Federal Sav. and Loan Ins. Corp. v. Molinaro

Decision Date16 November 1989
Docket NumberNo. 87-6662.,87-6662.
Citation889 F.2d 899
PartiesFEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, Plaintiff-Appellee, v. John L. MOLINARO, Defendant-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

M. Jean Starcevich, Law Offices of Robert L. Mezzetti, San Jose, Cal., for defendant-appellant.

J. Michael Echevarria and Richard Fruin, Lawler, Felix & Hall, Los Angeles, Cal., for plaintiff-appellee.

Before SCHROEDER, BOOCHEVER and BEEZER, Circuit Judges.

BOOCHEVER, Circuit Judge:

John L. Molinaro (Molinaro) appeals the district court's grant of summary judgment in favor of the Federal Savings and Loan Insurance Corporation (FSLIC) for $6.4 million plus interest. FSLIC sued Molinaro and others claiming, inter alia, that Molinaro breached his fiduciary duty as a director of a federally insured savings and loan institution by diverting loan proceeds for his personal benefit. We agree that Molinaro breached his fiduciary duty to the institution, but limit the amount of his liability to the profit he made as a result of that breach. Accordingly, we reverse and remand to the district court for a determination of the amount of Molinaro's liability.

FACTS AND PROCEDURAL HISTORY

On April 4, 1984, Molinaro and his equal partner, Donald P. Mangano, Sr. (Mangano), acquired Ramona Savings and Loan Association (Ramona), a state-chartered, federally insured savings and loan institution, for $3.9 million. One year later on May 15, 1985, Molinaro bought Mangano's interest for $5 million, becoming Ramona's sole shareholder, Chief Executive Officer, and Chairman of its Board of Directors.

In January 1986, Molinaro agreed to sell his entire interest in Ramona to Donald Stump (Stump) for $7.2 million. Stump needed to liquidate certain assets to complete the sale. Molinaro arranged for Ramona to extend a series of loans to the Copelands, a group of developers who were involved with Stump in several construction projects. The Copelands, in turn, used $6.4 million of the loan proceeds received from Ramona to buy out Stump's interest in the construction projects. Stump applied this money toward his intended purchase of Molinaro's stock. Pursuant to the written sale agreement between Molinaro and Stump, Stump transferred $5 million of the money he received from the Copelands to Molinaro and deposited $1.3 million in an escrow account to be used toward paying Molinaro the balance of the purchase price once Stump obtained the required regulatory approval to acquire Ramona. Stump paid the $2.2 million balance of the $7.2 million purchase price to Molinaro on May 7, 1986 — $1.3 million of which came from the escrow account while $900,000 was derived from "other sources." Regulatory approval for Stump's purchase of Ramona was denied on June 23, 1986.

The Federal Home Loan Bank Board determined that Ramona was insolvent on September 12, 1986, and appointed FSLIC as Ramona's receiver. FSLIC as receiver assigned the rights, claims, and liabilities of Ramona to FSLIC in its corporate capacity, apparently in an attempt to create federal jurisdiction under 28 U.S.C. § 1345 and 12 U.S.C. § 1730(k)(1). In its corporate capacity, FSLIC then filed a complaint against Molinaro and numerous other defendants.

On July 22, 1987, shortly after FSLIC filed its First Amended Complaint, Molinaro was arrested on charges not directly related to this action. He subsequently learned that the FBI was investigating him and that he might soon be indicted on charges pertaining to his activities with Ramona. Molinaro was afraid that the criminal investigators would take advantage of any inculpatory evidence generated during the course of civil proceedings, and on August 18 he filed a motion to stay all civil proceedings or alternatively to stay all civil discovery indefinitely. His motion was denied on September 14.

On September 18, 1987, FSLIC filed a motion for summary judgment on its claims against Molinaro for breach of fiduciary duty, conversion, fraud, and money had and received. A hearing was scheduled for October 19 but was continued to November 9. Molinaro chose not to file counter-affidavits in response to FSLIC's motion, claiming risk of self-incrimination. On November 4, five days before the summary judgment hearing, Molinaro requested a continuance so that he could conduct discovery. This request and a renewed request to stay all civil proceedings were denied on November 9, and the district court granted FSLIC's motion for summary judgment. The court entered final judgment in favor of FSLIC for $6.4 million plus interest. Molinaro now appeals, challenging 1) the district court's subject matter jurisdiction; 2) the denial of a stay of civil proceedings in the face of potential related criminal action; 3) the denial of a continuance of the summary judgment hearing to allow Molinaro to conduct discovery; 4) the legal standard used to impose liability; and 5) the computation of damages.

DISCUSSION

This court reviews de novo a trial court's grant of summary judgment. Lojek v. Thomas, 716 F.2d 675, 677 (9th Cir.1983). Summary judgment is appropriate where, viewing the evidence in the light most favorable to the nonmoving party, the court determines that there remains no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986); Fed.R.Civ.P. 56(c).

Jurisdiction

FSLIC, in its capacity as Ramona's receiver, assigned its claims to FSLIC in its corporate capacity. FSLIC maintains that, as a corporation, it is an agency of the federal government under 12 U.S.C. § 1730(k)(1)(A) (1982), and is therefore entitled to federal agency jurisdiction pursuant to 28 U.S.C. § 1345 (1982). Molinaro claims that such an assignment is invalid and insufficient to avoid the jurisdictional restraints of section 1730(k)(1). According to Molinaro, all jurisdictional grants under section 1730(k)(1), including subsection (A) under which FSLIC claims jurisdiction, are subject to the proviso in subsection (C):

Provided, That any action, suit, or proceeding to which the Corporation is a party in its capacity as conservator, receiver, or other legal custodian of an insured State-chartered institution and which involves only the rights or obligations of investors, creditors, stockholders, and such institution under State law shall not be deemed to arise under laws of the United States.

12 U.S.C. § 1730(k)(1)(C) (emphasis in original).

Ramona was a state-chartered institution. FSLIC is essentially acting in its receivership capacity, and this suit involves only the rights and obligations of investors, creditors, and stockholders. If this proviso applies to subsection (A), FSLIC's claims against Molinaro arise under state law and do not give rise to federal jurisdiction. Molinaro, therefore, argues that an intra-agency assignment of the right to pursue Ramona's claims from FSLIC/receiver to FSLIC/corporation is ineffective to confer federal jurisdiction under subsection (A) because Congress has specifically provided that no such jurisdiction exists in the circumstances set forth in subsection (C).

This argument was considerably more compelling before the Supreme Court's decision in Federal Savings & Loan Ins. Corp. v. Ticktin, ___ U.S. ___, 109 S.Ct. 1626, 104 L.Ed.2d 73 (1989), which considered whether FSLIC is entitled to federal agency jurisdiction when acting as a receiver for a state-chartered financial institution. The Court held that the quoted proviso in section 1730(k)(1)(C) applies only to those cases involving FSLIC "federal question" jurisdiction under section 1730(k)(1)(B) and (C). The proviso does not apply to subsection (A) entitling FSLIC to federal agency jurisdiction. Ticktin, 109 S.Ct. at 1629. The Court concluded that "because the proviso does not apply to clause (A), § 1730(k)(1) is not an Act of Congress that has `otherwise provided' a limitation on the jurisdictional grant in § 1345. Accordingly, the District Court has federal agency jurisdiction over the FSLIC's action." Id.

Ticktin requires the same result here. The validity of FSLIC's intra-agency assignment of Ramona's claims is jurisdictionally irrelevant, because FSLIC is entitled to federal agency jurisdiction whether it brings an action in its corporate or receivership capacity. The district court, therefore, correctly concluded it had jurisdiction to hear this action.

Stay of Civil Proceedings

Molinaro claims that the district court erred in refusing to stay this civil action pending the outcome of any criminal proceedings. We review a district court's ruling on a party's request to stay proceedings for an abuse of discretion. Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708 F.2d 1458, 1465 (9th Cir.1983).

While a district court may stay civil proceedings pending the outcome of parallel criminal proceedings, such action is not required by the Constitution. Securities & Exchange Comm'n v. Dresser Indus., 628 F.2d 1368, 1375 (D.C.Cir.), cert. denied, 449 U.S. 993, 101 S.Ct. 529, 66 L.Ed.2d 289 (1980); see generally United States v. Kordel, 397 U.S. 1, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970). Molinaro concedes that he has no absolute constitutional right to a stay, but nevertheless asserts that under the circumstances of this case, the court abused its discretion by refusing to stay the civil proceedings. We disagree.

A court must decide whether to stay civil proceedings in the face of parallel criminal proceedings in light of the particular circumstances and competing interests involved in the case. Dresser Indus., 628 F.2d at 1375. Obviously a court should consider the extent to which the defendant's fifth amendment rights are implicated. Id. at 1375-76. Other factors a court should consider will vary according to the case itself, but generally will include:

(1) the interest of the plaintiffs in proceeding expeditiously with this litigation or any
...

To continue reading

Request your trial
269 cases
  • Gonzalez v. Cnty. of Merced
    • United States
    • U.S. District Court — Eastern District of California
    • December 7, 2017
    ...pending the outcome of parallel criminal proceedings, such action is not required by the Constitution." Fed. Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989) (citations omitted). The Ninth Circuit has held that "[i]n the absence of substantial prejudice to the rights of......
  • Schuessler v. Benchmark Marketing and Consulting, Inc., S-90-1074
    • United States
    • Nebraska Supreme Court
    • May 14, 1993
    ...overturned on appeal absent an abuse of that discretion. See, American Life Ins. Co., supra; Landis, supra; Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899 (9th Cir.1989); General Dynamics Corp. v. Selb Manufacturing Co., 481 F.2d 1204 (8th Cir.1973), cert. denied 414 U.S. 1162, 94......
  • Heffington v. Moser
    • United States
    • Court of Special Appeals of Maryland
    • August 30, 2018
    ...the party seeking the stay based upon the Fifth Amendment privilege is not under a criminal indictment); Fed. Sav. & Loan Ins. Corp. v. Molinaro , 889 F.2d 899, 903 (9th Cir. 1989) (accord). And Kristi's refusal to comply with an order compelling her deposition testimony most likely would h......
  • King v. Olympic Pipeline Co.
    • United States
    • Washington Court of Appeals
    • December 26, 2000
    ...Petitioners' Fifth Amendment rights are implicated is "negligible." In support of this proposition, King relies upon Federal Savings and Loan Insurance Corp. v. Molinaro.31 King's reliance is misplaced. While the Ninth Circuit noted the absence of an indictment, the court discounted Molinar......
  • Request a trial to view additional results
6 books & journal articles
  • Table of Cases
    • United States
    • ABA Antitrust Library Antitrust Class Actions Handbook
    • January 1, 2018
    ...(E.D.N.C. 2007), 203 Fears v. Wilhelmina Model Agency, 2003 WL 21659373 (S.D.N.Y. 2003), 51 Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899 (9th Cir. 1989), 119 Fehr v. Sun Life Assurance Co., 2014 ONSC 2183 (Can.), 293 Feizen v. Andreas, 134 F.3d 873 (7th Cir. 1998), 243 Fernandez......
  • Class Certification Procedure
    • United States
    • ABA Antitrust Library Antitrust Class Actions Handbook
    • January 1, 2018
    ...jury or at trial. DEPARTMENT OF JUSTICE ANTITRUST DIVISION MANUAL (Fifth) Ch. III.F.12. 62. Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 903 (9th Cir. 1989). 63. See , e.g. , In re TFT-LCD (Flat Panel) Antitrust Litig., MDL No. 1827 (N.D. Cal. 2007) (Dkt. No. 300). 108 Class Ac......
  • Caught Between a Rock and a Hard Place
    • United States
    • State Bar of Georgia Georgia Bar Journal No. 15-1, August 2009
    • Invalid date
    ...397 U.S. 1, 11-12 (1970). [42] Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995) (quoting FSLIC v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989)); accord In re Ramu Corp., 903 F.2d 312, 318 (5th Cir. 1990) ("The stay of a pending matter is ordinarily within the trial c......
  • Applying the UCCJEA in Family Law
    • United States
    • ABA General Library Family Advocate No. 43-4, April 2021
    • April 8, 2021
    ...8, 2003), https://bit.ly/2Z7fNlx. outcome of a parallel criminal proceeding. See, e.g. , Federal Sav. & Loan Ins. Corp. v. Molinaro , 889 F.2d 899, 902 (9th Cir. 1989) (“[w]hile a district court may stay civil proceedings pending the outcome of parallel criminal proceedings, such action is ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT