Resolution Trust Corp. v. Diamond

137 F.R.D. 634, 1991 U.S. Dist. LEXIS 8961, 1991 WL 131946
CourtDistrict Court, S.D. New York
DecidedJuly 3, 1991
DocketNos. 91 Civ. 1361 (RLC), 91 Civ. 1683 (RLC)
StatusPublished
Cited by36 cases

This text of 137 F.R.D. 634 (Resolution Trust Corp. v. Diamond) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Resolution Trust Corp. v. Diamond, 137 F.R.D. 634, 1991 U.S. Dist. LEXIS 8961, 1991 WL 131946 (S.D.N.Y. 1991).

Opinion

ROBERT L. CARTER, District Judge.

On February 25, 1991, the Resolution Trust Corporation (the “RTC”), as receiver of Nassau Savings and Loan Association, F.A. (“Nassau Savings”), brought a declaratory judgment action, No. 91 Civ. 1361 (RLC), against Angelo Aponte, the Commissioner of the Division of Housing and Community Renewal of the State of New York (the “DHCR”); Robert Abrams, the Attorney General of the State of New York [638]*638(the “A.G.”); and the lessees of nine condominium units located at 444 East 57th Street, New York, New York (the “East 57th Street units”) that the RTC had acquired as a result of the failure of Nassau Federal Savings and Loan Association (“Nassau Federal”).1

The RTC, which was established by Congress for the purposes of managing and disposing of the assets of failed savings and loan institutions, seeks to establish that as a general matter, it has the right, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), Pub.L. 101-73, 103 Stat. 183; 12 U.S.C. § 1441a(b), to disaffirm and repudiate condominium and cooperative unit leases and tenancies; that pursuant to the Supremacy Clause of Article VI of the United States Constitution, the RTC has the right to sell, lease, maintain and otherwise exercise control over the East 57th Street units free and clear of any exercise of authority by the DHCR under Article 2 of New York’s Public Housing Law, the regulations enacted thereunder, or other laws and regulations of the State of New York; and that, also pursuant to the Supremacy Clause, the RTC has the right to sell, lease, maintain and otherwise exercise control over the East 57th Street units free and clear of any exercise of authority by the A.G. under the Martin Act, N.Y.Gen. Bus.Law, §§ 352 et seq.

On March 13, 1991, the A.G. and the DHCR (collectively the “A.G.”) commenced their own action, No. 91 Civ. 1683 (RLC), challenging the RTC’s authority to disregard New York State’s comprehensive statutory scheme regulating the rights of rental tenants during and after condominium and cooperative conversions. At a pretrial conference on May 21, 1991, the court consolidated the two actions for all purposes in light of the similarity of factual and legal issues that they presented.

At that conference, the court made an initial determination that discovery in the now-consolidated actions should be limited to the facts and events relating to the RTC’s disaffirmance and repudiation of the leases of the East 57th Street units. In addition, the court ordered the RTC to produce documents, on or before May 30,1991, that were responsive to the A.G.’s prior discovery request; directed the A.G. to advise the RTC, on or before June 14, 1991, of the specific individuals he wished to depose and any additional documents he wished to have the RTC produce; and to the extent that discovery issues remained in dispute, directed the parties to express their views to the court in writing by June 21, 1991, and to appear for a conference with the court on these unresolved issues on July 1, 1991.

Based upon the factual circumstances and legal positions presented to the court both in writing and during the conference held on July 1, 1991, the court made oral rulings on all of these disputed issues. In the interest of providing the parties with more guidance on how best to proceed toward a just and timely resolution of these cases, particularly in view of the pressing questions of public policy that these cases raise, the court herein sets forth its rulings in greater detail.

I. Scope of Discovery

Central to both sides’ claims in these two cases is the “Statement of Policy for the Disposition of Residential Units Which Were Previously Subject to Rent or Securities Regulation” (the “policy statement”), which the RTC issued on February 22, 1991. The policy statement declares, in relevant part:

1. The policy of the RTC will be to exercise its disaffirmance or repudiation [639]*639powers with regards [sz'c ] to these units when it determines that: 1) the insured depository institution is a party to the lease; 2) the performance of which the conservator or receiver determines, in its discretion, to be burdensome; and 3) ... the disaffirmance or repudiation of which the conservator or receiver determines, in its discretion, will promote the orderly administration of the institution’s affairs.
2. Where the RTC finds that units are leased by low or moderate income tenants, the RTC will not exercise its disaffirmance or repudiation powers with respect to those units. For this purpose, a low or moderate income tenant is defined as a family or individual whose income does not exceed one hundred and fifteen percent (115%) of the median income in the area involved____
3. Where the RTC determines to dis-affirm or repudiate the leases of such units, the RTC may, in its discretion, offer the units for sale to the existing tenants or negotiate other arrangements, on terms which the RTC finds acceptable, in accordance with its mandate to maximize recoveries on the assets of the institutions in its control. If the existing tenants decline or fail to purchase the units or to enter into any other agreement acceptable to the RTC, the RTC will be free to consummate the disaffir-mance or repudiation and to take whatever action it deems appropriate for the disposition of the units.

Complaint, No. 91 Civ. 1361 (RLC), Exhibit D.

Given the broad, nationwide applicability of the policy statement, its potential effect on all cooperative and condominium units in New York State that the RTC has taken over as a result of the failure of Nassau Federal and other institutions is clear. The RTC seeks this court’s determination that the RTC has complied with the statutory provisions of FIRREA in adopting its policy statement, that the RTC’s authority under FIRREA thereby preempts any state law or regulation to the contrary, and that the RTC may therefore sell the East 57th Street units pursuant only to FIRREA provisions and without restraint of any law or regulation of New York State or New York City.

The A.G. challenges not only the RTC’s authority to ignore state and local law in disposing of the East 57th Street units, but also the RTC’s adoption of the policy statement in the first place. The A.G. points out that the statutory mandate of the RTC under FIRREA is to conduct its operations in a manner that

(i) maximizes the net present value return from the sale or other disposition of institutions [under the RTC’s control] or the assets of such institutions;
(ii) minimizes the impact of such transactions on local real estate and financial markets;
(iii) makes efficient use of funds obtained from the Funding Corporation or from the Treasury;
(iv) minimizes the amount of any loss realized in the resolution of cases; and
(v) maximizes the preservation of the availability and affordability of residential real property for low and moderate-income individuals.

12 U.S.C. § 1441a(b)(3)(C).

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Bluebook (online)
137 F.R.D. 634, 1991 U.S. Dist. LEXIS 8961, 1991 WL 131946, Counsel Stack Legal Research, https://law.counselstack.com/opinion/resolution-trust-corp-v-diamond-nysd-1991.