Opinion ID: 6602
Heading Depth: 2
Heading Rank: 2

Heading: The Houston Action

Text: In October 1993, pursuant to its authority under the Federal Deposit Insurance Act (FDIA),8 the Board commenced an administrative proceeding against DLG and De La Garza. In this proceeding, the Board made the same allegation asserted earlier by the FRBD))namely, that the acquisition of the promissory notes made DLG a bank holding company, and therefore the failure to obtain Board approval prior to the purchase of the notes violated the BHCA. Based on this charge, the Board assessed civil penalties totaling $1,000,000))$500,000 each against DLG and De La Garza9 but 7 Of which amount, roughly $900,000 was used for the purchase of the promissory notes that gave rise to this litigation. 8 Under the Federal Deposit Insurance Act (FDIA), 12 U.S.C.A. §§ 1811-1834b (West 1989 & Supp. 1994), the Board has the exclusive authority to commence administrative proceedings for civil penalties and other relief for violations of the BHCA. Id. §§ 1818(b)(3), 1818(i). 9 See BHCA, 12 U.S.C. § 1847(b)(1) (providing for the imposition of civil fines of up to $25,000 per day against any 6 provided that the fines were payable only after an opportunity for an adversary administrative enforcement proceeding and the exhaustion of appeals therefrom. On November 1, 1993, the Board filed a motion in the Houston Court, seeking a restraining order to freeze De La Garza's and DLG's assets to prevent their dissipation.10 As noted, the Board relied, in part, on De La Garza's alleged diversion of the proceeds from the sale of the promissory notes to Southwest Underwood Company, and on his recent indictment for misapplying insurance company assets, as justification for seeking such an order. Based on the evidence presented by the Board, which included a sworn declaration by an agency official, the court found that the Board had made a prima facie showing that DLG and De La Garza had violated the BHCA and that civil penalties were justified.11 The company or person who participates in the violation of the BHCA). 10 The FDIA empowers the Board to obtain such a restraining order to assist it in its administrative actions. Specifically, § 1818(i)(4)(A) provides that a district court may, in the aid of . . . any administrative . . . action for . . . civil money penalties . . . issue a restraining order that))(i) prohibits any person subject to the proceeding from withdrawing, transferring, removing, dissipating, or disposing of any funds, assets or other property. 11 DLG purchased the promissory notes before the effective date of the 1993 amendments to the BHCA. These amendments altered the burden of proof that the Board must meet prior to attaching assets. Compare 12 U.S.C. § 1818(i)(4)(B) (Supp. III 1991) (A permanent or temporary injunction or restraining order shall be granted without bond upon a prima facie showing that money damages, restitution, or civil money penalties, as sought by such agency, is appropriate.) with 12 U.S.C.A. § 1818(i)(4)(B) (West Supp. 1994) (Rule 65 of the Federal Rules of Civil Procedure shall apply [to an application for a 7 court immediately issued an Order to Show Cause and Temporary Restraining Order, commanding DLG and De La Garza to appear in court on November 3, 1993, and show cause why they should not be enjoined from withdrawing, transferring, removing, dissipating, or disposing of their assets (November 1 Order). Pending further order of the court, the November 1 Order also prohibited DLG and De La Garza, or any of their employees, from withdrawing, transferring, removing, dissipating, or disposing of any of their assets. DLG and De La Garza appeal this order. Two days later, on November 3, 1993, a hearing was conducted by the Houston Court during which it received evidence and heard arguments from both sides. From the bench Chief Judge Black then orally issued a preliminary injunction (November 3 Injunction) that substantially modified and limited the November 1 Order, imposing a lien of $1,000,000 on but three among a number of properties owned by DLG. A slightly modified version of this preliminary injunction was issued in written form on December 23, 1993 (December 23 Injunction), replacing the November 3 Injunction entirely. De La Garza and DLG appeal from the December 23 Injunction. On March 17, 1994, the district court again modified its injunction, but unlike the December 23 Injunction, this March 17 modification was just thatSQa modificationSQwhich did not supplant the prior injunction. DLG and De La Garza have appealed the March restraining order] without regard to the requirement of such rule that the applicant show that the injury, loss, or damage is irreparable and immediate.). 8 17 modification, but the appeal of this modification was not consolidated with the instant appeals and thus is not before us.