Professional Documents
Culture Documents
3d 1466
63 USLW 2215
Franklin Savings and Loan Association (the Association) appeals the decision
of the district court that held the Association was not entitled to judicial review
of a decision of the Director of the Office of Thrift Supervision (the Director).
The Director replaced the conservator, who was to operate the Association,
with a receiver, who will liquidate the Association. We hold judicial review of
the replacement decision is not permitted. We furthermore hold Franklin
The Director, in 1990, determined the Association was "in an unsafe and
unsound condition to transact business" and appointed the Resolution Trust
Corporation as a conservator of the Association.1 Both the Association and its
Holding Company commenced an action pursuant to the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA or the Act) to
remove the conservator. The district court agreed, and we reversed holding the
proper scope of judicial review of the Director's appointment decision is limited
to the administrative record and finding the Director's decision to appoint a
conservator supported by the record. Franklin Sav. Ass'n v. Office of Thrift
Supervision, 742 F.Supp. 1089 (D.Kan.1990), rev'd, 934 F.2d 1127 (10th
Cir.1991) ("Franklin I "). After the case was dismissed, the Director of the
Office of Thrift Supervision decided to change the role of the Resolution Trust
Corporation from conservator to receiver. 57 Fed.Reg. 41,969 (Sept. 14, 1992).
The Association and the Holding Company initiated this suit to challenge the
replacement. The district court sustained the Director's motion to dismiss
holding the Director's decision to impose a receivership in the case at bar is not
subject to judicial review. Franklin Sav. Ass'n v. Office of Thrift Supervision,
821 F.Supp. 1414 (D.Kan.1993) ("Franklin II ").
A threshold question in this case is whether the Holding Company has standing
to bring this suit pursuant to 12 U.S.C.A. Sec. 1464(d)(2)(B) (Supp.1994).2 The
district court determined the Holding Company lacked standing because the
statute provides only "the association" may bring an action under FIRREA
challenging the appointment of a receiver or conservator. 12 U.S.C.A. Sec.
1464(d)(2)(B). The Holding Company is not the association; it is merely a
stockholder. The district court relying upon the clear statutory language
reasoned that the Holding Company lacked standing. We agree.
Appellants assert the question of the Holding Company's standing has been
raised and fully litigated in an earlier suit between the parties and claim res
judicata and collateral estoppel relieve this court from considering standing.
The issue of standing was argued before the district court during the summary
judgment phase of the first Franklin case. Franklin Sav. Ass'n v. Office of
Thrift Supervision, 740 F.Supp. 1531, 1533-34 (D.Kan.1990). The district court
found the Holding Company had the capacity to be a party plaintiff on its own
behalf. Standing was not raised during the appeal of the district court's decision
on the merits. Franklin I, 934 F.2d at 1135 n. 2 (Tenth Circuit panel noted the
issue of standing had not been raised). This court vacated the district court's
determination in the entirety, however, and ordered the case dismissed. See id.
at 1151. We noted the issue of standing need not be addressed because we
reversed on other grounds. Id. at 1135 n. 2.
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" 'A judgment that has been vacated, reversed, or set aside on appeal is thereby
deprived of all conclusive effect, both as res judicata and as collateral estoppel.'
" Jaffree v. Wallace, 837 F.2d 1461, 1466 (11th Cir.1988) (quoting 1B Moore's
Federal Practice p 0.416, at 517 (1984)). Because we entirely vacated the
district court's decision and remanded the case to be dismissed, the summary
judgment determination on standing lacks preclusive effect. Martinez v.
Winner, 800 F.2d 230, 231 (10th Cir.1986) (the court of appeals's order to
vacate and dismiss will remove the res judicata and the stare decisis effect of
the vacated judgments); cf. Johnson v. Chicago Board of Educ., 457 U.S. 52,
53-54, 102 S.Ct. 2223, 2224, 72 L.Ed.2d 668 (1982) ("Because we have
vacated the Court of Appeals' judgments in this case, the doctrine of the law of
the case does not constrain either the District Court or, should an appeal
subsequently be taken, the Court of Appeals."). Because the earlier
determination has been vacated, res judicata is not a concern.
The Holding Company lacks standing to sue the Director under Sec. 1464(d)(2)
(B) of FIRREA. 4
JUDICIAL REVIEW
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read one way: FIRREA prohibits judicial review of the Director's decision to
replace the conservator with a receiver. Franklin II, 821 F.Supp. at 1419. Under
this interpretation, the Association's current action would be barred by the
statute. We agree.
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The statute outlines procedural review by the courts. The statute reads:
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....
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(B) Power of appointment; judicial review
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(C) Replacement
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The Director may, without any prior notice, hearing, or other action, replace a
conservator with another conservator or with a receiver, but such replacement
shall not affect any right which the association may have to obtain judicial
review of the original appointment, except that any removal under this
subparagraph shall be removal of the conservator or receiver in office at the
time of such removal.
Except as otherwise provided in this subsection, no court may take any action
for or toward the removal of any conservator or receiver or, except at the
request of the Director, to restrain or affect the exercise of powers or functions
of a conservator or receiver.
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Our interpretation of Sec. 1464 is consistent with the broad policy objectives of
FIRREA to strengthen the enforcement powers of federal regulators and to deal
expeditiously with failed depository institutions. FIRREA, Pub.L. No. 101-73,
Sec. 101(8)-(9), 103 Stat. 187 (1989). Limiting judicial review to the initial
appointment of a conservator or receiver is also consistent with the strict
reading other courts of appeals have given the precursors to subsections (B)
through (D) of Sec. 1464(d)(2). See First Fed. Sav. Bank & Trust v. Ryan, 927
F.2d 1345, 1355-57 (6th Cir.) (declining to allow a action seeking to enjoin an
appointment of conservator or receiver prior to Director's decision), cert.
denied, --- U.S. ----, 112 S.Ct. 187, 116 L.Ed.2d 148 (1991); Haralson v.
Federal Home Loan Bank Bd., 837 F.2d 1123, 1125-26 (D.C.Cir.1988)
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The Association has already received all of the process due at this phase. The
Association has used its opportunity to challenge the Director's decision to
appoint a conservator. The courts reviewed the grounds for the appointment,
and the same grounds are required for the initial appointment of a receiver. 12
U.S.C.A. Sec. 1464(d)(2)(A). Due process is satisfied by the arbitrary and
capricious standard of review of the agency's initial determination that grounds
exist to appoint either a conservator or receiver. In the context of banking
regulation, post-deprivation court review generally satisfies due process
requirements. Franklin I, 934 F.2d at 1140; Haralson, 837 F.2d at 1126; Woods
v. Federal Home Loan Bank Bd., 826 F.2d 1400, 1410-13 (5th Cir.1987), cert.
denied, 485 U.S. 959, 108 S.Ct. 1221, 99 L.Ed.2d 422 (1988); see Fahey v.
Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947) (no constitutional
requirement an association be given an adjudicatory hearing prior to the Federal
Home Loan Bank Board's appointment of a conservator). The Association has
been furnished adequate procedure.
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CONCLUSION
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The Act does not grant federal courts the jurisdiction to evaluate the Director's
decision to replace a conservator with a receiver if the initial appointment
received review. Although we are concerned the lack of judicial review could
be used to conceal federal mismanagement, application of FIRREA to the
Director's decision does not violate the Association's Fifth Amendment right to
due process. Accordingly, we AFFIRM the district court's opinion.
For a full account of the factual background, see Franklin Sav. Ass'n v. Office
of Thrift Supervision, 742 F.Supp. 1089 (D.Kan.1990), and Franklin Sav. Ass'n
v. Office of Thrift Supervision, 934 F.2d 1127 (10th Cir.1991), cert. denied, --U.S. ----, 112 S.Ct. 1475, 117 L.Ed.2d 619 (1991)
"[T]he association may ... bring an action in the United States district court ...
for an order requiring the Director to remove such conservator or receiver." 12
U.S.C.A. Sec. 1464(d)(2)(B) (emphasis added)
Appellants also argue the Holding Company could have intervened as of right
and thus has standing to participate in the lawsuit as a party. We need not
address this argument as we are affirming the dismissal of the suit and the
Holding Company has not applied to intervene
5
In the dicta of Franklin I, this court made a distinction between managing the
assets and liquidating the assets. 934 F.2d at 1141 ("We believe it significant to
note the case before us does not involve the more severe decision to appoint a
conservator for the purpose of liquidation.... The decision to appoint a
conservator is not a judgment to divest the owner of his property.") However,
the dicta does not affect the outcome of this case. The statutory language
clearly limits judicial review and we are not convinced the appointment of a
receiver under FIRREA violates due process