Transohio Sav. Bank v. Director, Office of Thrift Supervision

Decision Date05 January 1993
Docket NumberNo. 91-5246,91-5246
Citation296 U.S. App. D.C. 231,967 F.2d 598
Parties, 61 USLW 2046 TRANSOHIO SAVINGS BANK, et al., Appellants, v. DIRECTOR, OFFICE OF THRIFT SUPERVISION, et al., Appellees.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (D.C.Civ. No. 90-1678).

Charles J. Cooper, with whom Michael A. Carvin and Robert J. Cynkar were on the brief, for appellants. Michael W. Kirk also entered an appearance for appellants.

Douglas Letter, Attorney, U.S. Dept. of Justice, with whom Stuart M. Gerson, Asst. Atty. Gen., Jay B. Stephens, U.S. Atty., Dorothy L. Nichols, Associate General Counsel, Federal Deposit Ins. Corp., and Jeanette E. Roach, Counsel, Federal Deposit Ins. Corp., were on the brief, for appellee, F.D.I.C.

Aaron B. Kahn, Asst. Chief Counsel, Office of Thrift Supervision, with whom Harris Weinstein, Chief Counsel, Thomas J. Segal, Deputy Chief Counsel, and Robert J. Lesnick, Sr. Trial Atty., were on the brief, for appellee, Director, Office of Thrift Supervision. Harvey A. Levin, Attorney, Office of Thrift Supervision, also entered an appearance for appellees.

Before MIKVA, Chief Judge, WALD and BUCKLEY, Circuit Judges.

Opinion for the court filed by Chief Judge MIKVA.

MIKVA, Chief Judge:

In the mid-1980s, as the savings and loan industry deteriorated, the Federal Savings and Loan Insurance Corporation (FSLIC) and the Federal Home Loan Bank Board encouraged a number of healthy thrifts to acquire failing ones. The government agencies provided financial assistance to the acquiring thrifts, and they promised favorable accounting treatment. Granting capital or accounting forbearances, the banking regulators allowed the thrifts to count toward their minimum capital requirements "supervisory goodwill," intangible assets created by the acquisitions. Appellants, Transohio Savings Bank and its holding companies (collectively referred to as "Transohio"), acquired two insolvent thrifts as part of such a "supervisory merger" in 1986.

In 1989, in major legislation addressing what had become known as the S & L Crisis, Congress forbade thrifts from counting supervisory goodwill toward minimum capital requirements, finding that stricter capital standards were essential to ensure the safety and soundness of the savings and loan industry. See Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), Pub.L. No. 101-73, 103 Stat. 183 (1989). Soon after, the Office of Thrift Supervision (OTS), which had taken over the duties of FSLIC and the Bank Board, announced it would apply the new rules to all thrifts, including those that had received capital or accounting forbearances from the OTS' predecessors.

As a result of the new rules, some of the thrifts that had been involved in supervisory mergers found themselves dangerously near, or even below, minimum capital requirements. Many of those thrifts, including Transohio, sued the banking regulators, claiming that Congress did not, and could not, change the capital accounting rules for thrifts with forbearance agreements. They argued, typically, that FIRREA, contrary to the OTS' interpretation, exempted thrifts with forbearance agreements. And they argued, alternatively, that the forbearance agreements gave the thrifts a contractual right to count goodwill as capital, and that the breach of that contract violated common law rules as well as the Constitution; barring the thrifts from counting goodwill as capital, they said, was a taking of property without just compensation and (a few alleged) a deprivation of property without due process of law. Although the thrifts have prevailed in the Claims Court and in several district courts (while losing in others), the four Courts of Appeals that have considered some or all of the issues have ruled against them. See Carteret Savings Bank, FA v. OTS, 963 F.2d 567 (3rd Cir.1992); Far West Fed. Bank v. Director, OTS, 951 F.2d 1093 (9th Cir.1991); Guaranty Fin. Servs., Inc. v. Ryan, 928 F.2d 994 (11th Cir.1991); Franklin Fed. Sav. Bank v. Director OTS, 927 F.2d 1332 (6th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 370, 116 L.Ed.2d 322 (1991). Today, we join the Third, Sixth, Ninth and Eleventh Circuits and reject a thrift's claims.

Before us is the district court's denial of Transohio's preliminary injunction motion. Because we agree that Transohio is unlikely to prevail on the merits, we affirm the district court's decision. We find that Congress, in FIRREA, required the OTS to apply the new capital rules to all FSLIC-insured savings institutions, including those with forbearance agreements. And we find that Transohio's agreement with FSLIC and the Bank Board, while it may have barred the banking regulators from applying different capital accounting rules to Transohio as long as it was a matter of agency discretion, did not prevent Congress from establishing new capital accounting rules and ordering federal agencies to enforce them. The contract documents did not waive Congress' regulatory power, and the agencies, in any event, lacked the authority to waive Congress' regulatory power. Because we conclude that Transohio did not have a property right that trumped Congress' power to regulate, we need not, and do not, decide whether the due process or takings clauses would immunize a thrift that possessed such a right from subsequent regulatory legislation.

Before we address the merits, we consider knotty questions of sovereign immunity and jurisdiction, matters not discussed below. We find that the Administrative Procedure Act waives sovereign immunity for Transohio's due process and statutory claims against the OTS, and that the district court properly exercised jurisdiction over those portions of Transohio's lawsuit. We find, however, that the district court did not have jurisdiction over Transohio's pure contract claims because only the Tucker Act, 28 U.S.C. § 1491(a)(1), waives sovereign immunity for Transohio's contract claims, and the Tucker Act provides for jurisdiction in the Claims Court alone.

I. BACKGROUND
A. The S & L Crisis and FIRREA

From the beginnings of the savings and loan industry in the 19th century, when savings and loan associations were called "building societies" and then "building and loan associations," the primary function of the industry has been to finance the purchase and construction of housing. JAMES J. WHITE, BANKING LAW 41 (1976). Like commercial banks, savings and loan associations were almost entirely unregulated until the Great Depression--the first great S & L Crisis--when many thrifts teetered and then failed, foreclosing on home mortgages and spending away customers' deposits. Ever since, the thrift industry has been subject to pervasive federal support, supervision and regulation in order to ensure the availability of home loans and to protect depositors' funds. See MILES A. COBB, FEDERAL REGULATION OF DEPOSITORY INSTITUTIONS p 1.03, pp. 1-8-1-9, 1-13-1-14 (1984).

Congress created the Federal Home Loan Bank Board in 1932 and FSLIC in 1934 to charter thrifts, insure deposits, and generally to regulate the industry. See Federal Home Loan Bank Act, Pub.L. No. 72-304, 47 Stat. 725 (1932); Home Owners' Loan Act of 1933, Pub.L. No. 73-43, 48 Stat. 128 (1933); Title IV of the National Housing Act, Pub.L. No. 73-479, 48 Stat. 1246 (1934). Since the 1930s, Congress and the agencies it created have "promulgated regulations governing 'the powers and operations of every Federal savings and loan association from its cradle to its corporate grave.' " Fidelity Fed. Sav. & Loan Ass'n v. De La Cuesta, 458 U.S. 141, 145, 102 S.Ct. 3014, 3018, 73 L.Ed.2d 664 (1982) (citation omitted). Through legislation and regulations, Congress and the agencies have developed guidelines for lending and investment activities, imposed reporting and record-keeping requirements, established liquidity standards, at times limited interest paid on deposits, and authorized the closing of thrifts and appointment of receivers. Capital requirements--both the minimum required and the items that can be counted as capital--have long been part of the regulatory scheme. The Bank Board and FSLIC set minimum capital requirements upon the agencies' creation, requirements that have been the subject of numerous statutory and regulatory changes over the years. See, e.g., Garn-St Germain Depository Institutions Act, Pub.L. No. 97-320, 96 Stat. 1469 (1982); Depository Institutions Deregulation and Monetary Control Act, Pub.L. No. 96-221, 94 Stat. 132 (1980); Emergency Home Finance Act, Pub.L. No. 91-351, 84 Stat. 450 (1970). Since the Depression, federal involvement in the thrift industry has become so extensive that Congress considers the industry "a federally-conceived and assisted system to provide citizens with affordable housing funds." H.R.Rep. No. 54(I), 101st Cong., 1st Sess. 292 (1989), reprinted in 1989 USCCAN 86, 88 ("House Report").

The recent S & L crisis had its roots in the high interest rates and high inflation of the late 1970s and early 1980s. Savings and loan associations had traditionally turned a predictable profit by taking advantage of the spread between the interest rate they paid on deposits, a rate set by regulation, and the somewhat higher rate they received from borrowers, primarily mortgage borrowers. But high interest rates drove depositors to move their money from thrifts to higher-paying investments, such as money market mutual funds, and rising inflation resulted in a higher cost of funds to thrifts. The thrifts, meanwhile, remained locked into long-term, relatively low-yielding, fixed-rate mortgages. The result was severe operating losses beginning in the early 1980s. See S.Rep. No. 19, 101st Cong., 1st Sess. 7 (1989) ("Senate Report"); House Report at 294, 1989 ...

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