Court Opinion

ID: 8988859
Source: CourtListenerOpinion
Date Created: 2022-11-27 11:59:26.268612+00
Date Added: 2024-06-11T17:10:51.049412
License: Public Domain

CONTIE, Senior Circuit Judge.
For the following reasons, I respectfully dissent.
I.
Though I agree with the majority’s conclusion that “the suit against the OTS is sufficiently ripe,” I do so for the reasons stated in my dissent in the companion case, First Fed. Sav. Bank, et al. v. Ryan, 927 F.2d 1345. Moreover, because the FDIC has threatened to terminate Franklin Federal’s deposit insurance, I disagree with the majority’s conclusion “that the claim against the FDIC is not ripe for review.” See Appellees’ Brief at 22 (“The OTS Supervisory Agent who is primarily responsible for the regulation of the institution informed Franklin Federal management that OTS would immediately seize the institution if FDIC initiates insurance termination proceedings. Thus, plaintiffs had no choice but to file this action when the Regional Director of FDIC subsequently informed the institution that the agency had decided to initiate insurance revocation proceedings in the absence of a new and significant capital infusion.”).
Accordingly, I will now address the substantive merits of this action.
II.
A.
When Congress intends to upset previously settled expectations, it is obligated to do so in unambiguous terms. See Bush v. Oceans Int’l, 621 F.2d 207, 211 n. 4 (5th Cir.1980) (“[A] change in the status quo should not be inferred unless Congress has unmistakably indicated a wish to the contrary.”). In the instant action, the government failed to identify any provision in FIRREA that expressly abrogates all conversion agreements; the government relies instead on strained inferences and select *1342legislative history. Neither the courts nor the defendants are entitled to “impute to Congress such a radical departure from established law in the absence of express congressional command.” Feres v. United States, 340 U.S. 135, 146, 71 S.Ct. 153, 159, 95 L.Ed. 152 (1950).
Contrary to the government’s position, the only statutory provision in FIRREA that directly applies to the instant action expressly precludes the abrogation of contracts:
(g) SAYINGS PROVISIONS RELATING TO FHLBB.—
(1) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS NOT AFFECTED.—
Subsection (a) [which abolishes FSLIC and FHLBB] shall not affect the validity of any right, duty, or obligation of the United States, the Federal Home Loan Bank Board, or any other person, which—
(A) arises under or pursuant to the Federal Home Loan Bank Act, the Home Owners’ Loan Act of 1933, or any other provision of law applicable with respect to such Board (other than title IV of the National Housing Act); and
(B) existed on the day before the date of the enactment of this Act.
Financial Institutions Reform, Recovery and Enforcement Act of 1989, Pub.L. No. 101-73, § 401(g), 103 Stat. 183. Because the most basic tenet of statutory construction dictates that “courts are required, where possible, to give words their plain, unambiguous meaning,” Lynch v. Lyng, 872 F.2d 718, 720-21 (6th Cir.1989), section 401(g)’s unambiguous language is conclusive “in the absence of ‘a clearly expressed legislative intent to the contrary.’ ” United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69 L.Ed.2d 246 (1981) (citation omitted).
Though the government readily admits that section 401(g) applies to obligations and duties, the government nevertheless contends that section 401(g) does not apply to conversion agreements (though the section does not expressly exempt conversion agreements from section 401(g)’s scope). Specifically, the government suggests that we narrow the breadth of section 401(g) to apply solely to “existing contracts to lease space, for office supplies, and the like.... ” If this were Congress’ intent in enacting § 401(g), however, Congress could have, and should have, restricted the section's wording to the procurement contracts identified by the government. Instead, Congress elected to save “any right, duty, or obligation of the United States_”, see FIRREA § 401(g), which arises under, or pursuant to, the Federal Home Loan Bank Act or the Home Owners’ Loan Act of 1933. Moreover, because Congress was well aware of conversion contracts when it adopted section 401(g), Congress’ decision not to specifically exclude such contracts from section 401(g) might reflect Congress’ intent to extend the section’s protection to include existing conversion contracts. See United States v. Rohm & Haas Co., 500 F.2d 167, 171 (5th Cir.1974) (citing De La Rama S.S. Co. v. United States, 344 U.S. 386, 389-90, 73 S.Ct. 381, 383-84, 97 L.Ed. 422 (1953)), cert. denied, 420 U.S. 962, 95 S.Ct. 1352, 43 L.Ed.2d 439 (1975) (“Such a reading of the savings clause is consistent with the rule that savings clauses are to be broadly construed.”).
Though the government argues that section 401(g) protects only those rights, duties and obligations endangered by the abolition of the FSLIC and the FHLBB, not by the enactment of FIRREA, the government’s contention merely manipulates the express language of section 401(g). Section 401(g) preserves FSLIC’s and FHLBB’s pre-existing duties and obligations though the agencies no longer exist. Semantics notwithstanding, section 401(g)’s express language dictates that FIRREA not relieve the government of its existing legal duties and/or obligations.
The government similarly argues that defeat of the proposed Hyde Amendment conclusively establishes Congress’ intent to abrogate all bargained-for forbearances that permit pre-FIRREA capital standards. Contrary to the government’s contention, however, the issue before Congress when it *1343considered the Hyde Amendment was not the validity of existing forbearances; instead, the Hyde Amendment contemplated the establishment of an administrative process to review possible contract claims. Though the appellants are correct that some representatives voted against the Hyde Amendment because they wanted all forbearance agreements abrogated, it is equally clear that many Congressmen opposed the Hyde Amendment because of the contemplated administrative process. Because the Hyde Amendment never presented Congress with the sole issue of whether conversion agreements should be abrogated, the amendment’s defeat is irrelevant to this action because the appellants, the ap-pellees, and this court can not determine, with any certainty, why Congress defeated the Hyde Amendment.
Though the appellants argue that FIR-REA § 401(h) (which provides that agency “orders, resolutions, determinations, and regulations ... shall continue in effect ... until modified, terminated, set aside, or superseded in accordance with applicable law_”) allows the government to terminate forbearances, a bargained-for forbearance constitutes a binding “obligation” or “duty,” not merely an order, resolution, determination or regulation. Accordingly, if FHLBB’s forbearance letter to Franklin Federal constitutes a bargained-for forbearance, see infra, then section 401(g) preserves the resulting governmental “obligation.” The government’s reliance on section 401(h) is without merit.
Although Congress may have intended to abrogate all existing forbearances (gratuitous and bargained-for) when it enacted FIRREA, section 401(g)’s express wording preserves the government’s existing “duties” and “obligations” which necessarily include bargained-for (quid pro quo) forbearances. Accordingly, we must now determine whether an “obligation” or “duty” (pursuant to § 401(g)) exists in this action (in the form of a bargained-for forbearance).
B.
The appellee argues:
What is at issue is whether Congress expressly abrogated all contracts between the government and the savings and loan industry. The Bank board undoubtedly granted forbearances to scores of institutions that applied for assistance. But Franklin Federal, and its holding company, stand in a different light. The forbearance obtained by Franklin Federal was specifically negotiated and bargained-for. It was, moreover, granted in consideration for Franklin Financial’s agreement to acquire the ailing institution and to provide an immediate capital injection of $5 million of the shareholders’ personal funds into the troubled institution. Hence, Franklin Federal’s right to treat supervisory goodwill as an asset does not stem “solely from a regulatory forbearance” as the government contends, but rather rests on a binding and enforceable contract.
Appellee’s Brief at 24 (citation omitted) (emphasis in original).
On January 12, 1989, the parties entered into a binding agreement deemed the “Voting and Disposition Rights/Dividend Agreement.” The Agreement provided, inter alia, that:
B. This Agreement shall be deemed a contract made under and governed by Federal law.
C. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective transferees, successors, assigns, heirs, administrators, executors, and trustees.
F. This Agreement has been duly authorized, executed, and delivered, and constitutes, in accordance with its terms, a valid and binding obligation of the Ac-quiror and the FSLIC....
K. This Agreement, together with any understanding agreed to in writing by the parties, constitutes the entire agreement between the parties and supersedes all prior agreements and understandings of the parties in connection with the subject matter hereof.
*1344Voting and Disposition Rights/Dividend Agreement at 8-9.
Accordingly, the appellees argue that the conversion agreement includes four documents: Franklin Federal’s business plan; the dividend agreement; the supervisory case findings; and, most importantly, the November 21, 1988 forbearance letter. The forbearance letter, signed by the Acting Secretary of the Federal Home Loan Bank Board, states (in its entirety):
In connection with the approval by the Federal Home Loan Bank Board (“Board”) of the Voluntary Supervisory Conversion and acquisition of Morris-town Federal Savings and Loan Association, Morristown, Tennessee (“Morris-town"), by Franklin Financial Group (“Franklin”), the converted institution shall be known as Franklin Federal Savings Bank, the following forbearance is hereby granted.
1.For purposes of reporting to the Board, the value of any unidentifiable intangible assets resulting from accounting for the acquisition in accordance with the purchase method may be amortized by Franklin Federal Savings Bank over a period not to exceed 25 years by the straight line method.
The forbearance extended by this letter does not relieve Franklin Federal Savings Bank of its continuing obligations to maintain records of its reserve and regulatory capital condition and to report its financial condition in accordance with applicable regulatory requirements. This letter does not and shall not be construed to constitute forbearance or waiver by the Board or the FSLIC with respect to any regulatory or other requirements other than those encompassed within the preceding paragraph 1. Other than the actions to enforce the regulatory requirements waived in accordance with paragraph 1 and the statutory provisions authorizing imposition of the waived requirement, insofar as such requirement is waived, the Board and the FSLIC expressly reserve all of their statutory rights and powers with respect to Franklin Federal Savings Bank including, without limitation, those under Section 5 of the Home Owners’ Loan Act of 1933 and Section 406 and 407 of the National Housing Act.
Joint Appendix at 35.
Though the government challenges the district court’s conclusion that the forbearance letter constitutes an integral part of the government’s binding agreement (“obligation”) with Franklin Federal Savings Bank, the government’s arguments are unpersuasive.
The government first argues that the forbearance letter is merely a “unilateral grant by the regulator which did not give rise to a ‘right, duty or obligation’ within the meaning of Section 401(g).” The government’s argument is belied, however, by the appellees’ affidavits and the testimonial evidence presented at the preliminary injunction hearing. Charles Robinette, Franklin Federal’s chief executive officer, testified that negotiations regarding the terms of the forbearance were conducted in the same manner as were the other terms of the acquisition. Robinette further testified that the forbearance was the linchpin of the agreement, adding that Franklin Financial would not have agreed to acquire Morristown had the government not agreed to the forbearance.
After reviewing all of the evidence, the district court held, inter alia, that:
2. The Court finds that the Federal Home Loan Bank Board had the authority to grant a forbearance as evidenced by the letter dated November 21, 1988 signed by the Acting Secretary, and that this grant gave the institution the right to amortize certain supervisory goodwill over a period not to exceed 25 years by the straight line method....
3. The Court finds that the voting and dividend agreement contemplates that other writings are also included in the full supervisory agreement as entered into by the defendants and the plaintiffs. The Court finds that the November 1988 grant of a forbearance is such a writing.
4. The Court finds that the forbearance agreement was an integral part of the entire agreement and was for the benefit *1345of all parties in order to recapitalize the failing institution and prevent additional agency and taxpayer expenditures which would have been necessitated by a failure of the institution.
5. The Court finds that the plaintiffs would not have invested an additional five million dollars into this institution absent the forbearance agreement, inasmuch as Franklin Federal would have been insolvent and subject to closure at its inception absent this agreement.
District Court’s July 16, 1990 Permanent Injunction Order at 1-2. The district court’s factual findings may not be reversed unless clearly erroneous. Fed.R. Civ.P. 52(a). See also United Slate, Tile & Composition Roofers, Damp & Waterproof Workers Ass’n, Local 307 v. G & M Roofing & Sheet Metal Co., 732 F.2d 495, 498 (6th Cir.1984) (“The finding that an agreement existed between G & M and Local 307 is a factual determination and is thus subject to the ‘clearly erroneous’ standard of review.”); Richter v. Westab, Inc., 529 F.2d 896, 899 (6th Cir.1976) (contract’s existence reviewed under clearly erroneous standard).
The bargained-for (quid pro quo) forbearance clearly constitutes an integral component of the negotiated agreement between the FHLBB and Franklin Federal and was not, as the government suggests, merely a gratuitous forbearance. Franklin Federal’s shareholders bargained for the instant forbearance and provided the government valuable consideration in reliance upon the government’s promise to allow Franklin Federal the right to amortize supervisory goodwill over a 25-year period. In similar circumstances, numerous district courts have treated the bargained-for (quid pro quo) forbearances as contractual rather than as mere regulatory determinations (gratuitous forbearances). Sterling Sav. Ass’n v. Ryan, 751 F.Supp. 871 (E.D.Wash.1990); Security Fed. Sav. Bank of Florida v. Director, Office of Thrift Supervision, 747 F.Supp. 656 (N.D.Fla.1990); Far West Fed. Bank v. Director, Office of Thrift Supervision, 746 F.Supp. 1042 (D.Or.1990): Guaranty Fin. Serv., Inc. v. Director, Office of Thrift Supervision, 742 F.Supp. 1159 (M.D.Ga.1990). Accordingly, the district court’s findings regarding the instant forbearance letter are not clearly erroneous.
III.
For the aforementioned reasons, I respectfully dissent.