505 SFD, LLC v. Federal Deposit Insurance Corporation

Background

505 SFD, LLC owns a commercial property in Greenbrae, California. First Republic Bank leased the property under a lease that began January 4, 2023, and was scheduled to end April 30, 2033. On May 1, 2023, California’s Department of Financial Protection and Innovation closed the bank and appointed the Federal Deposit Insurance Corporation as receiver. The receiver assumed the bank’s responsibilities under the lease and later repudiated the lease effective December 4, 2023.

505 SFD submitted an administrative claim to the receiver. The receiver allowed $23,000 and disallowed $1,315,093.49. 505 SFD then sued under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, commonly called FIRREA. Its second amended complaint sought $1,216,803.56, including $50,600.02 in unpaid base rent, additional rent for property taxes, utilities, insurance, and repair and maintenance work, and $23,000 described as the receiver’s partially allowed claim that remained unpaid.

The Federal Deposit Insurance Corporation moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. The motion did not challenge the unpaid-base-rent claim.

Repair and Maintenance Claims

FIRREA permits a lessor whose lease is repudiated by a receiver to recover certain contractual rent and unpaid rent, subject to statutory limits. The court explained that whether repair and maintenance costs qualify depends on the particular lease. The lease assigned some maintenance responsibilities to the landlord and others to the tenant. It also made some costs chargeable to the tenant in specified circumstances, including certain changes required because of the tenant’s improvements or business and certain damage caused by the tenant.

The court held that the second amended complaint did not plausibly allege that the claimed repair and maintenance costs were recoverable under FIRREA. The complaint did not show that these costs were fixed, regular, periodic charges expressly identified in the lease, so they were not sufficiently alleged as “contractual rent.” It also did not provide enough facts to show that the tenant had assumed responsibility for the specific work as part of the consideration for occupying the property. The complaint gave little explanation for large amounts, including $850,000 and $229,500 labeled “Tenant Repair Work.”

The complaint also lacked sufficient information about when the work occurred. Because FIRREA allows recovery of unpaid rent only if it was due by the receiver’s appointment on May 1, 2023, the court found that the complaint did not plausibly allege that the repair and maintenance costs were incurred within the allowable period. The court granted the motion to dismiss these claims with prejudice and denied further leave to amend.

Property Taxes, Utilities, and Insurance

The court denied the motion to dismiss the claims for property taxes, utilities, and insurance. It relied in part on Federal Rule of Civil Procedure 12(g), which generally prevents a party from raising in a later dismissal motion an available defense or objection that it omitted from an earlier motion. The court also stated that these claims would be more appropriately resolved on a fuller factual record showing when the costs were incurred.

The $23,000 Claim

The court determined from the allegations that the $23,000 represented one month of abated rent that the receiver had allowed. In an earlier order, the court had ruled that the lease’s rent-abatement provision was a penalty provision barred by FIRREA. Because judicial review of the damages claim was conducted anew, the receiver’s partial allowance did not require the court to permit recovery of that amount. The court granted the motion to dismiss the $23,000 claim with prejudice.

Disposition

The court granted in part and denied in part the motion to dismiss the second amended complaint. It granted the motion as to the repair and maintenance claims and the $23,000 claim for the receiver’s partially allowed claim that remained unpaid; those claims were dismissed with prejudice, and further amendment was not allowed. The claims for unpaid base rent, property taxes, utilities, and insurance remain in the case at this stage. The court also reset the initial case-management conference for November 21, 2025, at 2:30 p.m. by videoconference.