Saratoga Sav. and Loan Ass'n v. Federal Home Loan Bank Bd., No. 88-7209

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore FARRIS, THOMPSON and TROTT; FARRIS
Citation879 F.2d 689
PartiesSARATOGA SAVINGS AND LOAN ASSOCIATION, Petitioner, v. FEDERAL HOME LOAN BANK BOARD, Respondent.
Decision Date14 July 1989
Docket NumberNo. 88-7209

Page 689

879 F.2d 689
58 USLW 2082
SARATOGA SAVINGS AND LOAN ASSOCIATION, Petitioner,
v.
FEDERAL HOME LOAN BANK BOARD, Respondent.
No. 88-7209.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted June 7, 1989.
Decided July 14, 1989.

Page 690

Andrew L. Faber, Berliner, Cohen & Biagini, San Jose, Cal., for petitioner.

Steven W. Dimmick, Trial Atty., Federal Home Loan Bank Bd., Washington, D.C., for respondent. On the brief, Dorothy L. Nichols, Thomas J. Segal, Charlotte Kaplow, Edward J. O'Meara, for respondent. *

Petition to Review an Order of The Federal Home Loan Bank Board.

Before FARRIS, THOMPSON and TROTT, Circuit Judges.

FARRIS, Circuit Judge:

The Saratoga Savings and Loan Association petitions for review of a cease and desist order issued by the Federal Home Loan Bank Board. Saratoga challenges

Page 691

the Board's authority to issue the order and the evidentiary basis for its findings of regulatory violations. We affirm in part, reverse in part, and remand.
BACKGROUND

Saratoga is a California-chartered savings and loan association, opened in April 1983, whose accounts are insured by the Federal Savings and Loan Insurance Corporation. FSLIC was created by the National Housing Act of 1934, 12 U.S.C. Secs. 1724-1730g, to protect depositors by insuring accounts at participating institutions and to prevent participating institutions from engaging in unsafe and unsound practices. 12 U.S.C. Sec. 1726. The Federal Home Loan Bank Board is the operating head of the FSLIC. 12 U.S.C. Sec. 1725(a).

As an FSLIC-insured institution, Saratoga is subject to periodic examination. During the fall of 1985, FSLIC examiners discovered what they believed to be several violations of Board regulations. In response, the Board issued a Notice of Charges and Hearing under 12 U.S.C. Sec. 1730(e)(1). An administrative law judge conducted a hearing on the matter in February and March 1987, and issued a recommended decision in July 1987. The ALJ found that Saratoga had violated four Board regulations but recommended that the Board issue no order because the violations were isolated, technical, unintentional, or not likely to be repeated. The Board's Office of Enforcement filed exceptions to the Recommended Decision. Following oral argument, the Board issued a decision in May 1988 finding that Saratoga had violated Board regulations and engaged in unsafe and unsound practices. The Board issued a cease and desist order requiring Saratoga to comply with five specific Board regulations.

STANDARD OF REVIEW

We review de novo questions of law, including the scope of an agency's jurisdiction. See 5 U.S.C. Sec. 706(2)(C); Social Security Board v. Nierotko, 327 U.S. 358, 369, 66 S.Ct. 637, 643, 90 L.Ed. 718 (1946). We will uphold the Board's decision to issue a cease and desist order unless it is arbitrary, capricious, or an abuse of discretion. 5 U.S.C. Sec. 706(2)(A); Sears Sav. Bank v. Federal Sav. & Loan Ins. Corp., 775 F.2d 1028, 1029 (9th Cir.1985). The Board must have examined the relevant data and articulated a satisfactory explanation for its action. Sears, 775 F.2d at 1029. We also must determine whether substantial evidence supports the agency order. 5 U.S.C. Sec. 706(2)(E); Penasquitos Village, Inc. v. NLRB, 565 F.2d 1074, 1076 (9th Cir.1977). Both the ALJ and the Board's findings are to be considered in determining whether the Board's factual conclusions are supported by substantial evidence. See Penasquitos Village, 565 F.2d at 1076. The Board may reverse the ALJ if it explains its reasons for doing so. See Sterling Drug, Inc. v. FTC, 741 F.2d 1146, 1152 (9th Cir.1984), cert. denied, 470 U.S. 1084, 105 S.Ct. 1843, 85 L.Ed.2d 143 (1985). 1 We will defer to an agency's interpretation of those statutes that the agency is charged with administering, if its interpretation is reasonable. Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984).

DISCUSSION

A. Overview

Saratoga presents the following issues:

1. Did the Board have jurisdiction to consider matters not specifically raised by the Board staff in appealing the decision of the ALJ to the Board?

2. Must the Board show that a specific regulatory violation adversely affected the

Page 692

financial stability of Saratoga, was knowingly made, or is likely to be repeated in order to issue a cease and desist order?

3. Must the Board dismiss its cease and desist order because it failed to comply with the statutory deadline for issuing a decision?

4. Were the Board's conclusions that Saratoga committed regulatory violations supported by substantial evidence? Specifically:

--Did Saratoga comply with the appraisal regulation in approving five loans?

--Did Saratoga comply with the accounting regulation in classifying certain transactions as loans and not direct investments?

--Did Saratoga violate the direct investment limitation regulation?

--Did Saratoga violate the loan fee deferral regulation?

--Did Saratoga violate the liability growth limitation regulation?

B. Jurisdiction

The Board had jurisdiction to issue the cease and desist order under 12 U.S.C. Sec. 1730(e). We have jurisdiction to review cease and desist orders under 12 U.S.C. Sec. 1730(j)(2).

Saratoga argues that the Board is precluded from considering issues not raised in staff exceptions to the ALJ's decision concerning the appraisal requirements for five loans (the Price, Horn, Jaeger, Rule, and Lee/Thorpe/Raitz transactions). Under Board regulations, the failure of "a party" to file exceptions to any portion of the ALJ's decision is a waiver of that objection. 12 C.F.R. Sec. 509.12(b). The Board first argues that the staff is not a party subject to the requirements of Sec. 509.12(b). We disagree. Although the word party is not defined in that part of the regulations, the sections of the regulations concerned with procedure, of which the requirements for filing exceptions are a part, assume that the staff is a party. See 12 C.F.R. Secs. 509.7 (subpoenas), 509.8 (depositions), 509.9(a) (evidence), 509.10(b) (objections to motions), 509.11(a) (proposed findings and conclusions by parties), 509.11 (oral argument).

The Board also argues that its staff did take exceptions as required by 12 C.F.R. Sec. 509.12(b). We agree in part. In its list of specific exceptions, the staff stated that:

Because the Recommended Decision contains so many critical failings, the FSLIC staff has determined not to burden this Board with formal written exceptions to every erroneous finding, conclusion or recommendation. Of course, this determination should not be deemed to be agreement with, adoption of, or otherwise acquiescence in such findings, conclusions or recommendations as are not specifically excepted to.

Petitioner's Excerpt of Record 126-127 n. 2. The staff also discussed, in specific exceptions, the alleged regulatory violations that occurred in the appraisals for the Horn, Jaeger, Rule, and Lee/Thorpe/Raitz loans. Id. at 155-61, 170-84. Although the Price loan was not mentioned in the specific exceptions, it was discussed in the proposed final decision that accompanied the exceptions. Id. at 257. It also was addressed by the ALJ. Id. at 64-67. The cease and desist order does not mention any specific loans in regard to appraisal violations, but instead requires Saratoga to "observe FSLIC's appraisal regulation which requires safe and sound practices." In the Matter of Saratoga Sav. & Loan Ass'n, FHLBB No. 88-430, Decision and Order 63 (May 31, 1988). Saratoga has not alleged that it has suffered any prejudice from the failure of the staff to specify the Price loan in its exceptions. That loan was but one of several instances that the Board found violated appraisal regulations. Even if the Price loan is excepted from consideration, substantial evidence supports that portion of the order. The general exception stated in the footnote to the specific exceptions, the discussion of all but one of the violations, and the general nature of the cease and desist order, preclude our finding that the staff's exceptions failed to satisfy the requirements of Sec. 519.12(b).

Page 693

C. Statutory Authority

Saratoga argues that the Board abused its discretion in issuing a cease and desist order without concluding that the regulatory violations in question would affect adversely the financial stability of Saratoga or the FSLIC insurance fund. Saratoga misinterprets the meaning of the statute and the interpretive case law. As Saratoga recognizes, the plain language of the statute contains no such requirement.

If, in the opinion of the Corporation, any insured institution ... is violating or has violated ... a law, rule, or regulation ... the Corporation may issue and serve upon the institution ... a notice of charges in respect thereof.... [If] the Corporation shall find that any violation ... specified in the notice of charges has been established, the Corporation may issue and serve upon the institution ... an order to cease and desist from any such violation....

12 U.S.C. Sec. 1730(e)(1). The statute is unambiguous in providing the Board with the power to issue cease and desist orders upon a finding of a regulatory violation. No other finding--of intent to violate, financial impact, or risk to the insurance fund--is required. In contrast, Congress did require a finding that a violation of law is likely to cause serious financial harm before the Board may issue a temporary cease and desist order. 12 U.S.C. Sec. 1730(f)(1).

Given the unambiguous nature of the statute, recourse to legislative history is unnecessary. See Chevron, 467 U.S. at 842-43, 104 S.Ct. at 2781-82; see also Blanchard v. Bergeron, --- U.S. ----, 109 S.Ct. 939, 947, 103 L.Ed.2d 67 (1989) (Scalia, J., concurring) (criticizing use of congressional committee reports as authoritative exposition of legislative intent). Even if we reviewed the statute's legislative...

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22 practice notes
  • Chavers v. FLEET BANK (RI), NA, No. 2002-201-Appeal.
    • United States
    • Rhode Island Supreme Court
    • February 11, 2004
    ...630 F.2d at 988.14 This view is followed by the Ninth Circuit in Saratoga Savings and Loan Association v. Federal Home Loan Bank Board, 879 F.2d 689, 693 (9th Cir.1989), and the Fifth Circuit, which has adopted an even more restrictive interpretation, ruling that the alleged violation of la......
  • Stupak-Thrall v. U.S., STUPAK-THRAL
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • November 29, 1995
    ...Industriais v. United States, 913 F.2d 933, 937 (Fed.Cir.1990); Saratoga Savings and Loan Assoc. v. Federal Home Loan Bank Board, 879 F.2d 689, 691 (9th Cir.1989). Congressional delegation to the Forest Service is clearly present in the Organic Act of 1897, which authorizes the Secretary of......
  • US v. Scott, Civ. A. No. 90-1374-T.
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • March 24, 1992
    ...should 788 F. Supp. 1559 not suffer by the negligence of his servants."); Saratoga Sav. & Loan Assoc. v. Federal Home Loan Bank Bd., 879 F.2d 689, 694 (9th Cir.1989) ("The failure of an agency to comply with a statutory time limit does not divest the agency of jurisdiction."). It is thus a ......
  • Imel v. Laborers Pension Trust Fund for Northern California, No. 88-15668
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • May 22, 1990
    ...of a statute is a question of law which we review de novo. See, e.g., Saratoga Sav. & Loan Ass'n v. Federal Home Loan Bank Bd., 879 F.2d 689, 691 (9th Cir.1989) (National Housing Act of 1934); Batchelor v. Oak Hill Medical Group, 870 F.2d 1446, 1447 (9th Cir.1989) (ERISA). Findings of fact ......
  • Request a trial to view additional results
22 cases
  • Chavers v. FLEET BANK (RI), NA, No. 2002-201-Appeal.
    • United States
    • Rhode Island Supreme Court
    • February 11, 2004
    ...630 F.2d at 988.14 This view is followed by the Ninth Circuit in Saratoga Savings and Loan Association v. Federal Home Loan Bank Board, 879 F.2d 689, 693 (9th Cir.1989), and the Fifth Circuit, which has adopted an even more restrictive interpretation, ruling that the alleged violation of la......
  • Stupak-Thrall v. U.S., STUPAK-THRAL
    • United States
    • United States Courts of Appeals. United States Court of Appeals (6th Circuit)
    • November 29, 1995
    ...Industriais v. United States, 913 F.2d 933, 937 (Fed.Cir.1990); Saratoga Savings and Loan Assoc. v. Federal Home Loan Bank Board, 879 F.2d 689, 691 (9th Cir.1989). Congressional delegation to the Forest Service is clearly present in the Organic Act of 1897, which authorizes the Secretary of......
  • US v. Scott, Civ. A. No. 90-1374-T.
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • March 24, 1992
    ...should 788 F. Supp. 1559 not suffer by the negligence of his servants."); Saratoga Sav. & Loan Assoc. v. Federal Home Loan Bank Bd., 879 F.2d 689, 694 (9th Cir.1989) ("The failure of an agency to comply with a statutory time limit does not divest the agency of jurisdiction."). It is thus a ......
  • Imel v. Laborers Pension Trust Fund for Northern California, No. 88-15668
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • May 22, 1990
    ...of a statute is a question of law which we review de novo. See, e.g., Saratoga Sav. & Loan Ass'n v. Federal Home Loan Bank Bd., 879 F.2d 689, 691 (9th Cir.1989) (National Housing Act of 1934); Batchelor v. Oak Hill Medical Group, 870 F.2d 1446, 1447 (9th Cir.1989) (ERISA). Findings of fact ......
  • Request a trial to view additional results

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