Willem Ridder v. Office of Thrift Supervision and Ellen S. Seidman, Director

146 F.3d 1035, 331 U.S. App. D.C. 94
CourtCourt of Appeals for the D.C. Circuit
DecidedSeptember 17, 1998
Docket97-5181
StatusPublished
Cited by16 cases

This text of 146 F.3d 1035 (Willem Ridder v. Office of Thrift Supervision and Ellen S. Seidman, Director) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Willem Ridder v. Office of Thrift Supervision and Ellen S. Seidman, Director, 146 F.3d 1035, 331 U.S. App. D.C. 94 (D.C. Cir. 1998).

Opinion

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

Four former bank officers appeal the district court’s dismissal of a lawsuit they initiated to enjoin the enforcement of a temporary order to cease and desist issued by the Office of Thrift Supervision. We agree with the district court that it lacked jurisdiction to consider this case, and affirm.

I. Background

A.

In 1989, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act, Pub.L. No. 101-73, 103 Stat. 183 (“FIRREA”), in part “ ‘[t]o improve the supervision of savings associations by strengthening capital, accounting and other supervisory standards’ and to ‘promote, through regulatory reform, a safe and stable system of affordable housing finance.’” Transohio Sav. Bank v. Director, OTS, 967 F.2d 598, 603 (D.C.Cir.1992) (quoting FIRREA § 101(1) & (2), 103 Stat. 187, 12 U.S.C. § 1811 note). In addition to establishing stricter capital requirements for thrifts, FIR-REA also consolidated many of the powers and duties of two prior regulatory bodies in a newly-created entity, the Office of Thrift Supervision (“OTS”). See American Fed’n of Gov’t Employees v. FLRA, 46 F.3d 73, 74 (D.C.Cir.1995); CityFed Fin. Corp. v. OTS, 58 F.3d 738, 741 (D.C.Cir.1995). Under this statutory regime, when OTS determines that “any insured depository institution ... or any institution-affiliated party is engaging or has engaged ... in an unsafe or unsound practice in conducting the business of such depository institution, or is violating or has violated ... a law, rule, or regulation, or any condition imposed in writing by the agency,” it may “issue and serve upon the depository institution or such party a notice of charges ... [which] shall contain a statement of the facts constituting the alleged violation ... and shall fix a time and place at which a hearing will be held to determine whether an order to cease and desist therefrom should issue against the depository institution or the institution-affiliated party.” 12 U.S.C. § 1818(b)(1).

OTS is statutorily empowered to “issue a temporary order requiring the depository institution or such party to cease and desist from any ... violation or practice [charged in a section 1818(b)(1) proceeding] and to take affirmative action ... pending completion of such proceedings.” 12 U.S.C. § 1818(c)(1). It may issue such an order if it

determine[s] that the violation or threatened violation or the unsafe or unsound practice or practices, specified in the notice of charges served upon the depository institution or any institution-affiliated party pursuant to paragraph (1) of subsection (b) of this section, or the continuation thereof, is likely to cause insolvency or significant dissipation of assets or earnings of the depository institution, or is likely to weaken the condition of the depository institution or otherwise prejudice the interests of its depositors prior to the completion of the proceedings conducted pursuant to paragraph (1) of subsection (b) of this section. ...

Id.

Congress prohibited courts from reviewing regulated entities’ challenges to OTS-initiated proceedings under most circumstances. See 12 U.S.C. § 1818(i)(l); CityFed Fin. Corp., 58 F.3d at 741-42. However, the “depository institution concerned or any institution-affiliated party” may appeal to a United States district court from a temporary cease- and-desist order within ten days after being served with the order. 12 U.S.C. § 1818(e)(2). On appeal, a district court may enjoin such an order in whole or in part. Id.

B.

In 1984, CityFed Financial Corporation (“Holding Company”), a savings and loan holding company, was created in order to acquire City Federal Savings Bank (“Bank”), a federally insured savings institution. City Collateral and Financial Services, Inc. (“Subsidiary”) is a second tier subsidiary of Bank. Appellants Willem Ridder, Lyndon C. Mer- *1037 kle, John T. Hurst, and Gregory DeVany are former officers of Subsidiary. See Complaint ¶¶ 1-4.

When Holding Company acquired Bank, Holding Company — at the insistence of pre-FIRREA regulatory agency Federal Home Loan Bank Board — agreed to maintain Bank’s net worth at a level consistent with regulatory requirements, and also agreed to infuse additional equity capital into Bank if necessary. Holding Company did not live up to these promises. Thus, in 1989, OTS declared Bank insolvent, and appointed the Resolution Trust Corporation (“RTC”) as Receiver for Bank.

In 1994, pursuant to 12 U.S.C. § 1818(b)(1), OTS brought administrative enforcement proceedings against Holding Company and seven of its current and former directors. A Notice of Charges and Hearing (“Notice of Charges”) charged them with letting Bank’s net worth plunge below regulatory requirements by approximately $118 million. The Notice of Charges sought restitution of the $118 million, and demanded payment of over $2 million in civil penalties. Appellants were not named in the Notice of Charges.

Holding Company’s assets dwindled considerably after Bank was placed in receivership. - Thus, in June 1994, pursuant to 12 U.S.C. § 1818(c)(1),- OTS issued a temporary cease-and-desist order (“Temporary Order”) which restricted Holding Company’s use of its assets. OTS justified its issuance of the Temporary Order by concluding that Holding Company was “likely to cause ... significant dissipation of assets or earnings of the depository institution.” 12 U.S.C. § 1818(c)(1). Under the Temporary Order, which remains in effect, Holding Company is entitled to a $15,000 per month allowance to cover its operating expenses, and may dip into its assets to pay reasonable legal expenses incurred in its own defense. The Temporary Order also contains a “hardship” provision permitting Holding Company to petition for relief if the order’s enforcement “threatens to cause undue hardship to [Holding Company] in conducting its business or affairs.” 1 Appellants were not named in the Temporary Order.

In 1992 (two years before the Temporary Order issued), the RTC sued appellants for fraud and breach of fiduciary duty. These claims had nothing to do with the earlier administrative proceedings initiated by OTS.

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Bluebook (online)
146 F.3d 1035, 331 U.S. App. D.C. 94, Counsel Stack Legal Research, https://law.counselstack.com/opinion/willem-ridder-v-office-of-thrift-supervision-and-ellen-s-seidman-cadc-1998.