FED. SAV. AND LOAN INS. v. GLEN ELLYN SAV. & LOAN
| Citation | 606 F. Supp. 91 |
| Decision Date | 13 November 1984 |
| Docket Number | No. 84 C 7685.,84 C 7685. |
| Parties | FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Petitioner, v. GLEN ELLYN SAVINGS AND LOAN ASSOCIATION, Respondent. |
| Court | U.S. District Court — Northern District of Illinois |
H. Joan Nichols, Gerald F. Chapman, Rosemary Stewart, Washington, D.C., Linda A. Wawzenski, Asst. U.S. Atty., Chicago, Ill., for petitioner.
Robert C. Liston, Wheaton, Ill., John Franklin Rosch, Glen Ellyn, Ill., for respondent.
Federal Savings and Loan Insurance Corporation ("FSLIC") has filed its Petition under 12 U.S.C. § 1730(k)(2)1 for enforcement of a cease and desist order (the "Order") issued August 11, 1976 against Glen Ellyn Savings and Loan Association ("Glen Ellyn"), an institution insured by FSLIC. For the reasons stated in this memorandum opinion and order, FSLIC's petition is granted.
In 1976 FSLIC charged Glen Ellyn with numerous violations of federal and state regulatory provisions applicable to Illinois-chartered, FSLIC-insured savings and loan associations. Those violations, in FSLIC's view, were "unsafe or unsound practices" warranting the entry of a cease and desist order as provided in Section 1730(e). Glen Ellyn chose not to contest FSLIC's judgment. It consented to entry of the Order, avoiding the institution of cease-and-desist proceedings under the statute.
Periodic examinations of Glen Ellyn since 1976 have revealed continuing violations of various provisions of the Order. FSLIC has not responded by seeking judicial enforcement of the Order. Instead it has engaged in frequent negotiation and discussion with Glen Ellyn to obtain correction of the violations—informal means upon which FSLIC typically relies to seek compliance with a cease-and-desist order. Only in cases where such efforts repeatedly fail does FSLIC resort to judicial enforcement proceedings.2 This year the examiner's discovery of violations of ten of the Order's 26 provisions prompted FSLIC's resort to this Court for enforcement.3
During this Court's October 5, 1984 evidentiary hearing FSLIC presented the testimony of Larry E. Ferries ("Ferries"), the Federal Home Loan Bank Board ("Board") examiner who conducted the 1984 examination. Ferries listed and explained the multiple violations of the Order reflected in the examination report. FSLIC also submitted copies of reports covering the preceding three years' examinations.
Glen Ellyn offered no testimony at the hearing. It introduced copies of letters submitted in response to FSLIC's examination reports. Def. Ex. 2-6. While those letters question the existence of some of the violations identified by the examiners, they acknowledge the accuracy of the examination reports as to numerous violations and indicate Glen Ellyn's intent to take appropriate corrective action.
Glen Ellyn's real defense to the Petition is a laches argument (tendered by an "Addendum to Answer and Affirmative Defenses," filed the day of this Court's hearing). It contends FSLIC had not sought enforcement of the Order in the more than eight years since it was agreed to, a period in which there have been changes in (1) the ownership of Glen Ellyn's common stock, (2) the composition of Glen Ellyn's board of directors and (3) Glen Ellyn's management. Glen Ellyn asserts those changes were predicated, at least in part, on the belief FSLIC would seek no further enforcement of the Order. Under those circumstances, Glen Ellyn says, FSLIC should be barred from enforcement by the equitable doctrine of laches.
In both contractual and statutory terms, FSLIC's right to enforcement is plain. Glen Ellyn's consent to entry of the Order in 1976—and to its enforceability thereafter—was unequivocal (Pl. Ex. 1):
Glen Ellyn stipulates and agrees that said Order shall be deemed to be a "cease-and-desist order which has become final" as defined in Section 407(q)(1)(A) of the Act (12 U.S.C. § 1730(q)(1)(A)), that it fully complies with all requirements of law, and that the said Order shall become effective upon its issuance and be enforceable by the FSLIC under the provisions of Section 407(k)(2) of the Act (12 U.S.C. § 1730(k)(2)).
Nor does the Order contain any expiration provision. Indeed, Section 1730(e)(2) negates any concept comparable to a "sunset law":
A cease-and-desist order ... shall remain effective and enforceable except to such extent as it is stayed, modified, terminated, or set aside by action of the Corporation or a reviewing court.
FSLIC itself has declined to take any such action. In March 1980 Glen Ellyn petitioned FSLIC to terminate the Order. In denying that petition, Board supervisory agent David J. Kalina4 explained (Ans. Ex. B):
That conclusion is buttressed by the language of Section 1730(k)(2), which says in so many words (and without any qualifying language) FSLIC "in its discretion" may seek enforcement in the courts. That discretionary delegation is reflective of Congress' aim in creating the cease-and-desist powers (S.Rep. No. 1482, 89th Cong. 2d Sess., reprinted in 1966 U.S.Code Cong. & Ad.News 3532, 3537-38 (hereafter cited "S.Rep. at—")):
to provide the federal agencies supervising savings and loan associations with "additional flexible and effective supervisory powers" to supplement existing remedies that had proved "too drastic for use in many cases" as well as "too cumbersome to bring about prompt correction when promptness is very often vitally important."
And such vesting of discretion is consistent with the general doctrine that an administrative agency's special knowledge and expertise in the areas of its jurisdiction command judicial respect for the agency's choices as to how it will exercise its remedial powers. NLRB v. Gissell Packing Co., 395 U.S. 575, 612 n. 32, 89 S.Ct. 1918, 1939 n. 32, 23 L.Ed.2d 547 (1969).
Faced with such an uncontrovertible showing of FSLIC's power to obtain enforcement, Glen Ellyn is compelled to fall back on a laches defense. Surprisingly the availability of such a defense to bar enforcement of an FSLIC cease-and-desist order appears to be a question of first impression.
Glen Ellyn does not really support its position with reasoning or authority. Instead it simply asserts enforcement of the Order at this late date would be fundamentally unfair (R. Mem. 9-10):
Petitioner may not have it both ways. If the violations are as severe and serious as alleged, Petitioner should have, in the discharge of its duties as established by Congress, brought suit long ago to enforce the "cease and desist order." If, on the other hand, as Respondent contends, the violations, if any, are minor, clerical and inevitable, the action of the Petitioner is not only barred by laches but is an abuse of authority.
FSLIC, by contrast, offers three arguments for the proposition that laches is not an available defense:
1. Nothing in the statute under which FSLIC operates contemplates the effective termination of a cease-and-desist order by a district court presiding over an enforcement proceeding.
2. Case law involving other governmental agencies indicates laches is no defense to agency enforcement of an otherwise valid order.
3. Laches is not appropriate in the circumstances of this case.
Those contentions will be addressed in turn.
Section 1730(k)(2), after authorizing FSLIC's resort to a federal district court for enforcement of a final cease-and-desist order, goes on to say:
Except as otherwise provided in this section no court shall have jurisdiction to affect by injunction 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 order or notice.
Section 1730(j)(2) confers such jurisdiction in the course of judicial review by courts of appeal of cease-and-desist orders issued after a hearing before FSLIC:
Any party to the proceeding, or any person required by an order issued under this section to cease and desist from any of the violations or practices stated therein, may obtain a review of any order served pursuant to paragraph (1) of this subsection (other than an order issued with the consent of the institution or the director or officer or other person concerned, or an order issued under subsection (h)(1) of this section), by filing in the court of appeals of the United States for the circuit in which the principal office of the institution is located, or in the United States Court of Appeals for the District of Columbia Circuit, within thirty days after the date of service of such order, a written petition praying that the order of the Corporation be modified, terminated, or set aside.... Upon the filing of such petition, such court shall have jurisdiction, which upon the filing of the record shall, except as provided in the last sentence of said paragraph (1), be exclusive, to affirm, modify, terminate, or set aside, in whole or in part, the order of the Corporation.
No comparable statutory provision deals in terms with orders entered by consent.
Were this Court to pass upon the laches defense, FSLIC argues, it effectively would have reviewed or even "terminated" the Order—something it has no jurisdiction to do under Section 1730(k)(2) and Section 1730(j)(2). There is perhaps some surface plausibility to drawing a negative inference from the absence of a specific statutory provision as to consent orders that would parallel the last-quoted sentence of Section...
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