United Western Bank v. Office of the Comptroller of the Currency ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
UNITED WESTERN BANK, et al., )
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Plaintiffs, )
)
v. ) Civil Action No. 11-0408 (ABJ)
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OFFICE OF THRIFT SUPERVISION, )
et al., )
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Defendants. )
____________________________________)
MEMORANDUM OPINION
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”),
12 U.S.C. § 1461, et. seq., accords the Director of the Office of Thrift Supervision (“OTS”)
broad powers to regulate federally insured savings associations, including the power to appoint a
receiver or conservator for an association under certain circumstances. 12 U.S.C. §
1464(d)(2)(A). The appointment of a receiver strips the stockholders, members, officers, and
directors of the bank of any authority to act in connection with the bank – with one exception,
see 12 U.S.C. § 1821(d)(2)(A)(i) and 12 C.F.R. § 558(b)(5). In the event of the appointment of a
conservator or receiver, “the association may, within 30 days thereafter, bring an action . . . in
the United States District Court for the District of Columbia[] for an order requiring the Director
to remove such conservator or receiver . . . .” 12 U.S.C. § 1464(d)(2)(B).
In this case, plaintiff United Western Bank (“the bank” or “the association”) challenges
the January 21, 2011 decision by John E. Bowman, the Acting Director of OTS, to appoint the
Federal Deposit Insurance Corporation (“FDIC”) as receiver for the bank. Notwithstanding the
language of the FIRREA judicial review provision, defendants OTS and Bowman have moved
under Fed. R. Civ. Proc. 12(b)(1) to dismiss the complaint for lack of subject matter jurisdiction,
contending that there has been no waiver of sovereign immunity to allow plaintiffs to bring this
action. The FDIC has also moved to dismiss the claims brought against it in its corporate
capacity and in its capacity as receiver for the bank. Since the statute specifically contemplates
that a bank may challenge the Director of OTS’s decision to appoint a receiver in the District
Court, the Court will permit the claims filed on behalf of plaintiff United Western Bank to
proceed. But claims brought in the name of other would-be plaintiffs will be dismissed, and
claims filed against defendants other than OTS and its Director will also be dismissed.
BACKGROUND
United Western Bank was a federally chartered savings association with eight full-service
branches in Colorado. Compl. ¶ 30. Plaintiff United Western Bank, Inc. (“the holding
corporation”) was the sole shareholder of United Western Bank. Id. ¶ 19. In light of challenges
stemming from the global financial crisis, in November 2010, the bank submitted a plan for a
private sector recapitalization to OTS. Id. ¶ 34. The bank alleges that OTS was dissatisfied with
the recapitalization plan and particularly, its processing and settlement business model. Id. ¶ 36.
On January 21, 2011, defendant Bowman appointed FDIC as a receiver for United Western Bank
pursuant to 12 U.S.C. § 1464(d)(2)(A).
The Director identified three separate statutory grounds for appointing a receiver: (1) the
association was in an unsafe and unsound condition to transact business, see 12 U.S.C. §
1821(c)(5)(C); (2) the association was likely to be unable to pay its obligations or meet its
depositors’ demands in the normal course of business, see 12 U.S.C. § 1821(c)(5)(F); and (3) the
association was undercapitalized, as defined by 12 U.S.C. § 1831o(b), and had failed to submit a
capital restoration plan acceptable to OTS within the appropriate amount of time, see 12 U.S.C. §
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1821(c)(5)(K)(iii). See OTS Receivership Order for United Western Bank, Ex. 1 to Def. OTS’s
Mot. to Dismiss (“OTS Mem.”).
On February 17, 2011, the individuals who had previously constituted the board of
directors for the association and the holding corporation’s board held a joint meeting to discuss
the receivership. The meeting was attended by a quorum of each entity’s directors, as well as a
number of executives from the bank and the holding corporation, and the bank’s general counsel
and executive vice president, Theodore J. Abariotes. Abariotes Decl. Six of the bank’s seven
directors were present at the meeting. Decls. of Berling, Bullock, Darre, Gibson, Hirsh, and
Peoples. At this meeting, after reviewing a draft complaint, the participants unanimously agreed
to file suit seeking judicial review of OTS’s determination to appoint a receiver. Id. On
February 18, 2011, the association, the holding corporation, and five individual directors
(collectively “plaintiffs”) brought this action under 12 U.S.C. § 1464(d)(2)(B) against OTS,
OTS’s acting director, the FDIC as receiver for the bank (“FDIC-R”), and the FDIC in its
corporate capacity (“FDIC-C”).
I. STANDARD OF REVIEW
In evaluating a motion to dismiss under either Rule 12(b)(1) or 12(b)(6), the Court must
“treat the complaint’s factual allegations as true . . . and must grant plaintiff ‘the benefit of all
inferences that can be derived from the facts alleged.’” Sparrow v. United Air Lines, Inc., 216
F.3d 1111, 1113 (D.C. Cir. 2000) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir.
1979) (citations omitted)). Nevertheless, the Court need not accept inferences drawn by the
plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court
accept plaintiff’s legal conclusions. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002).
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A. 12(b)(1) Motion to Dismiss
Under Rule 12(b)(1), the plaintiff bears the burden of establishing jurisdiction by a
preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992);
Shekoyan v. Sibly Int’l Corp., 217 F. Supp. 2d 59, 63 (D.D.C. 2002). Federal courts are courts of
limited jurisdiction and the law presumes that “a cause lies outside this limited jurisdiction.”
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); see also Gen. Motors
Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C. Cir. 2004) (“As a court with limited
jurisdiction, we begin, and end, with examination of our jurisdiction.”). Because “subject-matter
jurisdiction is an ‘Art[icle] III as well as a statutory requirement, . . . no action of the parties can
confer subject-matter jurisdiction upon a federal court.’” Akinseye v. District of Columbia, 339
F.3d 970, 971 (D.C. Cir. 2003) (quoting Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de
Guinee, 456 U.S. 694, 702 (1982)).
When considering a motion to dismiss for lack of jurisdiction, unlike when deciding a
motion to dismiss under Rule 12(b)(6), the court “is not limited to the allegations of the
complaint.” Hohri v. United States, 782 F.2d 227, 241 (D.C. Cir. 1986) vacated on other
grounds, 482 U.S. 64 (1987). Rather, a court “may consider such materials outside the pleadings
as it deems appropriate to resolve the question of whether it has jurisdiction in the case.”
Scolaro v. D.C. Bd. of Elections & Ethics, 104 F. Supp. 2d 18, 22 (D.D.C. 2000) (citing Herbert
v. Nat’l Acad. of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1993); see also Jerome Stevens Pharms.,
Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005). In this case, both parties have submitted
materials for the Court’s consideration on this issue.
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B. 12(b)(6) Motion to Dismiss
“To survive a [Rule 12(b)(6)] motion to dismiss a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, --- U.S. ---, 129 S. Ct. 1937, 1949 (2009) (internal quotation marks omitted); see also Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the pleaded
factual content “allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Iqbal, 129 S. Ct. at 1949. “The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted
unlawfully.” Id. “[W]here the well-pleaded facts do not permit the court to infer more than the
mere possibility of misconduct, the complaint has alleged — but it has not ‘show[n]’ ‘that the
pleader is entitled to relief.’” Id. at 1950 (quoting Fed. R. Civ. Pro. 8(a)(2)). A pleading must
offer more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of
action,” id. at 1949 (quoting Twombly, 550 U.S. at 570), and “the tenet that a court must accept
as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. In
ruling upon a motion to dismiss, a court may ordinarily consider only “the facts alleged in the
complaint, documents attached as exhibits or incorporated by reference in the complaint, and
matters about which the Court may take judicial notice.” Gustave-Schmidt v. Chao, 226 F. Supp.
2d 191, 196 (D.D.C. 2002) (citations omitted).
C. Sovereign Immunity
Under the doctrine of sovereign immunity, the United States is immune to suit unless the
United States explicitly consents to being sued. United States v. Mitchell, 445 U.S. 535, 538
(1980). This immunity extends to the agencies of the federal government, including OTS. FDIC
v. Meyer, 510 U.S. 471, 474 (1994) (“Absent a waiver, sovereign immunity shields the Federal
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Government and its agencies from suit.”). See also Transohio Sav. Bank v. Director, Office of
Thrift Supervision, 967 F.2d 598, 607 (D.C. Cir. 1992). A waiver of immunity is strictly
construed in favor of the sovereign. Orff v. United States, 545 U.S. 596, 601−02 (2005).
“[A] plaintiff must overcome the defense of sovereign immunity in order to establish the
jurisdiction necessary to survive a Rule 12(b)(1) motion to dismiss.” Jackson v. Bush, 448 F.
Supp. 2d 198, 200 (D.D.C. 2006) (citing Tri-State Hosp. Supply Corp. v. United States, 341 F.3d
571, 575 (D.C. Cir. 2003)). Moreover, when the defense of sovereign immunity is raised in a
suit against a government agent in his or her individual capacity, that plaintiff must overcome the
defense in order to survive a Rule 12(b)(6) motion to dismiss. Id. Therefore, plaintiffs bear the
burden of establishing that sovereign immunity has been abrogated in order to overcome
defendants’ motions to dismiss.
II. ANALYSIS
A. The Claims Brought on Behalf of United Western Bank
OTS acknowledges that FIRREA contains a judicial review provision that permits an
association to seek the removal of a receiver in federal court. But it argues that since “the
complaint does not allege that the board of directors of the association authorized the filing of the
instant suit,” see OTS Mem. at 3, and the board did not take all of the ordinary corporate steps –
such as issuing notices of a board meeting, keeping minutes of the meeting, and executing a
board resolution, see id. at 10 and Tr. at 9, 31, and 36 – this Court does not have jurisdiction
under 12 U.S.C. §1464(d)(2)(B).
In the Court’s view, the directors’ failure to dot their “i’s” and cross their “t’s” should not
divest this Court of jurisdiction over the precise type of claim that Congress authorized it to hear.
Since OTS can point to no authority that would require proof of formal board action as a
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predicate to the exercise of subject matter jurisdiction under section 1464, and since the one case
that OTS identified as controlling in this instance does not support its position, the Court will
deny the government’s motion to dismiss the claims brought by, or on behalf of, United Western
Bank. While the statute fully authorizes OTS to decapitate the bank, it also grants the severed
head one final request – to ask to be reattached. It is no defense to complain that the head did not
put it in writing.
The Court is unaware of any requirement in any other context that a civil action brought
on behalf of an organizational plaintiff must specifically allege in the complaint that the lawsuit
was properly authorized. Nor has OTS pointed the Court to any authority for the proposition that
a court must ever look beyond the complaint and undertake such an inquiry before assuming
jurisdiction over a matter. OTS contends that the instant situation is unique because the
association itself is the only party permitted to sue. See OTS Mem. at 7−9. But the statute does
not contain any specific requirements for how the action – which by its nature is being brought
under extraordinary circumstances – must be initiated from within the organization. 1 The critical
1 OTS argues that only the board of directors, in its entirety, had the power to initiate
litigation on behalf of the association. This is not an accurate statement concerning corporate
governance in general, see 2 Fletcher Cyc. Corp. § 418 (“Generally, a formal resolution need not
be passed nor a formal vote taken in order to validate acts done at the meeting, unless so required
by statute, the articles of incorporation, or the bylaws.”). There is nothing in the United Western
Bank bylaws submitted to the court by OTS that would bar the group of former executives and
six out of seven former directors from taking that step, even if there was no formal notice of the
meeting in advance. The Amended and Restated Bylaws of United Western Bank submitted to
the Court state in Article II Section 6 that “the attendance of a director at a meeting shall
constitute a waiver of notice of such meeting,” and Section 8 provides that “the act of the
majority of the directors present at a meeting at which a quorum is present shall be the act of
Board of Directors . . . .” Exhibit 3 to Def. Bowman’s Mem. to Dismiss. But even if a
disgruntled shareholder or director could find grounds to complain that the lawsuit was not
properly authorized, that would not divest this court of jurisdiction to hear the suit brought on the
association’s behalf in the meantime.
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issue for purposes of jurisdiction is whether the action is being brought by or on behalf of the
association itself, since no other individual or entity is a proper plaintiff.
OTS insisted in its pleadings and in open court that its motion is governed by the D.C.
Circuit’s opinion in Gaubert v. Federal Home Loan Bank Board, 863 F.2d 59 (D.C. Cir. 1988).
OTS argued that “formal action by United Western Bank’s board of directors was necessary in
order to authorize the association to bring this suit.” OTS Memo. at 9 (citing Gaubert, 863 F.2d
at 67). See also OTS Reply at 1 (“The Court of Appeals for this circuit has held that this
challenge must ‘originate in the board of directors’ of the closed savings association, an act
which constitutes the directors’ ‘one remaining power’ after a receivership appointment.”)
(quoting Gaubert, 863 F.2d at 67); Tr. at 11. The government reads too much into the sentence
fragments it lifts from the Gaubert opinion.
In Gaubert, the Court of Appeals did not purport to address the question now pending
before this Court. An individual shareholder brought a derivative action on behalf of a savings
and loan association that had been placed into receivership by the Federal Home Loan Bank
Board (“FHLBB”). The district court dismissed the action pursuant to Fed. R. Civ. P. 23.1,
which governs derivative suits, on the grounds that the plaintiff had not first made a demand on
the board of directors that it proceed with the lawsuit, and that the plaintiff had failed to allege
with sufficient particularity why such a demand would have been futile. Gaubert, 863 F.2d at
61. The plaintiff took the position on appeal that no demand was needed since the board had
acceded to the receivership – it had closed the bank itself under prodding by the FHLBB, and
then the receiver was appointed. Id. Thus, the plaintiff argued, demand was futile.
The court’s analysis began with the requirements of Rule 23.1, and it discussed the
showing necessary to establish futility. See id. at 64–66. The court concluded that “we agree
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with the district court that something more than board acquiescence in the actions complained of
must be present before demand will be excused.” Id. at 66.
The court then summarized Gaubert’s argument that there should be an exception to the
demand requirement for derivative suits in which shareholders are contesting the appointment of
a receiver under 12 U.S.C. §1464(d)(6)(A). It stated:
In essence, Gaubert argues that the unique statutory setting of §1464 – in
which the only power left in the board of directors following the
appointment of a receiver is the authority to challenge that appointment,
see 12 U.S.C. §1464(d)(6)(A); First S & L Ass’n, 547 F. Supp. 988, 944
(D. Hawaii 1982) – somehow renders the board’s views on the
appointment of the receiver meaningless or irrelevant.
Gaubert, 863 F. 2d at 67. So, while Gaubert did note in the sentence excerpted by OTS that the
only thing the board can do is to bring an action to remove the receiver, it did not “hold” that
only the board can bring the action.
A careful reading of the rest of the opinion makes this conclusion even more clear. The
court went on to consider and reject the plaintiff’s suggestion that a demand should not be
necessary in a receivership situation. It stated:
Section 1464 itself contains no evidence that Congress sought to exempt
shareholders from the strictures of the demand requirement. Rather, it
provides that in the event of the appointment of a receiver, “the
association may . . . bring an action . . . .” If anything, this passage
suggests that Congress fully expected that challenges to the appointments
of receivers would originate in the board of directors.
Id. at 67. This language also does not support the interpretation advanced by OTS. The D.C.
Circuit did not “hold” that the challenge to the receiver “must” originate in the board of
directors, see OTS Reply at 1, and nowhere did it hold that “formal action” by the association’s
board is “necessary in order to authorize the association to bring this suit.” OTS Mem. at 9. In
fact, in addressing Gaubert’s contention, the court went on to observe:
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To the extent the 30-day limitation or the inherent financial difficulties of
corporations in receivership render demand more difficult in the § 1464
context, the court itself can apply its discretion in determining what effect
to give a board’s refusal to pursue the action or failure to acknowledge the
demand. A court may permissibly find, for example, that if a timely, good
faith demand is made on the board and there is no response within the 30
day period . . . the shareholder should be permitted to pursue the action in
a derivative capacity.
Id. at 67. The fact that the Gaubert court was willing to contemplate situations in which a
derivative action might be brought despite the board’s rejection of a shareholder’s demand
indicates that the court recognized that there may very well be a future suit brought under section
1464 which was not authorized by the board at all – either formally or informally.
Counsel for OTS complained to the Court: “What we are lacking at this point is any kind
of written record. And we do, as the government, require our insured institutions to keep written
records . . . .” Tr. at 34. In its papers, OTS cites to the regulations for the ordinary management
of saving associations, such as those that require the maintenance of “complete books and
records” or “minutes of the proceedings of its . . . board of directors, and committees of
directors.” OTS Reply at 6 n.7 (citing 12 C.F.R. §§ 552.6-1(a) and 552.11(a)). But the
government’s suggestion that those regulations would still be operative after the appointment of
a receiver runs counter to the very statutory provisions and regulations that OTS cites for the
proposition that the individual officers were devoid of any power to act. The government cannot
on the one hand invest the receiver with “all rights, title, powers, and privileges of the insured
depository institution and of any . . . officer[] or director of such institution,” 12 U.S.C. §
1821(d)(2)(A)(i), and direct that receiver to “immediately[] take possession of the savings
association’s books, records, and assets,” 12 C.F.R. § 558.1(b)(1), yet on the other hand demand
that the deposed directors still comply with regulations that govern the organization over which
they no longer have any authority.
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There is no other reading consistent with FIRREA. The government repeatedly cites 12
U.S.C. § 1821(d)(2)(A)(i) for the proposition that former officers and employees of the bank had
no authority to act after the appointment of the receiver. But that statute not only prohibits the
employees and officers from acting – it also bars the directors. So the provision has to be read in
a manner that does not eviscerate the judicial review provision contained in section
1464(d)(2)(B). 2
At the motion hearing on May 20, 2011, OTS protested that the lawsuit was in essence a
“rogue” action, since it was brought by officers and employees who, as of the date of the
receivership, had been ousted and had no authority to act for the association. OTS argues that
“[f]ormer employees who were fired . . . don’t have the ability to act on behalf of the
association.” Tr. at 31. “[T]he officers, shareholders, anyone else – [are] barred by statute from
invoking the authority of the association.” Id. at 11. See also id. at 35 (“[Without written
authorization] I’m a rogue attorney or rogue fired officer acting on my own.”). Counsel for OTS
likened the situation to a group of depositors getting together in a bowling alley and deciding to
sue OTS. Id. at 9. But this analogy is not apt, and the argument is not persuasive in light of the
2 As the Court noted in Gibralter Sav. v. Ryan, No. 89-3207, 1990 WL 484155, at * 7
(D.D.C. July 10, 1990): “As a final point, it is worth noting that if the Court were to construe the
statute to preclude entirely a judicial challenge, as the Director urges, this might well lead to
constitutional problems. The Supreme Court has repeatedly held that, in order to comport with
fifth amendment due process, an individual must be afforded ‘some kind of hearing’ before
being permanently deprived of a property interest. Cleveland Bd. of Educ. v. Loudermill, 470
U.S. 532, 542 (1985) (quoting Board of Regents v. Roth, 408 U.S. 564, 569-70 (1972)); see also
Hodel v. Virginia Surface Mining & Reclamation Ass’n, 452 U.S. 264, 299 (1981); Mathews v.
Eldridge, 424 U.S. 319, 333 (1976). Clearly, if this Court were to adopt the Director’s argument
and dismiss this complaint on the ground that the relevant law so requires, plaintiff would be
deprived of its property without any opportunity for a hearing. It is an established tenet that ‘an
Act of Congress ought not be construed to violate the Constitution if any other possible
construction remains available.’ Nat’l Labor Relations Bd. v. Catholic Bishop of Chicago, 440
U.S. 490, 500 (1979) (construing Murray v. The Charming Betsy, 2 Cranch 64, 118 (1804)).”
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unique situation presented by a receivership; that is, everyone, including the directors, has been
fired, and everyone, including the directors, has been barred by statute from acting on behalf of
the association. Yet the “association” is still permitted, under FIRREA, to bring a lawsuit. In
enacting the judicial review provision, Congress clearly intended that someone – and necessarily,
someone who has otherwise been deposed – would take that step on the association’s behalf.
This conclusion is borne out by First Savings & Loan Ass’n v. First Federal Savings &
Loan Ass’n of Hawaii, 547 F. Supp. 988 (D. Haw. 1982) (“First Savings II”). In that case, the
district court in Hawaii dismissed the plaintiffs’ anti-trust and other claims for damages and
equitable relief: “By virtue of its appointment as receiver, the [receiver] acquired all of the
powers of the members, directors and officers of First Savings except one . . . to bring an action
in the District Court for an order requiring the Board to remove such receiver.” Id. at 994. The
court reiterated:
The specific language of both the statutes and regulations clearly establish
that upon the appointment of . . . the receiver . . . the members, officers,
and directors of that association, save and except with the one exception
that I mentioned, lost all power to institute or prosecute or maintain any
legal claim or proceedings whatsoever on behalf of the association. The
exception heretofore mentioned by the Court is that the association may
within 30 days bring an action . . . for an order requiring the Board to
remove the receiver.
Id. Thus, there is language in the case cited by the D.C. Circuit – and relied upon by OTS – that
indicates that it is the “members, officers, and directors” who had the power to institute actions
“on behalf of” the association, and even after receivership, retained the power to bring the one
type of action that is before this Court: an action to remove the receiver brought “on behalf of”
the association.
Thus, this Court will deny OTS’s motion to dismiss the claims brought by, or on behalf
of, United Western Bank.
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B. The Claims Brought by the Holding Corporation and Individual Directors
OTS also argues that the limited waiver of sovereign immunity in section 1464(d)(2)(B)
allows only the association placed into conservatorship or receivership to challenge the
appointment. Thus, according to OTS, the holding corporation and individual directors lack
standing and are not proper plaintiffs in this action. The Court agrees.
It is clear from the plain language of the statute that Congress only authorized the
association to bring suit. Section 1464(d)(2)(B) states:
In the event of [the appointment of a receiver], the association may, within
30 days thereafter bring an action in . . . the United States District Court
for the District of Columbia[] for an order requiring the Director [of OTS]
to remove such . . . receiver.”
12 U.S.C. § 1464(d)(2)(B) (emphasis added). Because the statute expressly references only “the
association” and no other parties, it is reasonable to conclude that Congress intended to limit
judicial review to an action brought by the association.
Although few courts – and none in this Circuit – have directly addressed this issue, the
Court is persuaded by the analysis set forth by the Court of Appeals for the Tenth Circuit in a
similar case, Franklin Savings Ass’n v. Office of Thrift Supervision, 35 F.3d 1466 (10th Cir.
1994) (“Franklin II”). There, the court upheld the district court’s determination that the holding
company could not challenge the appointment of a receiver or conservator based on the “clear
statutory language” that the holding company lacked standing. Id. at 1469. The court reasoned
that the “[h]olding [c]ompany is not the association; it is merely a stockholder.” Id. See also
Life Bancshares, Inc. v. Fietcher, 847 F. Supp. 434, 441 (M.D. La. 1993) (dismissing an action
brought by officers, directors, and principal shareholders of a bank association – but not the
association itself – concluding “section 1464(d)(2)(B) only confers standing upon the
association”). The same conclusion is warranted here.
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Plaintiffs point to a number of cases where courts in this district have resolved section
1464(d)(2)(B) suits on the merits where individual directors, in addition to the association, were
plaintiffs. See Pls.’ Mem. in Opp. to OTS’s Mot. to Dismiss at 8−10. But none of these cases
squarely address the question now before the Court. For example, in Lincoln Savings & Loan
Ass’n v. Wall, 743 F. Supp. 901, 902 (D.D.C. 1990), the court resolved a suit against OTS and
FHLBB brought by both a holding corporation and its wholly owned subsidiary savings and loan
association. In its decision on the merits, the court made no mention of the holding corporation’s
lack of standing that OTS alleges here. In Haralson v. Federal Home Loan Bank Board, 721 F.
Supp. 1344 (D.D.C. 1989), the court resolved a case on the merits brought both by a savings and
loan institution and its principal shareholder against FHLBB to remove a receiver but did not
address the standing of the shareholder.
In addition, plaintiffs cite a number of cases outside this district in which suits
challenging a receivership appointment with multiple plaintiffs have proceeded to the merits.
See, e.g., Woods v. Fed. Home Loan Bank Bd., 826 F.2d 1400, 1404 (5th Cir. 1987) (reaching the
merits in a suit to remove a receiver brought by a principal owner, parent corporation, and vice
president in addition to the bank association); Biscayne Fed. Sav. & Loan Ass’n v. Fed. Home
Loan Bank Bd., 720 F.2d 1499, 1500 (11th Cir. 1983) (challenging a receivership appointment
brought by a bank association and its majority shareholder); Mariettta Franklin Securities Co. v.
Muldoon, No. 93-3432, 1994 WL 399550 (6th Cir. Aug. 1, 1994) (resolving a motion for relief
from judgment in an appeal brought by both the association and its owner when the court
previously refused to consider an appeal pursued by the owner without the association).
But these cases do not prove plaintiff’s point. At most, they represent instances where
defendants have failed to raise a standing challenge, and courts have failed to act sua sponte to
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dismiss the extra parties. The cases do not overcome the clear statutory language, decisions that
have directly resolved this issue on the contrary, and the well-established principles of sovereign
immunity. Therefore, the Court will grant OTS’s motion to dismiss the holding corporation and
individual directors as plaintiffs for lack of standing.
C. The Claims Against FDIC
Defendant FDIC, in both its corporate and receivership capacities, asserts that it is not a
proper defendant in this action and argues that the claims against it should be dismissed for lack
of subject matter jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule
12(b)(6).
Returning once again to the plain language of section 1464(d)(2)(B), the FDIC asserts
that the statute is expressly limited to actions against OTS. Def. FDIC’s Mot. to Dismiss (“FDIC
Mem.”) at 9. The statute provides:
In the event of [OTS’s appointment of the FDIC as receiver], the association
may[] . . . bring an action . . . for an order requiring the Director [of OTS] to
remove such . . . receiver . . . and the court shall upon the merits [either] dismiss
such action or direct the Director [of OTS] to remove such . . . receiver.
12 U.S.C. § 1464(d)(2)(B) (emphasis added). According to plaintiff, the statute is silent or
ambiguous as to whether any agency other than OTS is a proper defendant. Pls.’s Mem. in Opp.
to FDIC’s Mot. to Dismiss (“Pls.’ FDIC Opp.”) at 7−8.
Under these circumstances, the FDIC’s reading of the statute is the proper one. The
statute expressly authorizes only one party to be sued: the Director of OTS. 12 U.S.C. §
1464(d)(2)(B). Because any waiver of sovereign immunity must be explicit, see Mitchell, 445
U.S. at 538, it makes sense that Congress would create a statutory scheme where the agency
responsible for the appointment of the receiver would also be the proper defendant in a challenge
to that appointment. As the FDIC points out, this is precisely the approach that Congress has
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used in other related contexts. FDIC Mem. at 11. For example, the statute that authorizes the
FDIC to “appoint itself as sole conservator or receiver of any insured State depository
institution” also provides that a party may challenge the appointment by bringing suit against the
FDIC. 12 U.S.C. §§ 1821(c)(4), 1821(c)(7).
Plaintiffs suggest that because OTS relied on the FDIC’s brokered deposit determination
in deciding to appoint a conservator and receiver for United Western, FDIC is somehow
transformed into a proper defendant. Pls.’ FDIC Opp. at 11–14. This argument does not alter
the plain language of the statute or the Court’s analysis. Section 1464(d)(2)(b) does not
authorize suits against agencies on whose conclusions OTS relies in the decision to appoint a
receiver. 3
Finally, courts outside this district have also concluded that section 1464(d)(2)(B) only
authorizes suits against the appointing agency. For example, in First Savings & Loan Ass’n v.
First Federal Savings & Loan Ass’n, 531 F. Supp. 251, 253−54 (D. Haw. 1981) (“First Savings
I”), the court denied the plaintiff’s request for an order to restore its assets, reasoning that such
an order was beyond the court’s powers. “Section 1464 does not authorize a court to remove a
receiver except by issuing an order to the [appointer]. Because the [appointer] is not a party to
this action, this court cannot remove the [receiver].” Id. at 253.
Plaintiffs attempt to distinguish First Savings I by arguing that here, the appointer is
named in addition to the receiver. Pls.’ FDIC Opp. at 9. But the inclusion of a proper party does
not solve the sovereign immunity issue with respect to the other.
3 Moreover, the court in First Savings II held that the plaintiffs’ claims for money damages
against the receiver for conspiring to place the association into receivership were barred by the
Federal Tort Claims Act, specifically 28 U.S.C. § 2680(a) and (h). First Savings & Loan
Association, 547 F. Supp. at 997.
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Similarly, in Franklin Savings Ass’n v. Office of Thrift Supervision, 740 F. Supp. 1531,
1535 (D. Kan. 1990) (“Franklin I”), the plaintiff sued both the appointing agency and a state
official that had participated in the receivership determination. The court dismissed the state
official, even though he had played a role in the appointing decision, because the official had “no
power or authority to grant the relief plaintiffs seek.” Id. Plaintiffs counter that Franklin I is
distinguishable because the state official could not have reclaimed the plaintiff’s transferred
assets. Pls.’ FDIC Opp. at 10−11. This argument is also unpersuasive. As the court reasoned in
First Savings I, asking the receiver to reclaim plaintiff’s assets is beyond the Court’s authority
acting pursuant to section 1464(d)(2)(B). Thus, the Court rejects plaintiffs’ argument that they
cannot be afforded relief without FDIC as a defendant in this lawsuit.
Finally, Franklin I debunks plaintiffs’ assertion that a jurisdictional discovery order is
necessary to determine what role, if any, FDIC played in OTS’s decision to appoint a receiver.
The request for jurisdictional discovery presupposes that any agency that played a role in OTS’s
determination should ultimately be joined to the suit. But the statute does not provide for joining
parties that played a role; section 1464(d)(2)(B) authorizes suit only against the appointing
agency. Thus, the Court will dismiss the claims against FDIC in both its corporate and
receivership capacities. In sum, this case is moving forward, as the statute contemplates, with
one plaintiff – the bank association, and one defendant – the director of OTS.
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CONCLUSION
For the foregoing reasons, and in reliance upon the motions, the oppositions, and the
entire record of this case, the Court grants defendant OTS’s motion to dismiss United Western
Bank, Inc. and the individual directors, the Court denies OTS’s motion to dismiss United
Western, and the Court grants defendant FDIC’s motion to dismiss. A separate order will issue.
AMY BERMAN JACKSON
United States District Judge
DATE: June 24, 2011
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