Investment Co. Institute v. Federal Deposit Ins. Corp.

• Decision Date: 28 February 1984
• Docket Number: No. 82-1721,82-1721
• Citation: 728 F.2d 518
• Parties: , Fed. Sec. L. Rep. P 99,687 INVESTMENT COMPANY INSTITUTE v. FEDERAL DEPOSIT INSURANCE CORPORATION, an agency of the United States, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 518

728 F.2d 518

234 U.S.App.D.C. 237, Fed. Sec. L. Rep. P 99,687

INVESTMENT COMPANY INSTITUTE v. FEDERAL DEPOSIT INSURANCE CORPORATION, an agency of the

United States, et al., Appellants.

No. 82-1721.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 3, 1983.

Decided Feb. 28, 1984.

Appeal from the United States District Court for the District of Columbia (Civil Action No. 82-1408).

Marc Johnston, Attorney, Dept. of Justice, Washington, D.C., with whom Stanley S. Harris, U.S. Atty., Washington, D.C. (at the time the brief was filed), and Leonard Schaitman, Atty., Dept. of Justice, Washington, D.C., were on brief, for appellants.

David M. Miles, Washington, D.C., with whom Harvey L. Pitt, Henry A. Hubschman and James H. Schropp, Washington, D.C., were on brief, for appellee.

Edmund C. Case, Boston, Mass., with whom Martha S. Samuelson, Boston, Mass., was on brief, for amicus curiae urging reversal.

Before WRIGHT, BORK and SCALIA, Circuit Judges.

Opinion PER CURIAM.

Dissenting opinion filed by Circuit Judge J. SKELLY WRIGHT.

PER CURIAM:

The Federal Deposit Insurance Corporation appeals from a district court order--in the form of a discovery order--compelling it to enjoin a third party's allegedly illegal conduct and to consider, then rule upon the merits of, a petition filed by the Investment Company Institute which seeks to have that third party's conduct declared unlawful. We find the district court's order an injunction appealable under 28 U.S.C. Sec. 1292(a)(1) (1976). We also hold that the substance of the court order exceeded that court's power and authority under the federal banking laws.

I.

In the spring of 1982, the Boston Five Cents Savings Bank ("Bank") devised a plan to sell mutual fund shares through wholly owned subsidiaries. On April 13, appellee, the Investment Company Institute ("ICI"), petitioned the Federal Deposit Insurance Corporation ("FDIC") to declare this plan unlawful and to prevent the Bank from implementing it. FDIC held a public meeting of its Board of Directors on May 17 and declined to decide the merits of ICI's petition. It informed appellee of this action by letter of May 20, pointing out that the Bank had not yet submitted any application for approval of mutual fund activities.

Upon receiving FDIC's letter, ICI filed the present suit claiming (1) an abuse of discretion by FDIC in violation of the Administrative Procedure Act, 5 U.S.C. Sec. 706(2)(A) (1982), and (2) a violation of the Sunshine Act, 5 U.S.C. Sec. 552b (1982), based upon the allegation that the public meeting was merely pro forma and validated action that had been agreed upon in private beforehand. On May 23, appellee moved the court to shorten the discovery period, to require the production of certain documents by May 27, and to allow the scheduling of three depositions for May 28. The district court denied FDIC's ensuing request for a protective order, and granted all ICI's requests for expedited discovery. In early June, ICI moved to compel FDIC to produce several documents and answers to deposition questions, at the same time moving to shorten FDIC's time for response to the motion to four days. The district court granted the motion to shorten without an opportunity for reply by appellants.

FDIC did respond within the four-day limit, however, and requested a hearing on the motion. The district court denied the requested hearing, and on June 22, issued a discovery order requiring compliance with all ICI's discovery demands within three days. Appellant moved to dismiss or to stay the Order, furthermore offering to reconsider ICI's original petition at a de novo meeting of the Board. ICI responded that the suggested de novo meeting would not provide the "principal affirmative relief sought" by its complaint, in that the Board would retain discretion not to consider the merits of the petition, even in the event that a new meeting were held. On June 25, the district court signed an Order, drafted and submitted by ICI, and issued without any accompanying findings, explanation, or written opinion, reading in relevant part as follows:

ORDERED, that defendants' motion to dismiss this action or, in the alternative, for reconsideration of this Court's Order of June 22, 1982, be and hereby is, DENIED, and it is

FURTHER ORDERED, that defendant Federal Deposit Insurance Corporation shall convene a meeting open to public observation, as required by the Government in the Sunshine Act, to consider the Petition of the Investment Company Institute with respect to the Boston Five Cents Savings Bank (the "Bank") and shall (1) rule upon the merits of each violation of law alleged in the plaintiff's April 13, 1982 Petition; (2) afford all interested persons, including the plaintiff, an opportunity to be heard in connection with the plaintiff's Petition; (3) issue a written opinion on the merits of the plaintiff's Petition, which shall be subject to review by this Court; and (4) require the Bank, its subsidiaries, agents, representatives and all persons or entities acting in concert with the Bank, not to proceed to implement its plan to sell shares of any mutual fund to the public until the FDIC has ruled on the plaintiff's Petition, and it is

FURTHER ORDERED, that further proceedings on the plaintiff's complaint, and the effectiveness of this Court's June 22, 1982, Order, are stayed pending the filing with the Court of defendants' ruling on the plaintiff's Petition, in accordance with this Order, and it is

FURTHER ORDERED, that defendants shall produce forthwith to the Court under seal for safekeeping all documents covered by the Court's May 27, 1982 and June 22, 1982 Orders, and it is

FURTHER ORDERED, that defendants shall preserve all records relating to the Bank or the Institute's Petition until further order of this Court, and it is

FURTHER ORDERED, that this Court be and hereby retains jurisdiction over this action, pending further order of this Court.

Investment Company Institute v. Federal Deposit Insurance Corp., No. 82-1408

(D.D.C. June 25, 1982). FDIC immediately appealed this Order, filing a notice of appeal on June 25 and requesting a stay pending appeal.

On June 29, the district court denied the request for stay and included in its denial Order the finding that "[the] June 25, 1982 Order is a discovery-related order which is neither a 'final decision' nor a 'collateral order' subject to appellate review," and that "the defendants may relieve themselves of the obligations set forth in this Court's June 25, 1982 Order merely by complying with this Court's June 22 Order."

The district court's Order of June 25 is the subject of the present appeal. Appellee asserts lack of jurisdiction on the ground that it is, as the district court asserted, a "discovery-related order" and therefore interlocutory and non-appealable. See 7 J. Moore, Moore's Federal Practice p 65.21 (1983); 4 id. p 26.83[9.-1] (1983); 9 id. paragraphs 110.3, 110.20 (1983). This argument cannot be sustained on the face of the Order. While some of its provisions relate to earlier discovery orders or to the preservation of records for future discovery, its central provision, the second paragraph in the excerpt quoted above, has nothing to do with discovery, and requires action by FDIC unrelated to the conduct or management of the pending litigation. It is the sort of mandate that courts commonly issue in final disposition of a case, pursuant to their authority to "compel agency action unlawfully withheld," 5 U.S.C. Sec. 706(1). ¹ On its face, therefore, it is an injunction appealable under 28 U.S.C. Sec. 1292(a)(1).

Appellee asserts, however, that this provision did not represent a categorical mandate, but rather merely sets forth an optional performance that appellants could choose to render instead of complying with the discovery order. This interpretation is not supported by the facts. The June 25 Order is categorical in its terms. It stays the June 22 discovery order (requiring instead that the requested documents be deposited with the court) and contains no suggestion that the new mandate can be disregarded, and the earlier order resurrected, at appellants' option. Its mandatory character was reinforced by the district judge's threat to impose sanctions on the FDIC attorneys under 28 U.S.C. Sec. 1927 (1976) if it was not obeyed. See Joint Appendix ("J.A.") at 421. Both parties understood the Order as a categorical injunction at the time. J.A. at 416-19. Nothing in the text of the Order or the record supports appellee's interpretation except the court's statement in the June 29 post-appeal order that "the defendants may relieve themselves of the obligations set forth in this Court's June 25, 1982 Order merely by complying with this Court's June 22 Order." Even if this is taken to be an interpretation rather than (as seems more compatible with the facts) a new prescription, it cannot be dispositive of the Order's original meaning, and, hence, the Order's appealability at the time the appeal was filed. In our view, the June 25 Order was unambiguously a categorical injunction.

Appellee has also argued that appellants should not be able to render a discovery order appealable by proposing that the court replace it with an alternative order and thereafter appealing the alternative. Brief for Appellee at 32. As our recitation of the facts indicates, however, what was imposed upon appellants by the June 25 Order went well beyond what appellants had proposed, and appellee was well aware of this fact. Specifically, the Order eliminated appellee's principal objection to the proposal by requiring the Board to reach and determine the merits of the ICI petition. That is, and was obviously known to be, quite different from appellants' offer merely to reconsider the petition--which would again permit denial on grounds of ripeness or investigative discretion.

It remains to consider the effect of the statement in...