Board of Governors of the Federal Reserve System of the United States v. McOrp Financial, Inc McOrp v. Board of Governors of the Federal Reserve System of the United States

Decision Date03 December 1991
Docket Number90-914,Nos. 90-913,s. 90-913
Citation112 S.Ct. 459,502 U.S. 32,116 L.Ed.2d 358
PartiesBOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OF THE UNITED STATES, Petitioner, v. MCORP FINANCIAL, INC., et al. MCORP, et al., Petitioners, v. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OF THE UNITED STATES
CourtU.S. Supreme Court
Syllabus

After MCorp, a bank holding company, filed voluntary bankruptcy petitions, it initiated an adversary proceeding in the Bankruptcy Court against the Board of Governors of the Federal Reserve System (Board) seeking to enjoin the prosecution of two pending administrative proceedings, one charging MCorp with a violation of the Board's "source of strength" regulation and the other alleging a violation of § 23A of the Federal Reserve Act. The District Court transferred the adversary proceeding to its own docket, ruled that it had jurisdiction to enjoin the Board from prosecuting both administrative proceedings, and entered a preliminary injunction halting those proceedings. The Court of Appeals vacated the injunction barring the § 23A proceeding, reasoning that the plain language of the judicial review provisions of the Financial Institutions Supervisory Act of 1966 (FISA), particularly 12 U.S.C. § 1818(i)(1), deprived the District Court of jurisdiction to enjoin either administrative proceeding. However, the Court of Appeals also interpreted Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210, to authorize an injunction against any administrative proceeding conducted without statutory authorization, ruled that the Board's promulgation and enforcement of its source of strength regulation exceeded its statutory authority, and remanded the case with instructions to the District Court to enjoin the Board from enforcing the regulation.

Held: The District Court lacked jurisdiction to enjoin either regulatory proceeding. Pp. 37-45.

(a) This litigation is controlled by § 1818(i)(1)'s plain, preclusive language: "[N]o court shall have jurisdiction to affect by injunction . . . the issuance or enforcement of any [Board] notice or order." That language is not qualified or superseded by the Bankruptcy Code's automatic stay provision, 11 U.S.C. § 362. The Board's planned actions against MCorp fall squarely within § 362(b)(4), which expressly provides that the automatic stay will not reach proceedings to enforce a "governmental unit's police or regulatory power." MCorp is not protected by §§ 362(a)(3) and 362(a)(6)—which stay "any act" to obtain possession of, or to exercise control over, property of the estate, or to recover claims against the debtor that arose prior to the filing of a bankruptcy petition—because such provisions do not have any application to ongoing, nonfinal administrative proceedings such as those at issue here. Moreover, MCorp's reliance on 28 U.S.C. § 1334(b)—which authorizes district courts to exercise concurrent jurisdiction over certain bankruptcy-related civil proceedings that would otherwise be subject to the exclusive jurisdiction of another "court"—is misplaced, since the Board is not another "court," and since the prosecution of the Board's proceedings, prior to the entry of a final order and the commencement of any enforcement action, seems unlikely to impair the Bankruptcy Court's exclusive jurisdiction over the property of the estate protected by § 1334(d). Pp. 37-42.

(b) The Court of Appeals erred in interpreting Kyne to authorize judicial review of the source of strength regulation. In contrast to the situation in Kyne, FISA, in § 1818(h)(2), expressly provides MCorp with a meaningful and adequate opportunity for review of the regulation's validity and application if and when the Board finds that MCorp has violated the regulation and, in § 1818(i)(1), clearly and directly demonstrates a congressional intent to preclude review. In such circumstances, the District Court is without jurisdiction to review and enjoin the Board's ongoing administrative proceedings. Pp. 42-45.

900 F.2d 852 (CA 1990): No. 90-913, reversed; No. 90-914, affirmed.

STEVENS, J., delivered the opinion of the Court, in which all other Members joined, except THOMAS, J., who took no part in the consideration or decision of the cases.

Jeffrey P. Minear, Washington, D.C., for the Federal Reserve System.

Alan B. Miller, New York City, for MCorp, et al.

Justice STEVENS delivered the opinion of the Court.

MCorp, a bank holding company, filed voluntary bankruptcy petitions in March 1989. It then initiated an adversary proceeding against the Board of Governors of the Federal Reserve System (Board) seeking to enjoin the prosecution of two administrative proceedings, one charging MCorp with a violation of the Board's "source of strength" regulation 1 and the other alleging a violation of § 23A of the Federal Reserve Act, as added, 48 Stat. 183, and amended.2 The District Court enjoined both proceedings, and the Board appealed. The Court of Appeals held that the District Court had no jurisdiction to enjoin the § 23A proceeding, but that, under the doctrine set forth in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), the District Court had jurisdiction to review the validity of the "source of strength" regulation. The Court of Appeals then ruled that the Board had exceeded its statutory authority in promulgating that regulation. 900 F.2d 852 (CA5 1990). We granted certiorari, 499 U.S. ----, 111 S.Ct. 1101, 113 L.Ed.2d 212 (1991), to review the entire action but, because we conclude that the District Court lacked jurisdiction to enjoin either regulatory proceeding, we do not reach the merits of MCorp's challenge to the regulation.

I

In 1984, the Board promulgated a regulation requiring every bank holding company to "serve as a source of financial and managerial strength to its subsidiary banks." 3 In October 1988, the Board commenced an administrative proceeding against MCorp,4 alleging that MCorp violated the source of strength regulation and engaged in unsafe and unsound banking practices that jeopardized the financial condition of its subsidiary banks. The Board also issued three temporary cease-and-desist orders.5 The first forbids MCorp from declaring or paying any dividends without the prior approval of the Board. App. 65-67. The second forbids MCorp from dissipating any of its nonbank assets without the prior approval of the Board. Id., at 68-70. The third directs MCorp to use "all of its assets to provide capital support to its Subsidiary Banks in need of additional capital." Id., at 85. By agreement, enforcement of the third order was suspended while MCorp sought financial assistance from the Federal Deposit Insurance Corporation (FDIC).6

In March 1989, the FDIC denied MCorp's request for assistance. Thereafter, creditors filed an involuntary bankruptcy petition against MCorp in the Southern District of New York, and the Comptroller of the Currency determined that 20 of MCorp's subsidiary banks were insolvent and, accordingly, appointed the FDIC as receiver of those banks. MCorp then filed voluntary bankruptcy petitions in the Southern District of Texas and all bankruptcy proceedings were later consolidated in that forum.

At the end of March, the Board commenced a second administrative proceeding against MCorp alleging that it had violated § 23A of the Federal Reserve Act by causing two of its subsidiary banks to extend unsecured credit of approximately $63.7 million to an affiliate. For convenience we shall refer to that proceeding as the "§ 23A proceeding" and to the earlier proceeding as the "source of strength proceeding."

In May 1989, MCorp initiated this litigation by filing a complaint in the Bankruptcy Court against the Board seeking a declaration that both administrative proceedings had been automatically stayed pursuant to the Bankruptcy Code; in the alternative, MCorp prayed for an injunction against the further prosecution of those proceedings without the prior approval of the Bankruptcy Court. On the Board's motion, the District Court transferred that adversary proceeding to its own docket.

In June 1989, the District Court ruled that it had jurisdiction to enjoin the Board from prosecuting both administrative proceedings against MCorp and entered a preliminary injunction halting those proceedings. The injunction restrained the Board from exercising "its authority over bank holding companies. . . . to attempt to effect, directly or indirectly, a reorganization of the MCorp group [of companies] except through participation in the bankruptcy proceedings." In re MCorp, 101 B.R. 483, 491 (S.D.Tex.). The Board appealed.

Although the District Court did not differentiate between the two Board proceedings, the Court of Appeals held that the § 23A proceeding could go forward but that the source of strength proceeding should be enjoined. The court reasoned that the plain language of the judicial review provisions of the Financial Institutions Supervisory Act of 1966 (FISA), 80 Stat. 1046, as amended, 12 U.S.C. § 1818, et seq. (1988 ed. and Supp. I), particularly § 1818(i)(1), deprived the District Court of jurisdiction to enjoin either proceeding, but that our decision in Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), nevertheless authorized an injunction against an administrative proceeding conducted without statutory authorization. The Court of Appeals ruled that the Board's promulgation and enforcement of its source of strength regulation exceeded its statutory authority. Accordingly, the court vacated the District Court injunction barring the § 23A proceeding, but remanded the case with instructions to enjoin the Board from enforcing its source of strength regulation. Both parties petitioned for certiorari.

The Board's petition challenges the Court of Appeals' interpretation of Leedom v. Kyne, as well as its invalidation of the source of strength regulation. MCorp's petition challenges the Court of Appeals' interpretation of the...

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