Doolin Sec. Sav. Bank, F.S.B. v. Office of Thrift Supervision

Decision Date27 March 1998
Docket NumberNo. 97-1222,97-1222
Citation139 F.3d 203
PartiesDOOLIN SECURITY SAVINGS BANK, F.S.B., Petitioner v. OFFICE OF THRIFT SUPERVISION and Nicolas P. Retsinas, Director, Office of Thrift Supervision, Respondents
CourtU.S. Court of Appeals — District of Columbia Circuit

John C. Deal argued the cause and filed the briefs for petitioner.

Aaron B. Kahn, Principal Litigation Counsel, Office of Thrift Supervision, argued the cause for respondents. With him on the brief were Thomas J. Segal, Deputy Chief Counsel, Elizabeth R. Moore, Assistant Chief Counsel, and Jacqueline H. Fine, Trial Attorney.

Irene M. Solet, Attorney, U.S. Department of Justice, argued the cause for amicus curiae United States. With her on the brief were Frank W. Hunger, Assistant Attorney General, Mary Lou Leary, Acting U.S. Attorney at the time the brief was filed, Stephen W. Preston, Deputy Assistant Attorney General, U.S. Department of Justice, Douglas N. Letter, Litigation Counsel, and H. Thomas Byron, III, Attorney.

Theodore B. Olson, Paul Blankenstein, Mark A. Perry, John K. Villa, Mary G. Clark, Bettina M. Lawton, Frank J. Eisenhart, and Arthur W. Leibold, Jr., were on the brief for amici curiae Maxxam, Inc., et al. Richard P. Keeton entered an appearance.

Before: HENDERSON, RANDOLPH, and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

Article II of the Constitution allows the President to appoint Officers of the United States by and with the consent of the Senate. The President may also make temporary appointments of Officers without Senate confirmation for "Vacancies that may happen during the Recess of the Senate." What if an appointee resigns or dies while the Senate is in session? Must the office remain unoccupied unless the President nominates, and the Senate confirms, someone else? For more than two centuries, legislation has given an answer. In its modern version, the Vacancies Act, 5 U.S.C. §§ 3345-3349, authorizes the Executive to fill positions temporarily when a vacancy occurs as a result of an officer's resignation, death, illness or absence. A dispute about the meaning of the Vacancies Act is at the center of this case.

The dispute arose after an agency's "acting" director initiated administrative enforcement proceedings and then resigned before taking final agency action. The President invoked the Vacancies Act to name his replacement. This individual issued the final agency order now before us on judicial review. Neither the acting director nor the individual named by the President had been nominated and confirmed for the position of agency director. According to petitioner, the President's authority under the Vacancies Act had already expired when he invoked the Act, both individuals illegally occupied the office of agency director, and the orders they signed are therefore null and void.

I

In September 1993, on behalf of the Office of Thrift Supervision, "Acting Director" Jonathan L. Fiechter signed a "Notice of Charges and Hearing for Issuance of Cease and Desist Order Directing Affirmative Action," thus beginning an administrative enforcement action against petitioner Doolin Security Savings Bank. See 12 U.S.C. §§ 1464(d)(1)(A) & 1818(b). The usual thrusts and parries of litigation then ensued: subpoenas issued and motions to quash came back; extensions of time were sought and opposed; motions and memoranda were exchanged; depositions taken and objections noted; documents produced and withheld. Counsel for the Bank and counsel for OTS took their differences to an administrative law judge. After a year of this, a hearing began in Wheeling, West Virginia, with the ALJ presiding.

In April 1996, two and a half years after Acting Director Fiechter issued the Notice of Charges, the ALJ handed down his "Recommended Decision." The ALJ found that the Bank had violated the law and had engaged in unsafe and unsound banking practices. The ALJ's exhaustive findings of fact and conclusions of law ended with a proposed order for the "Acting Director," a position Fiechter was still occupying. The Bank and counsel for OTS filed exceptions. Before passing on the ALJ's recommendation, Fiechter resigned. A new Director, Nicolas P. Retsinas, extended the time for a final decision, reviewed the ALJ's proposal and the parties' exceptions, and issued a final written opinion and a cease and desist order against the Bank in March 1997. That order is the subject of the Bank's petition for judicial review.

Created in 1989, OTS is the principal oversight agency responsible for monitoring the financial health of thrift institutions. OTS is part of the Department of the Treasury, see 12 U.S.C. § 1462a(a), but the Secretary of the Treasury is barred from intervening in matters before the agency. See 12 U.S.C. § 1462a(b)(3) & (4). Congress placed OTS's broad oversight authority entirely in the hands of its Director. The Office of the Director is the only named position in OTS's governing statute, and it is the Director who is responsible for hiring staff and overseeing Because the OTS Director exercises "significant authority pursuant to the laws of the United States," the occupant of the position undoubtedly qualifies as an "Officer" under the Constitution, and is thereby subject to the Appointments Clause, Article II, § 2, cl. 2, of the Constitution. Buckley v. Valeo, 424 U.S. 1, 126, 96 S.Ct. 612, 685-86, 46 L.Ed.2d 659 (1976); Edmond v. United States, 520 U.S. 651, ----, 117 S.Ct. 1573, 1580, 137 L.Ed.2d 917 (1997). Congress did not vest the Director's appointment in the President or the Treasury Secretary. Instead the governing statute provides that the Director must "be appointed by the President, by and with the advice and consent of the Senate." 12 U.S.C. § 1462a(c)(1). "The Director shall be appointed for a term of 5 years," 12 U.S.C. § 1462a(c)(2), but an incumbent may hold over "after the expiration of the term for which appointed until a successor Director has been appointed." 12 U.S.C. § 1462a(c)(4).

[329 U.S.App.D.C. 168] the regulation of savings associations. See 12 U.S.C. § 1462a(a)-(e) & (h); 12 C.F.R. § 500.10.

Despite the Appointments Clause, the statute governing OTS, and the significant regulatory responsibility lodged in OTS, the agency has a history of being run by individuals who were neither nominated by the President nor confirmed by the Senate for the position of OTS Director.

OTS's first Director, M. Danny Wall, served from August 9, 1989, until he resigned on March 5, 1990. Wall had originally been appointed Chairman of the Federal Home Loan Bank Board, but was never nominated for the position of OTS Director. Two district courts held that his occupation of the office of OTS Director violated the Appointments Clause. See Olympic Fed. Sav. & Loan Ass'n v. Director, OTS, 732 F.Supp. 1183, 1193 (D.D.C.), dismissed as moot, 903 F.2d 837 (D.C.Cir.1990); Franklin Sav. Ass'n v. Director, OTS, 740 F.Supp. 1535, 1541 (D.Kan.1990), rev'd on other grounds, 934 F.2d 1127 (10th Cir.1991).

After Wall's departure, President Bush designated Salvatore R. Martoche to serve as acting Director of OTS, effective March 6, 1990. The legality of Martoche's occupation of the office was also called into question. See Olympic, 732 F.Supp. at 1199.

President Bush next nominated, and the Senate confirmed, Timothy Ryan to be OTS Director, effective April 4, 1990. Ryan served until December 4, 1992, when he resigned.

On his last day in office Ryan purported to delegate all his authority as Director to Jonathan L. Fiechter, who was then serving as OTS's Deputy Director for Washington Operations. See OTS Order No. 92-515 (Dec. 4, 1992). Ryan also formally designated Fiechter "Acting Director." See OTS Order No. 92-514 (Dec. 4, 1992). Fiechter served in that position for about four years, resigning on October 8, 1996.

Two days later, President Clinton invoked the Vacancies Act to designate Nicolas P. Retsinas as Director of OTS:

THE WHITE HOUSE

WASHINGTON

October 10, 1996

MEMORANDUM FOR THE HONORABLE NICOLAS P. RETSINAS

Assistant Secretary of Housing and Urban Development

Pursuant to the Constitution and the laws of the United States, including section 3347 of title 5, United States Code, you are directed to perform the duties of the office of Director of the Office of Thrift Supervision, Department of the Treasury, effective October 10, 1996.

/s/ William J. Clinton

Within 120 days of Retsinas's ascension, President Clinton nominated Ellen Seidman to serve as Director of OTS. 143 CONG. REC. S1117 (daily ed. Feb. 6, 1997). The Senate confirmed Seidman on October 23, 1997, see 143 CONG. REC . S11,165, S11,171 (daily ed. Oct. 23, 1997), and she took over as Director shortly thereafter.

In the meantime, Retsinas had issued his written opinion and the cease and desist order. In doing so, Retsinas rejected the Bank's motion to dismiss for lack of jurisdiction, a motion resting on the Bank's arguments that "Acting Director Jonathan Fiechter lacked authority to initiate this proceeding when he signed the notice of charges on September 20, 1993, and that the current Director's authority is defective under the Vacancies Act."

II

The best way to approach the controversy about the Vacancies Act is to take up first the legality of Retsinas's tenure. If his status rendered the final order void, it will not matter whether his predecessor, Fiechter, had authority to initiate the administrative proceedings.

The Bank assumes the constitutionality of the Vacancies Act in general and, in particular, the constitutionality of § 3347, the section relied upon by the President in directing Retsinas to perform the Director's duties. The Bank believes, however, that the President's authority to use § 3347 expired long before he named Retsinas to the post. From this it concludes that Retsinas occupied the office illegally, in violation of not...

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