants' cross-motion is granted. SPA's first cause of action is dismissed.
V. Attorney Fees
SPA contends that, "upon prevailing upon any cause of action herein, SPA is entitled to recover its legal fees and expenses in this action" pursuant to two lease provisions. DE 51 at 42-43. However, the attorneys' fees provisions are unenforceable because NCUAB repudiated the lease. In any event, awarding attorneys' fees would be inconsistent with Section 1787, which specifies that liability for repudiation of a contract shall be limited to "actual direct compensatory damages," and makes no mention of attorneys' fees or costs. See 12 U.S.C. § 1787(c)(3)(A)-(B). Thus, SPA's motion for fees and expenses is denied.
CONCLUSION
For the reasons discussed above, plaintiff's motion for summary judgment is denied and defendants' cross-motion for summary judgment is granted in its entirety. The Clerk of Court is respectfully directed to enter judgment in favor of defendants and close the case.