1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-10-1995

Reschini v First Federal

Precedential or Non-Precedential:

Docket 94-3086

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Recommended Citation

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http://digitalcommons.law.villanova.edu/thirdcircuit_1995/10
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 _______________ 

 NO. 94-3086 

 _______________ 

 ROGER J. RESCHINI 

 Appellant 

v. 

 FIRST FEDERAL SAVINGS AND LOAN 

 ASSOCIATION OF INDIANA; 

 CHARLES L. FRANCE 

 _______________ 

 On Appeal from the United States District Court 

 for the Western District of Pennsylvania 

 D.C. No. 94-cv-00122 

 _______________ 

 Argued July 11, 1994 

 _______________ 

 Before: SLOVITER, Chief Judge, ROTH, Circuit Judge, 

 and POLLAK, District Judge*

 (Filed January 10, 1995) 

 THOMAS E. SWEENEY, JR. (Argued) 

 Sweeney & Associates 

 7300 Penn Avenue 

 Pittsburgh, PA 15208 

 Attorney for Appellant 

 WALTER A. BUNT, JR. (Argued) 

 Kirkpatrick & Lockhart 

 1500 Oliver Building 

 Pittsburgh, PA 15222 

 Attorney for Appellees 

 

*. Honorable Louis H. Pollak, United States District Judge for 

the Eastern District of Pennsylvania, sitting by designation. 
 ______________ 

 OPINION OF THE COURT 

 _______________ 

POLLAK, District Judge. 

 This appeal addresses the dismissal of a suit brought 

by appellant Roger J. Reschini against appellees First Federal 

Savings and Loan Association of Indiana (the "Association") and 

Charles L. France, the chief executive officer of the 

Association. The complaint alleged that the Association and its 

chief executive officer had disseminated materially misleading 

proxy materials in violation of regulations adopted by the 

federal Office of Thrift Supervision (OTS) in carrying out its 

supervision of federal savings associations. The allegedly 

deficient proxy materials sought approval by Association members 

of the proposed conversion of the Association from a federal 

(i.e., federally-chartered) mutual savings and loan association 

to a Pennsylvania-chartered mutual savings bank. 

 The district court held that §§ 5(i)(2)(B) and 10(j) of 

the Home Owners' Loan Act (HOLA), 12 U.S.C. §§ 1464(i)(2)(B) and 

1467a(j), giving courts of appeals original and exclusive 

jurisdiction over decisions of the Director of the OTS approving 

or disapproving conversions of federal savings associations, 

precluded exercise by the district court of subject matter 

jurisdiction over Reschini's claim. Accordingly, the district 

court dismissed the complaint for lack of jurisdiction. On 
appeal we consider three questions: (1) whether Reschini's appeal 

is moot; (2) whether 12 U.S.C. §§ 1464(i)(2)(B) and 1467a(j) 

constitute an insurmountable bar to district court subject-matter 

jurisdiction over challenges to proxy materials distributed in 

connection with the Association's conversion; and (3) if 

jurisdiction in the district court is not precluded, whether 

dismissal of this suit was nevertheless required on the ground 

that the complaint failed to state a cognizable cause of action. 

 

I

 In late December of 1993 or early January of 1994, 

the Association distributed a notice to its members informing 

them that a special meeting would be held on January 28, 1994, 

for the purpose of voting on a conversion plan. Under the plan, 

the Association would abandon its federal charter and emerge as a 

Pennsylvania-chartered mutual savings bank known as the Indiana 

First Savings Bank. A proxy statement outlining the plan's 

business purposes and effects accompanied the notice. 

 Depositors in a federally-chartered mutual savings 

association are, pursuant to HOLA, members entitled to vote on 

proposals to convert to non-federal status,1 notwithstanding that 

the proprietary interest of a depositor-member in a mutual 

savings association is a chimera. Depositor-members "own the 

 

1. 12 U.S.C. § 1464(i)(3)(A)(ii) (discussed infra part III). 
mutual, but it is ownership in name only. They cannot sell what 

they 'own,' and if they withdraw savings they receive only the 

nominal value of the account rather than a portion of the 

mutual's net worth . . . ." Ordower v. Office of Thrift 

Supervision, 999 F.2d 1183 (7th Cir. 1993). On January 25, 1994, 

Robert Reschini, in his capacity as a depositor-member of First 

Federal Savings and Loan Association of Indiana, brought suit in 

the Western District of Pennsylvania against the Association and 

Charles France, the Association's chief executive officer. Count 

I of Reschini's complaint, invoking the district court's federal 

question jurisdiction, alleged that the proxy statement, in 

contravention of 12 C.F.R. § 569.4, contained false information 

regarding the principal business reasons for the proposed 

conversion and failed to disclose material information about the 

loss of member voting rights that would accompany the conversion. 

Reschini sought an injunction against the holding of the special 

meeting, an order prohibiting use of the proxy statement and 

requiring a legally sufficient proxy solicitation, costs and 

attorneys fees, and any other relief deemed just and equitable. 

Counts II and III of the complaint asserted state law claims. 

 On the day Reschini commenced suit, Reschini also filed 

a motion for a temporary restraining order. The next day, 

January 26, 1994, the district court, after a brief hearing, 

entered an order dismissing plaintiff's complaint for lack of 

subject-matter jurisdiction. On February 10, 1994, a special 
meeting of Association members was held, and the conversion plan 

was approved by the members. 

 Reschini filed a notice of appeal from the order of the 

district court on February 24, 1994. Oral argument in this 

court took place on July 12, 1994. At the time of oral argument, 

the proposed conversion was pending before the OTS but had not 

yet been approved. On October 18, 1994, the Director of the OTS 

approved the Association's application for conversion; the same 

day the Association completed its conversion to a Pennsylvaniachartered mutual savings bank.2 

 On November 17, 1994, Reschini filed in this court a 

petition to modify, terminate, or set aside the order of the OTS 

Director approving the proposed conversion.3 We are, however, at 

pains to point out that the petition for review  an invocation 

of this court's appellate authority with respect to certain 

decisions of the OTS Director  has not yet been briefed and 

argued and is not the subject of this opinion; in this opinion, 

and our concomitant ruling, we address only the decision of the 

district court dismissing Reschini's suit against the Association 

and France. 

 

2. The record on appeal has been supplemented to include these 

post-oral-argument events. 

3. We take judicial notice of the petition for review, filed sub

nom. Reschini v. Office of Thrift Supervision, No. 94-3625 (3d 

Cir. filed November 17, 1994). 
II

 As a preliminary matter, we address the contention of 

the Association and France that this appeal is moot because the 

special meeting that Reschini sought to enjoin has already 

occurred and the Association has already converted to a 

Pennsylvania-chartered savings bank. 

 "[I]f an event occurs while a case is pending on appeal 

that makes it impossible for the court to grant 'any effectual 

relief whatever' to a prevailing party, the appeal must be 

dismissed." Church of Scientology of California v. United 

States, 113 S. Ct. 447, 449 (1992) (quoting Mills v. Green, 159 

U.S. 651, 653 (1895)). However, "when a court can fashion 'some

form of meaningful relief,' even if it only partially redresses 

the grievances of the prevailing party, the appeal is not moot." 

Isidor Paiewonsky Assocs., Inc. v. Sharp Properties, Inc., 998 

F.2d 145, 151 (3d Cir. 1993) (quoting Church of Scientology, 113 

S. Ct. at 450). Such relief need not have been requested in the 

pleadings. Rather, "it is the court's obligation to grant the 

relief to which the prevailing party is entitled whether it has 

been specifically demanded or not." Kirby v. United States Dep't 

of Housing & Urban Dev., 745 F.2d 204, 207 (3d Cir. 1984). 

 If we were to find that the district court improperly 

dismissed Reschini's complaint and if, upon remand, Reschini were 

to prevail on his claim, it would then be the district court's 

responsibility to fashion an appropriate decree. In so doing, 
the district court would have the authority to deploy a full 

range of equitable remedies including  if deemed feasible and 

appropriate  a requirement that the Association and France take 

steps to reverse the conversion. Cf. Mills v. Electric Auto-Lite 

Co., 396 U.S. 375, 386 (1970) (where a merger is obtained through 

fraudulent proxy statements, "[p]ossible forms of relief will 

include setting aside the merger or granting other equitable 

relief"); Edelman v. Saloman, 559 F. Supp. 1178, 1184 (D. Del. 

1983) (stating that "a decree nullifying the corporate action 

taken on the basis of management's proxies" is a traditional form 

of relief in suits alleging fraudulent proxy materials). While 

it is conceivable that the district court might eventually 

determine that setting aside the conversion would entail undoing 

what cannot equitably be undone, such a determination would 

depend upon a fact-specific analysis of the circumstances  an 

analysis which we are not now in the position to perform. 

 Because setting aside the conversion remains a possible 

remedy should Reschini prevail on his claim, Reschini's appeal is 

not moot.4 

 

4. In arguing that this appeal is moot, appellees cite General 

Electric by Levitt v. Cathcart, 980 F.2d 927 (3d Cir. 1992), a 

case which involved allegations of proxy fraud in connection with 

the election of corporate directors. Because the directors' 

terms had expired several months before appellate argument, we 

dismissed the appeal as moot, stating that a court could grant 

equitable relief only "by doing the impossible: enjoining the 

directors from serving expired terms." General Electric, 980 

F.2d at 934. Here, unlike in General Electric, the vote which 

utilized the allegedly fraudulent proxy materials continues to 

have effect. In General Electric, the directors selected through 

the allegedly fraudulent election no longer held their positions 
III 

 Savings association conversions are governed by 12 

U.S.C. § 1464(i), codifying § 5(i) of HOLA. Section § 1464(i)(3) 

sets forth criteria governing conversions of federally-chartered 

savings associations to state-chartered form (federal-to-state 

conversions). According to these criteria, a federal-to-state 

conversion may only be performed "upon the vote in favor of such 

conversion cast in person or by proxy at a special meeting of 

(..continued) 

at the time of appeal. Here, in contrast, the result of the 

allegedly fraudulent vote  i.e., the Association's status as a 

Pennsylvania-chartered savings bank  remains in force. 

 Appellees also cite cases addressing denials of motions 

for preliminary injunctions. In these cases, the appeals were 

found moot because the actions sought to be enjoined had already 

occurred. See Scattergood v. Perelman, 945 F.2d 618, 621 (3d 

Cir. 1990) ("The merger has taken place, and this court has held 

on numerous occasions that when the event sought to be enjoined 

in a preliminary injunction has occurred, an appeal from the 

order denying the preliminary injunction is moot."); Bank of New 

York Co. v. Northeast Bancorp, Inc., 9 F.3d 1065, 1067 (2d Cir. 

1993) ("In general, an appeal from the denial of a preliminary 

injunction is mooted by the occurrence of the action sought to be 

enjoined."). 

 Unlike the situation at bar, these cases addressed 

appeals from denials of preliminary relief. In such situations 

it is improper for the appeals court to speculate upon other 

possible relief available since these issues still lie before the 

district court. See Tropicana Products Sales v. Phillips 

Brokerage Co., 874 F.2d 1581, 1582-83 (11th Cir. 1989) 

(distinguishing between the relief considered on appeal from the 

denial of a motion for preliminary injunction and the relief 

considered on appeal from a final judgment on the merits); 

Marilyn T., Inc. v. Evans, 803 F.2d 1383, 1384-85 (5th Cir. 1986) 

(rejecting consideration of alternative forms of relief where 

this would involve "issues [that] have yet to be resolved by the 

district court"). That approach is inapposite where, as here, we 

address an appeal from a final judgment. 
members or stockholders called to consider such action," pursuant 

to 

 the law of the State in which the home office 

of the Federal savings association is 

located, as required by such law for a Statechartered institution to convert itself into 

a Federal savings association, but in no 

event upon a vote of less than 51 percent of 

all the votes cast at such meeting . . . . 

12 U.S.C. § 1464(i)(3). 

 Section 1464(i)(2)(B) establishes a mechanism for 

judicial review in courts of appeals of orders of the OTS 

Director authorizing or barring proposed conversions. 

Specifically, § 1464(i)(2)(B) states that "[a]ny aggrieved person 

may obtain review of a final action of the Director [of the OTS] 

which approves or disapproves a plan of conversion pursuant to 

this subsection only by complying with the provisions of section 

1467a(j)." Section 1467a(j) provides in turn for review in 

courts of appeals.5

 

5. Section 1467a(j) provides in relevant part: 

 Any party aggrieved by an order of the 

Director under this section may obtain a 

review of such order by filing in the court 

of appeals of the United States for the 

circuit in which the principal office of such 

party is located, or in the United States 

Court of Appeals for the District of Columbia 

Circuit, within 30 days after the date of 

service of such order, a written petition 

praying that the order of the Director be 

modified, terminated, or set aside. 
 Appellees contend that §§ 1464(i)(2)(B) and 1467a(j), 

creating an exclusive review mechanism for review of final 

decisions by the Director of the OTS which approve or disapprove 

plans of conversion pursuant to "this subsection," 

§ 1464(i)(2)(B), bar district court subject-matter jurisdiction 

over Reschini's suit. The district court accepted this 

reasoning, and accordingly dismissed Reschini's claims.6 

 On appeal, Reschini disputes this conclusion for two 

reasons. First, Reschini claims that the term "this subsection," 

as employed in § 1464(i)(2)(B)'s review provisions, refers only 

to conversions governed by § 1464(i)(2),7 and thus does not cover 

 

6. As stated by the district court: 

 Under §5(i)(2)(B) of the Home Owners' Loan 

Act (HOLA), 12 U.S.C. §1464(i)(2)(B), an 

aggrieved person must first file his 

objections with the Director of the Office of 

Thrift Supervision and then seek review 

pursuant to 12 U.S.C. §1467a(j). Section 

1467a(j) provides for exclusive jurisdiction 

within the Court of Appeals. 12 U.S.C. 

§1467a(j) (1993); Ordower v. OTS, 999 F.2d 

1183 (7th Cir. 1993); Harr v. Prudential 

Savings and Loan Association, 557 F.2d 751 

(10th Cir. 1977), cert. denied, 434 U.S. 1033 

(1978). Because the Court of Appeals' 

jurisdiction is exclusive, this Court is 

without subject matter jurisdiction. 

Reschini v. First Fed. Sav. & Loan Ass'n, No. 94-122 (W.D. Pa. 

January 26, 1994). 

7. Section 1464(i)(2) refers expressly to mutual-to-stock 

conversions, but not to federal-to-state conversions. See 12 

U.S.C. § 1464(i)(2)(A) ("No savings association may convert from 

the mutual to the stock form, or from the stock form to the 

mutual form, except in accordance with the regulations of the 

Director."). 
federal-to-state conversions, which are governed by 

§ 1464(i)(3).8 The Association and France contend, however, that 

the term "this subsection" refers to § 1464(i) as a whole, not 

just to § 1464(i)(2), and that the federal-to-state conversions 

governed by § 1464(i)(3) therefore fall within the scope of 

§ 1464(i)(2)(B)'s review provisions. Second, Reschini claims 

that even if § 1464(i)(2)(B)'s review provisions do apply to 

federal-to-state conversions, challenges in district court to the 

accuracy of proxy materials are not barred because such 

challenges do not seek review of "a final action of the Director 

[of the OTS] which approves or disapproves a plan of conversion." 

12 U.S.C. § 1464(i)(2)(B). We examine the second of these two 

claims first. 

 The question whether a suit challenging the accuracy of 

proxy materials submitted in respect of a savings association 

conversion constitutes a challenge to OTS action was considered 

by the Seventh Circuit in Ordower v. Office of Thrift 

Supervision, 999 F.2d 1183 (7th Cir. 1993). Ordower concerned a 

federal savings association which gained approval both from the 

OTS and from its depositor-members to change from mutual status 

to stock status. Following the conversion, two depositors 

commenced two contemporaneous actions. One was a suit in a 

federal district court in Illinois which alleged that the 

association had utilized misleading proxy statements in seeking 

 

8. See discussion supra for text of § 1464(i)(3). 
association members' approval of the conversion; the district 

court dismissed the suit for lack of subject-matter jurisdiction. 

The other was a petition for review filed in the Seventh Circuit 

challenging, on numerous grounds, the OTS Director's approval of 

the conversion. The Seventh Circuit consolidated the appeal from 

the district court and the petition for review, disposing of both 

in one opinion. The court found no fault in the order of the OTS 

Director; but the court held that the district court had 

jurisdiction to entertain the challenge to the proxy materials, 

and accordingly remanded that lawsuit for further proceedings. 

 In examining whether the district court had subjectmatter jurisdiction over the depositors' suit alleging the 

fraudulent use of proxy materials, the Ordower court made a 

distinction between challenges to the accuracy of proxy materials 

and challenges to the substance of a conversion plan. With 

respect to challenges to the substance of a conversion plan, the 

court confirmed that § 1464(i)(2)(B) places exclusive 

jurisdiction in courts of appeals. "When Congress places review 

of an administrative decision in the court of appeals, district 

judges may not enjoin or penalize action that the agency has 

approved or that is the natural outcome of the agency's 

decision." Ordower, 999 F.2d at 1188 (citing FCC v. ITT World 

Communications, Inc., 466 U.S. 463 (1984) and Whitney Nat'l Bank 

v. Bank of New Orleans & Trust Co., 379 U.S. 411 (1965)). In 

contrast, because the OTS does not make a finding with respect to 
the accuracy of proxy materials, challenges to such materials 

could be entertained in the district court.9 

 

9. In deriving this conclusion, the Ordower court relied upon 

the regulations governing mutual-to-stock conversions, codified 

at 12 C.F.R. § 563b, as well as upon analogy to the practice of 

the Securities and Exchange Commission: 

 The OTS does not review the accuracy of 

materials by which management solicits the 

depositors' approval. . . . Similarly the 

SEC looks over corporate proxy materials 

without approving them. Defects in these 

materials may be challenged in a district 

court even though the court of appeals is the 

exclusive forum for review of the SEC's 

decisions. . . . That the OTS has found the 

substance of a transaction in compliance with 

federal law  which is all the OTS's 

approval establishes  does not relieve the 

bank's managers of the duty to tell the truth 

when asking the depositors to approve the 

transaction. . . . A district court 

accordingly may consider whether the 

materials describing the transaction and 

soliciting that approval were complete and 

accurate. 

Ordower, 999 F.2d at 1188 (citations omitted). 

 Harr v. Prudential Savings and Loan Ass'n, 557 F.2d 751 

(10th Cir. 1977), cert. denied, 434 U.S. 1033 (1978), supports 

the position taken in Ordower. There, the Tenth Circuit affirmed 

a district court's dismissal of a claim for materially misleading 

proxy statements on the basis of 12 U.S.C. §§ 1730a(k) and 

1725(j)(4) (the appeals court review provisions which served as 

precursors to 12 U.S.C. §§ 1464(i)(2)(B) and 1467a(j)). The 

court "assumed that the private remedies available under SEC 14A 

as to fraud also exist under the counterpart Bank Regulations," 

Harr, 557 F.2d at 752-53; however, the Tenth Circuit found 

dismissal appropriate because the suit was "in reality . . . a 

challenge to the Bank Board's decision [to approve a mutual-tostock savings association conversion] although cast in terms of 

Rule 10b-5," id. at 754. This analysis is consistent with the 

Ordower court's limitation on the kind of attacks the depositormember in that case could make on the allegedly false proxy 

materials. See Ordower, 999 F.2d at 1188 ("Ordower may not wage 
 We find that in the context of the Association's 

proposed federal-to-state conversion, as in the context of the 

mutual-to-stock conversion considered by Ordower, a suit 

challenging the accuracy of proxy materials does not seek to 

"enjoin or penalize action that the agency has approved or that 

is the natural outcome of the agency's decision." Ordower, 999 

F.2d at 1188. OTS approval of the Association's application was 

governed by the expedited treatment process set forth in 59 Fed. 

Reg. 44,625 (Aug. 30, 1994) (to be codified at 12 C.F.R. 

§ 563.22(b)(1)(ii)) and 12 C.F.R. § 516.3(a).10 According to the 

(..continued) 

a collateral attack on the valuation approved by the OTS by 

describing the repetition of that valuation in the proxy 

materials as a form of fraud or deceit."). 

 Similarly, in Craft v. Florida Federal Savings & Loan 

Ass'n, 786 F.2d 1546 (11th Cir. 1986), the Eleventh Circuit 

dismissed a challenge to proxy statements as comprising "bare 

bones allegations made to escape the exclusive review provisions 

of the Review Statutes." Craft, 786 F.2d at 1554. However, the 

court noted that it was "not called upon here to decide, nor . . 

. express any views concerning the jurisdiction vel non of the 

district court under the federal securities laws when securities 

fraud is properly alleged . . . ." Id.; cf. Rembold v. Pacific 

First Fed. Sav. Bank, 798 F.2d 1307, 1311 (9th Cir. 1986) 

(holding that "an order approving an application of a conversion 

plan does not relate in any way to the right of the purchaser of 

stock to seek damages against the savings institutions for any 

misrepresentations in the offering circular"). 

10. See Letter from Diana Garmus, Deputy Assistant Director, 

Corporate Activities, OTS, to Daniel Weitzel, counsel for 

appellees, of October 18, 1994 ("Pursuant to Section 

563.22(b)(1)(ii)(1994) . . . associations meeting the criteria 

for expedited processing under the OTS applications processing 

regulations (12 C.F.R. § 516.3(a)) may consummate a Sasser 

Conversion after filing a notification with the OTS at least 30 

days prior to the Sasser Conversion. We believe that the 

Association is subject to the above referenced regulations and 
expedited treatment process, "a savings association . . . may 

engage in activities upon filing a notice with the OTS together 

with any necessary certifications. For these activities, a 

notice will be all that is required and an association may engage 

in the activity unless the OTS objects within 30 days." 12 

C.F.R. § 516.3(a)(2) (1994). The regulations elaborating upon 

the necessary "notification" state that "[t]he notification may 

be in the form of either a letter describing the material 

features of the transaction or a copy of a filing made with 

another Federal or state regulatory agency seeking approval from 

that agency for the transaction . . . ." 59 Fed. Reg. 44,626 

(Aug. 30, 1994) (to be codified at 12 C.F.R. § 563.22(h)(1)). 

 There is no indication that findings with respect to 

the accuracy of proxy materials are part of the expedited 

treatment process. Rather, as in the mutual-to-stock context 

considered in Ordower, the regulations which governed approval of 

the Association's federal-to-state conversion address the 

(..continued) 

meets the criteria for expedited processing and 30-day 

notification to the OTS.") 

 This case has been complicated by the fact that the OTS 

regulatory structure governing federal-to-state conversions was 

amended during the pendency of this appeal. Prior to the 

adoption of the regulations published in the Federal Register on 

August 30, 1994, 59 Fed. Reg. 44,615-27, federal-to-state 

conversions of mutual savings associations were governed by the 

criteria codified at 12 C.F.R. § 571.5. See Letter from V. 

Gerard Comizio, Deputy Chief Counsel, Corporate and Securities 

Division, OTS, to Thomas Leahey, counsel for appellees, of May 

26, 1994. Because the OTS letter communicating approval of the 

Association's proposed conversion applied the recently adopted 

regulations, we analyze this case according to those regulations. 
substance of the conversion plan, but not the process by which 

that plan is approved by the depositor-members. Accordingly, we 

conclude that HOLA's provision for court of appeals review of any 

final OTS action that "approves or disapproves a plan of 

conversion," 12 U.S.C. § 1464(i)(2)(B), does not, of its own 

force, bar district court jurisdiction over allegations of 

materially false or misleading proxy materials.11

 Because we find that § 1464(i)(2)(B)'s court of appeals 

review provisions, assuming they govern federal-to-state 

 

11. The record suggests that OTS consideration of the 

Association's proposed conversion included some review of the 

proxy materials. On September 13, 1994, the OTS extended the 

applicable time period for OTS consideration of the conversion 

plan because of "significant issues of law and policy regarding 

whether the solicitation for proxies made by or on behalf of the 

association's board of directors complied with OTS proxy rules." 

Letter from Diana Garmus, Deputy Assistant Director, Corporate 

Activities, OTS, to Daniel Weitzel, counsel for appellees, of 

September 13, 1994. 

 The October 18, 1994 letter approving the conversion, 

however, indicates no findings with respect to the proxy 

materials. See Letter from Diana Garmus, Deputy Assistant 

Director, Corporate Activities, OTS, to Daniel Weitzel, counsel 

for appellees, of October 18, 1994. Moreover, mere examination 

of proxy materials by the OTS does not imply OTS findings with 

respect to the accuracy of the statements contained within. Cf.

12 C.F.R. § 563b.5(g)(2) (applying to mutual-to-stock 

conversions) ("The fact that a proxy statement, form of proxy or 

other soliciting material has been filed with or examined by the 

Office and authorized for use shall not be deemed a finding by 

the Office that such material is accurate or complete or not 

false or misleading . . . ."). In the absence of regulatory 

provisions requiring OTS approval of proxy materials as well as 

any explicit findings by the OTS regarding the Association's 

proxy materials, we find the limited review which may have 

occurred inadequate to constitute OTS approval of the accuracy of 

the Association's proxy materials. 
conversions, do not bar subject-matter jurisdiction in the 

district court over Reschini's claims, we do not reach Reschini's 

alternative contention  that is, that conversions governed by 

§ 1464(i)(3) fall outside the scope of § 1464(i)(2)(B)'s review 

provisions.12 

 In short, if count I of Reschini's complaint 

alleging that the Association and France distributed a proxy 

statement that was both false and incomplete  states a 

cognizable federal claim, the district court had subject-matter 

jurisdiction to entertain that claim. To the question whether 

count I states a cognizable federal claim we now turn. 

 

IV

 Arguing in the alternative, the Association and France 

contended in the district court that, even if the district court 

had jurisdiction to entertain Reschini's suit, the suit should 

nevertheless be dismissed because no implied private cause of 

action exists under 12 C.F.R. § 569.4, the OTS regulation invoked 

by Reschini in count I of his complaint as the source of his 

asserted federal claim. Because the district court found that it 

lacked subject-matter jurisdiction over Reschini's suit, the 

district court had no occasion to consider this alternative 

contention. As appellees, the Association and France have 

 

12. See supra text accompanying notes 7-8. 
renewed this contention here. Having determined that the 

district court, as a matter of subject-matter jurisdiction, is 

not precluded from entertaining Reschini's suit, we could remand 

to the district court the question whether HOLA contemplates such 

a suit. But remand would, in all likelihood, result in a 

subsequent appeal again presenting the same question. Because 

the question is one of law, considerations of judicial economy 

lead us to address the issue now. 

 Reschini bases his claim on 12 C.F.R. § 569.4 

(hereafter "Section 569.4" or "§ 569.4"), which provides as 

follows: 

 

 No solicitation of a proxy shall be made by 

means of any statement, form of proxy, notice 

of meeting, or other communication, written 

or oral, which . . . 

 (c)(1) Contains any statement that is false 

or misleading with respect to any material 

fact, or 

 (2) Omits to state any material fact: 

 (i) Necessary in order to make the statements 

therein not false or misleading or 

 (ii) Necessary to correct any statement in 

any earlier communication with respect to the 

solicitation of a proxy for the same meeting 

or subject matter that has subsequently 

become false or misleading. 

Section 569.4 was one of a number of regulations issued by the 

OTS in 1989, the year in which Congress, through the Financial 

Institutions Reform, Recovery, and Enforcement Act (FIRREA), 

abolished the Federal Home Loan Bank Board (FHLBB) and created 
the OTS, both to take the place of the FHLBB and to carry on 

other regulatory functions.13 Section 569.4 had originally been 

promulgated by the FHLBB in 1971 pursuant to the FHLBB's general 

regulatory authority under the National Housing Act and had 

applied to savings institutions insured by the Federal Savings 

and Loan Insurance Corporation (FSLIC).14 In 1989, the OTS 

repromulgated § 569.4 pursuant to its general regulatory 

authority under HOLA; as repromulgated, § 569.4 applies to all 

savings associations.15 

 

13. FIRREA reorganized the administrative structure applicable 

to savings associations by (1) dissolving the FHLBB; (2) creating 

the Office of Thrift Supervision, under the administration of the 

Department of Treasury, to serve as the successor to the FHLBB's 

former regulatory and chartering functions; and (3) transferring 

the insurance function of the Federal Savings and Loan Insurance 

Corporation to the Federal Deposit Insurance Corporation. See

H.R. Rep. No. 54(I), 101st Cong., 1st Sess. 293 (1989), reprinted

in 1989 U.S.C.C.A.N. 86, 106. 

14. The regulations were promulgated pursuant to the FHLBB's 

authority to regulate the FSLIC under sections 402, 403, and 407 

of the National Housing Act, formerly codified at 12 U.S.C. 

§§ 1725, 1726, and 1730. See 36 Fed. Reg. 19,973 (October 14, 

1971) (citing 12 U.S.C. §§ 1725, 1726, and 1730 as statutory 

authority for the regulations). Section 402 vested direction of 

the FSLIC in the FHLBB. Section 403 authorized the FSLIC to 

insure the accounts of federal savings and loan associations. 

Section 407, among other things, authorized the FSLIC to 

terminate the insured status of any institution engaged "in an 

unsafe or unsound practice" or which found itself "in an unsafe 

or unsound condition to continue operations as an insured 

institution." § 407(b)(1). 

15. The OTS repromulgated the regulations pursuant to its 

general regulatory authority under HOLA, codified at 12 U.S.C. 

§§ 1462, 1462a, and 1463. See 12 C.F.R. § 569 (1994) (citing 12 

U.S.C. §§ 1462, 1462a, and 1463 as statutory authority). 

Section 1462 defines terms. Section 1462a establishes the OTS 

and the position of Director of the OTS. Section 1463 confers on 
 The language of § 569.4 closely tracks that of SEC Rule 

14a-9, 17 C.F.R. § 240.14a-9,16 issued pursuant to section 14(a) 

of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a).17 

(..continued) 

the Director general authority to regulate savings associations 

and to prescribe accounting and disclosure standards for savings 

associations. 

16. 17 C.F.R. § 240.14a-9 provides in relevant part: 

 No solicitation subject to this regulation 

shall be made by means of any proxy 

statement, form of proxy, notice of meeting, 

or other communication written or oral, 

containing any statement which, at the time 

and in the light of the circumstances under 

which it is made, is false or misleading with 

respect to any material fact, or which omits 

to state any material fact necessary in order 

to make the statements therein not false or 

misleading or necessary to correct any 

statement in any earlier communication with 

respect to the solicitation of a proxy for 

the same meeting or subject matter which has 

become false or misleading. 

17. Section 14(a) of the 1934 Act, 15 U.S.C. § 78n(a), provides 

that 

 It shall be unlawful for any person, by the 

use of the mails or by any means or 

instrumentality of interstate commerce or of 

any facility of a national securities 

exchange or otherwise, in contravention of 

such rules and regulations as the Commission 

may prescribe as necessary or appropriate in 

the public interest or for the protection of 

investors, to solicit or to permit the use of 

his name to solicit any proxy or consent or 

authorization in respect of any security 

(other than an exempted security) registered 

pursuant to section 78l of this title. 
Rule 14a-9, taken together with its statutory parent, was found 

by the Court in J.I. Case Co. v. Borak, 377 U.S. 426 (1964), to 

support a private cause of action for materially misleading proxy 

statements. 

A

 Borak was decided in 1964. It is still good law as a 

construction of the 1934 Act and Rule 14a-9. However, it is not 

clear that Borak, if it arose for the first time today, would be 

decided the same way. See Touche Ross & Co. v. Redington, 442 

U.S. 560, 578 (1979) ("[S]ince Borak we have adhered to a 

stricter standard for the implication of private causes of action 

. . . ."). Starting in 1974, in Cort v. Ash, 422 U.S. 66 (1975), 

the Court has in a series of decisions developed the governing 

law on the implication, within the interstices of federal 

statutes and regulations, of private causes of action. Cort v. 

Ash directed courts to consider four factors  whether (1) "the 

plaintiff [is] 'one of the class for whose especial benefit the 

statute was enacted'"; (2) "there [is] any indication of 

legislative intent . . . to create such a remedy or to deny one"; 

(3) "it [is] consistent with the underlying purposes of the 

legislative scheme to imply such a remedy"; and (4) "the cause of 

action [is] one traditionally relegated to state law." Cort, 422 

U.S. at 78 (citations omitted). However, as the Court observed 
in Touche Ross, "the [Cort] Court did not decide that each of 

these factors is entitled to equal weight. The central inquiry 

remains whether Congress intended to create, either expressly or 

by implication, a private cause of action." Touche Ross, 442 

U.S. at 575. See also Virginia Bankshares, Inc. v. Sandberg, 501 

U.S. 1083, 1102 (1991) ("The rule that has emerged in the years 

since Borak and Mills came down is that recognition of any 

private right of action for violating a federal statute must 

ultimately rest on congressional intent to provide a private 

remedy.") (citing Touche Ross, 442 U.S. at 560). 

 In light of developments since Borak, the question 

whether a private cause of action for depositor-members of mutual 

savings associations is implied under § 569.4's proxy provisions 

must begin with an examination of congressional intent. 

 Reschini has not identified any provision of HOLA or 

the National Housing Act that indicates congressional intent "to 

create, either expressly or by implication," a private cause of 

action. Our own examination has been no more fruitful. In 

particular, we find nothing in the provisions constituting the 

statutory footing for § 569.4 that is supportive of a private 

cause of action.18

 Reschini contends, however, that § 569.4 is a 

regulatory embodiment of a "specific congressional intent," Brief 

of Roger R. Reschini, Appellant, at 8 n.7, located not in HOLA or 

 

18. See supra notes 14-15. 
the National Housing Act, but in 1974 amendments to the 

Securities Exchange Act of 1934. Specifically, Reschini asserts 

that language added to § 12(i) in 1974 requires the implication 

of a private cause of action under § 569.4's proxy provisions. 

 Section 12(i)  a 1964 addition to the 1934 Act 

authorizes certain non-SEC agencies to administer the 1934 Act's 

provisions with respect to securities issued by institutions over 

which these agencies have regulatory authority.19 As originally 

adopted, § 12(i) did not grant any regulatory authority to the 

FHLBB. Congress remedied this omission in 1974, however, 

providing regulatory authority to the FHLBB over securities 

issued by institutions whose accounts were insured by the FSLIC. 

Pub. L. No. 93-495, § 105(b), 88 Stat. 1500, 1503-04 (1974), 

codified at 15 U.S.C. § 78l(i). Section § 12(i) was again 

amended in 1989 via FIRREA; in the amended version, the OTS was 

substituted for the FHLBB and was given regulatory authority with 

respect to securities issued by institutions whose accounts are 

 

19. As added in 1964, § 12(i) vested the SEC's "powers, 

functions, and duties" (1) with respect to national and District 

of Columbia banks, in the Comptroller of the Currency; (2) with 

respect to all other member banks of the Federal Reserve System, 

in the Board of Governors of the Federal Reserve System; and (3) 

with respect to all other insured banks, in the Federal Deposit 

Insurance Corporation. Pub. L. No. 88-467, § 3(e), 78 Stat. 565, 

568-569 (1964), codified at 15 U.S.C. § 78l(i). The provision 

contemplated "extend[ing] disclosure protection to investors in 

[bank] securities and at the same time [providing] for full 

coordination with the safeguards provided by the Federal bank 

regulatory structure." S. Rep. No. 379, 88th Cong., 1st Sess. 31 

(1963). 
insured by the Federal Deposit Insurance Corporation. See 15 

U.S.C. § 78l (Historical and Statutory Notes, 1989 Amendment). 

 The 1974 amendment to § 12(i), in addition to its grant 

of regulatory authority to the FHLBB, added language directing 

the non-SEC agencies to issue regulations "substantially similar" 

to those promulgated by the SEC pursuant to numerous sections of 

the 1934 Act, including § 14(a): 

 In carrying out their responsibilities under 

this subsection, the agencies named . . . 

shall issue substantially similar regulations 

to regulations and rules issued by the [SEC] 

under sections 12, 13, 14(a), 14(c), 14(d), 

14(f) and 16 [of the 1934 Act], unless they 

find that implementation of substantially 

similar regulations with respect to insured 

banks and insured institutions [is] not 

necessary or appropriate in the public 

interest or for protection of investors, and 

publish such findings, and the detailed 

reasons therefor, in the Federal Register. 

15 U.S.C. § 78l(i). For the reasons that follow, we disagree 

with Reschini's contention that § 12(i)'s "substantially similar" 

language provides the requisite congressional intent to create a 

private cause of action under § 569.4 for depositor-members of 

mutual savings associations. 

 First, while Reschini's argument for a private cause of 

action under OTS proxy regulations may have merit insofar as it 

applies to proxy regulations issued pursuant to § 12(i)'s 

mandate,20 § 569.4 is not such a regulation. As described above, 

 

20. Cf. 12 C.F.R. § 563d (citing § 12 of the 1934 Act as 

statutory authority). Those regulations provide in part: 
§ 569.4 was originally adopted in 1971 pursuant to the general 

FHLBB's general regulatory authority under the National Housing 

Act  three years before § 12(i) was amended to give the FHLBB 

authority to administer the 1934 Act's securities provisions. 

When § 569.4 was promulgated anew by the OTS in 1989, the OTS 

cited its general regulatory authority under HOLA. On neither 

occasion was § 12(i) of the 1934 Act mentioned as authority for 

the regulation. 

 Second, the 1934 Securities Exchange Act provisions are 

simply not relevant to the ownership interests held by Reschini. 

The 1934 Act establishes a statutory scheme covering certain 

types of securities. Originally, the 1934 Act applied only to 

securities traded on national securities exchanges; in 1964, 

Congress passed the Securities Act Amendments which extended the 

1934 Act's protections and requirements to include many over-thecounter securities as well. See S. Rep. No. 379, 88th Cong., 1st 

(..continued) 

 In respect to any securities issued by 

savings associations, the powers, functions, 

and duties vested in the Securities and 

Exchange Commission (the "Commission") to 

administer and enforce sections 12, 13, 

14(a), 14(c), 14(d), 14(f), and 16 of the 

Securities Exchange Act of 1934 (the "Act") 

are vested in the Office. The rules, 

regulations and forms prescribed by the 

Commission pursuant to those sections or 

applicable in connection with obligations 

imposed by those sections, shall apply to 

securities issued by savings associations, 

except as otherwise provided in this part. 

12 C.F.R. § 563d.1. 
Sess. 1 (1963) (a "primary objective" of the 1964 amendments is 

to "improve investor protection by extending to the larger 

companies in the over-the-counter market the registration, 

reporting, proxy solicitation, and insider trading requirements 

now applicable to companies listed on an exchange").21 

 Reschini's ownership interest, however, is not among 

those types of securities covered by the 1934 Act's protections, 

even as expanded in 1964. When, in 1964, Congress extended the 

1934 Act's protections to certain over-the-counter securities, it 

specifically excluded from coverage "any security, other than 

permanent stock, guaranty stock, permanent reserve stock, or any 

similar certificate evidencing nonwithdrawable capital, issued by 

a savings and loan association." 15 U.S.C. 78l(g)(2)(C). Given 

that § 12(i) directs regulatory agencies to issue "substantially 

similar" regulations to those of the SEC in the context of 

"carrying out their responsibilities under this subsection," it 

would be anomalous to find that this language evidences 

congressional intent to create a private cause of action with 

 

21. Accordingly, the Securities Act Amendments (1) added 

registration requirements for most securities with certain 

minimum assets and number of stockholders, 15 U.S.C. § 78l(g); 

and (2) amended the disclosure requirements to encompass all 

registered securities. For example, § 14(a)'s language, which 

previously applied to proxies in respect of any nonexempt 

security "registered on any national securities exchange" was 

amended to apply to any nonexempt security "registered pursuant 

to section 12 of this title." See 15 U.S.C. § 78n (Historical 

Note, 1964 Amendment). 
respect to ownership interests outside the 1934 Act's 

protections.22

 Because § 569.4 was not promulgated pursuant to § 12(i) 

of the 1934 Act, and because the 1934 Act does not even apply to 

the ownership interests of depositor-members in mutual savings 

associations, we find no evidence in § 12(i) of congressional 

intent to create a private cause of action for depositor-members 

of mutual savings associations under § 569.4. 

B

 In the preceding section of this opinion we have 

addressed, as the touchstone issue, the question of congressional 

intent to establish a private cause of action. But there is a 

further issue to be addressed. Bearing in mind that  as in 

Borak  certain private causes of action were judicially implied 

in the pre-Cort era when congressional intent was "not . . . the 

considered focus," Virginia Bankshares, Inc. v. Sandberg, 501 

U.S. 1083, 1102 (1991), the question arises whether the nonimplication of a private cause of action would be "demonstrably 

 

22. In King v. Edwards, 559 F. Supp. 75 (N.D. Ga. 1982), the 

court concluded that the 1974 amendment to § 12(i) provided 

evidence of congressional intent to create a private cause of 

action under FHLBB proxy rules. King, 559 F. Supp. at 83. For 

the reasons set forth in the text, we disagree with this 

reasoning insofar as it applies to depositor-members of federal 

mutual savings associations seeking to convert to state-chartered 

form. 
inequitable to a class of would-be plaintiffs with claims 

comparable to those previously recognized," id. at 1104. 

 [W]here a legal structure of private 

statutory rights has developed without clear 

indications of congressional intent, the 

contours of that structure need not be frozen 

absolutely when the result would be 

demonstrably inequitable to a class of wouldbe plaintiffs with claims comparable to those 

previously recognized. Faced in that case 

with such a claim for equality in rounding 

out the scope of any implied private 

statutory right of action, we [look] to 

policy reasons for deciding where the outer 

limits of the right should lie. 

Id. at 1104-05 (discussing Blue Chip Stamps v. Manor Drug Stores, 

421 U.S. 723 (1975)). 

 The "previously recognized" cause of action to which 

Reschini's claim might be compared is that implied by the Borak

Court under SEC Rule 14a-9. Reschini's claim, like the claim at 

issue in Borak, involves an allegation of materially misleading 

proxy statements. Unlike the proxy statements in Borak, however, 

the proxy statements of which Reschini complains are not subject 

to the proxy disclosure provisions of the 1934 Act. As discussed 

above, securities issued by savings associations  with the 

exception of certain types of securities not relevant here  are 

expressly excluded from coverage of the Act's requirements and 

protections. 15 U.S.C. § 78l(g)(2)(C). 

 We find this difference to be significant. When 

Congress exempted accounts in savings and loan associations from 
the 1934 Act's requirements, it did so on the basis of an 

important distinction between such accounts and other types of 

securities: the lack of a trading interest. See S. Rep. 379, 

88th Cong., 1st Sess. at 61 (1963) (explaining the exemption for 

"share accounts in savings and loan associations" on the basis 

that "[t]here is normally no trading interest in . . . [this 

category] of securities"). The Ordower court also discussed the 

insubstantial nature of the ownership interests held by 

depositor-members of a mutual savings association.23 These 

characteristics lead us to conclude that Reschini's ownership 

interest in his savings account is not sufficiently comparable to 

the interests of persons with claims under SEC Rule 14a-9 such 

that the failure to recognize a private cause of action would be 

"demonstrably inequitable."24 

 

23. See supra text following note 1. 

24. Reschini's reliance on Ordower with respect to implication 

of a private cause of action is inapposite. There, after ruling 

on the jurisdictional question discussed in Part III, supra, the 

court held that a challenge to the accuracy of proxy materials 

used in a mutual-to-stock conversion could be brought in a 

district court, thus suggesting the existence of a private cause 

of action. Ordower, 999 F.2d at 1188. 

 Ordower, however, concerned different proxy 

regulations, those at 12 C.F.R. § 563b, in the context of a 

mutual-to-stock, rather than a federal-to-state, conversion. 

Mutual-to-stock conversions, which result in securities to which 

the 1934 Act's registration and disclosure requirements apply, 

are regulated in part by the 1934 Act's requirements. See 12 

C.F.R. § 563b (citing 1934 Act provisions as statutory authority 

for regulations governing mutual-to-stock conversions). Federalto-state conversions of mutual savings associations, in contrast, 

have no connection with the issuance of securities protected by 

the 1934 Act. Thus, Ordower is not authority for implying a 
C

 Our analysis has revealed no evidence of congressional 

intent to create a private cause of action under § 569.4 for 

depositor-members of mutual savings associations. Moreover, we 

are not persuaded that non-implication of a private cause of 

action would create a situation "demonstrably inequitable" to 

such depositor-members. Thus, we conclude that count I of 

Reschini's complaint does not state a federal claim on which 

relief can be granted. 

V

 Accordingly, albeit because of the absence of a 

cognizable federal cause of action rather than for lack of 

subject-matter jurisdiction, the judgment of the district court 

dismissing Reschini's complaint will be affirmed. 

(..continued) 

private cause of action under 12 C.F.R. § 569.4 in the context of 

federal-to-state conversions of mutual savings associations.