BISCAYNE FED. SAV. & LOAN v. Fed. Home Loan Bank Bd.

• Decision Date: 12 April 1983
• Docket Number: No. 83-815-CIV-EPS.,83-815-CIV-EPS.
• Citation: 561 F. Supp. 1046
• Parties: BISCAYNE FEDERAL SAVINGS & LOAN ASSOCIATION and Kaufman & Broad, Plaintiffs, v. FEDERAL HOME LOAN BANK BOARD, Richard T. Pratt, Edward Gray, Jamie Jackson, Federal Savings & Loan Insurance Corporation, and H. Brent Beesley, Defendants.
• Court: U.S. District Court — Southern District of Florida

561 F. Supp. 1046

BISCAYNE FEDERAL SAVINGS & LOAN ASSOCIATION and Kaufman & Broad, Plaintiffs, v. FEDERAL HOME LOAN BANK BOARD, Richard T. Pratt, Edward Gray, Jamie Jackson, Federal Savings & Loan Insurance Corporation, and H. Brent Beesley, Defendants.

No. 83-815-CIV-EPS.

United States District Court, S.D. Florida, Miami Division.

April 12, 1983.

Bruce Greer, Miami, Fla., for plaintiffs.

Lowell L. Garrett, Miami, Fla., for defendants.

MEMORANDUM OPINION AND ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

SPELLMAN, District Judge.

THIS CAUSE comes before the Court on Plaintiffs' motion for a temporary restraining order filed pursuant to Fed.R.Civ.P. 65(b). Plaintiffs request that this Court set aside Defendants' ex parte appointment of the Federal Savings and Loan Insurance Company (FSLIC) as receiver by the Federal Home Loan Bank Board (FHLBB) for Plaintiff Association. Plaintiffs argue that the ownership and management of the Association should be restored to the Association managers and owners who were ousted by the FHLBB actions. Plaintiffs also request that the new association formed by the FHLBB be dissolved and the old association be reinstated.

There is no dispute that Plaintiffs are a federally chartered association and subject to the control of the FHLBB pursuant to 12 U.S.C. § 1464(d)(1). Jurisdiction of this Court is grounded in § 1464(d)(6)(A).¹

Plaintiffs maintain that the Court should remove the receiver and restore control to the ousted managers for several reasons. Plaintiffs allege that the FHLBB acted precipitously and in bad faith by putting the Association in receivership while the parties were involved in negotiations concerning ways to strengthen the financial viability of the Association. Plaintiffs argue that § 1464(d)(6)(A) is facially unconstitutional because the procedures therein outlined violate Plaintiff's property rights without due process of law. Plaintiffs also claim that if the Association is not restored to their control, its assets will be depleted and that they will suffer irreparable harm.

Defendants maintain that under 12 U.S.C. § 1464(d)(6)(A) and 12 U.S.C. § 1729(b), they have the authority to place the Association in receivership and form a new institution.² Defendants state that the Association was placed in receivership because it was insolvent and in an unsafe or unsound condition to transact business. Defendants argue that since insolvency and an unsound condition are two of the grounds upon which it may be decided to place an Association in receivership under § 1464(d)(6)(A), Plaintiffs must prove their solvency and soundness in order for them to prevail on the merits of their case.

The Eleventh Circuit has recently reiterated the standard to be applied when considering whether or not to grant a temporary restraining order or a preliminary injunction. The Court stated:

The Court must exercise its discretion in light of the following four prerequisites for a preliminary injunction: (1) a substantial likelihood that plaintiff will prevail on the merits, (2) a substantial threat that plaintiff will suffer irreparable injury if the injunction is not granted, (3) that the threatened injury to plaintiff outweighs the threatened harm the injunction may do to defendant, and (4) that granting the preliminary injunction will not disserve the public interest. Canal Authority v. Callaway, 489 F.2d 567, 572 (5th Cir.1974). Because a preliminary injunction is an extraordinary and drastic remedy, its grant is the exception rather than the rule, and plaintiff must clearly carry the burden of persuasion. Texas v. Seatrain International, S.A., 518 F.2d 175, 179 (5th Cir.1975).

U.S. v. Lambert, 695 F.2d 536 at 539 (11th Cir., 1983).

The Court, without expressing an opinion as to whether any other of the elements for obtaining a temporary restraining order as delineated above has been met, believes that Plaintiffs have not made a sufficient showing of substantial threat or irreparable injury.

Defendants have represented to the Court that the FHLBB is prepared to infuse $30 million into the Association to bolster its financial situation if the FSLIC is prepared to insure said infusion. The FSLIC has represented that it will not insure said infusion unless the old Association remains in the hands of the receiver, a new Association is formed and a new Board of Directors is elected for the newly formed Association.

Based on Defendants' representations, the Court believes that Plaintiffs have not demonstrated that they will be irreparably harmed by having the receiver maintain control of the Association. The infusion of capital indicates that the financial position of the Association will be improved and stabilized, thus restoring confidence in the public and the depositors. Accordingly, Plaintiffs' efforts to remove the receiver at this point in the proceedings is hereby DENIED.

Plaintiffs' alternative argument is that if their motion is denied, then the Court should enjoin the Defendants from undertaking any action to liquidate the assets of the Association or from placing control of the same in the hands of third parties through a sale or merger of the Association pursuant to 12 U.S.C. § 1729(b). Plaintiffs argue that the Court has the implicit power to enjoin such contemplated actions pending the outcome of the hearings on the merits of its cause to have the receiver removed. Plaintiffs state that the Court's implicit power to effectuate this type of relief is found in § 1464(d)(6)(A).

Defendants maintain that under § 1464(d)(6)(A) and (C) the jurisdiction of this Court is limited to a determination of whether or not the receiver should be removed. Defendants claim that these statutes, particularly § 1464(d)(6)(C), leave no room for the Court to fashion an equitable remedy pending the outcome of the suit.³

The statute is clear that the Association may bring an action before this Court seeking to remove the receiver within thirty (30) days of the appointment of said receiver. Plaintiffs, having filed this suit on the same day as the appointment of the receiver, have timely filed this action.

The Court believes that the hearing "on the merits" referred to in § 1464(d)(6)(A) contemplates more than a quick, emergency hearing held at night without the parties having the benefit of fully preparing and presenting their positions. The Court believes that it has the power under the All Writs Act, 28 U.S.C. § 1651(a), to prevent a complete transformation of the status of the Association for a short period of time pending the outcome of the suit so long as the hearing is held expeditiously.⁴

When Congress enacted § 1464(d)(6)(A), its intent was to provide the Plaintiffs the right to contest the placing of its property in receivership. It seems logical to assume that in so providing, Congress intended to restore the Association to a wronged Plaintiff if the appointment of a receiver was effectuated without statutory justification. If this Court were powerless to place some limits on the ability of the Defendants to dispose of the property, particularly with respect to the involvement of the rights of third parties, the remedy afforded by Congress could be rendered meaningless.

It is inconceivable that Congress intended to so limit the power of the judiciary that a District Court might have to some day lament to a prevailing Plaintiff-Association in a § 1464 proceeding:

"On the facts, the Association wins; however, because of the law, `all the king's horses and all the king's men can't put * * *.'"

Defendants rely on the case of First Savings & Loan Association v. First Federal Savings & Loan Association of Hawaii, 547 F.Supp. 988 (D.Hawaii, 1982) for the proposition that this Court lacks jurisdiction to fashion an equitable remedy pending the outcome of the suit. Plaintiffs in First Savings, supra, filed their complaint for the removal of the receiver thirteen (13) months beyond the 30-day limit imposed by 12 U.S.C. § 1464(d)(6)(A). First Savings, 547 F.Supp. at 995. Plaintiff...