Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-94-05254/USCOURTS-caDC-94-05254-0/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 

---

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 8, 1995 Decided July 11, 1995

No. 94-5254

CITYFED FINANCIAL CORP., ET AL.,

APPELLANTS

v.

OFFICE OF THRIFT SUPERVISION,

UNITED STATES DEPARTMENT OF TREASURY AND

JONATHAN L. FIECHTER, ACTING DIRECTOR OF THE

OFFICE OF THRIFT SUPERVISION,

APPELLEES

-

Consolidated with

No. 94-5255

-

Appeals from the United States District Court

for the District of Columbia

(No. 94cv01273)

-

Frank J. Eisenhart argued the cause for appellants. With him on the briefs for CityFed Financial

Corp. were Arthur W. Leibold, Jr., Bettina L. Alexander and Neil R. Crowley.

Ronald W. Stevens and Douglas M. Kraus were on the briefs for appellants Gordon E. Allen, et al.

Dirk S. Roberts, Assistant Chief Counsel, U.S. Department of Treasury, argued the cause for

appellees. With him on the brief were Carolyn B. Lieberman, Acting Chief Counsel, Thomas J.

Segal, Deputy Chief Counsel, and Kerry W. Kircher, Senior Trial Attorney, U.S. Department of

Treasury.

Before: EDWARDS, Chief Judge, ROGERS and TATEL, Circuit Judges.

Opinion of the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: In June of 1994, the Office of Thrift Supervision issued a temporary

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 1 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

cease and desist order against CityFed Financial Corporation that froze virtually all of CityFed's

assets. According to OTS, the Corporation failed to use those assets to comply with the net worth

requirements for its subsidiary bank, City Federal Savings and Loan, which OTS had placed into

receivership several years earlier. Arguing that the receivership ended its control over its subsidiary

and therefore OTS's jurisdiction over it as a "holding company," CityFed sought a preliminary

injunction barring OTS from enforcing the temporary order. We agree with the district court that

because the alleged violations occurred before the receivership, OTS had jurisdiction to issue the

cease and desist order. Because CityFed failed to demonstrate that the temporary cease and desist

order would cause it irreparable harm, we also affirm the district court's denial of the preliminary

injunction.

I.

The savings and loan industrydeveloped primarilyas a means of "financ[ing]the purchase and

construction of housing." Transohio Sav. Bank v. Director, OTS, 967 F.2d 598, 601 (D.C. Cir.

1992); see also H.R. Rep. No. 54, pt. 1, 101st Cong., 1st Sess. 291 (1989) [hereinafter House

Report], reprinted in 1989 U.S.C.C.A.N. 86, 87. With the high interest rates of the late 1970s and

early 1980s, savings and loans found themselves "locked into long-term, low-yielding, fixed-rate

mortgages," while depositors transferred their assets from savings and loans into higher-yield

investments. House Report at 295; see Transohio, 967 F.2d at 602. In an effort to address the

resulting financial instability, the federal government significantly deregulated the savings and loan

industry, allowing institutions to participate in much riskier investments. See House Report at 294-

98. In combination with economic recession, poor management, and some fraud, failed high-risk

investments "left the industry struggling for survival, and ... virtually wiped-out its deposit insurance

fund." House Report at 292; see also S. Rep. No. 19, 101st Cong., 1st Sess. 7-10 (1989)

[hereinafter Senate Report]; Transohio, 967 F.2d at 601-04; see generally Graduate Colloquium

1990-91, The S&L Crisis: Death and Transfiguration, 59 Fordham L. Rev. S1, S1-S109 (1991).

In response to the lax regulation and loose capital requirements that it perceived at the root

of the savings and loan crisis, Congress enacted the Financial Institutions Reform, Recovery, and

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 2 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 183 (codified at 12 U.S.C. § 1811 and in

scattered sections of U.S.C.). In part, FIRREA was enacted to "establish stronger capital standards

for thrifts," thereby providing "a cushion against losses incurred in times of poor financial

performance." House Report at 307, 310. According to Congress, "if a crisis of this nature is to be

prevented from happening again, thrifts must be adequately capitalized against losses." Id. at 310;

see also Transohio, 967 F.2d at 603-04. In addition to establishing these higher capital requirements,

FIRREA was enacted to "enhance the regulatory enforcement powers of the depository institution

regulatory agencies to protect against fraud, waste, and insider abuse." House Report at 307-08.

To increase the effectiveness of the regulatory scheme, Congress consolidated many of the powers

and duties of the pre-FIRREA regulatory agencies, the Federal Home Loan Bank Board and the

FederalSavings and Loan InsuranceCorporation, into the newly-createdOffice ofThrift Supervision.

See American Fed'n of Gov't Employees v. FLRA, 46 F.3d 73, 74 (D.C. Cir. 1995); Transohio, 967

F.2d at 603; see also FIRREA, § 101(9), (10) (enacting FIRREA to "strengthen the enforcement

powers of Federal regulators ... [and] the civil sanctions ... for defrauding or otherwise damaging

depository institutions and their depositors").

Among OTS's powers is its ability to initiate administrative proceedings designed to protect

savings and loans. See 12 U.S.C. § 1464(d)(1)(A) (Supp. V 1993) (giving OTS Director authority

to enforce 12 U.S.C. § 1818). As authorized by 12 U.S.C. § 1818(b)(1) (Supp. V 1993), these

proceedings may begin once OTS determines that "any insured depository institution ... or any

institution-affiliated party is engaging or has engaged ... in an unsafe or unsound practice ... or is

violating or has violated ... a law, rule, or regulation, or any condition imposed in writing by the

agency." If one of these conditions exists "in the opinion of " OTS, it "may issue and serve upon ...

such party a notice of charges." 12 U.S.C. § 1818(b)(1). After this notice and a hearing, the agency

may issue a "permanent" cease and desist order that may require the party "to take affirmative action

to correct the conditions resulting from any such violation," id., including restitution in cases of

"unjust enrichment" or "reckless disregard for the law," 12 U.S.C. § 1818(b)(6) (Supp. V 1993).

In addition to its permanent cease and desist authority, OTS "may issue a temporary order

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 3 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

requiring the depository institution or such party to cease and desist from any ... violation or practice

[charged in a section 1818(b)(1) action] and to take affirmative action ... pending the completion of

such proceedings." 12 U.S.C. § 1818(c)(1) (Supp. V 1993). OTS can issue such orders, however,

only if it

determine[s] that the 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) ofsubsection (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 [administrative] proceedings.

12 U.S.C. § 1818(c)(1).

To ensure that holding companies like CityFed do not escape OTS's regulatory authority,

FIRREA made most of section 1818, including the permanent and the temporary cease and desist

powers, applicable "to any savings and loan holding company ... in the same manner as such

subsections apply to a savings association." 12 U.S.C. § 1818(b)(9). Under the statute, a "savings

and loan holding company" is "anycompanywhich directlyor indirectlycontrols a savings association

or controls any other company which is a savings and loan holding company." 12 U.S.C. §

1467a(a)(1)(D) (Supp. V 1993).

To prevent regulated parties from interfering with the comprehensive powers of the federal

banking regulatory agencies, Congress severely limited the jurisdiction of courts to review ongoing

administrative proceedings brought by banking agencies. Thus, with respect to actions under section

1818, section 1818(i)(1) providesthat, "except as otherwise provided in thissection ... no court shall

have jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or

order under [this] section, or to review, modify, suspend, terminate, or set aside any such notice or

order." 12 U.S.C. § 1818(i)(1) (Supp. V 1993). Temporary cease and desist orders, however, are

reviewable. Section 1818(c)(2) allows subjects of temporary cease and desist orders under section

1818(c)(1) to apply, within ten days, to their home federal judicial district or to the United States

District Court for the District of Columbia "for an inju[n]ction setting aside, limiting, or suspending

the enforcement, operation, or effectiveness of such order pending the completion of the

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 4 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

administrative proceedings ... and such court shall have jurisdiction to issue such injunction." 12

U.S.C. § 1818(c)(2). It is under this provision that CityFed, the subject of an OTS enforcement

proceeding, initiated this litigation in the district court.

CityFed began operating in 1984 as a savings and loan holding company with control over

City Federal Savings Bank. As required by the Federal Home Loan Bank Board, the federal

regulatory agency at the time, CityFed signed a net worth maintenance stipulation agreeing to "cause

the net worth of City Federal to be maintained at a level consistent with that required by ... the Rules

and Regulations for the Federal Savings and Loan Insurance Corporation, as now or hereafter in

effect, ... and, as necessary, [to] infuse sufficient additional equity capital, in a form satisfactory to

the SupervisoryAgent, to effect compliance with such requirement." Stipulation of CityFed Financial

Corp. (Dec. 4, 1984), in Joint Appendix at 30.

Like so many othersavings and loans, City Federal'sfinancial position deteriorated in the late

1980s. In a disclosure statement filed with the Securities and Exchange Commission in late 1989,

CityFed estimated that City Federal was approximately $118 million short of its regulatory capital

requirements. The Office of Thrift Supervision, which by then had succeeded the Federal Home Loan

Bank Board, sent CityFed a letter on December 6, 1989, demanding that CityFed comply with its net

worthmaintenance stipulation byinfusing asmuch capitalinto City Federal as possible. The next day,

OTS appointed the Resolution Trust Corporation as receiver for City Federal. Although CityFed

took some steps to aid City Federal's financialstatus, such as hiring consultants, it declined to infuse

any of its approximately $12.9 million in assets into City Federal, arguing that its funds would make

no significant difference given the magnitude of the shortfall.

Exercising its authority under 12 U.S.C. § 1818(b)(1), OTS initiated administrative

enforcement proceedings against CityFed in June of 1994. In these proceedings, which are still

pending before the agency, OTS alleged, among other regulatory violations, that CityFed had failed

to comply with the net worth maintenance stipulation it had signed ten years earlier. OTS sought

over $2 million in civil penalties from CityFed as well as restitution of the $118 million shortfall. As

authorized by 12 U.S.C. § 1818(c)(1), OTS also issued a temporary cease and desist order that

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 5 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

placed severe restrictions on CityFed's use of its assets. This order was a direct response to the fact

that from1989 to 1994, CityFed's assetsfellfrom $12.9 million to lessthan $9 million, at least in part

because of substantial legal fees that CityFed was paying for the defense of it and its directors. To

prevent further dissipation of funds that OTS alleges should have been paid into City Federal, the

temporary order required CityFed to post security for its assets and limited CityFed's monthly

expenditures to $15,000. As a result of this asset freeze, CityFed was unable to pay the legal fees of

its directors.

Along with its directors, who intervened in the suit, CityFed sued OTS, asking the district

court to enjoin the agency from enforcing the temporary cease and desist order. The district court

refused to issue an injunction against OTS. CityFed appeals, making three arguments. It claims, first,

that because City Federal effectively ceased to exist when it went into receivership in 1989, CityFed

no longer qualifies as a savings and loan holding company under the statute, thus depriving OTS of

jurisdiction to impose a temporary cease and desist order on it. Second, asserting that its assets have

not belonged, and do not now belong, to a "depository institution," CityFed argues that its activities

are not, as required by the temporary cease and desist statute, "likely to cause ... significant

dissipation of assets or earnings of the depository institution." 12 U.S.C. § 1818(c)(1). Focusing on

its allegation that it is likely to succeed on the merits in the underlying administrative proceeding, it

argues finally that it has satisfied the conditions justifying a preliminary injunction.

II.

CityFed does not dispute that it was a savings and loan holding company until December 7,

1989, when City Federal was placed into receivership. Nor does it deny that OTS would have

jurisdiction over it if the agency had served a temporary cease and desist order before that date. The

company claims that once OTS acted to protect the interests of City Federal's depositors by putting

the institution into receivership, OTS lost its authority to bring administrative proceedings against

CityFed.

CityFed's argument, of course, goes beyond a challenge to OTS'sjurisdiction in the temporary

cease and desist proceedings since OTS's authority to issue the temporary order under section

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 6 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

1818(c)(1) explicitly depends upon its jurisdiction in a "permanent" section 1818(b)(1) cease and

desist proceeding. See 12 U.S.C. § 1818(c)(1). Thus, although section 1818(i)(1) prevents us from

actually reviewing OTS's jurisdiction in the underlying permanent cease and desist proceedings, see

12 U.S.C. § 1818(i)(1), we can address CityFed's claims regarding OTS' jurisdiction to issue the

temporary order only by examining, as do the parties, OTS's jurisdiction in actions brought under

both sections 1818(b)(1) and (c)(1).

Our examination of CityFed'sjurisdictional argument begins, and largely ends, with the plain

language of those sections. Both authorize the OTS to initiate administrative proceedings and issue

a cease and desist order against a "party." 12 U.S.C. § 1818(b)(1) & (c)(1). A "party," according

to the statute, includes a holding company that "has engaged" in an unsafe practice or that "has

violated" any conditions imposed on it by law. 12 U.S.C. § 1818(b)(1). In this case, CityFed is a

"party" that, as a holding company subject to regulation, allegedly violated the terms of its net worth

maintenance agreement with the government. Accordingly, OTS "may issue and serve upon ... such

party a notice of charges" and may initiate enforcement proceedings. 12 U.S.C. § 1818(b)(1).

Because OTS had the authority to bring the subsection (b)(1) proceedings against CityFed, and

because OTS determined that CityFed's violation is likely to cause "significant dissipation of assets"

that properly belong to City Federal, subsection (c)(1) authorizes OTS to "issue a temporary order

requiring ...such party"i.e., CityFed"to cease and desist." 12 U.S.C. § 1818(c)(1). The statute's

plain language, therefore, gives OTS jurisdiction over CityFed.

CityFed arguesthat thislanguage isinsufficient, by itself, to give OTS continuing jurisdiction

over a former holding company. It points to section 1818(i)(3), which explicitly gives banking

agencies jurisdiction over individuals "institution-affiliated parties"for up to six years after they

end their association with an institution. See 12 U.S.C. § 1818(i)(3). According to CityFed, this

section proves both that Congress knows how to enact continuing jurisdiction authority ifit chooses,

and that it did not choose to grant such authority over holding companies. We disagree.

Congressincluded section 1818(i)(3) in FIRREA solely to addressthe effects of our decision

in Stoddard v. Board of Governors, 868 F.2d 1308 (D.C. Cir. 1989). See, e.g., House Report at 468-

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 7 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

69; Senate Report at 377-78 (discussing Senate predecessor of section 1818(i)(3)). In that case, the

Office of the Comptroller of the Currency served Stoddard, a former officer of a savings and loan,

with "a notice of its intent to remove him from office" under a banking enforcement statute similar

to the present section 1818(b)(1). 868 F.2d at 1810. The only problem was that Stoddard had

resigned his position a year before he received the notice. Concluding that "[o]ne cannot remove

what isn't there," and that the agency's construction "presents a linguistic (and metaphysical)

impossibility," we concluded that the agency could not issue a notice removing from office an officer

that had already resigned. Id. at 1310.

The banking agencies and Congress were concerned about the implications of Stoddard

because the "removal" provisions that Stoddard limited were the means by which banking agencies

barred individuals not only from association with a particular institution, but from all future

association with the banking industry. See 12 U.S.C. § 1818(j) (1988) (barring individuals subject

to removal orders from future association with the industry). To reinvigorate this method of

protecting savings and loan customers from former officers, Congress enacted section 1818(i)(3).

Asreports by both houses of Congress and the conference committee make clear, section 1818(i)(3)

was not intended to create a new cause of action, but rather to address the statutory ambiguity that

Stoddard highlighted and the regulatory gap that it created. See House Report at 393, 468-69;

Senate Report at 377-78; H.R. Conf. Rep. 222, 101st Cong., 1st Sess. 440 (1989).

Congress did not need to add similar continuing jurisdiction language to FIRREA regarding

"former" holding companies because the statutorylanguage simplydid not presentsimilar ambiguities

for such parties, let alone the "metaphysical" difficulties that we perceived in Stoddard. 868 F.2d at

1310. Unlike that case, in which the agency's enforcement authority over former officers rested on

its ability to remove from office someone that was no longer in office, OTS's authority over CityFed

depends only on whether CityFed is the "party" that was a holding company at the time that it

allegedly violated its agreements. See 12 U.S.C. § 1818(b)(1) & (c)(1). Even if CityFed is no longer

a holding company, it isindisputably the same "party" that allegedly violated the stipulation. Because

jurisdiction over CityFed or other former holding companies presents no "linguistic impossibility" in

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 8 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

reading the statute, 868 F.2d at 1310, the absence of explicit authorityfor continuing jurisdiction over

such parties, upon which CityFed places so much reliance, implies nothing.

Our conclusion that OTS hasjurisdiction overCityFed findssupport in the policies articulated

in several factually different yet conceptually similar cases that the parties debate in their briefs. See,

e.g., Akin v. OTS, 950 F.2d 1180, 1185 (5th Cir. 1992); Stanley v. Board of Governors, 940 F.2d

267, 270-71 (7th Cir. 1991); Anaya v. Federal Home Loan Bank Board, 839 F.2d 1349, 1350-51

(9th Cir. 1988); Larimore v. Conover, 775 F.2d 890, 896 (7th Cir. 1985), rev'd on other grounds,

789 F.2d 1244 (7th Cir. 1986) (en banc), superseded by statute, FIRREA § 902 (codified at 12

U.S.C. §§ 1786 & 1818); Paul v. OTS, 763 F. Supp. 568, 573 (S.D. Fla. 1990), aff'd sub nom. Paul

v. Ryan, 948 F.2d 1297 (11th Cir. 1991) (table). In each of these cases, former officers of failed

savings institutions challenged banking agencies' jurisdiction over them, and in each case, the court

rejected the challenge because it conflicted with the intent behind as well as the language of the

banking enforcement statutes. Echoing the logic of earlier cases, the Fifth Circuit observed that the

officer's interpretation "would allow an institution and its individual officers to ignore regulations,

statutes and agreements and commit flagrant violations, and yet retain immunityfromcease and desist

actions if the violations were sufficiently severe to warrant prompt imposition of receivership. This

interpretation belies congressional intent expressed to adopt broader cease and desist powers with

the passage of FIRREA." Akin, 950 F.2d at 1185; see also Stanley, 940 F.2d at 270-71; Larimore,

775 F.2d at 896.

It is true, as CityFed points out, that the post-FIRREA decisions rely at least in part on the

language in section 1818(i)(3), which gave banking agencies continuing jurisdiction over

institution-affiliated parties. See, e.g., Akin, 950 F.2d at 1185. It is also true that the officer in

Larimore received the notice before he resigned, 775 F.2d at 896, a situation in whichCityFed admits

that OTS would have jurisdiction. We do not think, however, that these distinctions influenced the

policy rationales articulated in those decisions. Instead, each rationale rested primarily on a common

understanding, shared by us, that FIRREA and its predecessor statutes were intended to protect

savings and loans and their customers, not those whose management practices risked the well-being

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 9 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

of the institutions. The policies articulated in those decisions are thus entirely applicable here.

As in the decisions from the Fifth, Seventh, and Ninth Circuits, our plain reading of sections

1818(b)(1) and (c)(1) comports rather than conflicts with our understanding of statutory purpose.

Compare Stoddard, 868 F.2d at 1311 (rejecting appeal to "congressional purpose" because it could

not "be reconciled with the language of the statute"). CityFed's theory would allow holding

companies to get off "scot-free" if they act carelessly enough to force OTS to appoint a receiver.

Stanley, 940 F.2d at 270. Neither language nor purpose compels us to create such an

incomprehensible loophole in FIRREA's comprehensive regulatory scheme.

Claiming that the agency has alternative ways to accomplish its objectives with respect to

former holding companies, CityFed argues that it would not necessarily escape all liability were we

to adopt its interpretation of the statute. Its proposed alternatives, however, do not offer a practical

substitute for OTS's cease and desist authority. For example, it argues that the "Federal banking

agency that succeeded to the government's rights under the net worth maintenance stipulation ...

could have brought [a contract] action against CityFed for the alleged violation of that stipulation."

CityFed Brief at 19 n.18. Yet in the same breath, CityFed undermines its own assertion that this

method would be a plausible enforcement alternative byarguing that "there is[a]substantialquestion"

regarding whether the stipulation could be enforced as a contract. Id. at 31 n.23. CityFed further

claims that OTS could always protect its jurisdiction by initiating enforcement proceedings before it

places an institution into receivership. This presumes, of course, that OTS has the time to conduct

the investigation that must precede the filing of administrative claims. If, as is likely, the institution's

financial status is deteriorating, OTS has little choice but to place it into receivership. It makes no

sense that Congress would have required the agency to choose between risking the financial

well-being ofthe institution and using FIRREA's carefully-considered statutory enforcement process

to recover from those responsible for the institution's downfall.

III.

As a basis for its issuance of the temporary cease and desist order, OTS concluded that

CityFed was "likely to cause ... significant dissipation of assets or earnings of the depository

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 10 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

institution." 12 U.S.C. § 1818(c)(1). CityFed argues that this is impossible because its assets have

never belonged to City Federal. According to OTS, however, CityFed improperly refused to use its

available assetsto support the net worth ofCityFederal, and so at least for purposes ofthe temporary

cease and desist order, we should consider those funds to be assets "of the depository institution."

We agree withOTS. CityFedor any other owner of assets that allegedly should have been paid into

a now-defunct savingsinstitutionis hardly in a position to argue that it can spend those assets with

impunity when the institution's downfall may have resulted, at least in part, from its retention or

accumulation of those assets.

The cases that discuss dissipation under section 1818 find no significance in the fact that

assets belong not to the institution, but to a party that has allegedly done it wrong. See, e.g., Parker

v. Ryan, 959 F.2d 579 (5th Cir. 1992) (upholding temporary cease and desist order to prevent

dissipation of former officer's assets); Spiegel v. Ryan, 946 F.2d 1435, 1438 (9th Cir. 1991)

("[R]estitution may not only compensate an institution for past wrongs, but may also serve to prevent

the dissipation of assets that may belong to it, and thereby prevent prejudice to its depositors."

(emphasis added)), cert. denied, 503 U.S. 970 (1992). According to CityFed, these cases are

distinguishable because the targeted partywas alleged to have defrauded the institution,so there were

at least allegations that the party's assets had, at one time, belonged to the institution. The critical

allegation in those cases, however, was not fraud, but the claim that the targeted party owned assets

that allegedly should have been in the hands ofthe depository institution. See, e.g., Parker, 959 F.2d

at 583 n.4 (noting that the bulk of OTS's allegations underlying a temporary order were based on the

exercise of "poor business judgment" and the improper allocation of dividends to third parties, not

fraud). That is exactly what OTS has alleged here. As in Spiegel and Parker, then, the temporary

cease and desist order in this case properly issued on the basis of OTS's allegationsthat CityFed was

dissipating assets to which City Federal may legally have been entitled.

Citing Webster's New Collegiate Dictionary, CityFed also argues that dissipation implies

"waste," and that no dissipation has occurred because its expenditures were reasonable. Webster's,

however, also defines dissipate as "to lose ... irrecoverably" and "to spread ... thin to the point of

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 11 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

vanishing." Webster's New Collegiate Dictionary 331 (1973). None of these definitions requires that

the spreading be wasteful. Because OTS reasonably believes that CityFed possesses assets that

properly belong to City Federal, CityFed's unmonitored spending "is likely to cause ... significant

dissipation of assets" of City Federal. The temporary cease and desist order was thus proper,

although we express no view on whether OTS will ultimately be able to order CityFed to make

restitution of those funds in light of its failure to comply with the net worth maintenance agreement.

See Rapaport v. OTS, --- F.3d ----, No. 93-1811 (D.C. Cir. July 11, 1995) (discussing standards for

finding "unjust enrichment").

IV.

We turn finally to CityFed's argument that the district court erred in failing to grant a

preliminary injunction against the temporary cease and desist order. To prevail, CityFed must

demonstrate 1) a substantial likelihood of success on the merits, 2) that it would suffer irreparable

injury if the injunction is not granted, 3) that an injunction would not substantially injure other

interested parties, and 4) that the public interest would be furthered by the injunction. See Sea

Containers Ltd. v. Stena AB, 890 F.2d 1205, 1208 (D.C. Cir. 1989). We review a district court

decision regarding a preliminary injunction for abuse of discretion, and any underlying legal

conclusions de novo. See id. at 1208-09; Transohio, 967 F.2d at 614. In denying the preliminary

injunction, the district court concluded that CityFed had not demonstrated irreparable injury, and we

agree.

The company has articulated at least three different theories of irreparable injury. In its initial

brief in this court, the company asserted that OTS's lack of enforcement authority amounted to per

se irreparable injury. In the district court, CityFed claimed that it risked bankruptcy, and its directors

claimed that they are unable to afford defenses to the legal proceedings to which they are parties.

Finally, CityFed argues in its reply brief that the Third Circuit has required it to pay the legal fees of

former directors of its former subsidiary, which it cannot do under the OTS order.

Our conclusionthat OTS had authorityto issue the temporaryorder disposes ofCityFed'sfirst

claim of irreparable injury. Its second is equally unpersuasive. As the district court pointed out,

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 12 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

CityFed is not truly threatened with bankruptcy. OTS's temporary cease and desist order allows the

company to spend a certain amount of its assets each month to meet expenses, and it also permitsthe

company to request "hardship" relief from the requirements of the order, an exception that CityFed

has yet to invoke. As for the individual directors, the district court concluded that they have sufficient

personal assets to meet their legal needs. CityFed Financial Corp. v. OTS, No. 94cv1273, at 4

(D.D.C. Sept. 8, 1994) (denying motion for preliminary injunction). If a director's personal assets

are not enough, the order's "hardship" provision offers one way that CityFed can provide additional

funds. Also, according to the district court, OTS has agreed to allow CityFed to advance fees to the

directors aslong asthey agree to return the feesshould CityFed lose in the administrative proceeding.

The directors have rejected this offer. See id. at 4-5. With respect to the Third Circuit order, see

Ridder v. CityFed, 47 F.3d 85 (3rd Cir. 1995), the "hardship" provision again provides a possible

means for CityFed to comply with both that order and OTS's requirements. Even if OTS refuses to

grant CityFed's "hardship" request, the company could still petition the Third Circuit for a stay

pending the resolution of OTS's cease and desist proceedings. At the very least, the request would

present the Third Circuit with a new issue because its decisionwhich was based on a state law

interpretation of the indemnity agreement that CityFed has with those officersdid not consider the

OTS order. Because CityFed has not pursued these alternatives, we conclude that the district court

was correct in finding that CityFed has not demonstrated irreparable injury.

In deciding whether to grant an injunction, the district court must balance the strengths of the

requesting party's arguments in each of the four required areas. If the arguments for one factor are

particularly strong, an injunction may issue even if the arguments in other areas are rather weak. An

injunction may be justified, for example, where there is a particularly strong likelihood ofsuccess on

the merits even if there is a relatively slight showing of irreparable injury. See Population Inst. v.

McPherson, 797 F.2d 1062, 1078 (D.C. Cir. 1986) (appendix, reprinting per curiam order granting

motion for injunction pending appeal). Despite this flexibility, we require the moving party to

demonstrate at least "some injury," id.; see, e.g., Sea Containers, 890 F.2d at 1210-1211 (upholding

district court decision denying request for preliminary injunction where moving party may have been

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 13 of 14
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

"likely to succeed" but did not carry burden of showing irreparable harm), since " "[t]he basis of

injunctive relief in the federal courts has always been irreparable harm.' " Sampson v. Murray, 415

U.S. 61, 88 (1974) (quoting Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506 (1959)). Because

CityFed hasmade no showing ofirreparable injury here, that alone issufficient for usto conclude that

the district court did not abuse its discretion by rejecting CityFed's request. We thus need not reach

the district court's consideration of the remaining factors relevant to the issuance of a preliminary

injunction.

V.

In the world of savings and loan regulation envisioned by CityFed, a bank holding company

that takes on net worth maintenance obligations has an incentive to act as recklessly as possible in

order to build up its own assets while so injuring the stability of its subsidiary institution that federal

banking agencies would have no choice but to place it into receivership. Once in receivership, the

holding company could freely use "its" assets as it saw fit, leaving nothing but the depleted assets of

the subsidiary institution for the federal government and taxpayers to pick through in search of

compensation for the holding company's reckless behavior. Because such a vision is contrary to the

language and purposes of FIRREA, we reject it and affirmthe decision ofthe district court. OTS had

jurisdiction overCityFed and statutoryauthority to issue the temporary cease and desist order against

it, and the district court did not abuse its discretion in concluding that CityFed had not met the

prerequisites for a preliminary injunction.

So ordered.

USCA Case #94-5254 Document #134830 Filed: 07/11/1995 Page 14 of 14