Appealed from United States District Court for the District of Oregon; Judge Panner.
Rich, Newman, and Michel, Circuit Judges.
This interlocutory appeal is taken on behalf of the Director of the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance Corporation ("FDIC"), and concerns the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), Pub. L. 101-73, 1989 U.S. Code Cong. & Admin. News (103 Stat.) 86 (codified at various sections of Titles 12 and 15).
In the course of litigation, the United States District Court for the District of Oregon denied the motion of the OTS and FDIC that Count IV of the complaint be severed and transferred to the United States Claims Court. Far West Federal Bank, S.B. v. Director, Office of Thrift Supervision, 744 F. Supp. 233 (D. Ore. 1990). The Federal Circuit, on the government's motion for a stay pending appeal, granted a temporary stay of proceedings with respect to Count IV.*fn1 Far West Federal Bank, S.B. v. Director, Office of Thrift Supervision, No. 90-1465 (Fed. Cir. Aug. 13, 1990) (Order).
We lift the stay, and affirm the ruling of the district court.
The following premises are either uncontested or as alleged by Far West,*fn2 and are accepted as true for the purposes of review of the only issue before us: whether the subject matter of Count IV should be severed and transferred to the Claims Court.
In 1987 Far West Federal Bank, a federally-chartered savings association in Portland, Oregon, was essentially insolvent. Initiated and encouraged by the Federal Home Loan Bank Board ("FHLBB") and its deposit insurance arm the Federal Savings and Loan Insurance Corporation ("FSLIC"), recapitalization with $27 million in cash was obtained from a number of investors ("the investment group"). On December 31, 1987 a group of documents, letters and agreements (collectively the "Conversion Agreement") were entered into among Far West, the investment group, the FHLBB, and FHLBB's regional bank the Federal Home Loan Bank of Seattle ("FHLB-Seattle"). The contractual obligations of the FHLBB and FHLB-Seattle included forbearances of certain regulatory requirements.
In brief, the FHLBB and FHLB-Seattle agreed to permit Far West to operate for ten years pursuant to certain "Modified Regulatory Capital Requirements" as set out in the Conversion Agreement. The Conversion Agreement provided that these modified requirements would remain in effect "notwithstanding any subsequent changes in the definition of regulatory capital." FHLB-Seattle provided Far West with a line of credit to enable it to engage in a conservative, FHLBB-approved structured arbitrage strategy. Far West was also granted a waiver of the standard liability growth limitations, to enable full utilization of this credit line. The FHLBB and FHLB-Seattle agreed to certain amortization treatment of the credit line for regulatory capital purposes; this treatment in turn determined Far West's "loans to one borrower" limit. Far West states that these terms were essential to the economic viability of the recapitalization.
Far West states that it operated successfully under the Conversion Agreement, and that this recapitalization with private funds was saving the FSLIC insurance fund from liability estimated at $325 million dollars.
FIRREA was enacted in August 1989. Among other purposes, the statute restructured the federal agencies responsible for regulating and insuring thrift institutions. The functions of the FHLBB were transferred to the newly-created OTS. The assets and liabilities of the FSLIC were placed in the FSLIC Resolution Fund which, with the new Savings Association Insurance Fund, were now administered by the FDIC. 12 U.S.C. § 1437. Other changes, not here pertinent, were also made.
New rules were established for the thrift industry. A new regulatory capital structure was required of all thrift institutions, including new limitations on the inclusion of intangible assets (such as a credit line) in regulatory capital, and new "loans to one borrower" limits. 12 U.S.C. § 1461. In general, the statutory requirements were more rigorous than those of the Conversion Agreement.
FIRREA, by its terms, preserved existing obligations between the FHLBB and thrift institutions:
(g) Savings provisions relating to FHLBB. --
(1) Existing rights, duties, and obligations not affected. -- Subsection (a) [abolishing the 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 --
(B) existed on the day before the date of the enactment of this Act [Aug. 9, 1989].
12 U.S.C. § 1437 (g). See also 12 U.S.C. § 1437(f) (preserving obligations of FSLIC).
In November 1989 OTS promulgated regulations requiring that FIRREA's regulatory capital and other restrictions would apply to all thrift institutions, regardless of past agreements with the FHLBB. See Regulatory Capital, 54 FR 46,845 (1989) (to be codified at 12 C.F.R. Parts 561, 563, 567). OTS Thrift Bulletin 38-2, issued January 9, 1990, states that FIRREA "eliminates . . . previously granted capital and accounting forbearance."
Regulatory actions by OTS, stated by Far West to be inconsistent with the terms of the Conversion Agreement, gave rise to the suit by Far West in the United States District Court for the District of Oregon. Far West's amended and supplemental complaint contained five counts. Counts I and II requested declaratory and injunctive relief from the FIRREA requirements, Count I on the basis that FIRREA did not supersede the Conversion Agreement, and Count II on the basis that the fifth amendment prohibits OTS from interfering with performance of the Conversion Agreement. Count III has been voluntarily dismissed. Count IV sought rescission ...