MetroBanc v. Federal Home Loan Bank Bd.

• Decision Date: 17 August 1987
• Docket Number: Civ. No. 87 72128.
• Citation: 666 F. Supp. 981
• Parties: METROBANC, Federal Savings Bank, a Federally Chartered Stock Savings Bank, and Comerica, Incorporated, a Delaware Corporation, Plaintiffs, v. FEDERAL HOME LOAN BANK BOARD, an Agency of the United States, and the Federal Savings and Loan Insurance Corporation, an Agency of the United States, Defendants.
• Court: U.S. District Court — Western District of Michigan

666 F. Supp. 981

METROBANC, Federal Savings Bank, a Federally Chartered Stock Savings Bank, and Comerica, Incorporated, a Delaware Corporation, Plaintiffs, v. FEDERAL HOME LOAN BANK BOARD, an Agency of the United States, and the Federal Savings and Loan Insurance Corporation, an Agency of the United States, Defendants.

Civ. No. 87 72128.

United States District Court, E.D. Michigan, S.D.

August 17, 1987.

COPYRIGHT MATERIAL OMITTED

Gregory L. Curtner, Detroit, Mich., Constance S. Huttner, New York City, for plaintiffs.

John B. Beaty, Howard L. Feinstein, Washington, D.C., for defendants.

MEMORANDUM OPINION AND ORDER

ANNA DIGGS TAYLOR, District Judge.

The present action was instituted by Plaintiffs to challenge enforcement of the application and review requirements promulgated by Defendants at 12 C.F.R. § 563.22(b) against Plaintiff MetroBanc, Federal Savings Bank's ("MetroBanc") proposed charter conversion and subsequent merger with Plaintiff Comerica, Incorporated ("Comerica"). This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331; 28 U.S.C. §§ 2201 and 2202; 5 U.S.C. §§ 553 and 706; Section 5(i)(3) of the Home Owners' Loan Act of 1933, 12 U.S.C. § 1464(i)(3); and Section 407(a) of the National Housing Act, 12 U.S.C. § 1730(a). A hearing on Plaintiffs' motion for a preliminary injunction was held on July 2, 1987. This memorandum memorializes the Court's findings of fact and conclusions of law, which were outlined on the record at the conclusion of the hearing.

In May of 1983, the Federal Home Loan Bank Board ("Bank Board"), a Defendant herein, amended 12 C.F.R. §§ 563.22 and 571.5 of the Rules and Regulations of FSLIC-Insured Institutions concerning the transfer of assets and liabilities by such institutions.

In late August of 1986, Plaintiffs MetroBanc and Comerica executed and publicly announced an Agreement and Plan of Reorganization, whereby MetroBanc would convert from a federally-chartered stock savings and loan institution to a Michigan state-chartered savings and loan association. Then, MetroBanc would leave the FSLIC system by converting its charter to that of a national banking association, to be insured by the FDIC, with the purpose of merging into Comerica Bank-Grand Rapids. The intermediate chartered entity would be denominated "MetroBanc Interim."

At approximately the same time as the MetroBanc-Comerica announcement, the Bank Board's Office of General Counsel ("OGC") wrote a letter advising another banking institution that the proposed charter conversion and subsequent merger plan of that bank constituted a "transfer of assets and liabilities" subject to the application and review procedures of 12 C.F.R. § 563.22(b). See Letter from Harry W. Quillan to Thomas P. Vartanian, Attorney for Westchester Federal Savings Bank (August 29, 1986).

Later, on October 7, 1986, the Bank Board issued in the Federal Register what it has designated as an interpretive rule "notifying all insured institutions that transfers by operation of law were also subject to the provisions of its transfer of assets regulations." 51 Fed.Reg. 36529 (October 10, 1986). The Bank Board also explicitly adopted the OGC opinion regarding the scope of § 563.22(b).

Because it was aware of published reports of the forthcoming MetroBanc-Comerica transaction, the Bank Board's OGC wrote to MetroBanc, in a letter dated October 14, 1986, specifically notifying MetroBanc of the application requirement imposed by 12 C.F.R. § 563.22(b). See Letter from Julie L. Williams to Robert H. Becker. Nevertheless, MetroBanc has not yet filed the required application. Instead, on June 5, 1987, after receiving approval of the merger from the Federal Reserve Board, MetroBanc and Comerica, Plaintiffs herein, have filed this lawsuit for declaratory and injunctive relief, challenging the Bank Board's adoption of the interpretive rule.

Three days after filing the complaint, on June 8, 1987, Plaintiffs filed this motion for a preliminary injunction against the Bank Board's enforcement of the rule against MetroBanc. Plaintiffs allege that the rule adopted by the Bank Board on October 7, 1986 exceeds the statutory authority and jurisdiction of the Bank Board, that it is arbitrary and capricious, and that it was adopted in violation of the notice and comment requirements of the Administrative Procedures Act ("APA").

To obtain a preliminary injunction in the Sixth Circuit, the Plaintiffs, MetroBanc and Comerica, must meet the following 4 prerequisites by demonstrating:

(1) a substantial likelihood of success on the merits;

(2) a strong or substantial likelihood of irreparable harm or injury occurring to the movants absent injunctive relief;

(3) that the threatened injury to Plaintiffs outweighs the harm which might be sustained by the Bank Board and FSLIC if the injunction were entered; and

(4) that the issuance of the injunction will serve the public interest.

In re DeLorean Motor Co., 755 F.2d 1223, 1228 (6th Cir.1985); Friendship Materials, Inc. v. Michigan Buick, Inc., 679 F.2d 100, 102 (6th Cir.1982).

A specific finding of irreparable injury to the movants is the single most important prerequisite that the Court must examine when ruling upon a motion for a preliminary injunction. Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983); Warner v. Central Trust Co., N.A., 715 F.2d 1121 (6th Cir. 1983); 11 Wright & Miller, Federal Practice and Procedure § 2948 (1986 Supp.) at 431. The absence of irreparable injury must end this Court's inquiry. Aluminum Workers Int'l Union v. Consolidated Aluminum Corp., 696 F.2d 437, 444 (6th Cir.1982); Detroit Newspaper Publishers Ass'n v. Detroit Typographical Union, 471 F.2d 872, 876 (6th Cir.1972).

Applying the foregoing rules of law to the case at bar, the Court finds that Plaintiffs have failed to demonstrate an irreparable injury which would warrant the extraordinary relief they have requested.

In the first instance, Plaintiffs argue that since the rule adopted by the Bank Board was enjoined by a district court in another merger transaction, see United First Federal Savings and Loan Association v. Federal Home Loan Bank Board, No. 86-661-CIV-5-16 (Nov. 4, 1986 M.D. Fla.), this Court should adopt that court's findings of irreparable injury and similarly enjoin enforcement of the rule with respect to the MetroBanc-Comerica transaction.

This Court finds that the United First Federal decision is completely distinguishable from the instant case. In that case, the irreparable harm largely relied upon by the district judge was the potential adverse effects to shareholders and others of application of this rule in view of the imminent effective date of the Tax Reform Act of 1986. The tax ramifications of the merger made time of the essence and the requirement of Bank Board approval threatened to delay, and likely destroy, the transaction.

The tax consequences of the MetroBanc-Comerica merger are not at issue, nor are there any other equally unmeasurable effects claimed which cannot be calculated in numbers at a later date. Plaintiffs do not seriously suggest that this merger would be destroyed by compliance with the rule, although its expense may be substantially enhanced. Accordingly, the United First Federal case is inapposite here.

Plaintiffs also argue that the very requirement of compliance with an unconstitutional statute or regulation constitutes irreparable harm per se. The Court cannot agree. The simple claim that a rule is unconstitutional is insufficient to demonstrate irreparable harm absent a showing of an imminent concrete and irreparable injury. Los Angeles v. Lyons, 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983); Hale v. Dept. of Energy, 806 F.2d 910 (9th Cir. 1986). Plaintiffs have made no such showing.

The injuries described by Plaintiffs' counsel at oral argument are all readily amenable to remedy at the conclusion of this lawsuit through monetary awards. Moreover, Plaintiffs' very failure to comply with the application and review procedures, as required by the Bank Board rule, has deprived the Court of the opportunity to observe what might be the Bank Board's precise position regarding the proposed MetroBanc-Comerica transaction, whether an exit fee is charged or what other prerequisites are placed on its approval, and to calculate the damages which Plaintiffs might sustain in attempting to comply with the Board's requirements.

Plaintiffs assert that the burden and expense of complying with the rule are so onerous that irreparable damage is inevitable. Contrary to Plaintiffs' assertion, the inconvenience and expense incident to an application process does not constitute an irreparable harm warranting issuance of a preliminary injunction. The potential for administrative expense, without more, does not satisfy the prerequisite of irreparable injury. Sampson v. Murray, 415 U.S. 61, 90, 94 S.Ct. 937, 953, 39 L.Ed.2d 166 (1974); Friendship Materials, Inc. v. Michigan Brick, Inc., supra; Downstate Stone Co. v. U.S., 651 F.2d 1234 (7th Cir.1981). Such expense is not devastating to the business plan of the parties, and as aforestated, the failure to file an application has prevented the Court from knowing what other expenses might be imposed.

Plaintiffs claim irreparable injury is demonstrated by the possibility that a defense of sovereign immunity by Defendants might frustrate recovery of monetary damages at the conclusion, in due course, of a lawsuit against them. The sovereign immunity of the United States Government has not irreparably injured Plaintiffs. If Plaintiffs had consummated the MetroBanc-Comerica merger without prior Bank Board approval, and subsequently were subjected to enforcement proceedings, Plaintiffs certainly would not be prevented from fully litigating their position to the highest court.

Plaintiffs also allege that the loss of time necessary for the Bank Board's review of the MetroBanc charter conversion...