Gross v. Bell Sav. Bank PaSA, RTC-R

Decision Date05 October 1992
Docket NumberRTC-C,RTC-R,No. 92-1196,92-1197,No. 92-1197,Nos. 92-1196,92-1196,s. 92-1196
Citation974 F.2d 403
Parties, 15 Employee Benefits Cas. 2758 Jay M. GROSS, as Trustee for Bell Savings Holdings, Inc. Money Purchase Pension Plan and Bell Savings Holdings, Inc. Profit Sharing Plan v. BELL SAVINGS BANK PA SA, in Receivership, Resolution Trust Corporation as Receiver; Bell Federal Savings Bank, in Conservatorship, Resolution Trust Corporation as Conservator Resolution Trust Corporation as Receiver for Bell Savings Bank PaSA ("eceiver") and Resolution Trust Corporation as Conservator for Bell Federal Bank ("onservator"). Appellants inRESOLUTION TRUST CORPORATION, as Receiver for Bell Savings Bank PaSA; and Resolution Trust Corporation, as Conservator for Bell Federal Savings Bank, Petitioners inv. The Honorable Lowell A. REED, Jr., United States District Court Judge in the Eastern District of Pennsylvania; and Jay Gross, as Trustee for Bell Savings Holdings, Inc. Money Purchase Pension Plan and Bell Savings Holdings, Inc. Profit Sharing Plan.
CourtU.S. Court of Appeals — Third Circuit

Alan S. Fellheimer (argued), Judith E. Fellheimer, Maia Caplan, Fellheimer & Eichen, P.C., Philadelphia, Pa., for appellee/respondents.

Michael R. Lastowski, Mark C. Levy, Patricia A. McElroy, Saul, Ewing, Remick & Saul, Philadelphia, Pa., Kirk K. Van Tine (argued), Timothy S. Durst, Baker & Botts, Richard T. Aboussie, Vice President and Associate Gen. Counsel, P. Matthew Sutko, Resolution Trust Corp., Washington, D.C., Stephen G. Burns, Section Chief (Litigation), Frank A. Mayer, III, Resolution Trust Corp., Valley Forge, Pa., for appellants/petitioners.

Before: MANSMANN, SCIRICA and ROTH, Circuit Judges.

OPINION OF THE COURT

ROTH, Circuit Judge:

In this expedited appeal we are faced with the crucial issue of a federal court's power to enjoin aspects of the Resolution Trust Corporation's (RTC) administration of the savings and loan crisis. Appellees Jay and Nathaniel Gross 1 sought an injunction requiring the appellant RTC to release nearly $500,000 of pension and profit-sharing assets in its control. The district court granted the requested relief. Because we find on these facts that an injunction would interfere with the powers granted the RTC under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub.L. No. 101-73, 103 Stat. 183 (1989), we will reverse.

I.

From 1971 to 1991, Jay and Nathaniel Gross served as high-ranking officers of Bell Savings Bank PaSA (Bell Savings), a now-defunct savings institution in Pennsylvania. As employees of the bank, the Grosses held substantial deposits with Bell Savings, totalling nearly $500,000, in the form of pension and profit sharing funds.

On March 15, 1991, the Director of the Office of Thrift Supervision (OTS) determined, pursuant to § 5(d)(2) of the Home Owners' Loan Act, 12 U.S.C.A. § 1464(d)(2) (Supp.1992), and § 11(c)(6) of the Federal Deposit Insurance Act, 12 U.S.C.A. § 1821(c)(6) (1989), that Bell Savings had been managed under "unsafe and unsound practices," which were likely to lead to losses that would "deplete all or substantially all of its capital." See 12 U.S.C.A. § 1821(c)(5)(A) & (B) (1989 & Supp.1992). On that date, OTS took control of Bell Savings, removed the Grosses from office, and appointed the RTC as the bank's conservator. As conservator, the RTC was charged with managing the ongoing affairs of the bank. Within days, Bell Savings' parent company, Bell Holdings, Inc., agreed with the RTC to discontinue the bank's pension and profit sharing plans, for which Nathaniel Gross was trustee. App.P, Grosses' Verified Complaint, p 8. The affected funds, which included the appellees' $500,000, were to be distributed once the decision to terminate the plans was approved by the IRS.

Four days into Bell Savings' conservatorship, the OTS decided that the bank could no longer be maintained as an ongoing concern. OTS placed the bank into receivership, and as receiver the RTC was charged with winding up the institution's affairs. Simultaneously, the OTS appointed RTC as conservator of the newly-chartered Bell Federal Savings Bank (Bell Federal). Bell Savings and Bell Federal entered into a Purchase and Assumption Agreement (the Purchase Agreement) which transferred certain assets and liabilities of the old bank to the new bank. The transferred obligations included, inter alia, demand deposits, App. O, Purch. Agreement § 2.1(a), and vested liabilities under Bell Savings' pension and profit sharing plans, App. O, Purch. Agreement § 2.1(g). Under § 9.3 of the Agreement, however, Bell Savings retained the right to order Bell Federal to withhold certain deposits from distribution that are necessary to offset depositor liabilities to the bank. App. O, Purch. Agreement § 9.3. 2

In April 1991, after they were notified of the RTC's intention to terminate Bell Savings' pension and profit-sharing plans, the Grosses attempted to withdraw their deposits in those plans from the bank. See App. Q (letter from Jay Gross to Bell Savings). The Grosses made further withdrawal attempts in September and November 1991, and in early January 1992. See App. P, Verified Complaint pp 11-12, 24. Relying on the withholding provision in § 9.3 of the Purchase Agreement, the RTC refused to distribute the funds, allegedly because the Grosses were under investigation for their role in the bank's failure. 3

On January 15, 1992, the Grosses filed a complaint in the Eastern District of Pennsylvania, on behalf of all participants in the pension and profit sharing plans, seeking a temporary restraining order directing "the Resolution Trust Company as receiver and/or conservator of Bell Savings Bank" to release the deposits. On the same day, the Grosses filed a motion for a preliminary injunction seeking the same relief. 4 The proceeding was subsequently narrowed to the amounts held in the Grosses' accounts, as the RTC informed the court that it would not object to the withdrawal and transfer of any other plan participant's account balance. 5

The Grosses alleged that by withholding the funds the RTC had breached its fiduciary duty under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.A. §§ 1001 et seq. (ERISA), and violated the due process clause of the Fifth Amendment. Without immediate relief, the complaint continued, Bell Federal might be placed in receivership and all uninsured deposits with the bank might be lost. 6 The RTC argued that it had the right to withhold the Grosses' account balances under both FIRREA and the Purchase Agreement because of the Grosses' liabilities to the bank. In support of its position in opposition to the preliminary injunction, the RTC submitted an affidavit of its investigator detailing the alleged fraud the bank suffered at the Grosses' hands.

On February 28, 1992, the district court denied the Grosses' request for a temporary restraining order. Though the court found that it had the power to issue an order requiring the RTC to release the funds, the court concluded that the Grosses had not successfully demonstrated a reasonable likelihood of success on the merits of either claim asserted. App. C, 2/28/92 Order at 6. Both parties filed motions for reconsideration. The RTC claimed error in the court's statutory analysis, arguing that FIRREA's anti-injunction provision prevented the court from considering the relief granted. The Grosses alleged that the court overlooked an additional cause of action not formally captioned in their brief: a depositor's common law right to withdraw deposits upon demand. See App. L, Memorandum in Support of Order at 9.

On March 12, 1992, after reconsidering the claims raised by the parties, the district court granted the Grosses' request for a preliminary injunction. Despite the RTC's objection, the court again found on reconsideration that it had the ability to issue an injunction but reversed its decision on the merits and held that the Grosses had shown a likelihood of success on their common law depositor claim. App. L. The RTC was directed to place the Grosses' funds in escrow with the court.

The RTC appealed the preliminary injunction order, filed motions to suspend the injunction pending appeal and to expedite briefing, and filed a petition for a writ of mandamus requiring the district court to vacate his orders regarding the injunction. On March 24, 1992, a panel of this court granted the RTC's motion for expedited briefing and denied its motion to suspend the injunction.

II.

This case presents the question of whether a federal court may order the RTC to release certain pension and profit-sharing funds of a failed savings institution. The district court enjoined the RTC, as both Receiver of Bell Savings and Conservator of Bell Federal, from withholding the disputed funds.

We review the district court's issuance of the preliminary injunction for an abuse of discretion. As part of this inquiry, we review de novo issues of law, such as the court's ability to enter such a remedy. See Rosa v. RTC, 938 F.2d 383, 388 (3d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 582, 116 L.Ed.2d 608 (1991).

Initially, we must determine whether a federal court has the power to enjoin the RTC's behavior. We conclude that it does not, for the following reasons. Under FIRREA, Congress gave the RTC the "power to take all actions necessary to resolve the problems posed by a financial institution in default." H.R.Rep. No. 101-54(I), 101st Cong., 1st Sess. 415 (1989), reprinted in 1989 U.S.Code Cong.Admin.News 86, 211. To this end, courts are generally not permitted to enjoin any actions the RTC takes in its role as receiver or conservator. FIRREA's § 1821(j) states:

Except as provided in this section, no court may take any action, except at the request of the Board of Directors by regulation or order, to restrain or affect the exercise of powers...

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