CityFed Financial Corp. v. Office of Thrift Supervision, Nos. 94-5254

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtTATEL
Citation58 F.3d 738
PartiesCITYFED FINANCIAL CORP., et al., Appellants, v. OFFICE OF THRIFT SUPERVISION, United States Department of Treasury and Jonathan L. Fiechter, Acting Director of the Office of Thrift Supervision, Appellees.
Decision Date11 July 1995
Docket Number94-5255,Nos. 94-5254

Page 738

58 F.3d 738
313 U.S.App.D.C. 178
CITYFED FINANCIAL CORP., et al., Appellants,
v.
OFFICE OF THRIFT SUPERVISION, United States Department of
Treasury and Jonathan L. Fiechter, Acting Director
of the Office of Thrift Supervision, Appellees.
Nos. 94-5254, 94-5255.
United States Court of Appeals,
District of Columbia Circuit.
Argued May 8, 1995.
Decided July 11, 1995.

Page 740

Appeals from the United States District Court for the District of Columbia (No. 94cv01273).

Frank J. Eisenhart argued the cause, appellants. With him on the briefs for CityFed Financial Corp. were Arthur W. Leibold, Jr., Bettina L. Alexander and Neil R. Crowley.

Ronald W. Stevens and Douglas M. Kraus were on the briefs, for appellants Gordon E. Allen, et al.

Dirk S. Roberts, Asst. Chief Counsel, U.S. Dept. of Treasury, argued the cause, for appellees. With him on the brief were Carolyn B. Lieberman, Acting Chief Counsel, Thomas J. Segal, Deputy Chief Counsel, and Kerry W. Kircher, Sr. Trial Atty., U.S. Dept. of Treasury.

Before: EDWARDS, Chief Judge, ROGERS and TATEL, Circuit Judges.

Opinion of the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

In June of 1994, the Office of Thrift Supervision issued a temporary cease and desist order against CityFed Financial Corporation that froze virtually all of CityFed's assets. According to OTS, the Corporation failed to use those assets to comply with the net worth requirements for its subsidiary bank, City Federal Savings and Loan, which OTS had placed into receivership several years earlier. Arguing that the receivership ended its control over its subsidiary and therefore OTS's jurisdiction over it as a "holding company," CityFed sought a preliminary injunction barring OTS from enforcing the temporary order. We agree with the district court that because the alleged violations occurred before the receivership, OTS had jurisdiction to issue the cease and desist order. Because CityFed failed to demonstrate that the temporary cease and desist order would cause it irreparable harm, we also affirm the district court's denial of the preliminary injunction.

I.

The savings and loan industry developed primarily as a means of "financ[ing] the purchase and construction of housing." Transohio Sav. Bank v. Director, OTS, 967 F.2d 598, 601 (D.C.Cir.1992); see also H.R.Rep. No. 54, pt. 1, 101st Cong., 1st Sess. 291 (1989) [hereinafter House Report], reprinted in 1989 U.S.C.C.A.N. 86, 87. With the high interest rates of the late 1970s and early 1980s, savings and loans found themselves "locked into long-term, low-yielding, fixed-rate mortgages," while depositors transferred their assets from savings and loans into higher-yield investments. House Report at 295, U.S.C.C.A.N.1989, p. 91; see Transohio, 967 F.2d at 602. In an effort to address the resulting financial instability, the federal government significantly deregulated the savings and loan industry, allowing institutions to participate in much riskier investments. See House Report at 294-98. In combination with economic recession, poor management, and some fraud, failed high-risk investments "left the industry struggling for survival, and ... virtually wiped-out its deposit insurance fund." Id. at 292; see also S.Rep. No. 19, 101st Cong., 1st Sess. 7-10 (1989) [hereinafter Senate Report], U.S.C.C.A.N.1989, p. 88; Transohio, 967 F.2d at 601-04; see generally Graduate Colloquium 1990-91, The S & L Crisis: Death and Transfiguration, 59 Fordham L.Rev. S1, S1-S109 (1991).

In response to the lax regulation and loose capital requirements that it perceived at the root of the savings and loan crisis, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub.L. No. 101-73, 103 Stat. 183 (codified at 12 U.S.C. Sec. 1811 and in scattered sections of U.S.C.). In part, FIRREA was enacted to "establish stronger capital standards for thrifts," thereby providing "a cushion against losses incurred in times of poor financial

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performance." House Report at 307, 310, U.S.C.C.A.N.1989, pp. 103, 106. According to Congress, "if a crisis of this nature is to be prevented from happening again, thrifts must be adequately capitalized against losses." Id. at 310, U.S.C.C.A.N.1989, p. 106; see also Transohio, 967 F.2d at 603-04. In addition to establishing these higher capital requirements, FIRREA was enacted to "enhance the regulatory enforcement powers of the depository institution regulatory agencies to protect against fraud, waste, and insider abuse." House Report at 307-08, U.S.C.C.A.N.1989, pp. 103-104. To increase the effectiveness of the regulatory scheme, Congress consolidated many of the powers and duties of the pre-FIRREA regulatory agencies, the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation, into the newly-created Office of Thrift Supervision. See American Fed'n of Gov't Employees v. FLRA, 46 F.3d 73, 74 (D.C.Cir.1995); Transohio, 967 F.2d at 603; see also FIRREA, Sec. 101(9), (10) (enacting FIRREA to "strengthen the enforcement powers of Federal regulators ... [and] the civil sanctions ... for defrauding or otherwise damaging depository institutions and their depositors").

Among OTS's powers is its ability to initiate administrative proceedings designed to protect savings and loans. See 12 U.S.C. Sec. 1464(d)(1)(A) (Supp. V 1993) (giving OTS Director authority to enforce 12 U.S.C. Sec. 1818). As authorized by 12 U.S.C. Sec. 1818(b)(1) (Supp. V 1993), these proceedings may begin once OTS determines that "any insured depository institution ... or any institution-affiliated party is engaging or has engaged ... in an unsafe or unsound practice ... or is violating or has violated ... a law, rule, or regulation, or any condition imposed in writing by the agency." If one of these conditions exists "in the opinion of" OTS, it "may issue and serve upon ... such party a notice of charges." 12 U.S.C. Sec. 1818(b)(1). After this notice and a hearing, the agency may issue a "permanent" cease and desist order that may require the party "to take affirmative action to correct the conditions resulting from any such violation," id., including restitution in cases of "unjust enrichment" or "reckless disregard for the law," 12 U.S.C. Sec. 1818(b)(6) (Supp. V 1993).

In addition to its permanent cease and desist authority, OTS "may issue a temporary order requiring the depository institution or such party to cease and desist from any ... violation or practice [charged in a section 1818(b)(1) proceeding] and to take affirmative action ... pending the completion of such proceedings." 12 U.S.C. Sec. 1818(c)(1) (Supp. V 1993). OTS can issue such orders, however, only if it

determine[s] that the violation ... or the unsafe or unsound practice or practices, specified in the notice of charges served upon the depository institution or any institution-affiliated party pursuant to paragraph (1) of subsection (b) of this section, or the continuation thereof, is likely to cause insolvency or significant dissipation of assets or earnings of the depository institution, or is likely to weaken the condition of the depository institution or otherwise prejudice the interests of its depositors prior to the completion of the [administrative] proceedings.

12 U.S.C. Sec. 1818(c)(1).

To ensure that holding companies like CityFed do not escape OTS's regulatory authority, FIRREA made most of section 1818, including the permanent and the temporary cease and desist powers, applicable "to any savings and loan holding company ... in the same manner as such subsections apply to a savings association." 12 U.S.C. Sec. 1818(b)(9). Under the statute, a "savings and loan holding company" is "any company which directly or indirectly controls a savings association or controls any other company which is a savings and loan holding company." 12 U.S.C. Sec. 1467a(a)(1)(D) (Supp. V 1993).

To prevent regulated parties from interfering with the comprehensive powers of the federal banking regulatory agencies, Congress severely limited the jurisdiction of courts to review ongoing administrative proceedings brought by banking agencies. Thus, with respect to actions under section 1818, section 1818(i)(1) provides that, "except as otherwise provided in this section ... no court shall have jurisdiction to affect by injunction

Page 742

or otherwise the issuance or enforcement of any notice or order under [this] section, or to review, modify, suspend, terminate, or set aside any such notice or order." 12 U.S.C. Sec. 1818(i)(1) (Supp. V 1993). Temporary cease and desist orders, however, are reviewable. Section 1818(c)(2) allows subjects of temporary cease and desist orders under section 1818(c)(1) to apply, within ten days, to their home federal judicial district or to the United States District Court for the District of Columbia "for an inju[n]ction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of such order pending the completion of the administrative proceedings ... and such court shall have jurisdiction to issue such injunction." 12 U.S.C. Sec. 1818(c)(2). It is under this provision that CityFed, the subject of an OTS enforcement proceeding, initiated this litigation in the district court.

CityFed began operating in 1984 as a savings and loan holding company with control over City Federal Savings Bank. As required by the Federal Home Loan Bank Board, the federal regulatory agency at the time, CityFed signed a net worth maintenance stipulation agreeing to "cause the net worth of City Federal to be maintained at a level consistent with that required by ... the Rules and Regulations for the Federal Savings and Loan Insurance Corporation, as now or hereafter in effect, ... and, as necessary, [to] infuse sufficient additional equity capital, in a form satisfactory to the Supervisory Agent, to effect compliance with such requirement." Stipulation of CityFed Financial Corp. (Dec. 4,...

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362 practice notes
  • Chaplaincy of Full Gospel Churches v. England, No. 05-5143.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 7, 2006
    ...the injunction. E.g., Mova Pharm. Corp., 140 F.3d 1060, 1066 (D.C.Cir.1998) (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746 (D.C.Cir.1995)) (internal quotation marks omitted). A district court must "balance the strengths of the requesting party's arguments in e......
  • Brady Campaign to Prevent Gun Violence v. Salazar, Civil Action No. 08-2243 (CKK).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 19, 2009
    ...may issue even if the showings in other areas are rather weak." Id. (quoting City-Fed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C.Cir.1995)). Nevertheless, the D.C. Circuit has advised that a movant must demonstrate "`at least some injury' for a preliminary injunction ......
  • Humane Society of U.S. v. Kempthorne, No. CIV.A. 06-1279(CKK).
    • United States
    • U.S. District Court — District of Columbia
    • August 9, 2006
    ...See Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1066 (D.C.Cir.1998) (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746 (D.C.Cir.1995)); Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1317-18 "These factors interrelate on a sliding scale and must be balanced agains......
  • Virtus Pharm. v. Garland, Civil Action 21-2308 (CKK)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 22, 2021
    ...Harm The Court next considers whether Virtus has demonstrated “irreparable harm.” CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C. Cir. 1995). To constitute “irreparable harm, ” the injury alleged must be “both certain and great, actual and not theoretical, beyond ......
  • Request a trial to view additional results
362 cases
  • Chaplaincy of Full Gospel Churches v. England, No. 05-5143.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • July 7, 2006
    ...the injunction. E.g., Mova Pharm. Corp., 140 F.3d 1060, 1066 (D.C.Cir.1998) (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746 (D.C.Cir.1995)) (internal quotation marks omitted). A district court must "balance the strengths of the requesting party's arguments in e......
  • Brady Campaign to Prevent Gun Violence v. Salazar, Civil Action No. 08-2243 (CKK).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • March 19, 2009
    ...may issue even if the showings in other areas are rather weak." Id. (quoting City-Fed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C.Cir.1995)). Nevertheless, the D.C. Circuit has advised that a movant must demonstrate "`at least some injury' for a preliminary injunction ......
  • Humane Society of U.S. v. Kempthorne, No. CIV.A. 06-1279(CKK).
    • United States
    • U.S. District Court — District of Columbia
    • August 9, 2006
    ...See Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1066 (D.C.Cir.1998) (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746 (D.C.Cir.1995)); Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1317-18 "These factors interrelate on a sliding scale and must be balanced agains......
  • Virtus Pharm. v. Garland, Civil Action 21-2308 (CKK)
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 22, 2021
    ...Harm The Court next considers whether Virtus has demonstrated “irreparable harm.” CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C. Cir. 1995). To constitute “irreparable harm, ” the injury alleged must be “both certain and great, actual and not theoretical, beyond ......
  • Request a trial to view additional results

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