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Government of the Virgin Islands v. A. Leonard

argued: January 11, 1991.

KENNETH J. ROSA; BRIAN O'CONNOR; GERALD L. NEGRI; HERBERT J. KUPFER; PRISCILLA CARPENTER, INDIVIDUALLY, AND ON BEHALF OF ALL PARTICIPANTS AND BENEFICIARIES OF THE CITY SAVINGS BANK, F.S.B., MINIMUM BENEFIT RETIREMENT PLAN (FORMERLY, THE "CITY FEDERAL SAVINGS BANK MINIMUM BENEFIT RETIREMENT PLAN")
v.
RESOLUTION TRUST CORPORATION, IN ITS CORPORATE CAPACITY, AND AS RECEIVER OF CITY FEDERAL SAVINGS BANK, AS RECEIVER OF CITY SAVINGS BANK, F.S.B. AND AS CONSERVATOR FOR CITY SAVINGS, F.S.B.; CITY FEDERAL SAVINGS BANK; MANUFACTURERS HANOVER TRUST COMPANY, A NEW YORK CORPORATION; CITY SAVINGS, F.S.B. ("CITY SAVINGS"); CITY SAVINGS BANK, F.S.B. ("CITY SAVINGS BANK") PENSION BENEFIT GUARANTY CORPORATION, INTERVENOR; RESOLUTION TRUST CORPORATION, CITY FEDERAL SAVINGS BANK, CITY SAVINGS BANK, F.S.B., AND CITY SAVINGS, F.S.B., APPELLANTS



Appeal from the United States District Court for the District of New Jersey; D.C. Civil No. 90-04559.

Stapleton, Greenberg and Seitz, Circuit Judges.

Author: Seitz

Opinion OF THE COURT

SEITZ, Circuit Judge

Defendants Resolution Trust Corporation, City Federal Savings Bank, City Savings Bank, F.S.B., and City Savings, F.S.B. ("appellants") appeal the order of the district court granting plaintiffs, participants in and beneficiaries of a pension plan, a preliminary injunction. This court has jurisdiction pursuant to 28 U.S.C. § 1292(a)(1) (1988). We review for abuse of discretion. Tustin v. Heckler, 749 F.2d 1055, 1060 (3d Cir. 1984). However, our review of legal issues is plenary. Id.

Plaintiffs' complaint invoked the jurisdiction of the district court under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq. (1988) ("ERISA"). The Resolution Trust Corporation ("RTC") challenges the district court's jurisdiction over plaintiffs' claims against appellants other than it in its corporate capacity for plaintiffs' failure first to comply with statutory claims procedures. See 12 U.S.C.A. § 1821(d)(3)-(13) (West 1989).

This case involves important issues as to the meaning of certain provisions of the Financial Institutions Reform and Recovery Enforcement Act of 1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183 (1989) (codified at various locations in the United States Code) in the context of claims brought under ERISA. Congress recently enacted FIRREA as a response to the crisis in the savings and loan industry that has commanded so much public attention in recent years. For example, the insurance system backing the industry was in financial danger and public confidence in the industry suffered. FIRREA's numerous and complex provisions seek to remedy the problems Congress perceived to result from the existing regulatory scheme. See H. Rep. No. 101-54(I), 101st Cong., 1st Sess. 291-312, reprinted in 1989 U.S. Code Cong. & Admin. News 86, 87-108 (detailing history and purposes of FIRREA).

One of FIRREA's purposes was "to establish a new corporation, to be known as the Resolution Trust Corporation, to contain, manage, and resolve failed savings associations." 12 U.S.C.A. § 1811 note (West 1989). RTC was created by section 501(b) of FIRREA, 12 U.S.C.A. § 1441a(b) (West Supp. 1991), which also defines its duties, powers, make-up and functions. RTC in large part took over the role of the Federal Savings and Loan Insurance Corporation ("FSLIC") with respect to failing insured savings and loan institutions. See id. § 1441a(b)(3)(A), (6), (11)(B). Broadly stated, this case involves the functioning of RTC.

I. FACTS

Plaintiffs are participants in and beneficiaries of the City Savings Bank, F.S.B., Minimum Retirement Benefit Plan (originally the City Federal Savings Bank Minimum Benefit Retirement Plan) ("plan"). This plan was created in 1985 and was subject to ERISA. The plan's trustee is Manufacturer's Hanover Trust Company ("trustee").

On December 7, 1989, the Director of the Office of Thrift Supervision ("OTS") issued a series of orders. First the Director appointed RTC receiver for City Federal Savings Bank ("City Federal") for the purpose of liquidation pursuant to its authority under 12 U.S.C.A. § 1464(d)(2)(H)(ii) (West Supp. 1991).*fn1 The Director next, upon RTC's application under 12 U.S.C.A. § 1821(d)(2)(F)(i) (West 1989), authorized RTC's organization of City Savings Bank, F.S.B. ("City Savings Bank"), and issued a charter under § 1464(a)(2). The Director then appointed RTC conservator for City Savings Bank pursuant to § 1464(d)(2)(B)(i) effective upon RTC's consent of such appointment on behalf of City Savings Bank.

On December 8, under a Purchase and Assumption agreement between RTC as receiver for City Federal and City Savings Bank, RTC as receiver transferred certain City Federal assets and liabilities to City Savings Bank. Many City Federal employees were hired by City Savings Bank.

As a means of encouraging employees to remain with City Savings Bank, RTC as conservator determined that it would assume and continue the plan. This is a critical event because the issues presented arise out of that action and subsequent events. In its capacity as conservator RTC represented to City Savings Bank employees that it assumed the plan, and the record contains numerous references to such communications. On February 9, 1990, RTC as conservator and the trustee executed an amendment of the trust agreement to reflect the assumption. Further, on February 12, RTC as conservator formally assumed the plan effective December 8, 1989, replacing by amendment all references to City Federal with references to City Savings Bank. In all other respects the plan remained in "full force and effect." The Pension Benefit Guaranty Corporation ("PBGC") was notified of the assumption and amendment.*fn2

City Savings Bank, through RTC as conservator, made two contribution payments to the trustee as they became due in January and April of 1990. Consistent with the assumption of the plan, participants continued to accrue rights and to have them vest, and the trustee continued to pay benefits.

The record reflects that sometime during the spring or summer of 1990, RTC as conservator began to consider terminating the plan. In July the conservator's managing agent's committee met to discuss its options with respect to the plan. Minutes of the committee's July 5 meeting recite that the committee approved the proposal "to freeze participant benefit accruals." Minutes of the July 12 meeting note that "the Committee unanimously concurred to return the Plan to the Receivership."

On July 13, 1990, Timothy O'Neill, RTC's attorney working on-site at City Savings Bank, instructed Jeffrey Kaplowitz, the plan administrator*fn3 and an employee of City Savings Bank, not to make the July contribution to the trustee. No further contributions were made by any party.

On July 18, 1990, Mr. O'Neill instructed Mr. Kaplowitz to distribute a notice of plan termination to plan participants. This notice, delivered on July 19, was directed to participants of the City Federal plan and stated that it was from RTC as receiver for City Federal. The notice stated that "the Conservator was prevented from assuming the Plan by applicable law, including 12 C.F.R. § 563.47."*fn4 Further, the notice stated that all benefits ceased accruing as of December 7, 1989 (the date RTC initially took over), and that the expected termination date of the plan was September 20, 1990.

On September 19, 1990, RTC, as receiver for City Federal, sent PBGC formal notice of its intention to terminate. That notice did not mention the assumption, but stated that "in connection with the receivership, the RTC as receiver for City Federal intends to file for a distress termination of the City Federal Savings Bank Minimum Benefit Retirement Plan . . . ." Further, the notice identified City Federal as plan administrator.*fn5

On September 21, 1990, the Director of OTS issued another series of orders. The Director first replaced the conservator of City Savings Bank with RTC as receiver for the purpose of liquidation, pursuant to 12 U.S.C.A. § 1464(d)(2)(F) and (H)(ii). Next, based on RTC's application under § 1464(d)(2)(F)(i), the Director authorized RTC's organization of a new bank, City Savings, F.S.B. ("City Savings"), and issued a charter under § 1464(a)(2). The Director then appointed RTC conservator for City Savings, effective upon RTC's consent, under § 1464(d)(2)(B)(i). On the same day, pursuant to a Purchase and Assumption Agreement between RTC as receiver for City Savings Bank and City Savings, City Savings Bank transferred certain assets and liabilities to City Savings.

On November 6, 1990, plaintiffs brought this class action in the United States District Court for the District of New Jersey.*fn6 Named as defendants were RTC in its various capacities (corporate capacity, receiver for both City Federal and City Savings Bank, and conservator for City Savings), City Federal, City Savings Bank, City Savings and the trustee.

The complaint contained seven "counts." Relevant to this appeal are the following: (1) City Savings Bank failed to make contributions to the plan and threatened wrongfully to terminate it on a retroactive basis without 100% vesting in violation of the plan and ERISA, 29 U.S.C. §§ 1053 and 1082; (2) RTC and City Savings Bank violated their fiduciary obligations under ERISA, 29 U.S.C. § 1104; (3) RTC and City Savings Bank breached the trust agreement and plan; (4) RTC and City Savings Bank induced plaintiffs justifiably and detrimentally to rely on assurances with respect to the plan; and (5) City Savings was created as a "sham" to avoid certain obligations under the plan and FIRREA.*fn7

Plaintiffs sought judgment (1) adjudging and declaring that RTC, City Savings Bank and City Savings acted wrongfully, (2) preliminarily and permanently enjoining those defendants from retroactively terminating the plan, (3) ordering those defendants to make all contributions due and owing, as well as future contributions when they became due, to the trustee. Plaintiffs also requested compensatory and punitive damages, costs and fees, and "other and further relief as the Court deems just and proper."*fn8

On December 5, 1990, the district court issued its opinion and order granting a preliminary injunction against appellants. Rosa v. Resolution Trust Corp., 752 F. Supp. 1231 (D.N.J. 1990). The court's December 5 order was amended on December 10, nunc pro tunc to December 5. The December 10 order (1) enjoined appellants from "taking any further action to terminate the [plan], or from taking any other action which would prejudice or adversely affect the rights of participants and beneficiaries of the Plan," (2) enjoined appellants from "sending or filing any further documents with [any governmental agency] for the purpose of terminating the Plan," (3) ordered appellants to pay contributions due and owing, totaling over two and one-half million dollars, to the trustee and (4) ordered appellants to continue to make all future contributions on a timely basis as required by the plan. Appellants filed a timely notice of appeal.*fn9

II. DISCUSSION

A few preliminary matters must be noted. First, the district court's order runs against and is appealed by RTC, City Federal, City Savings Bank and City Savings. Although only RTC filed a brief which it labeled "Brief of Appellant Resolution Trust Corporation," the parties before us have assumed that RTC speaks for all appellants. We shall do likewise. Therefore, any reference in this opinion to a contention made by RTC shall be deemed to be on behalf of the parties entitled to make such arguments.

Second, the parties agree that the takeover by a government agency did not alter the private character of the plan and we shall proceed on that basis.

Finally, we note that plaintiffs labor, as did the district court, under the misconception that the plan was, or was attempted to be, retroactively terminated. This is inconsistent with the record before us because the notice of termination contained a future date for termination of the plan and a retroactive date for the termination of benefits. This subtle distinction is important because benefits and plan termination are separate legal concepts under ERISA and involve separate rights. See, e.g., 29 U.S.C. §§ 1002 (defining plans subject to ERISA as those providing certain benefits); 1025 (reporting participant benefit rights); 1054-1056 (vesting, accrual and payment provisions for pension benefits); 1132(a)(1)(B) (action to recover benefits); 1341-1368 (procedure and liability respecting plan termination). We do not intend, however, to imply that termination and benefits are wholly separate and distinct, see, e.g., id. § 1322 (benefits guaranteed by PBGC at termination), but to emphasize the distinction for the purposes of clarity.

A. SUBJECT MATTER JURISDICTION OF THE DISTRICT COURT

We are met at the outset by the contention of RTC that the district court lacked subject matter jurisdiction to entertain plaintiffs' claims, except those against RTC in its corporate capacity. RTC argues that plaintiffs failed to exhaust FIRREA's claims procedures under 12 U.S.C.A. § 1821(d)(3)-(13) (West 1989).*fn10 RTC relies specifically on § 1821(d)(13)(D), which provides as follows:

Except as otherwise provided in this subsection, no court shall have jurisdiction over--

(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or

(ii) any claim relating to any act or omission of such institution or the Corporation as receiver.

Both plaintiffs and PBGC contend, although for different reasons, that the above provision does not apply to plaintiffs' claims. Plaintiffs argue, based on the district court's ruling, that the jurisdictional bar applies only to "pre-takeover" claims, i.e., claims against a depository institution arising prior to RTC's intervention. PBGC argues more broadly that the bar does not apply to the statutory claims plaintiffs assert.

Preliminarily, we are satisfied that § 1821(d)(13)(D), to the extent that it conflicts with a provision of ERISA granting the district court jurisdiction, prevails with respect to the subject matter jurisdiction of the district court.

That the bar is a statutory exhaustion requirement is indicated by the language "except as otherwise provided in this subsection." Subsection (d) of § 1821 provides for de novo district court jurisdiction only after the filing of a claim with, and the initial processing of that claim by, RTC pursuant to § 1821(d)(5) and (6)(A).*fn11 Plaintiffs do not contend that they have filed with a receiver any of the claims asserted in this action. Thus, unless the bar is inapplicable, the district court lacked jurisdiction over plaintiffs' claims.

We note that clause (i) of the bar refers to "any depository institution for which the Corporation has been appointed receiver." We believe that clause (ii) in using the phrase "such institution" clearly refers back to clause (i), and specifically to the depository institutions to which clause (i) applies. It is clear that all three banks involved in this case are "depository institutions" within the meaning of this language. Under the Federal Deposit Insurance ("FDI") Act, as amended by FIRREA, "depository institution" is defined as "any bank or savings association." 12 U.S.C.A. § 1813(c)(1) (West 1989). A "savings association" is defined as, inter alia, "any Federal savings association," ...


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