United States District Court, D. Minnesota
David S. Curcio, Esq., Jackson Walker LLP, Houston, TX; and Amy L. Schwartz, Esq., Lapp, Libra, Thomson, Stoebner & Push, Chartered, Minneapolis, MN, on behalf of Plaintiff.
Barbara Podlucky Berens, Esq., Justi Rae Miller, Esq., Erin K. Fogarty Lisle, Esq., and Carrie L. Zochert, Esq., Berens & Miller, P.A., Minneapolis, MN, on behalf of Defendant.
MEMORANDUM OPINION AND ORDER
ANN D. MONTGOMERY, U.S. DISTRICT JUDGE.
On February 20, 2014, the undersigned United States District Judge heard oral argument on Plaintiff Jackson Walker LLP's (" Jackson Walker" ) and Defendant Federal Deposit Insurance Corporation's (FDIC) cross-motions for summary judgment [Docket Nos. 17, 18]. For the reasons stated herein, Jackson Walker's motion is denied, and the FDIC's motion is granted.
Home Savings of America (" HSOA" ) is a federally chartered bank with headquarters in Little Falls, Minnesota. In the summer of 2010, Dirk Adams, the CEO of HSOA, contacted James Pledger, an attorney
at Jackson Walker, to discuss relocating HSOA from Minnesota to Texas. Pl.'s Index [Docket No. 26] Ex. A (" Pledger Dep." ) 7. On July 14, 2010, HSOA executed an engagement letter retaining Jackson Walker for the " conversion" of HSOA into a Texas state savings bank. Id. Ex. B (" Retainer Agmt." ) 1. The terms of the letter also applied to any agreed-upon expansion of legal services. Id. at 2. The Retainer Agreement required HSOA to pay a retainer of $5,000, stating:
Considering the nature and scope of the matter for which you have engaged us, you have provided us with a retainer of $5,000.00. We normally expect to retain this amount during the course of our engagement. However, at our discretion, we may apply this retainer to fees and expenses from time to time and, if we do, we may ask that it be replenished. When our representation is completed, we will apply the balance of the retainer against our final statement and refund any excess to you.
Id. On September 23, 2010, HSOA returned the executed Retainer Agreement and a $5,000 retainer, which Jackson Walker held in its Texas trust account. Miller Aff. Ex. D.
HSOA's retention of Jackson Walker was part of a plan to save the bank. On June 2, 2010--before execution and delivery of the Retainer Agreement--HSOA's holding company stipulated to the entry of an Order to Cease and Desist by the Office of Thrift Supervision (" OTS" ). The OTS concluded HSOA had engaged in unsafe or unsound practices, which resulted in the bank operating with insufficient capital. Miller Aff. Ex. G. The Order to Cease and Desist required HSOA to develop a capital plan to achieve sufficient cash flow and establish sufficient tangible equity capital. Id.
Adams informed Pledger of HSOA's undercapitalization when the two first discussed retaining Jackson Walker. Pledger also independently reviewed publicly-filed information about HSOA, and learned HSOA had " problem assets." Id. at 9. Adams' plan was to convert HSOA into a Texas-chartered bank while simultaneously obtaining an infusion of capital, which it would then use to acquire a " large Houston mortgage banking operation." Pledger Dep. 8. Adams believed this plan would solve the bank's undercapitalization problem. Id.
Adams' plan could not be executed. On November 2, 2011, the Texas Department of Savings and Mortgage designated HSOA a " problem bank." See Pledger Dep. 32-33. On November 16, 2011, the company from which HSOA had planned to obtain funding decided not to move forward. Id. at 35. On November 17, 2011, the Office of the Comptroller of the Currency (OCC) issued an " unfavorable" Report of Examination regarding HSOA, which Pledger discussed with HSOA's directors. Miller Aff. ¶ 11; Pledger Dep. 39.
Also on November 17, 2011, the date of the OCC report, Adams directed HSOA's general counsel, Laura Kayayan, to " [s]end Jackson Walker a $100,000 retainer and keep it refreshed." Miller Aff. Ex. H. Minutes later, Adams informed HSOA's other directors that he was retaining Pledger as HSOA's general corporate and regulatory counsel. Id. Ex. I. On November 18, 2011, the following day, Kayayan informed Pledger that she had approved " a payment of $100,000 (the evergreen retainer)." Id. Ex. J. Pledger informed Jackson Walker's accounting department that the firm received the $100,000 from
HSOA " because they are at serious risk of FDIC receivership in the 1st quarter." Id. Ex. L.
During its representation of the bank, Jackson Walker routinely sent HSOA monthly invoices for services rendered, which HSOA then paid. Id. Ex. C (" Kayayan Dep." ) 17-18; Ex. O. Jackson Walker only drew down on the retainer on one occasion, December 29, 2011, for a payment of $46,287.76. Miller Aff. Ex. N. This was the total amount of three outstanding invoices, for work performed in November and December 2011. HSOA replenished the retainer thereafter. Pledger Dep. 57.
On January 23, 2012, HSOA's acting general counsel Jonathan Jenkins recommended Pledger expedite Jackson Walker's January 2012 invoice. HSOA normally processed outgoing wires on Thursdays, and Jenkins stated that expediting the invoice might allow HSOA to pay the invoice by Thursday, February 2, 2012. Miller Aff. Ex. P. Jackson Walker did not issue the invoice until February 14, 2012. HSOA did not pay the invoice.
On February 24, 2012, the FDIC became the receiver for HSOA and Jackson Walker's representation of the bank ended. Pl.'s Index Ex. H. On February 27, 2012, Jackson Walker sent HSOA two additional invoices for legal services. The FDIC, acting as receiver for HSOA, did not approve payment of either invoice. The three unpaid invoices total $66,667.57. Miller Aff. Exs. Q, R, S.
On March 6, 2012, Pledger informed the FDIC that it intended to return only $33,332.43 of HSOA's retainer, and keep the balance in satisfaction of the unpaid invoices. Id. Ex. T. On May 29, 2012, Jackson Walker submitted a proof of claim to the FDIC, contending it had a secured claim in the amount of $66,667.57. On September 12, 2012, the FDIC informed Jackson Walker that it was ...