Court Opinion

ID: 3000518
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:05:49.314186+00
Date Added: 2024-06-11T11:45:41.711731
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

Nos. 05-1244, 05-3500, 05-3642, 05-3651
JOHN W. COURTNEY, et al.,
                     Plaintiffs-Appellants, Cross-Appellees,
                              v.

NEAL T. HALLERAN, et al.,
                   Defendants-Appellees, Cross-Appellants.
                       ____________
          Appeals from the United States District Court
      for the Northern District of Illinois, Eastern Division.
           No. 02 C 6926—Joan B. Gottschall, Judge.
                         ____________
   ARGUED SEPTEMBER 25, 2006—DECIDED MAY 7, 2007
                  ____________

 Before BAUER, KANNE, and WOOD, Circuit Judges.
  WOOD, Circuit Judge. This case was brought by frus-
trated depositors of Superior Bank FSB (“Superior”) in an
effort to recoup some of the money they lost when the
bank failed. A class of plaintiffs, represented by John W.
Courtney, Frances T. Lax, Lawrence M. Green, and Irene
Kortas, charged that the defendant bank’s owners, officers,
directors, and accountants violated the federal Racketeer
Influenced and Corrupt Organizations Act (RICO), 18
U.S.C. §§ 1961 et seq., the Illinois Consumer Fraud and
Deceptive Business Practices Act, 815 ILCS 505/1 et seq.
(CFA) and the Illinois Public Accounting Act, 225 ILCS
450/0.01 et seq., through the actions they took while
Superior was going under. The district court dismissed the
2                  Nos. 05-1244, 05-3500, 05-3642, 05-3651

RICO claims for lack of standing, and it dismissed without
prejudice the supplemental state claims. It also initially
dismissed a request for an injunction as unripe, but on
reconsideration it denied the motion, finding that the
requested relief would violate the prohibition in the
banking laws on judicial interference with actions of the
Federal Deposit Insurance Corporation. See 12 U.S.C.
§ 1821(j). Although the plaintiffs urge us to revive some
or all of this litigation, we conclude that the district court
resolved matters correctly, and we therefore affirm.

                              I
  During the latter part of the 1980s, more than a thou-
sand savings and loan associations in the United
States failed. See “Savings and Loan Crisis,” http://
en.wikipedia.org/wiki/Savings_and_Loan_crisis (visited
April 24, 2007); Fed. Deposit Ins. Corp., “The S&L
Crisis: A Chrono-Bibliography,” http://www.fdic.gov/bank/
historical/s&l/ (FDIC Chronology) (visited April 24, 2007).
The rate of failure was so great that the General Account-
ing Office1 (GAO) declared the Federal Savings & Loan
Insurance Corporation (FSLIC) fund insolvent by at least
$3.8 billion in January 1987. See FDIC Chronology. Dur-
ing this crisis, the Federal Deposit Insurance Corpora-
tion (FDIC) had organized a program that permitted the
consolidation of several failing or failed thrift organiza-
tions into one larger entity, which (the FDIC hoped) would
enjoy greater economies of scale and which would be
eligible for significant government assistance. See LaSalle
Talman Bank, F.S.B. v. United States, 317 F.3d 1363,

1
  As a result of the GAO Human Capital Reform Act of 2004,
Pub. L. 108-271, 118 Stat. 811 (2004), the name of the agency
was changed to the Government Accountability Office. We refer
to it here under the name it had at the time.
Nos. 05-1244, 05-3500, 05-3642, 05-3651                  3

1366-67 (Fed. Cir. 2003). It dubbed this the “Phoenix
program.” See id. at 1366.
  One of the institutions that failed was the Lyons (Illi-
nois) Savings Bank, which went under in December 1988.
Taking advantage of the Phoenix program, a group of
investors including Penny Pritzker, Thomas Pritzker, and
Alvin Dworman, through a holding company called Coast-
to-Coast Financial Corporation (CCFC), acquired Lyons
at the end of 1988. The group paid $42.5 million of its own
money, and it received assistance from the FSLIC, which
contributed a package of cash, tax credits, and loan
guarantees worth $645 million. The Pritzkers (together)
and Dworman each owned 50% of CCFC; CCFC in turn
created a company called Superior Holdings, Inc., which
was the nominal owner of the successor bank, Superior
Bank FSB. As the district judge did, we refer to the owners
as the CCFC defendants or group. The term “Bank defen-
dants” refers to the officers and directors of Superior.
  After the take-over, Superior began accumulating high-
risk assets associated with retained interests in mortgage
securitizations. Essentially, Superior would make a high-
risk loan to an auto or home buyer with a poor credit
history; it then pooled groups of these loans and sold the
portfolios to investors. Superior then collected the income
due from the underlying loans, and paid a fixed rate of
return to the investors. This was capable of being a
winning strategy as long as Superior correctly estimated
the rate of default or prepayment of the underlying loans,
and as long as it was not obligated to pay too high a fixed
rate to its investors.
   The plaintiffs were depositors of Superior. They claim
that the CCFC group plundered Superior’s assets
by withdrawing excessive amounts of money from the
bank and by engaging in self-interested transactions with
it. For example, they charge that the CCFC principals
4                  Nos. 05-1244, 05-3500, 05-3642, 05-3651

took out large loans from Superior that they had no
intention of repaying, and that they drained Superior’s
assets by directing Superior to pay CCFC $188 million in
dividends over the ten-year period from 1989 to 1999.
Eventually, Superior was not able to withstand the
alleged financial hemorrhage and it was forced to declare
insolvency. (This is the second time that this court has
been asked to consider aspects of that collapse. See FDIC
v. Ernst & Young LLP, 374 F.3d 579 (7th Cir. 2004).)
  According to plaintiffs, the CCFC group initially was
able to conceal its misfeasance in several ways. First, its
auditors, the accounting firm of Ernst & Young, allegedly
cooperated in the cooking of Superior’s books so that they
reflected vastly inflated values for the bank’s assets.
Based on Ernst & Young’s purported conclusions, the
CCFC group and the Bank defendants made statements
to depositors designed to assure them that Superior was
financially sound. Plaintiffs also allege that the Bank
defendants misrepresented the availability of FDIC
insurance to existing and potential depositors. They
charge that the Bank defendants told them that if they
opened up multiple accounts in different names, then each
account would be insured up to the maximum permitted
by the FDIC. This was inaccurate, but, in reliance on this
advice, the plaintiffs say that they were duped into
depositing far more than the maximum that could be
insured, just when Superior was about to fold.
   By 1998, Superior’s alleged mismanagement could no
longer be ignored. The Office of Thrift Supervision (OTS)
and the FDIC began to investigate, and they determined
that several of Superior’s audited financial statements
significantly overstated the value of its assets. In January
2001, Ernst & Young conceded that its accounting treat-
ment of Superior’s retained interests was incorrect, and
it agreed to re-evaluate its conclusions. That led to a write-
down of Superior’s retained interests first by $270 million,
Nos. 05-1244, 05-3500, 05-3642, 05-3651                    5

and later by another $150 million. Insolvency followed
soon thereafter; on July 27, 2001, the OTS appointed an
FDIC receiver for Superior. The receiver transferred all
insured deposits (that is, accounts that had up to $100,000
in them) to a new entity, Superior Federal, and it re-
tained $49 million of uninsured deposits. As of the time
the plaintiffs filed their lawsuit, Superior was still unable
to refund those uninsured deposits.
  The FDIC eventually settled Superior’s claims against
CCFC’s principals for $460 million, of which $100 million
was to be paid immediately and the remaining $360
million was to be paid over a 15-year period. Those monies
are to be distributed in accordance with the federal
statutory priority scheme, under which the plaintiff
depositors will recover some, but not all, of their invest-
ments. See 12 U.S.C. § 1821(d)(11)(A). Plaintiffs are
dissatisfied with the results of the settlement. They go
further, in fact, and claim that the settlement itself
violates the statute. They object to a feature under which
the FDIC agreed with the CCFC group jointly to pursue
the misrepresentation claims against Ernst & Young. If,
and to the extent that, the FDIC prevailed in that suit, it
agreed to assign the Pritzker/Dworman parties a percent-
age of its recovery. In the plaintiffs’ view, this arrange-
ment was a thinly disguised way of circumventing the
statutory priority scheme and allowing the CCFC group to
get more than its proper share.
  Acting in its corporate capacity, the FDIC filed a lawsuit
against Ernst & Young on November 2, 2002. The district
court dismissed that action for lack of standing. This
court affirmed on different grounds, finding that the
FDIC in its corporate capacity (“FDIC-Corporate”) had no
claim against the accountants. Instead, we held, under 12
U.S.C. § 1821 the FDIC in its capacity as receiver (“FDIC-
Receiver”) is the correct plaintiff “to pursue any claim
against Superior Bank’s accountants.” FDIC v. Ernst &
6                 Nos. 05-1244, 05-3500, 05-3642, 05-3651

Young LLP, 374 F.3d at 583. No further actions the FDIC
may have taken in any capacity are relevant to the
present case.

                            II
  After an initial foray into state court, plaintiffs found
themselves in federal court when the defendants removed
the case. Successive rounds of pleadings culminated in a
Fourth Amended Complaint, in which the plaintiffs as-
serted the following legal theories against the various
defendants:
    Count I: Violations of the Illinois Consumer Fraud Act
    by the CCFC group, the Bank defendants, and Ernst &
    Young
    Count II: Violations of RICO, 18 U.S.C. § 1962(c),
    against CCFC and Ernst & Young
    Count III: Violation of the Illinois Public Accounting
    Act, § 30.1, against Ernst & Young
    Count IV: Aiding and abetting a violation of RICO,
    against Ernst & Young
    Count V: Action for injunctive relief and a declaratory
    judgment, against the Pritzkers, Dworman, and the
    FDIC, seeking declaratory and injunctive relief de-
    signed to enforce the plaintiff depositors’ priority
    under 12 U.S.C. § 1821(d)(11)(A) over any assets
    recovered on behalf of Superior.
The district court dismissed the two RICO counts (II and
IV) with prejudice, finding that plaintiffs lacked stand-
ing to sue; it initially rejected Count V as unripe, but
later denied the requested declaratory and injunctive re-
lief as precluded by 12 U.S.C. § 1821(j); and it dismissed
the supplemental state claims in Counts I and III without
Nos. 05-1244, 05-3500, 05-3642, 05-3651                    7

prejudice. After plaintiffs filed a notice of appeal from the
denial of injunctive relief, this court briefly stayed the
distribution of the Ernst & Young settlement proceeds to
the shareholders of CCFC, but we dissolved the stay a
week later. The district court entered its final judgment
on July 27, 2005, and this appeal followed.

                            III
                             A
  We begin with a discussion of Count V of the complaint,
because that is the one that the plaintiffs have emphasized
before this court. They claim, in brief, that the FDIC’s
agreement about the disposition of potential proceeds
from its suit against Ernst & Young violates the manda-
tory distribution priorities established by the Financial
Institutions Reform Recovery and Enforcement Act
(FIRREA), Pub. L. 101-73, 103 Stat. 183, the pertinent
part of which is codified at 12 U.S.C. § 1821(d)(11). They
argue that a private party is entitled to an injunction
against the FDIC when the agency fails properly to
implement the distribution priorities of § 1821(d)(11),
notwithstanding the anti-injunction provision of FIRREA,
12 U.S.C. § 1821(j). Finally, they argue that any amounts
realized by the FDIC in its capacity as Superior’s re-
ceiver are necessarily subject to the distribution priorities
of § 1821(d)(11). They offer three arguments in support of
their position: first, that the FIRREA priority scheme is
functionally identical to priorities under the Bankruptcy
Code, and thus bankruptcy cases requiring strict adher-
ence to priorities dictate the outcome here as well; second,
that the FDIC’s authority as conservator or receiver to
transfer assets without obtaining any special approval or
consent under § 1821(d)(2)(G) is qualified by the priority
scheme of § 1821(d)(11); and third, that funds recovered
through litigation or settlement should be treated as
8                    Nos. 05-1244, 05-3500, 05-3642, 05-3651

“amounts realized . . . [by] other resolution” under
§ 1821(d)(11)(A). The FDIC, the Pritzkers, and Dworman
parry with several arguments: there is no private right of
action to enforce § 1821(d)(11); section 1821(j) squarely
precludes granting declaratory, injunctive, or other
equitable relief where such relief would interfere with the
receiver’s management of the estate; and there is no
violation of the § 1821(d)(11) priorities in any event.
  We begin our evaluation of these claims with a look at
the pertinent statutory language. Four parts of § 1821 are
implicated, the key parts of which we set forth here for
ease of reference:
    § 1821(d)(2)(G). Merger; transfer of assets and
    liabilities
    (i) In general
    The Corporation may, as conservator or receiver—
    . . . (II) subject to clause (ii), transfer any asset or
    liability of the institution in default (including assets
    and liabilities associated with any trust business)
    without any approval, assignment, or consent with
    respect to such transfer. . . .
    § 1821(d)(11). Depositor preference
    (A) In general
    Subject to section 1815(e)(2)(C) of this title [relating to
    losses incurred by the FDIC], amounts realized from
    the liquidation or other resolution of any insured
    depository institution by any receiver appointed for
    such institution shall be distributed to pay claims
    (other than secured claims to the extent of any such
    security) in the following order of priority:
    (i) Administrative expenses of the receiver.
    (ii) Any deposit liability of the institution.
Nos. 05-1244, 05-3500, 05-3642, 05-3651                     9

   (iii) Any other general or senior liability of the institu-
   tion (which is not a liability described in clause (iv) or
   (v)).
   (iv) Any obligation subordinated to depositors or
   general creditors (which is not an obligation described
   in clause (v)).
   (v) Any obligation to shareholders or members aris-
   ing as a result of their status as shareholders or
   members (including any depository institution holding
   company or any shareholder or creditor of such com-
   pany). . . .
   § 1821(j). Limitation on court action
   Except as provided in this section, no court may take
   any action, except at the request of the Board of
   Directors by regulation or order, to restrain or affect
   the exercise of powers or functions of the Corporation
   as a conservator or a receiver. . . .
   § 1821(p)(3). Settlement of claims
   Paragraphs (1) [prohibiting the sale of assets of a
   failed institution to certain persons] and (2) [forbid-
   ding debtors convicted of certain crimes from buying
   assets] shall not apply to the sale or transfer by the
   Corporation of any asset of any insured depository
   institution to any person if the sale or transfer of the
   asset resolves or settles, or is part of the resolution or
   settlement, of—
   (A) 1 or more claims that have been, or could have
   been, asserted by the Corporation against the person;
   or
   (B) obligations owed by the person to any insured
   depository institution, the FSLIC Resolution Fund, the
   Resolution Trust Corporation, or the Corporation.
10                 Nos. 05-1244, 05-3500, 05-3642, 05-3651

   Although the FDIC and the CCFC defendants would like
us to sweep this claim away by finding that there is no
private right of action to enforce the priority scheme
established by § 1821(d)(11), we prefer not to take that
approach. We are not compelled to consider this issue,
because it relates only to the question whether the plain-
tiffs have stated a claim, not to the question of the district
court’s jurisdiction. The district court did not rule on it,
and it is sufficiently complex, compare Hindes v. FDIC,
137 F.3d 148, 170 (3d Cir. 1998) (no private right of action
under § 1821(d)(13)(E)), with First Pac. Bancorp, Inc. v.
Helfer, 224 F.3d 1117, 1127 (9th Cir. 2000) (finding private
right of action under § 1821(d)(15) and acknowledging
conflict with Hindes), that it should not be handled as
some kind of after-thought. Furthermore, since we have
concluded that plaintiffs’ claims were properly dismissed,
this would at most be an alternative ground for decision.
We therefore save the question whether any kind of
private right of action exists under § 1821 for another
day. In addition, we express no opinion on the FDIC’s
alternative argument that plaintiffs’ failure to exhaust
administrative remedies is fatal to their claims. See 12
U.S.C. § 1821(d)(3)(13)(D); Am. First Fed., Inc. v. Lake
Forest Park, Inc., 198 F.3d 1259, 1265 (11th Cir. 1999);
Maher v. Harris Trust & Sav. Bank, 75 F.3d 1182, 1190
(7th Cir. 1996). Recall that the district court had originally
dismissed Count V as unripe; on reconsideration it relied
exclusively on the bar against injunctive relief found in
§ 1821(j), to which we are about to turn. We see no reason
why we should be compelled to consider exhaustion before
§ 1821(j), and thus we express no opinion on the plaintiffs’
arguments that they have done enough to exhaust and
that exhaustion does not apply under these circumstances.
  The glaring problem with the plaintiffs’ overall position
on this part of the case lies in the anti-injunction language
of § 1821(j). That section prohibits a court from taking any
Nos. 05-1244, 05-3500, 05-3642, 05-3651                    11

action either to restrain or affect the FDIC’s exercise of its
powers as a receiver, unless authorization can be found
elsewhere in the section. Far from finding such an authori-
zation, however, we see nothing but language that rein-
forces § 1821(j). For example, § 1821(p)(3) permits the
FDIC to sell or transfer assets as part of a settlement of
claims that it could have asserted against someone.
Section 1821(d)(2)(G)(i)(II) permits the FDIC to transfer
assets or liabilities without any further approvals.
  Other courts have recognized the breadth of § 1821(j)’s
prohibition. The Ninth Circuit described the ban as an
essential part of the FDIC’s ability to function as a re-
ceiver. Sahni v. Am. Diversified Partners, 83 F.3d 1054,
1058 (9th Cir. 1996). The D.C. Circuit said that § 1821(j)
“effect[s] a sweeping ouster of courts’ power to grant
equitable remedies to parties like the [plaintiffs].” Free-
man v. FDIC, 56 F.3d 1394, 1399 (D.C. Cir. 1995). Indeed,
the court went on to make a point equally important to
the case before us, in discussing whether the prohibition
also reaches declaratory relief and other equitable relief:
    Not only does [§ 1821(j)] bar injunctive relief, but in
    the circumstances of the present case where appellants
    seek a declaratory judgment that would effectively
    ‘restrain’ the FDIC from foreclosing on their property,
    § 1821(j) deprives the court of power to grant that
    remedy as well. . . . For the same reason, § 1821(j) also
    bars the court from granting the [plaintiffs’] plea for
    rescission of the underlying transaction.
Id. See also Tri-State Hotels, Inc. v. FDIC, 79 F.3d 707,
715 (8th Cir. 1996) (reaching the same conclusion).
  The plaintiffs try to avoid this significant obstacle to
their suit by arguing that § 1821(j) cannot apply to actions
of the FDIC that are ultra vires. First, they claim that the
FDIC is rigidly bound to the priority structure set forth in
§ 1821(d)(11), just as a bankruptcy court is bound by the
12                Nos. 05-1244, 05-3500, 05-3642, 05-3651

priorities established by the Code. In In re K-Mart Corp.,
we wrote that the general power conferred on a bank-
ruptcy court by 11 U.S.C. § 105(a) “does not create discre-
tion to set aside the Code’s rules about priority and
distribution; the power conferred by § 105(a) is one to
implement rather than override.” 359 F.3d 866, 871 (7th
Cir. 2004). So too here, plaintiffs argue. But the plain-
tiffs conveniently ignore the fact that this court rejected
the K-Mart plan because it did not meet the statutory
requirements for the prioritization scheme it had selected
and no other statute authorized the change in prioritiza-
tion. Id. at 874. The problem was not that the court was
powerless to allow a change in prioritization for any
reason. Id. Here, the FDIC had specific statutory authori-
zation for its actions. It has the power, under
§ 1821(d)(2)(G), to direct where funds should go. Bank-
ruptcy law does not contain an analogous provision, and
thus we do not find the plaintiffs’ analogy to be particu-
larly useful.
   Plaintiffs object that § 1821(d)(2)(G) must be read in
tandem with § 1821(d)(11)’s priority scheme. The FDIC’s
power to order transfers, they continue, may be exercised
only if it observes the priority structure of the latter
statute in designating the recipient. As support for their
position, they cite only the district court’s decision in
Adagio Investment Holding Ltd. v. FDIC, 338 F. Supp. 2d
71 (D.D.C. 2004). Aside from the fact that Adagio deals
with an entirely different situation—the sweep of funds
from one set of insured accounts to another set of unin-
sured accounts, all within the same bank—it is of course
not binding on this court. As we see it, plaintiffs are
reading language into § 1821(d)(11) that is not there—
essentially, they have equated transfers of existing
assets with the disposition of amounts received upon
“liquidation or other resolution” of an institution. In our
view, § 1821(d)(11) cannot be read to limit the FDIC’s
Nos. 05-1244, 05-3500, 05-3642, 05-3651                   13

authority under § 1821(d)(2)(G)(i)(II) so significantly. In
addition, we note that the FDIC promised in Ernst &
Young to apply any recovery it obtains from the accounting
firm in accordance with the statutory priorities. 374 F.3d
at 582. It is not clear why plaintiffs regard that as insuffi-
cient to protect their interests, but the premise of this
lawsuit is that more is needed for legal security. We
therefore continue with our consideration of their argu-
ments.
  The next question is whether the part of the FDIC’s
potential recovery from Ernst & Young that is dedicated
to the CCFC interests should be viewed as a future asset
of the estate that must be liquidated in accordance with
§ 1821(d)(11), or if it is better conceptualized as some-
thing the estate never had at all. Plaintiffs argue that
the fact that these (still-hypothetical) monies will pass
through the FDIC’s hands on the way to the recipients
means that their disposition must be governed by federal
law. They point to a decision of the U.S. Court of Federal
Claims, First Annapolis Bancorp., Inc. v. United States, 54
Fed. Cl. 529 (Fed. Cl. 2002), in support of their position.
Putting aside the facts that this decision, too, comes from
a trial court whose rulings are nonprecedential and that
ultimately the court rejected the FDIC’s suit for lack of a
case or controversy, First Annapolis does not help us
resolve the question before us. We must decide what to do
when damages are yet to be collected in the future, and
if and when they are collected, they will simply flow
through the FDIC’s hands to the ultimate recipient.
  Two reasons persuade us that the FDIC was entitled to
structure its settlement with the CCFC parties in the way
that it did. First is its general power to settle with alleged
wrongdoers under § 1821(p)(3)(A), which must operate
independently of § 1821(d)(11)(A) if it is to mean anything
at all. We also note that both the FDIC, in its capacity as
Superior’s receiver, and the CCFC parties had independent
14                 Nos. 05-1244, 05-3500, 05-3642, 05-3651

claims that they were entitled to assert against Ernst &
Young. Had they never agreed to the settlement, there is
no way that plaintiffs could have relied directly on
FIRREA’s provisions to get any part of a possible CCFC
recovery. (We do not exclude other theories, but plaintiffs
have asserted various other theories in the present law-
suit against the CCFC parties; the source of the funds
that the defendants might use to satisfy plaintiffs’ claims
is presumably not a matter of great interest to them, as
long as they know that enough money is there.)
  We conclude, therefore, that the district court correctly
rejected the plaintiffs’ request in Count V for declaratory
relief, injunctive relief, and other equitable relief.

                             B
   The district court dismissed Counts II and IV, the two
that are based on RICO, for lack of standing under the
statute. The basic problem is not, however, standing, for
the reasons we explained in FDIC v. Ernst & Young, 374
F.3d at 581-82. It is whether the depositors are entitled
under RICO to bring a direct action against an insolvent
bank’s shareholders and accountants in a case like this, or
if such a claim belongs exclusively to the FDIC at this
point. FIRREA provides that “the [FDIC] shall, as conser-
vator or receiver, and by operation of law, succeed to (i) all
rights, titles, powers, and privileges of the insured deposi-
tory institution, and of any stockholder, member, account
holder, depositor, officer, or director of such institution
with respect to the institution and assets of the institu-
tion.” 12 U.S.C. § 1821(d)(2)(A) (emphasis added). Al-
though this court has not spoken to the issue, both the
Ninth and the Third Circuits have concluded that the
depositors were not entitled to pursue their own RICO
claim. Hamid v. Price Waterhouse, 51 F.3d 1411, 1419-20
(9th Cir. 1995); Popkin v. Jacoby (In re Sunrise Sec. Litig.),
Nos. 05-1244, 05-3500, 05-3642, 05-3651                   15

916 F.2d 874, 880 (3d Cir. 1990). The Hamid court rea-
soned that, just as in the case of a shareholder derivative
action, where the harm has been suffered by all depositors
equally and plaintiffs have not suffered any distinct
individual injury, the claim belongs to the institution (or
its successor, the FDIC). 51 F.3d at 1419-20.
  Although the plaintiffs urge that they meet that last
criterion—injury unique to each person—they are talking
about something different. Even if each depositor suffered
different amounts of loss, the general misrepresentations
alleged affected everyone in the same way. We have
explained before that a “direct injury” for these purposes
is an “injury independent of the firm’s fate.” Mid-State
Fertilizer Co. v. Exchange Nat’l Bank, 877 F.2d 1333, 1336
(7th Cir. 1989). Plaintiffs’ injuries were entirely dependent
on the bank’s fate. The district court was therefore cor-
rect in substance to conclude that these plaintiffs were
not the parties entitled by the statute to pursue any
potential RICO claim.

                             C
  Finally, both parties challenge the district court’s
resolution of the supplemental claims raised in Counts I
and III. Plaintiffs would obviously like to see them re-
stored, along with the federal claims they have asserted;
defendants wish that the district court had retained them
and resolved them favorably to defendants, instead of
dismissing them without prejudice under 28 U.S.C.
§ 1367(c)(3). Because we have rejected the plaintiffs’
federal claims, there is nothing more we need to add about
the dismissal of their state claims. They are entitled, if
they wish and are able to do so under state law, to pursue
those matters in state court. Defendants believe that the
district court’s action was an abuse of discretion because
banking law is heavily regulated at the federal level. In
16                Nos. 05-1244, 05-3500, 05-3642, 05-3651

those circumstances, they argue, there should be a greater
presumption in favor of keeping the case in federal court
even after claims that genuinely arise under federal law
are gone.
  That assumes, of course, that there is no original federal
question jurisdiction over the state claims in Counts I and
III. Defendants argue that this is wrong, and that we
should find that federal law has entirely displaced state
law in this area. This has become a popular argument of
late, see Bennett v. Southwest Airlines Co., 2007 WL
1215055 (7th Cir. Apr. 26, 2007), but in this case it is
easy to reject it. The Supreme Court held in Barnett
Bank of Marion County, N.A. v. Nelson, 517 U.S. 25
(1996), that state banking laws are not preempted if they
“do[ ] not prevent or significantly interfere with the
national bank’s exercise of its powers.” Id. at 33. If state
banking laws are not preempted, there is even less reason
to think that federal banking laws preempt state laws of
general applicability like the Illinois Consumer Fraud Act
or the Public Accounting Act. Regulations issued by the
Office of Thrift Supervision of the Department of the
Treasury confirm that conclusion: “State laws of [contract
and commercial law and tort law] are not preempted to the
extent that they only incidentally affect the lending
operations of Federal savings associations.” 12 C.F.R.
§ 560.2(c).
  To the extent that we are dealing with conflict preemp-
tion, this is one of the many areas in which the district
court was entitled to conclude that the state courts
would faithfully apply whatever federal laws and regula-
tions may be implicated by this case.

                            III
  We have considered the other arguments that the parties
have presented and find nothing that requires comment.
Nos. 05-1244, 05-3500, 05-3642, 05-3651                  17

The judgment of the district court should be MODIFIED
to reflect the fact that the RICO counts are dismissed on
the merits, not for lack of standing; in all other respects,
the judgment of the district court is AFFIRMED.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit

                   USCA-02-C-0072—5-7-07