Reschini v. First Federal Sav. and Loan Ass'n of Indiana

• Decision Date: 10 January 1995
• Docket Number: No. 94-3086,94-3086
• Parties: Roger J. RESCHINI, Appellant, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF INDIANA; Charles L. France.
• Court: U.S. Court of Appeals — Third Circuit

Page 246

46 F.3d 246

Roger J. RESCHINI, Appellant, v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF INDIANA;

Charles L. France.

No. 94-3086.

United States Court of Appeals, Third Circuit.

Argued July 11, 1994.

Decided Jan. 10, 1995.

Thomas E. Sweeney, Jr., Sweeney & Associates, Pittsburgh, PA (argued), for appellant.

Walter A. Bunt, Jr. Kirkpatrick & Lockhart, Pittsburgh, PA (argued), for appellees.

Before: SLOVITER, Chief Judge, ROTH, Circuit Judge, and POLLAK, District Judge. ^*

OPINION OF THE COURT

LOUIS H. POLLAK, District Judge.

This appeal addresses the dismissal of a suit brought by appellant Roger J. Reschini against appellees First Federal Savings and Loan Association of Indiana (the "Association") and Charles L. France, the chief executive officer of the Association. The complaint alleged that the Association and its chief executive officer had disseminated materially misleading proxy materials in violation of regulations adopted by the federal Office of Thrift Supervision (OTS) in carrying out its supervision of federal savings associations. The allegedly deficient proxy materials sought approval by Association members of the proposed conversion of the Association from a federal (i.e., federally-chartered) mutual savings and loan association to a Pennsylvania-chartered mutual savings bank.

The district court held that Secs. 5(i)(2)(B) and 10(j) of the Home Owners' Loan Act (HOLA), 12 U.S.C. Secs. 1464(i)(2)(B) and 1467a(j), giving courts of appeals original and exclusive jurisdiction over decisions of the Director of the OTS approving or disapproving conversions of federal savings associations, precluded exercise by the district court of subject matter jurisdiction over Reschini's claim. Accordingly, the district court dismissed the complaint for lack of jurisdiction. On appeal we consider three questions: (1) whether Reschini's appeal is moot; (2) whether 12 U.S.C. Secs. 1464(i)(2)(B) and 1467a(j) constitute an insurmountable bar to district court subject-matter jurisdiction over challenges to proxy materials distributed in connection with the Association's conversion; and (3) if jurisdiction in the district court is not precluded, whether dismissal of this suit was nevertheless required on the ground that the complaint failed to state a cognizable cause of action.

I

In late December of 1993 or early January of 1994, the Association distributed a notice to its members informing them that a special meeting would be held on January 28, 1994, for the purpose of voting on a conversion plan. Under the plan, the Association would abandon its federal charter and emerge as a Pennsylvania-chartered mutual savings bank known as the Indiana First Savings Bank. A proxy statement outlining the plan's business purposes and effects accompanied the notice.

Depositors in a federally-chartered mutual savings association are, pursuant to HOLA, members entitled to vote on proposals to convert to non-federal status, ¹ notwithstanding that the proprietary interest of a depositor-member in a mutual savings association is a chimera. Depositor-members "own the mutual, but it is ownership in name only. They cannot sell what they 'own,' and if they withdraw savings they receive only the nominal value of the account rather than a portion of the mutual's net worth...." Ordower v. Office of Thrift Supervision, 999 F.2d 1183, 1185 (7th Cir.1993). On January 25, 1994, Robert Reschini, in his capacity as a depositor-member of First Federal Savings and Loan Association of Indiana, brought suit in the Western District of Pennsylvania against the Association and Charles France, the Association's chief executive officer. Count I of Reschini's complaint, invoking the district court's federal question jurisdiction, alleged that the proxy statement, in contravention of 12 C.F.R. Sec. 569.4, contained false information regarding the principal business reasons for the proposed conversion and failed to disclose material information about the loss of member voting rights that would accompany the conversion. Reschini sought an injunction against the holding of the special meeting, an order prohibiting use of the proxy statement and requiring a legally sufficient proxy solicitation, costs and attorneys fees, and any other relief deemed just and equitable. Counts II and III of the complaint asserted state law claims.

On the day Reschini commenced suit, Reschini also filed a motion for a temporary restraining order. The next day, January 26, 1994, the district court, after a brief hearing, entered an order dismissing plaintiff's complaint for lack of subject-matter jurisdiction. On February 10, 1994, a special meeting of Association members was held, and the conversion plan was approved by the members.

Reschini filed a notice of appeal from the order of the district court on February 24, 1994. Oral argument in this court took place on July 12, 1994. At the time of oral argument, the proposed conversion was pending before the OTS but had not yet been approved. On October 18, 1994, the Director of the OTS approved the Association's application for conversion; the same day the Association completed its conversion to a Pennsylvania-chartered mutual savings bank. ²

On November 17, 1994, Reschini filed in this court a petition to modify, terminate, or set aside the order of the OTS Director approving the proposed conversion. ³ We are, however, at pains to point out that the petition for review--an invocation of this court's appellate authority with respect to certain decisions of the OTS Director--has not yet been briefed and argued and is not the subject of this opinion; in this opinion, and our concomitant ruling, we address only the decision of the district court dismissing Reschini's suit against the Association and France.

II

As a preliminary matter, we address the contention of the Association and France that this appeal is moot because the special meeting that Reschini sought to enjoin has already occurred and the Association has already converted to a Pennsylvania-chartered savings bank.

"[I]f an event occurs while a case is pending on appeal that makes it impossible for the court to grant 'any effectual relief whatever' to a prevailing party, the appeal must be dismissed." Church of Scientology of California v. United States, --- U.S. ----, ----, 113 S.Ct. 447, 449, 121 L.Ed.2d 313 (1992) (quoting Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 133, 40 L.Ed. 293 (1895)). However, "when a court can fashion 'some form of meaningful relief,' even if it only partially redresses the grievances of the prevailing party, the appeal is not moot." Isidor Paiewonsky Assocs., Inc. v. Sharp Properties, Inc., 998 F.2d 145, 151 (3d Cir.1993) (quoting Church of Scientology, --- U.S. at ----, 113 S.Ct. at 450). Such relief need not have been requested in the pleadings. Rather, "it is the court's obligation to grant the relief to which the prevailing party is entitled whether it has been specifically demanded or not." Kirby v. United States Dep't of Housing & Urban Dev., 745 F.2d 204, 207 (3d Cir.1984).

If we were to find that the district court improperly dismissed Reschini's complaint and if, upon remand, Reschini were to prevail on his claim, it would then be the district court's responsibility to fashion an appropriate decree. In so doing, the district court would have the authority to deploy a full range of equitable remedies including--if deemed feasible and appropriate--a requirement that the Association and France take steps to reverse the conversion. Cf. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 386, 90 S.Ct. 616, 622, 24 L.Ed.2d 593 (1970) (where a merger is obtained through fraudulent proxy statements, "[p]ossible forms of relief will include setting aside the merger or granting other equitable relief"); Edelman v. Salomon, 559 F.Supp. 1178, 1184 (D.Del.1983) (stating that "a decree nullifying the corporate action taken on the basis of management's proxies" is a traditional form of relief in suits alleging fraudulent proxy materials). While it is conceivable that the district court might eventually determine that setting aside the conversion would entail undoing what cannot equitably be undone, such a determination would depend upon a fact-specific analysis of the circumstances--an analysis which we are not now in the position to perform.

Because setting aside the conversion remains a possible remedy should Reschini prevail on his claim, Reschini's appeal is not moot. ⁴

III

Savings association conversions are governed by 12 U.S.C. Sec. 1464(i), codifying Sec. 5(i) of HOLA. Section 1464(i)(3) sets forth criteria governing conversions of federally-chartered savings associations to state-chartered form (federal-to-state conversions). According to these criteria, a federal-to-state conversion may only be performed "upon the vote in favor of such conversion cast in person or by proxy at a special meeting of members or stockholders called to consider such action," pursuant to

the law of the State in which the home office of the Federal savings association is located, as required by such law for a State-chartered institution to convert itself into a Federal savings association, but in no event upon a vote of less than 51 percent of all the votes cast at such meeting....

12 U.S.C. Sec. 1464(i)(3).

Section 1464(i)(2)(B) establishes a mechanism for judicial review in courts of appeals of orders of the OTS Director authorizing or barring proposed conversions. Specifically, Sec. 1464(i)(2)(B) states that "[a]ny aggrieved person may obtain review of a final action of the Director [of the OTS] which approves or disapproves a plan of conversion pursuant to this subsection only by complying with the provisions of section 1467a(j)." Section 1467a(j) provides in turn for review in courts of appeals. ⁵

Appellees contend that Secs. 1464(i)(2)(B) and 1467a(j), creating an exclusive review mechanism for review of final decisions by the...