United Liberty Life Ins. Co. v. Ryan
| Decision Date | 17 February 1993 |
| Docket Number | No. 91-3933,91-3933 |
| Citation | 985 F.2d 1320 |
| Parties | Fed. Sec. L. Rep. P 97,370 UNITED LIBERTY LIFE INSURANCE COMPANY, Plaintiff-Appellant, v. Timothy RYAN, Director, Office of Thrift Supervision, United States Department of the Treasury; Resolution Trust Corporation; Federal Deposit Insurance Corporation; Pinnacle West Capital Corporation; Richard Snell; Henry B. Sargeant Jr.; Karl Eller; Pamela Grant; John R. Norton III; Donald N. Soldwedel; Maurice R. Tanner; Keith L. Turley; Douglas J. Wall; and Faye Widenmann, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Michael H. Siegler (argued and briefed), Mariann Yevin, (briefed), Ross, Jung, Phillipps & Carson, Cincinnati, OH, for plaintiff-appellant.
Elizabeth Baringhaus Mattingly, Office of the U.S. Atty., Cincinnati, OH, Aaron B. Kahn, David H. Enzel (argued and briefed), Office of the Dept. of Treasury, Thrift Supervision, Washington, DC, Joseph H. Vahlsing, Cors, Bassett, Kohlhepp, Halloran & Moran, Cincinnati, OH, E. Scott Dosek (argued and briefed), Kutak, Rock & Campbell, Phoenix, AZ, John T. Downing (argued and briefed), Washington, DC, Nancy A. Stratta, Snell & Wilmer, Phoenix, AZ, Robert A. Pitcairn, Jr., Katz, Teller, Brant & Hild, Cincinnati, OH, Richard A. Derevan (briefed), Snell & Wilmer, Irvine, CA, James R. Condo (argued), Snell & Wilmer, Phoenix, AZ, for defendants-appellees.
Before: GUY and RYAN, Circuit Judges; and CONTIE, Senior Circuit Judge.
This case is concerned primarily with the powers possessed by the federal entities charged with managing the nation's troubled savings and loan institutions. In 1989, Congress responded to the growing crisis in the savings and loan industry by passing legislation that created and empowered new supervisory entities to deal with the institutions, as well as granting new powers to existing agencies. This appeal requires us to consider the extent to which federal courts may exercise jurisdiction over claims against the implicated federal entities. In addition, we must address the district court's exercise of personal jurisdiction over defendants located outside the forum state.
Plaintiff United Liberty Life Insurance Company appeals from the district court's grant of summary judgment for all defendants. The federal defendants are Timothy Ryan, in his capacity as Director of the Office of Thrift Supervision (OTS); the Resolution Trust Corporation (RTC); and the Federal Deposit Insurance Corporation (FDIC). The private defendants are Pinnacle West Capital Corporation and its officers and directors. The dispute arose from a plan to save a failing savings institution, MeraBank, that was owned by Pinnacle West.
United Liberty claims that the federal defendants violated its due process rights and contract rights, and breached an indenture agreement, and that the private defendants violated civil RICO laws as well as state and federal securities laws.
Although this appeal presents numerous substantive issues, we dispose of the case on jurisdictional grounds. We conclude that the district court lacked jurisdiction to consider United Liberty's claims against the federal defendants. We do not decide, however, whether the district court would have jurisdiction over the private defendants, and remand the case for further proceedings.
Before tracing the history of this litigation, we briefly describe the parties. Plaintiff United Liberty is an Ohio insurance company. Defendant OTS is a federal regulatory body, established by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub.L. No. 101-73, 103 Stat. 183 (1989). When it enacted FIRREA, Congress eliminated the Federal Savings and Loan Insurance Corporation (FSLIC) and the Federal Home Loan Bank Board (FHLBB), and created OTS to assume the regulatory functions of these two bodies. OTS was vested with the power to regulate the savings and loan industry. 12 U.S.C. §§ 1462a, 1463.
Defendant FDIC is also a federal regulatory body. Under FIRREA, it assumed the insurance functions of FSLIC and FHLBB, and is charged with the duties of regulator, insurer, and receiver of banking institutions. 12 U.S.C. § 1811 et seq. Defendant RTC succeeded the FSLIC as the assistor, conservator, and receiver of troubled savings institutions.
Defendant Pinnacle West, formerly known as AZP Group, Inc., is an Arizona savings and loan holding company. The individual defendants were, at the times relevant to this case, officers or directors, or both, of Pinnacle West.
In addition to the defendants who are parties to this appeal, Pacholder Associates, Inc. was originally named as a defendant. Pacholder was the agent of, and investment advisor for, United Liberty.
In December 1986, AZP, later to become Pinnacle West, acquired all the stock in MeraBank, a federally chartered savings bank. At the time of the acquisition, MeraBank was Arizona's third largest financial institution. Before acquiring control of MeraBank, AZP had to comply with conditions prescribed by the FHLBB. These conditions were contained in a document styled "Stipulation of AZP Group, Inc.". In it, AZP stipulated to FSLIC as follows:
As long as it controls MeraBank, AZP will cause the net worth of MeraBank to be maintained at a level consistent with that required by [relevant banking regulations] and, as necessary, will infuse sufficient additional equity capital, in a form satisfactory to the Supervisory Agent, to effect compliance with such requirement.
The stipulation concluded with the following statement: "These stipulations are provided solely for the benefit of the FSLIC and the FHLBB, and may not be enforced by any other party."
The existence of the stipulation was published in AZP's 1986 Form 10-K filed with the Securities and Exchange Commission. The form stated:
The Company has stipulated to the FSLIC that, as long as it controls MeraBank, the Company will cause the regulatory capital of MeraBank to be maintained at the level required by applicable regulations and, as necessary, will infuse sufficient additional equity capital to effect compliance with such requirement.
In addition, United Liberty alleges that the capital infusion requirement was described in the annual reports of Pinnacle West.
In August and October 1987, United Liberty, acting through its agent, Pacholder, purchased two subordinated MeraBank debentures with a total value of $1 million, and due in 1996. The debentures were issued pursuant to an indenture dated June 30, 1984, between MeraBank and Valley National Bank of Arizona. The debentures were not insured by any federal agency. The president of United Liberty attested that United Liberty would not have purchased the debentures in the absence of AZP's commitment to the financial integrity of MeraBank.
In 1989, MeraBank fell below minimum capital requirements. In December 1989, Pinnacle West, the successor to AZP, and OTS, acting as the successor in interest to FSLIC and FHLBB, entered into a settlement agreement. OTS agreed to release Pinnacle West from its obligations under the stipulation if Pinnacle West delivered to MeraBank a cash payment of $300 million plus interest, and a note of $150 million plus interest.
In January 1990, OTS placed MeraBank in receivership and appointed RTC as receiver. OTS also authorized a charter for a new savings institution, MeraBank Federal Savings Bank, and appointed the RTC conservator of the new institution. At about the same time, the RTC, as receiver of MeraBank, transferred substantially all of MeraBank's assets to MeraBank Federal; however, MeraBank Federal did not assume any of the obligations owed to the holders of the MeraBank debentures, including, of course, United Liberty.
In March 1990, Pinnacle West delivered to RTC, as receiver of MeraBank, approximately $465 million in a cash payment and a note. At this time, RTC and OTS released Pinnacle West and its directors and officers from any obligations under the stipulation and from any other obligation to infuse capital into MeraBank. Also in March 1990, the FDIC separately released Pinnacle West from any claims the FDIC might have against it.
In February 1991, United Liberty filed an amended complaint in the United States District Court for the Southern District of Ohio. It contained seven counts, which we summarize as follows:
--Count One alleged that United Liberty purchased the debentures in reliance on the stipulation. By releasing Pinnacle West from its obligations under the stipulation, OTS, RTC, and FDIC substantially impaired the value of the debentures and thus took United Liberty's property without due process of law in violation of the Fifth Amendment.
--Count Two alleged that the private defendants issued false annual reports on which purchasers of the debentures relied. This conduct amounted to a pattern of racketeering, violating the civil provisions of RICO, 18 U.S.C. § 1962(b).
--Count Three alleged that the private defendants engaged in fraud in selling the debentures.
--Count Four alleged that United Liberty was a third-party beneficiary of the stipulation, and that the federal defendants' actions in releasing Pinnacle West from its obligations without the consent of United Liberty was a breach of the stipulation.
--Count Five alleged that RTC and OTS breached the indenture when they transferred the assets of MeraBank into MeraBank Federal while failing to transfer MeraBank's obligations under the indenture.
--Count Six alleged a violation of the Arizona Consumer Fraud Act.
--Count Seven alleged negligence on the part of Pacholder in its role as a fiduciary.
United Liberty sought actual and punitive damages against the private defendants in the approximate amount of $7.2 million. It also sought a declaration that the actions of the federal defendants violated United Liberty's rights under the Fifth Amendment; requested a permanent injunction...
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