Opinion ID: 515708
Heading Depth: 2
Heading Rank: 2

Heading: The Applicability of the Demand Requirement in the Sec. 1464 Receivership Context

Text: 30 Gaubert urges us to carve out an exception to the demand requirement for derivative suits in which shareholders contest the appointment of a receiver by the FHLBB pursuant to 12 U.S.C. Sec. 1464(d)(6)(A). In essence, Gaubert argues that the unique statutory setting of Sec. 1464--in which the only power left in the board of directors following the appointment of a receiver is the authority to challenge that appointment, see 12 U.S.C. Sec. 1464(d)(6)(A); First S & L Ass'n v. First Federal S & L Ass'n, 547 F.Supp. 988, 994 (D.Hawaii 1982)--somehow renders the board's views on the appointment of the receiver meaningless or irrelevant. 31 At the outset we note that whatever law--federal or state--governs the standards for excusing the demand requirement, Congress must evidence a clear intent to render that law inapplicable before we will read the demand requirement out of a particular statutory setting. If the demand requirement derives from Federal Rule 23.1 itself, some other statute will have to grant a clear exemption from the Rule: In the absence of a 'clear inconsistency' or a demonstrated congressional purpose to exclude one or more of the Federal Rules, 'a subsequently enacted statute should be so construed as to harmonize with the Federal Rules if that is at all feasible.'  Grossman v. Johnson, 674 F.2d 115, 122-23 (1st Cir.) (quoting 7 Moore's Federal Practice, p 86.04 at 86-22 (2d ed. 1980)), cert. denied, 459 U.S. 838, 103 S.Ct. 85, 74 L.Ed.2d 80 (1982). Conversely, if the content of the demand requirement derives from state law, as Gaubert argues so strenuously, then it will be preempted by a federal statute such as Sec. 1464 only when there is a clearly evidenced congressional intent to do so, or when the state law is manifestly inconsistent with the policies or application of the federal law. See Louisiana Public Service Comm'n v. FCC, 476 U.S. 355, 106 S.Ct. 1890, 1898-99, 90 L.Ed.2d 369 (1986). Under either analysis, this court will not bypass the directive to demand or explain why not, unless Congress has clearly told it to do so in another statute. 32 Section 1464 itself contains no evidence that Congress sought to exempt shareholders from the strictures of the demand requirement. Rather, it provides that in the event of the appointment of a receiver, the association may ... bring an action in the United States district court for the judicial district in which the home office of such association is located, or in the district court for District of Columbia. 12 U.S.C. Sec. 1464(d)(6)(A) (emphasis added). If anything, this passage suggests that Congress fully expected that challenges to the appointments of receivers would originate in the board of directors. Moreover, there is nothing to indicate that Congress did not intend for Rule 23.1's pleading requirements to apply, and we do not see how application of the demand requirement is in any way inconsistent with the application of Sec. 1464. Gaubert has not shown that a board will never or even in most cases not accede to a shareholder's demand to exercise its one remaining power and challenge a receiver's appointment. 33 Nor does Gaubert raise any countervailing federal interests that are jeopardized by adherence to the demand requirement. To the extent the 30-day limitation or the inherent financial difficulties of corporations in receivership render demand more difficult in the Sec. 1464 context, the court itself can apply its discretion in determining what effect to give a board's refusal to pursue the action or failure to acknowledge the demand. A court may permissibly find, for example, that if a timely, good faith demand is made on the board and there is no response within the 30-day period allowed under Sec. 1464(d)(6)(A), the shareholder should be permitted to pursue the action in a derivative capacity. Similarly, if a corporation's board of directors declines to pursue the litigation for lack of financial resources, a court may obviously consider this factor in deciding to permit the shareholder's suit to proceed. These are circumstances that argue in favor of flexibility in assessing the results of a demand requirement; they do not justify its wholesale abandonment. We therefore decline to create a per se rule excusing demand in Sec. 1464 actions. 9 34