Brandenburg v. First Maryland Sav. and Loan, Inc.

• Decision Date: 08 May 1987
• Docket Number: Civ. No. S 86-3556.
• Citation: 660 F. Supp. 717
• Parties: John P. BRANDENBURG; John P. Huffman, as custodian for Robert F. Coon, a minor; Baikunth K. Singh; Mridulah Singh; custodian for Anup Singh, a minor, and for Alka Singh, a minor; and Frank J. Talbot v. FIRST MARYLAND SAVINGS AND LOAN, INC.; Julian Seidel; Frank J. Calcara; David P. Cole; Robert Corletta; Edward A. Dacy; Michael Finci; Ronald Freudenheim; Alan S. Kerxton; Benjamin Maisel; Gloria Meyers; James Porter; Anne Sherman; Charles C. Hogg, II; Frances P. Anderson; Leonard Bass; Dennis B. Berlin; Michael A. Deitz; Jerome F. Dolivka; John C. Donohue, Sr.; Henry R. Elsnic; John D. Faulkner; James D. Laudeman; Terry L. Neifeld; George W.H. Pierson; Paul B. Trice; Baltimore County Savings and Loan Association, Inc.; Chevy Chase Savings and Loan Association, Inc.; Cowenton Savings and Loan Association; Fairmount Savings and Loan Association; Madison and Bradford Savings and Loan Association; Parkville Savings and Loan Association; and Sharon Savings and Loan Association.
• Court: U.S. District Court — District of Maryland

660 F. Supp. 717

John P. BRANDENBURG; John P. Huffman, as custodian for Robert F. Coon, a minor; Baikunth K. Singh; Mridulah Singh; custodian for Anup Singh, a minor, and for Alka Singh, a minor; and Frank J. Talbot v. FIRST MARYLAND SAVINGS AND LOAN, INC.; Julian Seidel; Frank J. Calcara; David P. Cole; Robert Corletta; Edward A. Dacy; Michael Finci; Ronald Freudenheim; Alan S. Kerxton; Benjamin Maisel; Gloria Meyers; James Porter; Anne Sherman; Charles C. Hogg, II; Frances P. Anderson; Leonard Bass; Dennis B. Berlin; Michael A. Deitz; Jerome F. Dolivka; John C. Donohue, Sr.; Henry R. Elsnic; John D. Faulkner; James D. Laudeman; Terry L. Neifeld; George W.H. Pierson; Paul B. Trice; Baltimore County Savings and Loan Association, Inc.; Chevy Chase Savings and Loan Association, Inc.; Cowenton Savings and Loan Association; Fairmount Savings and Loan Association; Madison and Bradford Savings and Loan Association; Parkville Savings and Loan Association; and Sharon Savings and Loan Association.

Civ. No. S 86-3556.

United States District Court, D. Maryland.

May 8, 1987.

Arthur M. Kaplan, Edward B. Rock, Donald L. Perelman, Fine, Kaplan and Black, Philadelphia, Pa., Andrew P. Goldstein, Washington, D.C., Kieron F. Quinn, Robert B. Kershaw, Thomas J. Minton, Quinn, Ward and Kershaw, P.A., Baltimore, Md., for plaintiffs.

Michael J. Travieso, Michael W. Skojec, Gallagher, Evelius & Jones, Baltimore, Md., for defendants Baltimore County Sav. & Loan Assn., Cowenton Sav. & Loan Assn., Fairmount Sav. & Loan Assn. & Madison and Bradford Sav. & Assn.

William W. Cahill, Sherry H. Flax, Weinberg & Green, Baltimore, Md., David J. Cynamon, Shaw, Pittman, Potts & Trowbridge, Washington, D.C., for defendant Chevy Chase Sav. Bank.

Daniel F. Goldstein, Elizabeth M. Kameen, Brown & Goldstein, Baltimore, Md., for defendants Finci & Corletta.

Andrew H. Marks, David B. Siegel, Luther Zeigler, Crowell & Moring, Washington, D.C., for defendants Bass, Dietz, Dolivka & Elsnic.

Francis S. Brocato, Baltimore, Md., for defendant Trice.

John H. Zink, Cook, Howard, Downes & Tracy, Towson, Md., for defendant Hogg.

Richard H. Gins, Gins & Seeber, P.C., Washington, D.C., for defendant Dacy.

Thomas G. Bodie, William F. Mosner, Power & Mosner, Towson, Md., for defendant Laudeman.

Stephen C. Winter, T. Bruce Hanley, Ridgely, Hanley & Winter, Towson, Md., for defendants Anderson and Donohue.

John T. Kotelly, Dickstein, Shapiro & Morin, Washington, D.C., for defendant Calcara.

Jerold Oshinsky, Nancy A. Markowitz, Anderson, Baker, Kill & Olick, Washington, D.C., for defendant Pierson.

Howard B. Possick, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., for defendant Faulkner.

James P. Ulwick, Michael L. Heikes, Kramon & Graham, P.A., Baltimore, Md., for defendant Seidel.

George A. Nilson, Stephen J. Immelt, Sheila Mossmiller Vidmar, Piper & Marbury, Baltimore, Md., for defendant First Maryland Sav. & Loan Assn.

Alva P. Weaver, III, Baltimore, Md., Charles F. Stein, III, Stein & Jett, Towson, Md., for defendant Parkville Sav. & Loan Assn.

Michael Schatzow, Melnicove, Kaufman, Weiner, Smouse & Garbis, Baltimore, Md., for defendant Sharon Sav. & Loan Assn.

Harold H. Burns, Jr., Maureen F. Mackey, Baltimore, Md., for defendant Neifeld.

Paul F. Kemp, Rockville, Md., for defendant Sherman.

Alan L. Tanenbaum, Bethesda, Md., for defendant Meyers.

Lawrence S. Greenwald, William D. Gruhn, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, Baltimore, Md., for defendant Kerxton.

SMALKIN, District Judge.

I.

On November 24, 1986, plaintiffs, John P. Brandenburg, and John P. Huffman, as custodian for Robert F. Coon, a minor, filed this action against thirty-two defendants (Paper No. 1). On January 20, 1987, plaintiffs filed an amended complaint, joining more plaintiffs and defendants (Paper No. 21.5). The amended complaint lists the parties as follows:

Plaintiffs — John P. Brandenburg; John P. Huffman, as custodian for Robert F. Coon, a minor; Baikunth K. Singh; Mridulah Singh, custodian for Anup Singh, a minor, and for Alka Singh, a minor; and Frank J. Talbot;

Defendants — First Maryland Savings and Loan, Inc. ("First Maryland"); Julian Seidel; Frank J. Calcara; David P. Cole; Robert Corletta; Edward A. Dacy; Michael Finci; Ronald Freudenheim; Alan S. Kerxton; Benjamin Maisel; Gloria Meyers; James Porter; Anne Sherman (collectively "the First Maryland defendants"); Charles C. Hogg, II; Frances P. Anderson; Leonard Bass; Dennis B. Berlin; Michael A. Deitz; Jerome F. Dolivka; John C. Donohue, Sr.; Henry R. Elsnic; John D. Faulkner; James D. Laudeman; Terry L. Neifeld; George W.H. Pierson; Paul B. Trice; Baltimore County Savings and Loan Association, Inc.; Chevy Chase Savings and Loan Association, Inc.; Cowenton Savings and Loan Association; Fairmount Savings and Loan Association; Madison and Bradford Savings and Loan Association; Parkville Savings and Loan Association; and Sharon Savings and Loan Association (collectively "the MSSIC defendants") (Paper No. 1).

Plaintiffs filed this action individually and on behalf of a class consisting of all persons who, as of August 23, 1985, had money deposited in First Maryland Savings and Loan (id.). The action has been dismissed voluntarily as against defendants Sharon Savings and Loan Association (Paper No. 52) and First Maryland (Paper No. 55).¹

Pending are the motions to dismiss of the following defendants: Parkville (Paper No. 30); Meyers (Paper No. 31); Chevy Chase (Paper No. 32); Finci and Corletta (Paper Nos. 33 & 36); Baltimore County, Cowenton, Fairmount, and Madison and Bradford Savings and Loans ("the Savings and Loan Group") (Paper No. 34); Anderson, Bass, Dietz, Dolivka, Donohue, Elsnic, Faulkner, Laudeman, Neifeld, and Pierson (Paper No. 35); Trice (Paper No. 37); Seidel (Paper No. 38); Sherman (Paper No. 39); Calcara (Paper No. 41); Hogg (Paper No. 42); and Kerxton (Paper No. 51). Plaintiffs have responded (Paper No. 54). Replies have been filed by the following defendants: the Savings and Loan Group (Paper No. 56); Chevy Chase (Paper No. 57); MSSIC directors (Paper No. 58); and Parkville (Paper No. 59). No hearing is necessary to decide these motions. Local Rule 6(G), D.Md.

II.

A. Factual Background

As most people in this State are aware, some more painfully so than others, in May 1985, rumors of the financial instability of two savings and loans — Old Court Savings and Loan and Merritt Savings and Loan — caused runs on those two institutions. Both Old Court and Merritt were insured by the Maryland Savings-Share Insurance Company ("MSSIC"). On May 13, 1985, conservators were appointed for Old Court and Merritt.

On May 14, 1985, Governor Hughes issued an Executive Order declaring a state of public crisis and emergency. That order, inter alia, limited withdrawals from all MSSIC-insured associations to a maximum of $1,000.00 per account, per 30-day period. On May 21, 1985, that order was amended to provide for additional withdrawals under certain conditions. The restrictions applied to over 100 MSSIC-insured institutions, including First Maryland.

B. The Legislative and Judicial Framework

With the onset of the crisis, Governor Hughes called the Maryland General Assembly into a special session to enact and amend legislation to respond to the crisis. The special session lasted from May 17, 1985 to May 28, 1985. At that session, eleven bills were enacted regarding the savings and loan crisis. The descriptions of the purposes of some of those bills are as follows.

CHAPTER 1

(Senate Bill 1)

AN ACT concerning

Savings and Loan Associations — Governor's Emergency Powers

FOR the purpose of authorizing the Governor in emergency situations, by executive order, to take certain action regarding savings and loan associations under certain circumstances; establishing procedures for legislative review; providing for the termination of this authority; ratifying and confirming certain action; requiring certain fees to be waived and prohibiting certain information from being recorded on a person's credit record; providing for the construction of this Act; providing for certain penalties; making this Act an emergency measure;

1985 Md.Laws, 1st Sp.Sess., ch. 1.

CHAPTER 2

(House Bill 2)

AN ACT concerning

Savings and Loan Associations — Conservatorship — Receivership

FOR the purpose of altering the conditions under which the court may appoint a conservator of a savings and loan association; altering and expanding the powers of a conservator of a savings and loan association; altering the conditions under which the court may appoint a receiver for a savings and loan association; making this Act an emergency measure; ...

1985 Md.Laws, 1st Sp.Sess., ch. 2.

CHAPTER 4

(House Bill 4)

AN ACT concerning

Creation of a State Debt — Savings and Loan Association Capital Stabilization and Insurance Loan

FOR the purpose of authorizing the creation of a State Debt in the amount of $100,000,000, the proceeds to be used for the purpose of providing monies for the Savings and Loan Association Capital Stabilization Fund created under this act and the Maryland Deposit Insurance Fund; providing for the creation of the Savings and Loan Association Capital Stabilization Fund, the composition of the Fund, and the management, supervision, and application of the Fund; ...

Preamble

WHEREAS, Public confidence in the security of deposits in privately insured savings and loan associations has been severely eroded by recent events in Ohio; and

WHEREAS, The events in Ohio have led to heightened sensitivity in Maryland to the fiscal integrity and financial stability of privately insured savings and loan associations; and

WHEREAS, Two major State-chartered, privately insured savings and loan associations are under court ordered conservatorships; and

WHEREAS, These events and the consequent erosion of public confidence have led to the proclamation by the Governor of an emergency sufficiently grave to require his

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