Q3 Investments Recovery Vehicle, LLC v. Mcevoy

Background

Q3 Investments Recovery Vehicle, LLC is an assignee of claims belonging to more than 70 investors who invested in Q3 I, L.P., a Delaware limited partnership formed to facilitate a cryptocurrency club. The partnership had accounts at Signature Bank. Q3 alleged in state court that an individual used those accounts to carry out fraud and that Signature Bank’s negligence, including ignoring indications of fraud, enabled the conduct.

Q3 filed the state-court action on December 16, 2020. On January 10, 2023, the Supreme Court of the State of New York granted motions to dismiss and dismissed the claims against Signature Bank. Q3 filed a notice of appeal three days later.

On March 12, 2023, the New York State Department of Financial Services closed Signature Bank and appointed the Federal Deposit Insurance Corporation as receiver. The FDIC replaced Signature Bank as defendant and removed the action to this Court on April 13, 2023, under the Financial Institution Reform, Recovery, and Enforcement Act of 1989. The case was stayed so Q3 could complete a required administrative claims process. The opinion states that Q3 represented that the process had been exhausted.

Parties’ Requests

Q3 asked the Court to lift the stay. It also asked either for direct appellate review of the state-court judgment or for the Court to adopt the state judgment, prepare the appellate record, and send the case to the Court of Appeals for the Second Circuit. Q3 further asked that federal appellate deadlines begin as though the case had been forwarded to that court on the date of forwarding.

The FDIC did not object to lifting the stay. It opposed direct appellate review by the district court and argued that the ordinary process for appealing a federal district court judgment should apply.

Court’s Analysis

The Court held that removal was proper. FIRREA allowed the FDIC to remove the case within 90 days after becoming a party, and the FDIC removed the case on the same day it replaced Signature Bank. The pending state-court appeal did not make removal improper.

The Court explained that the case created an unusual procedural problem because the state-court decision had already been entered and appealed before removal. The Second Circuit had not addressed the precise procedure. Other federal appellate courts had used different approaches, including direct district-court review, sending the state judgment to a federal appeals court, or adopting the state judgment as a federal judgment so the parties could use ordinary federal post-judgment procedures.

The Court chose the approach used by the Fourth and Ninth Circuits. With the parties’ consent, it lifted the stay and adopted as its own judgment, as of January 7, 2025, the portions of the January 10, 2023 state-court decision concerning Signature Bank’s motion to dismiss.

Disposition

The stay was lifted. The relevant portions of the state-court decision were adopted as the Court’s own judgment. The parties may seek relief available under the Federal Rules of Civil Procedure as if the judgment had originally been entered in federal court, including filing a timely notice of appeal to the Second Circuit. The Clerk was directed to terminate the plaintiff’s letter-motion on the docket.

Classification

This is a procedural order because the Court resolved the mechanics of a case removed while a state-court appeal was pending and did not independently decide the underlying fraud or negligence claims.