filed: September 9, 1992; As Amended October 5, 1992.
On Appeal From the United States District Court For the Eastern District of Pennsylvania. (D.C. Civil Action No. 92-0286)
Before: Mansmann, Scirica and Roth, Circuit Judges
In this expedited appeal we are faced with the crucial issue of a federal court's power to enjoin aspects of the Resolution Trust Corporation's (RTC) administration of the savings and loan crisis. Appellees Jay and Nathaniel Gross*fn1 sought an injunction requiring the appellant RTC to release nearly $500,000 of pension and profit-sharing assets in its control. The district court granted the requested relief. Because we find on these facts that an injunction would interfere with the powers granted the RTC under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), Pub. L. No. 101-73, 103 Stat. 183 (1989), we will reverse.
From 1971 to 1991, Jay and Nathaniel Gross served as high-ranking officers of Bell Savings Bank PaSA (Bell Savings), a now-defunct savings institution in Pennsylvania. As employees of the bank, the Grosses held substantial deposits with Bell Savings, totalling nearly $500,000, in the form of pension and profit sharing funds.
On March 15, 1991, the Director of the Office of Thrift Supervision (OTS) determined, pursuant to § 5(d)(2) of the Home Owners' Loan Act, 12 U.S.C.A. § 1464(d)(2) (Supp. 1992), and § 11(c)(6) of the Federal Deposit Insurance Act, 12 U.S.C.A. § 1821(c)(6) (1989), that Bell Savings had been managed under "unsafe and unsound practices," which were likely to lead to losses that would "deplete all or substantially all of its capital." See 12 U.S.C.A. § 1821(c)(5)(A) & (B) (1989 & Supp. 1992). On that date, OTS took control of Bell Savings, removed the Grosses from office, and appointed the RTC as the bank's conservator. As conservator, the RTC was charged with managing the ongoing affairs of the bank. Within days, Bell Savings' parent company, Bell Holdings, Inc., agreed with the RTC to discontinue the bank's pension and profit sharing plans, for which Nathaniel Gross was trustee. App. P, Grosses' Verified Complaint, P 8. The affected funds, which included the appellees' $500,000, were to be distributed once the decision to terminate the plans was approved by the IRS.
Four days into Bell Savings' conservatorship, the OTS decided that the bank could no longer be maintained as an ongoing concern. OTS placed the bank into receivership, and as receiver the RTC was charged with winding up the institution's affairs. Simultaneously, the OTS appointed RTC as conservator of the newly-chartered Bell Federal Savings Bank (Bell Federal). Bell Savings and Bell Federal entered into a Purchase and Assumption Agreement (the Purchase Agreement) which transferred certain assets and liabilities of the old bank to the new bank. The transferred obligations included, inter alia, demand deposits, App. O, Purch. Agreement § 2.1(a), and vested liabilities under Bell Savings' pension and profit sharing plans, App. O, Purch. Agreement § 2.1(g). Under § 9.3 of the Agreement, however, Bell Savings retained the right to order Bell Federal to withhold certain deposits from distribution that are necessary to offset depositor liabilities to the bank. App. O, Purch. Agreement § 9.3.*fn2
In April 1991, after they were notified of the RTC's intention to terminate Bell Savings' pension and profit-sharing plans, the Grosses attempted to withdraw their deposits in those plans from the bank. See App. Q (letter from Jay Gross to Bell Savings). The Grosses made further withdrawal attempts in September and November 1991, and in early January 1992. See App. P, Verified Complaint PP 11-12, 24. Relying on the withholding provision in § 9.3 of the Purchase Agreement, the RTC refused to distribute the funds, allegedly because the Grosses were under investigation for their role in the bank's failure.*fn3
On January 15, 1992, the Grosses filed a complaint in the Eastern District of Pennsylvania, on behalf of all participants in the pension and profit sharing plans, seeking a temporary restraining order directing "the Resolution Trust Company as receiver and/or conservator of Bell Savings Bank" to release the deposits. On the same day, the Grosses filed a motion for a preliminary injunction seeking the same relief.*fn4 The proceeding was subsequently narrowed to the amounts held in the Grosses' accounts, as the RTC informed the court that it would not object to the withdrawal and transfer of any other plan participant's account balance.*fn5
The Grosses alleged that by withholding the funds the RTC had breached its fiduciary duty under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.A. §§ 1001 et seq. (ERISA), and violated the due process clause of the Fifth Amendment. Without immediate relief, the complaint continued, Bell Federal might be placed in receivership and all uninsured deposits with the bank might be lost.*fn6 The RTC argued that it had the right to withhold the Grosses' account balances under both FIRREA and the Purchase Agreement because of the Grosses' liabilities to the bank. In support of its position in opposition to the preliminary injunction, the RTC submitted an affidavit of its investigator detailing the alleged fraud the bank suffered at the Grosses' hands.
On February 28, 1992, the district court denied the Grosses' request for a temporary restraining order. Though the court found that it had the power to issue an order requiring the RTC to release the funds, the court concluded that the Grosses had not successfully demonstrated a reasonable likelihood of success on the merits of either claim asserted. App. C, 2/28/92 Order at 6. Both parties filed motions for reconsideration. The RTC claimed error in the court's statutory analysis, arguing that FIRREA's anti-injunction provision prevented the court from considering the relief granted. The Grosses alleged that the court overlooked an additional cause of action not formally captioned in their brief: a depositor's common law right to withdraw deposits upon demand. See App. L, Memorandum in Support of Order at 9.
On March 12, 1992, after reconsidering the claims raised by the parties, the district court granted the Grosses' request for a preliminary injunction. Despite the RTC's objection, the court again found on reconsideration that it had the ability to issue an injunction but reversed its decision on the merits and held that the Grosses had shown a likelihood of success on their common law ...